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H&r Block Free File 2011

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H&r Block Free File 2011

H&r block free file 2011 Publication 530 - Main Content Table of Contents What You Can and Cannot DeductHardest Hit Fund and Emergency Homeowners' Loan Programs Real Estate Taxes Sales Taxes Home Mortgage Interest Mortgage Insurance Premiums Mortgage Interest CreditFiguring the Credit BasisFiguring Your Basis Adjusted Basis Keeping Records How To Get Tax HelpLow Income Taxpayer Clinics What You Can and Cannot Deduct To deduct expenses of owning a home, you must file Form 1040, U. H&r block free file 2011 S. H&r block free file 2011 Individual Income Tax Return, and itemize your deductions on Schedule A (Form 1040). H&r block free file 2011 If you itemize, you cannot take the standard deduction. H&r block free file 2011 This section explains what expenses you can deduct as a homeowner. H&r block free file 2011 It also points out expenses that you cannot deduct. H&r block free file 2011 There are four primary discussions: real estate taxes, sales taxes, home mortgage interest, and mortgage insurance premiums. H&r block free file 2011 Generally, your real estate taxes, home mortgage interest, and mortgage insurance premiums are included in your house payment. H&r block free file 2011 Your house payment. H&r block free file 2011   If you took out a mortgage (loan) to finance the purchase of your home, you probably have to make monthly house payments. H&r block free file 2011 Your house payment may include several costs of owning a home. H&r block free file 2011 The only costs you can deduct are real estate taxes actually paid to the taxing authority, interest that qualifies as home mortgage interest, and mortgage insurance premiums. H&r block free file 2011 These are discussed in more detail later. H&r block free file 2011   Some nondeductible expenses that may be included in your house payment include: Fire or homeowner's insurance premiums, and The amount applied to reduce the principal of the mortgage. H&r block free file 2011 Minister's or military housing allowance. H&r block free file 2011   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you still can deduct your real estate taxes and your home mortgage interest. H&r block free file 2011 You do not have to reduce your deductions by your nontaxable allowance. H&r block free file 2011 For more information see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers, and Publication 3, Armed Forces' Tax Guide. H&r block free file 2011 Nondeductible payments. H&r block free file 2011   You cannot deduct any of the following items. H&r block free file 2011 Insurance (other than mortgage insurance premiums), including fire and comprehensive coverage, and title insurance. H&r block free file 2011 Wages you pay for domestic help. H&r block free file 2011 Depreciation. H&r block free file 2011 The cost of utilities, such as gas, electricity, or water. H&r block free file 2011 Most settlement costs. H&r block free file 2011 See Settlement or closing costs under Cost as Basis, later, for more information. H&r block free file 2011 Forfeited deposits, down payments, or earnest money. H&r block free file 2011 Hardest Hit Fund and Emergency Homeowners' Loan Programs You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. H&r block free file 2011 You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. H&r block free file 2011 You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. H&r block free file 2011 If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098-MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received), box 4 (mortgage insurance premiums) and box 5 (real property taxes). H&r block free file 2011 However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. H&r block free file 2011 Real Estate Taxes Most state and local governments charge an annual tax on the value of real property. H&r block free file 2011 This is called a real estate tax. H&r block free file 2011 You can deduct the tax if it is assessed uniformly at a like rate on all real property throughout the community. H&r block free file 2011 The proceeds must be for general community or governmental purposes and not be a payment for a special privilege granted or service rendered to you. H&r block free file 2011 Deductible Real Estate Taxes You can deduct real estate taxes imposed on you. H&r block free file 2011 You must have paid them either at settlement or closing, or to a taxing authority (either directly or through an escrow account) during the year. H&r block free file 2011 If you own a cooperative apartment, see Special Rules for Cooperatives , later. H&r block free file 2011 Where to deduct real estate taxes. H&r block free file 2011   Enter the amount of your deductible real estate taxes on Schedule A (Form 1040), line 6. H&r block free file 2011 Real estate taxes paid at settlement or closing. H&r block free file 2011   Real estate taxes are generally divided so that you and the seller each pay taxes for the part of the property tax year you owned the home. H&r block free file 2011 Your share of these taxes is fully deductible if you itemize your deductions. H&r block free file 2011 Division of real estate taxes. H&r block free file 2011   For federal income tax purposes, the seller is treated as paying the property taxes up to, but not including, the date of sale. H&r block free file 2011 You (the buyer) are treated as paying the taxes beginning with the date of sale. H&r block free file 2011 This applies regardless of the lien dates under local law. H&r block free file 2011 Generally, this information is included on the settlement statement you get at closing. H&r block free file 2011   You and the seller each are considered to have paid your own share of the taxes, even if one or the other paid the entire amount. H&r block free file 2011 You each can deduct your own share, if you itemize deductions, for the year the property is sold. H&r block free file 2011 Example. H&r block free file 2011 You bought your home on September 1. H&r block free file 2011 The property tax year (the period to which the tax relates) in your area is the calendar year. H&r block free file 2011 The tax for the year was $730 and was due and paid by the seller on August 15. H&r block free file 2011 You owned your new home during the property tax year for 122 days (September 1 to December 31, including your date of purchase). H&r block free file 2011 You figure your deduction for real estate taxes on your home as follows. H&r block free file 2011 1. H&r block free file 2011 Enter the total real estate taxes for the real property tax year $730 2. H&r block free file 2011 Enter the number of days in the property tax year that you owned the property 122 3. H&r block free file 2011 Divide line 2 by 365 . H&r block free file 2011 3342 4. H&r block free file 2011 Multiply line 1 by line 3. H&r block free file 2011 This is your deduction. H&r block free file 2011 Enter it on Schedule A (Form 1040), line 6 $244   You can deduct $244 on your return for the year if you itemize your deductions. H&r block free file 2011 You are considered to have paid this amount and can deduct it on your return even if, under the contract, you did not have to reimburse the seller. H&r block free file 2011 Delinquent taxes. H&r block free file 2011   Delinquent taxes are unpaid taxes that were imposed on the seller for an earlier tax year. H&r block free file 2011 If you agree to pay delinquent taxes when you buy your home, you cannot deduct them. H&r block free file 2011 You treat them as part of the cost of your home. H&r block free file 2011 See Real estate taxes , later, under Basis. H&r block free file 2011 Escrow accounts. H&r block free file 2011   Many monthly house payments include an amount placed in escrow (put in the care of a third party) for real estate taxes. H&r block free file 2011 You may not be able to deduct the total you pay into the escrow account. H&r block free file 2011 You can deduct only the real estate taxes that the lender actually paid from escrow to the taxing authority. H&r block free file 2011 Your real estate tax bill will show this amount. H&r block free file 2011 Refund or rebate of real estate taxes. H&r block free file 2011   If you receive a refund or rebate of real estate taxes this year for amounts you paid this year, you must reduce your real estate tax deduction by the amount refunded to you. H&r block free file 2011 If the refund or rebate was for real estate taxes paid for a prior year, you may have to include some or all of the refund in your income. H&r block free file 2011 For more information, see Recoveries in Publication 525, Taxable and Nontaxable Income. H&r block free file 2011 Items You Cannot Deduct as Real Estate Taxes The following items are not deductible as real estate taxes. H&r block free file 2011 Charges for services. H&r block free file 2011   An itemized charge for services to specific property or people is not a tax, even if the charge is paid to the taxing authority. H&r block free file 2011 You cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged for trash collection), or A flat fee charged for a single service provided by your local government (such as a $30 charge for mowing your lawn because it had grown higher than permitted under a local ordinance). H&r block free file 2011    You must look at your real estate tax bill to decide if any nondeductible itemized charges, such as those listed above, are included in the bill. H&r block free file 2011 If your taxing authority (or lender) does not furnish you a copy of your real estate tax bill, ask for it. H&r block free file 2011 Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. H&r block free file 2011 Assessments for local benefits. H&r block free file 2011   You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. H&r block free file 2011 Local benefits include the construction of streets, sidewalks, or water and sewer systems. H&r block free file 2011 You must add these amounts to the basis of your property. H&r block free file 2011   You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. H&r block free file 2011 An example is a charge to repair an existing sidewalk and any interest included in that charge. H&r block free file 2011   If only a part of the assessment is for maintenance, repair, or interest charges, you must be able to show the amount of that part to claim the deduction. H&r block free file 2011 If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. H&r block free file 2011   An assessment for a local benefit may be listed as an item in your real estate tax bill. H&r block free file 2011 If so, use the rules in this section to find how much of it, if any, you can deduct. H&r block free file 2011 Transfer taxes (or stamp taxes). H&r block free file 2011   You cannot deduct transfer taxes and similar taxes and charges on the sale of a personal home. H&r block free file 2011 If you are the buyer and you pay them, include them in the cost basis of the property. H&r block free file 2011 If you are the seller and you pay them, they are expenses of the sale and reduce the amount realized on the sale. H&r block free file 2011 Homeowners association assessments. H&r block free file 2011   You cannot deduct these assessments because the homeowners association, rather than a state or local government, imposes them. H&r block free file 2011 Special Rules for Cooperatives If you own a cooperative apartment, some special rules apply to you, though you generally receive the same tax treatment as other homeowners. H&r block free file 2011 As an owner of a cooperative apartment, you own shares of stock in a corporation that owns or leases housing facilities. H&r block free file 2011 You can deduct your share of the corporation's deductible real estate taxes if the cooperative housing corporation meets the following conditions: The corporation has only one class of stock outstanding, Each stockholder, solely because of ownership of the stock, can live in a house, apartment, or house trailer owned or leased by the corporation, No stockholder can receive any distribution out of capital, except on a partial or complete liquidation of the corporation, and At least one of the following: At least 80% of the corporation's gross income for the tax year was paid by the tenant-stockholders. H&r block free file 2011 For this purpose, gross income means all income received during the entire tax year, including any received before the corporation changed to cooperative ownership. H&r block free file 2011 At least 80% of the total square footage of the corporation's property must be available for use by the tenant-stockholders during the entire tax year. H&r block free file 2011 At least 90% of the expenditures paid or incurred by the corporation were used for the acquisition, construction, management, maintenance, or care of the property for the benefit of the tenant-shareholders during the entire tax year. H&r block free file 2011 Tenant-stockholders. H&r block free file 2011   A tenant-stockholder can be any entity (such as a corporation, trust, estate, partnership, or association) as well as an individual. H&r block free file 2011 The tenant-stockholder does not have to live in any of the cooperative's dwelling units. H&r block free file 2011 The units that the tenant-stockholder has the right to occupy can be rented to others. H&r block free file 2011 Deductible taxes. H&r block free file 2011   You figure your share of real estate taxes in the following way. H&r block free file 2011 Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. H&r block free file 2011 Multiply the corporation's deductible real estate taxes by the number you figured in (1). H&r block free file 2011 This is your share of the real estate taxes. H&r block free file 2011   Generally, the corporation will tell you your share of its real estate tax. H&r block free file 2011 This is the amount you can deduct if it reasonably reflects the cost of real estate taxes for your dwelling unit. H&r block free file 2011 Refund of real estate taxes. H&r block free file 2011   If the corporation receives a refund of real estate taxes it paid in an earlier year, it must reduce the amount of real estate taxes paid this year when it allocates the tax expense to you. H&r block free file 2011 Your deduction for real estate taxes the corporation paid this year is reduced by your share of the refund the corporation received. H&r block free file 2011 Sales Taxes Generally, 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). H&r block free file 2011 Deductible sales taxes may include sales taxes paid on your home (including mobile and prefabricated), or home building materials if the tax rate was the same as the general sales tax rate. H&r block free file 2011 For information on figuring your deduction, see the Instructions for Schedule A (Form 1040). H&r block free file 2011 If you elect to deduct the sales taxes paid on your home, or home building materials, you cannot include them as part of your cost basis in the home. H&r block free file 2011 Home Mortgage Interest This section of the publication gives you basic information about home mortgage interest, including information on interest paid at settlement, points, and Form 1098, Mortgage Interest Statement. H&r block free file 2011 Most home buyers take out a mortgage (loan) to buy their home. H&r block free file 2011 They then make monthly payments to either the mortgage holder or someone collecting the payments for the mortgage holder. H&r block free file 2011 Usually, you can deduct the entire part of your payment that is for mortgage interest, if you itemize your deductions on Schedule A (Form 1040). H&r block free file 2011 However, your deduction may be limited if: Your total mortgage balance is more than $1 million ($500,000 if married filing separately), or You took out a mortgage for reasons other than to buy, build, or improve your home. H&r block free file 2011 If either of these situations applies to you, see Publication 936 for more information. H&r block free file 2011 Also see Publication 936 if you later refinance your mortgage or buy a second home. H&r block free file 2011 Refund of home mortgage interest. H&r block free file 2011   If you receive a refund of home mortgage interest that you deducted in an earlier year and that reduced your tax, you generally must include the refund in income in the year you receive it. H&r block free file 2011 For more information, see Recoveries in Publication 525. H&r block free file 2011 The amount of the refund will usually be shown on the mortgage interest statement you receive from your mortgage lender. H&r block free file 2011 See Mortgage Interest Statement , later. H&r block free file 2011 Deductible Mortgage Interest To be deductible, the interest you pay must be on a loan secured by your main home or a second home. H&r block free file 2011 The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. H&r block free file 2011 Prepaid interest. H&r block free file 2011   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. H&r block free file 2011 Generally, you can deduct in each year only the interest that qualifies as home mortgage interest for that year. H&r block free file 2011 An exception (discussed later) applies to points. H&r block free file 2011 Late payment charge on mortgage payment. H&r block free file 2011   You can deduct as home mortgage interest a late payment charge if it was not for a specific service in connection with your mortgage loan. H&r block free file 2011 Mortgage prepayment penalty. H&r block free file 2011   If you pay off your home mortgage early, you may have to pay a penalty. H&r block free file 2011 You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. H&r block free file 2011 Ground rent. H&r block free file 2011   