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How To File Tax Extension

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How To File Tax Extension

How to file tax extension 32. How to file tax extension   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 to file tax extension Employment Taxes for Household Employers Reminders Taxpayer identification number needed for each qualifying person. How to file tax extension  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 to file tax extension See Taxpayer identification number under Qualifying Person Test, later. How to file tax extension You may have to pay employment taxes. How to file tax extension  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 to file tax extension 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 to file tax extension See Employment Taxes for Household Employers , later. How to file tax extension Introduction This chapter discusses the credit for child and dependent care expenses and covers the following topics. How to file tax extension Tests you must meet to claim the credit. How to file tax extension How to figure the credit. How to file tax extension How to claim the credit. How to file tax extension Employment taxes you may have to pay as a household employer. How to file tax extension 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 to file tax extension The credit can be up to 35% of your expenses. How to file tax extension To qualify, you must pay these expenses so you can work or look for work. How to file tax extension This credit should not be confused with the child tax credit discussed in chapter 34. How to file tax extension Dependent care benefits. How to file tax extension   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 to file tax extension You must complete Form 2441, Part III, before you can figure the amount of your credit. How to file tax extension See Dependent Care Benefits under How To Figure the Credit, later. How to file tax extension 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 to file tax extension The care must be for one or more qualifying persons who are identified on Form 2441. How to file tax extension (See Qualifying Person Test . How to file tax extension ) You (and your spouse if filing jointly) must have earned income during the year. How to file tax extension (However, see Rule for student-spouse or spouse not able to care for self under Earned Income Test, later. How to file tax extension ) You must pay child and dependent care expenses so you (and your spouse if filing jointly) can work or look for work. How to file tax extension (See Work-Related Expense Test , later. How to file tax extension ) You must make payments for child and dependent care to someone you (and your spouse) cannot claim as a dependent. How to file tax extension 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 to file tax extension 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 to file tax extension (See Payments to Relatives or Dependents under Work-Related Expense Test, later. How to file tax extension ) Your filing status may be single, head of household, or qualifying widow(er) with dependent child. How to file tax extension If you are married, you must file a joint return, unless an exception applies to you. How to file tax extension (See Joint Return Test , later. How to file tax extension ) You must identify the care provider on your tax return. How to file tax extension (See Provider Identification Test , later. How to file tax extension ) 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 to file tax extension (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 to file tax extension See Reduced Dollar Limit under How To Figure the Credit, later. How to file tax extension ) These tests are presented in Figure 32-A and are also explained in detail in this chapter. How to file tax extension Figure 32-A. How to file tax extension Can You Claim the Credit? Please click here for the text description of the image. How to file tax extension 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 to file tax extension 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 to file tax extension Dependent defined. How to file tax extension   A dependent is a person, other than you or your spouse, for whom you can claim an exemption. How to file tax extension To be your dependent, a person must be your qualifying child (or your qualifying relative). How to file tax extension Qualifying child. How to file tax extension   To be your qualifying child, a child must live with you for more than half the year and meet other requirements. How to file tax extension More information. How to file tax extension   For more information about who is a dependent or a qualifying child, see chapter 3. How to file tax extension Physically or mentally not able to care for oneself. How to file tax extension   Persons who cannot dress, clean, or feed themselves because of physical or mental problems are considered not able to care for themselves. How to file tax extension Also, persons who must have constant attention to prevent them from injuring themselves or others are considered not able to care for themselves. How to file tax extension Person qualifying for part of year. How to file tax extension   You determine a person's qualifying status each day. How to file tax extension 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 to file tax extension Also see Yearly limit under Dollar Limit, later. How to file tax extension Birth or death of otherwise qualifying person. How to file tax extension   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 to file tax extension Taxpayer identification number. How to file tax extension   You must include on your return the name and taxpayer identification number (generally the social security number) of the qualifying person(s). How to file tax extension If the correct information is not shown, the credit may be reduced or disallowed. How to file tax extension Individual taxpayer identification number (ITIN) for aliens. How to file tax extension   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 to file tax extension The ITIN is entered wherever an SSN is requested on a tax return. How to file tax extension To apply for an ITIN, see Form W-7. How to file tax extension   An ITIN is for tax use only. How to file tax extension It does not entitle the holder to social security benefits or change the holder's employment or immigration status under U. How to file tax extension S. How to file tax extension law. How to file tax extension Adoption taxpayer identification number (ATIN). How to file tax extension   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 to file tax extension File Form W-7A, Application for Taxpayer Identification Number for Pending U. How to file tax extension S. How to file tax extension Adoptions. How to file tax extension Child of divorced or separated parents or parents living apart. How to file tax extension   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 to file tax extension   The custodial parent is the parent with whom the child lived for the greater number of nights in 2013. How to file tax extension 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 to file tax extension For details and an exception for a parent who works at night, see Pub. How to file tax extension 501. How to file tax extension   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 to file tax extension Earned Income Test To claim the credit, you (and your spouse if filing jointly) must have earned income during the year. How to file tax extension Earned income. How to file tax extension   Earned income includes wages, salaries, tips, other taxable employee compensation, and net earnings from self-employment. How to file tax extension A net loss from self-employment reduces earned income. How to file tax extension Earned income also includes strike benefits and any disability pay you report as wages. How to file tax extension   Generally, only taxable compensation is included. How to file tax extension However, you can elect to include nontaxable combat pay in earned income. How to file tax extension 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 to file tax extension (In other words, if one of you makes the election, the other one can also make it but does not have to. How to file tax extension ) You should figure your credit both ways and make the election if it gives you a greater tax benefit. How to file tax extension Members of certain religious faiths opposed to social security. How to file tax extension   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 to file tax extension See Earned Income Test in Publication 503. How to file tax extension Not earned income. How to file tax extension   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 to file tax extension S. How to file tax extension trade or business, or Any amount received for work while an inmate in a penal institution. How to file tax extension Rule for student-spouse or spouse not able to care for self. How to file tax extension   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 to file tax extension (Your spouse also must live with you for more than half the year. How to file tax extension )   If you are filing a joint return, this rule also applies to you. How to file tax extension 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 to file tax extension   Figure the earned income of the nonworking spouse described under (1) or (2) above as explained under Earned Income Limit , later. How to file tax extension   This rule applies to only one spouse for any one month. How to file tax extension 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 to file tax extension Full-time student. How to file tax extension   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 to file tax extension You must have been a full-time student for some part of each of 5 calendar months during the year. How to file tax extension (The months need not be consecutive. How to file tax extension ) School. How to file tax extension   The term “school” includes high schools, colleges, universities, and technical, trade, and mechanical schools. How to file tax extension A school does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. How to file tax extension Work-Related Expense Test Child and dependent care expenses must be work-related to qualify for the credit. How to file tax extension Expenses are considered work-related only if both of the following are true. How to file tax extension They allow you (and your spouse if filing jointly) to work or look for work. How to file tax extension They are for a qualifying person's care. How to file tax extension Working or Looking for Work To be work-related, your expenses must allow you to work or look for work. How to file tax extension If you are married, generally both you and your spouse must work or look for work. How to file tax extension 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 to file tax extension Your work can be for others or in your own business or partnership. How to file tax extension It can be either full time or part time. How to file tax extension Work also includes actively looking for work. How to file tax extension However, if you do not find a job and have no earned income for the year, you cannot take this credit. How to file tax extension See Earned Income Test , earlier. How to file tax extension An expense is not considered work-related merely because you had it while you were working. How to file tax extension The purpose of the expense must be to allow you to work. How to file tax extension Whether your expenses allow you to work or look for work depends on the facts. How to file tax extension Example 1. How to file tax extension The cost of a babysitter while you and your spouse go out to eat is not normally a work-related expense. How to file tax extension Example 2. How to file tax extension You work during the day. How to file tax extension Your spouse works at night and sleeps during the day. How to file tax extension You pay for care of your 5-year-old child during the hours when you are working and your spouse is sleeping. How to file tax extension Your expenses are considered work-related. How to file tax extension Volunteer work. How to file tax extension    For this purpose, you are not considered to be working if you do unpaid volunteer work or volunteer work for a nominal salary. How to file tax extension Work for part of year. How to file tax extension   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 to file tax extension 