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Free Online 1040ez

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Free Online 1040ez

Free online 1040ez 1. Free online 1040ez   Travel Table of Contents Traveling Away From HomeTax Home Tax Home Different From Family Home Temporary Assignment or Job What Travel Expenses Are Deductible?Employee. Free online 1040ez Business associate. Free online 1040ez Bona fide business purpose. Free online 1040ez Meals Travel in the United States Travel Outside the United States Luxury Water Travel Conventions If you temporarily travel away from your tax home, you can use this chapter to determine if you have deductible travel expenses. Free online 1040ez This chapter discusses: Traveling away from home, Temporary assignment or job, and What travel expenses are deductible. Free online 1040ez It also discusses the standard meal allowance, rules for travel inside and outside the United States, luxury water travel, and deductible convention expenses. Free online 1040ez Travel expenses defined. Free online 1040ez   For tax purposes, travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. Free online 1040ez   An ordinary expense is one that is common and accepted in your trade or business. Free online 1040ez A necessary expense is one that is helpful and appropriate for your business. Free online 1040ez An expense does not have to be required to be considered necessary. Free online 1040ez   You will find examples of deductible travel expenses in Table 1-1 , later. Free online 1040ez Traveling Away From Home You are traveling away from home if: Your duties require you to be away from the general area of your tax home (defined later) substantially longer than an ordinary day's work, and You need to sleep or rest to meet the demands of your work while away from home. Free online 1040ez This rest requirement is not satisfied by merely napping in your car. Free online 1040ez You do not have to be away from your tax home for a whole day or from dusk to dawn as long as your relief from duty is long enough to get necessary sleep or rest. Free online 1040ez Example 1. Free online 1040ez You are a railroad conductor. Free online 1040ez You leave your home terminal on a regularly scheduled round-trip run between two cities and return home 16 hours later. Free online 1040ez During the run, you have 6 hours off at your turnaround point where you eat two meals and rent a hotel room to get necessary sleep before starting the return trip. Free online 1040ez You are considered to be away from home. Free online 1040ez Example 2. Free online 1040ez You are a truck driver. Free online 1040ez You leave your terminal and return to it later the same day. Free online 1040ez You get an hour off at your turnaround point to eat. Free online 1040ez Because you are not off to get necessary sleep and the brief time off is not an adequate rest period, you are not traveling away from home. Free online 1040ez Members of the Armed Forces. Free online 1040ez   If you are a member of the U. Free online 1040ez S. Free online 1040ez Armed Forces on a permanent duty assignment overseas, you are not traveling away from home. Free online 1040ez You cannot deduct your expenses for meals and lodging. Free online 1040ez You cannot deduct these expenses even if you have to maintain a home in the United States for your family members who are not allowed to accompany you overseas. Free online 1040ez If you are transferred from one permanent duty station to another, you may have deductible moving expenses, which are explained in Publication 521, Moving Expenses. Free online 1040ez   A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a tax home (explained next) aboard the ship for travel expense purposes. Free online 1040ez Tax Home To determine whether you are traveling away from home, you must first determine the location of your tax home. Free online 1040ez Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. Free online 1040ez It includes the entire city or general area in which your business or work is located. Free online 1040ez If you have more than one regular place of business, your tax home is your main place of business. Free online 1040ez See Main place of business or work , later. Free online 1040ez If you do not have a regular or a main place of business because of the nature of your work, then your tax home may be the place where you regularly live. Free online 1040ez See No main place of business or work , later. Free online 1040ez If you do not have a regular or main place of business or post of duty and there is no place where you regularly live, you are considered an itinerant (a transient) and your tax home is wherever you work. Free online 1040ez As an itinerant, you cannot claim a travel expense deduction because you are never considered to be traveling away from home. Free online 1040ez Main place of business or work. Free online 1040ez   If you have more than one place of work, consider the following when determining which one is your main place of business or work. Free online 1040ez The total time you ordinarily spend in each place. Free online 1040ez The level of your business activity in each place. Free online 1040ez Whether your income from each place is significant or insignificant. Free online 1040ez Example. Free online 1040ez You live in Cincinnati where you have a seasonal job for 8 months each year and earn $40,000. Free online 1040ez You work the other 4 months in Miami, also at a seasonal job, and earn $15,000. Free online 1040ez Cincinnati is your main place of work because you spend most of your time there and earn most of your income there. Free online 1040ez No main place of business or work. Free online 1040ez   You may have a tax home even if you do not have a regular or main place of work. Free online 1040ez Your tax home may be the home where you regularly live. Free online 1040ez Factors used to determine tax home. Free online 1040ez   If you do not have a regular or main place of business or work, use the following three factors to determine where your tax home is. Free online 1040ez You perform part of your business in the area of your main home and use that home for lodging while doing business in the area. Free online 1040ez You have living expenses at your main home that you duplicate because your business requires you to be away from that home. Free online 1040ez You have not abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging. Free online 1040ez   If you satisfy all three factors, your tax home is the home where you regularly live. Free online 1040ez If you satisfy only two factors, you may have a tax home depending on all the facts and circumstances. Free online 1040ez If you satisfy only one factor, you are an itinerant; your tax home is wherever you work and you cannot deduct travel expenses. Free online 1040ez Example 1. Free online 1040ez You are single and live in Boston in an apartment you rent. Free online 1040ez You have worked for your employer in Boston for a number of years. Free online 1040ez Your employer enrolls you in a 12-month executive training program. Free online 1040ez You do not expect to return to work in Boston after you complete your training. Free online 1040ez During your training, you do not do any work in Boston. Free online 1040ez Instead, you receive classroom and on-the-job training throughout the United States. Free online 1040ez You keep your apartment in Boston and return to it frequently. Free online 1040ez You use your apartment to conduct your personal business. Free online 1040ez You also keep up your community contacts in Boston. Free online 1040ez When you complete your training, you are transferred to Los Angeles. Free online 1040ez You do not satisfy factor (1) because you did not work in Boston. Free online 1040ez You satisfy factor (2) because you had duplicate living expenses. Free online 1040ez You also satisfy factor (3) because you did not abandon your apartment in Boston as your main home, you kept your community contacts, and you frequently returned to live in your apartment. Free online 1040ez Therefore, you have a tax home in Boston. Free online 1040ez Example 2. Free online 1040ez You are an outside salesperson with a sales territory covering several states. Free online 1040ez Your employer's main office is in Newark, but you do not conduct any business there. Free online 1040ez Your work assignments are temporary, and you have no way of knowing where your future assignments will be located. Free online 1040ez You have a room in your married sister's house in Dayton. Free online 1040ez You stay there for one or two weekends a year, but you do no work in the area. Free online 1040ez You do not pay your sister for the use of the room. Free online 1040ez You do not satisfy any of the three factors listed earlier. Free online 1040ez You are an itinerant and have no tax home. Free online 1040ez Tax Home Different From Family Home If you (and your family) do not live at your tax home (defined earlier), you cannot deduct the cost of traveling between your tax home and your family home. Free online 1040ez You also cannot deduct the cost of meals and lodging while at your tax home. Free online 1040ez See Example 1 , later. Free online 1040ez If you are working temporarily in the same city where you and your family live, you may be considered as traveling away from home. Free online 1040ez See Example 2 , later. Free online 1040ez Example 1. Free online 1040ez You are a truck driver and you and your family live in Tucson. Free online 1040ez You are employed by a trucking firm that has its terminal in Phoenix. Free online 1040ez At the end of your long runs, you return to your home terminal in Phoenix and spend one night there before returning home. Free online 1040ez You cannot deduct any expenses you have for meals and lodging in Phoenix or the cost of traveling from Phoenix to Tucson. Free online 1040ez This is because Phoenix is your tax home. Free online 1040ez Example 2. Free online 1040ez Your family home is in Pittsburgh, where you work 12 weeks a year. Free online 1040ez The rest of the year you work for the same employer in Baltimore. Free online 1040ez In Baltimore, you eat in restaurants and sleep in a rooming house. Free online 1040ez Your salary is the same whether you are in Pittsburgh or Baltimore. Free online 1040ez Because you spend most of your working time and earn most of your salary in Baltimore, that city is your tax home. Free online 1040ez You cannot deduct any expenses you have for meals and lodging there. Free online 1040ez However, when you return to work in Pittsburgh, you are away from your tax home even though you stay at your family home. Free online 1040ez