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Free State Return Efile

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Free State Return Efile

Free state return efile 1. Free state return efile   Overview of Depreciation Table of Contents Introduction Useful Items - You may want to see: What Property Can Be Depreciated?Property You Own Property Used in Your Business or Income-Producing Activity Property Having a Determinable Useful Life Property Lasting More Than One Year What Property Cannot Be Depreciated?Land Excepted Property When Does Depreciation Begin and End?Placed in Service Idle Property Cost or Other Basis Fully Recovered Retired From Service What Method Can You Use To Depreciate Your Property?Property You Placed in Service Before 1987 Property Owned or Used in 1986 Intangible Property Corporate or Partnership Property Acquired in a Nontaxable Transfer Election To Exclude Property From MACRS What Is the Basis of Your Depreciable Property?Cost as Basis Other Basis Adjusted Basis How Do You Treat Repairs and Improvements? Do You Have To File Form 4562? How Do You Correct Depreciation Deductions?Filing an Amended Return Changing Your Accounting Method Introduction Depreciation is an annual income tax deduction that allows you to recover the cost or other basis of certain property over the time you use the property. Free state return efile It is an allowance for the wear and tear, deterioration, or obsolescence of the property. Free state return efile This chapter discusses the general rules for depreciating property and answers the following questions. Free state return efile What property can be depreciated? What property cannot be depreciated? When does depreciation begin and end? What method can you use to depreciate your property? What is the basis of your depreciable property? How do you treat repairs and improvements? Do you have to file Form 4562? How do you correct depreciation deductions? Useful Items - You may want to see: Publication 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 538 Accounting Periods and Methods 551 Basis of Assets Form (and Instructions) Sch C (Form 1040) Profit or Loss From Business Sch C-EZ (Form 1040) Net Profit From Business 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization See chapter 6 for information about getting publications and forms. Free state return efile What Property Can Be Depreciated? You can depreciate most types of tangible property (except land), such as buildings, machinery, vehicles, furniture, and equipment. Free state return efile You also can depreciate certain intangible property, such as patents, copyrights, and computer software. Free state return efile To be depreciable, the property must meet all the following requirements. Free state return efile It must be property you own. Free state return efile It must be used in your business or income-producing activity. Free state return efile It must have a determinable useful life. Free state return efile It must be expected to last more than one year. Free state return efile The following discussions provide information about these requirements. Free state return efile Property You Own To claim depreciation, you usually must be the owner of the property. Free state return efile You are considered as owning property even if it is subject to a debt. Free state return efile Example 1. Free state return efile You made a down payment to purchase rental property and assumed the previous owner's mortgage. Free state return efile You own the property and you can depreciate it. Free state return efile Example 2. Free state return efile You bought a new van that you will use only for your courier business. Free state return efile You will be making payments on the van over the next 5 years. Free state return efile You own the van and you can depreciate it. Free state return efile Leased property. Free state return efile   You can depreciate leased property only if you retain the incidents of ownership in the property (explained below). Free state return efile This means you bear the burden of exhaustion of the capital investment in the property. Free state return efile Therefore, if you lease property from someone to use in your trade or business or for the production of income, you generally cannot depreciate its cost because you do not retain the incidents of ownership. Free state return efile You can, however, depreciate any capital improvements you make to the property. Free state return efile See How Do You Treat Repairs and Improvements later in this chapter and Additions and Improvements under Which Recovery Period Applies in chapter 4. Free state return efile   If you lease property to someone, you generally can depreciate its cost even if the lessee (the person leasing from you) has agreed to preserve, replace, renew, and maintain the property. Free state return efile However, if the lease provides that the lessee is to maintain the property and return to you the same property or its equivalent in value at the expiration of the lease in as good condition and value as when leased, you cannot depreciate the cost of the property. Free state return efile Incidents of ownership. Free state return efile   Incidents of ownership in property include the following. Free state return efile The legal title to the property. Free state return efile The legal obligation to pay for the property. Free state return efile The responsibility to pay maintenance and operating expenses. Free state return efile The duty to pay any taxes on the property. Free state return efile The risk of loss if the property is destroyed, condemned, or diminished in value through obsolescence or exhaustion. Free state return efile Life tenant. Free state return efile   Generally, if you hold business or investment property as a life tenant, you can depreciate it as if you were the absolute owner of the property. Free state return efile However, see Certain term interests in property under Excepted Property, later. Free state return efile Cooperative apartments. Free state return efile   If you are a tenant-stockholder in a cooperative housing corporation and use your cooperative apartment in your business or for the production of income, you can depreciate your stock in the corporation, even though the corporation owns the apartment. Free state return efile   Figure your depreciation deduction as follows. Free state return efile Figure the depreciation for all the depreciable real property owned by the corporation in which you have a proprietary lease or right of tenancy. Free state return efile If you bought your cooperative stock after its first offering, figure the depreciable basis of this property as follows. Free state return efile Multiply your cost per share by the total number of outstanding shares, including any shares held by the corporation. Free state return efile Add to the amount figured in (a) any mortgage debt on the property on the date you bought the stock. Free state return efile Subtract from the amount figured in (b) any mortgage debt that is not for the depreciable real property, such as the part for the land. Free state return efile Subtract from the amount figured in (1) any depreciation for space owned by the corporation that can be rented but cannot be lived in by tenant-stockholders. Free state return efile Divide the number of your shares of stock by the total number of outstanding shares, including any shares held by the corporation. Free state return efile Multiply the result of (2) by the percentage you figured in (3). Free state return efile This is your depreciation on the stock. Free state return efile   Your depreciation deduction for the year cannot be more than the part of your adjusted basis in the stock of the corporation that is allocable to your business or income-producing property. Free state return efile You must also reduce your depreciation deduction if only a portion of the property is used in a business or for the production of income. Free state return efile Example. Free state return efile You figure your share of the cooperative housing corporation's depreciation to be $30,000. Free state return efile Your adjusted basis in the stock of the corporation is $50,000. Free state return efile You use one half of your apartment solely for business purposes. Free state return efile Your depreciation deduction for the stock for the year cannot be more than $25,000 (½ of $50,000). Free state return efile Change to business use. Free state return efile   If you change your cooperative apartment to business use, figure your allowable depreciation as explained earlier. Free state return efile The basis of all the depreciable real property owned by the cooperative housing corporation is the smaller of the following amounts. Free state return efile The fair market value of the property on the date you change your apartment to business use. Free state return efile This is considered to be the same as the corporation's adjusted basis minus straight line depreciation, unless this value is unrealistic. Free state return efile The corporation's adjusted basis in the property on that date. Free state return efile Do not subtract depreciation when figuring the corporation's adjusted basis. Free state return efile   If you bought the stock after its first offering, the corporation's adjusted basis in the property is the amount figured in (1), above. Free state return efile The fair market value of the property is considered to be the same as the corporation's adjusted basis figured in this way minus straight line depreciation, unless the value is unrealistic. Free state return efile   For a discussion of fair market value and adjusted basis, see Publication 551. Free state return efile Property Used in Your Business or Income-Producing Activity To claim depreciation on property, you must use it in your business or income-producing activity. Free state return efile If you use property to produce income (investment use), the income must be taxable. Free state return efile You cannot depreciate property that you use solely for personal activities. Free state return efile Partial business or investment use. Free state return efile   If you use property for business or investment purposes and for personal purposes, you can deduct depreciation based only on the business or investment use. Free state return efile For example, you cannot deduct depreciation on a car used only for commuting, personal shopping trips, family vacations, driving children to and from school, or similar activities. Free state return efile    You must keep records showing the business, investment, and personal use of your property. Free state return efile For more information on the records you must keep for listed property, such as a car, see What Records Must Be Kept in chapter 5. Free state return efile    Although you can combine business and investment use of property when figuring depreciation deductions, do not treat investment use as qualified business use when determining whether the business-use requirement for listed property is met. Free state return efile For information about qualified business use of listed property, see What Is the Business-Use Requirement in chapter 5. Free state return efile Office in the home. Free state return efile   If you use part of your home as an office, you may be able to deduct depreciation on that part based on its business use. Free state return efile For information about depreciating your home office, see Publication 587. Free state return efile Inventory. Free state return efile   You cannot depreciate inventory because it is not held for use in your business. Free state return efile Inventory is any property you hold primarily for sale to customers in the ordinary course of your business. Free state return efile   If you are a rent-to-own dealer, you may be able to treat certain property held in your business as depreciable property rather than as inventory. Free state return efile See Rent-to-own dealer under Which Property Class Applies Under GDS in chapter 4. Free state return efile   In some cases, it is not clear whether property is held for sale (inventory) or for use in your business. Free state return efile If it is unclear, examine carefully all the facts in the operation of the particular business. Free state return efile The following example shows how a careful examination of the facts in two similar situations results in different conclusions. Free state return efile Example. Free state return efile Maple Corporation is in the business of leasing cars. Free state return efile At the end of their useful lives, when the cars are no longer profitable to lease, Maple sells them. Free state return efile Maple does not have a showroom, used car lot, or individuals to sell the cars. Free state return efile Instead, it sells them through wholesalers or by similar arrangements in which a dealer's profit is not intended or considered. Free state return efile Maple can depreciate the leased cars because the cars are not held primarily for sale to customers in the ordinary course of business, but are leased. Free state return efile If Maple buys cars at wholesale prices, leases them for a short time, and then sells them at retail prices or in sales in which a dealer's profit is intended, the cars are treated as inventory and are not depreciable property. Free state return efile In this situation, the cars are held primarily for sale to customers in the ordinary course of business. Free state return efile Containers. Free state return efile   Generally, containers for the products you sell are part of inventory and you cannot depreciate them. Free state return efile However, you can depreciate containers used to ship your products if they have a life longer than one year and meet the following requirements. Free state return efile They qualify as property used in your business. Free state return efile Title to the containers does not pass to the buyer. Free state return efile   To determine if these requirements are met, consider the following questions. Free state return efile Does your sales contract, sales invoice, or other type of order acknowledgment indicate whether you have retained title? Does your invoice treat the containers as separate items? Do any of your records state your basis in the containers? Property Having a Determinable Useful Life To be depreciable, your property must have a determinable useful life. Free state return efile This means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Free state return efile Property Lasting More Than One Year To be depreciable, property must have a useful life that extends substantially beyond the year you place it in service. Free state return efile Example. Free state return efile You maintain a library for use in your profession. Free state return efile You can depreciate it. Free state return efile However, if you buy technical books, journals, or information services for use in your business that have a useful life of one year or less, you cannot depreciate them. Free state return efile Instead, you deduct their cost as a business expense. Free state return efile What Property Cannot Be Depreciated? Certain property cannot be depreciated. Free state return efile This includes land and certain excepted property. Free state return efile Land You cannot depreciate the cost of land because land does not wear out, become obsolete, or get used up. Free state return efile The cost of land generally includes the cost of clearing, grading, planting, and landscaping. Free state return efile Although you cannot depreciate land, you can depreciate certain land preparation costs, such as landscaping costs, incurred in preparing land for business use. Free state return efile These costs must be so closely associated with other depreciable property that you can determine a life for them along with the life of the associated property. Free state return efile Example. Free state return efile You constructed a new building for use in your business and paid for grading, clearing, seeding, and planting bushes and trees. Free state return efile Some of the bushes and trees were planted right next to the building, while others were planted around the outer border of the lot. Free state return efile If you replace the building, you would have to destroy the bushes and trees right next to it. Free state return efile These bushes and trees are closely associated with the building, so they have a determinable useful life. Free state return efile Therefore, you can depreciate them. Free state return efile Add your other land preparation costs to the basis of your land because they have no determinable life and you cannot depreciate them. Free state return efile Excepted Property Even if the requirements explained in the preceding discussions are met, you cannot depreciate the following property. Free state return efile Property placed in service and disposed of in the same year. Free state return efile Determining when property is placed in service is explained later. Free state return efile Equipment used to build capital improvements. Free state return efile You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. Free state return efile See Uniform Capitalization Rules in Publication 551. Free state return efile Section 197 intangibles. Free state return efile You must amortize these costs. Free state return efile Section 197 intangibles are discussed in detail in Chapter 8 of Publication 535. Free state return efile Intangible property, such as certain computer software, that is not section 197 intangible property, can be depreciated if it meets certain requirements. Free state return efile See Intangible Property , later. Free state return efile Certain term interests. Free state return efile Certain term interests in property. Free state return efile   You cannot depreciate a term interest in property created or acquired after July 27, 1989, for any period during which the remainder interest is held, directly or indirectly, by a person related to you. Free state return efile A term interest in property means a life interest in property, an interest in property for a term of years, or an income interest in a trust. Free state return efile Related persons. Free state return efile   For a description of related persons, see Related Persons, later. Free state return efile For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. Free state return efile Basis adjustments. Free state return efile   If you would be allowed a depreciation deduction for a term interest in property except that the holder of the remainder interest is related to you, you generally must reduce your basis in the term interest by any depreciation or amortization not allowed. Free state return efile   If you hold the remainder interest, you generally must increase your basis in that interest by the depreciation not allowed to the term interest holder. Free state return efile However, do not increase your basis for depreciation not allowed for periods during which either of the following situations applies. Free state return efile The term interest is held by an organization exempt from tax. Free state return efile The term interest is held by a nonresident alien individual or foreign corporation, and the income from the term interest is not effectively connected with the conduct of a trade or business in the United States. Free state return efile Exceptions. Free state return efile   The above rules do not apply to the holder of a term interest in property acquired by gift, bequest, or inheritance. Free state return efile They also do not apply to the holder of dividend rights that were separated from any stripped preferred stock if the rights were purchased after April 30, 1993, or to a person whose basis in the stock is determined by reference to the basis in the hands of the purchaser. Free state return efile When Does Depreciation Begin and End? You begin to depreciate your property when you place it in service for use in your trade or business or for the production of income. Free state return efile You stop depreciating property either when you have fully recovered your cost or other basis or when you retire it from service, whichever happens first. Free state return efile Placed in Service You place property in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. Free state return efile Even if you are not using the property, it is in service when it is ready and available for its specific use. Free state return efile Example 1. Free state return efile Donald Steep bought a machine for his business. Free state return efile The machine was delivered last year. Free state return efile However, it was not installed and operational until this year. Free state return efile It is considered placed in service this year. Free state return efile If the machine had been ready and available for use when it was delivered, it would be considered placed in service last year even if it was not actually used until this year. Free state return efile Example 2. Free state return efile On April 6, Sue Thorn bought a house to use as residential rental property. Free state return efile She made several repairs and had it ready for rent on July 5. Free state return efile At that time, she began to advertise it for rent in the local newspaper. Free state return efile The house is considered placed in service in July when it was ready and available for rent. Free state return efile She can begin to depreciate it in July. Free