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 to file tax extension 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 to file tax extension Temporary absence from work. How to file tax extension   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 to file tax extension Instead, you can figure your credit including the expenses you paid for the period of absence. How to file tax extension   An absence of 2 weeks or less is a short, temporary absence. How to file tax extension An absence of more than 2 weeks may be considered a short, temporary absence, depending on the circumstances. How to file tax extension Example. How to file tax extension You pay a nanny to care for your 2-year-old son and 4-year-old daughter so you can work. How to file tax extension You become ill and miss 4 months of work but receive sick pay. How to file tax extension You continue to pay the nanny to care for the children while you are ill. How to file tax extension Your absence is not a short, temporary absence, and your expenses are not considered work-related. How to file tax extension Part-time work. How to file tax extension   If you work part-time, you generally must figure your expenses for each day. How to file tax extension 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 to file tax extension Any day when you work at least 1 hour is a day of work. How to file tax extension Example 1. How to file tax extension You work 3 days a week. How to file tax extension While you work, your 6-year-old child attends a dependent care center, which complies with all state and local regulations. How to file tax extension You can pay the center $150 for any 3 days a week or $250 for 5 days a week. How to file tax extension Your child attends the center 5 days a week. How to file tax extension Your work-related expenses are limited to $150 a week. How to file tax extension Example 2. How to file tax extension The facts are the same as in Example 1 except the center does not offer a 3-day option. How to file tax extension The entire $250 weekly fee may be a work-related expense. How to file tax extension Care of a Qualifying Person To be work-related, your expenses must be to provide care for a qualifying person. How to file tax extension You do not have to choose the least expensive way of providing care. How to file tax extension 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 to file tax extension Expenses are for the care of a qualifying person only if their main purpose is the person's well-being and protection. How to file tax extension Expenses for household services qualify if part of the services is for the care of qualifying persons. How to file tax extension See Household services , later. How to file tax extension Expenses not for care. How to file tax extension   Expenses for care do not include amounts you pay for food, lodging, clothing, education, and entertainment. How to file tax extension 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 to file tax extension   Child support payments are not for care and do not qualify for the credit. How to file tax extension Education. How to file tax extension   Expenses for a child in nursery school, preschool, or similar programs for children below the level of kindergarten are expenses for care. How to file tax extension Expenses to attend kindergarten or a higher grade are not expenses for care. How to file tax extension Do not use these expenses to figure your credit. How to file tax extension   However, expenses for before- or after-school care of a child in kindergarten or a higher grade may be expenses for care. How to file tax extension   Summer school and tutoring programs are not for care. How to file tax extension Example 1. How to file tax extension 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 to file tax extension The lunch and educational activities are incidental to the childcare, and their cost cannot be separated from the cost of care. How to file tax extension You can count the total cost when you figure the credit. How to file tax extension Example 2. How to file tax extension You place your 10-year-old child in a boarding school so you can work full time. How to file tax extension Only the part of the boarding school expense that is for the care of your child is a work-related expense. How to file tax extension You can count that part of the expense in figuring your credit if it can be separated from the cost of education. How to file tax extension You cannot count any part of the amount you pay the school for your child's education. How to file tax extension Care outside your home. How to file tax extension   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 to file tax extension Dependent care center. How to file tax extension   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 to file tax extension   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 to file tax extension Camp. How to file tax extension   The cost of sending your child to an overnight camp is not considered a work-related expense. How to file tax extension 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 to file tax extension Transportation. How to file tax extension   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 to file tax extension This includes transportation by bus, subway, taxi, or private car. How to file tax extension However, transportation not provided by a care provider is not for the care of a qualifying person. How to file tax extension 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 to file tax extension Fees and deposits. How to file tax extension   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 to file tax extension However, a forfeited deposit is not for the care of a qualifying person if care is not provided. How to file tax extension Example 1. How to file tax extension 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 to file tax extension The fee you paid is a work-related expense. How to file tax extension Example 2. How to file tax extension You placed a deposit with a preschool to reserve a place for your 3-year-old child. How to file tax extension You later sent your child to a different preschool and forfeited the deposit. How to file tax extension The forfeited deposit is not for care and so is not a work-related expense. How to file tax extension Household services. How to file tax extension   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 to file tax extension   Household services are ordinary and usual services done in and around your home that are necessary to run your home. How to file tax extension They include the services of a housekeeper, maid, or cook. How to file tax extension However, they do not include the services of a chauffeur, bartender, or gardener. How to file tax extension See Household Services in Publication 503 for more information. How to file tax extension   In this chapter, the term housekeeper refers to any household employee whose services include the care of a qualifying person. How to file tax extension Taxes paid on wages. How to file tax extension   The taxes you pay on wages for qualifying child and dependent care services are work-related expenses. How to file tax extension See Employment Taxes for Household Employers , later. How to file tax extension 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 to file tax extension 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 to file tax extension Joint Return Test Generally, married couples must file a joint return to take the credit. How to file tax extension 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 to file tax extension Legally separated. How to file tax extension   You are not considered married if you are legally separated from your spouse under a decree of divorce or separate maintenance. How to file tax extension You may be eligible to take the credit on your return using head of household filing status. How to file tax extension Married and living apart. How to file tax extension   You are not considered married and are eligible to take the credit if all the following apply. How to file tax extension You file a return apart from your spouse. How to file tax extension Your home is the home of a qualifying person for more than half the year. How to file tax extension You pay more than half the cost of keeping up your home for the year. How to file tax extension Your spouse does not live in your home for the last 6 months of the year. How to file tax extension Costs of keeping up a home. How to file tax extension   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 to file tax extension   The costs of keeping up a home do not include payments for clothing, education, medical treatment, vacations, life insurance, transportation, or mortgage principal. How to file tax extension   They also do not include the purchase, permanent improvement, or replacement of property. How to file tax extension For example, you cannot include the cost of replacing a water heater. How to file tax extension However, you can include the cost of repairing a water heater. How to file tax extension Death of spouse. How to file tax extension   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 to file tax extension If you do remarry before the end of the year, the credit can be claimed on your deceased spouse's return. How to file tax extension Provider Identification Test You must identify all persons or organizations that provide care for your child or dependent. How to file tax extension Use Form 2441, Part I, to show the information. How to file tax extension 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 to file tax extension Information needed. How to file tax extension   To identify the care provider, you must give the provider's: Name, Address, and Taxpayer identification number. How to file tax extension   If the care provider is an individual, the taxpayer identification number is his or her social security number or individual taxpayer identification number. How to file tax extension If the care provider is an organization, then it is the employer identification number (EIN). How to file tax extension   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 to file tax extension In this case, enter “Tax-Exempt” in the space where Form 2441 asks for the number. How to file tax extension   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 to file tax extension Getting the information. How to file tax extension   You can use Form W-10 to request the required information from the care provider. How to file tax extension 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 to file tax extension    You should keep this information with your tax records. How to file tax extension Do not send Form W-10 (or other document containing this information) to the Internal Revenue Service. How to file tax extension Due diligence. How to file tax extension   If the care provider information you give is incorrect or incomplete, your credit may not be allowed. How to file tax extension However, if you can show that you used due diligence in trying to supply the information, you can still claim the credit. How to file tax extension   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 to file tax extension Care providers can be penalized if they do not provide this information to you or if they provide incorrect information. How to file tax extension Provider refusal. How to file tax extension   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 to file tax extension Enter “See Attached Statement” in the columns calling for the information you do not have. How to file tax extension Then attach a statement explaining that you requested the information from the care provider, but the provider did not give you the information. How to file tax extension Be sure to write your name and social security number on this statement. How to file tax extension The statement will show that you used due diligence in trying to furnish the necessary information. How to file tax extension U. How to file tax extension S. How to file tax extension citizens and resident aliens living abroad. How to file tax extension   If you are living abroad, your care provider may not have, and may not be required to get, a U. How to file tax extension S. How to file tax extension taxpayer identification number (for example, an SSN or EIN). How to file tax extension If so, enter “LAFCP” (Living Abroad Foreign Care Provider) in the space for the care provider's taxpayer identification number. How to file tax extension How To Figure the Credit Your credit is a percentage of your work-related expenses. How to file tax extension Your expenses are