You can deduct the cost of your round trip between Baltimore and Pittsburgh. Free online 1040ez You can also deduct your part of your family's living expenses for meals and lodging while you are living and working in Pittsburgh. Free online 1040ez Temporary Assignment or Job You may regularly work at your tax home and also work at another location. Free online 1040ez It may not be practical to return to your tax home from this other location at the end of each work day. Free online 1040ez Temporary assignment vs. Free online 1040ez indefinite assignment. Free online 1040ez   If your assignment or job away from your main place of work is temporary, your tax home does not change. Free online 1040ez You are considered to be away from home for the whole period you are away from your main place of work. Free online 1040ez You can deduct your travel expenses if they otherwise qualify for deduction. Free online 1040ez Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less. Free online 1040ez    However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home and you cannot deduct your travel expenses while there. Free online 1040ez An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than 1 year, whether or not it actually lasts for more than 1 year. Free online 1040ez   If your assignment is indefinite, you must include in your income any amounts you receive from your employer for living expenses, even if they are called travel allowances and you account to your employer for them. Free online 1040ez You may be able to deduct the cost of relocating to your new tax home as a moving expense. Free online 1040ez See Publication 521 for more information. Free online 1040ez Exception for federal crime investigations or prosecutions. Free online 1040ez   If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule. Free online 1040ez This means you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year provided you meet the other requirements for deductibility. Free online 1040ez   For you to qualify, the Attorney General (or his or her designee) must certify that you are traveling: For the federal government, In a temporary duty status, and To investigate, prosecute, or provide support services for the investigation or prosecution of a federal crime. Free online 1040ez Determining temporary or indefinite. Free online 1040ez   You must determine whether your assignment is temporary or indefinite when you start work. Free online 1040ez If you expect an assignment or job to last for 1 year or less, it is temporary unless there are facts and circumstances that indicate otherwise. Free online 1040ez An assignment or job that is initially temporary may become indefinite due to changed circumstances. Free online 1040ez A series of assignments to the same location, all for short periods but that together cover a long period, may be considered an indefinite assignment. Free online 1040ez   The following examples illustrate whether an assignment or job is temporary or indefinite. Free online 1040ez Example 1. Free online 1040ez You are a construction worker. Free online 1040ez You live and regularly work in Los Angeles. Free online 1040ez You are a member of a trade union in Los Angeles that helps you get work in the Los Angeles area. Free online 1040ez Your tax home is Los Angeles. Free online 1040ez Because of a shortage of work, you took a job on a construction project in Fresno. Free online 1040ez Your job was scheduled to end in 8 months. Free online 1040ez The job actually lasted 10 months. Free online 1040ez You realistically expected the job in Fresno to last 8 months. Free online 1040ez The job actually did last less than 1 year. Free online 1040ez The job is temporary and your tax home is still in Los Angeles. Free online 1040ez Example 2. Free online 1040ez The facts are the same as in Example 1, except that you realistically expected the work in Fresno to last 18 months. Free online 1040ez The job actually was completed in 10 months. Free online 1040ez Your job in Fresno is indefinite because you realistically expected the work to last longer than 1 year, even though it actually lasted less than 1 year. Free online 1040ez You cannot deduct any travel expenses you had in Fresno because Fresno became your tax home. Free online 1040ez Example 3. Free online 1040ez The facts are the same as in Example 1, except that you realistically expected the work in Fresno to last 9 months. Free online 1040ez After 8 months, however, you were asked to remain for 7 more months (for a total actual stay of 15 months). Free online 1040ez Initially, you realistically expected the job in Fresno to last for only 9 months. Free online 1040ez However, due to changed circumstances occurring after 8 months, it was no longer realistic for you to expect that the job in Fresno would last for 1 year or less. Free online 1040ez You can only deduct your travel expenses for the first 8 months. Free online 1040ez You cannot deduct any travel expenses you had after that time because Fresno became your tax home when the job became indefinite. Free online 1040ez Going home on days off. Free online 1040ez   If you go back to your tax home from a temporary assignment on your days off, you are not considered away from home while you are in your hometown. Free online 1040ez You cannot deduct the cost of your meals and lodging there. Free online 1040ez However, you can deduct your travel expenses, including meals and lodging, while traveling between your temporary place of work and your tax home. Free online 1040ez You can claim these expenses up to the amount it would have cost you to stay at your temporary place of work. Free online 1040ez   If you keep your hotel room during your visit home, you can deduct the cost of your hotel room. Free online 1040ez In addition, you can deduct your expenses of returning home up to the amount you would have spent for meals had you stayed at your temporary place of work. Free online 1040ez Probationary work period. Free online 1040ez   If you take a job that requires you to move, with the understanding that you will keep the job if your work is satisfactory during a probationary period, the job is indefinite. Free online 1040ez You cannot deduct any of your expenses for meals and lodging during the probationary period. Free online 1040ez What Travel Expenses Are Deductible? Once you have determined that you are traveling away from your tax home, you can determine what travel expenses are deductible. Free online 1040ez You can deduct ordinary and necessary expenses you have when you travel away from home on business. Free online 1040ez The type of expense you can deduct depends on the facts and your circumstances. Free online 1040ez Table 1-1 summarizes travel expenses you may be able to deduct. Free online 1040ez You may have other deductible travel expenses that are not covered there, depending on the facts and your circumstances. Free online 1040ez When you travel away from home on business, you should keep records of all the expenses you have and any advances you receive from your employer. Free online 1040ez You can use a log, diary, notebook, or any other written record to keep track of your expenses. Free online 1040ez The types of expenses you need to record, along with supporting documentation, are described in Table 5-1 (see chapter 5). Free online 1040ez Separating costs. Free online 1040ez   If you have one expense that includes the costs of meals, entertainment, and other services (such as lodging or transportation), you must allocate that expense between the cost of meals and entertainment and the cost of other services. Free online 1040ez You must have a reasonable basis for making this allocation. Free online 1040ez For example, you must allocate your expenses if a hotel includes one or more meals in its room charge. Free online 1040ez Travel expenses for another individual. Free online 1040ez    If a spouse, dependent, or other individual goes with you (or your employee) on a business trip or to a business convention, you generally cannot deduct his or her travel expenses. Free online 1040ez Employee. Free online 1040ez   You can deduct the travel expenses of someone who goes with you if that person: Is your employee, Has a bona fide business purpose for the travel, and Would otherwise be allowed to deduct the travel expenses. Free online 1040ez Business associate. Free online 1040ez   If a business associate travels with you and meets the conditions in (2) and (3), earlier, you can deduct the travel expenses you have for that person. Free online 1040ez A business associate is someone with whom you could reasonably expect to actively conduct business. Free online 1040ez A business associate can be a current or prospective (likely to become) customer, client, supplier, employee, agent, partner, or professional advisor. Free online 1040ez Bona fide business purpose. Free online 1040ez   A bona fide business purpose exists if you can prove a real business purpose for the individual's presence. Free online 1040ez Incidental services, such as typing notes or assisting in entertaining customers, are not enough to make the expenses deductible. Free online 1040ez Table 1-1. Free online 1040ez Travel Expenses You Can Deduct   This chart summarizes expenses you can deduct when you travel away from home for business purposes. Free online 1040ez IF you have expenses for. Free online 1040ez . Free online 1040ez . Free online 1040ez THEN you can deduct the cost of. Free online 1040ez . Free online 1040ez . Free online 1040ez transportation travel by airplane, train, bus, or car between your home and your business destination. Free online 1040ez If you were provided with a free ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero. Free online 1040ez If you travel by ship, see Luxury Water Travel and Cruise Ships (under Conventions) for additional rules and limits. Free online 1040ez taxi, commuter bus, and airport limousine fares for these and other types of transportation that take you between: The airport or station and your hotel, and The hotel and the work location of your customers or clients, your business meeting place, or your temporary work location. Free online 1040ez baggage and shipping sending baggage and sample or display material between your regular and temporary work locations. Free online 1040ez car operating and maintaining your car when traveling away from home on business. Free online 1040ez You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking. Free online 1040ez If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses. Free online 1040ez lodging and meals your lodging and meals if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. Free online 1040ez Meals include