In some states (such as Maryland), you may buy your home subject to a ground rent. H&r block free file 2011 A ground rent is an obligation you assume to pay a fixed amount per year on the property. H&r block free file 2011 Under this arrangement, you are leasing (rather than buying) the land on which your home is located. H&r block free file 2011 Redeemable ground rents. H&r block free file 2011   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. H&r block free file 2011 The ground rent is a redeemable ground rent only if all of the following are true. H&r block free file 2011 Your lease, including renewal periods, is for more than 15 years. H&r block free file 2011 You can freely assign the lease. H&r block free file 2011 You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specified amount. H&r block free file 2011 The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. H&r block free file 2011   Payments made to end the lease and buy the lessor's entire interest in the land are not redeemable ground rents. H&r block free file 2011 You cannot deduct them. H&r block free file 2011 Nonredeemable ground rents. H&r block free file 2011   Payments on a nonredeemable ground rent are not mortgage interest. H&r block free file 2011 You can deduct them as rent only if they are a business expense or if they are for rental property. H&r block free file 2011 Cooperative apartment. H&r block free file 2011   You can usually treat the interest on a loan you took out to buy stock in a cooperative housing corporation as home mortgage interest if you own a cooperative apartment, and the cooperative housing corporation meets the conditions described earlier under Special Rules for Cooperatives . H&r block free file 2011 In addition, you can treat as home mortgage interest your share of the corporation's deductible mortgage interest. H&r block free file 2011 Figure your share of mortgage interest the same way that is shown for figuring your share of real estate taxes in the Example under Division of real estate taxes, earlier. H&r block free file 2011 For more information on cooperatives, see Special Rule for Tenant-Stockholders in Cooperative Housing Corporations in Publication 936. H&r block free file 2011 Refund of cooperative's mortgage interest. H&r block free file 2011   You must reduce your mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. H&r block free file 2011 The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. H&r block free file 2011   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. H&r block free file 2011 Mortgage Interest Paid at Settlement One item that normally appears on a settlement or closing statement is home mortgage interest. H&r block free file 2011 You can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). H&r block free file 2011 This amount should be included in the mortgage interest statement provided by your lender. H&r block free file 2011 See the discussion under Mortgage Interest Statement , later. H&r block free file 2011 Also, if you pay interest in advance, see Prepaid interest , earlier, and Points , next. H&r block free file 2011 Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. H&r block free file 2011 Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points. H&r block free file 2011 A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. H&r block free file 2011 See Points paid by the seller , later. H&r block free file 2011 General rule. H&r block free file 2011   You cannot deduct the full amount of points in the year paid. H&r block free file 2011 They are prepaid interest, so you generally must deduct them over the life (term) of the mortgage. H&r block free file 2011 Exception. H&r block free file 2011   You can deduct the full amount of points in the year paid if you meet all the following tests. H&r block free file 2011 Your loan is secured by your main home. H&r block free file 2011 (Generally, your main home is the one you live in most of the time. H&r block free file 2011 ) Paying points is an established business practice in the area where the loan was made. H&r block free file 2011 The points paid were not more than the points generally charged in that area. H&r block free file 2011 You use the cash method of accounting. H&r block free file 2011 This means you report income in the year you receive it and deduct expenses in the year you pay them. H&r block free file 2011 Most individuals use this method. H&r block free file 2011 The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. H&r block free file 2011 The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. H&r block free file 2011 The funds you provided are not required to have been applied to the points. H&r block free file 2011 They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. H&r block free file 2011 You cannot have borrowed these funds. H&r block free file 2011 You use your loan to buy or build your main home. H&r block free file 2011 The points were computed as a percentage of the principal amount of the mortgage. H&r block free file 2011 The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. H&r block free file 2011 The points may be shown as paid from either your funds or the seller's. H&r block free file 2011 Note. H&r block free file 2011 If you meet all of the tests listed above and you itemize your deductions in the year you get the loan, you can either deduct the full amount of points in the year paid or deduct them over the life of the loan, beginning in the year you get the loan. H&r block free file 2011 If you do not itemize your deductions in the year you get the loan, you can spread the points over the life of the loan and deduct the appropriate amount in each future year, if any, when you do itemize your deductions. H&r block free file 2011 Home improvement loan. H&r block free file 2011   You can also fully deduct in the year paid points paid on a loan to improve your main home, if you meet the first six tests listed earlier. H&r block free file 2011 Refinanced loan. H&r block free file 2011   If you use part of the refinanced mortgage proceeds to improve your main home and you meet the first six tests listed earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. H&r block free file 2011 You can deduct the rest of the points over the life of the loan. H&r block free file 2011 Points not fully deductible in year paid. H&r block free file 2011    If you do not qualify under the exception to deduct the full amount of points in the year paid (or choose not to do so), see Points in Publication 936 for the rules on when and how much you can deduct. H&r block free file 2011 Figure A. H&r block free file 2011   You can use Figure A, next, as a quick guide to see whether your points are fully deductible in the year paid. H&r block free file 2011    Please click here for the text description of the image. H&r block free file 2011 Figure A. H&r block free file 2011 Are my points fully deductible this year? Amounts charged for services. H&r block free file 2011   Amounts charged by the lender for specific services connected to the loan are not interest. H&r block free file 2011 Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. H&r block free file 2011 You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. H&r block free file 2011 For information about the tax treatment of these amounts and other settlement fees and closing costs, see Basis , later. H&r block free file 2011 Points paid by the seller. H&r block free file 2011   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. H&r block free file 2011 Treatment by seller. H&r block free file 2011   The seller cannot deduct these fees as interest. H&r block free file 2011 However, they are a selling expense that reduces the seller's amount realized. H&r block free file 2011 See Publication 523 for more information. H&r block free file 2011 Treatment by buyer. H&r block free file 2011   The buyer treats seller-paid points as if he or she had paid them. H&r block free file 2011 If all the tests listed earlier under Exception are met, the buyer can deduct the points in the year paid. H&r block free file 2011 If any of those tests are not met, the buyer must deduct the points over the life of the loan. H&r block free file 2011   The buyer must also reduce the basis of the home by the amount of the seller-paid points. H&r block free file 2011 For more information about the basis of your home, see Basis , later. H&r block free file 2011 Funds provided are less than points. H&r block free file 2011   If you meet all the tests listed earlier under Exception except that the funds you provided were less than the points charged to you (test 6), you can deduct the points in the year paid up to the amount of funds you provided. H&r block free file 2011 In addition, you can deduct any points paid by the seller. H&r block free file 2011 Example 1. H&r block free file 2011 When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). H&r block free file 2011 You meet all the tests for deducting points in the year paid (see Exception , earlier), except the only funds you provided were a $750 down payment. H&r block free file 2011 Of the $1,000 you were charged for points, you can deduct $750 in the year paid. H&r block free file 2011 You spread the remaining $250 over the life of the mortgage. H&r block free file 2011 Example 2. H&r block free file 2011 The facts are the same as in Example 1 , except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. H&r block free file 2011 In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). H&r block free file 2011 You spread the remaining $250 over the life of the mortgage. H&r block free file 2011 You must reduce the basis of your home by the $1,000 paid by the seller. H&r block free file 2011 Excess points. H&r block free file 2011   If you meet all the tests under Exception , earlier, except that the points paid were more than are generally charged in your area (test 3), you can deduct in the year paid only the points that are generally charged. H&r block free file 2011 You must spread any additional points over the life of the mortgage. H&r block free file 2011 Mortgage ending early. H&r block free file 2011   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. H&r block free file 2011 A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. H&r block free file 2011 Example. H&r block free file 2011 Dan paid $3,000 in points in 2006 that he had to spread out over the 15-year life of the mortgage. H&r block free file 2011 He had deducted $1,400 of these points through 2012. H&r block free file 2011 Dan prepaid his mortgage in full in 2013. H&r block free file 2011 He can deduct the remaining $1,600 of points in 2013. H&r block free file 2011 Exception. H&r block free file 2011   If you refinance the mortgage with the same lender, you cannot deduct any remaining points for the year. H&r block free file 2011 Instead, deduct them over the term of the new loan. H&r block free file 2011 Form 1098. H&r block free file 2011   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your deductible points paid during the year. H&r block free file 2011 See Mortgage Interest Statement , later. H&r block free file 2011 Where To Deduct Home Mortgage Interest Enter on Schedule A (Form 1040), line 10, the home mortgage interest and points reported to you on Form 1098 (discussed next). H&r block free file 2011 If you did not receive a Form 1098, enter your deductible interest on line 11, and any deductible points on line 12. H&r block free file 2011 See Table 1 below for a summary of where to deduct home mortgage interest and real estate taxes. H&r block free file 2011 If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and social security number (SSN) or employer identification number (EIN) on the dotted lines next to line 11. H&r block free file 2011 The seller must give you this number and you must give the seller your SSN. H&r block free file 2011 Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. H&r block free file 2011 Failure to meet either of these requirements may result in a $50 penalty for each failure. H&r block free file 2011 Table 1. H&r block free file 2011 Where To Deduct Interest and Taxes Paid on Your Home See the text for information on what expenses are eligible. H&r block free file 2011 IF you are eligible to deduct . H&r block free file 2011 . H&r block free file 2011 . H&r block free file 2011 THEN report the amount  on Schedule A (Form 1040) . H&r block free file 2011 . H&r block free file 2011 . H&r block free file 2011 real estate taxes line 6. H&r block free file 2011 home mortgage interest and points reported on Form 1098 line 10. H&r block free file 2011 home mortgage interest not reported on  Form 1098 line 11. H&r block free file 2011 points not reported on Form 1098 line 12. H&r block free file 2011 qualified mortgage insurance premiums line 13. H&r block free file 2011 Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage to a mortgage holder in the course of that holder's trade or business, you should receive a Form 1098 or similar statement from the mortgage holder. H&r block free file 2011 The statement will show the total interest paid on your mortgage during the year. H&r block free file 2011 If you bought a main home during the year, it also will show the deductible points you paid and any points you can deduct that were paid by the person who sold you your home. H&r block free file 2011 See Points , earlier. H&r block free file 2011 The interest you paid at settlement should be included on the statement. H&r block free file 2011 If it is not, add the interest from the settlement sheet that qualifies as home mortgage interest to the total shown on Form 1098 or similar statement. H&r block free file 2011 Put the total on Schedule A (Form 1040), line 10, and attach a statement to your return explaining the difference. H&r block free file 2011 Write “See attached” to the right of line 10. H&r block free file 2011 A mortgage holder can be a financial institution, a governmental unit, or a cooperative housing corporation. H&r block free file 2011 If a statement comes from a cooperative housing corporation, it generally will show your share of interest. H&r block free file 2011 Your mortgage interest statement for 2013 should be provided or sent to you by January 31, 2014. H&r block free file 2011 If it is mailed, you should allow adequate time to receive it before contacting the mortgage holder. H&r block free file 2011 A copy of this form will be sent to the IRS also. H&r block free file 2011 Example. H&r block free file 2011 You bought a new home on May 3. H&r block free file 2011 You paid no points on the purchase. H&r block free file 2011 During the year, you made mortgage payments which included $4,480 deductible interest on your new home. H&r block free file 2011 The settlement sheet for the purchase of the home included interest of $620 for 29 days in May. H&r block free file 2011 The mortgage statement you receive from the lender includes total interest of $5,100 ($4,480 + $620). H&r block free file 2011 You can deduct the $5,100 if you itemize your deductions. H&r block free file 2011 Refund of overpaid interest. H&r block free file 2011   If you receive a refund of mortgage interest you overpaid in a prior year, you generally will receive a Form 1098 showing the refund in box 3. H&r block free file 2011 Generally, you must include the refund in income in the year you receive it. H&r block free file 2011 See Refund of home mortgage interest , earlier, under Home Mortgage Interest. H&r block free file 2011 More than one borrower. H&r block free file 2011   If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. H&r block free file 2011 Show how much of the interest each of you paid, and give the name and address of the person who received the form. H&r block free file 2011 Deduct your share of the interest on Schedule A (Form 1040), line 11, and write “See attached” to the right of that line. H&r block free file 2011 Mortgage Insurance Premiums You may be able to take an itemized deduction on Schedule A (Form 1040), line 13, for premiums you pay or accrue during 2013 for qualified mortgage insurance in connection with home acquisition debt on your qualified home. H&r block free file 2011 Mortgage insurance premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as an itemized deduction. H&r block free file 2011 Qualified Mortgage Insurance Qualified mortgage insurance is mortgage insurance provided by the Veterans Administration, the Federal Housing Administration, or the Rural Housing Administration, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). H&r block free file 2011 Prepaid mortgage insurance premiums. H&r block free file 2011   If you paid premiums that are allocable to periods after 2013, you must allocate them over the shorter of: The stated term of the mortgage, or 84 months, beginning with the month the insurance was obtained. H&r block free file 2011 The premiums are treated as paid in the year to which they were allocated. H&r block free file 2011 If the mortgage is satisfied before its term, no deduction is allowed for the unamortized balance. H&r block free file 2011 See Publication 936 for details. H&r block free file 2011 Exception for certain mortgage insurance. H&r block free file 2011   The allocation rules, explained above, do not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Service. H&r block free file 2011 Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home. H&r block free file 2011 It also must be secured by that home. H&r block free file 2011 If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. H&r block free file 2011 Home acquisition debt limit. H&r block free file 2011   The total amount you can treat as home acquisition debt at any time on your home cannot be more than $1 million ($500,000 if married filing separately). H&r block free file 2011 