state return efile Example 3. Free state return efile James Elm is a building contractor who specializes in constructing office buildings. Free state return efile He bought a truck last year that had to be modified to lift materials to second-story levels. Free state return efile The installation of the lifting equipment was completed and James accepted delivery of the modified truck on January 10 of this year. Free state return efile The truck was placed in service on January 10, the date it was ready and available to perform the function for which it was bought. Free state return efile Conversion to business use. Free state return efile   If you place property in service in a personal activity, you cannot claim depreciation. Free state return efile However, if you change the property's use to use in a business or income-producing activity, then you can begin to depreciate it at the time of the change. Free state return efile You place the property in service in the business or income-producing activity on the date of the change. Free state return efile Example. Free state return efile You bought a home and used it as your personal home several years before you converted it to rental property. Free state return efile Although its specific use was personal and no depreciation was allowable, you placed the home in service when you began using it as your home. Free state return efile You can begin to claim depreciation in the year you converted it to rental property because its use changed to an income-producing use at that time. Free state return efile Idle Property Continue to claim a deduction for depreciation on property used in your business or for the production of income even if it is temporarily idle (not in use). Free state return efile For example, if you stop using a machine because there is a temporary lack of a market for a product made with that machine, continue to deduct depreciation on the machine. Free state return efile Cost or Other Basis Fully Recovered You stop depreciating property when you have fully recovered your cost or other basis. Free state return efile You recover your basis when your section 179 and allowed or allowable depreciation deductions equal your cost or investment in the property. Free state return efile See What Is the Basis of Your Depreciable Property , later. Free state return efile Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. Free state return efile You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. Free state return efile You sell or exchange the property. Free state return efile You convert the property to personal use. Free state return efile You abandon the property. Free state return efile You transfer the property to a supplies or scrap account. Free state return efile The property is destroyed. Free state return efile If you included the property in a general asset account, see How Do You Use General Asset Accounts in chapter 4 for the rules that apply when you dispose of that property. Free state return efile What Method Can You Use To Depreciate Your Property? You must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate most property. Free state return efile MACRS is discussed in chapter 4. Free state return efile You cannot use MACRS to depreciate the following property. Free state return efile Property you placed in service before 1987. Free state return efile Certain property owned or used in 1986. Free state return efile Intangible property. Free state return efile Films, video tapes, and recordings. Free state return efile Certain corporate or partnership property acquired in a nontaxable transfer. Free state return efile Property you elected to exclude from MACRS. Free state return efile The following discussions describe the property listed above and explain what depreciation method should be used. Free state return efile Property You Placed in Service Before 1987 You cannot use MACRS for property you placed in service before 1987 (except property you placed in service after July 31, 1986, if MACRS was elected). Free state return efile Property placed in service before 1987 must be depreciated under the methods discussed in Publication 534. Free state return efile For a discussion of when property is placed in service, see When Does Depreciation Begin and End , earlier. Free state return efile Use of real property changed. Free state return efile   You generally must use MACRS to depreciate real property that you acquired for personal use before 1987 and changed to business or income-producing use after 1986. Free state return efile Improvements made after 1986. Free state return efile   You must treat an improvement made after 1986 to property you placed in service before 1987 as separate depreciable property. Free state return efile Therefore, you can depreciate that improvement as separate property under MACRS if it is the type of property that otherwise qualifies for MACRS depreciation. Free state return efile For more information about improvements, see How Do You Treat Repairs and Improvements , later and Additions and Improvements under Which Recovery Period Applies in chapter 4. Free state return efile Property Owned or Used in 1986 You may not be able to use MACRS for property you acquired and placed in service after 1986 if any of the situations described below apply. Free state return efile If you cannot use MACRS, the property must be depreciated under the methods discussed in Publication 534. Free state return efile For the following discussions, do not treat property as owned before you placed it in service. Free state return efile If you owned property in 1986 but did not place it in service until 1987, you do not treat it as owned in 1986. Free state return efile Personal property. Free state return efile   You cannot use MACRS for personal property (section 1245 property) in any of the following situations. Free state return efile You or someone related to you owned or used the property in 1986. Free state return efile You acquired the property from a person who owned it in 1986 and as part of the transaction the user of the property did not change. Free state return efile You lease the property to a person (or someone related to this person) who owned or used the property in 1986. Free state return efile You acquired the property in a transaction in which: The user of the property did not change, and The property was not MACRS property in the hands of the person from whom you acquired it because of (2) or (3) above. Free state return efile Real property. Free state return efile   You generally cannot use MACRS for real property (section 1250 property) in any of the following situations. Free state return efile You or someone related to you owned the property in 1986. Free state return efile You lease the property to a person who owned the property in 1986 (or someone related to that person). Free state return efile You acquired the property in a like-kind exchange, involuntary conversion, or repossession of property you or someone related to you owned in 1986. Free state return efile MACRS applies only to that part of your basis in the acquired property that represents cash paid or unlike property given up. Free state return efile It does not apply to the carried-over part of the basis. Free state return efile Exceptions. Free state return efile   The rules above do not apply to the following. Free state return efile Residential rental property or nonresidential real property. Free state return efile Any property if, in the first tax year it is placed in service, the deduction under the Accelerated Cost Recovery System (ACRS) is more than the deduction under MACRS using the half-year convention. Free state return efile For information on how to figure depreciation under ACRS, see Publication 534. Free state return efile Property that was MACRS property in the hands of the person from whom you acquired it because of (2) above. Free state return efile Related persons. Free state return efile   For this purpose, the following are related persons. Free state return efile An individual and a member of his or her family, including only a spouse, child, parent, brother, sister, half-brother, half-sister, ancestor, and lineal descendant. Free state return efile A corporation and an individual who directly or indirectly owns more than 10% of the value of the outstanding stock of that corporation. Free state return efile Two corporations that are members of the same controlled group. Free state return efile A trust fiduciary and a corporation if more than 10% of the value of the outstanding stock is directly or indirectly owned by or for the trust or grantor of the trust. Free state return efile The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Free state return efile The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. Free state return efile A tax-exempt educational or charitable organization and any person (or, if that person is an individual, a member of that person's family) who directly or indirectly controls the organization. Free state return efile Two S corporations, and an S corporation and a regular corporation, if the same persons own more than 10% of the value of the outstanding stock of each corporation. Free state return efile A corporation and a partnership if the same persons own both of the following. Free state return efile More than 10% of the value of the outstanding stock of the corporation. Free state return efile More than 10% of the capital or profits interest in the partnership. Free state return efile The executor and beneficiary of any estate. Free state return efile A partnership and a person who directly or indirectly owns more than 10% of the capital or profits interest in the partnership. Free state return efile Two partnerships, if the same persons directly or indirectly own more than 10% of the capital or profits interest in each. Free state return efile The related person and a person who is engaged in trades or businesses under common control. Free state return efile See section 52(a) and 52(b) of the Internal Revenue Code. Free state return efile When to determine relationship. Free state return efile   You must determine whether you are related to another person at the time you acquire the property. Free state return efile   A partnership acquiring property from a terminating partnership must determine whether it is related to the terminating partnership immediately before the event causing the termination. Free state return efile For this rule, a terminating partnership is one that sells or exchanges, within 12 months, 50% or more of its total interest in partnership capital or profits. Free state return efile Constructive ownership of stock or partnership interest. Free state return efile   To determine whether a person directly or indirectly owns any of the outstanding stock of a corporation or an interest in a partnership, apply the following rules. Free state return efile Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Free state return efile However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more of the value of the stock of the corporation. Free state return efile An individual is considered to own the stock or partnership interest directly or indirectly owned by or for the individual's family. Free state return efile An individual who owns, except by applying rule (2), any stock in a corporation is considered to own the stock directly or indirectly owned by or for the individual's partner. Free state return efile For purposes of rules (1), (2), or (3), stock or a partnership interest considered to be owned by a person under rule (1) is treated as actually owned by that person. Free state return efile However, stock or a partnership interest considered to be owned by an individual under rule (2) or (3) is not treated as owned by that individual for reapplying either rule (2) or (3) to make another person considered to be the owner of the same stock or partnership interest. Free state return efile Intangible Property Generally, if you can depreciate intangible property, you usually use the straight line method of depreciation. Free state return efile However, you can choose to depreciate certain intangible property under the income forecast method (discussed later). Free state return efile You cannot depreciate intangible property that is a section 197 intangible or that otherwise does not meet all the requirements discussed earlier under What Property Can Be Depreciated. Free state return efile Straight Line Method This method lets you deduct the same amount of depreciation each year over the useful life of the property. Free state return efile To figure your deduction, first determine the adjusted basis, salvage value, and estimated useful life of your property. Free state return efile Subtract the salvage value, if any, from the adjusted basis. Free state return efile The balance is the total depreciation you can take over the useful life of the property. Free state return efile Divide the balance by the number of years in the useful life. Free state return efile This gives you your yearly depreciation deduction. Free state return efile Unless there is a big change in adjusted basis or useful life, this amount will stay the same throughout the time you depreciate the property. Free state return efile If, in the first year, you use the property for less than a full year, you must prorate your depreciation deduction for the number of months in use. Free state return efile Example. Free state return efile In April, Frank bought a patent for $5,100 that is not a section 197 intangible. Free state return efile He depreciates the patent under the straight line method, using a 17-year useful life and no salvage value. Free state return efile He divides the $5,100 basis by 17 years to get his $300 yearly depreciation deduction. Free state return efile He only used the patent for 9 months during the first year, so he multiplies $300 by 9/12 to get his deduction of $225 for the first year. Free state return efile Next year, Frank can deduct $300 for the full year. Free state return efile Patents and copyrights. Free state return efile   If you can depreciate the cost of a patent or copyright, use the straight line method over the useful life. Free state return efile The useful life of a patent or copyright is the lesser of the life granted to it by the government or the remaining life when you acquire it. Free state return efile However, if the patent or copyright becomes valueless before the end of its useful life, you can deduct in that year any of its remaining cost or other basis. Free state return efile Computer software. Free state return efile   Computer software is generally a section 197 intangible and cannot be depreciated if you acquired it in connection with the acquisition of assets constituting a business or a substantial part of a business. Free state return efile   However, computer software is not a section 197 intangible and can be depreciated, even if acquired in connection with the acquisition of a business, if it meets all of the following tests. Free state return efile It is readily available for purchase by the general public. Free state return efile It is subject to a nonexclusive license. Free state return efile It has not been substantially modified. Free state return efile   If the software meets the tests above, it may also qualify for the section 179 deduction and the special depreciation allowance, discussed later. Free state return efile If you can depreciate the cost of computer software, use the straight line method over a useful life of 36 months. Free state return efile    Tax-exempt use property subject to a lease. Free state return efile   The useful life of computer software leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership), cannot be less than 125% of the lease term. Free state return efile Certain created intangibles. Free state return efile   You can amortize certain intangibles created on or after December 31, 2003, over a 15-year period using the straight line method and no salvage value, even though they have a useful life that cannot be estimated with reasonable accuracy. Free state return efile For example, amounts paid to acquire memberships or privileges of indefinite duration, such as a trade association membership, are eligible costs. Free state return efile   The following are not eligible. Free state return efile Any intangible asset acquired from another person. Free state return efile Created financial interests. Free state return efile Any intangible asset that has a useful life that can be estimated with reasonable accuracy. Free state return efile Any intangible asset that has an amortization period or limited useful life that is specifically prescribed or prohibited by the Code, regulations, or other published IRS guidance. Free state return efile Any amount paid to facilitate an acquisition of a trade or business, a change in the capital structure of a business entity, and certain other transactions. Free state return efile   You must also increase the 15-year safe harbor amortization period to a 25-year period for certain intangibles related to benefits arising from the provision, production, or improvement of real property. Free state return efile For this purpose, real property includes property that will remain attached to the real property for an indefinite period of time, such as roads, bridges, tunnels, pavements, and pollution control facilities. Free state return efile Income Forecast Method You can choose to use the income forecast method instead of the straight line method to depreciate the following depreciable intangibles. Free state return efile Motion picture films or video tapes. Free state return efile Sound recordings. Free state return efile Copyrights. Free state return efile Books. Free state return efile Patents. Free state return efile Under the income forecast method, each year's depreciation deduction is equal to the cost of the property, multiplied by a fraction. Free state return efile The numerator of the fraction is the current year's net income from the property, and the denominator is the total income anticipated from the property through the end of the 10th taxable year following the taxable year the property is placed in service. Free state return efile For more information, see section 167(g) of the Internal Revenue Code. Free state return efile Films, video tapes, and recordings. Free state return efile   You cannot use MACRS for motion picture films, video tapes, and sound recordings. Free state return efile For this purpose, sound recordings are discs, tapes, or other phonorecordings resulting from the fixation of a series of sounds. Free state return efile You can depreciate this property using either the straight line method or the income forecast method. Free state return efile Participations and residuals. Free state return efile   You can include participations and residuals in the adjusted basis of the property for purposes of computing your depreciation deduction under the income forecast method. Free state return efile The participations and residuals must relate to income to be derived from the property before the end of the 10th taxable year after the property is placed in service. Free state return efile For this purpose, participations and residuals are defined as costs which by contract vary with the amount of income earned in connection with the property. Free state return efile   Instead of including these amounts in the adjusted basis of the property, you can deduct the costs in the taxable year that they are paid. Free state return efile Videocassettes. Free state return efile   If you are in the business of renting videocassettes, you can depreciate only those videocassettes bought for rental. Free state return efile If the videocassette has a useful life of one year or less, you can currently deduct the cost as a business expense. Free state return efile Corporate or Partnership Property Acquired in a Nontaxable Transfer MACRS does not apply to property used before 1987 and transferred after 1986 to a corporation or partnership (except property the transferor placed in service after July 31, 1986, if MACRS was elected) to the extent its basis is carried over from the property's adjusted basis in the transferor's hands. Free state return efile You must continue to use the same depreciation method as the transferor and figure depreciation as if the transfer had not occurred. Free state return efile However, if MACRS would otherwise apply, you can use it to depreciate the part of the property's basis that exceeds the carried-over basis. Free state return efile The nontaxable transfers covered by this rule include the following. Free state return efile A distribution in complete liquidation of a subsidiary. Free state return efile A transfer to a corporation controlled by the transferor. Free state return efile An exchange of property solely for corporate stock or securities in a reorganization. Free state return efile A contribution of property to a partnership in exchange for a partnership interest. Free state return efile A partnership distribution of property to a partner. Free state return efile Election To Exclude Property From MACRS If you can properly depreciate any property under a method not based on a term of years, such as the unit-of-production method, you can elect to exclude that property from MACRS. Free state return efile You make the election by reporting your depreciation for the property