amounts spent for food, beverages, taxes, and related tips. Free online 1040ez See Meals for additional rules and limits. Free online 1040ez cleaning dry cleaning and laundry. Free online 1040ez telephone business calls while on your business trip. Free online 1040ez This includes business communication by fax machine or other communication devices. Free online 1040ez tips tips you pay for any expenses in this chart. Free online 1040ez other other similar ordinary and necessary expenses related to your business travel. Free online 1040ez These expenses might include transportation to or from a business meal, public stenographer's fees, computer rental fees, and operating and maintaining a house trailer. Free online 1040ez Example. Free online 1040ez Jerry drives to Chicago on business and takes his wife, Linda, with him. Free online 1040ez Linda is not Jerry's employee. Free online 1040ez Linda occasionally types notes, performs similar services, and accompanies Jerry to luncheons and dinners. Free online 1040ez The performance of these services does not establish that her presence on the trip is necessary to the conduct of Jerry's business. Free online 1040ez Her expenses are not deductible. Free online 1040ez Jerry pays $199 a day for a double room. Free online 1040ez A single room costs $149 a day. Free online 1040ez He can deduct the total cost of driving his car to and from Chicago, but only $149 a day for his hotel room. Free online 1040ez If he uses public transportation, he can deduct only his fare. Free online 1040ez Meals You can deduct the cost of meals in either of the following situations. Free online 1040ez It is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from home on business. Free online 1040ez The meal is business-related entertainment. Free online 1040ez Business-related entertainment is discussed in chapter 2 . Free online 1040ez The following discussion deals only with meals that are not business-related entertainment. Free online 1040ez Lavish or extravagant. Free online 1040ez   You cannot deduct expenses for meals that are lavish or extravagant. Free online 1040ez An expense is not considered lavish or extravagant if it is reasonable based on the facts and circumstances. Free online 1040ez Expenses will not be disallowed merely because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. Free online 1040ez 50% limit on meals. Free online 1040ez   You can figure your meals expense using either of the following methods. Free online 1040ez Actual cost. Free online 1040ez The standard meal allowance. Free online 1040ez Both of these methods are explained below. Free online 1040ez But, regardless of the method you use, you generally can deduct only 50% of the unreimbursed cost of your meals. Free online 1040ez   If you are reimbursed for the cost of your meals, how you apply the 50% limit depends on whether your employer's reimbursement plan was accountable or nonaccountable. Free online 1040ez If you are not reimbursed, the 50% limit applies whether the unreimbursed meal expense is for business travel or business entertainment. Free online 1040ez Chapter 2 discusses the 50% Limit in more detail, and chapter 6 discusses accountable and nonaccountable plans. Free online 1040ez Actual Cost You can use the actual cost of your meals to figure the amount of your expense before reimbursement and application of the 50% deduction limit. Free online 1040ez If you use this method, you must keep records of your actual cost. Free online 1040ez Standard Meal Allowance Generally, you can use the “standard meal allowance” method as an alternative to the actual cost method. Free online 1040ez It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs. Free online 1040ez The set amount varies depending on where and when you travel. Free online 1040ez In this publication, “standard meal allowance” refers to the federal rate for M&IE, discussed later under Amount of standard meal allowance . Free online 1040ez If you use the standard meal allowance, you still must keep records to prove the time, place, and business purpose of your travel. Free online 1040ez See the recordkeeping rules for travel in chapter 5 . Free online 1040ez Incidental expenses. Free online 1040ez   The term “incidental expenses” means fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. Free online 1040ez   Incidental expenses do not include expenses for laundry, cleaning and pressing of clothing, lodging taxes, costs of telegrams or telephone calls, transportation between places of lodging or business and places where meals are taken, or the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings. Free online 1040ez Incidental-expenses-only method. Free online 1040ez   You can use an optional method (instead of actual cost) for deducting incidental expenses only. Free online 1040ez The amount of the deduction is $5 a day. Free online 1040ez You can use this method only if you did not pay or incur any meal expenses. Free online 1040ez You cannot use this method on any day that you use the standard meal allowance. Free online 1040ez This method is subject to the proration rules for partial days. Free online 1040ez See Travel for days you depart and return , later in this chapter. Free online 1040ez Note. Free online 1040ez The incidental-expenses-only method is not subject to the 50% limit discussed below. Free online 1040ez Federal employees should refer to the Federal Travel Regulations at www. Free online 1040ez gsa. Free online 1040ez gov. Free online 1040ez Find the “Most Requested Links” on the upper left and click on “Regulations: FAR, FMR, FTR” for Federal Travel Regulation (FTR) for changes affecting claims for reimbursement. Free online 1040ez 50% limit may apply. Free online 1040ez   If you use the standard meal allowance method for meal expenses and you are not reimbursed or you are reimbursed under a nonaccountable plan, you can generally deduct only 50% of the standard meal allowance. Free online 1040ez If you are reimbursed under an accountable plan and you are deducting amounts that are more than your reimbursements, you can deduct only 50% of the excess amount. Free online 1040ez The 50% limit is discussed in more detail in chapter 2, and accountable and nonaccountable plans are discussed in chapter 6. Free online 1040ez There is no optional standard lodging amount similar to the standard meal allowance. Free online 1040ez Your allowable lodging expense deduction is your actual cost. Free online 1040ez Who can use the standard meal allowance. Free online 1040ez   You can use the standard meal allowance whether you are an employee or self-employed, and whether or not you are reimbursed for your traveling expenses. Free online 1040ez Use of the standard meal allowance for other travel. Free online 1040ez   You can use the standard meal allowance to figure your meal expenses when you travel in connection with investment and other income-producing property. Free online 1040ez You can also use it to figure your meal expenses when you travel for qualifying educational purposes. Free online 1040ez You cannot use the standard meal allowance to figure the cost of your meals when you travel for medical or charitable purposes. Free online 1040ez Amount of standard meal allowance. Free online 1040ez   The standard meal allowance is the federal M&IE rate. Free online 1040ez For travel in 2013, the rate for most small localities in the United States is $46 a day. Free online 1040ez    Most major cities and many other localities in the United States are designated as high-cost areas, qualifying for higher standard meal allowances. Free online 1040ez    You can find this information (organized by state) on the Internet at www. Free online 1040ez gsa. Free online 1040ez gov/perdiem. Free online 1040ez Enter a zip code or select a city and state for the per diem rates for the current fiscal year. Free online 1040ez Per diem rates for prior fiscal years are available by using the drop down menu under “Search by State. Free online 1040ez ”   Per diem rates are listed by the Federal government's fiscal year which runs from October 1 to September 30. Free online 1040ez You can choose to use the rates from the 2013 fiscal year per diem tables or the rates from the 2014 fiscal year tables, but you must consistently use the same tables for all travel you are reporting on your income tax return for the year. Free online 1040ez   If you travel to more than one location in one day, use the rate in effect for the area where you stop for sleep or rest. Free online 1040ez If you work in the transportation industry, however, see Special rate for transportation workers , later. Free online 1040ez Standard meal allowance for areas outside the continental United States. Free online 1040ez   The standard meal allowance rates above do not apply to travel in Alaska, Hawaii, or any other location outside the continental United States. Free online 1040ez The Department of Defense establishes per diem rates for Alaska, Hawaii, Puerto Rico, American Samoa, Guam, Midway, the Northern Mariana Islands, the U. Free online 1040ez S. Free online 1040ez Virgin Islands, Wake Island, and other non-foreign areas outside the continental United States. Free online 1040ez The Department of State establishes per diem rates for all other foreign areas. Free online 1040ez    You can access per diem rates for non-foreign areas outside the continental United States at: www. Free online 1040ez defensetravel. Free online 1040ez dod. Free online 1040ez mil/site/perdiemCalc. Free online 1040ez cfm. Free online 1040ez You can access all other foreign per diem rates at: www. Free online 1040ez state. Free online 1040ez gov/travel/. Free online 1040ez Click on “Travel Per Diem Allowances for Foreign Areas,” under “Foreign Per Diem Rates” to obtain the latest foreign per diem rates. Free online 1040ez Special rate for transportation workers. Free online 1040ez   You can use a special standard meal allowance if you work in the transportation industry. Free online 1040ez You are in the transportation industry if your work: Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates. Free online 1040ez If this applies to you, you can claim a standard meal allowance of $59 a day ($65 for travel outside the continental United States). Free online 1040ez   Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest. Free online 1040ez If you choose to use the special rate for any trip, you must use the special rate (and not use the regular standard meal allowance rates) for all trips you take that year. Free online 1040ez Travel for days you depart and return. Free online 1040ez   For both the day you depart for and the day you return from a business trip, you must