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How Do I Do My 2012 Taxes

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How Do I Do My 2012 Taxes

How do i do my 2012 taxes 8. How do i do my 2012 taxes   Business Expenses Table of Contents Introduction Useful Items - You may want to see: Bad DebtsAccrual method. How do i do my 2012 taxes Cash method. How do i do my 2012 taxes Car and Truck ExpensesOffice in the home. How do i do my 2012 taxes Methods for Deducting Car and Truck Expenses Reimbursing Your Employees for Expenses Depreciation Employees' PayFringe benefits. How do i do my 2012 taxes InsuranceHow to figure the deduction. How do i do my 2012 taxes Interest Legal and Professional FeesTax preparation fees. How do i do my 2012 taxes Pension Plans Rent Expense Taxes Travel, Meals, and EntertainmentTransportation. How do i do my 2012 taxes Taxi, commuter bus, and limousine. How do i do my 2012 taxes Baggage and shipping. How do i do my 2012 taxes Car or truck. How do i do my 2012 taxes Meals and lodging. How do i do my 2012 taxes Cleaning. How do i do my 2012 taxes Telephone. How do i do my 2012 taxes Tips. How do i do my 2012 taxes More information. How do i do my 2012 taxes Business Use of Your HomeExceptions to exclusive use. How do i do my 2012 taxes Other Expenses You Can Deduct Expenses You Cannot Deduct Introduction You can deduct the costs of operating your business. How do i do my 2012 taxes These costs are known as business expenses. How do i do my 2012 taxes These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year. How do i do my 2012 taxes To be deductible, a business expense must be both ordinary and necessary. How do i do my 2012 taxes An ordinary expense is one that is common and accepted in your field of business. How do i do my 2012 taxes A necessary expense is one that is helpful and appropriate for your business. How do i do my 2012 taxes An expense does not have to be indispensable to be considered necessary. How do i do my 2012 taxes For more information about the general rules for deducting business expenses, see chapter 1 in Publication 535, Business Expenses. How do i do my 2012 taxes If you have an expense that is partly for business and partly personal, separate the personal part from the business part. How do i do my 2012 taxes The personal part is not deductible. How do i do my 2012 taxes Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 946 How To Depreciate Property See chapter 12 for information about getting publications and forms. How do i do my 2012 taxes Bad Debts If someone owes you money you cannot collect, you have a bad debt. How do i do my 2012 taxes There are two kinds of bad debts, business bad debts and nonbusiness bad debts. How do i do my 2012 taxes A business bad debt is generally one that comes from operating your trade or business. How do i do my 2012 taxes You may be able to deduct business bad debts as an expense on your business tax return. How do i do my 2012 taxes Business bad debt. How do i do my 2012 taxes   A business bad debt is a loss from the worthlessness of a debt that was either of the following. How do i do my 2012 taxes Created or acquired in your business. How do i do my 2012 taxes Closely related to your business when it became partly or totally worthless. How do i do my 2012 taxes A debt is closely related to your business if your primary motive for incurring the debt is a business reason. How do i do my 2012 taxes   Business bad debts are mainly the result of credit sales to customers. How do i do my 2012 taxes They can also be the result of loans to suppliers, clients, employees, or distributors. How do i do my 2012 taxes Goods and services customers have not paid for are shown in your books as either accounts receivable or notes receivable. How do i do my 2012 taxes If you are unable to collect any part of these accounts or notes receivable, the uncollectible part is a business bad debt. How do i do my 2012 taxes    You can take a bad debt deduction for these accounts and notes receivable only if the amount you were owed was included in your gross income either for the year the deduction is claimed or for a prior year. How do i do my 2012 taxes Accrual method. How do i do my 2012 taxes   If you use an accrual method of accounting, you normally report income as you earn it. How do i do my 2012 taxes You can take a bad debt deduction for an uncollectible receivable if you have included the uncollectible amount in income. How do i do my 2012 taxes Cash method. How do i do my 2012 taxes   If you use the cash method of accounting, you normally report income when you receive payment. How do i do my 2012 taxes You cannot take a bad debt deduction for amounts owed to you that you have not received and cannot collect if you never included those amounts in income. How do i do my 2012 taxes More information. How do i do my 2012 taxes   For more information about business bad debts, see chapter 10 in Publication 535. How do i do my 2012 taxes Nonbusiness bad debts. How do i do my 2012 taxes   All other bad debts are nonbusiness bad debts and are deductible as short-term capital losses on Form 8949 and Schedule D (Form 1040). How do i do my 2012 taxes For more information on nonbusiness bad debts, see Publication 550, Investment Income and Expenses. How do i do my 2012 taxes Car and Truck Expenses If you use your car or truck in your business, you may be able to deduct the costs of operating and maintaining your vehicle. How do i do my 2012 taxes You also may be able to deduct other costs of local transportation and traveling away from home overnight on business. How do i do my 2012 taxes You may qualify for a tax credit for qualified plug-in electric vehicles, qualified plug-in electric drive motor vehicles, and alternative motor vehicles you place in service during the year. How do i do my 2012 taxes See Form 8936 and Form 8910 for more information. How do i do my 2012 taxes Local transportation expenses. How do i do my 2012 taxes   Local transportation expenses include the ordinary and necessary costs of all the following. How do i do my 2012 taxes Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. How do i do my 2012 taxes Tax home is defined later. How do i do my 2012 taxes Visiting clients or customers. How do i do my 2012 taxes Going to a business meeting away from your regular workplace. How do i do my 2012 taxes Getting from your home to a temporary workplace when you have one or more regular places of work. How do i do my 2012 taxes These temporary workplaces can be either within the area of your tax home or outside that area. How do i do my 2012 taxes Local business transportation does not include expenses you have while traveling away from home overnight. How do i do my 2012 taxes Those expenses are deductible as travel expenses and are discussed later under Travel, Meals, and Entertainment. How do i do my 2012 taxes However, if you use your car while traveling away from home overnight, use the rules in this section to figure your car expense deduction. How do i do my 2012 taxes   Generally, your tax home is your regular place of business, regardless of where you maintain your family home. How do i do my 2012 taxes It includes the entire city or general area in which your business or work is located. How do i do my 2012 taxes Example. How do i do my 2012 taxes You operate a printing business out of rented office space. How do i do my 2012 taxes You use your van to deliver completed jobs to your customers. How do i do my 2012 taxes You can deduct the cost of round-trip transportation between your customers and your print shop. How do i do my 2012 taxes    You cannot deduct the costs of driving your car or truck between your home and your main or regular workplace. How do i do my 2012 taxes These costs are personal commuting expenses. How do i do my 2012 taxes Office in the home. How do i do my 2012 taxes   Your workplace can be your home if you have an office in your home that qualifies as your principal place of business. How do i do my 2012 taxes For more information, see Business Use of Your Home, later. How do i do my 2012 taxes Example. How do i do my 2012 taxes You are a graphics designer. How do i do my 2012 taxes You operate your business out of your home. How do i do my 2012 taxes Your home qualifies as your principal place of business. How do i do my 2012 taxes You occasionally have to drive to your clients to deliver your completed work. How do i do my 2012 taxes You can deduct the cost of the round-trip transportation between your home and your clients. How do i do my 2012 taxes Methods for Deducting Car and Truck Expenses For local transportation or overnight travel by car or truck, you generally can use one of the following methods to figure your expenses. How do i do my 2012 taxes Standard mileage rate. How do i do my 2012 taxes Actual expenses. How do i do my 2012 taxes Standard mileage rate. How do i do my 2012 taxes   You may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. How do i do my 2012 taxes For 2013, the standard mileage rate is 56. How do i do my 2012 taxes 5 cents per mile. How do i do my 2012 taxes    If you choose to use the standard mileage rate for a year, you cannot deduct your actual expenses for that year except for business-related parking fees and tolls. How do i do my 2012 taxes Choosing the standard mileage rate. How do i do my 2012 taxes   If you want to use the standard mileage rate for a car or truck you own, you must choose to use it in the first year the car is available for use in your business. How do i do my 2012 taxes In later years, you can choose to use either the standard mileage rate or actual expenses. How do i do my 2012 taxes   If you use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period (including renewals). How do i do my 2012 taxes Standard mileage rate not allowed. How do i do my 2012 taxes   You cannot use the standard mileage rate if you: Operate five or more cars at the same time, Claimed a depreciation deduction using any method other than straight line, for example, ACRS or MACRS, Claimed a section 179 deduction on the car, Claimed the special depreciation allowance on the car, Claimed actual car expenses for a car you leased, or Are a rural mail carrier who received a qualified reimbursement. How do i do my 2012 taxes Parking fees and tolls. How do i do my 2012 taxes   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. How do i do my 2012 taxes (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. How do i do my 2012 taxes ) Actual expenses. How do i do my 2012 taxes   If you do not choose to use the standard mileage rate, you may be able to deduct your actual car or truck expenses. How do i do my 2012 taxes    If you qualify to use both methods, figure your deduction both ways to see which gives you a larger deduction. How do i do my 2012 taxes   Actual car expenses include the costs of the following items. How do i do my 2012 taxes Depreciation Lease payments Registration Garage rent Licenses Repairs Gas Oil Tires Insurance Parking fees Tolls   If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. How do i do my 2012 taxes You can divide your expenses based on the miles driven for each purpose. How do i do my 2012 taxes Example. How do i do my 2012 taxes You are the sole proprietor of a flower shop. How do i do my 2012 taxes You drove your van 20,000 miles during the year. How do i do my 2012 taxes 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use (including commuting miles). How do i do my 2012 taxes You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. How do i do my 2012 taxes More information. How do i do my 2012 taxes   For more information about the rules for claiming car and truck expenses, see Publication 463. How do i do my 2012 taxes Reimbursing Your Employees for Expenses You generally can deduct the amount you reimburse your employees for car and truck expenses. How do i do my 2012 taxes The reimbursement you deduct and the manner in which you deduct it depend in part on whether you reimburse the expenses under an accountable plan or a nonaccountable plan. How do i do my 2012 taxes For details, see chapter 11 in Publication 535. How do i do my 2012 taxes That chapter explains accountable and nonaccountable plans and tells you whether to report the reimbursement on your employee's Form W-2, Wage and Tax Statement. How do i do my 2012 taxes Depreciation If property you acquire to use in your business is expected to last more than 1 year, you generally cannot deduct the entire cost as a business expense in the year you acquire it. How do i do my 2012 taxes You must spread the cost over more than 1 tax year and deduct part of it each year on Schedule C. How do i do my 2012 taxes This method of deducting the cost of business property is called depreciation. How do i do my 2012 taxes The discussion here is brief. How do i do my 2012 taxes You will find more information about depreciation in Publication 946. How do i do my 2012 taxes What property can be depreciated?   