subject to the earned income limit and the dollar limit. How to file tax extension The percentage is based on your adjusted gross income. How to file tax extension Figuring Total Work-Related Expenses To figure the credit for 2013 work-related expenses, count only those you paid by December 31, 2013. How to file tax extension Expenses prepaid in an earlier year. How to file tax extension   If you pay for services before they are provided, you can count the prepaid expenses only in the year the care is received. How to file tax extension Claim the expenses for the later year as if they were actually paid in that later year. How to file tax extension Expenses not paid until the following year. How to file tax extension   Do not count 2012 expenses that you paid in 2013 as work-related expenses for 2013. How to file tax extension You may be able to claim an additional credit for them on your 2013 return, but you must figure it separately. How to file tax extension See Payments for prior year's expenses under Amount of Credit in Publication 503. How to file tax extension    If you had expenses in 2013 that you did not pay until 2014, you cannot count them when figuring your 2013 credit. How to file tax extension You may be able to claim a credit for them on your 2014 return. How to file tax extension Expenses reimbursed. How to file tax extension   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 to file tax extension Example. How to file tax extension You paid work-related expenses of $3,000. How to file tax extension You are reimbursed $2,000 by a state social services agency. How to file tax extension You can use only $1,000 to figure your credit. How to file tax extension Medical expenses. How to file tax extension   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 to file tax extension You can use them either way, but you cannot use the same expenses to claim both a credit and a medical expense deduction. How to file tax extension   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 to file tax extension 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 to file tax extension    Amounts excluded from your income under your employer's dependent care benefits plan cannot be used to claim a medical expense deduction. How to file tax extension Dependent Care Benefits If you receive dependent care benefits, your dollar limit for purposes of the credit may be reduced. How to file tax extension See Reduced Dollar Limit , later. How to file tax extension But, even if you cannot take the credit, you may be able to take an exclusion or deduction for the dependent care benefits. How to file tax extension Dependent care benefits. How to file tax extension   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 to file tax extension Your salary may have been reduced to pay for these benefits. How to file tax extension If you received benefits as an employee, they should be shown in box 10 of your Form W-2. How to file tax extension See Statement for employee , later. How to file tax extension Benefits you received as a partner should be shown in box 13 of your Schedule K-1 (Form 1065) with code O. How to file tax extension Enter the amount of these benefits on Form 2441, Part III, line 12. How to file tax extension Exclusion or deduction. How to file tax extension   If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. How to file tax extension Your employer can tell you whether your benefit plan qualifies. How to file tax extension To claim the exclusion, you must complete Part III of Form 2441. How to file tax extension You cannot use Form 1040EZ. How to file tax extension   If you are self-employed and receive benefits from a qualified dependent care benefit plan, you are treated as both employer and employee. How to file tax extension Therefore, you would not get an exclusion from wages. How to file tax extension 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 to file tax extension To claim the deduction, you must use Form 2441. How to file tax extension   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 to file tax extension 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 to file tax extension See Earned Income Limit, later. How to file tax extension    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 to file tax extension Statement for employee. How to file tax extension   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 to file tax extension 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 to file tax extension Effect of exclusion on credit. How to file tax extension   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 to file tax extension 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 to file tax extension Earned income is defined under Earned Income Test , earlier. How to file tax extension 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 to file tax extension Separated spouse. How to file tax extension   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 to file tax extension Use only your income in figuring the earned income limit. How to file tax extension Surviving spouse. How to file tax extension   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 to file tax extension Community property laws. How to file tax extension   You should disregard community property laws when you figure earned income for this credit. How to file tax extension You or your spouse is a student or not able to care for self. How to file tax extension   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 to file tax extension 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 to file tax extension Spouse works. How to file tax extension   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 to file tax extension Spouse qualifies for part of month. How to file tax extension    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 to file tax extension You are a student or not able to care for self. How to file tax extension   These rules also apply if you are a student or not able to care for yourself and you are filing a joint return. How to file tax extension 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 to file tax extension If you also work during that month, use the higher of $250 (or $500) or your actual earned income for that month. How to file tax extension Both spouses qualify. How to file tax extension   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 to file tax extension Dollar Limit There is a dollar limit on the amount of your work-related expenses you can use to figure the credit. How to file tax extension This limit is $3,000 for one qualifying person, or $6,000 for two or more qualifying persons. How to file tax extension If you paid work-related expenses for the care of two or more qualifying persons, the applicable dollar limit is $6,000. How to file tax extension This $6,000 limit does not need to be divided equally among them. How to file tax extension 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 to file tax extension Yearly limit. How to file tax extension   The dollar limit is a yearly limit. How to file tax extension 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 to file tax extension 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 to file tax extension 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 to file tax extension 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 to file tax extension Your reduced dollar limit is figured on Form 2441, Part III. How to file tax extension See Dependent Care Benefits , earlier, for information on excluding or deducting these benefits. How to file tax extension Example 1. How to file tax extension George is a widower with one child and earns $24,000 a year. How to file tax extension 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 to file tax extension His employer pays an additional $1,000 under a dependent care benefit plan. How to file tax extension This $1,000 is excluded from George's income. How to file tax extension 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 to file tax extension This is because his dollar limit is reduced as shown next. How to file tax extension   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 to file tax extension Randall is married and both he and his wife are employed. How to file tax extension Each has earned income in excess of $6,000. How to file tax extension They have two children, Anne and Andy, ages 2 and 4, who attend a daycare facility licensed and regulated by the state. How to file tax extension Randall's work-related expenses are $6,000 for the year. How to file tax extension 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 to file tax extension Randall has elected to take the maximum $5,000 exclusion from his salary to cover dependent care expenses through this program. How to file tax extension 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 to file tax extension This is because his dollar limit is reduced as shown next. How to file tax extension   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 to file tax extension This percentage depends on your adjusted gross income shown on Form 1040, line 38, or Form 1040A, line 22. How to file tax extension The following table shows the percentage to use based on adjusted gross income. How to file tax extension   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 to file tax extension You cannot claim the credit on Form 1040EZ. How to file tax extension Form 1040 or 1040A. How to file tax extension   You must complete Form 2441 and attach it to your Form 1040 or 1040A. How to file tax extension Enter the credit on Form 1040, line 48, or Form 1040A, line 29. How to file tax extension Limit on credit. How to file tax extension   The amount of credit you can claim is generally limited to the amount of your tax. How to file tax extension For more information, see the Instructions for Form 2441. How to file tax extension Tax credit not refundable. How to file tax extension   You cannot get a refund for any part of the credit that is more than this limit. How to file tax extension Recordkeeping. How to file tax extension You should keep records of your work-related expenses. How to file tax extension 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 to file tax extension Other records you should keep to support your claim for the credit are described earlier under Provider Identification Test . How to file tax extension 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 to file tax extension If you are a household employer, you will need an employer identification number (EIN) and you may have to pay employment taxes. How to file tax extension 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 to file tax extension Self-employed persons who are in business for themselves are not household employees. How to file tax extension 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 to file tax extension 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 to file tax extension This control could include providing rules of conduct and appearance and requiring regular reports. How to file tax extension In this case, you do not have to pay employment taxes. How to file tax extension 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 to file tax extension 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 to file tax extension Social security and Medicare taxes are generally withheld from the employee's pay and matched by the employer. How to file tax extension 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 to file tax extension Federal income tax is withheld from the employee's total pay if the employee asks you to do so and you agree. How to file tax extension For more information on a household employer's tax responsibilities, see Publication 926 and Schedule H (Form 1040) and its instructions. How to file tax extension State employment tax. How to file tax extension   You may also have to pay state unemployment tax. How to file tax extension Contact your state unemployment tax office for information. How to file tax extension You should also find out whether you need to pay or collect other state employment taxes or carry workers' compensation insurance. How to file tax extension For a list of state unemployment tax agencies, visit the U. How to file tax extension S. How to file tax extension Department of Labor's website. How to file tax extension A link to that website is in Publication 926, or you can find it with an online search. How to file tax extension Prev  Up  Next   Home   More Online Publications
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Abusive Tax Schemes - Criminal Investigation (CI)

