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Free Prior Year Tax Software

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Free Prior Year Tax Software

Free prior year tax software 7. Free prior year tax software   Filing Information Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: What, When, and Where To FileResident Aliens Nonresident Aliens Amended Returns and Claims for Refund Other Forms You May Have To File PenaltiesCivil Penalties Criminal Penalties Introduction This chapter provides the basic filing information that you may need. Free prior year tax software Topics - This chapter discusses: Forms aliens must file, When and where to file, Penalties, and Amended returns and claims for refund. Free prior year tax software Useful Items - You may want to see: Forms (and Instructions) 1040 U. Free prior year tax software S. Free prior year tax software Individual Income Tax Return 1040A U. Free prior year tax software S. Free prior year tax software Individual Income Tax Return 1040EZ Income Tax Return for Single and Joint Filers With No Dependents 1040NR U. Free prior year tax software S. Free prior year tax software Nonresident Alien Income Tax Return 1040NR-EZ U. Free prior year tax software S. Free prior year tax software Income Tax Return for Certain Nonresident Aliens With No Dependents See chapter 12 for information about getting these forms. Free prior year tax software What, When, and Where To File What return you must file as well as when and where you file that return, depends on your status at the end of the tax year as a resident or a nonresident alien. Free prior year tax software Resident Aliens Resident aliens should file Form 1040EZ, 1040A, or 1040 at the address shown in the instructions for that form. Free prior year tax software The due date for filing the return and paying any tax due is April 15 of the year following the year for which you are filing a return (but see the Tip, later). Free prior year tax software Under U. Free prior year tax software S. Free prior year tax software immigration law, a lawful permanent resident who is required to file a tax return as a resident and fails to do so may be regarded as having abandoned status and may lose permanent resident status. Free prior year tax software Extensions of time to file. Free prior year tax software   You are allowed an automatic extension to June 15 to file if your main place of business and the home you live in are outside the United States and Puerto Rico on April 15. Free prior year tax software You can get an extension of time to October 15 to file your return if you get an extension by April 15 (June 15 if you qualify for the June 15 extension). Free prior year tax software Use Form 4868 to get the extension to October 15. Free prior year tax software In addition to this 6-month extension, taxpayers who are out of the country (as defined in the Form 4868 instructions) can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). Free prior year tax software To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. Free prior year tax software Send the letter by the extended due date (October 15 for calendar year taxpayers) to the following address:  Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215   You will not receive any notification from the IRS unless your request is denied for being untimely. Free prior year tax software   The discretionary 2-month additional extension is not available to taxpayers who have an approved extension of time to file on Form 2350 (for U. Free prior year tax software S. Free prior year tax software citizens and resident aliens abroad who expect to qualify for special tax treatment). Free prior year tax software    If the due date for filing falls on a Saturday, Sunday, or legal holiday, the due date is the next day which is not a Saturday, Sunday, or legal holiday. Free prior year tax software You may be able to file your return electronically. Free prior year tax software See IRS e-file in your form instructions. Free prior year tax software Nonresident Aliens Nonresident aliens who are required to file an income tax return should use Form 1040NR or, if qualified, Form 1040NR-EZ. Free prior year tax software If you are any of the following, you must file a return. Free prior year tax software A nonresident alien individual engaged or considered to be engaged in a trade or business in the United States during 2013. Free prior year tax software (But see Exceptions , later. Free prior year tax software ) You must file even if: Your income did not come from a trade or business conducted in the United States, You have no income from U. Free prior year tax software S. Free prior year tax software sources, or Your income is exempt from income tax. Free prior year tax software A nonresident alien individual not engaged in a trade or business in the United States with U. Free prior year tax software S. Free prior year tax software income on which the tax liability was not satisfied by the withholding of tax at the source. Free prior year tax software A representative or agent responsible for filing the return of an individual described in (1) or (2). Free prior year tax software A fiduciary for a nonresident alien estate or trust. Free prior year tax software You must also file if you want to: Claim a refund of overwithheld or overpaid tax, or Claim the benefit of any deductions or credits. Free prior year tax software For example, if you have no U. Free prior year tax software S. Free prior year tax software business activities but have income from real property that you choose to treat as effectively connected income (discussed in chapter 4), you must timely file a true and accurate return to take any allowable deductions against that income. Free prior year tax software For information on what is timely, see When to file for deductions and credits under When To File, later. Free prior year tax software Exceptions. Free prior year tax software   You do not need to file Form 1040NR or Form 1040NR-EZ if you meet either of the following conditions. Free prior year tax software Your only U. Free prior year tax software S. Free prior year tax software trade or business was the performance of personal services, and Your wages were less than $3,900, and You have no other need to file a return to claim a refund of overwithheld taxes, to satisfy additional withholding at source, or to claim income exempt or partly exempt by treaty. Free prior year tax software You were a nonresident alien student, teacher, or trainee who was temporarily present in the United States under an “F,” “J,” “M,” or “Q” visa and you have no income that is subject to tax, such as wages, tips, scholarship and fellowship grants, dividends, etc. Free prior year tax software Even if you have left the United States and filed a Form 1040-C, U. Free prior year tax software S. Free prior year tax software Departing Alien Income Tax Return, on departure, you still must file an annual U. Free prior year tax software S. Free prior year tax software income tax return. Free prior year tax software If you are married and both you and your spouse are required to file, you must each file a separate return. Free prior year tax software Form 1040NR-EZ You can use Form 1040NR-EZ if all of the following conditions are met. Free prior year tax software You do not claim any dependents. Free prior year tax software You cannot be claimed as a dependent on someone else's U. Free prior year tax software S. Free prior year tax software tax return. Free prior year tax software If you were married, you do not claim an exemption for your spouse. Free prior year tax software Your taxable income is less than $100,000. Free prior year tax software The only itemized deduction you can claim is for state and local income taxes. Free prior year tax software Note. Free prior year tax software Residents of India who were students or business apprentices may be able to take the standard deduction instead of the itemized deduction for state and local income taxes. Free prior year tax software See chapter 5. Free prior year tax software Your only U. Free prior year tax software S. Free prior year tax software source income is from wages, salaries, tips, taxable refunds of state and local income taxes, scholarship or fellowship grants, and nontaxable interest or dividends. Free prior year tax software (If you had taxable interest or dividend income, you cannot use this form. Free prior year tax software ) You are not claiming any adjustments to income other than the student loan interest deduction or scholarship and fellowship grants excluded. Free prior year tax software You are not claiming any tax credits. Free prior year tax software This is not an “expatriation return. Free prior year tax software ” See Expatriation Tax in chapter 4. Free prior year tax software The only taxes you owe are: The income tax from the Tax Table. Free prior year tax software The social security and Medicare tax from Form 4137 or Form 8919. Free prior year tax software You are not claiming a credit for excess social security and tier 1 RRTA tax withheld. Free prior year tax software You are not filing Form 8959, to figure the amount of Additional Medicare Tax you owe and/or the amount of Additional Medicare Tax withheld by your employer, if any. Free prior year tax software If you do not meet all of the above conditions, you must file Form 1040NR. Free prior year tax software When To File If you are an employee and you receive wages subject to U. Free prior year tax software S. Free prior year tax software income tax withholding, you will generally file by the 15th day of the 4th month after your tax year ends. Free prior year tax software For the 2013 calendar year, file your return by April 15, 2014. Free prior year tax software If you are not an employee who receives wages subject to U. Free prior year tax software S. Free prior year tax software income tax withholding, you must file by the 15th day of the 6th month after your tax year ends. Free prior year tax software For the 2013 calendar year, file your return by June 16, 2014 (because June 15 is a Sunday. Free prior year tax software ) Extensions of time to file. Free prior year tax software   If you cannot file your return by the due date, file Form 4868 or use one of the electronic filing options explained in the Form 4868 instructions. Free prior year tax software For the 2013 calendar year, this will extend the due date to October 15, 2014 (December 15, 2014, if the regular due date of your return is June 16, 2014). Free prior year tax software You must file the extension by the regular due date of your return. Free prior year tax software   In addition to the 6-month extension to October 15, taxpayers whose main place of business is outside the United States and Puerto Rico and who live outside those jurisdictions can request a discretionary 2-month extension of time to file their returns (to December 15 for calendar year taxpayers). Free prior year tax software To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. Free prior year tax software Send the letter by the extended due date (October 15 for calendar year taxpayers) to the following address: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215   You will not receive any notification from the IRS unless your request is denied for being untimely. Free prior year tax software When to file for deductions and credits. Free prior year tax software   To get the benefit of any allowable deductions or credits, you must timely file a true and accurate return. Free prior year tax software For this purpose, a return is timely if it is filed within 16 months of the due date just discussed. Free prior year tax software However, if you did not file a 2012 tax return and 2013 is not the first year for which you are required to file one, your 2013 return is timely for this purpose if it is filed by the earlier of: The date that is 16 months after the due date for filing your 2013 return, or The date the IRS notifies you that your 2013 return has not been filed and that you cannot claim certain deductions and credits. Free prior year tax software The allowance of the following credits is not affected by this time requirement. Free prior year tax software Credit for withheld taxes. Free prior year tax software Credit for excise tax on certain uses of gasoline and special fuels. Free prior year tax software Credit for tax paid by a mutual fund (or other regulated investment company) or a real estate investment trust on undistributed long-term capital gains. Free prior year tax software Protective return. Free prior year tax software   If your activities in the United States were limited and you do not believe that you had any gross income effectively connected with a U. Free prior year tax software S. Free prior year tax software trade or business during the year, you can file a protective return (Form 1040NR) by the deadline explained above. Free prior year tax software By filing a protective return, you protect your right to receive the benefit of deductions and credits in the event it is later determined that some or all of your income is effectively connected. Free prior year tax software You are not required to report any effectively connected income or any deductions on the protective return, but you must give the reason the return is being filed. Free prior year tax software   If you believe some of your activities resulted in effectively connected income, file your return reporting that income and related deductions by the regular due date. Free prior year tax software To protect your right to claim deductions or credits resulting from other activities, attach a statement to that return explaining that you wish to protect your right to claim deductions and credits if it is later determined that the other activities produced effectively connected income. Free prior year tax software   You can follow the same procedure if you believe you have no U. Free prior year tax software S. Free prior year tax software tax liability because of a U. Free prior year tax software S. Free prior year tax software tax treaty. Free prior year tax software Be sure to also complete item L on page 5 of Form 1040NR. Free prior year tax software Waiver of filing deadline. Free prior year tax software   The IRS may waive the filing deadline if you establish that, based on the facts and circumstances, you acted reasonably and in good faith in failing to file a U. Free prior year tax software S. Free prior year tax software income tax return (including a protective return) and you cooperate with the IRS in determining your U. Free prior year tax software S. Free prior year tax software income tax liability for the tax year for which you did not file a return. Free prior year tax software