on line 15 in Part II of Form 4562 and attaching a statement as described in the instructions for Form 4562. Free state return efile You must make this election by the return due date (including extensions) for the tax year you place your property in service. Free state return efile However, 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 six months of the due date of the return (excluding extensions). Free state return efile Attach the election to the amended return and write “Filed pursuant to section 301. Free state return efile 9100-2” on the election statement. Free state return efile File the amended return at the same address you filed the original return. Free state return efile Use of standard mileage rate. Free state return efile   If you use the standard mileage rate to figure your tax deduction for your business automobile, you are treated as having made an election to exclude the automobile from MACRS. Free state return efile See Publication 463 for a discussion of the standard mileage rate. Free state return efile What Is the Basis of Your Depreciable Property? To figure your depreciation deduction, you must determine the basis of your property. Free state return efile To determine basis, you need to know the cost or other basis of your property. Free state return efile Cost as Basis The basis of property you buy is its cost plus amounts you paid for items such as sales tax (see Exception , below), freight charges, and installation and testing fees. Free state return efile The cost includes the amount you pay in cash, debt obligations, other property, or services. Free state return efile Exception. Free state return efile   You can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040). Free state return efile If you make that choice, you cannot include those sales taxes as part of your cost basis. Free state return efile Assumed debt. Free state return efile   If you buy property and assume (or buy subject to) an existing mortgage or other debt on the property, your basis includes the amount you pay for the property plus the amount of the assumed debt. Free state return efile Example. Free state return efile You make a $20,000 down payment on property and assume the seller's mortgage of $120,000. Free state return efile Your total cost is $140,000, the cash you paid plus the mortgage you assumed. Free state return efile Settlement costs. Free state return efile   The basis of real property also includes certain fees and charges you pay in addition to the purchase price. Free state return efile These generally are shown on your settlement statement and include the following. Free state return efile Legal and recording fees. Free state return efile Abstract fees. Free state return efile Survey charges. Free state return efile Owner's title insurance. Free state return efile Amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Free state return efile   For fees and charges you cannot include in the basis of property, see Real Property in Publication 551. Free state return efile Property you construct or build. Free state return efile   If you construct, build, or otherwise produce property for use in your business, you may have to use the uniform capitalization rules to determine the basis of your property. Free state return efile For information about the uniform capitalization rules, see Publication 551 and the regulations under section 263A of the Internal Revenue Code. Free state return efile Other Basis Other basis usually refers to basis that is determined by the way you received the property. Free state return efile For example, your basis is other than cost if you acquired the property in exchange for other property, as payment for services you performed, as a gift, or as an inheritance. Free state return efile If you acquired property in this or some other way, see Publication 551 to determine your basis. Free state return efile Property changed from personal use. Free state return efile   If you held property for personal use and later use it in your business or income-producing activity, your depreciable basis is the lesser of the following. Free state return efile The fair market value (FMV) of the property on the date of the change in use. Free state return efile Your original cost or other basis adjusted as follows. Free state return efile Increased by the cost of any permanent improvements or additions and other costs that must be added to basis. Free state return efile Decreased by any deductions you claimed for casualty and theft losses and other items that reduced your basis. Free state return efile Example. Free state return efile Several years ago, Nia paid $160,000 to have her home built on a lot that cost her $25,000. Free state return efile Before changing the property to rental use last year, she paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house. Free state return efile Land is not depreciable, so she includes only the cost of the house when figuring the basis for depreciation. Free state return efile Nia's adjusted basis in the house when she changed its use was $178,000 ($160,000 + $20,000 − $2,000). Free state return efile On the same date, her property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. Free state return efile The basis for depreciation on the house is the FMV on the date of change ($165,000), because it is less than her adjusted basis ($178,000). Free state return efile Property acquired in a nontaxable transaction. Free state return efile   Generally, if you receive property in a nontaxable exchange, the basis of the property you receive is the same as the adjusted basis of the property you gave up. Free state return efile Special rules apply in determining the basis and figuring the MACRS depreciation deduction and special depreciation allowance for property acquired in a like-kind exchange or involuntary conversion. Free state return efile See Like-kind exchanges and involuntary conversions. Free state return efile under How Much Can You Deduct? in chapter 3 and Figuring the Deduction for Property Acquired in a Nontaxable Exchange in chapter 4. Free state return efile   There are also special rules for determining the basis of MACRS property involved in a like-kind exchange or involuntary conversion when the property is contained in a general asset account. Free state return efile See How Do You Use General Asset Accounts in chapter 4. Free state return efile Adjusted Basis To find your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service. Free state return efile These events could include the following. Free state return efile Installing utility lines. Free state return efile Paying legal fees for perfecting the title. Free state return efile Settling zoning issues. Free state return efile Receiving rebates. Free state return efile Incurring a casualty or theft loss. Free state return efile For a discussion of adjustments to the basis of your property, see Adjusted Basis in Publication 551. Free state return efile If you depreciate your property under MACRS, you also may have to reduce your basis by certain deductions and credits with respect to the property. Free state return efile For more information, see What Is the Basis for Depreciation in chapter 4. Free state return efile . Free state return efile Basis adjustment for depreciation allowed or allowable. Free state return efile   You must reduce the basis of property by the depreciation allowed or allowable, whichever is greater. Free state return efile Depreciation allowed is depreciation you actually deducted (from which you received a tax benefit). Free state return efile Depreciation allowable is depreciation you are entitled to deduct. Free state return efile   If you do not claim depreciation you are entitled to deduct, you must still reduce the basis of the property by the full amount of depreciation allowable. Free state return efile   If you deduct more depreciation than you should, you must reduce your basis by any amount deducted from which you received a tax benefit (the depreciation allowed). Free state return efile How Do You Treat Repairs and Improvements? If you improve depreciable property, you must treat the improvement as separate depreciable property. Free state return efile Improvement means an addition to or partial replacement of property that adds to its value, appreciably lengthens the time you can use it, or adapts it to a different use. Free state return efile You generally deduct the cost of repairing business property in the same way as any other business expense. Free state return efile However, if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it. Free state return efile Example. Free state return efile You repair a small section on one corner of the roof of a rental house. Free state return efile You deduct the cost of the repair as a rental expense. Free state return efile However, if you completely replace the roof, the new roof is an improvement because it increases the value and lengthens the life of the property. Free state return efile You depreciate the cost of the new roof. Free state return efile Improvements to rented property. Free state return efile   You can depreciate permanent improvements you make to business property you rent from someone else. Free state return efile Do You Have To File Form 4562? Use Form 4562 to figure your deduction for depreciation and amortization. Free state return efile Attach Form 4562 to your tax return for the current tax year if you are claiming any of the following items. Free state return efile A section 179 deduction for the current year or a section 179 carryover from a prior year. Free state return efile See chapter 2 for information on the section 179 deduction. Free state return efile Depreciation for property placed in service during the current year. Free state return efile Depreciation on any vehicle or other listed property, regardless of when it was placed in service. Free state return efile See chapter 5 for information on listed property. Free state return efile A deduction for any vehicle if the deduction is reported on a form other than Schedule C (Form 1040) or Schedule C-EZ (Form 1040). Free state return efile Amortization of costs if the current year is the first year of the amortization period. Free state return efile Depreciation or amortization on any asset on a corporate income tax return (other than Form 1120S, U. Free state return efile S. Free state return efile Income Tax Return for an S Corporation) regardless of when it was placed in service. Free state return efile You must submit a separate Form 4562 for each business or activity on your return for which a Form 4562 is required. Free state return efile Table 1-1 presents an overview of the purpose of the various parts of Form 4562. Free state return efile Employee. Free state return efile   Do not use Form 4562 if you are an employee and you deduct job-related vehicle expenses using either actual expenses (including depreciation) or the standard mileage rate. Free state return efile Instead, use either Form 2106 or Form 2106-EZ. Free state return efile Use Form 2106-EZ if you are claiming the standard mileage rate and you are not reimbursed by your employer for any expenses. Free state return efile How Do You Correct Depreciation Deductions? If you deducted an incorrect amount of depreciation in any year, you may be able to make a correction by filing an amended return for that year. Free state return efile See Filing an Amended Return , next. Free state return efile If you are not allowed to make the correction on an amended return, you may be able to change your accounting method to claim the correct amount of depreciation. Free state return efile See Changing Your Accounting Method , later. Free state return efile Filing an Amended Return You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. Free state return efile You claimed the incorrect amount because of a mathematical error made in any year. Free state return efile You claimed the incorrect amount because of a posting error made in any year. Free state return efile You have not adopted a method of accounting for property placed in service by you in tax years ending after December 29, 2003. Free state return efile You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. Free state return efile Adoption of accounting method defined. Free state return efile   Generally, you adopt a method of accounting for depreciation by using a permissible method of determining depreciation when you file your first tax return, or by using the same impermissible method of determining depreciation in two or more consecutively filed tax returns. Free state return efile   For an exception to this 2-year rule, see Revenue Procedure 2011-14 on page 330 of the Internal Revenue Bulletin 2011-4, available at www. Free state return efile irs. Free state return efile gov/pub/irs-irbs/irb11-04. Free state return efile pdf. Free state return efile (Note. Free state return efile Revenue Procedure 2011-14 is clarified and modified by Revenue Procedure 2012-20. Free state return efile For more information, see Revenue Procedure 2012-20 on page 700 of the Internal Revenue Bulletin 2012-14, available at www. Free state return efile irs. Free state return efile gov/pub/irs-irbs/irb12-14. Free state return efile pdf. Free state return efile )   For a safe harbor method of accounting to treat rotable spare parts as depreciable assets and procedures to obtain automatic consent to change to the safe harbor method of accounting, see Revenue Procedure 2007-48 on page 110 of Internal Revenue Bulletin 2007-29, available at www. Free state return efile irs. Free state return efile gov/pub/irs-irbs/irb07-29. Free state return efile pdf. Free state return efile When to file. Free state return efile   If an amended return is allowed, you must file it by the later of the following. Free state return efile 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. Free state return efile A return filed before an unextended due date is considered filed on that due date. Free state return efile 2 years from the time you paid your tax for that year. Free state return efile Changing Your Accounting Method Generally, you must get IRS approval to change your method of accounting. Free state return efile You generally must file Form 3115, Application for Change in Accounting Method, to request a change in your method of accounting for depreciation. Free state return efile The following are examples of a change in method of accounting for depreciation. Free state return efile A change from an impermissible method of determining depreciation for depreciable property, if the impermissible method was used in two or more consecutively filed tax returns. Free state return efile A change in the treatment of an asset from nondepreciable to depreciable or vice versa. Free state return efile A change in the depreciation method, period of recovery, or convention of a depreciable asset. Free state return efile A change from not claiming to claiming the special depreciation allowance if you did not make the election to not claim any special allowance. Free state return efile A change from claiming a 50% special depreciation allowance to claiming a 30% special depreciation allowance for qualified property (including property that is included in a class of property for which you elected a 30% special allowance instead of a 50% special allowance). Free state return efile Changes in depreciation that are not a change in method of accounting (and may only be made on an amended return) include the following. Free state return efile An adjustment in the useful life of a depreciable asset for which depreciation is determined under section 167. Free state return efile A change in use of an asset in the hands of the same taxpayer. Free state return efile Making a late depreciation election or revoking a timely valid depreciation election (including the election not to deduct the special depreciation allowance). Free state return efile If you elected not to claim any special allowance, a change from not claiming to claiming the special allowance is a revocation of the election and is not an accounting method change. Free state return efile Generally, you must get IRS approval to make a late depreciation election or revoke a depreciation election. Free state return efile You must submit a request for a letter ruling to make a late election or revoke an election. Free state return efile Any change in the placed in service date of a depreciable asset. Free state return efile See section 1. Free state return efile 446-1(e)(2)(ii)(d) of the regulations for more information and examples. Free state return efile IRS approval. Free state return efile   In some instances, you may be able to get approval from the IRS to change your method of accounting for depreciation under the automatic change request procedures generally covered in Revenue Procedure 2011-14. Free state return efile If you do not qualify to use the automatic procedures to get approval, you must use the advance consent request procedures generally covered in Revenue Procedure 97-27, 1997-1 C. Free state return efile B. Free state return efile 680. Free state return efile Also see the Instructions for Form 3115 for more information on getting approval, including lists of scope limitations and automatic accounting method changes. Free state return efile Additional guidance. Free state return efile    For additional guidance and special procedures for changing your accounting method, automatic change procedures, amending your return, and filing Form 3115, see Revenue Procedure 2011-14 on page 330 of the Internal Revenue Bulletin 2011-4, available at www. Free state return efile irs. Free state return efile gov/pub/irs-irbs/irb11-04. Free state return efile pdf. Free state return efile (Note. Free state return efile Revenue Procedure 2011-14 is clarified and modified by Revenue Procedure 2012-20. Free state return efile For more information, see Revenue Procedure 2012-20 on page 700 of the Internal Revenue Bulletin 2012-14, available at www. Free state return efile irs. Free state return efile gov/pub/irs-irbs/irb12-14. Free state return efile pdf. Free state return efile )   For a safe harbor method of accounting to treat rotable spare parts as depreciable assets, see Revenue Procedure 2007-48 on page 110 of Internal Revenue Bulletin 2007-29, available at www. Free state return efile irs. Free state return efile gov/pub/irs-irbs/irb07-29. Free state return efile pdf. Free state return efile Table 1-1. Free state return efile Purpose of Form 4562 This table describes the purpose of the various parts of Form 4562. Free state return efile For more information, see Form 4562 and its instructions. Free state return efile Part Purpose I • Electing the section 179 deduction • Figuring the maximum section 179 deduction for the current year • Figuring any section 179 deduction carryover to the next year II • Reporting the special depreciation allowance for property (other than listed property) placed in service during the tax year • Reporting depreciation deductions on property being depreciated under any method other than Modified Accelerated Cost Recovery System (MACRS) III • Reporting MACRS depreciation deductions for property placed in service before this year • Reporting MACRS depreciation deductions for property (other than listed property) placed in service during the current year IV • Summarizing other parts V • Reporting the special depreciation allowance for automobiles and other listed property • Reporting MACRS depreciation on automobiles and other listed property • Reporting the section 179 cost elected for automobiles and other listed property • Reporting information on the use of automobiles and other transportation vehicles VI • Reporting amortization deductions Section 481(a) adjustment. Free state return efile   If you file Form 3115 and change from an impermissible method to a permissible method of accounting for depreciation, you can make a section 481(a) adjustment for any unclaimed or excess amount of allowable depreciation. Free state return efile The adjustment is the difference between the total depreciation actually deducted for the property and the total amount allowable prior to the year of change. Free state return efile If no depreciation was deducted, the adjustment is the total depreciation allowable prior to the year of change. Free state return efile A negative section 481(a) adjustment results in a decrease in taxable income. Free state return efile It is taken into account in the year of change and is reported on your business tax returns as “other expenses. Free state return efile ” A positive section 481(a) adjustment results in an increase in taxable income. Free state return efile It is generally taken into account over 4 tax years and is reported on your business tax returns as “other income. Free state return efile ” However, you can elect to use a one-year adjustment period and report the adjustment in the year of change if the total adjustment is less than $25,000. Free state return efile Make the election by completing the appropriate line on Form 3115. Free state return efile   If you file a Form 3115 and change from one permissible method to another permissible method, the section 481(a) adjustment is zero. Free state return efile Prev  Up  Next   Home   More Online Publications
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Time May be Running Out -- March 31 is an Important Deadline