Overview - Abusive Tax Schemes
Since the mid-1990s, the IRS has witnessed a proliferation of abusive tax schemes, particularly those with offshore components. 

What are some of the Most Common Abusive Tax Schemes?
The most common abusive tax schemes involve numerous domestic and foreign trusts, partnerships, or nominees.

How Does the Taxpayer Access the Funds in Offshore Accounts? - Abusive Tax Schemes
There are two methods commonly used to get funds back to the taxpayers. They are through credit/debit cards and fraudulent loans. 

In Partnership - IRS Criminal and Civil Enforcement and Department of Justice - Abusive Tax Schemes
Parallel civil and criminal investigations are an effective and aggressive approach that halts these schemes quickly and permanently.

Civil and Criminal Penalties - Abusive Tax Schemes
Investors of abusive tax schemes that improperly evade tax are still liable for taxes, interest, and civil penalties.

Statistical Data - Abusive Tax Schemes
Enforcement statistics on investigations initiated, prosecutions recommended, indictments, sentenced, and months to serve in prison.

Examples of Abusive Tax Scheme
Examples have been written from public record documents filed in the district courts where the case was prosecuted.

 


Criminal Enforcement Home Page

How to Report Suspected Tax Fraud Activities

Page Last Reviewed or Updated: 30-Oct-2013

The How To File Tax Extension

How to file tax extension 22. How to file tax extension   Taxes Table of Contents IntroductionIndian tribal government. How to file tax extension Useful Items - You may want to see: Tests To Deduct Any Tax Income TaxesState and Local Income Taxes Foreign Income Taxes General Sales TaxesMotor vehicles. How to file tax extension Real Estate TaxesReal estate taxes for prior years. How to file tax extension Examples. How to file tax extension Form 1099-S. How to file tax extension Real Estate-Related Items You Cannot Deduct Personal Property Taxes Taxes and Fees You Cannot Deduct Where To Deduct Introduction This chapter discusses which taxes you can deduct if you itemize deductions on Schedule A (Form 1040). How to file tax extension It also explains which taxes you can deduct on other schedules or forms and which taxes you cannot deduct. How to file tax extension This chapter covers the following topics. How to file tax extension Income taxes (federal, state, local, and foreign). How to file tax extension General sales taxes (state and local). How to file tax extension Real estate taxes (state, local, and foreign). How to file tax extension Personal property taxes (state and local). How to file tax extension Taxes and fees you cannot deduct. How to file tax extension Use Table 22-1 as a guide to determine which taxes you can deduct. How to file tax extension The end of the chapter contains a section that explains which forms you use to deduct different types of taxes. How to file tax extension Business taxes. How to file tax extension   You can deduct certain taxes only if they are ordinary and necessary expenses of your trade or business or of producing income. How to file tax extension For information on these taxes, see Publication 535, Business Expenses. How to file tax extension State or local taxes. How to file tax extension   These are taxes imposed by the 50 states, U. How to file tax extension S. How to file tax extension possessions, or any of their political subdivisions (such as a county or city), or by the District of Columbia. How to file tax extension Indian tribal government. How to file tax extension   An Indian tribal government recognized by the Secretary of the Treasury as performing substantial government functions will be treated as a state for purposes of claiming a deduction for taxes. How to file tax extension Income taxes, real estate taxes, and personal property taxes imposed by that Indian tribal government (or by any of its subdivisions that are treated as political subdivisions of a state) are deductible. How to file tax extension General sales taxes. How to file tax extension   These are taxes imposed at one rate on retail sales of a broad range of classes of items. How to file tax extension Foreign taxes. How to file tax extension   These are taxes imposed by a foreign country or any of its political subdivisions. How to file tax extension Useful Items - You may want to see: Publication 514 Foreign Tax Credit for Individuals 530 Tax Information for Homeowners Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule E (Form 1040) Supplemental Income and Loss 1116 Foreign Tax Credit Tests To Deduct Any Tax The following two tests must be met for you to deduct any tax. How to file tax extension The tax must be imposed on you. How to file tax extension You must pay the tax during your tax year. How to file tax extension The tax must be imposed on you. How to file tax extension   In general, you can deduct only taxes imposed on you. How to file tax extension   Generally, you can deduct property taxes only if you are an owner of the property. How to file tax extension If your spouse owns the property and pays the real estate taxes, the taxes are deductible on your spouse's separate return or on your joint return. How to file tax extension You must pay the tax during your tax year. How to file tax extension   If you are a cash basis taxpayer, you can deduct only those taxes you actually paid during your tax year. How to file tax extension If you pay your taxes by check, the day you mail or deliver the check is the date of payment, provided the check is honored by the financial institution. How to file tax extension If you use a pay-by-phone account (such as a credit card or electronic funds withdrawal), the date reported on the statement of the financial institution showing when payment was made is the date of payment. How to file tax extension If you contest a tax liability and are a cash basis taxpayer, you can deduct the tax only in the year you actually pay it (or transfer money or other property to provide for satisfaction of the contested liability). How to file tax extension See Publication 538, Accounting Periods and Methods, for details. How to file tax extension    If you use an accrual method of accounting, see Publication 538 for more information. How to file tax extension Income Taxes This section discusses the deductibility of state and local income taxes (including employee contributions to state benefit funds) and foreign income taxes. How to file tax extension State and Local Income Taxes You can deduct state and local income taxes. How to file tax extension However, you can elect to deduct state and local general sales taxes instead of state and local income taxes. How to file tax extension See General Sales Taxes , later. How to file tax extension Exception. How to file tax extension    You cannot deduct state and local income taxes you pay on income that is exempt from federal income tax, unless the exempt income is interest income. How to file tax extension For example, you cannot deduct the part of a state's income tax that is on a cost-of-living allowance exempt from federal income tax. How to file tax extension What To Deduct Your deduction may be for withheld taxes, estimated tax payments, or other tax payments as follows. How to file tax extension Withheld taxes. How to file tax extension   You can deduct state and local income taxes withheld from your salary in the year they are withheld. How to file tax extension Your Form(s) W-2 will show these amounts. How to file tax extension Forms W-2G, 1099-G, 1099-R, and 1099-MISC may also show state and local income taxes withheld. How to file tax extension Estimated tax payments. How to file tax extension   You can deduct estimated tax payments you made during the year to a state or local government. How to file tax extension However, you must have a reasonable basis for making the estimated tax payments. How to file tax extension Any estimated state or local tax payments that are not made in good faith at the time of payment are not deductible. How to file tax extension For example, you made an estimated state income tax payment. How to file tax extension However, the estimate of your state tax liability shows that you will get a refund of the full amount of your estimated payment. How to file tax extension You had no reasonable basis to believe you had any additional liability for state income taxes and you cannot deduct the estimated tax payment. How to file tax extension Refund applied to taxes. How to file tax extension   You can deduct any part of a refund of prior-year state or local