Discharges of qualified principal residence indebtedness. H&r block free file 2011   You can exclude from gross income any discharges of qualified principal residence indebtedness made after 2006 and before 2014. H&r block free file 2011 You must reduce the basis of your principal residence (but not below zero) by the amount you exclude. H&r block free file 2011 Principal residence. H&r block free file 2011   Your principal residence is the home where you ordinarily live most of the time. H&r block free file 2011 You can have only one principal residence at any one time. H&r block free file 2011 Qualified principal residence indebtedness. H&r block free file 2011   This is a mortgage that you took out to buy, build, or substantially improve your principal residence and that is secured by that residence. H&r block free file 2011 If the amount of your original mortgage is more than the cost of your principal residence plus the cost of substantial improvements, qualified principal residence indebtedness cannot be more than the cost of your principal residence plus improvements. H&r block free file 2011   Any debt secured by your principal residence that you use to refinance qualified principal residence indebtedness is qualified principal residence indebtedness up to the amount of your old mortgage principal just before the refinancing. H&r block free file 2011 Additional debt incurred to substantially improve your principal residence is also qualified principal residence indebtedness. H&r block free file 2011 Amount you can exclude. H&r block free file 2011   You can only exclude debt discharged after 2006 and before 2014. H&r block free file 2011 The most you can exclude is $2 million ($1 million if married filing separately). H&r block free file 2011 You cannot exclude any amount that was discharged because of services performed for the lender or on account of any other factor not directly related either to a decline in the value of your residence or to your financial condition. H&r block free file 2011 Ordering rule. H&r block free file 2011   If only a part of a loan is qualified principal residence indebtedness, you can exclude only the amount of the discharge that is more than the amount of the loan (immediately before the discharge) that is not qualified principal residence indebtedness. H&r block free file 2011 Qualified Home This means your main home or your second home. H&r block free file 2011 A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. H&r block free file 2011 Main home. H&r block free file 2011   You can have only one main home at any one time. H&r block free file 2011 This is the home where you ordinarily live most of the time. H&r block free file 2011 Second home and other special situations. H&r block free file 2011   If you have a second home, use part of your home for other than residential living (such as a home office), rent out part of your home, or are having your home constructed, see Qualified Home in Publication 936. H&r block free file 2011 Limit on Deduction If your adjusted gross income (AGI) on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are deductible is reduced and may be eliminated. H&r block free file 2011 See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. H&r block free file 2011 If your AGI is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. H&r block free file 2011 Form 1098. H&r block free file 2011   The amount of mortgage insurance premiums you paid during 2013 should be reported in box 4. H&r block free file 2011 See Form 1098, Mortgage Interest Statement in Publication 936. H&r block free file 2011 Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals afford home ownership. H&r block free file 2011 If you qualify, you can claim the credit on Form 8396 each year for part of the home mortgage interest you pay. H&r block free file 2011 Who qualifies. H&r block free file 2011   You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate (MCC) from your state or local government. H&r block free file 2011 Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. H&r block free file 2011 The MCC will show the certificate credit rate you will use to figure your credit. H&r block free file 2011 It also will show the certified indebtedness amount. H&r block free file 2011 Only the interest on that amount qualifies for the credit. H&r block free file 2011 See Figuring the Credit , later. H&r block free file 2011 You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home. H&r block free file 2011 Contact your state or local housing finance agency for information about the availability of MCCs in your area. H&r block free file 2011 How to claim the credit. H&r block free file 2011   To claim the credit, complete Form 8396 and attach it to your Form 1040 or Form 1040NR, U. H&r block free file 2011 S. H&r block free file 2011 Nonresident Alien Income Tax Return. H&r block free file 2011 Include the credit in your total for Form 1040, line 53, or Form 1040NR, line 50; be sure to check box c and write “Form 8396” on that line. H&r block free file 2011 Reducing your home mortgage interest deduction. H&r block free file 2011   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. H&r block free file 2011 You must do this even if part of that amount is to be carried forward to 2014. H&r block free file 2011 Selling your home. H&r block free file 2011   If you purchase a home after 1990 using an MCC, and you sell that home within 9 years, you may have to recapture (repay) all or part of the benefit you received from the MCC program. H&r block free file 2011 For additional information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, in Publication 523. H&r block free file 2011 Figuring the Credit Figure your credit on Form 8396. H&r block free file 2011 Mortgage not more than certified indebtedness. H&r block free file 2011   If your mortgage loan amount is equal to (or smaller than) the certified indebtedness amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. H&r block free file 2011 Mortgage more than certified indebtedness. H&r block free file 2011   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. H&r block free file 2011 To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. H&r block free file 2011 Certified indebtedness amount on your MCC Original amount of your mortgage   The fraction will not change as long as you are entitled to take the mortgage interest credit. H&r block free file 2011 Example. H&r block free file 2011 Emily bought a home this year. H&r block free file 2011 Her mortgage loan is $125,000. H&r block free file 2011 The certified indebtedness amount on her MCC is $100,000. H&r block free file 2011 She paid $7,500 interest this year. H&r block free file 2011 Emily figures the interest to enter on Form 8396, line 1, as follows:   $100,000 = 80% (. H&r block free file 2011 80)       $125,000       $7,500 x . H&r block free file 2011 80 = $6,000   Emily enters $6,000 on Form 8396, line 1. H&r block free file 2011 In each later year, she will figure her credit using only 80% of the interest she pays for that year. H&r block free file 2011 Limits Two limits may apply to your credit. H&r block free file 2011 A limit based on the credit rate, and A limit based on your tax. H&r block free file 2011 Limit based on credit rate. H&r block free file 2011   If the certificate credit rate is higher than 20%, the credit you are allowed cannot be more than $2,000. H&r block free file 2011 Limit based on tax. H&r block free file 2011   After applying the limit based on the credit rate, your credit generally cannot be more than your tax liability. H&r block free file 2011 See the Credit Limit Worksheet in the Form 8396 instructions to calculate the limit based on tax. H&r block free file 2011 Dividing the Credit If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, the credit must be divided based on the interest held by each person. H&r block free file 2011 Example. H&r block free file 2011 John and his brother, George, were issued an MCC. H&r block free file 2011 They used it to get a mortgage on their main home. H&r block free file 2011 John has a 60% ownership interest in the home, and George has a 40% ownership interest in the home. H&r block free file 2011 John paid $5,400 mortgage interest this year and George paid $3,600. H&r block free file 2011 The MCC shows a credit rate of 25% and a certified indebtedness amount of $130,000. H&r block free file 2011 The loan amount (mortgage) on their home is $120,000. H&r block free file 2011 The credit is limited to $2,000 because the credit rate is more than 20%. H&r block free file 2011 John figures the credit by multiplying the mortgage interest he paid this year ($5,400) by the certificate credit rate (25%) for a total of $1,350. H&r block free file 2011 His credit is limited to $1,200 ($2,000 × 60%). H&r block free file 2011 George figures the credit by multiplying the mortgage interest he paid this year ($3,600) by the certificate credit rate (25%) for a total of $900. H&r block free file 2011 His credit is limited to $800 ($2,000 × 40%). H&r block free file 2011 Carryforward If your allowable credit is reduced because of the limit based on your tax, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. H&r block free file 2011 Example. H&r block free file 2011 You receive a mortgage credit certificate from State X. H&r block free file 2011 This year, your regular tax liability is $1,100, you owe no alternative minimum tax, and your mortgage interest credit is $1,700. H&r block free file 2011 You claim no other credits. H&r block free file 2011 Your unused mortgage interest credit for this year is $600 ($1,700 − $1,100). H&r block free file 2011 You can carry forward this amount to the next 3 years or until used, whichever comes first. H&r block free file 2011 Credit rate more than 20%. H&r block free file 2011   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). H&r block free file 2011 Example. H&r block free file 2011 In the earlier example under Dividing the Credit , John and George used the entire $2,000 credit. H&r block free file 2011 The excess   John $1,350 − $1,200 = $150     George $900 − $800 = $100   $150 for John ($1,350 − $1,200) and $100 for George ($900 − $800) cannot be carried forward to future years, despite the respective tax liabilities for John and George. H&r block free file 2011 Refinancing If you refinance your original mortgage loan on which you had been given an MCC, you must get a new MCC to be able to claim the credit on the new loan. H&r block free file 2011 The amount of credit you can claim on the new loan may change. H&r block free file 2011 Table 2 below summarizes how to figure your credit if you refinance your original mortgage loan. H&r block free file 2011 Table 2. H&r block free file 2011 Effect of Refinancing on Your Credit IF you get a new (reissued) MCC and the amount of your new mortgage is . H&r block free file 2011 . H&r block free file 2011 . H&r block free file 2011 THEN the interest you claim on Form 8396, line 1, is* . H&r block free file 2011 . H&r block free file 2011 . H&r block free file 2011 smaller than or equal to the certified indebtedness amount on the new MCC all the interest paid during the year on your new mortgage. H&r block free file 2011 larger than the certified indebtedness amount on the new MCC interest paid during the year on your new mortgage multiplied by the following fraction. H&r block free file 2011         certified indebtedness  amount on your new MCC       original amount of your  mortgage   *The credit using the new MCC cannot be more than the credit using the old MCC. H&r block free file 2011  See New MCC cannot increase your credit above. H&r block free file 2011 An issuer may reissue an MCC after you refinance your mortgage. H&r block free file 2011 If you did not get a new MCC, you may want to contact the state or local housing finance agency that issued your original MCC for information about whether you can get a reissued MCC. H&r block free file 2011 Year of refinancing. H&r block free file 2011   In the year of refinancing, add the applicable amount of interest paid on the old mortgage and the applicable amount of interest paid on the new mortgage, and enter the total on Form 8396, line 1. H&r block free file 2011   If your new MCC has a credit rate different from the rate on the old MCC, you must attach a statement to Form 8396. H&r block free file 2011 The statement must show the calculation for lines 1, 2, and 3 for the part of the year when the old MCC was in effect. H&r block free file 2011 It must show a separate calculation for the part of the year when the new MCC was in effect. H&r block free file 2011 Combine the amounts from both calculations for line 3, enter the total on line 3 of the form, and write “See attached” on the dotted line next to line 2. H&r block free file 2011 New MCC cannot increase your credit. H&r block free file 2011   The credit that you claim with your new MCC cannot be more than the credit that you could have claimed with your old MCC. H&r block free file 2011   In most cases, the agency that issues your new MCC will make sure that it does not increase your credit. H&r block free file 2011 However, if either your old loan or your new loan has a variable (adjustable) interest rate, you will need to check this yourself. H&r block free file 2011 In that case, you will need to know the amount of the credit you could have claimed using the old MCC. H&r block free file 2011   There are two methods for figuring the credit you could have claimed. H&r block free file 2011 Under one method, you figure the actual credit that would have been allowed. H&r block free file 2011 This means you use the credit rate on the old MCC and the interest you would have paid on the old loan. H&r block free file 2011   If your old loan was a variable rate mortgage, you can use another method to determine the credit that you could have claimed. H&r block free file 2011 Under this method, you figure the credit using a payment schedule of a hypothetical self-amortizing mortgage with level payments projected to the final maturity date of the old mortgage. H&r block free file 2011 The interest rate of the hypothetical mortgage is the annual percentage rate (APR) of the new mortgage for purposes of the Federal Truth in Lending Act. H&r block free file 2011 The principal of the hypothetical mortgage is the remaining outstanding balance of the certified mortgage indebtedness shown on the old MCC. H&r block free file 2011    You must choose one method and use it consistently beginning with the first tax year for which you claim the credit based on the new MCC. H&r block free file 2011    As part of your tax records, you should keep your old MCC and the schedule of payments for your old mortgage. H&r block free file 2011 Basis Basis is your starting point for figuring a gain or loss if you later sell your home, or for figuring depreciation if you later use part of your home for business purposes or for rent. H&r block free file 2011 While you own your home, you may add certain items to your basis. H&r block free file 2011 You may subtract certain other items from your basis. H&r block free file 2011 These items are called adjustments to basis and are explained later under Adjusted Basis . H&r block free file 2011 It is important that you understand these terms when you first acquire your home because you must keep track of your basis and adjusted basis during the period you own your home. H&r block free file 2011 You also must keep records of the events that affect basis or adjusted basis. H&r block free file 2011 See Keeping Records , below. H&r block free file 2011 Figuring Your Basis How you figure your basis depends on how you acquire your home. H&r block free file 2011 If you buy or build your home, your cost is your basis. H&r block free file 2011 If you receive your home as a gift, your basis is usually the same as the adjusted basis of the person who gave you the property. H&r block free file 2011 If you inherit your home from a decedent, different rules apply depending on the date of the decedent's death. H&r block free file 2011 Each of these topics is discussed later. H&r block free file 2011 Property transferred from a spouse. H&r block free file 2011   If your home is transferred to you from your spouse, or from your former spouse as a result of a divorce, your basis is the same as your spouse's (or former spouse's) adjusted basis just before the transfer. H&r block free file 2011 Publication 504, Divorced or Separated Individuals, fully discusses transfers between spouses. H&r block free file 2011 Cost as Basis The cost of your home, whether you purchased it or constructed it, is the amount you paid for it, including any debt you assumed. H&r block free file 2011 The cost of your home includes most settlement or closing costs you paid when you bought the home. H&r block free file 2011 If you built your home, your cost includes most closing costs paid when you bought the land or settled on your mortgage. H&r block free file 2011 See Settlement or closing costs , later. H&r block free file 2011 If you elect to deduct the sales taxes on the purchase or construction of your home as an itemized deduction on Schedule A (Form 1040), you cannot include the sales taxes as part of your cost basis in the home. H&r block free file 2011 Purchase. H&r block free file 2011   The basis of a home you bought is the amount you paid for it. H&r block free file 2011 This usually includes your down payment and any debt you assumed. H&r block free file 2011 The basis of a cooperative apartment is the amount you paid for your shares in the corporation that owns or controls the property. H&r block free file 2011 This amount includes any purchase commissions or other costs of acquiring the shares. H&r block free file 2011 Construction. H&r block free file 2011   If you contracted