Where To File If you are not enclosing a payment, file Form 1040NR-EZ and Form 1040NR at the following address. Free prior year tax software  Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215 If enclosing a payment, mail your return to:  Internal Revenue Service  P. Free prior year tax software O. Free prior year tax software Box 1303 Charlotte, NC 28201-1303 Aliens from the U. Free prior year tax software S. Free prior year tax software Virgin Islands. Free prior year tax software    If you are a bona fide resident of the U. Free prior year tax software S. Free prior year tax software Virgin Islands during your entire tax year and work temporarily in the United States, you must pay your income taxes to the U. Free prior year tax software S. Free prior year tax software Virgin Islands and file your income tax returns at the following address. Free prior year tax software Virgin Islands Bureau of Internal Revenue 6115 Estate Smith Bay Suite 225 St. Free prior year tax software Thomas, VI 00802   Report all income from U. Free prior year tax software S. Free prior year tax software sources, as well as income from other sources, on your return. Free prior year tax software For information on filing U. Free prior year tax software S. Free prior year tax software Virgin Islands returns, contact the U. Free prior year tax software S. Free prior year tax software Virgin Islands Bureau of Internal Revenue. Free prior year tax software   Chapter 8 discusses withholding from U. Free prior year tax software S. Free prior year tax software wages of U. Free prior year tax software S. Free prior year tax software Virgin Islanders. Free prior year tax software Aliens from Guam or the Commonwealth of the Northern Mariana Islands. Free prior year tax software   If you are a bona fide resident of Guam or the Commonwealth of the Northern Mariana Islands (CNMI) during your entire tax year, you must file your return with, and pay any tax due to, Guam or the CNMI. Free prior year tax software Report all income, including income from U. Free prior year tax software S. Free prior year tax software sources, on your return. Free prior year tax software It is not necessary to file a separate U. Free prior year tax software S. Free prior year tax software income tax return. Free prior year tax software    Bona fide residents of Guam should file their Guam returns at the following address. Free prior year tax software   Department of Revenue and Taxation Government of Guam P. Free prior year tax software O. Free prior year tax software Box 23607 GMF, GU 96921    Bona fide residents of the CNMI should file their CNMI income tax returns at the following address. Free prior year tax software   Department of Finance Division of Revenue and Taxation Commonwealth of the Northern Mariana Islands P. Free prior year tax software O. Free prior year tax software Box 5234 CHRB Saipan, MP 96950   If you are not a bona fide resident of Guam or the CNMI, see Pub. Free prior year tax software 570, Tax Guide for Individuals With Income From U. Free prior year tax software S. Free prior year tax software Possessions, for information on where to file your return. Free prior year tax software Amended Returns and Claims for Refund If you find changes in your income, deductions, or credits after you mail your return, file Form 1040X, Amended U. Free prior year tax software S. Free prior year tax software Individual Income Tax Return. Free prior year tax software Also use Form 1040X if you should have filed Form 1040, 1040A, or 1040EZ instead of Form 1040NR or 1040NR-EZ, or vice versa. Free prior year tax software If you amend Form 1040NR or Form 1040NR-EZ or file the correct return, attach the corrected return (Form 1040, Form 1040NR, etc. Free prior year tax software ) to Form 1040X. Free prior year tax software Print “Amended” across the top. Free prior year tax software Ordinarily, an amended return claiming a refund must be filed within 3 years from the date your return was filed or within 2 years from the time the tax was paid, whichever is later. Free prior year tax software A return filed before the final due date is considered to have been filed on the due date. Free prior year tax software Other Forms You May Have To File You may be required to file information returns to report certain foreign income or assets, or monetary transactions. Free prior year tax software FinCen Form 105 FinCEN Form 105 (formerly Customs Form 4790), Report of International Transportation of Currency or Monetary Instruments, must be filed by each person who physically transports, mails, or ships, or causes to be physically transported, mailed, or shipped, currency or other monetary instruments in a total amount of more than $10,000 at one time from the United States to any place outside the United States, or into the United States from any place outside the United States. Free prior year tax software The filing requirement also applies to each person who receives in the United States currency or monetary instruments totaling more than $10,000 at one time from any place outside of the United States. Free prior year tax software The term “monetary instruments” means the following: Coin and currency of the United States or of any other country, Travelers' checks in any form, Investment securities or stock in bearer form or otherwise in such form that title to them passes upon delivery, Negotiable instruments (including checks, promissory notes, and money orders) in bearer form, endorsed without restriction, made out to a fictitious payee, or otherwise in such form that title to them passes upon delivery, and Checks, promissory notes, and money orders which are signed but on which the name of the payee has been omitted. Free prior year tax software However, the term does not include: Checks or money orders made payable to the order of a named person which have not been endorsed or which contain restrictive endorsements, Warehouse receipts, or Bills of lading. Free prior year tax software A transfer of funds through normal banking procedures (wire transfer) that does not involve the physical transportation of currency or monetary instruments is not required to be reported on FinCEN Form 105. Free prior year tax software Filing requirements. Free prior year tax software   FinCEN Form 105 filing requirements follow. Free prior year tax software Recipients. Free prior year tax software   Each person who receives currency or other monetary instruments in the United States must file FinCEN Form 105 within 15 days after receipt, with the Customs officer in charge at any port of entry or departure, or by mail at the following address. Free prior year tax software Commissioner of Customs  Attention: Currency Transportation Reports Washington, DC 20229 Shippers or mailers. Free prior year tax software   If the currency or other monetary instrument does not accompany the person entering or departing the United States, FinCEN Form 105 can be filed by mail at the above address on or before the date of entry, departure, mailing, or shipping. Free prior year tax software Travelers. Free prior year tax software   Travelers must file FinCEN Form 105 with the Customs officer in charge at any Customs port of entry or departure, when entering or departing the United States. Free prior year tax software Penalties. Free prior year tax software   Civil and criminal penalties are provided for failing to file a report, filing a report containing material omissions or misstatements, or filing a false or fraudulent report. Free prior year tax software Also, the entire amount of the currency or monetary instrument may be subject to seizure and forfeiture. Free prior year tax software More information. Free prior year tax software   More information regarding the filing of FinCEN Form 105 can be found in the instructions on the back of the form. Free prior year tax software Form 8938 You may have to file Form 8938, Statement of Specified Foreign Financial Assets, to report the ownership of specified foreign financial asset(s) if you are one of the following individuals. Free prior year tax software A resident alien of the United States for any part of the tax year. Free prior year tax software A resident alien of the United States who elects to be treated as a resident of a foreign country under the provisions of a U. Free prior year tax software S. Free prior year tax software income tax treaty. Free prior year tax software See Effect of Tax Treaties in chapter 1. Free prior year tax software A nonresident alien who makes an election to be treated as a resident alien for purposes of filing a joint income tax return. Free prior year tax software See chapter 1 for information about this election. Free prior year tax software A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico. Free prior year tax software See Publication 570, Tax Guide for Individuals With Income From U. Free prior year tax software S. Free prior year tax software Possessions, for a definition of bona fide resident. Free prior year tax software You must file Form 8938 if the total value of those assets exceeds an applicable threshold (the “reporting threshold”). Free prior year tax software The reporting threshold varies depending on whether you live in the United States, are married, or file a joint income tax return with your spouse. Free prior year tax software Specified foreign financial assets include any financial account maintained by a foreign financial institution and, to the extent held for investment, any stock, securities, or any other interest in a foreign entity and any financial instrument or contract with an issuer or counterparty that is not a U. Free prior year tax software S. Free prior year tax software person. Free prior year tax software You may have to pay penalties if you are required to file Form 8938 and fail to do so, or if you have an understatement of tax due to any transaction involving an undisclosed foreign financial asset. Free prior year tax software More information about the filing of Form 8938 can be found in the separate instructions for Form 8938. Free prior year tax software Penalties The law provides penalties for failure to file returns or pay taxes as required. Free prior year tax software Civil Penalties If you do not file your return and pay your tax by the due date, you may have to pay a penalty. Free prior year tax software You may also have to pay a penalty if you substantially understate your tax, file a frivolous tax submission, or fail to supply your taxpayer identification number. Free prior year tax software If you provide fraudulent information on your return, you may have to pay a civil fraud penalty. Free prior year tax software Filing late. Free prior year tax software   If you do not file your return by the due date (including extensions), you may have to pay a failure-to-file penalty. Free prior year tax software The penalty is based on the tax not paid by the due date (without regard to extensions). Free prior year tax software The penalty is usually 5% for each month or part of a month that a return is late, but not more than 25%. Free prior year tax software Fraud. Free prior year tax software   If your failure to file is due to fraud, the penalty is 15% for each month or part of a month that your return is late, up to a maximum of 75%. Free prior year tax software Return over 60 days late. Free prior year tax software   If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax. Free prior year tax software Exception. Free prior year tax software   You will not have to pay the penalty if you show that you failed to file on time because of reasonable cause and not because of willful neglect. Free prior year tax software Paying tax late. Free prior year tax software   You will have to pay a failure-to-pay penalty of ½ of 1% (. Free prior year tax software 50%) of your unpaid taxes for each month, or part of a month, after the due date that the tax is not paid. Free prior year tax software This penalty does not apply during the automatic 6-month extension of time to file period, if you paid at least 90% of your actual tax liability on or before the due date of your return and pay the balance when you file the return. Free prior year tax software   The monthly rate of the failure-to-pay penalty is half the usual rate (. Free prior year tax software 25% instead of . Free prior year tax software 50%) if an installment agreement is in effect for that month. Free prior year tax software You must have filed your return by the due date (including extensions) to qualify for this reduced penalty. Free prior year tax software   If a notice of intent to levy is issued, the rate will increase to 1% at the start of the first month beginning at least 10 days after the day that the notice is issued. Free prior year tax software If a notice and demand for immediate payment is issued, the rate will increase to 1% at the start of the first month beginning after the day that the notice and demand is issued. Free prior year tax software   This penalty cannot be more than 25% of your unpaid tax. Free prior year tax software You will not have to pay the penalty if you can show that you had a good reason for not paying your tax on time. Free prior year tax software Combined penalties. Free prior year tax software   If both the failure-to-file penalty and the failure-to-pay penalty (discussed earlier) apply in any month, the 5% (or 15%) failure-to-file penalty is reduced by the failure-to-pay penalty. Free prior year tax software However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax. Free prior year tax software Accuracy-related penalty. Free prior year tax software   You may have to pay an accuracy-related penalty if you underpay your tax because: You show negligence or disregard of rules or regulations, You substantially understate your income tax, You claim tax benefits for a transaction that lacks economic substance, or You fail to disclose a foreign financial asset. Free prior year tax software The penalty is equal to 20% of the underpayment. Free prior year tax software The penalty is 40% of any portion of the underpayment that is attributable to an undisclosed noneconomic substance transaction or an undisclosed foreign financial asset transaction. Free prior year tax software The penalty will not be figured on any part of an underpayment on which the fraud penalty (discussed later) is charged. Free prior year tax software Negligence or disregard. Free prior year tax software   The term “negligence” includes a failure to make a reasonable attempt to comply with the tax law or to exercise ordinary and reasonable care in preparing a return. Free prior year tax software Negligence also includes failure to keep adequate books and records. Free prior year tax software You will not have to pay a