prorate the standard meal allowance (figure a reduced amount for each day). Free online 1040ez You can do so by one of two methods. Free online 1040ez Method 1: You can claim 3/4 of the standard meal allowance. Free online 1040ez Method 2: You can prorate using any method that you consistently apply and that is in accordance with reasonable business practice. Free online 1040ez Example. Free online 1040ez Jen is employed in New Orleans as a convention planner. Free online 1040ez In March, her employer sent her on a 3-day trip to Washington, DC, to attend a planning seminar. Free online 1040ez She left her home in New Orleans at 10 a. Free online 1040ez m. Free online 1040ez on Wednesday and arrived in Washington, DC, at 5:30 p. Free online 1040ez m. Free online 1040ez After spending two nights there, she flew back to New Orleans on Friday and arrived back home at 8:00 p. Free online 1040ez m. Free online 1040ez Jen's employer gave her a flat amount to cover her expenses and included it with her wages. Free online 1040ez Under Method 1, Jen can claim 2½ days of the standard meal allowance for Washington, DC: 3/4 of the daily rate for Wednesday and Friday (the days she departed and returned), and the full daily rate for Thursday. Free online 1040ez Under Method 2, Jen could also use any method that she applies consistently and that is in accordance with reasonable business practice. Free online 1040ez For example, she could claim 3 days of the standard meal allowance even though a federal employee would have to use Method 1 and be limited to only 2½ days. Free online 1040ez Travel in the United States The following discussion applies to travel in the United States. Free online 1040ez For this purpose, the United States includes the 50 states and the District of Columbia. Free online 1040ez The treatment of your travel expenses depends on how much of your trip was business related and on how much of your trip occurred within the United States. Free online 1040ez See Part of Trip Outside the United States , later. Free online 1040ez Trip Primarily for Business You can deduct all of your travel expenses if your trip was entirely business related. Free online 1040ez If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct only your business-related travel expenses. Free online 1040ez These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination. Free online 1040ez Example. Free online 1040ez You work in Atlanta and take a business trip to New Orleans in May. Free online 1040ez Your business travel totals 850 miles round trip. Free online 1040ez On your way, you stop in Mobile to visit your parents. Free online 1040ez You spend $2,120 for the 9 days you are away from home for travel, meals, lodging, and other travel expenses. Free online 1040ez If you had not stopped in Mobile, you would have been gone only 6 days, and your total cost would have been $1,820. Free online 1040ez You can deduct $1,820 for your trip, including the cost of round-trip transportation to and from New Orleans. Free online 1040ez The deduction for your meals is subject to the 50% limit on meals mentioned earlier. Free online 1040ez Trip Primarily for Personal Reasons If your trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. Free online 1040ez However, you can deduct any expenses you have while at your destination that are directly related to your business. Free online 1040ez A trip to a resort or on a cruise ship may be a vacation even if the promoter advertises that it is primarily for business. Free online 1040ez The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip. Free online 1040ez Part of Trip Outside the United States If part of your trip is outside the United States, use the rules described later in this chapter under Travel Outside the United States for that part of the trip. Free online 1040ez For the part of your trip that is inside the United States, use the rules for travel in the United States. Free online 1040ez Travel outside the United States does not include travel from one point in the United States to another point in the United States. Free online 1040ez The following discussion can help you determine whether your trip was entirely within the United States. Free online 1040ez Public transportation. Free online 1040ez   If you travel by public transportation, any place in the United States where that vehicle makes a scheduled stop is a point in the United States. Free online 1040ez Once the vehicle leaves the last scheduled stop in the United States on its way to a point outside the United States, you apply the rules under Travel Outside the United States . Free online 1040ez Example. Free online 1040ez You fly from New York to Puerto Rico with a scheduled stop in Miami. Free online 1040ez You return to New York nonstop. Free online 1040ez The flight from New York to Miami is in the United States, so only the flight from Miami to Puerto Rico is outside the United States. Free online 1040ez Because there are no scheduled stops between Puerto Rico and New York, all of the return trip is outside the United States. Free online 1040ez Private car. Free online 1040ez   Travel by private car in the United States is travel between points in the United States, even though you are on your way to a destination outside the United States. Free online 1040ez Example. Free online 1040ez You travel by car from Denver to Mexico City and return. Free online 1040ez Your travel from Denver to the border and from the border back to Denver is travel in the United States, and the rules in this section apply. Free online 1040ez The rules under Travel Outside the United States apply to your trip from the border to Mexico City and back to the border. Free online 1040ez Travel Outside the United States If any part of your business travel is outside the United States, some of your deductions for the cost of getting to and from your destination may be limited. Free online 1040ez For this purpose, the United States includes the 50 states and the District of Columbia. Free online 1040ez How much of your travel expenses you can deduct depends in part upon how much of your trip outside the United States was business related. Free online 1040ez Travel Entirely for Business or Considered Entirely for Business You can deduct all your travel expenses of getting to and from your business destination if your trip is entirely for business or considered entirely for business. Free online 1040ez Travel entirely for business. Free online 1040ez   If you travel outside the United States and you spend the entire time on business activities, you can deduct all of your travel expenses. Free online 1040ez Travel considered entirely for business. Free online 1040ez   Even if you did not spend your entire time on business activities, your trip is considered entirely for business if you meet at least one of the following four exceptions. Free online 1040ez Exception 1 - No substantial control. Free online 1040ez   Your trip is considered entirely for business if you did not have substantial control over arranging the trip. Free online 1040ez The fact that you control the timing of your trip does not, by itself, mean that you have substantial control over arranging your trip. Free online 1040ez   You do not have substantial control over your trip if you: Are an employee who was reimbursed or paid a travel expense allowance, and Are not related to your employer, or Are not a managing executive. Free online 1040ez    “Related to your employer” is defined later in chapter 6 under Per Diem and Car Allowances . Free online 1040ez   A “managing executive” is an employee who has the authority and responsibility, without being subject to the veto of another, to decide on the need for the business travel. Free online 1040ez   A self-employed person generally has substantial control over arranging business trips. Free online 1040ez Exception 2 - Outside United States no more than a week. Free online 1040ez   Your trip is considered entirely for business if you were outside the United States for a week or less, combining business and nonbusiness activities. Free online 1040ez One week means 7 consecutive days. Free online 1040ez In counting the days, do not count the day you leave the United States, but do count the day you return to the United States. Free online 1040ez Example. Free online 1040ez You traveled to Brussels primarily for business. Free online 1040ez You left Denver on Tuesday and flew to New York. Free online 1040ez On Wednesday, you flew from New York to Brussels, arriving the next morning. Free online 1040ez On Thursday and Friday, you had business discussions, and from Saturday until Tuesday, you were sightseeing. Free online 1040ez You flew back to New York, arriving Wednesday afternoon. Free online 1040ez On Thursday, you flew back to Denver. Free online 1040ez Although you were away from your home in Denver for more than a week, you were not outside the United States for more than a week. Free online 1040ez This is because the day you depart does not count as a day outside the United States. Free online 1040ez You can deduct your cost of the round-trip flight between Denver and Brussels. Free online 1040ez You can also deduct the cost of your stay in Brussels for Thursday and Friday while you conducted business. Free online 1040ez However, you cannot deduct the cost of your stay in Brussels from Saturday through Tuesday because those days were spent on nonbusiness activities. Free online 1040ez Exception 3 - Less than 25% of time on personal activities. Free online 1040ez   Your trip is considered entirely for business if: You were outside the United States for more than a week, and You spent less than 25% of the total time you were outside the United States on nonbusiness activities. Free online 1040ez For this purpose, count both the day your trip began and the day it ended. Free online 1040ez Example. Free online 1040ez You flew from Seattle to Tokyo, where you spent 14 days on business and 5 days on personal matters. Free online 1040ez You then flew back to Seattle. Free online 1040ez You spent 1 day flying in each direction. Free online 1040ez Because only 5/21 (less than 25%) of your total time abroad was for nonbusiness activities, you can deduct as travel expenses what it would have cost you to make the trip if you had not engaged in any nonbusiness activity. Free online 1040ez The amount you can deduct is the cost of the round-trip plane fare and 16 days of meals (subject to the 50% limit), lodging, and other related expenses. Free online 1040ez Exception 4 - Vacation not a major consideration. Free online 1040ez   Your trip is considered entirely for business if you can establish that a personal vacation was not a major