to have your home built on land that you own, your basis in the home is your basis in the land plus the amount you paid to have the home built. H&r block free file 2011 This includes the cost of labor and materials, the amount you paid the contractor, any architect's fees, building permit charges, utility meter and connection charges, and legal fees that are directly connected with building your home. H&r block free file 2011 If you built all or part of your home yourself, your basis is the total amount it cost you to build it. H&r block free file 2011 You cannot include in basis the value of your own labor or any other labor for which you did not pay. H&r block free file 2011 Real estate taxes. H&r block free file 2011   Real estate taxes are usually divided so that you and the seller each pay taxes for the part of the property tax year that each owned the home. H&r block free file 2011 See the earlier discussion of Real estate taxes paid at settlement or closing , under Real Estate Taxes, earlier, to figure the real estate taxes you paid or are considered to have paid. H&r block free file 2011   If you pay any part of the seller's share of the real estate taxes (the taxes up to the date of sale), and the seller did not reimburse you, add those taxes to your basis in the home. H&r block free file 2011 You cannot deduct them as taxes paid. H&r block free file 2011   If the seller paid any of your share of the real estate taxes (the taxes beginning with the date of sale), you can still deduct those taxes. H&r block free file 2011 Do not include those taxes in your basis. H&r block free file 2011 If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. H&r block free file 2011 Example 1. H&r block free file 2011 You bought your home on September 1. H&r block free file 2011 The property tax year in your area is the calendar year, and the tax is due on August 15. H&r block free file 2011 The real estate taxes on the home you bought were $1,275 for the year and had been paid by the seller on August 15. H&r block free file 2011 You did not reimburse the seller for your share of the real estate taxes from September 1 through December 31. H&r block free file 2011 You must reduce the basis of your home by the $426 [(122 ÷ 365) × $1,275] the seller paid for you. H&r block free file 2011 You can deduct your $426 share of real estate taxes on your return for the year you purchased your home. H&r block free file 2011 Example 2. H&r block free file 2011 You bought your home on May 3, 2013. H&r block free file 2011 The property tax year in your area is the calendar year. H&r block free file 2011 The taxes for the previous year are assessed on January 2 and are due on May 31 and November 30. H&r block free file 2011 Under state law, the taxes become a lien on May 31. H&r block free file 2011 You agreed to pay all taxes due after the date of sale. H&r block free file 2011 The taxes due in 2013 for 2012 were $1,375. H&r block free file 2011 The taxes due in 2014 for 2013 will be $1,425. H&r block free file 2011 You cannot deduct any of the taxes paid in 2013 because they relate to the 2012 property tax year and you did not own the home until 2013. H&r block free file 2011 Instead, you add the $1,375 to the cost (basis) of your home. H&r block free file 2011 You owned the home in 2013 for 243 days (May 3 to December 31), so you can take a tax deduction on your 2014 return of $949 [(243 ÷ 365) × $1,425] paid in 2014 for 2013. H&r block free file 2011 You add the remaining $476 ($1,425 − $949) of taxes paid in 2014 to the cost (basis) of your home. H&r block free file 2011 Settlement or closing costs. H&r block free file 2011   If you bought your home, you probably paid settlement or closing costs in addition to the contract price. H&r block free file 2011 These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. H&r block free file 2011 If you built your home, you probably paid these costs when you bought the land or settled on your mortgage. H&r block free file 2011   The only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. H&r block free file 2011 You deduct them in the year you buy your home if you itemize your deductions. H&r block free file 2011 You can add certain other settlement or closing costs to the basis of your home. H&r block free file 2011 Items added to basis. H&r block free file 2011   You can include in your basis the settlement fees and closing costs you paid for buying your home. H&r block free file 2011 A fee is for buying the home if you would have had to pay it even if you paid cash for the home. H&r block free file 2011   The following are some of the settlement fees and closing costs that you can include in the original basis of your home. H&r block free file 2011 Abstract fees (abstract of title fees). H&r block free file 2011 Charges for installing utility services. H&r block free file 2011 Legal fees (including fees for the title search and preparation of the sales contract and deed). H&r block free file 2011 Recording fees. H&r block free file 2011 Surveys. H&r block free file 2011 Transfer or stamp taxes. H&r block free file 2011 Owner's title insurance. H&r block free file 2011 Any amount the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, cost for improvements or repairs, and sales commissions. H&r block free file 2011   If the seller actually paid for any item for which you are liable and for which you can take a deduction (such as your share of the real estate taxes for the year of sale), you must reduce your basis by that amount unless you are charged for it in the settlement. H&r block free file 2011 Items not added to basis and not deductible. H&r block free file 2011   Here are some settlement and closing costs that you cannot deduct or add to your basis. H&r block free file 2011 Fire insurance premiums. H&r block free file 2011 Charges for using utilities or other services related to occupancy of the home before closing. H&r block free file 2011 Rent for occupying the home before closing. H&r block free file 2011 Charges connected with getting or refinancing a mortgage loan, such as: Loan assumption fees, Cost of a credit report, and Fee for an appraisal required by a lender. H&r block free file 2011 Points paid by seller. H&r block free file 2011   If you bought your home after April 3, 1994, you must reduce your basis by any points paid for your mortgage by the person who sold you your home. H&r block free file 2011   If you bought your home after 1990 but before April 4, 1994, you must reduce your basis by seller-paid points only if you deducted them. H&r block free file 2011 See Points , earlier, for the rules on deducting points. H&r block free file 2011 Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined later) to the donor just before it was given to you, its fair market value (FMV) at the time it was given to you, and any gift tax paid on it. H&r block free file 2011 Fair market value. H&r block free file 2011   Fair market value (FMV) is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and who both have a reasonable knowledge of all the necessary facts. H&r block free file 2011 Donor's adjusted basis is more than FMV. H&r block free file 2011   If someone gave you your home and the donor's adjusted basis, when it was given to you, was more than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis. H&r block free file 2011 Disposition basis. H&r block free file 2011   If the donor's adjusted basis at the time of the gift is more than the FMV, your basis (plus or minus any required adjustments, see Adjusted Basis , later) when you dispose of the property will depend on whether you have a gain or a loss. H&r block free file 2011 Your basis for figuring a gain is the same as the donor's adjusted basis. H&r block free file 2011 Your basis for figuring a loss is the FMV when you received the gift. H&r block free file 2011 If you use the donor's adjusted basis to figure a gain and it results in a loss, then you must use the FMV (at the time of the gift) to refigure the loss. H&r block free file 2011 However, if using the FMV results in a gain, then you neither have a gain nor a loss. H&r block free file 2011 Example 1. H&r block free file 2011 Andrew received a house as a gift from Ishmael (the donor). H&r block free file 2011 At the time of the gift, the home had an FMV of $80,000. H&r block free file 2011 Ishmael's adjusted basis was $100,000. H&r block free file 2011 After he received the house, no events occurred to increase or decrease the basis. H&r block free file 2011 If Andrew sells the house for $120,000, he will have a $20,000 gain because he must use the donor's adjusted basis ($100,000) at the time of the gift as his basis to figure the gain. H&r block free file 2011 Example 2. H&r block free file 2011 Same facts as Example 1 , except this time Andrew sells the house for $70,000. H&r block free file 2011 He will have a loss of $10,000 because he must use the FMV ($80,000) at the time of the gift as his basis to figure the loss. H&r block free file 2011 Example 3. H&r block free file 2011 Same facts as Example 1 , except this time Andrew sells the house for $90,000. H&r block free file 2011 Initially, he figures the gain using Ishmael's adjusted basis ($100,000), which results in a loss of $10,000. H&r block free file 2011 Since it is a loss, Andrew must now recalculate the loss using the FMV ($80,000), which results in a gain of $10,000. H&r block free file 2011 So in this situation, Andrew will neither have a gain nor a loss. H&r block free file 2011 Donor's adjusted basis equal to or less than the FMV. H&r block free file 2011   If someone gave you your home after 1976 and the donor's adjusted basis, when it was given to you, was equal to or less than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home. H&r block free file 2011 Part of federal gift tax due to net increase in value. H&r block free file 2011   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. H&r block free file 2011 The numerator (top part) of the fraction is the net increase in the value of the home, and the denominator (bottom part) is the value of the home for gift tax purposes after reduction for any annual exclusion and marital or charitable deduction that applies to the gift. H&r block free file 2011 The net increase in the value of the home is its FMV minus the adjusted basis of the donor. H&r block free file 2011 Publication 551 gives more information, including examples, on figuring your basis when you receive property as a gift. H&r block free file 2011 Inheritance Your basis in a home you inherited is generally the fair market value of the home on the date of the decedent's death or on the alternative valuation date if the personal representative for the estate chooses to use alternative valuation. H&r block free file 2011 If an estate tax return was filed, your basis is generally the value of the home listed on the estate tax return. H&r block free file 2011 If an estate tax return was not filed, your basis is the appraised value of the home at the decedent's date of death for state inheritance or transmission taxes. H&r block free file 2011 Publication 551 and Publication 559, Survivors, Executors, and Administrators, have more information on the basis of inherited property. H&r block free file 2011 If you inherited your home from someone who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. H&r block free file 2011 Adjusted Basis While you own your home, various events may take place that can change the original basis of your home. H&r block free file 2011 These events can increase or decrease your original basis. H&r block free file 2011 The result is called adjusted basis. H&r block free file 2011 See Table 3, on this page, for a list of some of the items that can adjust your basis. H&r block free file 2011 Table 3. H&r block free file 2011 Adjusted Basis This table lists examples of some items that generally will increase or decrease your basis in your home. H&r block free file 2011 It is not intended to be all-inclusive. H&r block free file 2011 Increases to Basis Decreases to Basis Improvements: Putting an addition on your home Replacing an entire roof Paving your driveway Installing central air conditioning Rewiring your home Assessments for local improvements (see Assessments for local benefits , under What You Can and Cannot Deduct, earlier) Amounts spent to restore damaged property Insurance or other reimbursement for casualty losses Deductible casualty loss not covered by insurance Payments received for easement or right-of-way granted Depreciation allowed or allowable if home is used for business or rental purposes Value of subsidy for energy conservation measure excluded from income Improvements. H&r block free file 2011   An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. H&r block free file 2011 You must add the cost of any improvements to the basis of your home. H&r block free file 2011 You cannot deduct these costs. H&r block free file 2011   Improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, and paving your driveway. H&r block free file 2011 Amount added to basis. H&r block free file 2011   The amount you add to your basis for improvements is your actual cost. H&r block free file 2011 This includes all costs for material and labor, except your own labor, and all expenses related to the improvement. H&r block free file 2011 For example, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. H&r block free file 2011   You also must add to your basis state and local assessments for improvements such as streets and sidewalks if they increase the value of the property. H&r block free file 2011 These assessments are discussed earlier under Real Estate Taxes . H&r block free file 2011 Improvements no longer part of home. H&r block free file 2011    Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. H&r block free file 2011 Example. H&r block free file 2011 You put wall-to-wall carpeting in your home 15 years ago. H&r block free file 2011 Later, you replaced that carpeting with new wall-to-wall carpeting. H&r block free file 2011 The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. H&r block free file 2011 Repairs versus improvements. H&r block free file 2011   A repair keeps your home in an ordinary, efficient operating condition. H&r block free file 2011 It does not add to the value of your home or prolong its life. H&r block free file 2011 Repairs include repainting your home inside or outside, fixing your gutters or floors, fixing leaks or plastering, and replacing broken window panes. H&r block free file 2011 You cannot deduct repair costs and generally cannot add them to the basis of your home. H&r block free file 2011   However, repairs that are done as part of an extensive remodeling or restoration of your home are considered improvements. H&r block free file 2011 You add them to the basis of your home. H&r block free file 2011 Records to keep. H&r block free file 2011   You can use Table 4 (at the end of the publication) as a guide to help you keep track of improvements to your home. H&r block free file 2011 Also see Keeping Records , below. H&r block free file 2011 Energy conservation subsidy. H&r block free file 2011   If a public utility gives you (directly or indirectly) a subsidy for the purchase or installation of an energy conservation measure for your home, do not include the value of that subsidy in your income. H&r block free file 2011 You must reduce the basis of your home by that value. H&r block free file 2011   An energy conservation measure is an installation or modification primarily designed to reduce consumption of electricity or natural gas or to improve the management of energy demand. H&r block free file 2011 Keeping Records Keeping full and accurate records is vital to properly report your income and expenses, to support your deductions and credits, and to know the basis or adjusted basis of your home. H&r block free file 2011 These records include your purchase contract and settlement papers if you bought the property, or other objective evidence if you acquired it by gift, inheritance, or similar means. H&r block free file 2011 You should keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. H&r block free file 2011 In addition, you should keep track of any decreases to the basis such as those listed in Table 3, earlier. H&r block free file 2011 How to keep records. H&r block free file 2011   How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. H&r block free file 2011 How long to keep records. H&r block free file 2011   You must keep your records for as long as they are important for meeting any provision of the federal tax law. H&r block free file 2011   Keep records that support an item of income, a deduction, or a credit appearing on a return until the period of limitations for the return runs out. H&r block free file 2011 (A period of limitations is the period of time after which no legal action can be brought. H&r block free file 2011 ) For assessment of tax you owe, this is generally 3 years from the date you filed the return. H&r block free file 2011 For filing a claim for credit or refund, this is generally 3 years from the date you filed the original return, or 2 years from the date you paid the tax, whichever is later. H&r block free file 2011 Returns filed before the due date are treated as filed on the due date. H&r block free file 2011   You may need to keep records relating to the basis of property (discussed earlier) for longer than the period of limitations. H&r block free file 2011 Keep those records as long as they are important in figuring the basis of the original or replacement property. H&r block free file 2011 Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. H&r block free file 2011 Table 4. H&r block free file 2011 Record of Home Improvements Keep this for your records. H&r block free file 2011 Also, keep receipts or other proof of improvements. H&r block free file 2011 Remove from this record any improvements that are no longer part of your main home. H&r block free file 2011 For example, if you put wall-to-wall carpeting in your home and later replace it with new wall-to-wall carpeting, remove the cost of the first carpeting. H&r block free file 2011 (a) Type of Improvement (b) Date (c) Amount   (a) Type of Improvement (b) Date (c) Amount Additions:       Heating & Air  Conditioning:     Bedroom       Heating system     Bathroom       Central air conditioning     Deck       Furnace     Garage       Duct work     Porch       Central humidifier     Patio       Filtration system     Storage shed       Other     Fireplace       Electrical:     Other           Lawn & Grounds:       Lighting fixtures           Wiring upgrades     Landscaping       Other     Driveway       Plumbing:     Walkway           Fences       Water heater     Retaining wall       Soft water system     Sprinkler system       Filtration system     Swimming pool       Other     Exterior lighting       Insulation:     Other           Communications:       Attic           Walls     Satellite dish       Floors     Intercom       Pipes and duct work     Security system       Other     Other             Miscellaneous:       Interior  Improvements:     Storm windows and doors       Built-in appliances     Roof       Kitchen modernization     Central vacuum       Bathroom modernization     Other       Flooring             Wall-to-wall carpeting             Other     How To