You can depreciate property if it meets all the following requirements. How do i do my 2012 taxes It must be property you own. How do i do my 2012 taxes It must be used in business or held to produce income. How do i do my 2012 taxes You never can depreciate inventory (explained in chapter 2) because it is not held for use in your business. How do i do my 2012 taxes It must have a useful life that extends substantially beyond the year it is placed in service. How do i do my 2012 taxes It must have a determinable useful life, which means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. How do i do my 2012 taxes You never can depreciate the cost of land because land does not wear out, become obsolete, or get used up. How do i do my 2012 taxes It must not be excepted property. How do i do my 2012 taxes This includes property placed in service and disposed of in the same year. How do i do my 2012 taxes Repairs. How do i do my 2012 taxes    You cannot depreciate repairs and replacements that do not increase the value of your property, make it more useful, or lengthen its useful life. How do i do my 2012 taxes You can deduct these amounts on line 21 of Schedule C or line 2 of Schedule C-EZ. How do i do my 2012 taxes Depreciation method. How do i do my 2012 taxes   The method for depreciating most business and investment property placed in service after 1986 is called the Modified Accelerated Cost Recovery System (MACRS). How do i do my 2012 taxes MACRS is discussed in detail in Publication 946. How do i do my 2012 taxes Section 179 deduction. How do i do my 2012 taxes   You can elect to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. How do i do my 2012 taxes This deduction is known as the “section 179 deduction. How do i do my 2012 taxes ” The maximum amount you can elect to deduct during 2013 is generally $500,000 (higher limits apply to certain property). How do i do my 2012 taxes See IRC 179(e). How do i do my 2012 taxes   This limit is generally reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. How do i do my 2012 taxes The total amount of depreciation (including the section 179 deduction) you can take for a passenger automobile you use in your business and first place in service in 2013 is $3,160 ($11,160 if you take the special depreciation allowance for qualified passenger automobiles placed in service in 2013). How do i do my 2012 taxes Special rules apply to trucks and vans. How do i do my 2012 taxes For more information, see Publication 946. How do i do my 2012 taxes It explains what property qualifies for the deduction, what limits apply to the deduction, and when and how to recapture the deduction. How do i do my 2012 taxes    Your section 179 election for the cost of any sport utility vehicle (SUV) and certain other vehicles is limited to $25,000. How do i do my 2012 taxes For more information, see the Instructions for Form 4562 or Publication 946. How do i do my 2012 taxes Listed property. How do i do my 2012 taxes   You must follow special rules and recordkeeping requirements when depreciating listed property. How do i do my 2012 taxes Listed property is any of the following. How do i do my 2012 taxes Most passenger automobiles. How do i do my 2012 taxes Most other property used for transportation. How do i do my 2012 taxes Any property of a type generally used for entertainment, recreation, or amusement. How do i do my 2012 taxes Certain computers and related peripheral equipment. How do i do my 2012 taxes   For more information about listed property, see Publication 946. How do i do my 2012 taxes Form 4562. How do i do my 2012 taxes   Use Form 4562, Depreciation and Amortization, if you are claiming any of the following. How do i do my 2012 taxes Depreciation on property placed in service during the current tax year. How do i do my 2012 taxes A section 179 deduction. How do i do my 2012 taxes Depreciation on any listed property (regardless of when it was placed in service). How do i do my 2012 taxes    If you have to use Form 4562, you must file Schedule C. How do i do my 2012 taxes You cannot use Schedule C-EZ. How do i do my 2012 taxes   Employees' Pay You can generally deduct on Schedule C the pay you give your employees for the services they perform for your business. How do i do my 2012 taxes The pay may be in cash, property, or services. How do i do my 2012 taxes To be deductible, your employees' pay must be an ordinary and necessary expense and you must pay or incur it in the tax year. How do i do my 2012 taxes In addition, the pay must meet both the following tests. How do i do my 2012 taxes The pay must be reasonable. How do i do my 2012 taxes The pay must be for services performed. How do i do my 2012 taxes Chapter 2 in Publication 535 explains and defines these requirements. How do i do my 2012 taxes You cannot deduct your own salary or any personal withdrawals you make from your business. How do i do my 2012 taxes As a sole proprietor, you are not an employee of the business. How do i do my 2012 taxes If you had employees during the year, you must use Schedule C. How do i do my 2012 taxes You cannot use Schedule C-EZ. How do i do my 2012 taxes Kinds of pay. How do i do my 2012 taxes   Some of the ways you may provide pay to your employees are listed below. How do i do my 2012 taxes For an explanation of each of these items, see chapter 2 in Publication 535. How do i do my 2012 taxes Awards. How do i do my 2012 taxes Bonuses. How do i do my 2012 taxes Education expenses. How do i do my 2012 taxes Fringe benefits (discussed later). How do i do my 2012 taxes Loans or advances you do not expect the employee to repay if they are for personal services actually performed. How do i do my 2012 taxes Property you transfer to an employee as payment for services. How do i do my 2012 taxes Reimbursements for employee business expenses. How do i do my 2012 taxes Sick pay. How do i do my 2012 taxes Vacation pay. How do i do my 2012 taxes Fringe benefits. How do i do my 2012 taxes   A fringe benefit is a form of pay for the performance of services. How do i do my 2012 taxes The following are examples of fringe benefits. How do i do my 2012 taxes Benefits under qualified employee benefit programs. How do i do my 2012 taxes Meals and lodging. How do i do my 2012 taxes The use of a car. How do i do my 2012 taxes Flights on airplanes. How do i do my 2012 taxes Discounts on property or services. How do i do my 2012 taxes Memberships in country clubs or other social clubs. How do i do my 2012 taxes Tickets to entertainment or sporting events. How do i do my 2012 taxes   Employee benefit programs include the following. How do i do my 2012 taxes Accident and health plans. How do i do my 2012 taxes Adoption assistance. How do i do my 2012 taxes Cafeteria plans. How do i do my 2012 taxes Dependent care assistance. How do i do my 2012 taxes Educational assistance. How do i do my 2012 taxes Group-term life insurance coverage. How do i do my 2012 taxes Welfare benefit funds. How do i do my 2012 taxes   You can generally deduct the cost of fringe benefits you provide on your Schedule C in whatever category the cost falls. How do i do my 2012 taxes For example, if you allow an employee to use a car or other property you lease, deduct the cost of the lease as a rent or lease expense. How do i do my 2012 taxes If you own the property, include your deduction for its cost or other basis as a section 179 deduction or a depreciation deduction. How do i do my 2012 taxes    You may be able to exclude all or part of the fringe benefits you provide from your employees' wages. How do i do my 2012 taxes For more information about fringe benefits and the exclusion of benefits, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. How do i do my 2012 taxes Insurance You can generally deduct premiums you pay for the following kinds of insurance related to your business. How do i do my 2012 taxes Fire, theft, flood, or similar insurance. How do i do my 2012 taxes Credit insurance that covers losses from business bad debts. How do i do my 2012 taxes Group hospitalization and medical insurance for employees, including long-term care insurance. How do i do my 2012 taxes Liability insurance. How do i do my 2012 taxes Malpractice insurance that covers your personal liability for professional negligence resulting in injury or damage to patients or clients. How do i do my 2012 taxes Workers' compensation insurance set by state law that covers any claims for bodily injuries or job-related diseases suffered by employees in your business, regardless of fault. How do i do my 2012 taxes Contributions to a state unemployment insurance fund are deductible as taxes if they are considered taxes under state law. How do i do my 2012 taxes Overhead insurance that pays for business overhead expenses you have during long periods of disability caused by your injury or sickness. How do i do my 2012 taxes Car and other vehicle insurance that covers vehicles used in your business for liability, damages, and other losses. How do i do my 2012 taxes If you operate a vehicle partly for personal use, deduct only the part of the insurance premium that applies to the business use of the vehicle. How do i do my 2012 taxes If you use the standard mileage rate to figure your car expenses, you cannot deduct any car insurance premiums. How do i do my 2012 taxes Life insurance covering your employees if you are not directly or indirectly the beneficiary under the contract. How do i do my 2012 taxes Business interruption insurance that pays for lost profits if your business is shut down due to a fire or other cause. How do i do my 2012 taxes Nondeductible premiums. How do i do my 2012 taxes   You cannot deduct premiums on the following kinds of insurance. How do i do my 2012 taxes Self-insurance reserve funds. How do i do my 2012 taxes You cannot deduct amounts credited to a reserve set up for self-insurance. How do i do my 2012 taxes This applies even if you cannot get business insurance coverage for certain business risks. How do i do my 2012 taxes However, your actual losses may be deductible. How do i do my 2012 taxes For more information, see Publication 547, Casualties, Disasters, and Thefts. How do i do my 2012 taxes Loss of earnings. How do i do my 2012 taxes You cannot deduct premiums for a policy that pays for your lost earnings due to sickness or disability. How do i do my 2012 taxes However, see item (8) in the previous list. How do i do my 2012 taxes Certain life insurance and annuities. How do i do my 2012 taxes For contracts issued before June 9, 1997, you cannot deduct the premiums on a life insurance policy covering you, an employee, or any person with a financial interest in your business if you are directly or indirectly a beneficiary of the policy. How do i do my 2012 taxes You are included among possible beneficiaries of the policy if the policy owner is obligated to repay a loan from you using the proceeds of the policy. How do i do my 2012 taxes A person has a financial interest in your business if the person is an owner or part owner of the business or has lent money to the business. How do i do my 2012 taxes For contracts issued after June 8, 1997, you generally cannot deduct the premiums on any life insurance policy, endowment contract, or annuity contract if you are directly or indirectly a beneficiary. How do i do my 2012 taxes The disallowance applies without regard to whom the policy covers. How do i do my 2012 taxes Insurance to secure a loan. How do i do my 2012 taxes If you take out a policy on your life or on the life of another person with a financial interest in your business to get or protect a business loan, you cannot deduct the premiums as a business expense. How do i do my 2012 taxes Nor can you deduct the premiums as interest on business loans or as an expense of financing loans. How do i do my 2012 taxes In the event of death, the proceeds of the policy are not taxed as income even if they are used to liquidate the debt. How do i do my 2012 taxes Self-employed health insurance deduction. How do i do my 2012 taxes   You may be able to deduct the amount you paid for medical and dental insurance and qualified long-term care insurance for you and your family. How do i do my 2012 taxes How to figure the deduction. How do i do my 2012 taxes   Generally, you can use the worksheet in the Form 1040 instructions to figure your deduction. How do i do my 2012 taxes However, if any of the following apply, you must use the worksheet in chapter 6 of Publication 535. How do i do my 2012 taxes You have more than one source of income subject to self-employment tax. How do i do my 2012 taxes You file Form 2555 or Form 2555-EZ (relating to foreign earned income). How do i do my 2012 taxes You are using amounts paid for qualified long-term care insurance to figure the deduction. How do i do my 2012 taxes Prepayment. How do i do my 2012 taxes   You cannot deduct expenses in advance, even if you pay them in advance. How do i do my 2012 taxes This rule applies to any expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. How do i do my 2012 taxes Example. How do i do my 2012 taxes In 2013, you signed a 3-year insurance contract. How do i do my 2012 taxes Even though you paid the premiums for 2013, 2014, and 2015 when you signed the contract, you can only deduct the premium for 2013 on your 2013 tax return. How do i do my 2012 taxes You can deduct in 2014 and 2015 the premium allocable to those years. How do i do my 2012 taxes More information. How do i do my 2012 taxes   For more information about deducting insurance, see chapter 6 in Publication 535. How do i do my 2012 taxes Interest You can