income taxes that you chose to have credited to your 2013 estimated state or local income taxes. How to file tax extension    Do not reduce your deduction by either of the following items. How to file tax extension Any state or local income tax refund (or credit) you expect to receive for 2013. How to file tax extension Any refund of (or credit for) prior-year state and local income taxes you actually received in 2013. How to file tax extension   However, part or all of this refund (or credit) may be taxable. How to file tax extension See Refund (or credit) of state or local income taxes , later. How to file tax extension Separate federal returns. How to file tax extension   If you and your spouse file separate state, local, and federal income tax returns, you each can deduct on your federal return only the amount of your own state and local income tax that you paid during the tax year. How to file tax extension Joint state and local returns. How to file tax extension   If you and your spouse file joint state and local returns and separate federal returns, each of you can deduct on your separate federal return a part of the total state and local income taxes paid during the tax year. How to file tax extension You can deduct only the amount of the total taxes that is proportionate to your gross income compared to the combined gross income of you and your spouse. How to file tax extension However, you cannot deduct more than the amount you actually paid during the year. How to file tax extension You can avoid this calculation if you and your spouse are jointly and individually liable for the full amount of the state and local income taxes. How to file tax extension If so, you and your spouse can deduct on your separate federal returns the amount you each actually paid. How to file tax extension Joint federal return. How to file tax extension   If you file a joint federal return, you can deduct the total of the state and local income taxes both of you paid. How to file tax extension Contributions to state benefit funds. How to file tax extension    As an employee, you can deduct mandatory contributions to state benefit funds withheld from your wages that provide protection against loss of wages. How to file tax extension For example, certain states require employees to make contributions to state funds providing disability or unemployment insurance benefits. How to file tax extension Mandatory payments made to the following state benefit funds are deductible as state income taxes on Schedule A (Form 1040), line 5. How to file tax extension Alaska Unemployment Compensation Fund. How to file tax extension California Nonoccupational Disability Benefit Fund. How to file tax extension New Jersey Nonoccupational Disability Benefit Fund. How to file tax extension New Jersey Unemployment Compensation Fund. How to file tax extension New York Nonoccupational Disability Benefit Fund. How to file tax extension Pennsylvania Unemployment Compensation Fund. How to file tax extension Rhode Island Temporary Disability Benefit Fund. How to file tax extension Washington State Supplemental Workmen's Compensation Fund. How to file tax extension    Employee contributions to private or voluntary disability plans are not deductible. How to file tax extension Refund (or credit) of state or local income taxes. How to file tax extension   If you receive a refund of (or credit for) state or local income taxes in a year after the year in which you paid them, you may have to include the refund in income on Form 1040, line 10, in the year you receive it. How to file tax extension This includes refunds resulting from taxes that were overwithheld, applied from a prior year return, not figured correctly, or figured again because of an amended return. How to file tax extension If you did not itemize your deductions in the previous year, do not include the refund in income. How to file tax extension If you deducted the taxes in the previous year, include all or part of the refund on Form 1040, line 10, in the year you receive the refund. How to file tax extension For a discussion of how much to include, see Recoveries in chapter 12. How to file tax extension Foreign Income Taxes Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. How to file tax extension S. How to file tax extension possession. How to file tax extension However, you cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. How to file tax extension S. How to file tax extension tax under the foreign earned income exclusion or the foreign housing exclusion. How to file tax extension For information on these exclusions, see Publication 54, Tax Guide for U. How to file tax extension S. How to file tax extension Citizens and Resident Aliens Abroad. How to file tax extension For information on the foreign tax credit, see Publication 514. How to file tax extension General Sales Taxes You can elect to deduct state and local general sales taxes, instead of state and local income taxes, as an itemized deduction on Schedule A (Form 1040), line 5b. How to file tax extension You can use either your actual expenses or the state and local sales tax tables to figure your sales tax deduction. How to file tax extension Actual expenses. How to file tax extension   Generally, you can deduct the actual state and local general sales taxes (including compensating use taxes) if the tax rate was the same as the general sales tax rate. How to file tax extension However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. How to file tax extension If you paid sales tax on a motor vehicle at a rate higher than the general sales tax rate, you can deduct only the amount of tax that you would have paid at the general sales tax rate on that vehicle. How to file tax extension If you use the actual expenses method, you must have receipts to show the general sales taxes paid. How to file tax extension Do not include sales taxes paid on items used in your trade or business. How to file tax extension Motor vehicles. How to file tax extension   For purposes of this section, motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. How to file tax extension This also includes sales taxes on a leased motor vehicle, but not on vehicles used in your trade or business. How to file tax extension Optional sales tax tables. How to file tax extension   Instead of using your actual expenses, you can figure your state and local general sales tax deduction using the state and local sales tax tables in the Instructions for Schedule A (Form 1040). How to file tax extension You may also be able to add the state and local general sales taxes paid on certain specified items. How to file tax extension   Your applicable table amount is based on the state where you live, your income, and the number of exemptions claimed on your tax return. How to file tax extension Your income is your adjusted gross income plus any nontaxable items such as the following. How to file tax extension Tax-exempt interest. How to file tax extension Veterans' benefits. How to file tax extension Nontaxable combat pay. How to file tax extension Workers' compensation. How to file tax extension Nontaxable part of social security and railroad retirement benefits. How to file tax extension Nontaxable part of IRA, pension, or annuity distributions, excluding rollovers. How to file tax extension Public assistance payments. How to file tax extension If you lived in different states during the same tax year, you must prorate your applicable table amount for each state based on the days you lived in each state. How to file tax extension See the Instructions for Schedule A (Form 1040), line 5, for details. How to file tax extension Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real property levied for the general public welfare. How to file tax extension You can deduct these taxes only if they are based on the assessed value of the real property and charged uniformly against all property under the jurisdiction of the taxing authority. How to file tax extension Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. How to file tax extension They also do not include itemized charges for services (such as trash collection) assessed against specific property or certain people, even if the charge is paid to the taxing authority. How to file tax extension For more information about taxes and charges that are not deductible, see Real Estate-Related Items You Cannot Deduct , later. How to file tax extension Tenant-shareholders in a cooperative housing corporation. How to file tax extension   Generally, if you are a tenant-stockholder in a