IRS Health Care Tax Tip 2014-11, March 25, 2014                                                Español

Time May be Running Out – March 31 is an Important Deadline

Health Care Law Considerations for 2014

For most people, the Affordable Care Act has no effect on the 2013 income tax return they are filing in 2014. However, some people may need to make important decisions by the March 31, 2014 deadline for open enrollment. 

Below are five things about the health care law you may need to consider soon.

  • Currently Insured – No Change: If you already insured, you do not need to do anything more than continue your insurance.
  • Uninsured – Enroll by March 31: The open enrollment period to purchase health care coverage through the Health Insurance Marketplace for 2014 runs through March 31, 2014. When you get health insurance through the marketplace, you may be able to get advance payments of the premium tax credit that will immediately help lower your monthly premium. Learn more at HealthCare.gov.
  • Premium Tax Credit To Lower Your Monthly Premium: If you get insurance through the Marketplace, you may be eligible to claim the premium tax credit. You can elect to have advance payments of the tax credit sent directly to your insurer during 2014 so that the monthly premium you pay is lower, or wait to claim the credit when you file your tax return in 2015. If you choose to have advance payments sent to your insurer, you will have to reconcile the payments on your 2014 tax return, which will be filed in 2015. If you’re already receiving advance payments of the credit, you need to do nothing at this time unless you have a change in circumstance like a change in income or family size. Learn More.
  • Change in Circumstances: If you're receiving advance payments of the premium tax credit to help pay for your insurance coverage, you should report life changes, such as income, marital status or family size changes, to the Marketplace. Reporting changes will help to make sure you have the right coverage and are getting the proper amount of advance payments of the premium tax credit.
  • Individual Shared Responsibility Payment: Starting January 2014, you and your family have been required to have health care coverage or have an exemption from coverage.  Most people already have qualifying health care coverage.  These individuals will not need to do anything more than maintain that coverage throughout 2014. If you can afford coverage but decide not to buy it and remain uninsured, you may have to make an individual shared responsibility payment when you file your 2014 tax return in 2015. Learn More.

 

More Information

Find out more tax-related provisions of the health care law at IRS.gov/aca

Find out more about the Health Insurance Marketplace at HealthCare.gov.

To receive copies of IRS tax tips via email, subscribe at www.irs.gov/uac/Subscribe-to-IRS-Tax-Tips.

Page Last Reviewed or Updated: 26-Mar-2014

 