generally deduct as a business expense all interest you pay or accrue during the tax year on debts related to your business. How do i do my 2012 taxes Interest relates to your business if you use the proceeds of the loan for a business expense. How do i do my 2012 taxes It does not matter what type of property secures the loan. How do i do my 2012 taxes You can deduct interest on a debt only if you meet all of the following requirements. How do i do my 2012 taxes You are legally liable for that debt. How do i do my 2012 taxes Both you and the lender intend that the debt be repaid. How do i do my 2012 taxes You and the lender have a true debtor-creditor relationship. How do i do my 2012 taxes You cannot deduct on Schedule C or C-EZ the interest you paid on personal loans. How do i do my 2012 taxes If a loan is part business and part personal, you must divide the interest between the personal part and the business part. How do i do my 2012 taxes Example. How do i do my 2012 taxes In 2013, you paid $600 interest on a car loan. How do i do my 2012 taxes During 2013, you used the car 60% for business and 40% for personal purposes. How do i do my 2012 taxes You are claiming actual expenses on the car. How do i do my 2012 taxes You can only deduct $360 (60% × $600) for 2013 on Schedule C or C-EZ. How do i do my 2012 taxes The remaining interest of $240 is a nondeductible personal expense. How do i do my 2012 taxes More information. How do i do my 2012 taxes   For more information about deducting interest, see chapter 4 in Publication 535. How do i do my 2012 taxes That chapter explains the following items. How do i do my 2012 taxes Interest you can deduct. How do i do my 2012 taxes Interest you cannot deduct. How do i do my 2012 taxes How to allocate interest between personal and business use. How do i do my 2012 taxes When to deduct interest. How do i do my 2012 taxes The rules for a below-market interest rate loan. How do i do my 2012 taxes (This is generally a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. How do i do my 2012 taxes ) Legal and Professional Fees Legal and professional fees, such as fees charged by accountants, that are ordinary and necessary expenses directly related to operating your business are deductible on Schedule C or C-EZ. How do i do my 2012 taxes However, you usually cannot deduct legal fees you pay to acquire business assets. How do i do my 2012 taxes Add them to the basis of the property. How do i do my 2012 taxes If the fees include payments for work of a personal nature (such as making a will), you can take a business deduction only for the part of the fee related to your business. How do i do my 2012 taxes The personal part of legal fees for producing or collecting taxable income, doing or keeping your job, or for tax advice may be deductible on Schedule A (Form 1040) if you itemize deductions. How do i do my 2012 taxes For more information, see Publication 529, Miscellaneous Deductions. How do i do my 2012 taxes Tax preparation fees. How do i do my 2012 taxes   You can deduct on Schedule C or C-EZ the cost of preparing that part of your tax return relating to your business as a sole proprietor or statutory employee. How do i do my 2012 taxes You can deduct the remaining cost on Schedule A (Form 1040) if you itemize your deductions. How do i do my 2012 taxes   You can also deduct on Schedule C or C-EZ the amount you pay or incur in resolving asserted tax deficiencies for your business as a sole proprietor or statutory employee. How do i do my 2012 taxes Pension Plans You can set up and maintain the following small business retirement plans for yourself and your employees. How do i do my 2012 taxes SEP (Simplified Employee Pension) plans. How do i do my 2012 taxes SIMPLE (Savings Incentive Match Plan for Employees) plans. How do i do my 2012 taxes Qualified plans (including Keogh or H. How do i do my 2012 taxes R. How do i do my 2012 taxes 10 plans). How do i do my 2012 taxes SEP, SIMPLE, and qualified plans offer you and your employees a tax favored way to save for retirement. How do i do my 2012 taxes You can deduct contributions you make to the plan for your employees on line 19 of Schedule C. How do i do my 2012 taxes If you are a sole proprietor, you can deduct contributions you make to the plan for yourself on line 28 of Form 1040. How do i do my 2012 taxes You can also deduct trustees' fees if contributions to the plan do not cover them. How do i do my 2012 taxes Earnings on the contributions are generally tax free until you or your employees receive distributions from the plan. How do i do my 2012 taxes You may also be able to claim a tax credit of 50% of the first $1,000 of qualified startup costs if you begin a new qualified defined benefit or defined contribution plan (including a 401(k) plan), SIMPLE plan, or simplified employee pension. How do i do my 2012 taxes Under certain plans, employees can have you contribute limited amounts of their before-tax pay to a plan. How do i do my 2012 taxes These amounts (and earnings on them) are generally tax free until your employees receive distributions from the plan. How do i do my 2012 taxes For more information on retirement plans for small business, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). How do i do my 2012 taxes Publication 590, Individual Retirement Arrangements (IRAs), discusses other tax favored ways to save for retirement. How do i do my 2012 taxes Rent Expense Rent is any amount you pay for the use of property you do not own. How do i do my 2012 taxes In general, you can deduct rent as a business expense only if the rent is for property you use in your business. How do i do my 2012 taxes If you have or will receive equity in or title to the property, you cannot deduct the rent. How do i do my 2012 taxes Unreasonable rent. How do i do my 2012 taxes   You cannot take a rental deduction for unreasonable rents. How do i do my 2012 taxes Ordinarily, the issue of reasonableness arises only if you and the lessor are related. How do i do my 2012 taxes Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. How do i do my 2012 taxes Rent is not unreasonable just because it is figured as a percentage of gross receipts. How do i do my 2012 taxes   Related persons include members of your immediate family, including only brothers and sisters (either whole or half), your spouse, ancestors, and lineal descendants. How do i do my 2012 taxes For a list of the other related persons, see section 267 of the Internal Revenue Code. How do i do my 2012 taxes Rent on your home. How do i do my 2012 taxes   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. How do i do my 2012 taxes You must meet the requirements for business use of your home. How do i do my 2012 taxes For more information, see Business Use of Your Home , later. How do i do my 2012 taxes Rent paid in advance. How do i do my 2012 taxes   Generally, rent paid in your business is deductible in the year paid or accrued. How do i do my 2012 taxes If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. How do i do my 2012 taxes You can deduct the rest of your payment only over the period to which it applies. How do i do my 2012 taxes More information. How do i do my 2012 taxes   For more information about rent, see chapter 3 in Publication 535. How do i do my 2012 taxes Taxes You can deduct on Schedule C or C-EZ various federal, state, local, and foreign taxes directly attributable to your business. How do i do my 2012 taxes Income taxes. How do i do my 2012 taxes   You can deduct on Schedule C or C-EZ a state tax on gross income (as distinguished from net income) directly attributable to your business. How do i do my 2012 taxes You can deduct other state and local income taxes on Schedule A (Form 1040) if you itemize your deductions. How do i do my 2012 taxes Do not deduct federal income tax. How do i do my 2012 taxes Employment taxes. How do i do my 2012 taxes   You can deduct the social security, Medicare, and federal unemployment (FUTA) taxes you paid out of your own funds as an employer. How do i do my 2012 taxes Employment taxes are discussed briefly in chapter 1. How do i do my 2012 taxes You can also deduct payments you made as an employer to a state unemployment compensation fund or to a state disability benefit fund. How do i do my 2012 taxes Deduct these payments as taxes. How do i do my 2012 taxes Self-employment tax. How do i do my 2012 taxes   You can deduct one-half of your self-employment tax on line 27 of Form 1040. How do i do my 2012 taxes Self-employment tax is discussed in chapters 1 and 10. How do i do my 2012 taxes Personal property tax. How do i do my 2012 taxes   You can deduct on Schedule C or C-EZ any tax imposed by a state or local government on personal property used in your business. How do i do my 2012 taxes   You can also deduct registration fees for the right to use property within a state or local area. How do i do my 2012 taxes Example. How do i do my 2012 taxes May and Julius Winter drove their car 7,000 business miles out of a total of 10,000 miles. How do i do my 2012 taxes They had to pay $25 for their annual state license tags and $20 for their city registration sticker. How do i do my 2012 taxes They also paid $235 in city personal property tax on the car, for a total of $280. How do i do my 2012 taxes They are claiming their actual car expenses. How do i do my 2012 taxes Because they used the car 70% for business, they can deduct 70% of the $280, or $196, as a business expense. How do i do my 2012 taxes Real estate taxes. How do i do my 2012 taxes   You can deduct on Schedule C or C-EZ the real estate taxes you pay on your business property. How do i do my 2012 taxes Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. How do i do my 2012 taxes The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. How do i do my 2012 taxes   For more information about real estate taxes, see chapter 5 in Publication 535. How do i do my 2012 taxes That chapter explains special rules for deducting the following items. How do i do my 2012 taxes Taxes for local benefits, such as those for sidewalks, streets, water mains, and sewer lines. How do i do my 2012 taxes Real estate taxes when you buy or sell property during the year. How do i do my 2012 taxes Real estate taxes if you use an accrual method of accounting and choose to accrue real estate tax related to a definite period ratably over that period. How do i do my 2012 taxes Sales tax. How do i do my 2012 taxes   Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. How do i do my 2012 taxes If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. How do i do my 2012 taxes If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. How do i do my 2012 taxes If the property is depreciable, add the sales tax to the basis for depreciation. How do i do my 2012 taxes For information on the basis of property, see Publication 551, Basis of Assets. How do i do my 2012 taxes    Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. How do i do my 2012 taxes Do not include these taxes in gross receipts or sales. How do i do my 2012 taxes Excise taxes. How do i do my 2012 taxes   You can deduct on Schedule C or C-EZ all excise taxes that are ordinary and necessary expenses of carrying on your business. How do i do my 2012 taxes Excise taxes are discussed briefly in chapter 1. How do i do my 2012 taxes Fuel taxes. How do i do my 2012 taxes   Taxes on gasoline, diesel fuel, and other motor fuels you use in your business are usually included as part of the cost of the fuel. How do i do my 2012 taxes Do not deduct these taxes as a separate item. How do i do my 2012 taxes   You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. How do i do my 2012 taxes For more information, see Publication 510, Excise Taxes. How do i do my 2012 taxes Travel, Meals, and Entertainment This section briefly explains the kinds of travel and entertainment expenses you can deduct on Schedule C or C-EZ. How do i do my 2012 taxes Table 8-1. How do i do my 2012 taxes When Are Entertainment Expenses Deductible? (Note. How do i do my 2012 taxes The following is a summary of the rules for deducting entertainment expenses. How do i do my 2012 taxes For more details about these rules, see Publication 463. How do i do my 2012 taxes ) General rule You can deduct ordinary and necessary expenses to entertain a client, customer, or employee if the expenses meet the directly-related test or the associated test. How do i do my 2012 taxes Definitions Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a customer or client. How do i do my 2012 taxes An ordinary expense is one that is common and accepted in your field of business, trade, or profession. How do i do my 2012 taxes A necessary expense is one that is helpful and appropriate, although not necessarily required, for your business. How do i do my 2012 taxes Tests to be met Directly-related test Entertainment took place in a clear business setting, or Main purpose of entertainment was the active conduct of business, and You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit. How do i do my 2012 taxes   Associated test Entertainment is associated with your trade or business, and Entertainment directly precedes or follows a substantial business discussion. How do i do my 2012 taxes Other rules You cannot deduct the cost of your meal as an