negligence penalty if you have a reasonable basis for a position you took. Free prior year tax software   The term “disregard” includes any careless, reckless, or intentional disregard. Free prior year tax software Adequate disclosure. Free prior year tax software   You can avoid the penalty for disregard of rules or regulations if you adequately disclose on your return a position that has at least a reasonable basis. Free prior year tax software See Disclosure statement , later. Free prior year tax software   This exception will not apply to an item that is attributable to a tax shelter. Free prior year tax software In addition, it will not apply if you fail to keep adequate books and records, or substantiate items properly. Free prior year tax software Substantial understatement of income tax. Free prior year tax software   You understate your tax if the tax shown on your return is less than the correct tax. Free prior year tax software The understatement is substantial if it is more than the larger of 10% of the correct tax or $5,000. Free prior year tax software However, the amount of the understatement is reduced to the extent the understatement is due to: Substantial authority, or Adequate disclosure and a reasonable basis. Free prior year tax software   If an item on your return is attributable to a tax shelter, there is no reduction for an adequate disclosure. Free prior year tax software However, there is a reduction for a position with substantial authority, but only if you reasonably believed that your tax treatment was more likely than not the proper treatment. Free prior year tax software Substantial authority. Free prior year tax software   Whether there is or was substantial authority for the tax treatment of an item depends on the facts and circumstances. Free prior year tax software Consideration will be given to court opinions, Treasury regulations, revenue rulings, revenue procedures, and notices and announcements issued by the IRS and published in the Internal Revenue Bulletin that involve the same or similar circumstances as yours. Free prior year tax software Disclosure statement. Free prior year tax software   To adequately disclose the relevant facts about your tax treatment of an item, use Form 8275, Disclosure Statement. Free prior year tax software You must also have a reasonable basis for treating the item the way you did. Free prior year tax software   In cases of substantial understatement only, items that meet the requirements of Revenue Procedure 2012-51, 2012-51 IRB 719 (or later update) are considered adequately disclosed on your return without filing Form 8275. Free prior year tax software   Use Form 8275-R, Regulation Disclosure Statement, to disclose items or positions contrary to regulations. Free prior year tax software Transaction lacking economic substance. Free prior year tax software   For more information on economic substance, see section 7701(o). Free prior year tax software Foreign financial asset. Free prior year tax software   For more information on undisclosed foreign financial assets, see section 6662(j) or the Instructions for Form 8938. Free prior year tax software Reasonable cause. Free prior year tax software   You will not have to pay a penalty if you show a good reason (reasonable cause) for the way you treated an item. Free prior year tax software You must also show that you acted in good faith. Free prior year tax software This does not apply to a transaction that lacks economic substance. Free prior year tax software Filing erroneous claim for refund or credit. Free prior year tax software   You may have to pay a penalty if you file an erroneous claim for refund or credit. Free prior year tax software The penalty is equal to 20% of the disallowed amount of the claim, unless you can show a reasonable basis for the way you treated an item. Free prior year tax software However, any disallowed amount due to a transaction that lacks economic substance will not be treated as having a reasonable basis. Free prior year tax software The penalty will not be figured on any part of the disallowed amount of the claim that relates to the earned income credit or on which the accuracy-related or fraud penalties are charged. Free prior year tax software Frivolous tax submission. Free prior year tax software   You may have to pay a penalty of $5,000 if you file a frivolous tax return or other frivolous submissions. Free prior year tax software A frivolous tax return is one that does not include enough information to figure the correct tax or that contains information clearly showing that the tax you reported is substantially incorrect. Free prior year tax software For more information on frivolous returns, frivolous submissions, and a list of positions that are identified as frivolous, see Notice 2010-33, 2010-17 IRB 609 available at www. Free prior year tax software irs. Free prior year tax software gov/irb/2010-17_irb/ar13. Free prior year tax software html. Free prior year tax software   You will have to pay the penalty if you filed this kind of return or submission based on a frivolous position or a desire to delay or interfere with the administration of federal tax laws. Free prior year tax software This includes altering or striking out the preprinted language above the space provided for your signature. Free prior year tax software   This penalty is added to any other penalty provided by law. Free prior year tax software Fraud. Free prior year tax software   If there is any underpayment of tax on your return due to fraud, a penalty of 75% of the underpayment due to fraud will be added to your tax. Free prior year tax software Failure to supply taxpayer identification number. Free prior year tax software   If you do not include your social security number (SSN) or individual taxpayer identification number (ITIN) or the SSN or ITIN of another person where required on a return, statement, or other document, you will be subject to a penalty of $50 for each failure. Free prior year tax software You will also be subject to a penalty of $50 if you do not give your SSN or ITIN to another person when it is required on a return, statement, or other document. Free prior year tax software   For example, if you have a bank account that earns interest, you must give your SSN or ITIN to the bank. Free prior year tax software The number must be shown on the Form 1099-INT or other statement the bank sends you. Free prior year tax software If you do not give the bank your SSN or ITIN, you will be subject to the $50 penalty. Free prior year tax software (You also may be subject to “backup” withholding of income tax. Free prior year tax software )   You will not have to pay the penalty if you are able to show that the failure was due to reasonable cause and not willful neglect. Free prior year tax software Criminal Penalties You may be subject to criminal prosecution (brought to trial) for actions such as: Tax evasion, Willful failure to file a return, supply information, or pay any tax due, Fraud and false statements, or Preparing and filing a fraudulent return. Free prior year tax software Prev  Up  Next   Home   More Online Publications
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The Free Prior Year Tax Software

Free prior year tax software 3. Free prior year tax software   Farm Income Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Schedule F (Form 1040) Sales of Farm ProductsSchedule F. Free prior year tax software Form 4797. Free prior year tax software Sales Caused by Weather-Related Conditions Rents (Including Crop Shares)Crop Shares Agricultural Program PaymentsCommodity Credit Corporation (CCC) Loans Conservation Reserve Program (CRP) Crop Insurance and Crop Disaster Payments Feed Assistance and Payments Cost-Sharing Exclusion (Improvements) Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 Tobacco Quota Buyout Program Payments Other Payments Payment to More Than One Person Income From CooperativesPatronage Dividends Per-Unit Retain Certificates Cancellation of DebtGeneral Rule Exceptions Exclusions Income From Other SourcesSod. Free prior year tax software Granting the right to remove deposits. Free prior year tax software Income Averaging for FarmersElected Farm Income (EFI) How To Figure the Tax Effect on Other Tax Determinations Tax for Certain Children Who Have Unearned Income Alternative Minimum Tax (AMT) Schedule J Introduction You may receive income from many sources. Free prior year tax software You must report the income from all the different sources on your tax return, unless it is excluded by law. Free prior year tax software Where you report the income on your tax return depends on its source. Free prior year tax software This chapter discusses farm income you report on Schedule F (Form 1040), Profit or Loss From Farming. Free prior year tax software For information on where to report other income, see the Instructions for Form 1040, U. Free prior year tax software S. Free prior year tax software Individual Income Tax Return. Free prior year tax software Accounting method. Free prior year tax software   The rules discussed in this chapter assume you use the cash method of accounting. Free prior year tax software Under the cash method, you generally include an item of income in gross income in the year you receive it. Free prior year tax software See Cash Method in chapter 2. Free prior year tax software   If you use an accrual method of accounting, different rules may apply to your situation. Free prior year tax software See Accrual Method in chapter 2. Free prior year tax software Topics - This chapter discusses: Schedule F Sales of farm products Rents (including crop shares) Agricultural program payments Income from cooperatives Cancellation of debt Income from other sources Income averaging for farmers Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 550 Investment Income and Expenses 908 Bankruptcy Tax Guide 925 Passive Activity and At-Risk Rules 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness Sch E (Form 1040) Supplemental Income and Loss Sch J (Form 1040) Income Averaging for Farmers and Fishermen 1099-G Certain Government Payments 1099-PATR Taxable Distributions Received From Cooperatives 4797 Sales of Business Property 4835 Farm Rental Income and Expenses See chapter 16 for information about getting publications and forms. Free prior year tax software Schedule F (Form 1040) Individuals, trusts, and partnerships report farm income on Schedule F (Form 1040), Profit or Loss From Farming. Free prior year tax software Use this schedule to figure the net profit or loss from regular farming operations. Free prior year tax software Income from farming reported on Schedule F includes amounts you receive from cultivating, operating, or managing a farm for gain or profit, either as owner or tenant. Free prior year tax software This includes income from operating a stock, dairy, poultry, fish, fruit, or truck farm and income from operating a plantation, ranch, range, or orchard. Free prior year tax software It also includes income from the sale of crop shares if you materially participate in producing the crop. Free prior year tax software See Rents (Including Crop Shares) , later. Free prior year tax software Income received from operating a nursery, which specializes in growing ornamental plants, is considered to be income from farming. Free prior year tax software Income reported on Schedule F does not include gains or losses from sales or other dispositions of the following farm assets. Free prior year tax software Land. Free prior year tax software Depreciable farm equipment. Free prior year tax software Buildings and structures. Free prior year tax software Livestock held for draft, breeding, sport, or dairy purposes. Free prior year tax software Gains and losses from most dispositions of farm assets are discussed in chapters 8 and 9. Free prior year tax software Gains and losses from casualties, thefts, and condemnations are discussed in chapter 11. Free prior year tax software Sales of Farm Products Where to report. Free prior year tax software    Table 3-1 shows where to report the sale of farm products on your tax return. Free prior year tax software Schedule F. Free prior year tax software   Amounts received from the sales of products you raised on your farm for sale (or bought for resale), such as livestock, produce, or grains, are reported on Schedule F. Free prior year tax software This includes money and the fair market value of any property or services you receive. Free prior year tax software When you sell farm products bought for resale, your profit or loss is the difference between your selling price (money plus the fair market value of any property) and your basis in the item (usually the cost). Free prior year tax software See chapter 6 for information on the basis of assets. Free prior year tax software You generally report these amounts on Schedule F for the year you receive payment. Free prior year tax software Example. Free prior year tax software In 2012, you bought 20 feeder calves for $11,000 for resale. Free prior year tax software You sold them in 2013 for $21,000. Free prior year tax software You report the $21,000 sales price on Schedule F, line 1b, subtract your $11,000 basis on line 1d, and report the resulting $10,000 profit on line 1e. Free prior year tax software Form 4797. Free prior year tax software   Sales of livestock held for draft, breeding, sport, or dairy purposes may result in ordinary or capital gains or losses, depending on the circumstances. Free prior year tax software In either case, you should always report these sales on Form 4797 instead of Schedule F. Free prior year tax software See Livestock under Ordinary or Capital Gain or Loss in chapter 8. Free prior year tax software Animals you do not hold primarily for sale are considered business assets of your farm. Free prior year tax software Table 3-1. Free prior year tax software Where To Report Sales of Farm Products Item Sold Schedule F Form 4797 Farm products raised for sale X   Farm products bought for resale X   Farm assets not held primarily for sale, such as livestock held for draft, breeding, sport, or dairy purposes (bought or raised)   X Sale by agent. Free prior year tax software   If your agent sells your farm products, you have constructive receipt of the income when your agent receives payment and you must include the net proceeds from the sale in gross income for the year the agent receives payment. Free prior year tax software This applies even if your agent pays you in a later year. Free prior year tax software For a discussion on constructive receipt of income, see Cash Method under Accounting Methods in chapter 2. Free prior year tax software Sales Caused by Weather-Related Conditions If you sell or exchange more livestock, including