cooperative housing corporation, you can deduct the amount paid to the corporation that represents your share of the real estate taxes the corporation paid or incurred for your dwelling unit. How to file tax extension The corporation should provide you with a statement showing your share of the taxes. How to file tax extension For more information, see Special Rules for Cooperatives in Publication 530. How to file tax extension Division of real estate taxes between buyers and sellers. How to file tax extension   If you bought or sold real estate during the year, the real estate taxes must be divided between the buyer and the seller. How to file tax extension   The buyer and the seller must divide the real estate taxes according to the number of days in the real property tax year (the period to which the tax is imposed relates) that each owned the property. How to file tax extension The seller is treated as paying the taxes up to, but not including, the date of sale. How to file tax extension The buyer is treated as paying the taxes beginning with the date of sale. How to file tax extension This applies regardless of the lien dates under local law. How to file tax extension Generally, this information is included on the settlement statement provided at the closing. How to file tax extension    If you (the seller) cannot deduct taxes until they are paid because you use the cash method of accounting, and the buyer of your property is personally liable for the tax, you are considered to have paid your part of the tax at the time of the sale. How to file tax extension This lets you deduct the part of the tax to the date of sale even though you did not actually pay it. How to file tax extension However, you must also include the amount of that tax in the selling price of the property. How to file tax extension The buyer must include the same amount in his or her cost of the property. How to file tax extension   You figure your deduction for taxes on each property bought or sold during the real property tax year as follows. How to file tax extension Worksheet 22-1. How to file tax extension Figuring Your Real Estate Tax Deduction 1. How to file tax extension Enter the total real estate taxes for the real property tax year   2. How to file tax extension Enter the number of days in the real property tax year that you owned the property   3. How to file tax extension Divide line 2 by 365 (for leap years, divide line 2 by 366) . How to file tax extension 4. How to file tax extension Multiply line 1 by line 3. How to file tax extension This is your deduction. How to file tax extension Enter it on Schedule A (Form 1040), line 6   Note. How to file tax extension Repeat steps 1 through 4 for each property you bought or sold during the real property tax year. How to file tax extension Your total deduction is the sum of the line 4 amounts for all of the properties. How to file tax extension Real estate taxes for prior years. How to file tax extension   Do not divide delinquent taxes between the buyer and seller if the taxes are for any real property tax year before the one in which the property is sold. How to file tax extension Even if the buyer agrees to pay the delinquent taxes, the buyer cannot deduct them. How to file tax extension The buyer must add them to the cost of the property. How to file tax extension The seller can deduct these taxes paid by the buyer. How to file tax extension However, the seller must include them in the selling price. How to file tax extension Examples. How to file tax extension   The following examples illustrate how real estate taxes are divided between buyer and seller. How to file tax extension Example 1. How to file tax extension Dennis and Beth White's real property tax year for both their old home and their new home is the calendar year, with payment due August 1. How to file tax extension The tax on their old home, sold on May 7, was $620. How to file tax extension The tax on their new home, bought on May 3, was $732. How to file tax extension Dennis and Beth are considered to have paid a proportionate share of the real estate taxes on the old home even though they did not actually pay them to the taxing authority. How to file tax extension On the other hand, they can claim only a proportionate share of the taxes they paid on their new property even though they paid the entire amount. How to file tax extension Dennis and Beth owned their old home during the real property tax year for 126 days (January 1 to May 6, the day before the sale). How to file tax extension They figure their deduction for taxes on their old home as follows. How to file tax extension Worksheet 22-1. How to file tax extension Figuring Your Real Estate Tax Deduction — Taxes on Old Home 1. How to file tax extension Enter the total real estate taxes for the real property tax year $620 2. How to file tax extension Enter the number of days in the real property tax year that you owned the property 126 3. How to file tax extension Divide line 2 by 365 (for leap years, divide line 2 by 366) . How to file tax extension 3452 4. How to file tax extension Multiply line 1 by line 3. How to file tax extension This is your deduction. How to file tax extension Enter it on Schedule A (Form 1040), line 6 $214 Since the buyers of their old home paid all of the taxes, Dennis and Beth also include the $214 in the selling price of the old home. How to file tax extension (The buyers add the $214 to their cost of the home. How to file tax extension ) Dennis and Beth owned their new home during the real property tax year for 243 days (May 3 to December 31, including their date of purchase). How to file tax extension They figure their deduction for taxes on their new home as follows. How to file tax extension Worksheet 22-1. How to file tax extension Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. How to file tax extension Enter the total real estate taxes for the real property tax year $732 2. How to file tax extension Enter the number of days in the real property tax year that you owned the property 243 3. How to file tax extension Divide line 2 by 365 (for leap years, divide line 2 by 366) . How to file tax extension 6658 4. How to file tax extension Multiply line 1 by line 3. How to file tax extension This is your deduction. How to file tax extension Enter it on Schedule A (Form 1040), line 6 $487 Since Dennis and Beth paid all of the taxes on the new home, they add $245 ($732 paid less $487 deduction) to their cost of the new home. How to file tax extension (The sellers add this $245 to their selling price and deduct the $245 as a real estate tax. How to file tax extension ) Dennis and Beth's real estate tax deduction for their old and new homes is the sum of $214 and $487, or $701. How to file tax extension They will enter this amount on Schedule A (Form 1040), line 6. How to file tax extension Example 2. How to file tax extension George and Helen Brown bought a new home on May 3, 2013. How to file tax extension Their real property tax year for the new home is the calendar year. How to file tax extension Real estate taxes for 2012 were assessed in their state on January 1, 2013. How to file tax extension The taxes became due on May 31, 2013, and October 31, 2013. How to file tax extension The Browns agreed to pay all taxes due after the date of purchase. How to file tax extension Real estate taxes for 2012 were $680. How to file tax extension They paid $340 on May 31, 2013, and $340 on October 31, 2013. How to file tax extension These taxes were for the 2012 real property tax year. How to file tax extension The Browns cannot deduct them since they did not own the property until 2013. How to file tax extension Instead, they must add $680 to the cost of their new home. How to file tax extension In January 2014, the Browns receive their 2013 property tax statement for $752, which they will pay in 2014. How to file tax extension The Browns owned their new home during the 2013 real property tax year for 243 days (May 3 to December 31). How to file tax extension They will figure their 2014 deduction for taxes as follows. How to file tax extension Worksheet 22-1. How to file tax extension Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. How to file tax extension Enter the total real estate taxes for the real property tax year $752 2. How to file tax extension Enter the number of days in the real property tax year that you owned the property 243 3. How to file tax extension Divide line 2 by 365 (for leap years, divide line 2 by 366) . How to file tax extension 6658 4. How to file tax extension