entertainment expense if you are claiming the meal as a travel expense. How do i do my 2012 taxes You cannot deduct expenses that are lavish or extravagant under the circumstances. How do i do my 2012 taxes You generally can deduct only 50% of your unreimbursed entertainment expenses. How do i do my 2012 taxes Travel expenses. How do i do my 2012 taxes   These are the ordinary and necessary expenses of traveling away from home for your business. How do i do my 2012 taxes You are traveling away from home if both the following conditions are met. How do i do my 2012 taxes Your duties require you to be away from the general area of your tax home (defined later) substantially longer than an ordinary day's work. How do i do my 2012 taxes You need to get sleep or rest to meet the demands of your work while away from home. How do i do my 2012 taxes Generally, your tax home is your regular place of business, regardless of where you maintain your family home. How do i do my 2012 taxes It includes the entire city or general area in which your business is located. How do i do my 2012 taxes See Publication 463 for more information. How do i do my 2012 taxes   The following is a brief discussion of the expenses you can deduct. How do i do my 2012 taxes Transportation. How do i do my 2012 taxes   You can deduct the cost of travel by airplane, train, bus, or car between your home and your business destination. How do i do my 2012 taxes Taxi, commuter bus, and limousine. How do i do my 2012 taxes   You can deduct fares for these and other types of transportation between the airport or station and your hotel, or between the hotel and your work location away from home. How do i do my 2012 taxes Baggage and shipping. How do i do my 2012 taxes   You can deduct the cost of sending baggage and sample or display material between your regular and temporary work locations. How do i do my 2012 taxes Car or truck. How do i do my 2012 taxes   You can deduct the costs of operating and maintaining your vehicle when traveling away from home on business. How do i do my 2012 taxes You can deduct actual expenses or the standard mileage rate (discussed earlier under Car and Truck Expenses), as well as business-related tolls and parking. How do i do my 2012 taxes If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses. How do i do my 2012 taxes Meals and lodging. How do i do my 2012 taxes   You can deduct the cost of meals and lodging if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. How do i do my 2012 taxes In most cases, you can deduct only 50% of your meal expenses. How do i do my 2012 taxes Cleaning. How do i do my 2012 taxes   You can deduct the costs of dry cleaning and laundry while on your business trip. How do i do my 2012 taxes Telephone. How do i do my 2012 taxes   You can deduct the cost of business calls while on your business trip, including business communication by fax machine or other communication devices. How do i do my 2012 taxes Tips. How do i do my 2012 taxes   You can deduct the tips you pay for any expense in this list. How do i do my 2012 taxes More information. How do i do my 2012 taxes   For more information about travel expenses, see Publication 463. How do i do my 2012 taxes Entertainment expenses. How do i do my 2012 taxes   You may be able to deduct business-related entertainment expenses for entertaining a client, customer, or employee. How do i do my 2012 taxes In most cases, you can deduct only 50% of these expenses. How do i do my 2012 taxes   The following are examples of entertainment expenses. How do i do my 2012 taxes Entertaining guests at nightclubs, athletic clubs, theaters, or sporting events. How do i do my 2012 taxes Providing meals, a hotel suite, or a car to business customers or their families. How do i do my 2012 taxes To be deductible, the expenses must meet the rules listed in Table 8-1. How do i do my 2012 taxes For details about these rules, see Publication 463. How do i do my 2012 taxes Reimbursing your employees for expenses. How do i do my 2012 taxes   You generally can deduct the amount you reimburse your employees for travel and entertainment expenses. How do i do my 2012 taxes The reimbursement you deduct and the manner in which you deduct it depend in part on whether you reimburse the expenses under an accountable plan or a nonaccountable plan. How do i do my 2012 taxes For details, see chapter 11 in Publication 535. How do i do my 2012 taxes That chapter explains accountable and nonaccountable plans and tells you whether to report the reimbursement on your employee's Form W-2, Wage and Tax Statement. How do i do my 2012 taxes Business Use of Your Home To deduct expenses related to the part of your home used for business, you must meet specific requirements. How do i do my 2012 taxes Even then, your deduction may be limited. How do i do my 2012 taxes To qualify to claim expenses for business use of your home, you must meet the following tests. How do i do my 2012 taxes Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use , later), Regular, For your business, and The business part of your home must be one of the following: Your principal place of business (defined later), A place where you meet or deal with patients, clients, or customers in the normal course of your business, or A separate structure (not attached to your home) you use in connection with your business. How do i do my 2012 taxes Exclusive use. How do i do my 2012 taxes   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. How do i do my 2012 taxes The area used for business can be a room or other separately identifiable space. How do i do my 2012 taxes The space does not need to be marked off by a permanent partition. How do i do my 2012 taxes   You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. How do i do my 2012 taxes Example. How do i do my 2012 taxes You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. How do i do my 2012 taxes Your family also uses the den for recreation. How do i do my 2012 taxes The den is not used exclusively in your profession, so you cannot claim a business deduction for its use. How do i do my 2012 taxes Exceptions to exclusive use. How do i do my 2012 taxes   You do not have to meet the exclusive use test if you use part of your home in either of the following ways. How do i do my 2012 taxes For the storage of inventory or product samples. How do i do my 2012 taxes As a daycare facility. How do i do my 2012 taxes For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). How do i do my 2012 taxes Regular use. How do i do my 2012 taxes   To qualify under the regular use test, you must use a specific area of your home for business on a continuing basis. How do i do my 2012 taxes You do not meet the test if your business use of the area is only occasional or incidental, even if you do not use that area for any other purpose. How do i do my 2012 taxes Principal place of business. How do i do my 2012 taxes   You can have more than one business location, including your home, for a single trade or business. How do i do my 2012 taxes To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that business. How do i do my 2012 taxes To determine your principal place of business, you must consider all the facts and circumstances. How do i do my 2012 taxes   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. How do i do my 2012 taxes You use it exclusively and regularly for administrative or management activities of your business. How do i do my 2012 taxes You have no other fixed location where you conduct substantial administrative or management activities of your business. How do i do my 2012 taxes   Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors. How do i do my 2012 taxes The relative importance of the activities performed at each location. How do i do my 2012 taxes If the relative importance factor does not determine your principal place of business, you can also consider the time spent at each location. How do i do my 2012 taxes   If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. How do i do my 2012 taxes However, for other ways to qualify to deduct home office expenses, see Publication 587. How do i do my 2012 taxes Deduction limit. How do i do my 2012 taxes   If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. How do i do my 2012 taxes If your gross income from the business use is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. How do i do my 2012 taxes   Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation (with depreciation taken last), allocable to the business is limited to the gross income from the business use of your home minus the sum of the following. How do i do my 2012 taxes The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). How do i do my 2012 taxes The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. How do i do my 2012 taxes Do not include in (2) above your deduction for one-half of your self-employment tax. How do i do my 2012 taxes   Use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. How do i do my 2012 taxes New simplified method. How do i do my 2012 taxes    The IRS now provides a simplified method to determine your expenses for business use of your home. How do i do my 2012 taxes The simplified method is an alternative to calculating and substantiating actual expenses. How do i do my 2012 taxes In most cases, you will figure your deduction by multiplying $5 by the area of your home used for a qualified business use. How do i do my 2012 taxes The area you use to figure your deduction is limited to 300 square feet. How do i do my 2012 taxes For more information, see the Instructions for Schedule C. How do i do my 2012 taxes More information. How do i do my 2012 taxes   For more information on deducting expenses for the business use of your home, see Publication 587. How do i do my 2012 taxes Other Expenses You Can Deduct You may also be able to deduct the following expenses. How do i do my 2012 taxes See Publication 535 to find out whether you can deduct them. How do i do my 2012 taxes Advertising. How do i do my 2012 taxes Bank fees. How do i do my 2012 taxes Donations to business organizations. How do i do my 2012 taxes Education expenses. How do i do my 2012 taxes Energy efficient commercial buildings deduction expenses. How do i do my 2012 taxes Impairment-related expenses. How do i do my 2012 taxes Interview expense allowances. How do i do my 2012 taxes Licenses and regulatory fees. How do i do my 2012 taxes Moving machinery. How do i do my 2012 taxes Outplacement services. How do i do my 2012 taxes Penalties and fines you pay for late performance or nonperformance of a contract. How do i do my 2012 taxes Repairs that keep your property in a normal efficient operating condition. How do i do my 2012 taxes Repayments of income. How do i do my 2012 taxes Subscriptions to trade or professional publications. How do i do my 2012 taxes Supplies and materials. How do i do my 2012 taxes Utilities. How do i do my 2012 taxes Expenses You Cannot Deduct You usually cannot deduct the following as business expenses. How do i do my 2012 taxes For more information, see Publication 535. How do i do my 2012 taxes Bribes and kickbacks. How do i do my 2012 taxes Charitable contributions. How do i do my 2012 taxes Demolition expenses or losses. How do i do my 2012 taxes Dues to business, social, athletic, luncheon, sporting, airline, and hotel clubs. How do i do my 2012 taxes Lobbying expenses. How do i do my 2012 taxes Penalties and fines you pay to a governmental agency or instrumentality because you broke the law. How do i do my 2012 taxes Personal, living, and family expenses. How do i do my 2012 taxes Political contributions. How do i do my 2012 taxes Repairs that add to the value of your property or significantly increase its life. How do i do my 2012 taxes Prev  Up  Next   Home   More Online Publications
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Know Your Options

Airline delays caused by bad weather, traffic control problems, and mechanical repairs are hard to predict. If your flight is canceled, most airlines will rebook you on the earliest flight possible to your destination, at no additional charge. If you're able to find a flight on another airline, ask the first airline to endorse your ticket to the new carrier. This could save you a fare increase, but there is no rule requiring them to do this.

Each airline has its own policies about what it will do for delayed passengers; there are no federal requirements. If your flight is delayed or canceled, ask the airline if it will pay for meals or a phone call. Contrary to what many people believe, airlines are not required to do so.

Tarmac Delays

Under new federal rules, U.S. airlines operating domestic flights must allow passengers to deplane after a tarmac delay of three hours. The only exceptions allowed are for safety or security, or if air traffic control advises the pilot otherwise. Carriers are also required to provided adequate food and drinking water within two hours of being delayed on the tarmac; they must also maintain operable lavatories and, if necessary, provide medical attention.
There are other protections as well, such as prohibiting airlines from scheduling chronically delayed flights. For more information, search for Airline Passenger Protections on the Department of Transportation's website.