The Free State Return Efile

Free state return efile 1. Free state return efile   Filing Information Table of Contents What's New Reminders Introduction Do I Have To File a Return?Individuals—In General Dependents Certain Children Under Age 19 or Full-Time Students Self-Employed Persons Aliens Who Should File Which Form Should I Use?Form 1040EZ Form 1040A Form 1040 Does My Return Have To Be on Paper?IRS e-file When Do I Have To File?Private delivery services. Free state return efile Extensions of Time To File How Do I Prepare My Return?When Do I Report My Income and Expenses? Social Security Number (SSN) Presidential Election Campaign Fund Computations Attachments Third Party Designee Signatures Paid Preparer Refunds Amount You Owe Gift To Reduce Debt Held by the Public Name and Address Where Do I File? What Happens After I File?What Records Should I Keep? Why Keep Records? Kinds of Records to Keep Basic Records How Long to Keep Records Refund Information Interest on Refunds Change of Address What If I Made a Mistake?Amended Returns and Claims for Refund Penalties Identity Theft What's New Filing status for same-sex married couple. Free state return efile   If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or married filing separately filing status on your 2013 return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage. Free state return efile See Publication 501 for more information. Free state return efile Additional Medicare Tax. Free state return efile  Beginning in 2013, a 0. Free state return efile 9% Additional Medicare Tax applies to Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income over a threshold amount based on your filing status. Free state return efile For more information, see the Instructions for Form 1040, line 60, and Form 8959. Free state return efile Net Investment Income Tax. Free state return efile  Beginning in 2013, you may be subject to Net Investment Income Tax (NIIT). Free state return efile NIIT is a 3. Free state return efile 8% tax on the lesser of net investment income or the excess of your modified adjusted gross income over a threshold amount. Free state return efile For more information, see the Instructions for Form 1040, line 60, and Form 8960. Free state return efile Refundable credit for prior year minimum tax. Free state return efile  The refundable portion of the credit for prior year minimum tax is no longer available. Free state return efile Who must file. Free state return efile  Generally, the amount of income you can receive before you must file a return has been increased. Free state return efile See Table 1-1, Table 1-2, and Table 1-3 for the specific amounts. Free state return efile Reminders File online. Free state return efile  Rather than filing a return on paper, you may be able to file electronically using IRS e-file. Free state return efile Create your own personal identification number (PIN) and file a completely paperless tax return. Free state return efile For more information, see Does My Return Have To Be on Paper , later. Free state return efile Change of address. Free state return efile  If you change your address, you should notify the IRS. Free state return efile You can use Form 8822 to notify the IRS of the change. Free state return efile See Change of Address , later, under What Happens After I File. Free state return efile Enter your social security number. Free state return efile  You must enter your social security number (SSN) in the spaces provided on your tax return. Free state return efile If you file a joint return, enter the SSNs in the same order as the names. Free state return efile Direct deposit of refund. Free state return efile  Instead of getting a paper check, you may be able to have your refund deposited directly into your account at a bank or other financial institution. Free state return efile See Direct Deposit under Refunds, later. Free state return efile If you choose direct deposit of your refund, you may be able to split the refund among two or three accounts. Free state return efile Pay online or by phone. Free state return efile  If you owe additional tax, you may be able to pay online or by phone. Free state return efile See How To Pay , later. Free state return efile Installment agreement. Free state return efile  If you cannot pay the full amount due with your return, you may ask to make monthly installment payments. Free state return efile See Installment Agreement , later, under Amount You Owe. Free state return efile You may be able to apply online for a payment agreement if you owe federal tax, interest, and penalties. Free state return efile Automatic 6-month extension. Free state return efile  You can get an automatic 6-month extension to file your tax return if, no later than the date your return is due, you file Form 4868, Application for Automatic Extension of Time To File U. Free state return efile S. Free state return efile Individual Income Tax Return. Free state return efile See Automatic Extension , later. Free state return efile Service in combat zone. Free state return efile  You are allowed extra time to take care of your tax matters if you are a member of the Armed Forces who served in a combat zone, or if you served in the combat zone in support of the Armed Forces. Free state return efile See Individuals Serving in Combat Zone , later, under When Do I Have To File. Free state return efile Adoption taxpayer identification number. Free state return efile  If a child has been placed in your home for purposes of legal adoption and you will not be able to get a social security number for the child in time to file your return, you may be able to get an adoption taxpayer identification number (ATIN). Free state return efile For more information, see Social Security Number (SSN) , later. Free state return efile Taxpayer identification number for aliens. Free state return efile  If you or your dependent is a nonresident or resident alien who does not have and is not eligible to get a social security number, file Form W-7, Application for IRS Individual Taxpayer Identification Number, with the IRS. Free state return efile For more information, see Social Security Number (SSN) , later. Free state return efile Frivolous tax submissions. Free state return efile  The IRS has published a list of positions that are identified as frivolous. Free state return efile The penalty for filing a frivolous tax return is $5,000. Free state return efile Also, the $5,000 penalty will apply to other specified frivolous submissions. Free state return efile For more information, see Civil Penalties , later. Free state return efile Introduction This chapter discusses the following topics. Free state return efile Whether you have to file a return. Free state return efile Which form to use. Free state return efile How to file electronically. Free state return efile When, how, and where to file your return. Free state return efile What happens if you pay too little or too much tax. Free state return efile What records you should keep and how long you should keep them. Free state return efile How you can change a return you have already filed. Free state return efile Do I Have To File a Return? You must file a federal income tax return if you are a citizen or resident of the United States or a resident of Puerto Rico and you meet the filing requirements for any of the following categories that apply to you. Free state return efile Individuals in general. Free state return efile (There are special rules for surviving spouses, executors, administrators, legal representatives, U. Free state return efile S. Free state return efile citizens and residents living outside the United States, residents of Puerto Rico, and individuals with income from U. Free state return efile S. Free state return efile possessions. Free state return efile ) Dependents. Free state return efile Certain children under age 19 or full-time students. Free state return efile Self-employed persons. Free state return efile Aliens. Free state return efile The filing requirements for each category are explained in this chapter. Free state return efile The filing requirements apply even if you do not owe tax. Free state return efile Even if you do not have to file a return, it may be to your advantage to do so. Free state return efile See Who Should File, later. Free state return efile File only one federal income tax return for the year regardless of how many jobs you had, how many Forms W-2 you received, or how many states you lived in during the year. Free state return efile Do not file more than one original return for the same year, even if you have not gotten your refund or have not heard from the IRS since you filed. Free state return efile Individuals—In General If you are a U. Free state return efile S. Free state return efile citizen or resident, whether you must file a return depends on three factors: Your gross income, Your filing status, and Your age. Free state return efile To find out whether you must file, see Table 1-1, Table 1-2, and Table 1-3. Free state return efile Even if no table shows that you must file, you may need to file to get money back. Free state return efile (See Who Should File , later. Free state return efile ) Gross income. Free state return efile   This includes all income you receive in the form of money, goods, property, and services that is not exempt from tax. Free state return efile It also includes income from sources outside the United States or from the sale of your main home (even if you can exclude all or part of it). Free state return efile Include part of your social security benefits if: You were married, filing a separate return, and you lived with your spouse at any time during 2013; or Half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). Free state return efile If either (1) or (2) applies, see the instructions for Form 1040 or 1040A, or Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure the social security benefits you must include in gross income. Free state return efile   Common types of income are discussed in Part Two of this publication. Free state return efile Community income. Free state return efile   If you are married and your permanent home is in a community property state, half of any income described by state law as community income may be considered yours. Free state return efile This affects your federal taxes, including whether you must file if you do not file a joint return with your spouse. Free state return efile See Publication 555, Community Property, for more information. Free state return efile Nevada, Washington, and California domestic partners. Free state return efile   A registered domestic partner in Nevada, Washington, or California generally must report half the combined community income of the individual and his or her domestic partner. Free state return efile See Publication 555. Free state return efile Self-employed individuals. Free state return efile   If you are self-employed, your gross income includes the amount on line 7 of Schedule C (Form 1040), Profit or Loss From Business; line 1 of Schedule C-EZ (Form 1040), Net Profit From Business; and line 9 of Schedule F (Form 1040), Profit or Loss From Farming. Free state return efile See Self-Employed Persons , later, for more information about your filing requirements. Free state return efile    If you do not report all of your self-employment income, your social security benefits may be lower when you retire. Free state return efile Filing status. Free state return efile   Your filing status depends on whether you are single or married and on your family situation. Free state return efile Your filing status is determined on the last day of your tax year, which is December 31 for most taxpayers. Free state return efile See chapter 2 for an explanation of each filing status. Free state return efile Age. Free state return efile   If you are 65 or older at the end of the year, you generally can have a higher amount of gross income than other taxpayers before you must file. Free state return efile See Table 1-1. Free state return efile You are considered 65 on the day before your 65th birthday. Free state return efile For example, if your 65th birthday is on January 1, 2014, you are considered 65 for 2013. Free state return efile Table 1-1. Free state return efile 2013 Filing Requirements for Most Taxpayers IF your filing status is. Free state return efile . Free state return efile . Free state return efile AND at the end of 2013 you  were. Free state return efile . Free state return efile . Free state return efile * THEN file a return if  your gross income  was at least. Free state return efile . Free state return efile . Free state return efile ** single under 65 $10,000     65 or older $11,500   married filing jointly*** under 65 (both spouses) $20,000     65 or older (one spouse) $21,200     65 or older (both spouses) $22,400   married filing separately any age $3,900   head of household under 65 $12,850     65 or older $14,350   qualifying widow(er) with dependent child under 65 $16,100   65 or older $17,300   * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Free state return efile ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). Free state return efile Do not include any social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time during 2013 or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). Free state return efile If (a) or (b) applies, see the Instructions for Form 1040 or 1040A or Publication 915 to figure the taxable part of social security benefits you must include in gross income. Free state return efile Gross income includes gains, but not losses, reported on Form 8949 or Schedule D. Free state return efile Gross income from a business means, for example, the amount on Schedule C, line 7, or Schedule F, line 9. Free state return efile But, in figuring gross income, do not reduce your income by any losses, including any loss on Schedule C, line 7, or Schedule F, line 9. Free state return efile *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900, you must file a return regardless of your age. Free state return efile Surviving Spouses, Executors, Administrators, and Legal Representatives You must file a final return for a decedent (a person who died) if both of the following are true. Free state return efile You are the surviving spouse, executor, administrator, or legal representative. Free state return efile The decedent met the filing requirements at the date of death. Free state return efile For more information on rules for filing a decedent's final return, see Publication 559, Survivors, Executors, and Administrators. Free state return efile U. Free state return efile S. Free state return efile Citizens and Resident Aliens Living Abroad To determine whether you must file a return, include in your gross income any income you received abroad, including any income you can exclude under the foreign earned income exclusion. Free state return efile For information on special tax rules that may apply to you, see Publication 54, Tax Guide for U. Free state return efile S. Free state return efile Citizens and Resident Aliens Abroad. Free state return efile It is available online and at most U. Free state return efile S. Free state return efile embassies and consulates. Free state return efile See How To Get Tax Help in the back of this publication. Free state return efile Residents of Puerto Rico If you are a U. Free state return efile S. Free state return efile citizen and also a bona fide resident of Puerto Rico, you generally must file a U. Free state return efile S. Free state return efile income tax return for any year in which you meet the income requirements. Free state return efile This is in addition to any legal requirement you may have to file an income tax return with Puerto Rico. Free state return efile If you are a bona fide resident of Puerto Rico for the entire year, your U. Free state return efile S. Free state return efile gross income does not include income from sources within Puerto Rico. Free state return efile It does, however, include any income you received for your services as an employee of the United States or a U. Free state return efile S. Free state return efile agency. Free state return efile If you receive income from Puerto Rican sources that is not subject to U. Free state return efile S. Free state return efile tax, you must reduce your standard deduction. Free state return efile As a result, the amount of income you must have before you are required to file a U. Free state return efile S. Free state return efile income tax return is lower than the applicable amount in Table 1-1 or Table 1-2. Free state return efile For more information, see Publication 570, Tax Guide for Individuals With Income From U. Free state return efile S. Free state return efile Possessions. Free state return efile Individuals With Income From U. Free state return efile S. Free state return efile Possessions If you had income from Guam, the Commonwealth of the Northern Mariana Islands, American Samoa, or the U. Free state return efile S. Free state return efile Virgin Islands, special rules may apply when determining whether you must file a U. Free state return efile S. Free state return efile federal income tax return. Free state return efile In addition, you may have to file a return with the individual island government. Free state return efile See Publication 570 for more information. Free state return efile Dependents If you are a dependent (one who meets the dependency tests in chapter 3), see Table 1-2 to find out whether you must file a return. Free state return efile You also must file if your situation is described in Table 1-3. Free state return efile Responsibility of parent. Free state return efile   Generally, a child is responsible for filing his or her own tax return and for paying any tax on the return. Free state return efile If a dependent child must file an income tax return but cannot file due to age or any other reason, then a parent, guardian, or other legally responsible person must file it for the child. Free state return efile If the child cannot sign the return, the parent or guardian must sign the child's name followed by the words “By (your signature), parent for minor child. Free state return efile ” Child's earnings. Free state return efile   Amounts a child earns by performing services are included in his or her gross income and not the gross income of the parent. Free state return efile This is true even if under local law the child's parent has the right to the earnings and may actually have received them. Free state return efile But if the child does not pay the tax due on this income, the parent is liable for the tax. Free state return efile Certain Children Under Age 19 or Full-Time Students If a child's only income is interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends), the child was under age 19 at the end of 2013 or was a full-time student under age 24 at the end of 2013, and certain other conditions are met, a parent can elect to include the child's income on the parent's return. Free state return efile If this election is made, the child does not have to file a return. Free state return efile See Parent's Election To Report Child's Interest and Dividends in chapter 31. Free state return efile Self-Employed Persons You are self-employed if you: Carry on a trade or business as a sole proprietor, Are an independent contractor, Are a member of a partnership, or Are in business for yourself in any other way. Free state return efile Self-employment can include work in addition to your regular full-time business activities, such as certain part-time work you do at home or in addition to your regular job. Free state return efile You must file a return if your gross income is at least as much as the filing requirement amount for your filing status and age (shown in Table 1-1). Free state return efile Also, you must file Form 1040 and Schedule SE (Form 1040), Self-Employment Tax, if: Your net earnings from self-employment (excluding church employee income) were $400 or more, or You had church employee income of $108. Free state return efile 28 or more. Free state return efile (See Table 1-3. Free state return efile ) Use Schedule SE (Form 1040) to figure your self-employment tax. Free state return efile Self-employment tax is comparable to the social security and Medicare tax withheld