consideration, even if you have substantial control over arranging the trip. Free online 1040ez Travel Primarily for Business If you travel outside the United States primarily for business but spend some of your time on other activities, you generally cannot deduct all of your travel expenses. Free online 1040ez You can only deduct the business portion of your cost of getting to and from your destination. Free online 1040ez You must allocate the costs between your business and other activities to determine your deductible amount. Free online 1040ez See Travel allocation rules , later. Free online 1040ez You do not have to allocate your travel expenses if you meet one of the four exceptions listed earlier under Travel considered entirely for business . Free online 1040ez In those cases, you can deduct the total cost of getting to and from your destination. Free online 1040ez Travel allocation rules. Free online 1040ez   If your trip outside the United States was primarily for business, you must allocate your travel time on a day-to-day basis between business days and nonbusiness days. Free online 1040ez The days you depart from and return to the United States are both counted as days outside the United States. Free online 1040ez   To figure the deductible amount of your round-trip travel expenses, use the following fraction. Free online 1040ez The numerator (top number) is the total number of business days outside the United States. Free online 1040ez The denominator (bottom number) is the total number of business and nonbusiness days of travel. Free online 1040ez Counting business days. Free online 1040ez   Your business days include transportation days, days your presence was required, days you spent on business, and certain weekends and holidays. Free online 1040ez Transportation day. Free online 1040ez   Count as a business day any day you spend traveling to or from a business destination. Free online 1040ez However, if because of a nonbusiness activity you do not travel by a direct route, your business days are the days it would take you to travel a reasonably direct route to your business destination. Free online 1040ez Extra days for side trips or nonbusiness activities cannot be counted as business days. Free online 1040ez Presence required. Free online 1040ez   Count as a business day any day your presence is required at a particular place for a specific business purpose. Free online 1040ez Count it as a business day even if you spend most of the day on nonbusiness activities. Free online 1040ez Day spent on business. Free online 1040ez   If your principal activity during working hours is the pursuit of your trade or business, count the day as a business day. Free online 1040ez Also, count as a business day any day you are prevented from working because of circumstances beyond your control. Free online 1040ez Certain weekends and holidays. Free online 1040ez   Count weekends, holidays, and other necessary standby days as business days if they fall between business days. Free online 1040ez But if they follow your business meetings or activity and you remain at your business destination for nonbusiness or personal reasons, do not count them as business days. Free online 1040ez Example 1. Free online 1040ez Your tax home is New York City. Free online 1040ez You travel to Quebec, where you have a business appointment on Friday. Free online 1040ez You have another appointment on the following Monday. Free online 1040ez Because your presence was required on both Friday and Monday, they are business days. Free online 1040ez Because the weekend is between business days, Saturday and Sunday are counted as business days. Free online 1040ez This is true even though you use the weekend for sightseeing, visiting friends, or other nonbusiness activity. Free online 1040ez Example 2. Free online 1040ez If, in Example 1, you had no business in Quebec after Friday, but stayed until Monday before starting home, Saturday and Sunday would be nonbusiness days. Free online 1040ez Nonbusiness activity on the way to or from your business destination. Free online 1040ez   If you stopped for a vacation or other nonbusiness activity either on the way from the United States to your business destination, or on the way back to the United States from your business destination, you must allocate part of your travel expenses to the nonbusiness activity. Free online 1040ez   The part you must allocate is the amount it would have cost you to travel between the point where travel outside the United States begins and your nonbusiness destination and a return to the point where travel outside the United States ends. Free online 1040ez   You determine the nonbusiness portion of that expense by multiplying it by a fraction. Free online 1040ez The numerator (top number) of the fraction is the number of nonbusiness days during your travel outside the United States and the denominator (bottom number) is the total number of days you spend outside the United States. Free online 1040ez Example. Free online 1040ez You live in New York. Free online 1040ez On May 4 you flew to Paris to attend a business conference that began on May 5. Free online 1040ez The conference ended at noon on May 14. Free online 1040ez That evening you flew to Dublin where you visited with friends until the afternoon of May 21, when you flew directly home to New York. Free online 1040ez The primary purpose for the trip was to attend the conference. Free online 1040ez If you had not stopped in Dublin, you would have arrived home the evening of May 14. Free online 1040ez You do not meet any of the exceptions that would allow you to consider your travel entirely for business. Free online 1040ez May 4 through May 14 (11 days) are business days and May 15 through May 21 (7 days) are nonbusiness days. Free online 1040ez You can deduct the cost of your meals (subject to the 50% limit), lodging, and other business-related travel expenses while in Paris. Free online 1040ez You cannot deduct your expenses while in Dublin. Free online 1040ez You also cannot deduct 7/18 of what it would have cost you to travel round-trip between New York and Dublin. Free online 1040ez You paid $750 to fly from New York to Paris, $400 to fly from Paris to Dublin, and $700 to fly from Dublin back to New York. Free online 1040ez Round-trip airfare from New York to Dublin would have been $1,250. Free online 1040ez You figure the deductible part of your air travel expenses by subtracting 7/18 of the round-trip fare and other expenses you would have had in traveling directly between New York and Dublin ($1,250 × 7/18 = $486) from your total expenses in traveling from New York to Paris to Dublin and back to New York ($750 + $400 + $700 = $1,850). Free online 1040ez Your deductible air travel expense is $1,364 ($1,850 − $486). Free online 1040ez Nonbusiness activity at, near, or beyond business destination. Free online 1040ez   If you had a vacation or other nonbusiness activity at, near, or beyond your business destination, you must allocate part of your travel expenses to the nonbusiness activity. Free online 1040ez   The part you must allocate is the amount it would have cost you to travel between the point where travel outside the United States begins and your business destination and a return to the point where travel outside the United States ends. Free online 1040ez   You determine the nonbusiness portion of that expense by multiplying it by a fraction. Free online 1040ez The numerator (top number) of the fraction is the number of nonbusiness days during your travel outside the United States and the denominator (bottom number) is the total number of days you spend outside the United States. Free online 1040ez   None of your travel expenses for nonbusiness activities at, near, or beyond your business destination are deductible. Free online 1040ez Example. Free online 1040ez Assume that the dates are the same as in the previous example but that instead of going to Dublin for your vacation, you fly to Venice, Italy, for a vacation. Free online 1040ez You cannot deduct any part of the cost of your trip from Paris to Venice and return to Paris. Free online 1040ez In addition, you cannot deduct 7/18 of the airfare and other expenses from New York to Paris and back to New York. Free online 1040ez You can deduct 11/18 of the round-trip plane fare and other travel expenses from New York to Paris, plus your meals (subject to the 50% limit), lodging, and any other business expenses you had in Paris. Free online 1040ez (Assume these expenses total $4,939. Free online 1040ez ) If the round-trip plane fare and other travel-related expenses (such as food during the trip) are $1,750, you can deduct travel costs of $1,069 (11/18 × $1,750), plus the full $4,939 for the expenses you had in Paris. Free online 1040ez Other methods. Free online 1040ez   You can use another method of counting business days if you establish that it more clearly reflects the time spent on other than business activities outside the United States. Free online 1040ez Travel Primarily for Personal Reasons If you travel outside the United States primarily for vacation or for investment purposes, the entire cost of the trip is a nondeductible personal expense. Free online 1040ez However, if you spend some time attending brief professional seminars or a continuing education program, you can deduct your registration fees and other expenses you have that are directly related to your business. Free online 1040ez Example. Free online 1040ez The university from which you graduated has a continuing education program for members of its alumni association. Free online 1040ez This program consists of trips to various foreign countries where academic exercises and conferences are set up to acquaint individuals in most occupations with selected facilities in several regions of the world. Free online 1040ez However, none of the conferences are directed toward specific occupations or professions. Free online 1040ez It is up to each participant to seek out specialists and organizational settings appropriate to his or her occupational interests. Free online 1040ez Three-hour sessions are held each day over a 5-day period at each of the selected overseas facilities where participants can meet with individual practitioners. Free online 1040ez These sessions are composed of a variety of activities including workshops, mini-lectures, role playing, skill development, and exercises. Free online 1040ez Professional conference directors schedule and conduct the sessions. Free online 1040ez Participants can choose those sessions they wish to attend. Free online 1040ez You can participate in this program since you are a member of the alumni association. Free