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The H&r Block Free File 2011

H&r block free file 2011 Publication 947 - Main Content Table of Contents Practice Before the IRSWhat Is Practice Before the IRS? Who Can Practice Before the IRS? Who Cannot Practice Before the IRS? How Does an Individual Become Enrolled? What Are the Rules of Practice? Authorizing a RepresentativeWhat Is a Power of Attorney? When Is a Power of Attorney Required? When Is a Power of Attorney Not Required? How Do I Fill Out Form 2848? What Happens to the Power of Attorney When Filed? How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). H&r block free file 2011 Practice Before the IRS The Office of Professional Responsibility and the Return Preparer Office generally are responsible for administering and enforcing the regulations governing practice before the IRS. H&r block free file 2011 The Office of Professional Responsibility generally has responsibility for matters related to practitioner conduct and exclusive responsibility for discipline, including disciplinary proceedings and sanctions. H&r block free file 2011 The Return Preparer Office is responsible for matters related to the authority to practice, including acting on applications for enrollment and administering competency testing and continuing education. H&r block free file 2011 What Is Practice Before the IRS? Practice before the IRS covers all matters relating to any of the following. H&r block free file 2011 Communicating with the IRS for a taxpayer regarding the taxpayer's rights, privileges, or liabilities under laws and regulations administered by the IRS. H&r block free file 2011 Representing a taxpayer at conferences, hearings, or meetings with the IRS. H&r block free file 2011 Preparing and filing documents, including tax returns, with the IRS for a taxpayer. H&r block free file 2011 Providing a client with written advice which has a potential for tax avoidance or evasion. H&r block free file 2011 Furnishing information at the request of the IRS or appearing as a witness for the taxpayer is not practice before the IRS. H&r block free file 2011 Who Can Practice Before the IRS? The following individuals can practice before the IRS. H&r block free file 2011 However, any individual who is recognized to practice (a recognized representative) must be designated as the taxpayer's representative and file a written declaration with the IRS stating that he or she is authorized and qualified to represent a particular taxpayer. H&r block free file 2011 Form 2848 can be used for this purpose. H&r block free file 2011 Attorneys. H&r block free file 2011   Any attorney who is not currently under suspension or disbarment from practice before the IRS and who is a member in good standing of the bar of the highest court of any state, possession, territory, commonwealth, or the District of Columbia may practice before the IRS. H&r block free file 2011 Certified public accountants (CPAs). H&r block free file 2011   Any CPA who is not currently under suspension or disbarment from practice before the IRS and who is duly qualified to practice as a CPA in any state, possession, territory, commonwealth, or the District of Columbia may practice before the IRS. H&r block free file 2011 Enrolled agents. H&r block free file 2011   Any enrolled agent in active status who is not currently under suspension or disbarment from practice before the IRS may practice before the IRS. H&r block free file 2011 Enrolled retirement plan agents. H&r block free file 2011   Any enrolled retirement plan agent in active status who is not currently under suspension or disbarment from practice before the IRS may practice before the IRS. H&r block free file 2011 The practice of enrolled retirement plan agents is limited to certain Internal Revenue Code sections that relate to their area of expertise, principally those sections governing employee retirement plans. H&r block free file 2011 Enrolled actuaries. H&r block free file 2011   Any individual who is enrolled as an actuary by the Joint Board for the Enrollment of Actuaries who is not currently under suspension or disbarment from practice before the IRS may practice before the IRS. H&r block free file 2011 The practice of enrolled actuaries is limited to certain Internal Revenue Code sections that relate to their area of expertise, principally those sections governing employee retirement plans. H&r block free file 2011 Student. H&r block free file 2011    Under certain circumstances, a student who is supervised by a practitioner may request permission to represent another person before the IRS. H&r block free file 2011 For more information, see Authorization for special appearances, later. H&r block free file 2011 Registered tax return preparers and unenrolled return preparers. H&r block free file 2011   A registered tax return preparer is an individual who has passed an IRS competency test and is authorized to prepare and sign tax returns as the preparer. H&r block free file 2011 An unenrolled return preparer is an individual other than an attorney, CPA, enrolled agent, enrolled retirement plan agent, or enrolled actuary who prepares and signs a taxpayer's return as the preparer, or who prepares a return but is not required (by the instructions to the return or regulations) to sign the return. H&r block free file 2011   Registered tax return preparers and unenrolled return preparers may only represent taxpayers before revenue agents, customer service representatives, or similar officers and employees of the Internal Revenue Service (including the Taxpayer Advocate Service) during an examination of the taxable year or period covered by the tax return they prepared and signed. H&r block free file 2011 Registered tax return preparers and unenrolled return preparers cannot represent taxpayers, regardless of the circumstances requiring representation, before appeals officers, revenue officers, counsel or similar officers or employees of the Internal Revenue Service or the Department of Treasury. H&r block free file 2011 Registered tax return preparers and unenrolled return preparers cannot execute closing agreements, extend the statutory period for tax assessments or collection of tax, execute waivers, execute claims for refund, or sign any document on behalf of a taxpayer. H&r block free file 2011   If the unenrolled return preparer does not meet the requirements for limited representation, you may file Form 8821 to allow the preparer to inspect your tax information and receive copies of notices sent to you by the IRS. H&r block free file 2011 See Form 8821. H&r block free file 2011 Practice denied. H&r block free file 2011   Any individual engaged in limited practice before the IRS who is involved in disreputable conduct is subject to disciplinary action. H&r block free file 2011 Disreputable conduct includes, but is not limited to, the list of items under Incompetence and Disreputable Conduct shown later under What Are the Rules of Practice. H&r block free file 2011 Other individuals who may serve as representatives. H&r block free file 2011   Because of their special relationship with a taxpayer, the following individuals can represent the specified taxpayers before the IRS, provided they present satisfactory identification and, except in the case of an individual described in (1) below, proof of authority to represent the taxpayer. H&r block free file 2011 An individual. H&r block free file 2011 An individual can represent himself or herself before the IRS and does not have to file a written declaration of qualification and authority. H&r block free file 2011 A family member. H&r block free file 2011 An individual can represent members of his or her immediate family. H&r block free file 2011 Immediate family includes a spouse, child, parent, brother, or sister of the individual. H&r block free file 2011 An officer. H&r block free file 2011 A bona fide officer of a corporation (including a parent, subsidiary, or other affiliated corporation), association, or organized group can represent the corporation, association, or organized group. H&r block free file 2011 An officer of a governmental unit, agency, or authority, in the course of his or her official duties, can represent the organization before the IRS. H&r block free file 2011 A partner. H&r block free file 2011 A general partner may represent the partnership before the IRS. H&r block free file 2011 An employee. H&r block free file 2011 A regular full-time employee can represent his or her employer. H&r block free file 2011 An employer can be, but is not limited to, an individual, partnership, corporation (including a parent, subsidiary, or other affiliated corporation), association, trust, receivership, guardianship, estate, organized group, governmental unit, agency, or authority. H&r block free file 2011 A fiduciary. H&r block free file 2011 A fiduciary (trustee, executor, personal representative, administrator, receiver, or guardian) stands in the position of a taxpayer and acts as the taxpayer, not as a representative. H&r block free file 2011 See Fiduciary under When Is a Power of Attorney Not Required, later. H&r block free file 2011 Representation Outside the United States Any individual may represent an individual or entity, who is outside the United States, before personnel of the IRS when such representation occurs outside the United States. H&r block free file 2011 See section 10. H&r block free file 2011 7(c)(1)(vii) of Circular 230. H&r block free file 2011 Authorization for Special Appearances The Commissioner of Internal Revenue, or delegate, can authorize an individual who is not otherwise eligible to practice before the IRS to represent another person for a particular matter. H&r block free file 2011 The prospective representative must request this authorization in writing from the Office of Professional Responsibility. H&r block free file 2011 However, it is granted only when extremely compelling circumstances exist. H&r block free file 2011 If granted, the Commissioner, or delegate, will issue a letter that details the conditions related to the appearance and the particular tax matter for which the authorization is granted. H&r block free file 2011 The authorization letter should not be confused with a letter from an IRS center advising an individual that he or she has been assigned a Centralized Authorization File (CAF) number. H&r block free file 2011 The issuance of a CAF number does not indicate that an individual is either recognized or authorized to practice before the IRS. H&r block free file 2011 It merely confirms that a centralized file for authorizations has been established for the individual under that number. H&r block free file 2011 Students in LITCs and the STCP. H&r block free file 2011   A student who works in a Low Income Taxpayer Clinic (LITC) or Student Tax Clinic Program (STCP) who is supervised by a practitioner may request permission to represent another person before the IRS. H&r block free file 2011 Authorization requests must be made to the Office of Professional Responsibility. H&r block free file 2011 If granted, a letter authorizing the student's special appearance and detailing any conditions related to the appearance will be issued. H&r block free file 2011 Students receiving an authorization letter generally can represent taxpayers before any IRS function or office subject to any conditions in the authorization letter. H&r block free file 2011 If you intend to have a student represent you, review the authorization letter and ask your student, your student's supervisor, or the Office of Professional Responsibility if you have questions about the terms of the authorization. H&r block free file 2011 Who Cannot Practice Before the IRS? In general, individuals who are not eligible or who have lost the privilege as a result of certain actions cannot practice before the IRS. H&r block free file 2011 If an individual loses eligibility to practice, the IRS will not recognize a power of attorney that names the individual as a representative. H&r block free file 2011 Corporations, associations, partnerships, and other persons that are not individuals. H&r block free file 2011   These organizations (or persons) are not eligible to practice before the IRS. H&r block free file 2011 Loss of Eligibility Generally, individuals lose their eligibility to practice before the IRS in the following ways. H&r block free file 2011 Not meeting the requirements for renewal of enrollment (such as continuing professional education). H&r block free file 2011 Requesting to be placed in inactive retirement status. H&r block free file 2011 Being suspended or disbarred by the Office of Professional Responsibility for violating the regulations governing practice before the IRS. H&r block free file 2011 Failure to meet requirements. H&r block free file 2011   Individuals who fail to comply with the requirements for eligibility for renewal of enrollment will be notified by the IRS. H&r block free file 2011 The notice will explain the reason for noncompliance and provide the individual with an opportunity to furnish information for reconsideration. H&r block free file 2011 The individual has 60 days from the date of the notice to respond. H&r block free file 2011 Inactive roster. H&r block free file 2011   An individual will be placed on the roster of inactive individuals for a period of three years, if he or she: Fails to respond timely to the notice of noncompliance with the renewal requirements, Fails to file timely the application for renewal, or Does not satisfy the requirements of eligibility for renewal. H&r block free file 2011 The individual must file an application for renewal and satisfy all requirements for renewal after being placed in inactive status. H&r block free file 2011 Otherwise, at the conclusion of the next renewal cycle, he or she will be removed from the roster and the enrollment or registration terminated. H&r block free file 2011 Inactive retirement status. H&r block free file 2011   Individuals who request to be placed in an inactive retirement status will be ineligible to practice before the IRS. H&r block free file 2011 They must continue to adhere to all renewal requirements. H&r block free file 2011 They can be reinstated to an active enrollment status by filing an application for renewal and providing evidence that they have completed the required continuing professional education hours for the enrollment cycle or registration year. H&r block free file 2011 Suspension and disbarment. H&r block free file 2011   Individuals authorized to practice before the IRS are subject to disciplinary proceedings and may be suspended or disbarred for violating any regulation governing practice before the IRS. H&r block free file 2011 This includes engaging in acts of disreputable conduct. H&r block free file 2011 For more information, see Incompetence and Disreputable Conduct under What are the Rules of Practice, later. H&r block free file 2011   Practitioners who are suspended in a disciplinary proceeding are not allowed to practice before the IRS during the period of suspension. H&r block free file 2011 See What Is Practice Before the IRS, earlier. H&r block free file 2011   Practitioners who are disbarred in a disciplinary proceeding are not allowed to practice before the IRS. H&r block free file 2011 However, a practitioner can seek reinstatement from the Office of Professional Responsibility five years after disbarment. H&r block free file 2011   If the practitioner seeks reinstatement, he or she may not practice before the IRS until the Office of Professional Responsibility authorizes reinstatement. H&r block free file 2011 The Office of Professional Responsibility may reinstate the practitioner if it is determined that: The practitioner's future conduct is not likely to be in violation of the regulations, and Granting the reinstatement would not be contrary to the public interest. H&r block free file 2011 How Does an Individual Become Enrolled? The Return Preparer Office can grant enrollment to practice before the IRS to an applicant who demonstrates special competence in tax matters by passing a written examination administered by the IRS. H&r block free file 2011 Enrollment also can be granted to an applicant who qualifies because of past service and technical experience in the IRS. H&r block free file 2011 In either