Overbooked Flights

Selling more tickets than there are seats is not illegal. Most airlines overbook their flights to compensate for "no-shows." If there are more passengers than seats just before a plane is scheduled to depart, you could be "bumped" or left behind against your will. Whether you are bumped or not may depend on when you officially check-in for your flight, so try to arrive early. The U.S. Department of Transportation requires airlines to ask people to give up their seats voluntarily, in exchange for compensation. Airlines decide what to offer volunteers, such as money, a free trip, food or lodging.

Federal rules protect you if you are "bumped" on most flights within the United States and on outbound international flights. Passengers who are involuntarily bumped are protected under Federal Aviation Administration guidelines. If you volunteer to be bumped, your agreement with the airline that is not regulated and will depend on negotiating at the gate.
The airline must give you a written statement describing your rights, as well as the airline's boarding priority rules and criteria. If the airline is not able to get you to your final destination within one hour of your original arrival time, the airline must pay you an amount equal to 200% of your one-way fare, with a maximum of $650. To receive this payment, you must have a confirmed reservation. You must also meet the airline's deadlines for ticketing and check-in. An airline may offer you a free ticket on a future flight in place of a check, but you have the right to insist on a check.

The How Do I Do My 2012 Taxes

How do i do my 2012 taxes 32. How do i do my 2012 taxes   Child and Dependent Care Credit Table of Contents Reminders Introduction Useful Items - You may want to see: Tests To Claim the CreditQualifying Person Test Earned Income Test Work-Related Expense Test Joint Return Test Provider Identification Test How To Figure the CreditFiguring Total Work-Related Expenses Earned Income Limit Dollar Limit Amount of Credit How To Claim the CreditTax credit not refundable. How do i do my 2012 taxes Employment Taxes for Household Employers Reminders Taxpayer identification number needed for each qualifying person. How do i do my 2012 taxes  You must include on line 2 of Form 2441 the name and taxpayer identification number (generally the social security number) of each qualifying person. How do i do my 2012 taxes See Taxpayer identification number under Qualifying Person Test, later. How do i do my 2012 taxes You may have to pay employment taxes. How do i do my 2012 taxes  If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer who has to pay employment taxes. How do i do my 2012 taxes Usually, you are not a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business. How do i do my 2012 taxes See Employment Taxes for Household Employers , later. How do i do my 2012 taxes Introduction This chapter discusses the credit for child and dependent care expenses and covers the following topics. How do i do my 2012 taxes Tests you must meet to claim the credit. How do i do my 2012 taxes How to figure the credit. How do i do my 2012 taxes How to claim the credit. How do i do my 2012 taxes Employment taxes you may have to pay as a household employer. How do i do my 2012 taxes You may be able to claim the credit if you pay someone to care for your dependent who is under age 13 or for your spouse or dependent who is not able to care for himself or herself. How do i do my 2012 taxes The credit can be up to 35% of your expenses. How do i do my 2012 taxes To qualify, you must pay these expenses so you can work or look for work. How do i do my 2012 taxes This credit should not be confused with the child tax credit discussed in chapter 34. How do i do my 2012 taxes Dependent care benefits. How do i do my 2012 taxes   If you received any dependent care benefits from your employer during the year, you may be able to exclude from your income all or part of them. How do i do my 2012 taxes You must complete Form 2441, Part III, before you can figure the amount of your credit. How do i do my 2012 taxes See Dependent Care Benefits under How To Figure the Credit, later. How do i do my 2012 taxes Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information 503 Child and Dependent Care Expenses 926 Household Employer's Tax Guide Form (and Instructions) 2441 Child and Dependent Care Expenses Schedule H (Form 1040) Household Employment Taxes W-7 Application for IRS Individual Taxpayer Identification Number W-10 Dependent Care Provider's Identification and Certification Tests To Claim the Credit To be able to claim the credit for child and dependent care expenses, you must file Form 1040 or Form 1040A, not Form 1040EZ, and meet all the following tests. How do i do my 2012 taxes The care must be for one or more qualifying persons who are identified on Form 2441. How do i do my 2012 taxes (See Qualifying Person Test . How do i do my 2012 taxes ) You (and your spouse if filing jointly) must have earned income during the year. How do i do my 2012 taxes (However, see Rule for student-spouse or spouse not able to care for self under Earned Income Test, later. How do i do my 2012 taxes ) You must pay child and dependent care expenses so you (and your spouse if filing jointly) can work or look for work. How do i do my 2012 taxes (See Work-Related Expense Test , later. How do i do my 2012 taxes ) You must make payments for child and dependent care to someone you (and your spouse) cannot claim as a dependent. How do i do my 2012 taxes If you make payments to your child, he or she cannot be your dependent and must be age 19 or older by the end of the year. How do i do my 2012 taxes You cannot make payments to: Your spouse, or The parent of your qualifying person if your qualifying person is your child and under age 13. How do i do my 2012 taxes (See Payments to Relatives or Dependents under Work-Related Expense Test, later. How do i do my 2012 taxes ) Your filing status may be single, head of household, or qualifying widow(er) with dependent child. How do i do my 2012 taxes If you are married, you must file a joint return, unless an exception applies to you. How do i do my 2012 taxes (See Joint Return Test , later. How do i do my 2012 taxes ) You must identify the care provider on your tax return. How do i do my 2012 taxes (See Provider Identification Test , later. How do i do my 2012 taxes ) If you exclude or deduct dependent care benefits provided by a dependent care benefits plan, the total amount you exclude or deduct must be less than the dollar limit for qualifying expenses (generally, $3,000 if one qualifying person was cared for or $6,000 if two or more qualifying persons were cared for). How do i do my 2012 taxes (If two or more qualifying persons were cared for, the amount you exclude or deduct will always be less than the dollar limit, since the total amount you can exclude or deduct is limited to $5,000. How do i do my 2012 taxes See Reduced Dollar Limit under How To Figure the Credit, later. How do i do my 2012 taxes ) These tests are presented in Figure 32-A and are also explained in detail in this chapter. How do i do my 2012 taxes Figure 32-A. How do i do my 2012 taxes Can You Claim the Credit? Please click here for the text description of the image. How do i do my 2012 taxes Figure 32-A Can You Claim the Credit? Qualifying Person Test Your child and dependent care expenses must be for the care of one or more qualifying persons. How do i do my 2012 taxes A qualifying person is: Your qualifying child who is your dependent and who was under age 13 when the care was provided (but see Child of divorced or separated parents or parents living apart, later), Your spouse who was not physically or mentally able to care for himself or herself and lived with you for more than half the year, or A person who was not physically or mentally able to care for himself or herself, lived with you for more than half the year, and either: Was your dependent, or Would have been your dependent except that: He or she received gross income of $3,900 or more, He or she filed a joint return, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. How do i do my 2012 taxes Dependent defined. How do i do my 2012 taxes   A dependent is a person, other than you or your spouse, for whom you can claim an exemption. How do i do my 2012 taxes To be your dependent, a person must be your qualifying child (or your qualifying relative). How do i do my 2012 taxes Qualifying child. How do i do my 2012 taxes   To be your qualifying child, a child must live with you for more than half the year and meet other requirements. How do i do my 2012 taxes More information. How do i do my 2012 taxes   For more information about who is a dependent or a qualifying child, see chapter 3. How do i do my 2012 taxes Physically or mentally not able to care for oneself. How do i do my 2012 taxes   Persons who cannot dress, clean, or feed themselves because of physical or mental problems are considered not able to care for themselves. How do i do my 2012 taxes Also, persons who must have constant attention to prevent them from injuring themselves or others are considered not able to care for themselves. How do i do my 2012 taxes Person qualifying for part of year. How do i do my 2012 taxes   You determine a person's qualifying status each day. How do i do my 2012 taxes For example, if the person for whom you pay child and dependent care expenses no longer qualifies on September 16, count only those expenses through September 15. How do i do my 2012 taxes Also see Yearly limit under Dollar Limit, later. How do i do my 2012 taxes Birth or death of otherwise qualifying person. How do i do my 2012 taxes   In determining whether a person is a qualifying person, a person who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the person's home for more than half the time he or she was alive in 2013. How do i do my 2012 taxes Taxpayer identification number. How do i do my 2012 taxes   You must include on your return the name and taxpayer identification number (generally the social security number) of the qualifying person(s). How do i do my 2012 taxes If the correct information is not shown, the credit may be reduced or disallowed. How do i do my 2012 taxes Individual taxpayer identification number (ITIN) for aliens. How do i do my 2012 taxes   If your qualifying person is a nonresident or resident alien who does not have and cannot get a social security number (SSN), use that person's ITIN. How do i do my 2012 taxes The ITIN is entered wherever an SSN is requested on a tax return. How do i do my 2012 taxes To apply for an ITIN, see Form W-7. How do i do my 2012 taxes   An ITIN is for tax use only. How do i do my 2012 taxes It does not entitle the holder to social security benefits or change the holder's employment or immigration status under U. How do i do my 2012 taxes S. How do i do my 2012 taxes law. How do i do my 2012 taxes Adoption taxpayer identification number (ATIN). How do i do my 2012 taxes   If your qualifying person is a child who was placed in your home for adoption and for whom you do not have an SSN, you must get an ATIN for the child. How do i do my 2012 taxes File Form W-7A, Application for Taxpayer Identification Number for Pending U. How do i do my 2012 taxes S. How do i do my 2012 taxes Adoptions. How do i do my 2012 taxes Child of divorced or separated parents or parents living apart. How do i do my 2012 taxes   Even if you cannot claim your child as a dependent, he or she is treated as your qualifying person if: The child was under age 13 or was not physically or mentally able to care for himself or herself, The child received over half of his or her support during the calendar year from one or both parents who are divorced or legally separated under a decree of divorce or separate maintenance, are separated under a written separation agreement, or lived apart at all times during the last 6 months of the calendar year, The child was in the custody of one or both parents for more than half the year, and You were the child's custodial parent. How do i do my 2012 taxes   The custodial parent is the parent with whom the child lived for the greater number of nights in 2013. How do i do my 2012 taxes If the child was with each parent for an equal number of nights, the custodial parent is the parent with the higher adjusted gross income. How do i do my 2012 taxes For details and an exception for a parent who works at night, see Pub. How do i do my 2012 taxes 501. How do i do my 2012 taxes   The noncustodial parent cannot treat the child as a qualifying person even if that parent is entitled to claim the child as a dependent under the special rules for a child of divorced or separated parents. How do i do my 2012 taxes Earned Income Test To claim the credit, you (and your spouse if filing jointly) must have earned income during the year. How do i do my 2012 taxes Earned income. How do i do my 2012 taxes   Earned income includes wages, salaries, tips, other taxable employee compensation, and net earnings from self-employment. How do i do my 2012 taxes A net loss from self-employment reduces earned income. How do i do my 2012 taxes Earned income also includes strike benefits and any disability pay you report as wages. How do i do my 2012 taxes   Generally, only taxable compensation is included. How do i do my 2012 taxes However, you can elect to include