online 1040ez You and your family take one of the trips. Free online 1040ez You spend about 2 hours at each of the planned sessions. Free online 1040ez The rest of the time you go touring and sightseeing with your family. Free online 1040ez The trip lasts less than 1 week. Free online 1040ez Your travel expenses for the trip are not deductible since the trip was primarily a vacation. Free online 1040ez However, registration fees and any other incidental expenses you have for the five planned sessions you attended that are directly related and beneficial to your business are deductible business expenses. Free online 1040ez These expenses should be specifically stated in your records to ensure proper allocation of your deductible business expenses. Free online 1040ez Luxury Water Travel If you travel by ocean liner, cruise ship, or other form of luxury water transportation for business purposes, there is a daily limit on the amount you can deduct. Free online 1040ez The limit is twice the highest federal per diem rate allowable at the time of your travel. Free online 1040ez (Generally, the federal per diem is the amount paid to federal government employees for daily living expenses when they travel away from home, but in the United States, for business purposes. Free online 1040ez ) Daily limit on luxury water travel. Free online 1040ez   The highest federal per diem rate allowed and the daily limit for luxury water travel in 2013 is shown in the following table. Free online 1040ez   2013 Dates Highest Federal Per Diem Daily Limit on Luxury Water Travel   Jan. Free online 1040ez 1 – Mar. Free online 1040ez 31 $367 $734   Apr. Free online 1040ez 1 – June 30 312 624   July 1 – Aug. Free online 1040ez 31 310 620   Sept. Free online 1040ez 1 – Sept. Free online 1040ez 30 366 732   Oct. Free online 1040ez 1 – Dec. Free online 1040ez 31 374 748 Example. Free online 1040ez Caroline, a travel agent, traveled by ocean liner from New York to London, England, on business in May. Free online 1040ez Her expense for the 6-day cruise was $5,200. Free online 1040ez Caroline's deduction for the cruise cannot exceed $3,744 (6 days × $624 daily limit). Free online 1040ez Meals and entertainment. Free online 1040ez   If your expenses for luxury water travel include separately stated amounts for meals or entertainment, those amounts are subject to the 50% limit on meals and entertainment before you apply the daily limit. Free online 1040ez For a discussion of the 50% Limit , see chapter 2. Free online 1040ez Example. Free online 1040ez In the previous example, Caroline's luxury water travel had a total cost of $5,200. Free online 1040ez Of that amount, $3,700 was separately stated as meals and entertainment. Free online 1040ez Caroline, who is self-employed, is not reimbursed for any of her travel expenses. Free online 1040ez Caroline figures her deductible travel expenses as follows. Free online 1040ez Meals and entertainment $3,700   50% limit × . Free online 1040ez 50   Allowable meals &     entertainment $1,850   Other travel expenses + 1,800   Allowable cost before the daily limit $3,650 Daily limit for May 2013 $624   Times number of days × 6   Maximum luxury water travel     deduction $3,744 Amount of allowable deduction $3,650 Caroline's deduction for her cruise is limited to $3,650, even though the limit on luxury water travel is slightly higher. Free online 1040ez Not separately stated. Free online 1040ez   If your meal or entertainment charges are not separately stated or are not clearly identifiable, you do not have to allocate any portion of the total charge to meals or entertainment. Free online 1040ez Exceptions The daily limit on luxury water travel (discussed earlier) does not apply to expenses you have to attend a convention, seminar, or meeting on board a cruise ship. Free online 1040ez See Cruise Ships under Conventions. Free online 1040ez Conventions You can deduct your travel expenses when you attend a convention if you can show that your attendance benefits your trade or business. Free online 1040ez You cannot deduct the travel expenses for your family. Free online 1040ez If the convention is for investment, political, social, or other purposes unrelated to your trade or business, you cannot deduct the expenses. Free online 1040ez Your appointment or election as a delegate does not, in itself, determine whether you can deduct travel expenses. Free online 1040ez You can deduct your travel expenses only if your attendance is connected to your own trade or business. Free online 1040ez Convention agenda. Free online 1040ez   The convention agenda or program generally shows the purpose of the convention. Free online 1040ez You can show your attendance at the convention benefits your trade or business by comparing the agenda with the official duties and responsibilities of your position. Free online 1040ez The agenda does not have to deal specifically with your official duties and responsibilities; it will be enough if the agenda is so related to your position that it shows your attendance was for business purposes. Free online 1040ez Conventions Held Outside the North American Area You cannot deduct expenses for attending a convention, seminar, or similar meeting held outside the North American area unless: The meeting is directly related to your trade or business, and It is reasonable to hold the meeting outside the North American area. Free online 1040ez See Reasonableness test , later. Free online 1040ez If the meeting meets these requirements, you also must satisfy the rules for deducting expenses for business trips in general, discussed earlier under Travel Outside the United States . Free online 1040ez North American area. Free online 1040ez   The North American area includes the following locations. Free online 1040ez American Samoa Johnston Island Antigua and Barbuda Kingman Reef Aruba Marshall Islands Bahamas Mexico Baker Island Micronesia Barbados Midway Islands Bermuda Netherlands Antilles Canada Northern Mariana Costa Rica Islands Dominica Palau Dominican Republic Palmyra Atoll Grenada Panama Guam Puerto Rico Guyana Trinidad and Tobago Honduras USA Howland Island U. Free online 1040ez S. Free online 1040ez Virgin Islands Jamaica Wake Island Jarvis Island   The North American area also includes U. Free online 1040ez S. Free online 1040ez islands, cays, and reefs that are possessions of the United States and not part of the fifty states or the District of Columbia. Free online 1040ez Reasonableness test. Free online 1040ez   The following factors are taken into account to determine if it was reasonable to hold the meeting outside the North American area. Free online 1040ez The purpose of the meeting and the activities taking place at the meeting. Free online 1040ez The purposes and activities of the sponsoring organizations or groups. Free online 1040ez The homes of the active members of the sponsoring organizations and the places at which other meetings of the sponsoring organizations or groups have been or will be held. Free online 1040ez Other relevant factors you may present. Free online 1040ez Cruise Ships You can deduct up to $2,000 per year of your expenses of attending conventions, seminars, or similar meetings held on cruise ships. Free online 1040ez All ships that sail are considered cruise ships. Free online 1040ez You can deduct these expenses only if all of the following requirements are met. Free online 1040ez The convention, seminar, or meeting is directly related to your trade or business. Free online 1040ez The cruise ship is a vessel registered in the United States. Free online 1040ez All of the cruise ship's ports of call are in the United States or in possessions of the United States. Free online 1040ez You attach to your return a written statement signed by you that includes information about: The total days of the trip (not including the days of transportation to and from the cruise ship port), The number of hours each day that you devoted to scheduled business activities, and A program of the scheduled business activities of the meeting. Free online 1040ez You attach to your return a written statement signed by an officer of the organization or group sponsoring the meeting that includes: A schedule of the business activities of each day of the meeting, and The number of hours you attended the scheduled business activities. Free online 1040ez Prev  Up  Next   Home   More Online Publications
 
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The Free Online 1040ez

Free online 1040ez Publication 597 - Main Content Table of Contents Application of Treaty Personal Services Pensions, Annuities, Social Security, and AlimonyRoth IRAs. Free online 1040ez Tax-deferred plans. Free online 1040ez Investment Income From Canadian Sources Other Income Charitable ContributionsQualified charities. Free online 1040ez Income Tax Credits Competent Authority Assistance How To Get Tax HelpText of Treaty U. Free online 1040ez S. Free online 1040ez Taxation Canadian Taxation Application of Treaty The benefits of the income tax treaty are generally provided on the basis of residence for income tax purposes. Free online 1040ez That is, a person who is recognized as a resident of the United States who has income from Canada, will often pay less income tax to Canada on that income than if no treaty was in effect. Free online 1040ez Article IV provides definitions of residents of Canada and the United States, and provides specific criteria for applying the treaty in cases where a taxpayer is considered by both countries to be a resident. Free online 1040ez Saving clause. Free online 1040ez   In most instances, a treaty does not affect the right of a country to tax its own residents (including those who are U. Free online 1040ez S. Free online 1040ez citizens) or of the United States to tax its residents or citizens (including U. Free online 1040ez S. Free online 1040ez citizens who are residents of the foreign country). Free online 1040ez This provision is known as the “saving clause. Free online 1040ez ”   For example, an individual who is a U. Free online 1040ez S. Free online 1040ez citizen and a resident of Canada may have dividend income from a U. Free online 1040ez S. Free online 1040ez corporation. Free online 1040ez The treaty provides a maximum rate of 15% on dividends received by a resident of Canada from sources in the United States. Free online 1040ez Even though a resident of Canada, the individual is a U. Free online 1040ez S. Free online 1040ez citizen and the saving clause overrides the treaty article that limits the U. Free online 1040ez S. Free online 1040ez tax to 15%. Free online 1040ez    Exceptions to the saving clause can be found in Article XXIX, paragraph 3. Free