case, certain application forms, discussed next, must be filed. H&r block free file 2011 Additionally, an applicant must not have engaged in any conduct that would justify suspension or disbarment from practice before the IRS. H&r block free file 2011 See Incompetence and Disreputable Conduct, later. H&r block free file 2011 Form 2587. H&r block free file 2011   Applicants can apply to take the special enrollment examination by filing Form 2587, Application for Special Enrollment Examination. H&r block free file 2011 Form 2587 can be filed online, by mail, or by fax. H&r block free file 2011 For more information, see instructions and fees listed on the form. H&r block free file 2011 To get Form 2587, see How To Get Tax Help, later. H&r block free file 2011 Form 23 and Form 23-EP. H&r block free file 2011   Individuals who have passed the examination or are applying on the basis of past service and technical experience with the IRS can apply for enrollment by filing Form 23, Application for Enrollment to Practice Before the Internal Revenue Service, or Form 23-EP, Application for Enrollment to Practice Before the Internal Revenue Service as an Enrolled Retirement Plan Agent. H&r block free file 2011 The application must include a check or money order in the amount of the fee shown on Form 23 or Form 23-EP. H&r block free file 2011 Alternatively, payment may be made electronically pursuant to instructions on the forms. H&r block free file 2011 To get Form 23 or Form 23-EP, see How To Get Tax Help, later. H&r block free file 2011 Form 5434. H&r block free file 2011   An individual may apply as an enrolled actuary on the basis of past employment with the IRS and technical experience by filing Form 5434, Application for Enrollment, with the Joint Board for the Enrollment of Actuaries. H&r block free file 2011 The application must include a check or money order in the amount of the fee shown on Form 5434. H&r block free file 2011 To get Form 5434, see How To Get Tax Help, later. H&r block free file 2011 Period of enrollment. H&r block free file 2011   An enrollment card will be issued to each individual whose enrollment application is approved. H&r block free file 2011 The individual is enrolled until the expiration date shown on the enrollment card or certificate. H&r block free file 2011 To continue practicing beyond the expiration date, the individual must request renewal of the enrollment by filing Form 8554, Application for Renewal of Enrollment to Practice Before the Internal Revenue Service, or Form 8554-EP, Application for Renewal of Enrollment to Practice Before the Internal Revenue Service as an Enrolled Retirement Plan Agent (ERPA). H&r block free file 2011 What Are the Rules of Practice? The rules governing practice before the IRS are published in the Code of Federal Regulations at 31 C. H&r block free file 2011 F. H&r block free file 2011 R. H&r block free file 2011 part 10 and reprinted in Treasury Department Circular No. H&r block free file 2011 230 (Circular 230). H&r block free file 2011 An attorney, CPA, enrolled agent, enrolled retirement plan agent, registered tax return preparer, or enrolled actuary authorized to practice before the IRS (referred to hereafter as a practitioner) has the duty to perform certain acts and is restricted from performing other acts. H&r block free file 2011 In addition, a practitioner cannot engage in disreputable conduct (discussed later). H&r block free file 2011 Any practitioner who does not comply with the rules of practice or engages in disreputable conduct is subject to disciplinary action. H&r block free file 2011 Also, unenrolled preparers must comply with the rules of practice and conduct to exercise the privilege of limited practice before the IRS. H&r block free file 2011 See Publication 470 for a discussion of the special rules for limited practice by unenrolled preparers. H&r block free file 2011 Duties Practitioners must promptly submit records or information requested by officers or employees of the IRS, except when the practitioner believes on reasonable belief and good faith that the information is privileged. H&r block free file 2011 Communications with respect to tax advice between a federally authorized tax practitioner and a taxpayer generally are confidential to the same extent that communication would be privileged if it were between a taxpayer and an attorney if the advice relates to: Noncriminal tax matters before the IRS, or Noncriminal tax proceedings brought in federal court by or against the United States. H&r block free file 2011 Communications regarding corporate tax shelters. H&r block free file 2011   This protection of tax advice communications does not apply to any written communications between a federally authorized tax practitioner and any person, including a director, shareholder, officer, employee, agent, or representative of a corporation if the communication involves the promotion of the direct or indirect participation of the corporation in any tax shelter. H&r block free file 2011 Duty to advise. H&r block free file 2011   A practitioner who knows that his or her client has not complied with the revenue laws or has made an error or omission in any return, document, affidavit, or other required paper, has the responsibility to advise the client promptly of the noncompliance, error, or omission, and the consequences of the noncompliance, error, or omission. H&r block free file 2011 Due diligence. H&r block free file 2011   A practitioner must exercise due diligence when performing the following duties. H&r block free file 2011 Preparing or assisting in the preparing, approving, and filing of returns, documents, affidavits, and other papers relating to IRS matters. H&r block free file 2011 Determining the correctness of oral or written representations made by him or her to the Department of the Treasury. H&r block free file 2011 Determining the correctness of oral or written representations made by him or her to clients with reference to any matter administered by the IRS. H&r block free file 2011 Restrictions Practitioners are restricted from engaging in certain practices. H&r block free file 2011 The following paragraphs discuss some of these restricted practices. H&r block free file 2011 Delays. H&r block free file 2011   A practitioner must not unreasonably delay the prompt disposition of any matter before the IRS. H&r block free file 2011 Assistance from disbarred or suspended persons and former IRS employees. H&r block free file 2011   A practitioner must not knowingly, directly or indirectly, do the following. H&r block free file 2011 Accept assistance from, or assist, any person who is under disbarment or suspension from practice before the IRS if the assistance relates to matters considered practice before the IRS. H&r block free file 2011 Accept assistance from any former government employee where provisions of Circular 230 or any federal law would be violated. H&r block free file 2011 Performance as a notary. H&r block free file 2011   A practitioner who is a notary public and is employed as counsel, attorney, or agent in a matter before the IRS, or has a material interest in the matter, cannot engage in any notary activities related to that matter. H&r block free file 2011 Negotiations of taxpayer refund checks. H&r block free file 2011   Practitioners must not endorse or otherwise negotiate (cash) any refund check (including directing or accepting payment by any means, electronic or otherwise, in an account owned or controlled by the practitioner or any firm or other entity with whom the practitioner is associated) issued to the taxpayer. H&r block free file 2011 Incompetence and Disreputable Conduct Any practitioner or unenrolled return preparer may be disbarred or suspended from practice before the IRS, or censured, for incompetence or disreputable conduct. H&r block free file 2011 The following list contains examples of conduct that is considered disreputable. H&r block free file 2011 Being convicted of any criminal offense under the revenue laws or of any offense involving dishonesty or breach of trust. H&r block free file 2011 Knowingly giving false or misleading information in connection with federal tax matters, or participating in such activity. H&r block free file 2011 Soliciting employment by prohibited means as discussed in section 10. H&r block free file 2011 30 of Circular 230. H&r block free file 2011 Willfully failing to file a federal tax return, evading or attempting to evade any federal tax or payment, or participating in such actions. H&r block free file 2011 Misappropriating, or failing to properly and promptly remit, funds received from clients for payment of taxes or other obligations due the United States. H&r block free file 2011 Directly or indirectly attempting to influence the official action of IRS employees by the use of threats, false accusations, duress, or coercion, or by offering gifts, favors, or any special inducements. H&r block free file 2011 Being disbarred or suspended from practice as an attorney, CPA, public accountant, or actuary, by the District of Columbia or any state, possession, territory, commonwealth, or any federal court, or any federal agency, body, or board. H&r block free file 2011 Knowingly aiding and abetting another person to practice before the IRS during a period of suspension, disbarment, or ineligibility of that other person. H&r block free file 2011 Using abusive language, making false accusations and statements knowing them to be false, circulating or publishing malicious or libelous matter, or engaging in any contemptuous conduct in connection with practice before the IRS. H&r block free file 2011 Giving a false opinion knowingly, recklessly, or through gross incompetence; or following a pattern of providing incompetent opinions in questions arising under the federal tax laws. H&r block free file 2011 Censure, Disbarments, and Suspensions The Office of Professional Responsibility may censure or institute proceedings to censure, suspend or disbar any attorney, CPA, or enrolled agent who has violated Circular 230. H&r block free file 2011 A practitioner will be given the opportunity to demonstrate compliance with the rules before any disciplinary action is taken. H&r block free file 2011 Authorizing a Representative You may either represent yourself, or you may authorize an individual to represent you before the IRS. H&r block free file 2011 If you chose to have someone represent you, your representative must be a person eligible to practice before the IRS. H&r block free file 2011 See Who Can Practice Before the IRS, earlier. H&r block free file 2011 What Is a Power of Attorney? A power of attorney is your written authorization for an individual to act on your behalf. H&r block free file 2011 If the authorization is not limited, the individual generally can perform all acts that you can perform. H&r block free file 2011 The authority granted to a registered tax return preparer or an unenrolled preparer is limited. H&r block free file 2011 For information on the limits regarding registered tax return preparers, see Circular 230 §10. H&r block free file 2011 3(f). H&r block free file 2011 For information on the limits regarding unenrolled preparers, see Publication 470. H&r block free file 2011 Acts performed. H&r block free file 2011   Any representative, other than a registered tax return preparer or an unenrolled return preparer, can usually perform the following acts. H&r block free file 2011 Represent you before any office of the IRS. H&r block free file 2011 Sign an offer or a waiver of restriction on assessment or collection of a tax deficiency, or a waiver of notice of disallowance of claim for credit or refund. H&r block free file 2011 Sign a consent to extend the statutory time period for assessment or collection of a tax. H&r block free file 2011 Sign a closing agreement. H&r block free file 2011 Signing your return. H&r block free file 2011   The representative named under a power of attorney is not permitted to sign your income tax return unless: The signature is permitted under the Internal Revenue Code and the related regulations (see Regulations section 1. H&r block free file 2011 6012-1(a)(5)). H&r block free file 2011 You specifically authorize this in your power of attorney. H&r block free file 2011 For example, the regulation permits a representative to sign your return if you are unable to sign the return due to: Disease or injury. H&r block free file 2011 Continuous absence from the United States (including Puerto Rico) for a period of at least 60 days prior to the date required by law for filing the return. H&r block free file 2011 Other good cause if specific permission is requested of and granted by the IRS. H&r block free file 2011 When a return is signed by a representative, it must be accompanied by a power of attorney (or copy) authorizing the representative to sign the return. H&r block free file 2011 For more information, see the Form 2848 instructions. H&r block free file 2011 Limitation on substitution or delegation. H&r block free file 2011   A recognized representative can substitute or delegate authority under the power of attorney to another recognized representative only if the act is specifically authorized by you on the power of attorney. H&r block free file 2011   After a substitution has been made, only the newly recognized representative will be recognized as the taxpayer's representative. H&r block free file 2011 If a delegation of power has been made, both the original and the delegated representative will be recognized by the IRS to represent you. H&r block free file 2011 Disclosure of returns to a third party. H&r block free file 2011   Your representative cannot execute consents that will allow the IRS to disclose tax return or return information to a third party unless you specifically delegate this authority to your representative on line 5 of Form 2848. H&r block free file 2011 Incapacity or incompetency. H&r block free file 2011   A power of attorney is generally terminated if you become incapacitated or incompetent. H&r block free file 2011   The power of attorney can continue, however, in the case of your incapacity or incompetency if you authorize this on line 5 “Other” of the Form 2848 and if your non-IRS durable power of attorney meets all the requirements for acceptance by the IRS. H&r block free file 2011 See Non-IRS powers of attorney, later. H&r block free file 2011 When Is a Power of Attorney Required? Submit a power of attorney when you want to authorize an individual to represent you before the IRS, whether or not the representative performs any of the other acts cited earlier under What Is a Power of Attorney. H&r block free file 2011 A power of attorney is most often required when you want to authorize another individual to perform at least one of the following acts on your behalf. H&r block free file 2011 Represent you at a meeting with the IRS. H&r block free file 2011 Prepare and file a written response to the IRS. H&r block free file 2011 Form Required Use Form 2848 to appoint a recognized representative to act on your behalf before the IRS. H&r block free file 2011 Individuals recognized to practice before the IRS are listed under Part II, Declaration of Representative, of Form 2848. H&r block free file 2011 Your representative must complete that part of the form. H&r block free file 2011 Non-IRS powers of attorney. H&r block free file 2011   The IRS will accept a non-IRS power of attorney, but a completed Form 2848 must be attached in order for the power of attorney to be entered on the Centralized Authorization File (CAF) system. H&r block free file 2011 For more information, see Processing a non-IRS power of attorney, later. H&r block free file 2011   If you want to use a power of attorney document other than Form 2848, it must contain the following information. H&r block free file 2011 Your name and mailing address. H&r block free file 2011 Your social security number and/or employer identification number. H&r block free file 2011 Your employee plan number, if applicable. H&r block free file 2011 The name and mailing address of your representative(s). H&r block free file 2011 The types of tax involved. H&r block free file 2011 The federal tax form number. H&r block free file 2011 The specific year(s) or period(s) involved. H&r block free file 2011 For estate tax matters, the decedent's date of death. H&r block free file 2011 A clear expression of your intention concerning the scope of authority granted to your representative(s). H&r block free file 2011 Your signature and date. H&r block free file 2011 You also must attach to the non-IRS power of attorney a signed and dated statement made by your representative. H&r block free file 2011 This statement, which is referred to as the Declaration of Representative, is contained in Part II of Form 2848. H&r block free file 2011 The statement should read: I am not currently under suspension or disbarment from practice before the Internal Revenue Service or other practice of my profession by any other authority, I am aware of the regulations contained in Circular 230, I am authorized to represent the taxpayer(s) identified in the power of attorney, and I am an individual described in 26 CFR 601. H&r block free file 2011 502(b). H&r block free file 2011 Required information missing. H&r block free file 2011   The IRS will not accept your non-IRS power of attorney if it does not contain all the information listed above. H&r block free file 2011 You can sign and submit a completed Form 2848 or a new non-IRS power of attorney that contains all the information. H&r block free file 2011 If you cannot sign an acceptable replacement document, your attorney-in-fact may be able to perfect (make acceptable to the IRS) your non-IRS power of attorney by using the procedure described next. H&r block free file 2011 Procedure for