poultry, than you normally would in a year because of a drought, flood, or other weather-related condition, you may be able to postpone reporting the gain from the additional animals until the next year. Free prior year tax software You must meet all the following conditions to qualify. Free prior year tax software Your principal trade or business is farming. Free prior year tax software You use the cash method of accounting. Free prior year tax software You can show that, under your usual business practices, you would not have sold or exchanged the additional animals this year except for the weather-related condition. Free prior year tax software The weather-related condition caused an area to be designated as eligible for assistance by the federal government. Free prior year tax software Sales or exchanges made before an area became eligible for federal assistance qualify if the weather-related condition that caused the sale or exchange also caused the area to be designated as eligible for federal assistance. Free prior year tax software The designation can be made by the President, the Department of Agriculture (or any of its agencies), or by other federal departments or agencies. Free prior year tax software A weather-related sale or exchange of livestock (other than poultry) held for draft, breeding, or dairy purposes may be an involuntary conversion. Free prior year tax software See Other Involuntary Conversions in chapter 11. Free prior year tax software Usual business practice. Free prior year tax software   You must determine the number of animals you would have sold had you followed your usual business practice in the absence of the weather-related condition. Free prior year tax software Do this by considering all the facts and circumstances, but do not take into account your sales in any earlier year for which you postponed the gain. Free prior year tax software If you have not yet established a usual business practice, rely on the usual business practices of similarly situated farmers in your general region. Free prior year tax software Connection with affected area. Free prior year tax software   The livestock does not have to be raised or sold in an area affected by a weather-related condition for the postponement to apply. Free prior year tax software However, the sale must occur solely because of a weather-related condition that affected the water, grazing, or other requirements of the livestock. Free prior year tax software This requirement generally will not be met if the costs of feed, water, or other requirements of the livestock affected by the weather-related condition are not substantial in relation to the total costs of holding the livestock. Free prior year tax software Classes of livestock. Free prior year tax software   You must figure the amount to be postponed separately for each generic class of animals—for example, hogs, sheep, and cattle. Free prior year tax software Do not separate animals into classes based on age, sex, or breed. Free prior year tax software Amount to be postponed. Free prior year tax software   Follow these steps to figure the amount of gain to be postponed for each class of animals. Free prior year tax software Divide the total income realized from the sale of all livestock in the class during the tax year by the total number of such livestock sold. Free prior year tax software For this purpose, do not treat any postponed gain from the previous year as income received from the sale of livestock. Free prior year tax software Multiply the result in (1) by the excess number of such livestock sold solely because of weather-related conditions. Free prior year tax software Example. Free prior year tax software You are a calendar year taxpayer and you normally sell 100 head of beef cattle a year. Free prior year tax software As a result of drought, you sold 135 head during 2012. Free prior year tax software You realized $70,200 from the sale. Free prior year tax software On August 9, 2012, as a result of drought, the affected area was declared a disaster area eligible for federal assistance. Free prior year tax software The income you can postpone until 2013 is $18,200 [($70,200 ÷ 135) × 35]. Free prior year tax software How to postpone gain. Free prior year tax software   To postpone gain, attach a statement to your tax return for the year of the sale. Free prior year tax software The statement must include your name and address and give the following information for each class of livestock for which you are postponing gain. Free prior year tax software A statement that you are postponing gain under Internal Revenue Code (IRC) section 451(e). Free prior year tax software Evidence of the weather-related conditions that forced the early sale or exchange of the livestock and the date, if known, on which an area was designated as eligible for assistance by the federal government because of weather-related conditions. Free prior year tax software A statement explaining the relationship of the area affected by the weather-related condition to your early sale or exchange of the livestock. Free prior year tax software The number of animals sold in each of the 3 preceding years. Free prior year tax software The number of animals you would have sold in the tax year had you followed your normal business practice in the absence of weather-related conditions. Free prior year tax software The total number of animals sold and the number sold because of weather-related conditions during the tax year. Free prior year tax software A computation, as described above, of the income to be postponed for each class of livestock. Free prior year tax software   Generally, you must file the statement and the return by the due date of the return, including extensions. Free prior year tax software However, for sales or exchanges treated as an involuntary conversion from weather-related sales of livestock in an area eligible for federal assistance (discussed in chapter 11), you can file this statement at any time during the replacement period. Free prior year tax software For other sales or exchanges, if you timely filed your return for the year without postponing gain, you can still postpone gain by filing an amended return within 6 months of the due date of the return (excluding extensions). Free prior year tax software Attach the statement to the amended return and write “Filed pursuant to section 301. Free prior year tax software 9100-2” at the top of the amended return. Free prior year tax software File the amended return at the same address you filed the original return. Free prior year tax software Once you have filed the statement, you can cancel your postponement of gain only with the approval of the IRS. Free prior year tax software Rents (Including Crop Shares) The rent you receive for the use of your farmland is generally rental income, not farm income. Free prior year tax software However, if you materially participate in farming operations on the land, the rent is farm income. Free prior year tax software See Landlord Participation in Farming in chapter 12. Free prior year tax software Pasture income and rental. Free prior year tax software   If you pasture someone else's livestock and take care of them for a fee, the income is from your farming business. Free prior year tax software You must enter it as Other income on Schedule F. Free prior year tax software If you simply rent your pasture for a flat cash amount without providing services, report the income as rent on Part I of Schedule E (Form 1040), Supplemental Income and Loss. Free prior year tax software Crop Shares You must include rent you receive in the form of crop shares in income in the year you convert the shares to money or the equivalent of money. Free prior year tax software It does not matter whether you use the cash method of accounting or an accrual method of accounting. Free prior year tax software If you materially participate in operating a farm from which you receive rent in the form of crop shares or livestock, the rental income is included in self-employment income. Free prior year tax software See Landlord Participation in Farming in chapter 12. Free prior year tax software Report the rental income on Schedule F. Free prior year tax software If you do not materially participate in operating the farm, report this income on Form 4835 and carry the net income or loss to Schedule E (Form 1040). Free prior year tax software The income is not included in self-employment income. Free prior year tax software Crop shares you use to feed livestock. Free prior year tax software   Crop shares you receive as a landlord and feed to your livestock are considered converted to money when fed to the livestock. Free prior year tax software You must include the fair market value of the crop shares in income at that time. Free prior year tax software You are entitled to a business expense deduction for the livestock feed in the same amount and at the same time you include the fair market value of the crop share as rental income. Free prior year tax software Although these two transactions cancel each other for figuring adjusted gross income on Form 1040, they may be necessary to figure your self-employment tax. Free prior year tax software See  chapter 12. Free prior year tax software Crop shares you give to others (gift). Free prior year tax software   Crop shares you receive as a landlord and give to others are considered converted to money when you make the gift. Free prior year tax software You must report the fair market value of the crop share as income, even though someone else receives payment for the crop share. Free prior year tax software Example. Free prior year tax software A tenant farmed part of your land under a crop-share arrangement. Free prior year tax software The tenant harvested and delivered the crop in your name to an elevator company. Free prior year tax software Before selling any of the crop, you instructed the elevator company to cancel your warehouse receipt and make out new warehouse receipts in equal amounts of the crop in the names of your children. Free prior year tax software They sell their crop shares in the following year and the elevator company makes payments directly to your children. Free prior year tax software In this situation, you are considered to have received rental income and then made a gift of that income. Free prior year tax software You must include the fair market value of the crop shares in your income for the tax year you gave the crop shares to your children. Free prior year tax software Crop share loss. Free prior year tax software   If you are involved in a rental or crop-share lease arrangement, any loss from these activities may be subject to the limits under the passive loss rules. Free prior year tax software See Publication 925 for information on these rules. Free prior year tax software Agricultural Program Payments You must include in income most government payments, such as those for approved conservation practices, direct payments, and counter-cyclical payments, whether you receive them in cash, materials, services, or commodity certificates. Free prior year tax software However, you can exclude from income some payments you receive under certain cost-sharing conservation programs. Free prior year tax software See Cost-Sharing Exclusion (Improvements) , later. Free prior year tax software Report the agricultural program payment on the appropriate line of Schedule F, Part I. Free prior year tax software Report the full amount even if you return a government check for cancellation, refund any of the payment you receive, or the government collects all or part of the payment from you by reducing the amount of some other payment or Commodity Credit Corporation (CCC) loan. Free prior year tax software However, you can deduct the amount you refund or return or that reduces some other payment or loan to you. Free prior year tax software Claim the deduction on Schedule F for the year of repayment or reduction. Free prior year tax software Commodity Credit Corporation (CCC) Loans Generally, you do not report loans you receive as income. Free prior year tax software However, if you pledge part or all of your production to secure a CCC loan, you can treat the loan as if it were a sale of the crop and report the loan proceeds as income in the year you receive them. Free prior year tax software You do not need approval from the IRS to adopt this method of reporting CCC loans. Free prior year tax software Once you report a CCC loan as income for the year received, you generally must report all CCC loans in that year and later years in the same way. Free prior year tax software However, you can obtain for your tax year an automatic consent to change your method of accounting for loans received from the CCC, from including the loan amount in gross income for the tax year in which the loan is received to treating the loan amount as a loan. Free prior year tax software For more information, see Part I of the Instructions for Form 3115 and Revenue Procedure 2008-52. Free prior year tax software Revenue Procedure 2008-52, 2008-36 I. Free prior year tax software R. Free prior year tax software B. Free prior year tax software 587, is available at  www. Free prior year tax software irs. Free prior year tax software gov/irb/2008-36_IRB/ar09. Free prior year tax software html. Free prior year tax software You can request income tax withholding from CCC loan payments you receive. Free prior year tax software Use Form W-4V, Voluntary Withholding Request. Free prior year tax software See chapter 16 for information about ordering the form. Free prior year tax software To elect to report a CCC loan as income, include the loan proceeds as income on Schedule F, line 7a, for the year you receive it. Free prior year tax software Attach a statement to your return showing the details of the loan. Free prior year tax software You must file the statement and the return by the due date of the return, including extensions. Free prior year tax software If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Free prior year tax software Attach the statement to the amended return and write “Filed pursuant to section 301. Free prior year tax software 9100-2” at the top of the return. Free prior year tax software File the amended return at the same address you filed the original return. Free prior year tax software When you make this election, the amount you report as income becomes your basis in the commodity. Free prior year tax software See chapter 6 for information on the basis of assets. Free prior year tax software If you later repay the loan, redeem the pledged commodity, and sell it, you report as income at the time of sale the sale proceeds minus your basis in the commodity. Free prior year tax