nontaxable combat pay in earned income. How do i do my 2012 taxes If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election. How do i do my 2012 taxes (In other words, if one of you makes the election, the other one can also make it but does not have to. How do i do my 2012 taxes ) You should figure your credit both ways and make the election if it gives you a greater tax benefit. How do i do my 2012 taxes Members of certain religious faiths opposed to social security. How do i do my 2012 taxes   Certain income earned by persons who are members of certain religious faiths that are opposed to participation in Social Security Act programs and have an IRS-approved form that exempts certain income from social security and Medicare taxes may not be considered earned income for this purpose. How do i do my 2012 taxes See Earned Income Test in Publication 503. How do i do my 2012 taxes Not earned income. How do i do my 2012 taxes   Earned income does not include: Pensions and annuities, Social security and railroad retirement benefits, Workers' compensation, Interest and dividends, Unemployment compensation, Scholarship or fellowship grants, except for those reported on a Form W-2 and paid to you for teaching or other services, Nontaxable workfare payments, Child support payments received by you, Income of nonresident aliens that is not effectively connected with a U. How do i do my 2012 taxes S. How do i do my 2012 taxes trade or business, or Any amount received for work while an inmate in a penal institution. How do i do my 2012 taxes Rule for student-spouse or spouse not able to care for self. How do i do my 2012 taxes   Your spouse is treated as having earned income for any month that he or she is: A full-time student, or Physically or mentally not able to care for himself or herself. How do i do my 2012 taxes (Your spouse also must live with you for more than half the year. How do i do my 2012 taxes )   If you are filing a joint return, this rule also applies to you. How do i do my 2012 taxes You can be treated as having earned income for any month you are a full-time student or not able to care for yourself. How do i do my 2012 taxes   Figure the earned income of the nonworking spouse described under (1) or (2) above as explained under Earned Income Limit , later. How do i do my 2012 taxes   This rule applies to only one spouse for any one month. How do i do my 2012 taxes If, in the same month, both you and your spouse do not work and are either full-time students or not physically or mentally able to care for yourselves, only one of you can be treated as having earned income in that month. How do i do my 2012 taxes Full-time student. How do i do my 2012 taxes   You are a full-time student if you are enrolled at a school for the number of hours or classes that the school considers full time. How do i do my 2012 taxes You must have been a full-time student for some part of each of 5 calendar months during the year. How do i do my 2012 taxes (The months need not be consecutive. How do i do my 2012 taxes ) School. How do i do my 2012 taxes   The term “school” includes high schools, colleges, universities, and technical, trade, and mechanical schools. How do i do my 2012 taxes A school does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. How do i do my 2012 taxes Work-Related Expense Test Child and dependent care expenses must be work-related to qualify for the credit. How do i do my 2012 taxes Expenses are considered work-related only if both of the following are true. How do i do my 2012 taxes They allow you (and your spouse if filing jointly) to work or look for work. How do i do my 2012 taxes They are for a qualifying person's care. How do i do my 2012 taxes Working or Looking for Work To be work-related, your expenses must allow you to work or look for work. How do i do my 2012 taxes If you are married, generally both you and your spouse must work or look for work. How do i do my 2012 taxes One spouse is treated as working during any month he or she is a full-time student or is not physically or mentally able to care for himself or herself. How do i do my 2012 taxes Your work can be for others or in your own business or partnership. How do i do my 2012 taxes It can be either full time or part time. How do i do my 2012 taxes Work also includes actively looking for work. How do i do my 2012 taxes However, if you do not find a job and have no earned income for the year, you cannot take this credit. How do i do my 2012 taxes See Earned Income Test , earlier. How do i do my 2012 taxes An expense is not considered work-related merely because you had it while you were working. How do i do my 2012 taxes The purpose of the expense must be to allow you to work. How do i do my 2012 taxes Whether your expenses allow you to work or look for work depends on the facts. How do i do my 2012 taxes Example 1. How do i do my 2012 taxes The cost of a babysitter while you and your spouse go out to eat is not normally a work-related expense. How do i do my 2012 taxes Example 2. How do i do my 2012 taxes You work during the day. How do i do my 2012 taxes Your spouse works at night and sleeps during the day. How do i do my 2012 taxes You pay for care of your 5-year-old child during the hours when you are working and your spouse is sleeping. How do i do my 2012 taxes Your expenses are considered work-related. How do i do my 2012 taxes Volunteer work. How do i do my 2012 taxes    For this purpose, you are not considered to be working if you do unpaid volunteer work or volunteer work for a nominal salary. How do i do my 2012 taxes Work for part of year. How do i do my 2012 taxes   If you work or actively look for work during only part of the period covered by the expenses, then you must figure your expenses for each day. How do i do my 2012 taxes For example, if you work all year and pay care expenses of $250 a month ($3,000 for the year), all the expenses are work-related. How do i do my 2012 taxes However, if you work or look for work for only 2 months and 15 days during the year and pay expenses of $250 a month, your work-related expenses are limited to $625 (2½ months × $250). How do i do my 2012 taxes Temporary absence from work. How do i do my 2012 taxes   You do not have to figure your expenses for each day during a short, temporary absence from work, such as for vacation or a minor illness, if you have to pay for care anyway. How do i do my 2012 taxes Instead, you can figure your credit including the expenses you paid for the period of absence. How do i do my 2012 taxes   An absence of 2 weeks or less is a short, temporary absence. How do i do my 2012 taxes An absence of more than 2 weeks may be considered a short, temporary absence, depending on the circumstances. How do i do my 2012 taxes Example. How do i do my 2012 taxes You pay a nanny to care for your 2-year-old son and 4-year-old daughter so you can work. How do i do my 2012 taxes You become ill and miss 4 months of work but receive sick pay. How do i do my 2012 taxes You continue to pay the nanny to care for the children while you are ill. How do i do my 2012 taxes Your absence is not a short, temporary absence, and your expenses are not considered work-related. How do i do my 2012 taxes Part-time work. How do i do my 2012 taxes   If you work part-time, you generally must figure your expenses for each day. How do i do my 2012 taxes However, if you have to pay for care weekly, monthly, or in another way that includes both days worked and days not worked, you can figure your credit including the expenses you paid for days you did not work. How do i do my 2012 taxes Any day when you work at least 1 hour is a day of work. How do i do my 2012 taxes Example 1. How do i do my 2012 taxes You work 3 days a week. How do i do my 2012 taxes While you work, your 6-year-old child attends a dependent care center, which complies with all state and local regulations. How do i do my 2012 taxes You can pay the center $150 for any 3 days a week or $250 for 5 days a week. How do i do my 2012 taxes Your child attends the center 5 days a week. How do i do my 2012 taxes Your work-related expenses are limited to $150 a week. How do i do my 2012 taxes Example 2. How do i do my 2012 taxes The facts are the same as in Example 1 except the center does not offer a 3-day option. How do i do my 2012 taxes The entire $250 weekly fee may be a work-related expense. How do i do my 2012 taxes Care of a Qualifying Person To be work-related, your expenses must be to provide care for a qualifying person. How do i do my 2012 taxes You do not have to choose the least expensive way of providing care. How do i do my 2012 taxes The cost of a paid care provider may be an expense for the care of a qualifying person even if another care provider is available at no cost. How do i do my 2012 taxes Expenses are for the care of a qualifying person only if their main purpose is the person's well-being and protection. How do i do my 2012 taxes Expenses for household services qualify if part of the services is for the care of qualifying persons. How do i do my 2012 taxes See Household services , later. How do i do my 2012 taxes Expenses not for care. How do i do my 2012 taxes   Expenses for care do not include amounts you pay for food, lodging, clothing, education, and entertainment. How do i do my 2012 taxes However, you can include small amounts paid for these items if they are incidental to and cannot be separated from the cost of caring for the qualifying person. How do i do my 2012 taxes   Child support payments are not for care and do not qualify for the credit. How do i do my 2012 taxes Education. How do i do my 2012 taxes   Expenses for a child in nursery school, preschool, or similar programs for children below the level of kindergarten are expenses for care. How do i do my 2012 taxes Expenses to attend kindergarten or a higher grade are not expenses for care. How do i do my 2012 taxes Do not use these expenses to figure your credit. How do i do my 2012 taxes   However, expenses for before- or after-school care of a child in kindergarten or a higher grade may be expenses for care. How do i do my 2012 taxes   Summer school and tutoring programs are not for care. How do i do my 2012 taxes Example 1. How do i do my 2012 taxes You take your 3-year-old child to a nursery school that provides lunch and educational activities as a part of its preschool childcare service. How do i do my 2012 taxes The lunch and educational activities are incidental to the childcare, and their cost cannot be separated from the cost of care. How do i do my 2012 taxes You can count the total cost when you figure the credit. How do i do my 2012 taxes Example 2. How do i do my 2012 taxes You place your 10-year-old child in a boarding school so you can work full time. How do i do my 2012 taxes Only the part of the boarding school expense that is for the care of your child is a work-related expense. How do i do my 2012 taxes You can count that part of the expense in figuring your credit if it can be separated from the cost of education. How do i do my 2012 taxes You cannot count any part of the amount you pay the school for your child's education. How do i do my 2012 taxes Care outside your home. How do i do my 2012 taxes   You can count the cost of care provided outside your home if the care is for your dependent under age 13 or any other qualifying person who regularly spends at least 8 hours each day in your home. How do i do my 2012 taxes Dependent care center. How do i do my 2012 taxes   You can count care provided outside your home by a dependent care center only if the center complies with all state and local regulations that apply to these centers. How do i do my 2012 taxes   A dependent care center is a place that provides care for more than six persons (other than persons who live there) and receives a fee, payment, or grant for providing services for any of those persons, even if the center is not run for profit. How do i do my 2012 taxes Camp. How do i do my 2012 taxes   The cost of sending your child to an overnight camp is not considered a work-related expense. How do i do my 2012 taxes The cost of sending your child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers or soccer. How do i do my 2012 taxes Transportation. How do i do my 2012 taxes   If a care provider takes a qualifying person to or from a place where care is provided, that transportation is for the care of the qualifying person. How do i do my 2012 taxes This includes transportation by bus, subway, taxi, or private car. How do i do my 2012 taxes However, transportation not provided by a care provider is not for the care of a qualifying person. How do i do my 2012 taxes Also, if you pay the transportation cost for the care provider to come to your home, that expense is not for care of a qualifying person. How do i do my 2012 taxes Fees and deposits. How do i do my 2012 taxes   Fees you paid to an agency to get the services of a care provider, deposits you paid to an agency or preschool, application fees, and other indirect expenses are work-related expenses if you have to pay them to get care, even though they are not directly for care. How do i do my 2012 taxes However, a forfeited deposit is not for the care of a qualifying person if care is not provided. How do i do my 2012 taxes Example 1. How do i do my 2012 taxes You paid a fee to an agency to get the services of the nanny who cares for