online 1040ez Treaty-based position. Free online 1040ez   If you take the position that any U. Free online 1040ez S. Free online 1040ez tax is overruled or otherwise reduced by a U. Free online 1040ez S. Free online 1040ez treaty (a treaty-based position), you generally must disclose that position on Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), and attach it to your return. Free online 1040ez Personal Services A U. Free online 1040ez S. Free online 1040ez citizen or resident who is temporarily present in Canada during the tax year is exempt from Canadian income taxes on pay for services performed, or remittances received from the United States, if the citizen or resident qualifies under one of the treaty exemption provisions set out below. Free online 1040ez Income from employment (Article XV). Free online 1040ez   Income U. Free online 1040ez S. Free online 1040ez residents receive for the performance of dependent personal services in Canada (except as public entertainers) is exempt from Canadian tax if it is not more than $10,000 in Canadian currency for the year. Free online 1040ez If it is more than $10,000 for the year, it is exempt only if: The residents are present in Canada for no more than 183 days in any 12-month period beginning or ending in the year concerned, and The income is not paid by, or on behalf of, a Canadian resident and is not borne by a permanent establishment in Canada. Free online 1040ez    Whether there is a permanent establishment in Canada is determined by the rules set forth in Article V. Free online 1040ez Example. Free online 1040ez You are a U. Free online 1040ez S. Free online 1040ez resident employed under an 8-month contract with a Canadian firm to install equipment in their Montreal plant. Free online 1040ez During the calendar year you were physically present in Canada for 179 days and were paid $16,500 (Canadian) for your services. Free online 1040ez Although you were in Canada for not more than 183 days during the year, your income is not exempt from Canadian income tax because it was paid by a Canadian resident and was more than $10,000 (Canadian) for the year. Free online 1040ez Pay received by a U. Free online 1040ez S. Free online 1040ez resident for work regularly done in more than one country as an employee on a ship, aircraft, motor vehicle, or train operated by a U. Free online 1040ez S. Free online 1040ez resident is exempt from Canadian tax. Free online 1040ez Income from self-employment (Article VII). Free online 1040ez   Income from services performed (other than those performed as an employee) are taxed in Canada if they are attributable to a permanent establishment in Canada. Free online 1040ez This income is treated as business profits, and deductions similar to those allowed under U. Free online 1040ez S. Free online 1040ez law are allowable. Free online 1040ez   If you carry on (or have carried on) business in both Canada and the United States, the business profits are attributable to each country based on the profits that the permanent establishment might be expected to make if it were a distinct and separate person engaged in the same or similar activities. Free online 1040ez The business profits attributable to the permanent establishment include only those profits derived from assets used, risks assumed, and activities performed by the permanent establishment. Free online 1040ez   You may be considered to have a permanent establishment if you meet certain conditions. Free online 1040ez For more information, see Article V (Permanent Establishment) and Article VII (Business Profits). Free online 1040ez Public entertainers (Article XVI). Free online 1040ez   The provisions under income from employment or income from self-employment do not apply to public entertainers (such as theater, motion picture, radio, or television artistes, musicians, or athletes) from the United States who receive more than $15,000 in gross receipts in Canadian currency, including reimbursed expenses, from their entertainment activities in Canada during the calendar year. Free online 1040ez However, this provision for public entertainers does not apply (and the other provisions will apply) to athletes participating in team sports in leagues with regularly scheduled games in both the United States and Canada. Free online 1040ez Compensation paid by the U. Free online 1040ez S. Free online 1040ez Government (Article XIX). Free online 1040ez   Wages, salaries, and similar income (other than pensions) paid to a U. Free online 1040ez S. Free online 1040ez citizen by the United States or any of its agencies, instrumentalities, or political subdivisions for discharging governmental functions are exempt from Canadian income tax. Free online 1040ez   The exemption does not apply to pay for services performed in connection with any trade or business carried on for profit by the United States, or any of its agencies, instrumentalities, or political subdivisions. Free online 1040ez Students and apprentices (Article XX). Free online 1040ez   A full-time student, apprentice, or business trainee who is in Canada to study or acquire business experience is exempt from Canadian income tax on remittances received from any source outside Canada for maintenance, education, or training. Free online 1040ez The recipient must be or must have been a U. Free online 1040ez S. Free online 1040ez resident immediately before visiting Canada. Free online 1040ez   An apprentice or business trainee can claim this exemption only for a period of one year from the date the individual first arrived in Canada for the purpose of training. Free online 1040ez Pensions, Annuities, Social Security, and Alimony Under Article XVIII, pensions and annuities from Canadian sources paid to U. Free online 1040ez S. Free online 1040ez residents are subject to tax by Canada, but the tax is limited to 15% of the gross amount (if a periodic pension payment) or of the taxable amount (if an annuity). Free online 1040ez Canadian pensions and annuities paid to U. Free online 1040ez S. Free online 1040ez residents may be taxed by the United States, but the amount of any pension included in income for U. Free online 1040ez S. Free online 1040ez tax purposes may not be more than the amount that would be included in income in Canada if the recipient were a Canadian resident. Free online 1040ez Pensions. Free online 1040ez   A pension includes any payment under a pension or other retirement arrangement, Armed Forces retirement pay, war veterans pensions and allowances, and payments under a sickness, accident, or disability plan. Free online 1040ez It includes pensions paid by private employers and the government for services rendered. Free online 1040ez   Pensions also include payments from individual retirement arrangements (IRAs) in the United States, registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) in Canada. Free online 1040ez   Pensions do not include social security benefits. Free online 1040ez Roth IRAs. Free online 1040ez   A distribution from a Roth IRA is exempt from Canadian tax to the extent it would be exempt from U. Free online 1040ez S. Free online 1040ez tax if paid to a U. Free online 1040ez S. Free online 1040ez resident. Free online 1040ez In addition, you may elect to defer any tax in Canada on income accrued within the Roth IRA but not distributed by the Roth IRA. Free online 1040ez However, you cannot defer tax on any accruals due to contributions made after you become a Canadian resident. Free online 1040ez Tax-deferred plans. Free online 1040ez   Generally, income that accrues in a Canadian RRSP or RRIF is subject to U. Free online 1040ez S. Free online 1040ez tax, even if it is not distributed. Free online 1040ez However, a U. Free online 1040ez S. Free online 1040ez citizen or resident can elect to defer U. Free online 1040ez S. Free online 1040ez tax on income from the plan until the income is distributed. Free online 1040ez Form 8891 is used to make the election. Free online 1040ez Annuities. Free online 1040ez    An annuity is a stated sum payable periodically at stated times, during life, or during a specified number of years, under an obligation to make the payments in return for adequate and full consideration (other than services rendered). Free online 1040ez Annuities do not include: Non-periodic payments, or An annuity the cost of which was deductible for tax purposes. Free online 1040ez Special rules. Free online 1040ez    Special rules apply to pensions and annuities with respect to: Short-term assignments, Cross-border commuters, and Individuals who participate in a Canadian qualifying plan. Free online 1040ez Generally, distributions in such cases are deemed to be earned in the country in which the plan is established, without regard to where the services were rendered. Free online 1040ez Social security benefits. Free online 1040ez   U. Free online 1040ez S. Free online 1040ez social security benefits paid to a resident of Canada are taxed in Canada as if they were benefits under the Canada Pension Plan, except that 15% of the amount of the benefit is exempt from Canadian tax. Free online 1040ez Alimony. Free online 1040ez   Alimony and similar amounts (including child support payments) from Canadian sources paid to U. Free online 1040ez S. Free online 1040ez residents are exempt from Canadian tax. Free online 1040ez For purposes of U. Free online 1040ez S. Free online 1040ez tax, these amounts are excluded from income to the same extent they would be excluded from income in Canada if the recipient was a Canadian resident. Free online 1040ez Investment Income From Canadian Sources The treaty provides beneficial treatment for certain items of Canadian source income that result from an investment of capital. Free online 1040ez Dividends (Article X). Free online 1040ez   For Canadian source dividends received by U. Free online 1040ez S. Free online 1040ez residents, the Canadian income tax generally may not be more than 15%. Free online 1040ez   A 5% rate applies to intercorporate dividends paid from a subsidiary to a parent corporation owning at least 10% of the subsidiary's voting stock. Free online 1040ez However, a 10% rate applies if the payer of the dividend is a nonresident-owned Canadian investment corporation. Free online 1040ez   These rates do not apply if the owner of the dividends carries on, or has carried on, a business in Canada through a permanent establishment and the holding on which the income is paid is effectively connected with that permanent establishment. Free online 1040ez Interest (Article XI). Free online 1040ez   Generally, Canadian source interest received by U. Free online 1040ez S. Free online 1040ez residents is exempt from