software If the sale proceeds are less than your basis in the commodity, you can report the difference as a loss on Schedule F. Free prior year tax software If you forfeit the pledged crops to the CCC in full payment of the loan, the forfeiture is treated for tax purposes as a sale of the crops. Free prior year tax software If you did not report the loan proceeds as income for the year you received them, you must include them in your income for the year of the forfeiture. Free prior year tax software Form 1099-A. Free prior year tax software   If you forfeit pledged crops to the CCC in full payment of a loan, you may receive a Form 1099-A, Acquisition or Abandonment of Secured Property. Free prior year tax software “CCC” should be shown in box 6. Free prior year tax software The amount of any CCC loan outstanding when you forfeited your commodity should also be indicated on the form. Free prior year tax software Market Gain Under the CCC nonrecourse marketing assistance loan program, your repayment amount for a loan secured by your pledge of an eligible commodity is generally based on the lower of the loan rate or the prevailing world market price for the commodity on the date of repayment. Free prior year tax software If you repay the loan when the world price is lower, the difference between that repayment amount and the original loan amount is market gain. Free prior year tax software Whether you use cash or CCC certificates to repay the loan, you will receive a Form 1099-G showing the market gain you realized. Free prior year tax software Market gain should be reported as follows. Free prior year tax software If you elected to include the CCC loan in income in the year you received it, do not include the market gain in income. Free prior year tax software However, adjust the basis of the commodity for the amount of the market gain. Free prior year tax software If you did not include the CCC loan in income in the year received, include the market gain in your income. Free prior year tax software The following examples show how to report market gain. Free prior year tax software Example 1. Free prior year tax software Mike Green is a cotton farmer. Free prior year tax software He uses the cash method of accounting and files his tax return on a calendar year basis. Free prior year tax software He has deducted all expenses incurred in producing the cotton and has a zero basis in the commodity. Free prior year tax software In 2012, Mike pledged 1,000 pounds of cotton as collateral for a CCC loan of $2,000 (a loan rate of $2. Free prior year tax software 00 per pound). Free prior year tax software In 2013, he repaid the loan and redeemed the cotton for $1,500 when the world price was $1. Free prior year tax software 50 per pound (lower than the loan amount). Free prior year tax software Later in 2013, he sold the cotton for $2,500. Free prior year tax software The market gain on the redemption was $. Free prior year tax software 50 ($2. Free prior year tax software 00 – $1. Free prior year tax software 50) per pound. Free prior year tax software Mike realized total market gain of $500 ($. Free prior year tax software 50 x 1,000 pounds). Free prior year tax software How he reports this market gain and figures his gain or loss from the sale of the cotton depends on whether he included CCC loans in income in 2012. Free prior year tax software Included CCC loan. Free prior year tax software   Mike reported the $2,000 CCC loan as income for 2012 on Schedule F, line 1b, so he is treated as if he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when he redeemed it. Free prior year tax software The $500 market gain is not recognized on the redemption. Free prior year tax software He reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. Free prior year tax software   Mike's basis in the cotton after he redeemed it was $1,500, which is the redemption (repurchase) price paid for the cotton. Free prior year tax software His gain from the sale is $1,000 ($2,500 – $1,500). Free prior year tax software He reports the $1,000 gain as income for 2013 on Schedule F, line 1b. Free prior year tax software Excluded CCC loan. Free prior year tax software   Mike has income of $500 from market gain in 2013. Free prior year tax software He reports it on Schedule F, lines 4a and 4b. Free prior year tax software His basis in the cotton is zero, so his gain from its sale is $2,500. Free prior year tax software He reports the $2,500 gain as income for 2013 on Schedule F, line 1b. Free prior year tax software Example 2. Free prior year tax software The facts are the same as in Example 1 except that, instead of selling the cotton for $2,500 after redeeming it, Mike entered into an option-to-purchase contract with a cotton buyer before redeeming the cotton. Free prior year tax software Under that contract, Mike authorized the cotton buyer to pay the CCC loan on Mike's behalf. Free prior year tax software In 2013, the cotton buyer repaid the loan for $1,500 and immediately exercised his option, buying the cotton for $1,500. Free prior year tax software How Mike reports the $500 market gain on the redemption of the cotton and figures his gain or loss from its sale depends on whether he included CCC loans in income in 2012. Free prior year tax software Included CCC loan. Free prior year tax software   As in Example 1, Mike is treated as though he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when the cotton buyer redeemed it for him. Free prior year tax software The $500 market gain is not recognized on the redemption. Free prior year tax software Mike reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. Free prior year tax software   Also, as in Example 1, Mike's basis in the cotton when the cotton buyer redeemed it for him was $1,500. Free prior year tax software Mike has no gain or loss on its sale to the cotton buyer for that amount. Free prior year tax software Excluded CCC loan. Free prior year tax software   As in Example 1, Mike has income of $500 from market gain in 2013. Free prior year tax software He reports it on Schedule F, lines 4a and 4b. Free prior year tax software His basis in the cotton is zero, so his gain from its sale is $1,500. Free prior year tax software He reports the $1,500 gain as income for 2013 on Schedule F, line 1b. Free prior year tax software Conservation Reserve Program (CRP) Under the Conservation Reserve Program (CRP), if you own or operate highly erodible or other specified cropland, you may enter into a long-term contract with the USDA, agreeing to convert to a less intensive use of that cropland. Free prior year tax software You must include the annual rental payments and any one-time incentive payment you receive under the program on Schedule F, lines 4a and 4b. Free prior year tax software Cost-share payments you receive may qualify for the cost-sharing exclusion. Free prior year tax software See Cost-Sharing Exclusion (Improvements) , later. Free prior year tax software CRP payments are reported to you on Form 1099-G. Free prior year tax software Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. Free prior year tax software See the instructions for Schedule SE (Form 1040). Free prior year tax software Crop Insurance and Crop Disaster Payments You must include in income any crop insurance proceeds you receive as the result of physical crop damage or reduction of crop revenue, or both. Free prior year tax software You generally include them in the year you receive them. Free prior year tax software Treat as crop insurance proceeds the crop disaster payments you receive from the federal government as the result of destruction or damage to crops, or the inability to plant crops, because of drought, flood, or any other natural disaster. Free prior year tax software You can request income tax withholding from crop disaster payments you receive from the federal government. Free prior year tax software Use Form W-4V, Voluntary Withholding Request. Free prior year tax software See chapter 16 for information about ordering the form. Free prior year tax software Election to postpone reporting until the following year. Free prior year tax software   You can postpone reporting some or all crop insurance proceeds as income until the year following the year the physical damage occurred if you meet all the following conditions. Free prior year tax software You use the cash method of accounting. Free prior year tax software You receive the crop insurance proceeds in the same tax year the crops are damaged. Free prior year tax software You can show that under your normal business practice you would have included income from the damaged crops in any tax year following the year the damage occurred. Free prior year tax software   Deferral is not permitted for proceeds received from revenue insurance policies. Free prior year tax software   To postpone reporting some or all crop insurance proceeds received in 2013, report the amount you received on Schedule F, line 6a, but do not include it as a taxable amount on line 6b. Free prior year tax software Check the box on line 8c and attach a statement to your tax return. Free prior year tax software The statement must include your name and address and contain the following information. Free prior year tax software A statement that you are making an election under IRC section 451(d) and Regulations section 1. Free prior year tax software 451-6. Free prior year tax software The specific crop or crops physically destroyed or damaged. Free prior year tax software A statement that under your normal business practice you would have included income from some or all of the destroyed or damaged crops in gross income for a tax year following the year the crops were destroyed or damaged. Free prior year tax software The cause of the physical destruction or damage and the date or dates it occurred. Free prior year tax software The total payments you received from insurance carriers, itemized for each specific crop, and the date you received each payment. Free prior year tax software The name of each insurance carrier from whom you received payments. Free prior year tax software   One election covers all crops representing a single trade or business. Free prior year tax software If you have more than one farming business, make a separate election for each one. Free prior year tax software For example, if you operate two separate farms on which you grow different crops and you keep separate books for each farm, you should make two separate elections to postpone reporting insurance proceeds you receive for crops grown on each of your farms. Free prior year tax software   An election is binding for the year unless the IRS approves your request to change it. Free prior year tax software To request IRS approval to change your election, write to the IRS at the following address giving your name, address, identification number, the year you made the election, and your reasons for wanting to change it. Free prior year tax software Ogden Submission Processing Center P. Free prior year tax software O. Free prior year tax software Box 9941 Ogden, UT 84409 Feed Assistance and Payments The Disaster Assistance Act of 1988 authorizes programs to provide feed assistance, reimbursement payments, and other benefits to qualifying livestock producers if the Secretary of Agriculture determines that, because of a natural disaster, a livestock emergency exists. Free prior year tax software These programs include partial reimbursement for the cost of purchased feed and for certain transportation expenses. Free prior year tax software They also include the donation or sale at a below-market price of feed owned by the Commodity Credit Corporation. Free prior year tax software Include in income: The market value of donated feed, The difference between the market value and the price you paid for feed you buy at below-market prices, and Any cost reimbursement you receive. Free prior year tax software You must include these benefits in income in the year you receive them. Free prior year tax software You cannot postpone reporting them under the rules explained earlier for weather-related sales of livestock or crop insurance proceeds. Free prior year tax software Report the benefits on Schedule F, Part I, as agricultural program payments. Free prior year tax software You can usually take a current deduction for the same amount as a feed expense. Free prior year tax software Cost-Sharing Exclusion (Improvements) You can exclude from your income part or all of a payment you receive under certain federal or state cost-sharing conservation, reclamation, and restoration programs. Free prior year tax software A payment is any economic benefit you get as a result of an improvement. Free prior year tax software However, this exclusion applies only to that part of a payment that meets all three of the following tests. Free prior year tax software It was for a capital expense. Free prior year tax software You cannot exclude any part of a payment for an expense you can deduct in the year you pay or incur it. Free prior year tax software You must include the payment for a deductible expense in income, and you can take any offsetting deduction. Free prior year tax software See chapter 5 for information on deducting soil and water conservation expenses. Free prior year tax software It does not substantially increase your annual income from the property for which it is made. Free prior year tax software An increase in annual income is substantial if it is more than the greater of the following amounts. Free prior year tax software 10% of the average annual income derived from the affected property before receiving the improvement. Free prior year tax software $2. Free prior year tax software 50 times the number of affected acres. Free prior year tax software The Secretary of Agriculture certified that the payment was primarily made for conserving soil and water resources, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. Free prior year tax software Qualifying programs. Free prior year tax software   If the three tests listed above are met, you can exclude part or all of the payments from the following programs. Free prior year tax software The rural clean water program authorized by the Federal Water Pollution Control Act. Free prior year tax software The rural abandoned mine program authorized by the Surface Mining Control and Reclamation Act of 1977. Free prior year tax software The water bank program authorized by the Water Bank Act. Free prior year tax software The emergency conservation measures program authorized by title IV of the Agricultural Credit Act of 1978. Free prior year tax software The agricultural conservation program authorized by the Soil Conservation and Domestic Allotment Act. Free prior year tax software