from an employee's wages. Free state return efile For more information about this tax, see Publication 334, Tax Guide for Small Business. Free state return efile Employees of foreign governments or international organizations. Free state return efile   If you are a U. Free state return efile S. Free state return efile citizen who works in the United States for an international organization, a foreign government, or a wholly owned instrumentality of a foreign government, and your employer is not required to withhold social security and Medicare taxes from your wages, you must include your earnings from services performed in the United States when figuring your net earnings from self-employment. Free state return efile Ministers. Free state return efile   You must include income from services you performed as a minister when figuring your net earnings from self-employment, unless you have an exemption from self-employment tax. Free state return efile This also applies to Christian Science practitioners and members of a religious order who have not taken a vow of poverty. Free state return efile For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Free state return efile Table 1-2. Free state return efile 2013 Filing Requirements for Dependents See chapter 3 to find out if someone can claim you as a dependent. Free state return efile If your parents (or someone else) can claim you as a dependent, use this table to see if you must file a return. Free state return efile (See Table 1-3 for other situations when you must file. Free state return efile ) In this table, earned income includes salaries, wages, tips, and professional fees. Free state return efile It also includes taxable scholarship and fellowship grants. Free state return efile (See Scholarships and fellowships in chapter 12. Free state return efile ) Unearned income includes investment-type income such as taxable interest, ordinary dividends, and capital gain distributions. Free state return efile It also includes unemployment compensation, taxable social security benefits, pensions, annuities, cancellation of debt, and distributions of unearned income from a trust. Free state return efile Gross income is the total of your earned and unearned income. Free state return efile   Single dependents—Were you either age 65 or older or blind? □ No. Free state return efile You must file a return if any of the following apply. Free state return efile     • Your unearned income was more than $1,000. Free state return efile     • Your earned income was more than $6,100. Free state return efile     • Your gross income was more than the larger of:       • $1,000, or       • Your earned income (up to $5,750) plus $350. Free state return efile □ Yes. Free state return efile You must file a return if any of the following apply. Free state return efile     • Your unearned income was more than $2,500 ($4,000 if 65 or older and blind). Free state return efile     • Your earned income was more than $7,600 ($9,100 if 65 or older and blind). Free state return efile     • Your gross income was more than the larger of:       • $2,500 ($4,000 if 65 or older and blind), or       • Your earned income (up to $5,750) plus $1,850 ($3,350 if 65 or older and blind). Free state return efile Married dependents—Were you either age 65 or older or blind? □ No. Free state return efile You must file a return if any of the following apply. Free state return efile     • Your unearned income was more than $1,000. Free state return efile     • Your earned income was more than $6,100. Free state return efile     • Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Free state return efile     • Your gross income was more than the larger of:       • $1,000, or       • Your earned income (up to $5,750) plus $350. Free state return efile □ Yes. Free state return efile You must file a return if any of the following apply. Free state return efile     • Your unearned income was more than $2,200 ($3,400 if 65 or older and blind). Free state return efile     • Your earned income was more than $7,300 ($8,500 if 65 or older and blind). Free state return efile     • Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Free state return efile     • Your gross income was more than the larger of:       • $2,200 ($3,400 if 65 or older and blind), or       • Your earned income (up to $5,750) plus $1,550 ($2,750 if 65 or older and blind). Free state return efile Aliens Your status as an alien—resident, nonresident, or dual-status—determines whether and how you must file an income tax return. Free state return efile The rules used to determine your alien status are discussed in Publication 519, U. Free state return efile S. Free state return efile Tax Guide for Aliens. Free state return efile Resident alien. Free state return efile   If you are a resident alien for the entire year, you must file a tax return following the same rules that apply to U. Free state return efile S. Free state return efile citizens. Free state return efile Use the forms discussed in this publication. Free state return efile Nonresident alien. Free state return efile   If you are a nonresident alien, the rules and tax forms that apply to you are different from those that apply to U. Free state return efile S. Free state return efile citizens and resident aliens. Free state return efile See Publication 519 to find out if U. Free state return efile S. Free state return efile income tax laws apply to you and which forms you should file. Free state return efile Dual-status taxpayer. Free state return efile   If you are a resident alien for part of the tax year and a nonresident alien for the rest of the year, you are a dual-status taxpayer. Free state return efile Different rules apply for each part of the year. Free state return efile For information on dual-status taxpayers, see Publication 519. Free state return efile Table 1-3. Free state return efile Other Situations When You Must File a 2013 Return You must file a return if any of the four conditions below apply for 2013. Free state return efile 1. Free state return efile   You owe any special taxes, including any of the following. Free state return efile   a. Free state return efile Alternative minimum tax. Free state return efile   b. Free state return efile Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax-favored account. Free state return efile But if you are filing a return only because you owe this tax, you can file Form 5329 by itself. Free state return efile   c. Free state return efile Household employment taxes. Free state return efile But if you are filing a return only because you owe this tax, you can file Schedule H by itself. Free state return efile   d. Free state return efile Social security and Medicare tax on tips you did not report to your employer or on wages you received from an employer who did not withhold these taxes. Free state return efile   e. Free state return efile Recapture of first-time homebuyer credit. Free state return efile   f. Free state return efile Write-in taxes, including uncollected social security and Medicare or RRTA tax on tips you reported to your employer or on group-term life insurance and additional taxes on health savings accounts. Free state return efile   g. Free state return efile Recapture taxes. Free state return efile 2. Free state return efile   You (or your spouse, if filing jointly) received HSA, Archer MSA, or Medicare Advantage MSA distributions. Free state return efile 3. Free state return efile   You had net earnings from self-employment of at least $400. Free state return efile 4. Free state return efile   You had wages of $108. Free state return efile 28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes. Free state return efile Who Should File Even if you do not have to file, you should file a federal income tax return to get money back if any of the following conditions apply. Free state return efile You had federal income tax withheld or made estimated tax payments. Free state return efile You qualify for the earned income credit. Free state return efile See chapter 36 for more information. Free state return efile You qualify for the additional child tax credit. Free state return efile See chapter 34 for more information. Free state return efile You qualify for the health coverage tax credit. Free state return efile See chapter 37 for more information. Free state return efile You qualify for the American opportunity credit. Free state return efile See chapter 35 for more information. Free state return efile You qualify for the credit for federal tax on fuels. Free state return efile See chapter 37 for more information. Free state return efile Which Form Should I Use? You must use one of three forms to file your return: Form 1040EZ, Form 1040A, or Form 1040. Free state return efile (But also see Does My Return Have To Be on Paper , later. Free state return efile ) See the discussion under Form 1040 for when you must use that form. Free state return efile Form 1040EZ Form 1040EZ is the simplest form to use. Free state return efile You can use Form 1040EZ if all of the following apply. Free state return efile    Your filing status is single or married filing jointly. Free state return efile If you were a nonresident alien at any time in 2013, your filing status must be married filing jointly. Free state return efile You (and your spouse if married filing a joint return) were under age 65 and not blind at the end of 2013. Free state return efile If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Free state return efile You do not claim any dependents. Free state return efile Your taxable income is less than $100,000. Free state return efile Your income is only from wages, salaries, tips, unemployment compensation, Alaska Permanent Fund dividends, taxable scholarship and fellowship grants, and taxable interest of $1,500 or less. Free state return efile You do not claim any adjustments to income, such as a deduction for IRA contributions or student loan interest. Free state return efile You do not claim any credits other than the earned income credit. Free state return efile You do not owe any household employment taxes on wages you paid to a household employee. Free state return efile If you earned tips, they are included in boxes 5 and 7 of your Form W-2. Free state return efile You are not a debtor in a chapter 11 bankruptcy case filed after October 16, 2005. Free state return efile   You must meet all of these requirements to use Form 1040EZ. Free state return efile If you do not, you must use Form 1040A or Form 1040. Free state return efile Figuring tax. Free state return efile   On Form 1040EZ, you can use only the tax table to figure your income tax. Free state return efile You cannot use Form 1040EZ to report any other tax. Free state return efile Form 1040A If you do not qualify to use Form 1040EZ, you may be able to use Form 1040A. Free state return efile You can use Form 1040A if all of the following apply. Free state return efile    Your income is only from: Wages, salaries, and tips, Interest, Ordinary dividends (including Alaska Permanent Fund dividends), Capital gain distributions, IRA distributions, Pensions and annuities, Unemployment compensation, Taxable social security and railroad retirement benefits, and Taxable scholarship and fellowship grants. Free state return efile If you receive a capital gain distribution that includes unrecaptured section 1250 gain, section 1202 gain, or collectibles (28%) gain, you cannot use Form 1040A. Free state return efile You must use Form 1040. Free state return efile Your taxable income is less than $100,000. Free state return efile Your adjustments to income are for only the following items. Free state return efile Educator expenses. Free state return efile IRA deduction. Free state return efile Student loan interest deduction. Free state return efile Tuition and fees. Free state return efile You do not itemize your deductions. Free state return efile You claim only the following tax credits. Free state return efile The credit for child and dependent care expenses. Free state return efile (See chapter 32. Free state return efile ) The credit for the elderly or the disabled. Free state return efile (See chapter 33. Free state return efile ) The education credits. Free state return efile (See chapter 35. Free state return efile ) The retirement savings contribution credit. Free state return efile (See chapter 37. Free state return efile ) The child tax credit. Free state return efile (See chapter 34. Free state return efile ) The earned income credit. Free state return efile (See chapter 36. Free state return efile ) The additional child tax credit. Free state return efile (See chapter 34. Free state return efile ) You did not have an alternative minimum tax adjustment on stock you acquired from the exercise of an incentive stock option. Free state return efile (See Publication 525, Taxable and Nontaxable Income. Free state return efile )   You can also use Form 1040A if you received employer-provided dependent care benefits or if you owe tax from the recapture of an education credit or the alternative minimum tax. Free state return efile   You must meet all these requirements to use Form 1040A. Free state return efile If you do not, you must use Form 1040. Free state return efile Form 1040 If you cannot use Form 1040EZ or Form 1040A, you must use Form 1040. Free state return efile You can use Form 1040 to report all types of income, deductions, and credits. Free state return efile You may pay less tax by filing Form 1040 because you can take itemized deductions, some adjustments to income, and credits you cannot take on Form 1040A or Form 1040EZ. Free state return efile You must use Form 1040 if any of the following apply. Free state return efile    Your taxable income is $100,000 or more. Free state return efile You itemize your deductions on Schedule A. Free state return efile You had income that cannot be reported on Form 1040EZ or Form 1040A, including tax-exempt interest from private activity bonds issued after August 7, 1986. Free state return efile You claim any adjustments to gross income other than the adjustments listed earlier under Form 1040A. Free state return efile Your Form W-2, box 12, shows uncollected employee tax (social security and Medicare tax) on tips (see chapter 6) or group-term life insurance (see chapter 5). Free state return efile You received $20 or more in tips in any 1 month and did not report all of them to your employer. Free state return efile (See chapter 6. Free state return efile ) You were a bona fide resident of Puerto Rico and exclude income from sources in Puerto Rico. Free state return efile You claim any credits other than the credits listed earlier under Form 1040A. Free state return efile You owe the excise tax on insider stock compensation from an expatriated corporation. Free state return efile Your Form W-2 shows an amount in box 12 with a code Z. Free state return efile You had a qualified health savings account funding distribution from your IRA. Free state return efile You are an employee and your employer did not withhold social security and Medicare tax. Free state return efile You have to file other forms with your return to report certain exclusions, taxes, or transactions, such as Form 8959 or Form 8960. Free state return efile You are a debtor in a bankruptcy case filed after October 16, 2005. Free state return efile You must repay the first-time homebuyer credit. Free state return efile You have adjusted gross income of more than $150,000 and must reduce the dollar amount of your exemptions. Free state return efile Does My Return Have To Be on Paper? You may be able to file a paperless return using IRS e-file (electronic filing). Free state return efile If your 2013 adjusted gross income (AGI) is less than a certain amount, you are eligible for Free File. Free state return efile See your tax return instructions for details. Free state return efile If you do not qualify for Free File, then you should check out IRS. Free state return efile gov for low-cost e-file options or Free File Fillable Forms. Free state return efile IRS e-file Table 1-4 lists the benefits of IRS e-file. Free state return efile IRS e-file uses automation to replace most of the manual steps needed to process paper returns. Free state return efile As a result, the processing of e-file returns is faster and more accurate than the processing of paper returns. Free state return efile However, as with a paper return, you are responsible for making sure your return contains accurate information and is filed on time. Free state return efile Using e-file does not affect your chances of an IRS examination of your return. Free state return efile Free File Fillable Forms. Free state return efile   If you do not need the help of a tax preparer, then Free File Fillable Forms may be for you. Free state return efile These forms: Do not have an income requirement so everyone is eligible, Are easy to use, Perform basic math calculations, Are available only at IRS. Free state return efile gov, and Apply only to a federal tax return. Free state return efile Electronic return signatures. Free state return efile   To file your return electronically, you must sign the return electronically using a personal identification number (PIN). Free state return efile If you are filing online, you must use a Self-Select PIN. Free state return efile If you are filing electronically using a tax practitioner, you can use a Self-Select PIN or a Practitioner PIN. Free state return efile Self-Select PIN. Free state return efile   The Self-Select PIN method allows you to create your own PIN. Free state return efile If you are married filing jointly, you and your spouse will each need to create a PIN and enter these PINs as your electronic signatures. Free state return efile   A PIN is any combination of five digits you choose except five zeros. Free state return efile If you use a PIN, there is nothing to sign and nothing to mail—not even your Forms W-2. Free state return efile   To verify your identity, you will be prompted to enter your adjusted gross income (AGI) from your originally filed 2012 federal income tax return, if applicable. Free state return efile Do not use your AGI from an amended return (Form 1040X) or a math error correction made by the IRS. Free state return efile AGI is the amount shown on your 2012 Form 1040, line 38; Form 1040A, line 22; or Form 1040EZ, line 4. Free state return efile If you do not have your 2012 income tax return, you can quickly request a transcript by using our automated self-service tool. Free state return efile Visit us at IRS. Free state return efile gov and click on Order a Return or Account Transcript or call 1-800-908-9946 to get a free transcript of your return. Free state return efile (If you filed electronically last year, you may use your prior year PIN to verify your identity instead of your prior year AGI. Free state return efile The prior year PIN is the five digit PIN you used to electronically sign your 2012 return. Free state return efile ) You will also be prompted to enter your date of birth. Free state return efile Table 1-4. Free state return efile Benefits of IRS e-file • Free File allows qualified taxpayers to prepare and e-file their own tax returns for free. Free state return efile • Free File is available in English and Spanish. Free state return efile • Free File is available online 24 hours a day, 7 days a week. Free state return efile • Get your refund faster by e-filing using Direct Deposit. Free state return efile • Sign electronically with a secure self-selected PIN and file a completely paperless return. Free state return efile • Receive an acknowledgement that your return was received and accepted. Free state return efile • If you owe, you can e-file and pay electronically either online or by phone, using your bank account or a credit or debit card. Free state return efile You can also file a return early and pay the amount you owe by the due date of your return. Free state return efile • Save time by preparing and e-filing federal and state returns together. Free state return efile • IRS computers quickly and automatically check for errors or other missing information. Free state return efile • Help the environment, use less paper, and save taxpayer money—it costs less to process an e-filed return than a paper return. Free state return efile You cannot use