Multiply line 1 by line 3. How to file tax extension This is your deduction. How to file tax extension Claim it on Schedule A (Form 1040), line 6 $501 The remaining $251 ($752 paid less $501 deduction) of taxes paid in 2014, along with the $680 paid in 2013, is added to the cost of their new home. How to file tax extension Because the taxes up to the date of sale are considered paid by the seller on the date of sale, the seller is entitled to a 2013 tax deduction of $931. How to file tax extension This is the sum of the $680 for 2012 and the $251 for the 122 days the seller owned the home in 2013. How to file tax extension The seller must also include the $931 in the selling price when he or she figures the gain or loss on the sale. How to file tax extension The seller should contact the Browns in January 2014 to find out how much real estate tax is due for 2013. How to file tax extension Form 1099-S. How to file tax extension   For certain sales or exchanges of real estate, the person responsible for closing the sale (generally the settlement agent) prepares Form 1099-S, Proceeds From Real Estate Transactions, to report certain information to the IRS and to the seller of the property. How to file tax extension Box 2 of Form 1099-S is for the gross proceeds from the sale and should include the portion of the seller's real estate tax liability that the buyer will pay after the date of sale. How to file tax extension The buyer includes these taxes in the cost basis of the property, and the seller both deducts this amount as a tax paid and includes it in the sales price of the property. How to file tax extension   For a real estate transaction that involves a home, any real estate tax the seller paid in advance but that is the liability of the buyer appears on Form 1099-S, box 5. How to file tax extension The buyer deducts this amount as a real estate tax, and the seller reduces his or her real estate tax deduction (or includes it in income) by the same amount. How to file tax extension See Refund (or rebate) , later. How to file tax extension Taxes placed in escrow. How to file tax extension   If your monthly mortgage payment includes an amount placed in escrow (put in the care of a third party) for real estate taxes, you may not be able to deduct the total amount placed in escrow. How to file tax extension You can deduct only the real estate tax that the third party actually paid to the taxing authority. How to file tax extension If the third party does not notify you of the amount of real estate tax that was paid for you, contact the third party or the taxing authority to find the proper amount to show on your return. How to file tax extension Tenants by the entirety. How to file tax extension   If you and your spouse held property as tenants by the entirety and you file separate federal returns, each of you can deduct only the taxes each of you paid on the property. How to file tax extension Divorced individuals. How to file tax extension   If your divorce or separation agreement states that you must pay the real estate taxes for a home owned by you and your spouse, part of your payments may be deductible as alimony and part as real estate taxes. How to file tax extension See Taxes and insurance in chapter 18 for more information. How to file tax extension Ministers' and military housing allowances. How to file tax extension   If you are a minister or a member of the uniformed services and receive a housing allowance that you can exclude from income, you still can deduct all of the real estate taxes you pay on your home. How to file tax extension Refund (or rebate). How to file tax extension   If you received a refund or rebate in 2013 of real estate taxes you paid in 2013, you must reduce your deduction by the amount refunded to you. How to file tax extension If you received a refund or rebate in 2013 of real estate taxes you deducted in an earlier year (either as an itemized deduction or an increase to your standard deduction), you generally must include the refund or rebate in income in the year you receive it. How to file tax extension However, the amount you include in income is limited to the amount of the deduction that reduced your tax in the earlier year. How to file tax extension For more information, see Recoveries in chapter 12. How to file tax extension Table 22-1. How to file tax extension Which Taxes Can You Deduct? Type of Tax You Can Deduct You Cannot Deduct Fees and Charges Fees and charges that are expenses of your trade or business or of producing income. How to file tax extension Fees and charges that are not expenses of your trade or business or of producing income, such as fees for driver's licenses, car inspections, parking, or charges for water bills (see Taxes and Fees You Cannot Deduct ). How to file tax extension     Fines and penalties. How to file tax extension Income Taxes State and local income taxes. How to file tax extension Federal income taxes. How to file tax extension   Foreign income taxes. How to file tax extension     Employee contributions to state funds listed under Contributions to state benefit funds . How to file tax extension Employee contributions to private or voluntary disability plans. How to file tax extension     State and local general sales taxes if you choose to deduct state and local income taxes. How to file tax extension General Sales Taxes State and local general sales taxes, including compensating use taxes. How to file tax extension State and local income taxes if you choose to deduct state and local general sales taxes. How to file tax extension Other Taxes Taxes that are expenses of your trade or business. How to file tax extension Federal excise taxes, such as tax on gasoline, that are not expenses of your trade or business or of producing income. How to file tax extension   Taxes on property producing rent or royalty income. How to file tax extension Per capita taxes. How to file tax extension   Occupational taxes. How to file tax extension See chapter 28. How to file tax extension     One-half of self-employment tax paid. How to file tax extension   Personal Property Taxes State and local personal property taxes. How to file tax extension Customs duties that are not expenses of your trade or business or of producing income. How to file tax extension Real Estate Taxes State and local real estate taxes. How to file tax extension Real estate taxes that are treated as imposed on someone else (see Division of real estate taxes between buyers and sellers ). How to file tax extension   Foreign real estate taxes. How to file tax extension Taxes for local benefits (with exceptions). How to file tax extension See Real Estate-Related Items You Cannot Deduct . How to file tax extension   Tenant's share of real estate taxes paid by  cooperative housing corporation. How to file tax extension Trash and garbage pickup fees (with exceptions). How to file tax extension See Real Estate-Related Items You Cannot Deduct . How to file tax extension     Rent increase due to higher real estate taxes. How to file tax extension     Homeowners' association charges. How to file tax extension Real Estate-Related Items You Cannot Deduct Payments for the following items generally are not deductible as real estate taxes. How to file tax extension Taxes for local benefits. How to file tax extension Itemized charges for services (such as trash and garbage pickup fees). How to file tax extension Transfer taxes (or stamp taxes). How to file tax extension Rent increases due to higher real estate taxes. How to file tax extension Homeowners' association charges. How to file tax extension Taxes for local benefits. How to file tax extension   Deductible real estate taxes generally do not include taxes charged for local benefits and improvements tending to increase the value of your property. How to file tax extension These include assessments for streets, sidewalks, water mains, sewer lines, public parking facilities, and similar improvements. How to file tax extension You should increase the basis of your property by the amount of the assessment. How to file tax extension   Local benefit taxes are deductible only if they are for maintenance, repair, or interest charges related to those benefits. How to file tax extension If only a part of the taxes is for maintenance, repair, or interest, you must be able to show the amount of that part to claim the deduction. How to file tax extension If you cannot determine what part of the tax is for maintenance, repair, or interest, none of it is deductible. How to file tax extension    Taxes for local benefits may