The great plains conservation program authorized by the Soil Conservation and Domestic Policy Act. Free prior year tax software The resource conservation and development program authorized by the Bankhead-Jones Farm Tenant Act and by the Soil Conservation and Domestic Allotment Act. Free prior year tax software Certain small watershed programs, listed later. Free prior year tax software Any program of a state, possession of the United States, a political subdivision of any of these, or of the District of Columbia under which payments are made to individuals primarily for conserving soil, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. Free prior year tax software Several state programs have been approved. Free prior year tax software For information about the status of those programs, contact the state offices of the Farm Service Agency (FSA) and the Natural Resources and Conservation Service (NRCS). Free prior year tax software Small watershed programs. Free prior year tax software   If the three tests listed earlier are met, you can exclude part or all of the payments you receive under the following programs for improvements made in connection with a watershed. Free prior year tax software The programs under the Watershed Protection and Flood Prevention Act. Free prior year tax software The flood prevention projects under the Flood Control Act of 1944. Free prior year tax software The Emergency Watershed Protection Program under the Flood Control Act of 1950. Free prior year tax software Certain programs under the Colorado River Basin Salinity Control Act. Free prior year tax software The Wetlands Reserve Program authorized by the Food Security Act of 1985, the Federal Agriculture Improvement and Reform Act of 1996 and the Farm Security and Rural Investment Act of 2002. Free prior year tax software The Environmental Quality Incentives Program (EQIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. Free prior year tax software The Wildlife Habitat Incentives Program (WHIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. Free prior year tax software The Soil and Water Conservation Assistance Program authorized by the Agricultural Risk Protection Act of 2000. Free prior year tax software The Agricultural Management Assistance Program authorized by the Agricultural Risk Protection Act of 2000. Free prior year tax software The Conservation Reserve Program authorized by the Food Security Act of 1985 and the Federal Agriculture Improvement and Reform Act of 1996. Free prior year tax software The Forest Land Enhancement Program authorized under the Farm Security and Rural Investment Act of 2002. Free prior year tax software The Conservation Security Program authorized by the Food Security Act of 1985. Free prior year tax software The Forest Health Protection Program (FHPP) authorized by the Cooperative Forestry Assistance Act of 1978. Free prior year tax software Income realized. Free prior year tax software   The gross income you realize upon getting an improvement under these cost-sharing programs is the value of the improvement reduced by the sum of the excludable portion and your share of the cost of the improvement (if any). Free prior year tax software Value of the improvement. Free prior year tax software   You determine the value of the improvement by multiplying its fair market value (defined in chapter 6) by a fraction. Free prior year tax software The numerator of the fraction is the total cost of the improvement (all amounts paid either by you or by the government for the improvement) reduced by the sum of the following items. Free prior year tax software Any government payments under a program not listed earlier. Free prior year tax software Any part of a government payment under a program listed earlier that the Secretary of Agriculture has not certified as primarily for conservation. Free prior year tax software Any government payment to you for rent or for your services. Free prior year tax software The denominator of the fraction is the total cost of the improvement. Free prior year tax software Excludable portion. Free prior year tax software   The excludable portion is the present fair market value of the right to receive annual income from the affected acreage of the greater of the following amounts. Free prior year tax software 10% of the prior average annual income from the affected acreage. Free prior year tax software The prior average annual income is the average of the gross receipts from the affected acreage for the last 3 tax years before the tax year in which you started to install the improvement. Free prior year tax software $2. Free prior year tax software 50 times the number of affected acres. Free prior year tax software The calculation of present fair market value of the right to receive annual income is too complex to discuss in this publication. Free prior year tax software You may need to consult your tax advisor for assistance. Free prior year tax software Example. Free prior year tax software One hundred acres of your land was reclaimed under a rural abandoned mine program contract with the Natural Resources Conservation Service of the USDA. Free prior year tax software The total cost of the improvement was $500,000. Free prior year tax software The USDA paid $490,000. Free prior year tax software You paid $10,000. Free prior year tax software The value of the cost-sharing improvement is $15,000. Free prior year tax software The present fair market value of the right to receive the annual income described in (1) above is $1,380, and the present fair market value of the right to receive the annual income described in (2) is $1,550. Free prior year tax software The excludable portion is the greater amount, $1,550. Free prior year tax software You figure the amount to include in gross income as follows: Value of cost-sharing improvement $15,000 Minus: Your share $10,000     Excludable portion 1,550 11,550 Amount included in income $ 3,450 Effects of the exclusion. Free prior year tax software   When you figure the basis of property you acquire or improve using cost-sharing payments excluded from income, subtract the excluded payments from your capital costs. Free prior year tax software Any payment excluded from income is not part of your basis. Free prior year tax software In the example above, the increase in basis is $500,000 – $490,000 + $3,450 = $13,450. Free prior year tax software   In addition, you cannot take depreciation, amortization, or depletion deductions for the part of the cost of the property for which you receive cost-sharing payments you exclude from income. Free prior year tax software How to report the exclusion. Free prior year tax software   Attach a statement to your tax return (or amended return) for the tax year you receive the last government payment for the improvement. Free prior year tax software The statement must include the following information. Free prior year tax software The dollar amount of the cost funded by the government payment. Free prior year tax software The value of the improvement. Free prior year tax software The amount you are excluding. Free prior year tax software   Report the total cost-sharing payments you receive on Schedule F, line 4a, and the taxable amount on line 4b. Free prior year tax software Recapture. Free prior year tax software   If you dispose of the property within 20 years after you received the excluded payments, you must treat as ordinary income part or all of the cost-sharing payments you excluded. Free prior year tax software In the above example, if the 100 acres were sold within 20 years of the exclusion for a gain of $2,000, $1,550 of that amount would be included in ordinary income. Free prior year tax software You must report the recapture on Form 4797. Free prior year tax software See Section 1255 property under Other Gains in chapter 9. Free prior year tax software Electing not to exclude payments. Free prior year tax software   You can elect not to exclude all or part of any payments you receive under these programs. Free prior year tax software If you make this election for all of these payments, none of the above restrictions and rules apply. Free prior year tax software You must make this election by the due date, including extensions, for filing your return. Free prior year tax software In the example above, an election not to exclude payments results in $5,000 included in income and a $15,000 increase in basis. Free prior year tax software If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Free prior year tax software Write “Filed pursuant to section 301. Free prior year tax software 9100-2” at the top of the amended return and file it at the same address you filed the original return. Free prior year tax software Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 The Farm Security and Rural Investment Act of 2002 created two new types of payments—direct and counter-cyclical payments. Free prior year tax software You must include these payments on Schedule F, lines 4a and 4b. Free prior year tax software The Food, Conservation, and Energy Act of 2008 provides for direct and counter-cyclical payments (DCP) as well as Average Crop Revenue Election (ACRE) payments. Free prior year tax software You must include these payments on Schedule F, lines 6a and 6b. Free prior year tax software The American Taxpayer Relief Act of 2012, enacted on January 2, 2013, amends the Food, Conservation, and Energy Act of 2008 and provided a one-year extension for these payments. Free prior year tax software Tobacco Quota Buyout Program Payments The Fair and Equitable Tobacco Reform Act of 2004, title VI of the American Jobs Creation Act of 2004, terminated the tobacco marketing quota program and the tobacco price support program. Free prior year tax software As a result, the USDA offered to enter into contracts with eligible tobacco quota holders and growers to provide compensation for the lost value of the quotas and related price support. Free prior year tax software If you are an eligible tobacco quota holder, your contract entitles you to receive total payments of $7 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. Free prior year tax software If you are an eligible tobacco grower, your contract entitles you to receive total payments of up to $3 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. Free prior year tax software Tobacco Quota Holders Contract payments you receive are considered proceeds from a sale of your tobacco quota as of the date on which you and the USDA enter into the contract. Free prior year tax software Your taxable gain or loss is the total amount received for your quota reduced by any amount treated as interest (discussed below), over your adjusted basis. Free prior year tax software The gain or loss is capital or ordinary depending on how you used the quota. Free prior year tax software See Capital or ordinary gain or loss , later. Free prior year tax software Report the entire gain on your income tax return for the tax year that includes the date you entered into the contract if you elect not to use the installment method. Free prior year tax software Adjusted basis. Free prior year tax software   The adjusted basis of your quota is determined differently depending on how you obtained the quota. Free prior year tax software The basis of a quota derived from an original grant by the federal government is zero. Free prior year tax software The basis of a purchased quota is the purchase price. Free prior year tax software The basis of a quota received as a gift is generally the same as the donor's basis. Free prior year tax software However, under certain circumstances, the basis is increased by the amount of gift taxes paid. Free prior year tax software If the basis is greater than the fair market value of the quota at the time of the gift, the basis for determining loss is the fair market value. Free prior year tax software The basis of an inherited quota is generally the fair market value of the quota at the time of the decedent's death. Free prior year tax software Reduction of basis. Free prior year tax software   You are required to reduce the basis of your tobacco quota by the following amounts. Free prior year tax software Deductions you took for amortization, depletion, or depreciation. Free prior year tax software Amounts you previously deducted as a loss because of a reduction in the number of pounds of tobacco allowable under the quota. Free prior year tax software The entire cost of a purchased quota you deducted in an earlier year (which reduces your basis to zero). Free prior year tax software Amount treated as interest. Free prior year tax software   You must reduce your tobacco quota buyout program payment by the amount treated as interest. Free prior year tax software The interest is reportable as ordinary income. Free prior year tax software If payments total $3,000 or less, your total quota buyout program payment does not include any amount treated as interest and you are not required to reduce the total payment you receive. Free prior year tax software   In all other cases, a portion of each payment may be treated as interest for federal tax purposes. Free prior year tax software You may be required to reduce your total quota buyout program payment before you calculate your gain or loss. Free prior year tax software For more information, see Notice 2005-57, 2005-32 I. Free prior year tax software R. Free prior year tax software B. Free prior year tax software 267, available at www. Free prior year tax software irs. Free prior year tax software gov/irb/2005-32_IRB/ar13. Free prior year tax software html. Free prior year tax software Installment method. Free prior year tax software   You may use the installment method to report a gain if you receive at least one payment after the close of your tax year. Free prior year tax software Under the installment method, a portion of the gain is taken into account in each year in which a payment is received. Free prior year tax software See chapter 10 for more information. Free prior year tax software Capital or ordinary gain or loss. Free prior year tax software   Whether your gain or loss is ordinary or capital depends on how you used the quota. Free prior year tax software Quota used in the trade or business of farming. Free prior year tax software   If you used the quota in the trade or business of farming and you held it for more than one year, you report the transaction as a section 1231 transaction on Form 4797. Free prior year tax software See Section 1231 transactions in the Instructions for Form 4797 for detailed information on reporting section 1231 transactions. Free prior year tax software Quota held for investment. Free prior year tax software   If you held the quota for investment purposes, any gain or