Canadian income tax. Free online 1040ez   The exemption does not apply if the owner of the interest carries on, or has carried on, a business in Canada through a permanent establishment and the debt on which the income is paid is effectively connected with that permanent establishment. Free online 1040ez Gains from the sale of property (Article XIII). Free online 1040ez   Generally, gains from the sale of personal property by a U. Free online 1040ez S. Free online 1040ez resident having no permanent establishment in Canada are exempt from Canadian income tax. Free online 1040ez However, the exemption from Canadian tax does not apply to gains realized by U. Free online 1040ez S. Free online 1040ez residents on Canadian real property, and on personal property belonging to a permanent establishment in Canada. Free online 1040ez   If the property subject to Canadian tax is a capital asset and was owned by the U. Free online 1040ez S. Free online 1040ez resident on September 26, 1980, not as part of the business property of a permanent establishment in Canada, generally the taxable gain is limited to the appreciation after 1984. Free online 1040ez Royalties (Article XII). Free online 1040ez   The following are exempt from Canadian tax: Copyright royalties and other like payments for the production or reproduction of any literary, dramatic, musical, or artistic work (other than payments for motion pictures and works on film, videotape, or other means of reproduction for use in connection with television, which may be taxed at 10%), Payments for the use of, or the right to use, computer software, Payments for the use of, or the right to use, any patent or any information concerning industrial, commercial, or scientific experience (but not within a rental or franchise agreement), and Payments for broadcasting as agreed to in an exchange of notes between the countries. Free online 1040ez   This rate or exemption does not apply if the owner of the royalties carries on, or has carried on, a business in Canada through a permanent establishment and the right or property on which the income is paid is effectively connected with that permanent establishment. Free online 1040ez   This exemption (or lower rate) does not apply to royalties to explore for or to exploit mineral deposits, timber, and other natural resources. Free online 1040ez Other Income Generally, Canadian source income that is not specifically mentioned in the treaty, may be taxed by Canada. Free online 1040ez Gambling losses. Free online 1040ez   Canadian residents may deduct gambling losses in the U. Free online 1040ez S. Free online 1040ez against gambling winnings in the U. Free online 1040ez S. Free online 1040ez in the same manner as a U. Free online 1040ez S. Free online 1040ez resident. Free online 1040ez Charitable Contributions United States income tax return. Free online 1040ez   Under Article XXI, you may deduct contributions to certain qualified Canadian charitable organizations on your United States income tax return. Free online 1040ez Besides being subject to the overall limits applicable to all your charitable contributions under U. Free online 1040ez S. Free online 1040ez tax law, your charitable contributions to Canadian organizations (other than contributions to a college or university at which you or a member of your family is or was enrolled) are subject to the U. Free online 1040ez S. Free online 1040ez percentage limits on charitable contributions, applied to your Canadian source income. Free online 1040ez If your return does not include gross income from Canadian sources, charitable contributions to Canadian organizations are generally not deductible. Free online 1040ez Example. Free online 1040ez You are a U. Free online 1040ez S. Free online 1040ez citizen living in Canada. Free online 1040ez You have both U. Free online 1040ez S. Free online 1040ez and Canadian source income. Free online 1040ez During your tax year, you contribute to Canadian organizations that would qualify as charitable organizations under U. Free online 1040ez S. Free online 1040ez tax law if they were U. Free online 1040ez S. Free online 1040ez organizations. Free online 1040ez To figure the maximum amount of the contribution to Canadian organizations that you can deduct on your U. Free online 1040ez S. Free online 1040ez income tax return, multiply your adjusted gross income from Canadian sources by the percentage limit that applies to contributions under U. Free online 1040ez S. Free online 1040ez income tax law. Free online 1040ez Then include this amount on your return along with all your domestic charitable contributions, subject to the appropriate percentage limit required for contributions under U. Free online 1040ez S. Free online 1040ez income tax law. Free online 1040ez The appropriate percentage limit for U. Free online 1040ez S. Free online 1040ez tax purposes is applied to your total adjusted gross income from all sources. Free online 1040ez Qualified charities. Free online 1040ez   These Canadian organizations must meet the qualifications that a U. Free online 1040ez S. Free online 1040ez charitable organization must meet under U. Free online 1040ez S. Free online 1040ez tax law. Free online 1040ez Usually an organization will notify you if it qualifies. Free online 1040ez For further information on charitable contributions and the U. Free online 1040ez S. Free online 1040ez percentage limits, see Publication 526, Charitable Contributions. Free online 1040ez Canadian income tax return. Free online 1040ez   Under certain conditions, contributions to qualified U. Free online 1040ez S. Free online 1040ez charitable organizations may also be claimed on your Canadian income tax return if you are a Canadian resident. Free online 1040ez Income Tax Credits The treaty contains a credit provision (Article XXIV) for the elimination of double taxation. Free online 1040ez In general, the United States and Canada both allow a credit against their income tax for the income tax paid to the other country on income from sources in that other country. Free online 1040ez For detailed discussions of the U. Free online 1040ez S. Free online 1040ez income tax treatment of tax paid to foreign countries, see Publication 514, Foreign Tax Credit for Individuals. Free online 1040ez See paragraphs (4) and (5) of Article XXIV for certain provisions that affect the computation of the credit allowed by the United States for Canadian income taxes paid by U. Free online 1040ez S. Free online 1040ez citizens residing in Canada. Free online 1040ez Competent Authority Assistance Under Article XXVI, a U. Free online 1040ez S. Free online 1040ez citizen or resident may request assistance from the U. Free online 1040ez S. Free online 1040ez competent authority when the actions of Canada, the United States, or both, potentially result in double taxation or taxation contrary to the treaty. Free online 1040ez The U. Free online 1040ez S. Free online 1040ez competent authority may then consult with the Canadian competent authority to determine if the double taxation or denial of treaty benefits in question can be avoided. Free online 1040ez If the competent authorities are not able to reach agreement in a case, binding arbitration proceedings may apply. Free online 1040ez It is important that your request for competent authority assistance be made as soon as you have been notified by either Canada or the United States of proposed adjustments that would result in denial of treaty benefits or in double taxation. Free online 1040ez This is so that implementation of any agreement reached by the competent authorities is not barred by administrative, legal, or procedural barriers. Free online 1040ez For information that you should include with your request for competent authority assistance, see Revenue Procedure 2006-54, 2006-49 IRB 1035, available at www. Free online 1040ez irs. Free online 1040ez gov/irb/2006-49_IRB/ar13. Free online 1040ez html. Free online 1040ez The request should be addressed to:  Deputy Commissioner (International) Large Business and International Division Attn: Office of Tax Treaty  Internal Revenue Service 1111 Constitution Ave. Free online 1040ez , NW Routing: MA3-322A Washington, D. Free online 1040ez C. Free online 1040ez 20024 In addition to a timely request for assistance, you should take the following measures: File a timely protective claim for credit or refund of U. Free online 1040ez S. Free online 1040ez taxes on Form 1040X, Form 1120X, or amended Form 1041, whichever is appropriate. Free online 1040ez This will, among other things, give you the benefit of a foreign tax credit in case you do not qualify for the treaty benefit in question. Free online 1040ez For figuring this credit, attach either Form 1116, Foreign Tax Credit (Individual, Estate, or Trust), or Form 1118, Foreign Tax Credit — Corporations, as appropriate. Free online 1040ez Attach your protective claim to your request for competent authority assistance. Free online 1040ez Take appropriate action under Canadian procedures to avoid the lapse or termination of your right of appeal under Canadian income tax law. Free online 1040ez How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS and the Canada Revenue Agency in several ways. Free online 1040ez Text of Treaty You can get the text of the U. Free online 1040ez S. Free online 1040ez —Canada income tax treaty from: Superintendent of Documents U. Free online 1040ez S. Free online 1040ez Government Printing Office P. Free online 1040ez O. Free online 1040ez Box 371954 Pittsburgh, PA 15250-7954 The treaty can also be found on the Internet at IRS. Free online 1040ez gov. Free online 1040ez U. Free online 1040ez S. Free online 1040ez Taxation During the filing season, the IRS conducts a taxpayer assistance program in Canada. Free online 1040ez To find out if IRS personnel will be in your area, you should contact the consular office at the nearest U. Free online 1040ez S. Free online 1040ez Embassy or consulate. Free online 1040ez Mail. Free online 1040ez For answers to technical or account questions, you can write to:   Internal Revenue Service International Section Philadelphia, PA 19255-0525 Phone. Free online 1040ez You can call the IRS for help at (267) 941-1000 (not a toll-free call). Free online 1040ez Canadian Taxation You can get information on Canadian taxation from the Canada Revenue Agency. Free online 1040ez The International Tax Services Office can be contacted on 1-800-267-5177 (from anywhere in Canada and the U. Free online 1040ez S. Free online 1040ez ) or on the Internet at www. Free online 1040ez cra-arc. Free online 1040ez gc. Free online 1040ez ca. Free online 1040ez Prev  Up  Next   Home   More Online Publications