your 2-year-old daughter while you work. How do i do my 2012 taxes The fee you paid is a work-related expense. How do i do my 2012 taxes Example 2. How do i do my 2012 taxes You placed a deposit with a preschool to reserve a place for your 3-year-old child. How do i do my 2012 taxes You later sent your child to a different preschool and forfeited the deposit. How do i do my 2012 taxes The forfeited deposit is not for care and so is not a work-related expense. How do i do my 2012 taxes Household services. How do i do my 2012 taxes   Expenses you pay for household services meet the work-related expense test if they are at least partly for the well-being and protection of a qualifying person. How do i do my 2012 taxes   Household services are ordinary and usual services done in and around your home that are necessary to run your home. How do i do my 2012 taxes They include the services of a housekeeper, maid, or cook. How do i do my 2012 taxes However, they do not include the services of a chauffeur, bartender, or gardener. How do i do my 2012 taxes See Household Services in Publication 503 for more information. How do i do my 2012 taxes   In this chapter, the term housekeeper refers to any household employee whose services include the care of a qualifying person. How do i do my 2012 taxes Taxes paid on wages. How do i do my 2012 taxes   The taxes you pay on wages for qualifying child and dependent care services are work-related expenses. How do i do my 2012 taxes See Employment Taxes for Household Employers , later. How do i do my 2012 taxes Payments to Relatives or Dependents You can count work-related payments you make to relatives who are not your dependents, even if they live in your home. How do i do my 2012 taxes However, do not count any amounts you pay to: A dependent for whom you (or your spouse if filing jointly) can claim an exemption, Your child who was under age 19 at the end of the year, even if he or she is not your dependent, A person who was your spouse any time during the year, or The parent of your qualifying person if your qualifying person is your child and under age 13. How do i do my 2012 taxes Joint Return Test Generally, married couples must file a joint return to take the credit. How do i do my 2012 taxes However, if you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. How do i do my 2012 taxes Legally separated. How do i do my 2012 taxes   You are not considered married if you are legally separated from your spouse under a decree of divorce or separate maintenance. How do i do my 2012 taxes You may be eligible to take the credit on your return using head of household filing status. How do i do my 2012 taxes Married and living apart. How do i do my 2012 taxes   You are not considered married and are eligible to take the credit if all the following apply. How do i do my 2012 taxes You file a return apart from your spouse. How do i do my 2012 taxes Your home is the home of a qualifying person for more than half the year. How do i do my 2012 taxes You pay more than half the cost of keeping up your home for the year. How do i do my 2012 taxes Your spouse does not live in your home for the last 6 months of the year. How do i do my 2012 taxes Costs of keeping up a home. How do i do my 2012 taxes   The costs of keeping up a home normally include property taxes, mortgage interest, rent, utility charges, home repairs, insurance on the home, and food eaten at home. How do i do my 2012 taxes   The costs of keeping up a home do not include payments for clothing, education, medical treatment, vacations, life insurance, transportation, or mortgage principal. How do i do my 2012 taxes   They also do not include the purchase, permanent improvement, or replacement of property. How do i do my 2012 taxes For example, you cannot include the cost of replacing a water heater. How do i do my 2012 taxes However, you can include the cost of repairing a water heater. How do i do my 2012 taxes Death of spouse. How do i do my 2012 taxes   If your spouse died during the year and you do not remarry before the end of the year, you generally must file a joint return to take the credit. How do i do my 2012 taxes If you do remarry before the end of the year, the credit can be claimed on your deceased spouse's return. How do i do my 2012 taxes Provider Identification Test You must identify all persons or organizations that provide care for your child or dependent. How do i do my 2012 taxes Use Form 2441, Part I, to show the information. How do i do my 2012 taxes If you do not have any care providers and you are filing Form 2441 only to report taxable income in Part III, enter “none” in line 1, column (a). How do i do my 2012 taxes Information needed. How do i do my 2012 taxes   To identify the care provider, you must give the provider's: Name, Address, and Taxpayer identification number. How do i do my 2012 taxes   If the care provider is an individual, the taxpayer identification number is his or her social security number or individual taxpayer identification number. How do i do my 2012 taxes If the care provider is an organization, then it is the employer identification number (EIN). How do i do my 2012 taxes   You do not have to show the taxpayer identification number if the care provider is a tax-exempt organization (such as a church or school). How do i do my 2012 taxes In this case, enter “Tax-Exempt” in the space where Form 2441 asks for the number. How do i do my 2012 taxes   If you cannot provide all of the information or if the information is incorrect, you must be able to show that you used due diligence (discussed later) in trying to furnish the necessary information. How do i do my 2012 taxes Getting the information. How do i do my 2012 taxes   You can use Form W-10 to request the required information from the care provider. How do i do my 2012 taxes If you do not use Form W-10, you can get the information from one of the other sources listed in the instructions for Form W-10 including: A copy of the provider's social security card, A copy of the provider's completed Form W-4 if he or she is your household employee, A copy of the statement furnished by your employer if the provider is your employer's dependent care plan, or A letter or invoice from the provider if it shows the information. How do i do my 2012 taxes    You should keep this information with your tax records. How do i do my 2012 taxes Do not send Form W-10 (or other document containing this information) to the Internal Revenue Service. How do i do my 2012 taxes Due diligence. How do i do my 2012 taxes   If the care provider information you give is incorrect or incomplete, your credit may not be allowed. How do i do my 2012 taxes However, if you can show that you used due diligence in trying to supply the information, you can still claim the credit. How do i do my 2012 taxes   You can show due diligence by getting and keeping the provider's completed Form W-10 or one of the other sources of information just listed. How do i do my 2012 taxes Care providers can be penalized if they do not provide this information to you or if they provide incorrect information. How do i do my 2012 taxes Provider refusal. How do i do my 2012 taxes   If the provider refuses to give you their identifying information, you should report on Form 2441 whatever information you have (such as the name and address). How do i do my 2012 taxes Enter “See Attached Statement” in the columns calling for the information you do not have. How do i do my 2012 taxes Then attach a statement explaining that you requested the information from the care provider, but the provider did not give you the information. How do i do my 2012 taxes Be sure to write your name and social security number on this statement. How do i do my 2012 taxes The statement will show that you used due diligence in trying to furnish the necessary information. How do i do my 2012 taxes U. How do i do my 2012 taxes S. How do i do my 2012 taxes citizens and resident aliens living abroad. How do i do my 2012 taxes   If you are living abroad, your care provider may not have, and may not be required to get, a U. How do i do my 2012 taxes S. How do i do my 2012 taxes taxpayer identification number (for example, an SSN or EIN). How do i do my 2012 taxes If so, enter “LAFCP” (Living Abroad Foreign Care Provider) in the space for the care provider's taxpayer identification number. How do i do my 2012 taxes How To Figure the Credit Your credit is a percentage of your work-related expenses. How do i do my 2012 taxes Your expenses are subject to the earned income limit and the dollar limit. How do i do my 2012 taxes The percentage is based on your adjusted gross income. How do i do my 2012 taxes Figuring Total Work-Related Expenses To figure the credit for 2013 work-related expenses, count only those you paid by December 31, 2013. How do i do my 2012 taxes Expenses prepaid in an earlier year. How do i do my 2012 taxes   If you pay for services before they are provided, you can count the prepaid expenses only in the year the care is received. How do i do my 2012 taxes Claim the expenses for the later year as if they were actually paid in that later year. How do i do my 2012 taxes Expenses not paid until the following year. How do i do my 2012 taxes   Do not count 2012 expenses that you paid in 2013 as work-related expenses for 2013. How do i do my 2012 taxes You may be able to claim an additional credit for them on your 2013 return, but you must figure it separately. How do i do my 2012 taxes See Payments for prior year's expenses under Amount of Credit in Publication 503. How do i do my 2012 taxes    If you had expenses in 2013 that you did not pay until 2014, you cannot count them when figuring your 2013 credit. How do i do my 2012 taxes You may be able to claim a credit for them on your 2014 return. How do i do my 2012 taxes Expenses reimbursed. How do i do my 2012 taxes   If a state social services agency pays you a nontaxable amount to reimburse you for some of your child and dependent care expenses, you cannot count the expenses that are reimbursed as work-related expenses. How do i do my 2012 taxes Example. How do i do my 2012 taxes You paid work-related expenses of $3,000. How do i do my 2012 taxes You are reimbursed $2,000 by a state social services agency. How do i do my 2012 taxes You can use only $1,000 to figure your credit. How do i do my 2012 taxes Medical expenses. How do i do my 2012 taxes   Some expenses for the care of qualifying persons who are not able to care for themselves may qualify as work-related expenses and also as medical expenses. How do i do my 2012 taxes You can use them either way, but you cannot use the same expenses to claim both a credit and a medical expense deduction. How do i do my 2012 taxes   If you use these expenses to figure the credit and they are more than the earned income limit or the dollar limit, discussed later, you can add the excess to your medical expenses. How do i do my 2012 taxes However, if you use your total expenses to figure your medical expense deduction, you cannot use any part of them to figure your credit. How do i do my 2012 taxes    Amounts excluded from your income under your employer's dependent care benefits plan cannot be used to claim a medical expense deduction. How do i do my 2012 taxes Dependent Care Benefits If you receive dependent care benefits, your dollar limit for purposes of the credit may be reduced. How do i do my 2012 taxes See Reduced Dollar Limit , later. How do i do my 2012 taxes But, even if you cannot take the credit, you may be able to take an exclusion or deduction for the dependent care benefits. How do i do my 2012 taxes Dependent care benefits. How do i do my 2012 taxes   Dependent care benefits include: Amounts your employer paid directly to either you or your care provider for the care of your qualifying person while you work, The fair market value of care in a daycare facility provided or sponsored by your employer, and Pre-tax contributions you made under a dependent care flexible spending arrangement. How do i do my 2012 taxes Your salary may have been reduced to pay for these benefits. How do i do my 2012 taxes If you received benefits as an employee, they should be shown in box 10 of your Form W-2. How do i do my 2012 taxes See Statement for employee , later. How do i do my 2012 taxes Benefits you received as a partner should be shown in box 13 of your Schedule K-1 (Form 1065) with code O. How do i do my 2012 taxes Enter the amount of these benefits on Form 2441, Part III, line 12. How do i do my 2012 taxes Exclusion or deduction. How do i do my 2012 taxes   If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. How do i do my 2012 taxes Your employer can tell you whether your benefit plan qualifies. How do i do my 2012 taxes To claim the exclusion, you must complete Part III of Form 2441. How do i do my 2012 taxes You cannot use Form 1040EZ. How do i do my 2012 taxes   If you are self-employed and receive benefits from a qualified dependent care benefit plan, you are treated as both employer and employee. How do i do my 2012 taxes Therefore, you would not get an exclusion from wages. How do i do my 2012 taxes Instead, you would get a deduction on Form 1040, Schedule C, line 14; Schedule E, line 19 or 28; or Schedule F, line 15. How do i do my 2012 taxes To claim the deduction, you must use Form 2441. How do i do my 2012 taxes   The amount you can exclude or