loss is capital gain or loss. Free prior year tax software The same result also applies if you held the quota for the production of income, though not connected with a trade or business. Free prior year tax software Gain treated as ordinary income. Free prior year tax software   If you previously deducted any of the following items, some or all of the capital gain must be recharacterized and reported as ordinary income. Free prior year tax software Any resulting capital gain is taxed as ordinary income up to the amount previously deducted. Free prior year tax software The cost of acquiring a quota. Free prior year tax software Amounts for amortization, depletion, or depreciation. Free prior year tax software Amounts to reflect a reduction in the quota pounds. Free prior year tax software   You should include the ordinary income on your return for the tax year even if you use the installment method to report the remainder of the gain. Free prior year tax software Self-employment income. Free prior year tax software   The tobacco quota buyout payments are not self-employment income. Free prior year tax software Income averaging for farmers. Free prior year tax software   The gain or loss resulting from the quota payments does not qualify for income averaging. Free prior year tax software A tobacco quota is considered an interest in land. Free prior year tax software Income averaging is not available for gain or loss arising from the sale or other disposition of land. Free prior year tax software Involuntary conversion. Free prior year tax software   The buyout of the tobacco quota is not an involuntary conversion. Free prior year tax software Form 1099-S. Free prior year tax software   A tobacco quota is considered an interest in land, so the USDA will generally report the total amount you receive under a contract on Form 1099-S, Proceeds From Real Estate Transactions, if the amount is $600 or more. Free prior year tax software The USDA will generally report any portion of a payment treated as interest of $600 or more to you on Form 1099-INT, Interest Income, for the year in which the payment is made. Free prior year tax software Like-kind exchange of quota. Free prior year tax software   You may postpone reporting the gain or loss from tobacco quota buyout payments by entering into a like-kind exchange if you comply with the requirements of section 1031 and the regulations thereunder. Free prior year tax software See Notice 2005-57 for more information. Free prior year tax software Tobacco Growers Contract payments you receive are determined by reference to the amount of quota under which you produced (or planted) quota tobacco during the 2002, 2003, and 2004 tobacco marketing years and are prorated based on the number of years that you produced (or planted) quota tobacco during those years. Free prior year tax software Taxation of payments to tobacco growers. Free prior year tax software   Payments to growers replace ordinary income that would have been earned had the tobacco marketing quota and price support programs continued. Free prior year tax software Individuals will generally report the payments as an Agricultural program payment on Schedule F. Free prior year tax software If you are a landowner who does not materially participate in the operation or management of the farm and are receiving the grower payment because your farm rental income is based on the tobacco grown by a tenant, the grower payment should be reported on Form 4835. Free prior year tax software Self-employment income. Free prior year tax software   Payments to growers generally represent self-employment income. Free prior year tax software If the grower is an individual carrying on a trade or business and deriving income (other than farm rental income properly reported on Form 4835) from that trade or business, the payments are net earnings from self-employment. Free prior year tax software Income averaging for farmers. Free prior year tax software   Payments to growers who are individuals qualify for farm income averaging. Free prior year tax software Form 1099-G. Free prior year tax software   If the amount received in a taxable year is $600 or more, the amount will generally be reported by the USDA on a Form 1099-G. Free prior year tax software Other Payments You must include most other government program payments in income. Free prior year tax software Fertilizer and Lime Include in income the value of fertilizer or lime you receive under a government program. Free prior year tax software How to claim the offsetting deduction is explained under Fertilizer and Lime in chapter 4. Free prior year tax software Improvements If government payments are based on improvements, such as a pollution control facility, you must include them in income. Free prior year tax software You must also capitalize the full cost of the improvement. Free prior year tax software Since you have included the payments in income, they do not reduce your basis. Free prior year tax software However, see Cost-Sharing Exclusion (Improvements) , earlier, for additional information. Free prior year tax software National Tobacco Growers' Settlement Trust Fund Payments If you are a producer, landowner, or tobacco quota owner who receives money from the National Tobacco Growers' Settlement Trust Fund, you must report those payments as income. Free prior year tax software You should receive a Form 1099-MISC, Miscellaneous Income, that shows the payment amount. Free prior year tax software If you produce a tobacco crop, report the payments as income from farming on your Schedule F. Free prior year tax software If you are a landowner or tobacco quota owner who leases tobacco-related property but you do not produce the crop, report the payments as farm rental income on Form 4835. Free prior year tax software Payment to More Than One Person The USDA reports program payments to the IRS. Free prior year tax software It reports a program payment intended for more than one person as having been paid to the person whose identification number is on record for that payment (payee of record). Free prior year tax software If you, as the payee of record, receive a program payment belonging to someone else, such as your landlord, the amount belonging to the other person is a nominee distribution. Free prior year tax software You should file Form 1099-G to report the identity of the actual recipient to the IRS. Free prior year tax software You should also give this information to the recipient. Free prior year tax software You can avoid the inconvenience of unnecessary inquiries about the identity of the recipient if you file this form. Free prior year tax software Report the total amount reported to you as the payee of record on Schedule F, line 4a or 6a. Free prior year tax software However, do not report as a taxable amount on line 4b or 6b any amount belonging to someone else. Free prior year tax software See chapter 16 for information about ordering Form 1099-G. Free prior year tax software Income From Cooperatives If you buy farm supplies through a cooperative, you may receive income from the cooperative in the form of patronage dividends (refunds). Free prior year tax software If you sell your farm products through a cooperative, you may receive either patronage dividends or a per-unit retain certificate, explained later, from the cooperative. Free prior year tax software Form 1099-PATR. Free prior year tax software   The cooperative will report the income to you on Form 1099-PATR or a similar form and send a copy to the IRS. Free prior year tax software Form 1099-PATR may also show an alternative minimum tax adjustment that you must include on Form 6251, Alternative Minimum Tax—Individuals, if you are required to file the form. Free prior year tax software For information on the alternative minimum tax, see the Instructions for Form 6251. Free prior year tax software Patronage Dividends You generally report patronage dividends as income on Schedule F, lines 3a and 3b, for the tax year you receive them. Free prior year tax software They include the following items. Free prior year tax software Money paid as a patronage dividend, including cash advances received (for example, from a marketing cooperative). Free prior year tax software The stated dollar value of qualified written notices of allocation. Free prior year tax software The fair market value of other property. Free prior year tax software Do not report as income on line 3b any patronage dividends you receive from expenditures that were not deductible, such as buying personal or family items, capital assets, or depreciable property. Free prior year tax software You must reduce the cost or other basis of these items by the amount of such patronage dividends received. Free prior year tax software Personal items include fuel purchased for personal use, basic local telephone service, and personal long distance calls. Free prior year tax software If you cannot determine what the dividend is for, report it as income on lines 3a and 3b. Free prior year tax software Qualified written notice of allocation. Free prior year tax software   If you receive a qualified written notice of allocation as part of a patronage dividend, you must generally include its stated dollar value in your income on Schedule F, lines 3a and 3b, in the year you receive it. Free prior year tax software A written notice of allocation is qualified if at least 20% of the patronage dividend is paid in money or by qualified check and either of the following conditions is met. Free prior year tax software The notice must be redeemable in cash for at least 90 days after it is issued, and you must have received a written notice of your right of redemption at the same time as the written notice of allocation. Free prior year tax software You must have agreed to include the stated dollar value in income in the year you receive the notice by doing one of the following. Free prior year tax software Signing and giving a written agreement to the cooperative. Free prior year tax software Getting or keeping membership in the cooperative after it adopted a bylaw providing that membership constitutes agreement. Free prior year tax software The cooperative must notify you in writing of this bylaw and give you a copy. Free prior year tax software Endorsing and cashing a qualified check paid as part of the same patronage dividend. Free prior year tax software You must cash the check by the 90th day after the close of the payment period for the cooperative's tax year for which the patronage dividend was paid. Free prior year tax software Qualified check. Free prior year tax software   A qualified check is any instrument that is redeemable in money and meets both of the following requirements. Free prior year tax software It is part of a patronage dividend that also includes a qualified written notice of allocation for which you met condition 2(c), above. Free prior year tax software It is imprinted with a statement that endorsing and cashing it constitutes the payee's consent to include in income the stated dollar value of any written notices of allocation paid as part of the same patronage dividend. Free prior year tax software Loss on redemption. Free prior year tax software   You can deduct on Schedule F, Part II, any loss incurred on the redemption of a qualified written notice of allocation you received in the ordinary course of your farming business. Free prior year tax software The loss is the difference between the stated dollar amount of the qualified written notice you included in income and the amount you received when you redeemed it. Free prior year tax software Nonqualified notice of allocation. Free prior year tax software   Do not include the stated dollar value of any nonqualified notice of allocation in income when you receive it. Free prior year tax software Your basis in the notice is zero. Free prior year tax software You must include in income for the tax year of disposition any amount you receive from its sale, redemption, or other disposition. Free prior year tax software Report that amount, up to the stated dollar value of the notice, on Schedule F, lines 3a and 3b. Free prior year tax software However, do not include that amount in your income if the notice resulted from buying or selling capital assets or depreciable property or from buying personal items, as explained in the following discussions. Free prior year tax software   If the amount you receive is more than the stated dollar value of the notice, report the excess as the type of income it represents. Free prior year tax software For example, if it represents interest income, report it on your return as interest. Free prior year tax software Buying or selling capital assets or depreciable property. Free prior year tax software   Do not include in income patronage dividends from buying capital assets or depreciable property used in your business. Free prior year tax software You must, however, reduce the basis of these assets by the dividends. Free prior year tax software This reduction is taken into account as of the first day of the tax year in which the dividends are received. Free prior year tax software If the dividends are more than your unrecovered basis, reduce the unrecovered basis to zero and include the difference on Schedule F, line 3a, for the tax year you receive them. Free prior year tax software   This rule and the exceptions explained below also apply to amounts you receive from the sale, redemption, or other disposition of a nonqualified notice of allocation that resulted from buying or selling capital assets or depreciable property. Free prior year tax software Example. Free prior year tax software On July 1, 2012, Mr. Free prior year tax software Brown, a patron of a cooperative association, bought a machine for his dairy farm business from the association for $2,900. Free prior year tax software The machine has a life of 7 years under MACRS (as provided in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946, Depreciation and Amortization). Free prior year tax software Mr. Free prior year tax software Brown files his return on a calendar year basis. Free prior year tax software For 2012, he claimed a depreciation deduction of $311, using the 10. Free prior year tax software 71% depreciation rate from the 150% declining balance, half-year convention table (shown in Table A-14 in Appendix A of Publication 946). Free prior year tax software On July 2, 2013, the cooperative association paid Mr. Free prior year tax software Brown a $300 cash patronage dividend for buying the machine. Free prior year tax software Mr. Free prior year tax software Brown adjusts the basis of the machine and figures his depreciation deduction for 2013 (and later years) as follows. Free prior year tax software