be included in your real estate tax bill. How to file tax extension If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. How to file tax extension You should use the rules above to determine if the local benefit tax is deductible. How to file tax extension Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. How to file tax extension Itemized charges for services. How to file tax extension    An itemized charge for services assessed against specific property or certain people is not a tax, even if the charge is paid to the taxing authority. How to file tax extension For example, you cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged to each homeowner for trash collection), or A flat fee charged for a single service provided by your government (such as a $30 charge for mowing your lawn because it was allowed to grow higher than permitted under your local ordinance). How to file tax extension    You must look at your real estate tax bill to determine if any nondeductible itemized charges, such as those listed above, are included in the bill. How to file tax extension If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. How to file tax extension Exception. How to file tax extension   Service charges used to maintain or improve services (such as trash collection or police and fire protection) are deductible as real estate taxes if: The fees or charges are imposed at a like rate against all property in the taxing jurisdiction, The funds collected are not earmarked; instead, they are commingled with general revenue funds, and Funds used to maintain or improve services are not limited to or determined by the amount of these fees or charges collected. How to file tax extension Transfer taxes (or stamp taxes). How to file tax extension   Transfer taxes and similar taxes and charges on the sale of a personal home are not deductible. How to file tax extension If they are paid by the seller, they are expenses of the sale and reduce the amount realized on the sale. How to file tax extension If paid by the buyer, they are included in the cost basis of the property. How to file tax extension Rent increase due to higher real estate taxes. How to file tax extension   If your landlord increases your rent in the form of a tax surcharge because of increased real estate taxes, you cannot deduct the increase as taxes. How to file tax extension Homeowners' association charges. How to file tax extension   These charges are not deductible because they are imposed by the homeowners' association, rather than the state or local government. How to file tax extension Personal Property Taxes Personal property tax is deductible if it is a state or local tax that is: Charged on personal property, Based only on the value of the personal property, and Charged on a yearly basis, even if it is collected more or less than once a year. How to file tax extension A tax that meets the above requirements can be considered charged on personal property even if it is for the exercise of a privilege. How to file tax extension For example, a yearly tax based on value qualifies as a personal property tax even if it is called a registration fee and is for the privilege of registering motor vehicles or using them on the highways. How to file tax extension If the tax is partly based on value and partly based on other criteria, it may qualify in part. How to file tax extension Example. How to file tax extension Your state charges a yearly motor vehicle registration tax of 1% of value plus 50 cents per hundredweight. How to file tax extension You paid $32 based on the value ($1,500) and weight (3,400 lbs. How to file tax extension ) of your car. How to file tax extension You can deduct $15 (1% × $1,500) as a personal property tax because it is based on the value. How to file tax extension The remaining $17 ($. How to file tax extension 50 × 34), based on the weight, is not deductible. How to file tax extension Taxes and Fees You Cannot Deduct Many federal, state, and local government taxes are not deductible because they do not fall within the categories discussed earlier. How to file tax extension Other taxes and fees, such as federal income taxes, are not deductible because the tax law specifically prohibits a deduction for them. How to file tax extension See Table 22-1. How to file tax extension Taxes and fees that are generally not deductible include the following items. How to file tax extension Employment taxes. How to file tax extension This includes social security, Medicare, and railroad retirement taxes withheld from your pay. How to file tax extension However, one-half of self-employment tax you pay is deductible. How to file tax extension In addition, the social security and other employment taxes you pay on the wages of a household worker may be included in medical expenses that you can deduct or child care expenses that allow you to claim the child and dependent care credit. How to file tax extension For more information, see chapters 21 and 32. How to file tax extension Estate, inheritance, legacy, or succession taxes. How to file tax extension However, you can deduct the estate tax attributable to income in respect of a decedent if you, as a beneficiary, must include that income in your gross income. How to file tax extension In that case, deduct the estate tax as a miscellaneous deduction that is not subject to the 2%-of-adjusted-gross-income limit. How to file tax extension For more information, see Publication 559, Survivors, Executors, and Administrators. How to file tax extension Federal income taxes. How to file tax extension This includes income taxes withheld from your pay. How to file tax extension Fines and penalties. How to file tax extension You cannot deduct fines and penalties paid to a government for violation of any law, including related amounts forfeited as collateral deposits. How to file tax extension Gift taxes. How to file tax extension License fees. How to file tax extension You cannot deduct license fees for personal purposes (such as marriage, driver's, and dog license fees). How to file tax extension Per capita taxes. How to file tax extension You cannot deduct state or local per capita taxes. How to file tax extension Many taxes and fees other than those listed above are also nondeductible, unless they are ordinary and necessary expenses of a business or income producing activity. How to file tax extension For other nondeductible items, see Real Estate-Related Items You Cannot Deduct , earlier. How to file tax extension Where To Deduct You deduct taxes on the following schedules. How to file tax extension State and local income taxes. How to file tax extension    These taxes are deducted on Schedule A (Form 1040), line 5, even if your only source of income is from business, rents, or royalties. How to file tax extension Check box a on line 5. How to file tax extension General sales taxes. How to file tax extension   Sales taxes are deducted on Schedule A (Form 1040), line 5. How to file tax extension You must check box b on line 5. How to file tax extension If you elect to deduct sales taxes, you cannot deduct state and local income taxes on Schedule A (Form 1040), line 5, box a. How to file tax extension Foreign income taxes. How to file tax extension   Generally, income taxes you pay to a foreign country or U. How to file tax extension S. How to file tax extension possession can be claimed as an itemized deduction on Schedule A (Form 1040), line 8, or as a credit against your U. How to file tax extension S. How to file tax extension income tax on Form 1040, line 47. How to file tax extension To claim the credit, you may have to complete and attach Form 1116. How to file tax extension For more information, see chapter 37, the Form 1040 instructions, or Publication 514. How to file tax extension Real estate taxes and personal property taxes. How to file tax extension    Real estate and personal property taxes are deducted on Schedule A (Form 1040), lines 6 and 7, respectively, unless they are paid on property used in your business, in which case they are deducted on Schedule C, Schedule C-EZ, or Schedule F (Form 1040). How to file tax extension Taxes on property that produces rent or royalty income are deducted on Schedule E (Form 1040). How to file tax extension Self-employment tax. How to file tax extension    Deduct one-half of your self-employment tax on Form 1040, line 27. How to file tax extension Other taxes. How to file tax extension    All other deductible taxes are deducted on Schedule A (Form 1040), line 8. 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