the Self-Select PIN method if you are a first-time filer under age 16 at the end of 2013. Free state return efile If you cannot locate your prior year AGI or prior year PIN, use the Electronic Filing PIN Request. Free state return efile This can be found at IRS. Free state return efile gov. Free state return efile Click on Request an Electronic Filing PIN. Free state return efile Or you can call 1-866-704-7388. Free state return efile Practitioner PIN. Free state return efile   The Practitioner PIN method allows you to authorize your tax practitioner to enter or generate your PIN. Free state return efile The practitioner can provide you with details. Free state return efile Form 8453. Free state return efile   You must send in a paper Form 8453 if you have to attach certain forms or other documents that cannot be electronically filed. Free state return efile For details, see Form 8453. Free state return efile For more details, visit www. Free state return efile irs. Free state return efile gov/efile and click on “ Individuals. Free state return efile ” Identity Protection PIN. Free state return efile   If the IRS gave you an identity protection personal identification number (PIN) because you were a victim of identity theft, enter it in the spaces provided on your tax form. Free state return efile If the IRS has not given you this type of number, leave these spaces blank. Free state return efile For more information, see the Instructions for Form 1040A or Form 1040. Free state return efile Power of attorney. Free state return efile   If an agent is signing your return for you, a power of attorney (POA) must be filed. Free state return efile Attach the POA to Form 8453 and file it using that form's instructions. Free state return efile See Signatures , later, for more information on POAs. Free state return efile State returns. Free state return efile   In most states, you can file an electronic state return simultaneously with your federal return. Free state return efile For more information, check with your local IRS office, state tax agency, tax professional, or the IRS website at  www. Free state return efile irs. Free state return efile gov/efile. Free state return efile Refunds. Free state return efile   You can have a refund check mailed to you, or you can have your refund deposited directly to your checking or savings account or split among two or three accounts. Free state return efile With e-file, your refund will be issued faster than if you filed on paper. Free state return efile   As with a paper return, you may not get all of your refund if you owe certain past-due amounts, such as federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or certain other federal nontax debts, such as student loans. Free state return efile See Offset against debts under Refunds, later. Free state return efile Refund inquiries. Free state return efile   Information about your return will generally be available within 24 hours after the IRS receives your e-filed return. Free state return efile See Refund Information , later. Free state return efile Amount you owe. Free state return efile   To avoid late-payment penalties and interest, pay your taxes in full by April 15, 2014. Free state return efile See How To Pay , later, for information on how to pay the amount you owe. Free state return efile Using Your Personal Computer You can file your tax return in a fast, easy, and convenient way using your personal computer. Free state return efile A computer with Internet access and tax preparation software are all you need. Free state return efile Best of all, you can e-file from the comfort of your home 24 hours a day, 7 days a week. Free state return efile IRS approved tax preparation software is available for online use on the Internet, for download from the Internet, and in retail stores. Free state return efile For information, visit www. Free state return efile irs. Free state return efile gov/efile. Free state return efile Through Employers and Financial Institutions Some businesses offer free e-file to their employees, members, or customers. Free state return efile Others offer it for a fee. Free state return efile Ask your employer or financial institution if they offer IRS e-file as an employee, member, or customer benefit. Free state return efile Free Help With Your Return Free help in preparing your return is available nationwide from IRS-trained volunteers. Free state return efile The Volunteer Income Tax Assistance (VITA) program is designed to help low to moderate income taxpayers and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 or older with their tax returns. Free state return efile Many VITA sites offer free electronic filing and all volunteers will let you know about the credits and deductions you may be entitled to claim. Free state return efile To find a site near you, call 1-800-906-9887. Free state return efile Or to find the nearest AARP TaxAide site, visit AARP's website at www. Free state return efile aarp. Free state return efile org/taxaide or call 1-888-227-7669. Free state return efile For more information on these programs, go to IRS. Free state return efile gov and enter keyword “VITA” in the search box. Free state return efile Using a Tax Professional Many tax professionals electronically file tax returns for their clients. Free state return efile You may personally enter your PIN or complete Form 8879, IRS e-file Signature Authorization, to authorize the tax professional to enter your PIN on your return. Free state return efile Note. Free state return efile Tax professionals may charge a fee for IRS e-file. Free state return efile Fees can vary depending on the professional and the specific services rendered. Free state return efile When Do I Have To File? April 15, 2014, is the due date for filing your 2013 income tax return if you use the calendar year. Free state return efile For a quick view of due dates for filing a return with or without an extension of time to file (discussed later), see Table 1-5. Free state return efile Table 1-5. Free state return efile When To File Your 2013 Return For U. Free state return efile S. Free state return efile citizens and residents who file returns on a calendar year. Free state return efile   For Most Taxpayers For Certain Taxpayers Outside the U. Free state return efile S. Free state return efile No extension requested April 15, 2014 June 16, 2014 Automatic extension October 15, 2014 October 15, 2014 If you use a fiscal year (a year ending on the last day of any month except December, or a 52-53-week year), your income tax return is due by the 15th day of the 4th month after the close of your fiscal year. Free state return efile When the due date for doing any act for tax purposes—filing a return, paying taxes, etc. Free state return efile —falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day. Free state return efile Filing paper returns on time. Free state return efile   Your paper return is filed on time if it is mailed in an envelope that is properly addressed, has enough postage, and is postmarked by the due date. Free state return efile If you send your return by registered mail, the date of the registration is the postmark date. Free state return efile The registration is evidence that the return was delivered. Free state return efile If you send a return by certified mail and have your receipt postmarked by a postal employee, the date on the receipt is the postmark date. Free state return efile The postmarked certified mail receipt is evidence that the return was delivered. Free state return efile Private delivery services. Free state return efile   If you use a private delivery service designated by the IRS to send your return, the postmark date generally is the date the private delivery service records in its database or marks on the mailing label. Free state return efile The private delivery service can tell you how to get written proof of this date. Free state return efile   For the IRS mailing address to use if you are using a private delivery service, go to IRS. Free state return efile gov and enter “private delivery service” in the search box. Free state return efile   The following are designated private delivery services. Free state return efile DHL Express (DHL): Same Day Service. Free state return efile Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. Free state return efile United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Free state return efile M. Free state return efile , UPS Worldwide Express Plus, and UPS Worldwide Express. Free state return efile Filing electronic returns on time. Free state return efile   If you use IRS e-file, your return is considered filed on time if the authorized electronic return transmitter postmarks the transmission by the due date. Free state return efile An authorized electronic return transmitter is a participant in the IRS e-file program that transmits electronic tax return information directly to the IRS. Free state return efile   The electronic postmark is a record of when the authorized electronic return transmitter received the transmission of your electronically filed return on its host system. Free state return efile The date and time in your time zone controls whether your electronically filed return is timely. Free state return efile Filing late. Free state return efile   If you do not file your return by the due date, you may have to pay a failure-to-file penalty and interest. Free state return efile For more information, see Penalties , later. Free state return efile Also see Interest under Amount You Owe. Free state return efile   If you were due a refund but you did not file a return, you generally must file within 3 years from the date the return was due (including extensions) to get that refund. Free state return efile Nonresident alien. Free state return efile    If you are a nonresident alien and earn wages subject to U. Free state return efile S. Free state return efile income tax withholding, your 2013 U. Free state return efile S. Free state return efile income tax return (Form 1040NR or Form 1040NR-EZ) is due by: April 15, 2014, if you use a calendar year, or The 15th day of the 4th month after the end of your fiscal year if you use a fiscal year. Free state return efile   If you do not earn wages subject to U. Free state return efile S. Free state return efile income tax withholding, your return is due by: June 16, 2014, if you use a calendar year, or The 15th day of the 6th month after the end of your fiscal year, if you use a fiscal year. Free state return efile See Publication 519 for more filing information. Free state return efile Filing for a decedent. Free state return efile   If you must file a final income tax return for a taxpayer who died during the year (a decedent), the return is due by the 15th day of the 4th month after the end of the decedent's normal tax year. Free state return efile See Publication 559. Free state return efile Extensions of Time To File You may be able to get an extension of time to file your return. Free state return efile There are three types of situations where you may qualify for an extension: Automatic extensions, You are outside the United States, or You are serving in a combat zone. Free state return efile Automatic Extension If you cannot file your 2013 return by the due date, you may be able to get an automatic 6-month extension of time to file. Free state return efile Example. Free state return efile If your return is due on April 15, 2014, you will have until October 15, 2014, to file. Free state return efile If you do not pay the tax due by the regular due date (generally, April 15), you will owe interest. Free state return efile You may also be charged penalties, discussed later. Free state return efile How to get the automatic extension. Free state return efile   You can get the automatic extension by: Using IRS e-file (electronic filing), or Filing a paper form. Free state return efile E-file options. Free state return efile   There are two ways you can use e-file to get an extension of time to file. Free state return efile Complete Form 4868, Application for Automatic Extension of Time To File U. Free state return efile S. Free state return efile Individual Income Tax Return, to use as a worksheet. Free state return efile If you think you may owe tax when you file your return, use Part II of the form to estimate your balance due. Free state return efile If you e-file Form 4868 to the IRS, do not also send a paper Form 4868. Free state return efile E-file using your personal computer or a tax professional. Free state return efile    You can use a tax software package with your personal computer or a tax professional to file Form 4868 electronically. Free state return efile You will need to provide certain information from your tax return for 2012. Free state return efile If you wish to make a payment by direct transfer from your bank account, see Pay online , under How To Pay, later in this chapter. Free state return efile E-file and pay by credit or debit card or by direct transfer from your bank account. Free state return efile   You can get an extension by paying part or all of your estimate of tax due by using a credit or debit card or by direct transfer from your bank account. Free state return efile You can do this by phone or over the Internet. Free state return efile You do not file Form 4868. Free state return efile See Pay online , under How To Pay, later in this chapter. Free state return efile Filing a paper Form 4868. Free state return efile   You can get an extension of time to file by filing a paper Form 4868. Free state return efile Mail it to the address shown in the form instructions. Free state return efile   If you want to make a payment with the form, make your check or money order payable to “United States Treasury. Free state return efile ” Write your SSN, daytime phone number, and “2013 Form 4868” on your check or money order. Free state return efile When to file. Free state return efile   You must request the automatic extension by the due date for your return. Free state return efile You can file your return any time before the 6-month extension period ends. Free state return efile When you file your return. Free state return efile   Enter any payment you made related to the extension of time to file on Form 1040, line 68. Free state return efile If you file Form 1040EZ or Form 1040A, include that payment in your total payments on Form 1040EZ, line 9, or Form 1040A, line 41. Free state return efile Also enter “Form 4868” and the amount paid in the space to the left of line 9 or line 41. Free state return efile Individuals Outside the United States You are allowed an automatic 2-month extension, without filing Form 4868, (until June 16, 2014, if you use the calendar year) to file your 2013 return and pay any federal income tax due if: You are a U. Free state return efile S. Free state return efile citizen or resident, and On the due date of your return: You are living outside the United States and Puerto Rico, and your main place of business or post of duty is outside the United States and Puerto Rico, or You are in military or naval service on duty outside the United States and  Puerto Rico. Free state return efile However, if you pay the tax due after the regular due date (generally, April 15), interest will be charged from that date until the date the tax is paid. Free state return efile If you served in a combat zone or qualified hazardous duty area, you may be eligible for a longer extension of time to file. Free state return efile See Individuals Serving in Combat Zone , later, for special rules that apply to you. Free state return efile Married taxpayers. Free state return efile   If you file a joint return, only one spouse has to qualify for this automatic extension. Free state return efile If you and your spouse file separate returns, this automatic extension applies only to the spouse who qualifies. Free state return efile How to get the extension. Free state return efile   To use this automatic extension, you must attach a statement to your return explaining what situation qualified you for the extension. Free state return efile (See the situations listed under (2), earlier. Free state return efile ) Extensions beyond 2 months. Free state return efile   If you cannot file your return within the automatic 2-month extension period, you may be able to get an additional 4-month extension, for a total of 6 months. Free state return efile File Form 4868 and check the box on line 8. Free state return efile No further extension. Free state return efile   An extension of more than 6 months will generally not be granted. Free state return efile However, if you are outside the United States and meet certain tests, you may be granted a longer extension. Free state return efile For more information, see When To File and Pay in Publication 54. Free state return efile Individuals Serving in Combat Zone The deadline for filing your tax return, paying any tax you may owe, and filing a claim for refund is automatically extended if you serve in a combat zone. Free state return efile This applies to members of the Armed Forces, as well as merchant marines serving aboard vessels under the operational control of the Department of Defense, Red Cross personnel, accredited correspondents, and civilians under the direction of the Armed Forces in support of the Armed Forces. Free state return efile Combat zone. Free state return efile   For purposes of the automatic extension, the term “combat zone” includes the following areas. Free state return efile The Arabian peninsula area, effective January 17, 1991. Free state return efile The Kosovo area, effective March 24, 1999. Free state return efile Afghanistan area, effective September 19, 2001. Free state return efile   See Publication 3, Armed Forces' Tax Guide, for more detailed information on the locations comprising each combat zone. Free state return efile The publication also has information about other tax benefits available to military personnel serving in a combat zone. Free state return efile Extension period. Free state return efile   The deadline for filing your return, paying any tax due, and filing a claim for refund is extended for at least 180 days after the later of: The last day you are in a combat zone or the last day the area qualifies as a combat zone, or The last day of any continuous qualified hospitalization for injury from service in the combat zone. Free state return efile   In addition to the 180 days, your deadline is also extended by the number of days you had left to take action with the IRS when you entered the combat zone. Free state return efile For example, you have 3½ months (January 1 – April 15) to file your tax return. Free state return efile Any days left in this period when you entered the combat zone (or the entire 3½ months if you entered it before the beginning of the year) are added to the 180 days. Free state return efile See Extension of Deadlines in Publication 3 for more information. Free state return efile   The rules on the extension for filing your return also apply when you are deployed outside the United States (away from your permanent duty station) while participating in a designated contingency operation. Free state return efile How Do I Prepare My Return? This section explains how to get ready to fill in your tax return and when to report your income and expenses. Free state return efile It also explains how to complete certain sections of the form. Free state return efile You may find Table 1-6 helpful when you prepare your paper return. Free state return efile Table 1-6. Free state return efile Six Steps for Preparing Your Paper Return 1 — Get your records together for income and expenses. Free state return efile 2 — Get the forms, schedules, and publications you need. Free state return efile 3 — Fill in your return. Free state return efile 4 — Check your return to make sure it is correct. Free state return efile 5 — Sign and date your return. Free state return efile 6 — Attach all required forms and schedules. Free state return efile Electronic returns. Free state return efile   For information you may find useful in preparing a paperless return, see Does My Return Have To Be on Paper , earlier. Free state return efile Substitute tax forms. Free state return efile   You cannot use your own version of a tax form unless it meets the requirements