Cost of machine on July 1, 2012 $2,900 Minus: 2012 depreciation $311     2013 cash dividend 300 611 Adjusted basis for  depreciation for 2013: $2,289 Depreciation rate: 1 ÷ 6½ (remaining recovery period as of 1/1/2012) = 15. Free prior year tax software 38% × 1. Free prior year tax software 5 = 23. Free prior year tax software 07% Depreciation deduction for 2013 ($2,289 × 23. Free prior year tax software 07%) $528 Exceptions. Free prior year tax software   If the dividends are for buying or selling capital assets or depreciable property you did not own at any time during the year you received the dividends, you must include them on Schedule F, lines 3a and 3b, unless one of the following rules applies. Free prior year tax software If the dividends relate to a capital asset you held for more than 1 year for which a loss was or would have been deductible, treat them as gain from the sale or exchange of a capital asset held for more than 1 year. Free prior year tax software If the dividends relate to a capital asset for which a loss was not or would not have been deductible, do not report them as income (ordinary or capital gain). Free prior year tax software   If the dividends are for selling capital assets or depreciable property during the year you received the dividends, treat them as an additional amount received on the sale. Free prior year tax software Personal purchases. Free prior year tax software   Because you cannot deduct the cost of personal, living, or family items, such as supplies, equipment, or services not related to the production of farm income, you can omit from the taxable amount of patronage dividends on Schedule F, line 3b, any dividends from buying those items (and you must reduce the cost or other basis of those items by the amount of the dividends). Free prior year tax software This rule also applies to amounts you receive from the sale, redemption, or other disposition of a nonqualified written notice of allocation resulting from these purchases. Free prior year tax software Per-Unit Retain Certificates A per-unit retain certificate is any written notice that shows the stated dollar amount of a per-unit retain allocation made to you by the cooperative. Free prior year tax software A per-unit retain allocation is an amount paid to patrons for products sold for them that is fixed without regard to the net earnings of the cooperative. Free prior year tax software These allocations can be paid in money, other property, or qualified certificates. Free prior year tax software Per-unit retain certificates issued by a cooperative generally receive the same tax treatment as patronage dividends, discussed earlier. Free prior year tax software Qualified certificates. Free prior year tax software   Qualified per-unit retain certificates are those issued to patrons who have agreed to include the stated dollar amount of these certificates in income in the year of receipt. Free prior year tax software The agreement may be made in writing or by getting or keeping membership in a cooperative whose bylaws or charter states that membership constitutes agreement. Free prior year tax software If you receive qualified per-unit retain certificates, include the stated dollar amount of the certificates in income on Schedule F, lines 3a and 3b, for the tax year you receive them. Free prior year tax software Nonqualified certificates. Free prior year tax software   Do not include the stated dollar value of a nonqualified per-unit retain certificate in income when you receive it. Free prior year tax software Your basis in the certificate is zero. Free prior year tax software You must include in income any amount you receive from its sale, redemption, or other disposition. Free prior year tax software Report the amount you receive from the disposition as ordinary income on Schedule F, lines 3a and 3b, for the tax year of disposition. Free prior year tax software Cancellation of Debt This section explains the general rule for including canceled debt in income and the exceptions to the general rule. Free prior year tax software For more information on canceled debt, see Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Free prior year tax software General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in gross income for tax purposes. Free prior year tax software Discharge of qualified farm indebtedness (defined below) is one of the exceptions to the general rule. Free prior year tax software It is excluded from taxable income (see Exclusions , later). Free prior year tax software Report the canceled amount on Schedule F, line 8, if you incurred the debt in your farming business. Free prior year tax software If the debt is a nonbusiness debt, report the canceled amount as other income on Form 1040, line 21. Free prior year tax software Election to defer income from discharge of indebtedness. Free prior year tax software   You can elect to defer income from a discharge of business indebtedness that occurred after 2008 and before 2011. Free prior year tax software Generally, if the election is made, the deferred income is included in gross income ratably over a 5-year period beginning in 2014 (for calendar year taxpayers) and the exclusions listed below do not apply. Free prior year tax software See IRC section 108(i) and Publication 4681 for details. Free prior year tax software Form 1099-C. Free prior year tax software   If a federal agency, financial institution, credit union, finance company, or credit card company cancels or forgives your debt of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. Free prior year tax software The amount of debt canceled is shown in box 2. Free prior year tax software Exceptions The following discussion covers some exceptions to the general rule for canceled debt. Free prior year tax software These exceptions apply before the exclusions discussed below. Free prior year tax software Price reduced after purchase. Free prior year tax software   If your purchase of property was financed by the seller and the seller reduces the amount of the debt at a time when you are not insolvent and the reduction does not occur in a chapter 11 bankruptcy case, the amount of the debt reduction will be treated as a reduction in the purchase price of the property. Free prior year tax software Reduce your basis in the property by the amount of the reduction in the debt. Free prior year tax software The rules that apply to bankruptcy and insolvency are explained below under Exclusions . Free prior year tax software Deductible debt. Free prior year tax software   You do not realize income from a canceled debt to the extent the payment of the debt would have been a deductible expense. Free prior year tax software This exception applies before the price reduction exception discussed above and the bankruptcy and insolvency exclusions discussed next. Free prior year tax software Example. Free prior year tax software You get accounting services for your farm on credit. Free prior year tax software Later, you have trouble paying your farm debts, but you are not bankrupt or insolvent. Free prior year tax software Your accountant forgives part of the amount you owe for the accounting services. Free prior year tax software How you treat the canceled debt depends on your method of accounting. Free prior year tax software Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. Free prior year tax software Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. Free prior year tax software Exclusions Do not include canceled debt in income in the following situations. Free prior year tax software The cancellation takes place in a bankruptcy case under title 11 of the U. Free prior year tax software S. Free prior year tax software Code. Free prior year tax software The cancellation takes place when you are insolvent. Free prior year tax software The canceled debt is a qualified farm debt. Free prior year tax software The canceled debt is a qualified real property business debt (in the case of a taxpayer other than a C corporation). Free prior year tax software See Publication 334, Tax Guide for Small Business, chapter 5. Free prior year tax software The canceled debt is qualified principal residence indebtedness which is discharged after 2006 and before 2014. Free prior year tax software The exclusions do not apply in the following situations: If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations (2), (3), (4), and (5) do not apply. Free prior year tax software If a canceled debt is excluded from income because it takes place when you are insolvent, the exclusions in situations (3) and (4) do not apply to the extent you are insolvent. Free prior year tax software If a canceled debt is excluded from income because it is qualified principal residence indebtedness, the exclusion in situation (2) does not apply unless you elect to apply situation (2) instead of the exclusion for qualified principal residence indebtedness. Free prior year tax software See Form 982 , later, for information on how to claim an exclusion for a canceled debt. Free prior year tax software Debt. Free prior year tax software   For this discussion, debt includes any debt for which you are liable or that attaches to property you hold. Free prior year tax software Bankruptcy and Insolvency You can exclude a canceled debt from income if you are bankrupt or to the extent you are insolvent. Free prior year tax software Bankruptcy. Free prior year tax software   A bankruptcy case is a case under title 11 of the U. Free prior year tax software S. Free prior year tax software Code if you are under the jurisdiction of the court and the cancellation of the debt is granted by the court or is the result of a plan approved by the court. Free prior year tax software   Do not include debt canceled in a bankruptcy case in your income in the year it is canceled. Free prior year tax software Instead, you must use the amount canceled to reduce your tax attributes, explained below under Reduction of tax attributes . Free prior year tax software Insolvency. Free prior year tax software   You are insolvent to the extent your liabilities are more than the fair market value of your assets immediately before the cancellation of debt. Free prior year tax software   You can exclude canceled debt from gross income up to the amount by which you are insolvent. Free prior year tax software If the canceled debt is more than this amount and the debt qualifies, you can apply the rules for qualified farm debt or qualified real property business debt to the difference. Free prior year tax software Otherwise, you include the difference in gross income. Free prior year tax software Use the amount excluded because of insolvency to reduce any tax attributes, as explained below under Reduction of tax attributes . Free prior year tax software You must reduce the tax attributes under the insolvency rules before applying the rules for qualified farm debt or for qualified real property business debt. Free prior year tax software Example. Free prior year tax software You had a $15,000 debt that was not qualified principal residence debt canceled outside of bankruptcy. Free prior year tax software Immediately before the cancellation, your liabilities totaled $80,000 and your assets totaled $75,000. Free prior year tax software Since your liabilities were more than your assets, you were insolvent to the extent of $5,000 ($80,000 − $75,000). Free prior year tax software You can exclude this amount from income. Free prior year tax software The remaining canceled debt ($10,000) may be subject to the qualified farm debt or qualified real property business debt rules. Free prior year tax software If not, you must include it in income. Free prior year tax software Reduction of tax attributes. Free prior year tax software   If you exclude canceled debt from income in a bankruptcy case or during insolvency, you must use the excluded debt to reduce certain tax attributes. Free prior year tax software Order of reduction. Free prior year tax software   You must use the excluded canceled debt to reduce the following tax attributes in the order listed unless you elect to reduce the basis of depreciable property first, as explained later. Free prior year tax software Net operating loss (NOL). Free prior year tax software Reduce any NOL for the tax year of the debt cancellation, and then any NOL carryover to that year. Free prior year tax software Reduce the NOL or NOL carryover one dollar for each dollar of excluded canceled debt. Free prior year tax software General business credit carryover. Free prior year tax software Reduce the credit carryover to or from the tax year of the debt cancellation. Free prior year tax software Reduce the carryover 331/3 cents for each dollar of excluded canceled debt. Free prior year tax software Minimum tax credit. Free prior year tax software Reduce the minimum tax credit available at the beginning of the tax year following the tax year of the debt cancellation. Free prior year tax software Reduce the credit 331/3 cents for each dollar of excluded canceled debt. Free prior year tax software Capital loss. Free prior year tax software Reduce any net capital loss for the tax year of the debt cancellation, and then any capital loss carryover to that year. Free prior year tax software Reduce the capital loss or loss carryover one dollar for each dollar of excluded canceled debt. Free prior year tax software Basis. Free prior year tax software Reduce the basis of the property you hold at the beginning of the tax year following the tax year of the debt cancellation in the following order. Free prior year tax software Real property (except inventory) used in your trade or business or held for investment that secured the canceled debt. Free prior year tax software Personal property (except inventory and accounts and notes receivable) used in your trade or business or held for investment that secured the canceled debt. Free prior year tax software Other property (except inventory and accounts and notes receivable) used in your trade or business or held for investment. Free prior year tax software Inventory and accounts and notes receivable. Free prior year tax software Other property. Free prior year tax software Reduce the basis one dollar for each dollar of excluded canceled debt. Free prior year tax software However, the reduction cannot be more than the total basis of property and the amount of money you hold immediately after the debt cancellation minus your total liabilities immediately after the cancellation. Free prior year tax software For allocation rules that apply to basis reductions for multiple canceled debts, see Regulations section 1. Free prior year tax software 1017-1(b)(2). Free prior year tax software Also see Electing to reduce the basis of depreciable property