perfecting a non-IRS power of attorney. H&r block free file 2011   Under the following conditions, the attorney-in-fact named in your non-IRS power of attorney can sign a Form 2848 on your behalf. H&r block free file 2011 The original non-IRS power of attorney grants authority to handle federal tax matters (for example, general authority to perform any acts). H&r block free file 2011 The attorney-in-fact attaches a statement (signed under penalty of perjury) to the Form 2848 stating that the original non-IRS power of attorney is valid under the laws of the governing jurisdiction. H&r block free file 2011 Example. H&r block free file 2011 John Elm, a taxpayer, signs a non-IRS durable power of attorney that names his neighbor and CPA, Ed Larch, as his attorney-in-fact. H&r block free file 2011 The power of attorney grants Ed the authority to perform any and all acts on John's behalf. H&r block free file 2011 However, it does not list specific tax-related information such as types of tax or tax form numbers. H&r block free file 2011 Shortly after John signs the power of attorney, he is declared incompetent. H&r block free file 2011 Later, a federal tax matter arises concerning a prior year return filed by John. H&r block free file 2011 Ed attempts to represent John before the IRS but is rejected because the durable power of attorney does not contain required information. H&r block free file 2011 If Ed attaches a statement (signed under the penalty of perjury) that the durable power of attorney is valid under the laws of the governing jurisdiction, he can sign a completed Form 2848 and submit it on John's behalf. H&r block free file 2011 If Ed can practice before the IRS (see Who Can Practice Before the IRS, earlier), he can name himself as representative on Form 2848. H&r block free file 2011 Otherwise, he must name another individual who can practice before the IRS. H&r block free file 2011 Processing a non-IRS power of attorney. H&r block free file 2011   The IRS has a centralized computer database system called the CAF system. H&r block free file 2011 This system contains information on the authority of taxpayer representatives. H&r block free file 2011 Generally, when you submit a power of attorney document to the IRS, it is processed for inclusion on the CAF system. H&r block free file 2011 Entry of your power of attorney on the CAF system enables IRS personnel, who do not have a copy of your power of attorney, to verify the authority of your representative by accessing the CAF. H&r block free file 2011 It also enables the IRS to automatically send copies of notices and other IRS communications to your representative if you specify that your representative should receive those communications. H&r block free file 2011   You can have your non-IRS power of attorney entered on the CAF system by attaching it to a completed Form 2848 and submitting it to the IRS. H&r block free file 2011 Your signature is not required; however, your attorney-in-fact must sign the Declaration of Representative (see Part II of Form 2848). H&r block free file 2011 Preparation of Form — Helpful Hints The preparation of Form 2848 is illustrated by an example, later under How Do I Fill Out Form 2848. H&r block free file 2011 However, the following will also assist you in preparing the form. H&r block free file 2011 Line-by-line hints. H&r block free file 2011   The following hints are summaries of some of the line-by-line instructions for Form 2848. H&r block free file 2011 Line 1—Taxpayer information. H&r block free file 2011   If a joint return is involved, the husband and wife each file a separate Form 2848 if they both want to be represented. H&r block free file 2011 If only one spouse wants to be represented in the matter, that spouse files a Form 2848. H&r block free file 2011 Line 2—Representative(s). H&r block free file 2011   Only individuals may be named as representatives. H&r block free file 2011 If your representative has not been assigned a CAF number, enter “None” on that line and the IRS will issue one to your representative. H&r block free file 2011 If the representative's address or phone number has changed since the CAF number was issued, you should check the appropriate box. H&r block free file 2011 Enter your representative's fax number if available. H&r block free file 2011   If you want to name more than three representatives, attach additional Form(s) 2848. H&r block free file 2011 The IRS can send copies of notices and communications to two of your representatives. H&r block free file 2011 You must, however, check the boxes on line 2 of the Form 2848 if you want the IRS to routinely send copies of notices and communications to your representatives. H&r block free file 2011 If you do not check the boxes, your representatives will not routinely receive copies of notices and communications. H&r block free file 2011 Line 3—Tax matters. H&r block free file 2011   You may list any tax years or periods that have already ended as of the date you sign the power of attorney. H&r block free file 2011 However, you may include on a power of attorney only future tax periods that end no later than 3 years after the date the power of attorney is received by the IRS. H&r block free file 2011 The 3 future periods are determined starting after December 31 of the year the power of attorney is received by the IRS. H&r block free file 2011 However, avoid general references such as “all years” or “all taxes. H&r block free file 2011 ” Any Form 2848 with general references will be returned. H&r block free file 2011 Line 4—Specific use not recorded on Centralized Authorization File (CAF). H&r block free file 2011   Certain matters cannot be recorded on the CAF system. H&r block free file 2011 Examples of such matters include, but are not limited to, the following. H&r block free file 2011 Requests for a private letter ruling or technical advice. H&r block free file 2011 Applications for an employer identification number (EIN). H&r block free file 2011 Claims filed on Form 843, Claim for Refund and Request for Abatement. H&r block free file 2011 Corporate dissolutions. H&r block free file 2011 Requests for change of accounting method. H&r block free file 2011 Requests for change of accounting period. H&r block free file 2011 Applications for recognition of exemption under sections 501(c)(3), 501(a), or 521 (Forms 1023, 1034, or 1028). H&r block free file 2011 Request for a determination of the qualified status of an employee benefit plan (Forms 5300, 5307, or 5310). H&r block free file 2011 Application for Award for Original Information under section 7623. H&r block free file 2011 Voluntary submissions under the Employee Plans Compliance Resolution System (EPCRS). H&r block free file 2011 Freedom of Information Act requests. H&r block free file 2011 If the tax matter described on line 3 of Form 2848 concerns one of these matters specifically, check the box on line 4. H&r block free file 2011 If this box is checked, the representative should mail or fax the power of attorney to the IRS office handling the matter. H&r block free file 2011 Otherwise, the representative should bring a copy of the power of attorney to each meeting with the IRS. H&r block free file 2011 Where To File a Power of Attorney Generally, you can mail or fax a paper Form 2848 directly to the IRS. H&r block free file 2011 To determine where you should file Form 2848, see Where To File in the instructions for Form 2848. H&r block free file 2011 If Form 2848 is for a specific use, mail or fax it to the office handling that matter. H&r block free file 2011 For more information on specific use, see the Instructions for Form 2848, line 4. H&r block free file 2011 FAX copies. H&r block free file 2011   The IRS will accept a copy of a power of attorney that is submitted by facsimile transmission (fax). H&r block free file 2011 If you choose to file a power of attorney by fax, be sure the appropriate IRS office is equipped to accept this type of transmission. H&r block free file 2011 Your representative may be able to file Form 2848 electronically via the IRS website. H&r block free file 2011 For more information, your representative can go to www. H&r block free file 2011 irs. H&r block free file 2011 gov and under the Tax Professionals tab, click on e-services–Online Tools for Tax Professionals. H&r block free file 2011 If you complete Form 2848 for electronic signature authorization, do not file Form 2848 with the IRS. H&r block free file 2011 Instead, give it to your representative, who will retain the document. H&r block free file 2011 Updating a power of attorney. H&r block free file 2011   Submit any update or modification to an existing power of attorney in writing. H&r block free file 2011 Your signature (or the signature of the individual(s) authorized to sign on your behalf) is required. H&r block free file 2011 Do this by sending the updated Form 2848 or non-IRS power of attorney to the IRS office(s) where you previously sent the original(s), including the center where the related return was, or will be filed. H&r block free file 2011   A recognized representative may substitute or delegate authority if you specifically authorize your representative to substitute or delegate representation in the original power of attorney. H&r block free file 2011 To make a substitution or delegation, the representative must file the following items with the IRS office(s) where the power of attorney was filed. H&r block free file 2011 A written notice of substitution or delegation signed by the recognized representative. H&r block free file 2011 A written declaration of representative made by the new representative. H&r block free file 2011 A copy of the power of attorney that specifically authorizes the substitution or delegation. H&r block free file 2011 Retention/Revocation of Prior Power(s) of Attorney A newly filed power of attorney concerning the same matter will revoke a previously filed power of attorney. H&r block free file 2011 However, the new power of attorney will not revoke the prior power of attorney if it specifically states it does not revoke such prior power of attorney and either of the following are attached to the new power of attorney. H&r block free file 2011 A copy of the unrevoked prior power of attorney, or A statement signed by the taxpayer listing the name and address of each representative authorized under the prior unrevoked power of attorney. H&r block free file 2011 Note. H&r block free file 2011 The filing of Form 2848 will not revoke any  Form 8821 that is in effect. H&r block free file 2011 Revocation of Power of Attorney/Withdrawal of Representative If you want to revoke an existing power of attorney and do not want to name a new representative, or if a representative wants to withdraw from representation, mail or fax a copy of the previously executed power of attorney to the IRS, or if the power of attorney is for a specific matter, to the IRS office handling the matter. H&r block free file 2011 If the taxpayer is revoking the power of attorney, the taxpayer must write “REVOKE” across the top of the first page with a current signature and date below this annotation. H&r block free file 2011 If the representative is withdrawing from the representation, the representative must write “WITHDRAW” across the top of the first page with a current signature and date below this annotation. H&r block free file 2011 If you do not have a copy of the power of attorney you want to revoke or withdraw, send a statement to the IRS. H&r block free file 2011 The statement of revocation or withdrawal must indicate that the authority of the power of attorney is revoked or withdrawn, list the matters and periods, and must be signed and dated by the taxpayer or representative as applicable. H&r block free file 2011 If the taxpayer is revoking, list the name and address of each recognized representative whose authority is revoked. H&r block free file 2011 When the taxpayer is completely revoking authority, the form should state “remove all years/periods” instead of listing the specific tax matter, years, or periods. H&r block free file 2011 If the representative is withdrawing, list the name, TIN, and address (if known) of the taxpayer. H&r block free file 2011 To revoke a specific use power of attorney, send the power of attorney or statement of revocation to the IRS office handling your case, using the above instructions. H&r block free file 2011 A power of attorney held by a student will be recorded on the CAF system for 130 days from the receipt date. H&r block free file 2011 If you are authorizing a student to represent you after that time, you will need to submit a current and valid Form 2848. H&r block free file 2011 When Is a Power of Attorney Not Required? A power of attorney is not required when the third party is not dealing with the IRS as your representative. H&r block free file 2011 The following situations do not require a power of attorney. H&r block free file 2011 Providing information to the IRS. H&r block free file 2011 Authorizing the disclosure of tax return information through Form 8821, Tax Information Authorization, or other written or oral disclosure consent. H&r block free file 2011 Allowing the IRS to discuss return information with a third party via the checkbox provided on a tax return or other document. H&r block free file 2011 Allowing a tax matters partner or person (TMP) to perform acts for the partnership. H&r block free file 2011 Allowing the IRS to discuss return information with a fiduciary. H&r block free file 2011 How Do I Fill Out Form 2848? The following example illustrates how to complete Form 2848. H&r block free file 2011 The two completed forms for this example are shown on the next pages. H&r block free file 2011 Example. H&r block free file 2011 Stan and Mary Doe have been notified that their joint tax returns (Forms 1040) for 2009, 2010, and 2011 are being examined. H&r block free file 2011 They have decided to appoint Jim Smith, an enrolled agent, to represent them in this matter and any future matters concerning these returns. H&r block free file 2011 Jim, who has prepared returns at the same location for years, already has a Centralized Authorization File (CAF) number assigned to him. H&r block free file 2011 Mary does not want Jim to sign any agreements on her behalf, but Stan is willing to have Jim do so. H&r block free file 2011 They want copies of all notices and written communications sent to Jim. H&r block free file 2011 This is the first time Stan and Mary have given power of attorney to anyone. H&r block free file 2011 They should each complete a Form 2848 as follows. H&r block free file 2011 Line 1—Taxpayer information. H&r block free file 2011   Stan and Mary must each file a separate Form 2848. H&r block free file 2011 On his separate Form 2848, Stan enters his name, street address, and social security number in the spaces provided. H&r block free file 2011 Mary does likewise on her separate Form 2848. H&r block free file 2011 Line 2—Representative(s). H&r block free file 2011   On their separate Forms 2848, Stan and Mary each enters the name and current address of their chosen representative, Jim Smith. H&r block free file 2011 Both Stan and Mary want Jim Smith to receive notices and communications concerning the matters identified in line 3, so on their separate Forms 2848, Stan and Mary each checks the box in the first column of line 2. H&r block free file 2011 They also enter Mr. H&r block free file 2011 Smith's CAF number, his telephone number, and his fax number. H&r block free file 2011 Mr. H&r block free file 2011 Smith's address, telephone number, and fax number have not changed since the IRS issued his CAF number, so Stan and Mary do not check the boxes in the second column. H&r block free file 2011 Line 3—Tax Matters. H&r block free file 2011   On their separate Forms 2848, Stan and Mary each enters “income” for the type of tax, “1040” for the form number, and “2009, 2010, and 2011” for the tax years. H&r block free file 2011 Line 4—Specific use not recorded on Centralized Authorization File (CAF). H&r block free file 2011   On their separate Forms 2848, Stan and Mary make no entry on this line because they do not want to restrict the use of their powers of attorney to a specific use that is not recorded on the CAF. H&r block free file 2011 See Preparation of Form — Helpful Hints, earlier. H&r block free file 2011 Line 5—Acts authorized. H&r block free file 2011   Mary wants to sign any agreement that reflects changes to her and Stan's joint 2009, 2010, and 2011 income tax liability, so she writes “Taxpayer must sign any agreement form” on line 5 of her Form 2848. H&r block free file 2011 Stan does not wish to restrict the authority of Jim Smith in this regard, so he leaves line 5 of his Form 2848 blank. H&r block free file 2011 If either Mary or Stan had chosen, they could have listed other restrictions on line 5 of their separate Forms 2848. H&r block free file 2011 Line 6—Retention/revocation of prior power(s) of attorney. H&r block free file 2011   Stan and Mary are each filing their first powers of attorney, so they make no entry on this line. H&r block free file 2011 However, if they had filed prior powers of attorney, the filing of this current power would revoke any earlier ones for the same tax matter(s) unless they checked the box on line 6 and attached a copy of the prior power of attorney that they wanted to remain in effect. H&r block free file 2011   If Mary later decides that she can handle the examination on her own, she can revoke her power of attorney even though Stan does not revoke his power of attorney. H&r block free file 2011 (See Revocation of Power of Attorney/Withdrawal of Representative, earlier, for the special rules that apply. H&r block free file 2011 ) Line 7—Signature of taxpayer. H&r block free file 2011   Stan and Mary each signs and dates