explained in Publication 1167, General Rules and Specifications for Substitute Forms and Schedules. Free state return efile Form W-2. Free state return efile   If you were an employee, you should receive Form W-2 from your employer. Free state return efile You will need the information from this form to prepare your return. Free state return efile See Form W-2 under Credit for Withholding and Estimated Tax in chapter 4. Free state return efile   Your employer is required to provide or send Form W-2 to you no later than January 31, 2014. Free state return efile If it is mailed, you should allow adequate time to receive it before contacting your employer. Free state return efile If you still do not get the form by February 15, the IRS can help you by requesting the form from your employer. Free state return efile When you request IRS help, be prepared to provide the following information. Free state return efile Your name, address (including ZIP code), and phone number. Free state return efile Your SSN. Free state return efile Your dates of employment. Free state return efile Your employer's name, address (including ZIP code), and phone number. Free state return efile Form 1099. Free state return efile   If you received certain types of income, you may receive a Form 1099. Free state return efile For example, if you received taxable interest of $10 or more, the payer is required to provide or send Form 1099 to you no later than January 31, 2014 (or by February 18, 2014, if furnished by a broker). Free state return efile If it is mailed, you should allow adequate time to receive it before contacting the payer. Free state return efile If you still do not get the form by February 18 (or by March 5, 2014, if furnished by a broker), call the IRS for help. Free state return efile When Do I Report My Income and Expenses? You must figure your taxable income on the basis of a tax year. Free state return efile A “tax year” is an annual accounting period used for keeping records and reporting income and expenses. Free state return efile You must account for your income and expenses in a way that clearly shows your taxable income. Free state return efile The way you do this is called an accounting method. Free state return efile This section explains which accounting periods and methods you can use. Free state return efile Accounting Periods Most individual tax returns cover a calendar year—the 12 months from January 1 through December 31. Free state return efile If you do not use a calendar year, your accounting period is a fiscal year. Free state return efile A regular fiscal year is a 12-month period that ends on the last day of any month except December. Free state return efile A 52-53-week fiscal year varies from 52 to 53 weeks and always ends on the same day of the week. Free state return efile You choose your accounting period (tax year) when you file your first income tax return. Free state return efile It cannot be longer than 12 months. Free state return efile More information. Free state return efile   For more information on accounting periods, including how to change your accounting period, see Publication 538, Accounting Periods and Methods. Free state return efile Accounting Methods Your accounting method is the way you account for your income and expenses. Free state return efile Most taxpayers use either the cash method or an accrual method. Free state return efile You choose a method when you file your first income tax return. Free state return efile If you want to change your accounting method after that, you generally must get IRS approval. Free state return efile Cash method. Free state return efile   If you use this method, report all items of income in the year in which you actually or constructively receive them. Free state return efile Generally, you deduct all expenses in the year you actually pay them. Free state return efile This is the method most individual taxpayers use. Free state return efile Constructive receipt. Free state return efile   Generally, you constructively receive income when it is credited to your account or set apart in any way that makes it available to you. Free state return efile You do not need to have physical possession of it. Free state return efile For example, interest credited to your bank account on December 31, 2013, is taxable income to you in 2013 if you could have withdrawn it in 2013 (even if the amount is not entered in your records or withdrawn until 2014). Free state return efile Garnisheed wages. Free state return efile   If your employer uses your wages to pay your debts, or if your wages are attached or garnisheed, the full amount is constructively received by you. Free state return efile You must include these wages in income for the year you would have received them. Free state return efile Debts paid for you. Free state return efile   If another person cancels or pays your debts (but not as a gift or loan), you have constructively received the amount and generally must include it in your gross income for the year. Free state return efile See Canceled Debts in chapter 12 for more information. Free state return efile Payment to third party. Free state return efile   If a third party is paid income from property you own, you have constructively received the income. Free state return efile It is the same as if you had actually received the income and paid it to the third party. Free state return efile Payment to an agent. Free state return efile   Income an agent receives for you is income you constructively received in the year the agent receives it. Free state return efile If you indicate in a contract that your income is to be paid to another person, you must include the amount in your gross income when the other person receives it. Free state return efile Check received or available. Free state return efile   A valid check that was made available to you before the end of the tax year is constructively received by you in that year. Free state return efile A check that was “made available to you” includes a check you have already received, but not cashed or deposited. Free state return efile It also includes, for example, your last paycheck of the year that your employer made available for you to pick up at the office before the end of the year. Free state return efile It is constructively received by you in that year whether or not you pick it up before the end of the year or wait to receive it by mail after the end of the year. Free state return efile No constructive receipt. Free state return efile   There may be facts to show that you did not constructively receive income. Free state return efile Example. Free state return efile Alice Johnson, a teacher, agreed to her school board's condition that, in her absence, she would receive only the difference between her regular salary and the salary of a substitute teacher hired by the school board. Free state return efile Therefore, Alice did not constructively receive the amount by which her salary was reduced to pay the substitute teacher. Free state return efile Accrual method. Free state return efile   If you use an accrual method, you generally report income when you earn it, rather than when you receive it. Free state return efile You generally deduct your expenses when you incur them, rather than when you pay them. Free state return efile Income paid in advance. Free state return efile   An advance payment of income is generally included in gross income in the year you receive it. Free state return efile Your method of accounting does not matter as long as the income is available to you. Free state return efile An advance payment may include rent or interest you receive in advance and pay for services you will perform later. Free state return efile   A limited deferral until the next tax year may be allowed for certain advance payments. Free state return efile See Publication 538 for specific information. Free state return efile Additional information. Free state return efile   For more information on accounting methods, including how to change your accounting method, see Publication 538. Free state return efile Social Security Number (SSN) You must enter your SSN on your return. Free state return efile If you are married, enter the SSNs for both you and your spouse, whether you file jointly or separately. Free state return efile If you are filing a joint return, include the SSNs in the same order as the names. Free state return efile Use this same order in submitting other forms and documents to the IRS. Free state return efile Check that both the name and SSN on your Form 1040, W-2, and 1099 agree with your social security card. Free state return efile If they do not, certain deductions and credits on your Form 1040 may be reduced or disallowed and you may not receive credit for your social security earnings. Free state return efile If your Form W-2 shows an incorrect SSN or name, notify your employer or the form-issuing agent as soon as possible to make sure your earnings are credited to your social security record. Free state return efile If the name or SSN on your social security card is incorrect, call the SSA at 1-800-772-1213. Free state return efile Name change. Free state return efile   If you changed your name because of marriage, divorce, etc. Free state return efile , be sure to report the change to your local Social Security Administration (SSA) office before filing your return. Free state return efile This prevents delays in processing your return and issuing refunds. Free state return efile It also safeguards your future social security benefits. Free state return efile Dependent's SSN. Free state return efile   You must provide the SSN of each dependent you claim, regardless of the dependent's age. Free state return efile This requirement applies to all dependents (not just your children) claimed on your tax return. Free state return efile Exception. Free state return efile    If your child was born and died in 2013 and did not have an SSN, enter “DIED” in column (2) of line 6c (Form 1040 or 1040A) and include a copy of the child's birth certificate, death certificate, or hospital records. Free state return efile The document must show that the child was born alive. Free state return efile No SSN. Free state return efile   File Form SS-5, Application for a Social Security Card, with your local SSA office to get an SSN for yourself or your dependent. Free state return efile It usually takes about 2 weeks to get an SSN. Free state return efile If you or your dependent is not eligible for an SSN, see Individual taxpayer identification number (ITIN) , later. Free state return efile   If you are a U. Free state return efile S. Free state return efile citizen or resident alien, you must show proof of age, identity, and citizenship or alien status with your Form SS-5. Free state return efile If you are 12 or older and have never been assigned an SSN, you must appear in person with this proof at an SSA office. Free state return efile   Form SS-5 is available at any SSA office, on the Internet at www. Free state return efile socialsecurity. Free state return efile gov, or by calling 1-800-772-1213. Free state return efile If you have any questions about which documents you can use as proof of age, identity, or citizenship, contact your SSA office. Free state return efile   If your dependent does not have an SSN by the time your return is due, you may want to ask for an extension of time to file, as explained earlier under When Do I Have To File . Free state return efile   If you do not provide a required SSN or if you provide an incorrect SSN, your tax may be increased and any refund may be reduced. Free state return efile Adoption taxpayer identification number (ATIN). Free state return efile   If you are in the process of adopting a child who is a U. Free state return efile S. Free state return efile citizen or resident and cannot get an SSN for the child until the adoption is final, you can apply for an ATIN to use instead of an SSN. Free state return efile    File Form W-7A, Application for Taxpayer Identification Number for Pending U. Free state return efile S. Free state return efile Adoptions, with the IRS to get an ATIN if all of the following are true. Free state return efile You have a child living with you who was placed in your home for legal adoption. Free state return efile You cannot get the child's existing SSN even though you have made a reasonable attempt to get it from the birth parents, the placement agency, and other persons. Free state return efile You cannot get an SSN for the child from the SSA because, for example, the adoption is not final. Free state return efile You are eligible to claim the child as a dependent on your tax return. Free state return efile After the adoption is final, you must apply for an SSN for the child. Free state return efile You cannot continue using the ATIN. Free state return efile   See Form W-7A for more information. Free state return efile Nonresident alien spouse. Free state return efile   If your spouse is a nonresident alien, your spouse must have either an SSN or an ITIN if: You file a joint return, You file a separate return and claim an exemption for your spouse, or Your spouse is filing a separate return. Free state return efile If your spouse is not eligible for an SSN, see the following discussion on ITINs. Free state return efile Individual taxpayer identification number (ITIN). Free state return efile   The IRS will issue you an ITIN if you are a nonresident or resident alien and you do not have and are not eligible to get an SSN. Free state return efile This also applies to an alien spouse or dependent. Free state return efile To apply for an ITIN, file Form W-7 with the IRS. Free state return efile It usually takes about 6 to 10 weeks to get an ITIN. Free state return efile Enter the ITIN on your tax return wherever an SSN is requested. Free state return efile    If you are applying for an ITIN for yourself, your spouse, or a dependent in order to file your tax return, attach your completed tax return to your Form W-7. Free state return efile See the Form W-7 instructions for how and where to file. Free state return efile You cannot e-file a return using an ITIN in the calendar year the ITIN is issued; however, you can e-file returns in the following years. Free state return efile ITIN for tax use only. Free state return efile   An ITIN is for tax use only. Free state return efile It does not entitle you or your dependent to social security benefits or change the employment or immigration status of either of you under U. Free state return efile S. Free state return efile law. Free state return efile Penalty for not providing social security number. Free state return efile   If you do not include your SSN or the SSN of your spouse or dependent as required, you may have to pay a penalty. Free state return efile See the discussion on Penalties , later, for more information. Free state return efile SSN on correspondence. Free state return efile   If you write to the IRS about your tax account, be sure to include your SSN (and the name and SSN of your spouse, if you filed a joint return) in your correspondence. Free state return efile Because your SSN is used to identify your account, this helps the IRS respond to your correspondence promptly. Free state return efile Presidential Election Campaign Fund This fund helps pay for Presidential election campaigns. Free state return efile If you want $3 to go to this fund, check the box. Free state return efile If you are filing a joint return, your spouse can also have $3 go to the fund. Free state return efile If you check a box, your tax or refund will not change. Free state return efile Computations The following information may be useful in making the return easier to complete. Free state return efile Rounding off dollars. Free state return efile   You can round off cents to whole dollars on your return and schedules. Free state return efile If you do round to whole dollars, you must round all amounts. Free state return efile To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar. Free state return efile For example, $1. Free state return efile 39 becomes $1 and $2. Free state return efile 50 becomes $3. Free state return efile   If you have to add two or more amounts to figure the amount to enter on a line, include cents when adding the amounts and round off only the total. Free state return efile Example. Free state return efile You receive two Forms W-2: one showing wages of $5,000. Free state return efile 55 and one showing wages of $18,500. Free state return efile 73. Free state return efile On Form 1040, line 7, you would enter $23,501 ($5,000. Free state return efile 55 + $18,500. Free state return efile 73 = $23,501. Free state return efile 28), not $23,502 ($5,001 + $18,501). Free state return efile Equal amounts. Free state return efile   If you are asked to enter the smaller or larger of two equal amounts, enter that amount. Free state return efile Example. Free state return efile Line 1 is $500. Free state return efile Line 3 is $500. Free state return efile Line 5 asks you to enter the smaller of line 1 or 3. Free state return efile Enter $500 on line 5. Free state return efile Negative amounts. Free state return efile   If you file a paper return and you need to enter a negative amount, put the amount in parentheses rather than using a minus sign. Free state return efile To combine positive and negative amounts, add all the positive amounts together and then subtract the negative amounts. Free state return efile Attachments Depending on the form you file and the items reported on your return, you may have to complete additional schedules and forms and attach them to your paper return. Free state return efile You may be able to file a paperless return using IRS e-file. Free state return efile There's nothing to attach or mail, not even your Forms W-2. Free state return efile See Does My Return Have To Be on Paper, earlier. Free state return efile Form W-2. Free state return efile   Form W-2 is a statement from your employer of wages and other compensation paid to you and taxes withheld from your pay. Free state return efile You should have a Form W-2 from each employer. Free state return efile If you file a paper return, be sure to attach a copy of Form W-2 in the place indicated on the front page of your return. Free state return efile Attach it to the front page of your paper return, not to any attachments. Free state return efile For more information, see Form W-2 in chapter 4. Free state return efile   If you received a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Free state return efile , showing federal income tax withheld, and you file a paper return, attach a copy of that form in the place indicated on the front page of your return. Free state return efile Form 1040EZ. Free state return efile   There are no additional schedules to file with Form 1040EZ. Free state return efile Form 1040A. Free state return efile   If you file a paper return, attach any forms and schedules behind Form 1040A in order of the “Attachment Sequence Number” shown in the upper right corner of the form or schedule. Free state return efile Then arrange all other statements or attachments in the same order as the forms and schedules they relate to and attach them last. Free state return efile Do not attach items unless required to do so. Free state return efile Form 1040. Free state return efile   If you file a paper return, attach any forms and schedules behind Form 1040 in order of the “Attachment Sequence Number” shown in the upper right corner of the form or schedule. Free state return efile Then arrange all other statements or attachments in the same order as the forms and schedules they relate to and attach them last. Free state return efile Do not attach items unless required to do so. Free state return efile Third Party Designee You can authorize the IRS to discuss your return with your preparer, a friend, family member, or any other person you choose. Free state return efile If you check the “Yes” box in the Third party designee area of your 2013 tax return and provide the information required, you are authorizing: The IRS to call the designee to answer any questions that arise during the processing of your return, and The designee to: Give information that is missing from your return to the IRS, Call the IRS for information about th