deduct is limited to the smallest of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). How do i do my 2012 taxes The definition of earned income for the exclusion or deduction is the same as the definition used when figuring the credit except that earned income for the exclusion or deduction does not include any dependent care benefits you receive. How do i do my 2012 taxes See Earned Income Limit, later. How do i do my 2012 taxes    You can choose to include your nontaxable combat pay in earned income when figuring your exclusion or deduction, even if you choose not to include it in earned income for the earned income credit or the credit for child and dependent care expenses. How do i do my 2012 taxes Statement for employee. How do i do my 2012 taxes   Your employer must give you a Form W-2 (or similar statement) showing in box 10 the total amount of dependent care benefits provided to you during the year under a qualified plan. How do i do my 2012 taxes Your employer will also include any dependent care benefits over $5,000 in your wages shown on your Form W-2 in box 1. How do i do my 2012 taxes Effect of exclusion on credit. How do i do my 2012 taxes   If you exclude dependent care benefits from your income, the amount of the excluded benefits: Is not included in your work-related expenses, and Reduces the dollar limit, discussed later. How do i do my 2012 taxes Earned Income Limit The amount of work-related expenses you use to figure your credit cannot be more than: Your earned income for the year if you are single at the end of the year, or The smaller of your or your spouse's earned income for the year if you are married at the end of the year. How do i do my 2012 taxes Earned income is defined under Earned Income Test , earlier. How do i do my 2012 taxes For purposes of item (2), use your spouse's earned income for the entire year, even if you were married for only part of the year. How do i do my 2012 taxes Separated spouse. How do i do my 2012 taxes   If you are legally separated or married and living apart from your spouse (as described under Joint Return Test , earlier), you are not considered married for purposes of the earned income limit. How do i do my 2012 taxes Use only your income in figuring the earned income limit. How do i do my 2012 taxes Surviving spouse. How do i do my 2012 taxes   If your spouse died during the year and you file a joint return as a surviving spouse, you may, but are not required to, take into account the earned income of your spouse who died during the year. How do i do my 2012 taxes Community property laws. How do i do my 2012 taxes   You should disregard community property laws when you figure earned income for this credit. How do i do my 2012 taxes You or your spouse is a student or not able to care for self. How do i do my 2012 taxes   Your spouse who is either a full-time student or not able to care for himself or herself is treated as having earned income. How do i do my 2012 taxes His or her earned income for each month is considered to be at least $250 if there is one qualifying person in your home, or at least $500 if there are two or more. How do i do my 2012 taxes Spouse works. How do i do my 2012 taxes   If your spouse works during that month, use the higher of $250 (or $500) or his or her actual earned income for that month. How do i do my 2012 taxes Spouse qualifies for part of month. How do i do my 2012 taxes    If your spouse is a full-time student or not able to care for himself or herself for only part of a month, the full $250 (or $500) still applies for that month. How do i do my 2012 taxes You are a student or not able to care for self. How do i do my 2012 taxes   These rules also apply if you are a student or not able to care for yourself and you are filing a joint return. How do i do my 2012 taxes For each month or part of a month you are a student or not able to care for yourself, your earned income is considered to be at least $250 (or $500). How do i do my 2012 taxes If you also work during that month, use the higher of $250 (or $500) or your actual earned income for that month. How do i do my 2012 taxes Both spouses qualify. How do i do my 2012 taxes   If, in the same month, both you and your spouse are either full-time students or not able to care for yourselves, only one spouse can be considered to have this earned income of $250 (or $500) for that month. How do i do my 2012 taxes Dollar Limit There is a dollar limit on the amount of your work-related expenses you can use to figure the credit. How do i do my 2012 taxes This limit is $3,000 for one qualifying person, or $6,000 for two or more qualifying persons. How do i do my 2012 taxes If you paid work-related expenses for the care of two or more qualifying persons, the applicable dollar limit is $6,000. How do i do my 2012 taxes This $6,000 limit does not need to be divided equally among them. How do i do my 2012 taxes For example, if your work-related expenses for the care of one qualifying person are $3,200 and your work-related expenses for another qualifying person are $2,800, you can use the total, $6,000, when figuring the credit. How do i do my 2012 taxes Yearly limit. How do i do my 2012 taxes   The dollar limit is a yearly limit. How do i do my 2012 taxes The amount of the dollar limit remains the same no matter how long, during the year, you have a qualifying person in your household. How do i do my 2012 taxes Use the $3,000 limit if you paid work-related expenses for the care of one qualifying person at any time during the year. How do i do my 2012 taxes Use $6,000 if you paid work-related expenses for the care of more than one qualifying person at any time during the year. How do i do my 2012 taxes Reduced Dollar Limit If you received dependent care benefits that you exclude or deduct from your income, you must subtract that amount from the dollar limit that applies to you. How do i do my 2012 taxes Your reduced dollar limit is figured on Form 2441, Part III. How do i do my 2012 taxes See Dependent Care Benefits , earlier, for information on excluding or deducting these benefits. How do i do my 2012 taxes Example 1. How do i do my 2012 taxes George is a widower with one child and earns $24,000 a year. How do i do my 2012 taxes He pays work-related expenses of $2,900 for the care of his 4-year-old child and qualifies to claim the credit for child and dependent care expenses. How do i do my 2012 taxes His employer pays an additional $1,000 under a dependent care benefit plan. How do i do my 2012 taxes This $1,000 is excluded from George's income. How do i do my 2012 taxes Although the dollar limit for his work-related expenses is $3,000 (one qualifying person), George figures his credit on only $2,000 of the $2,900 work-related expenses he paid. How do i do my 2012 taxes This is because his dollar limit is reduced as shown next. How do i do my 2012 taxes   George's Reduced Dollar Limit 1) Maximum allowable expenses for one qualifying person $3,000 2) Minus: Dependent care benefits George excludes from income −1,000 3) Reduced dollar limit on expenses George can use for the credit $2,000 Example 2. How do i do my 2012 taxes Randall is married and both he and his wife are employed. How do i do my 2012 taxes Each has earned income in excess of $6,000. How do i do my 2012 taxes They have two children, Anne and Andy, ages 2 and 4, who attend a daycare facility licensed and regulated by the state. How do i do my 2012 taxes Randall's work-related expenses are $6,000 for the year. How do i do my 2012 taxes Randall's employer has a dependent care assistance program as part of its cafeteria plan, which allows employees to make pre-tax contributions to a dependent care flexible spending arrangement. How do i do my 2012 taxes Randall has elected to take the maximum $5,000 exclusion from his salary to cover dependent care expenses through this program. How do i do my 2012 taxes Although the dollar limit for his work- related expenses is $6,000 (two or more qualifying persons), Randall figures his credit on only $1,000 of the $6,000 work-related expense paid. How do i do my 2012 taxes This is because his dollar limit is reduced as shown next. How do i do my 2012 taxes   Randall's Reduced Dollar Limit 1) Maximum allowable expenses for two qualifying persons $6,000 2) Minus: Dependent care benefits Randall selects from employer's cafeteria plan and excludes from income −5,000 3) Reduced dollar limit on expenses Randall can use for the credit $1,000 Amount of Credit To determine the amount of your credit, multiply your work-related expenses (after applying the earned income and dollar limits) by a percentage. How do i do my 2012 taxes This percentage depends on your adjusted gross income shown on Form 1040, line 38, or Form 1040A, line 22. How do i do my 2012 taxes The following table shows the percentage to use based on adjusted gross income. How do i do my 2012 taxes   IF your adjusted gross income is: THEN the percentage is:       Over   But not over         $0   $15,000   35%       15,000   17,000   34%       17,000   19,000   33%       19,000   21,000   32%       21,000   23,000   31%       23,000   25,000   30%       25,000   27,000   29%       27,000   29,000   28%       29,000   31,000   27%       31,000   33,000   26%       33,000   35,000   25%       35,000   37,000   24%       37,000   39,000   23%       39,000   41,000   22%       41,000   43,000   21%       43,000   No limit   20%   How To Claim the Credit To claim the credit, you can file Form 1040 or Form 1040A. How do i do my 2012 taxes You cannot claim the credit on Form 1040EZ. How do i do my 2012 taxes Form 1040 or 1040A. How do i do my 2012 taxes   You must complete Form 2441 and attach it to your Form 1040 or 1040A. How do i do my 2012 taxes Enter the credit on Form 1040, line 48, or Form 1040A, line 29. How do i do my 2012 taxes Limit on credit. How do i do my 2012 taxes   The amount of credit you can claim is generally limited to the amount of your tax. How do i do my 2012 taxes For more information, see the Instructions for Form 2441. How do i do my 2012 taxes Tax credit not refundable. How do i do my 2012 taxes   You cannot get a refund for any part of the credit that is more than this limit. How do i do my 2012 taxes Recordkeeping. How do i do my 2012 taxes You should keep records of your work-related expenses. How do i do my 2012 taxes Also, if your dependent or spouse is not able to care for himself or herself, your records should show both the nature and the length of the disability. How do i do my 2012 taxes Other records you should keep to support your claim for the credit are described earlier under Provider Identification Test . How do i do my 2012 taxes Employment Taxes for Household Employers If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer. How do i do my 2012 taxes If you are a household employer, you will need an employer identification number (EIN) and you may have to pay employment taxes. How do i do my 2012 taxes If the individuals who work in your home are self-employed, you are not liable for any of the taxes discussed in this section. How do i do my 2012 taxes Self-employed persons who are in business for themselves are not household employees. How do i do my 2012 taxes Usually, you are not a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business. How do i do my 2012 taxes If you use a placement agency that exercises control over what work is done and how it will be done by a babysitter or companion who works in your home, the worker is not your employee. How do i do my 2012 taxes This control could include providing rules of conduct and appearance and requiring regular reports. How do i do my 2012 taxes In this case, you do not have to pay employment taxes. How do i do my 2012 taxes But, if an agency merely gives you a list of sitters and you hire one from that list, and pay the sitter directly, the sitter may be your employee. How do i do my 2012 taxes If you have a household employee, you may be subject to: Social security and Medicare taxes, Federal unemployment tax, and Federal income tax withholding. How do i do my 2012 taxes Social security and Medicare taxes are generally withheld from the employee's pay and matched by the employer. How do i do my 2012 taxes Federal unemployment (FUTA) tax is paid by the employer only and provides for payments of unemployment compensation to workers who have lost their jobs. How do i do my 2012 taxes Federal income tax is withheld from the employee's total pay if the employee asks you to do so and you agree. How do i do my 2012 taxes For more information on a household employer's tax responsibilities, see Publication 926 and Schedule H (Form 1040) and its instructions. How do i do my 2012 taxes State employment tax. How do i do my 2012 taxes   You may also have to pay state unemployment tax. How do i do my 2012 taxes Contact your state unemployment tax office for information. How do i do my 2012 taxes You should also find out whether you need to pay or collect other state employment taxes or carry workers' compensation insurance. How do i do my 2012 taxes For a list of state unemployment tax agencies, visit the U. How do i do my 2012 taxes S. How do i do my 2012 taxes Department of Labor's website. How do i do my 2012 taxes A link to that website is in Publication 926, or you can find it with an online search. How do i do my 2012 taxes Prev  Up  Next   Home   More Online Publications