his or her Form 2848. H&r block free file 2011 If a taxpayer does not sign, the IRS cannot accept the form. H&r block free file 2011 Part II—Declaration of Representative. H&r block free file 2011   Jim Smith must complete this part of Form 2848. H&r block free file 2011 If he does not sign this part, the IRS cannot accept the form. H&r block free file 2011 What Happens to the Power of Attorney When Filed? A power of attorney will be recognized after it is received, reviewed, and determined by the IRS to contain the required information. H&r block free file 2011 However, until a power of attorney is entered on the CAF system, IRS personnel may be unaware of the authority of the person you have named to represent you. H&r block free file 2011 Therefore, during this interim period, IRS personnel may request that you or your representative bring a copy to any meeting with the IRS. H&r block free file 2011 This image is too large to be displayed in the current screen. H&r block free file 2011 Please click the link to view the image. H&r block free file 2011 Filled-in Form 2848 - Page 1 This image is too large to be displayed in the current screen. H&r block free file 2011 Please click the link to view the image. H&r block free file 2011 Filled-in Form 2848 - Page 2 This image is too large to be displayed in the current screen. H&r block free file 2011 Please click the link to view the image. H&r block free file 2011 Filled-in Form 2848 - Page 1 This image is too large to be displayed in the current screen. H&r block free file 2011 Please click the link to view the image. H&r block free file 2011 Filled-in Form 2848 - Page 2 Processing and Handling How the power of attorney is processed and handled depends on whether it is a complete or incomplete document. H&r block free file 2011 Incomplete document. H&r block free file 2011   If Form 2848 is incomplete, the IRS will attempt to secure the missing information either by writing or telephoning you or your representative. H&r block free file 2011 For example, if your signature or signature date is missing, the IRS will contact you. H&r block free file 2011 If information concerning your representative is missing and information sufficient to make a contact (such as an address and/or a telephone number) is on the document, the IRS will try to contact your representative. H&r block free file 2011   In either case, the power of attorney is not considered valid until all required information is entered on the document. H&r block free file 2011 The individual(s) named as representative(s) will not be recognized to practice before the IRS, on your behalf, until the document is complete and accepted by the IRS. H&r block free file 2011 Complete document. H&r block free file 2011   If the power of attorney is complete and valid, the IRS will take action to recognize the representative. H&r block free file 2011 In most instances, this includes processing the document on the CAF system. H&r block free file 2011 Recording the data on the CAF system enables the IRS to direct copies of mailings to authorized representatives and to readily recognize the scope of authority granted. H&r block free file 2011 Documents not processed on CAF. H&r block free file 2011   Specific-use powers of attorney are not processed on the CAF system (see Preparation of Form – Helpful Hints, earlier). H&r block free file 2011 For example, a power of attorney that is a one-time or specific-issue grant of authority is not processed on the CAF system. H&r block free file 2011 These documents remain with the related case files. H&r block free file 2011 In this situation, you should check the box on line 4 of Form 2848. H&r block free file 2011 In these situations, the representative should bring a copy of the power of attorney to each meeting with the IRS. H&r block free file 2011 Dealing With the Representative After a valid power of attorney is filed, the IRS will recognize your representative. H&r block free file 2011 However, if it appears the representative is responsible for unreasonably delaying or hindering the prompt disposition of an IRS matter by failing to furnish, after repeated requests, nonprivileged information, the IRS can contact you directly. H&r block free file 2011 For example, in most instances in which a power of attorney is recognized, the IRS will contact the representative to set up appointments and to provide lists of required items. H&r block free file 2011 However, if the representative is unavailable, does not respond to repeated requests, and does not provide required items (other than items considered privileged), the IRS can bypass your representative and contact you directly. H&r block free file 2011 If a representative engages in conduct described above, the matter can be referred to the Office of Professional Responsibility for consideration of possible disciplinary action. H&r block free file 2011 Notices and other correspondence. H&r block free file 2011   If you have a recognized representative, you and the representative will routinely receive notices and other correspondence from the IRS (either the original or a copy) if you checked the box in the left column of line 2 of Form 2848. H&r block free file 2011 If the power of attorney is processed on the CAF system, the IRS will send your representative(s) a duplicate of all computer-generated correspondence that is sent to you. H&r block free file 2011 This includes notices and letters produced either at the Martinsburg Computing Center, or other IRS centers. H&r block free file 2011 The IRS employee handling the case is responsible for ensuring that the original and any requested copies of each manually-generated correspondence are sent to you and your representative(s) in accordance with your authorization. H&r block free file 2011 How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. H&r block free file 2011 By selecting the method that is best for you, you will have quick and easy access to tax help. H&r block free file 2011 Free help with your return. H&r block free file 2011   Free help in preparing your return is available nationwide from IRS-certified volunteers. H&r block free file 2011 The Volunteer Income Tax Assistance (VITA) program is designed to help low and moderate income taxpayers and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. H&r block free file 2011 Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. H&r block free file 2011 To find the nearest VITA or TCE site, visit IRS. H&r block free file 2011 gov or call 1-800-906-9887 or 1-800-829-1040. H&r block free file 2011   As part of the TCE program, AARP offers the Tax-Aide counseling program. H&r block free file 2011 To find the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP's website at www. H&r block free file 2011 aarp. H&r block free file 2011 org/money/taxaide. H&r block free file 2011   For more information on these programs, go to IRS. H&r block free file 2011 gov and enter keyword “VITA” in the upper right-hand corner. H&r block free file 2011 Internet. H&r block free file 2011 You can access the IRS website at IRS. H&r block free file 2011 gov 24 hours a day, 7 days a week to: E-file your return. H&r block free file 2011 Find out about commercial tax preparation and e-file services available free to eligible taxpayers. H&r block free file 2011 Check the status of your refund. H&r block free file 2011 Go to IRS. H&r block free file 2011 gov and click on Where's My Refund. H&r block free file 2011 Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. H&r block free file 2011 If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). H&r block free file 2011 Have your tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. H&r block free file 2011 Download forms, including talking tax forms, instructions, and publications. H&r block free file 2011 Order IRS products online. H&r block free file 2011 Research your tax questions online. H&r block free file 2011 Search publications online by topic or keyword. H&r block free file 2011 Use the online Internal Revenue Code, regulations, or other official guidance. H&r block free file 2011 View Internal Revenue Bulletins (IRBs) published in the last few years. H&r block free file 2011 Figure your withholding allowances using the withholding calculator online at www. H&r block free file 2011 irs. H&r block free file 2011 gov/individuals. H&r block free file 2011 Determine if Form 6251 must be filed by using our Alternative Minimum Tax (AMT) Assistant available online at www. H&r block free file 2011 irs. H&r block free file 2011 gov/individuals. H&r block free file 2011 Sign up to receive local and national tax news by email. H&r block free file 2011 Get information on starting and operating a small business. H&r block free file 2011 Phone. H&r block free file 2011 Many services are available by phone. H&r block free file 2011   Ordering forms, instructions, and publications. H&r block free file 2011 Call 1-800-TAX -FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions. H&r block free file 2011 You should receive your order within 10 days. H&r block free file 2011 Asking tax questions. H&r block free file 2011 Call the IRS with your tax questions at 1-800-829-1040. H&r block free file 2011 Solving problems. H&r block free file 2011 You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. H&r block free file 2011 An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. H&r block free file 2011 Call your local Taxpayer Assistance Center for an appointment. H&r block free file 2011 To find the number, go to www. H&r block free file 2011 irs. H&r block free file 2011 gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. H&r block free file 2011 TTY/TDD equipment. H&r block free file 2011 If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. H&r block free file 2011 TeleTax topics. H&r block free file 2011 Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. H&r block free file 2011 Refund information. H&r block free file 2011 To check the status of your refund, call 1-800-829-1954 or 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). H&r block free file 2011 Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. H&r block free file 2011 If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). H&r block free file 2011 Have your tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. H&r block free file 2011 If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. H&r block free file 2011 Other refund information. H&r block free file 2011 To check the status of a prior-year refund or amended return refund, call 1-800-829-1040. H&r block free file 2011 Evaluating the quality of our telephone services. H&r block free file 2011 To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. H&r block free file 2011 One method is for a second IRS representative to listen in on or record random telephone calls. H&r block free file 2011 Another is to ask some callers to complete a short survey at the end of the call. H&r block free file 2011 Walk-in. H&r block free file 2011 Many products and services are available on a walk-in basis. H&r block free file 2011   Products. H&r block free file 2011 You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. H&r block free file 2011 Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. H&r block free file 2011 Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. H&r block free file 2011 Services. H&r block free file 2011 You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. H&r block free file 2011 An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. H&r block free file 2011 If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. H&r block free file 2011 No appointment is necessary—just walk in. H&r block free file 2011 If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. H&r block free file 2011 A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. H&r block free file 2011 If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. H&r block free file 2011 All other issues will be handled without an appointment. H&r block free file 2011 To find the number of your local office, go to  www. H&r block free file 2011 irs. H&r block free file 2011 gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. H&r block free file 2011 Mail. H&r block free file 2011 You can send your order for forms, instructions, and publications to the address below. H&r block free file 2011 You should receive a response within 10 days after your request is received. H&r block free file 2011  Internal Revenue Service 1201 N. H&r block free file 2011 Mitsubishi Motorway Bloomington, IL 61705-6613 Taxpayer Advocate Service. H&r block free file 2011   The Taxpayer Advocate Service (TAS) is your voice at the IRS. H&r block free file 2011 Our job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights. H&r block free file 2011 We offer free help to guide you through the often-confusing process of resolving tax problems that you haven’t been able to solve on your own. H&r block free file 2011 Remember, the worst thing you can do is nothing at all. H&r block free file 2011   TAS can help if you can’t resolve your problem with the IRS and: Your problem is causing financial difficulties for you, your family, or your business. H&r block free file 2011 You face (or your business is facing) an immediate threat of adverse action. H&r block free file 2011 You have tried repeatedly to contact the IRS but no one has responded, or the IRS has not responded to you by the date promised. H&r block free file 2011   If you qualify for our help, we’ll do everything we can to get your problem resolved. H&r block free file 2011 You will be assigned to one advocate who will be with you at every turn. H&r block free file 2011 We have offices in every state, the District of Columbia, and Puerto Rico. H&r block free file 2011 Although TAS is independent within the IRS, our advocates know how to work with the IRS to get your problems resolved. H&r block free file 2011 And our services are always free. H&r block free file 2011   As a taxpayer, you have rights that the IRS must abide by in its dealings with you. H&r block free file 2011 Our tax toolkit at www. H&r block free file 2011 TaxpayerAdvocate. H&r block free file 2011 irs. H&r block free file 2011 gov can help you understand these rights. H&r block free file 2011   If you think TAS might be able to help you, call your local advocate, whose number is in your phone book and on our website at www. H&r block free file 2011 irs. H&r block free file 2011 gov/advocate. H&r block free file 2011 You can also call our toll-free number at 1-877-777-4778 or TTY/TDD 1-800-829-4059. H&r block free file 2011   TAS also handles large-scale or systemic problems that affect many taxpayers. H&r block free file 2011 If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. H&r block free file 2011 irs. H&r block free file 2011 gov/advocate. H&r block free file 2011 Low Income Taxpayer Clinics (LITCs). H&r block free file 2011   Low Income Taxpayer Clinics (LITCs) are independent from the IRS. H&r block free file 2011 Some clinics serve individuals whose income is below a certain level and who need to resolve a tax problem. H&r block free file 2011 These clinics provide professional representation before the IRS or in court on audits, appeals, tax collection disputes, and other issues for free or for a small fee. H&r block free file 2011 Some clinics can provide information about taxpayer rights and responsibilities in many different languages for individuals who speak English as a second language. H&r block free file 2011 For more information and to find a clinic near you, see the LITC page on www. H&r block free file 2011 irs. H&r block free file 2011 gov/advocate or IRS Publication 4134, Low Income Taxpayer Clinic List. H&r block free file 2011 This publication is also available by calling 1-800-829-3676 or at your local IRS office. H&r block free file 2011 Free tax services. H&r block free file 2011   Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. H&r block free file 2011 Learn about free tax information from the IRS, including publications, services, and education and assistance programs. H&r block free file 2011 The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. H&r block free file 2011 The majority of the information and services listed in this publication are available to you free of charge. H&r block free file 2011 If there is a fee associated with a resource or service, it is listed in the publication. H&r block free file 2011   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. H&r block free file 2011 DVD for tax products. H&r block free file 2011 You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. H&r block free file 2011 Prior-year forms, instructions, and publications. H&r block free file 2011 Tax Map: an electronic research tool and finding aid. H&r block free file 2011 Tax law frequently asked questions. H&r block free file 2011 Tax Topics from the IRS telephone response system. H&r block free file 2011 Internal Revenue Code—Title 26 of the U. H&r block free file 2011 S. H&r block free file 2011 Code. H&r block free file 2011 Links to other Internet based Tax Research Materials. H&r block free file 2011 Fill-in, print, and save features for most tax forms. H&r block free file 2011 Internal Revenue Bulletins. H&r block free file 2011 Toll-free and email technical support. H&r block free file 2011 Two releases during the year. H&r block free file 2011  – The first release will ship the beginning of January. H&r block free file 2011  – The final release will ship the beginning of March. H&r block free file 2011 Purchase the DVD from National Technical Information Service (NTIS) at www. H&r block free file 2011 irs. H&r block free file 2011 gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee). H&r block free file 2011 Prev  Up  Next   Home   More Online Publications