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Hr block free edition Publication 3 - Main Content Table of Contents Gross IncomeForeign Source Income Military Spouses Residency Relief Act (MSRRA) Community Property Form W-2 Codes Adjustments to IncomeArmed Forces Reservists Individual Retirement Arrangements Moving Expenses Combat Zone ExclusionCombat Zone Serving in a Combat Zone Amount of Exclusion Alien StatusResident Aliens Nonresident Aliens Dual-Status Aliens Sale of HomePeriod of suspension. Hr block free edition Qualified official extended duty. Hr block free edition ForeclosuresLump Sum Portion of Settlement Payment. Hr block free edition Interest Payment on Lump Sum Portion of Settlement Payment. Hr block free edition Lost Equity Portion of Settlement Payment. Hr block free edition The rules that apply to a lost equity payment you received for the foreclosure of a property that was not your main home are different. Hr block free edition Interest Payment on Lost Equity Portion of Settlement Payment. Hr block free edition Itemized DeductionsEmployee Business Expenses Repayments CreditsFirst-Time Homebuyer Credit Child Tax Credit Earned Income Credit Credit for Excess Social Security Tax Withheld Forgiveness of Decedent's Tax LiabilityCombat Zone Related Forgiveness Terrorist or Military Action Related Forgiveness Claims for Tax Forgiveness Filing ReturnsSame-Sex Marriage Where To File When To File Signing Returns Extension of DeadlinesService That Qualifies for an Extension of Deadline Length of Extension Actions for Which Deadlines Are Extended Deferral of Payment Maximum Rate of Interest How To Get Tax HelpLow Income Taxpayer Clinics Gross Income Members of the Armed Forces receive many different types of pay and allowances. Hr block free edition Some are included in gross income while others are excluded from gross income. Hr block free edition Included items (Table 1) are subject to tax and must be reported on your tax return. Hr block free edition Excluded items (Table 2) are not subject to tax, but may have to be shown on your tax return. Hr block free edition For information on the exclusion of pay for service in a combat zone and other tax benefits for combat zone participants, see Combat Zone Exclusion and Extension of Deadlines , later. Hr block free edition Table 1. Hr block free edition Included Items These items are included in gross income, unless the pay is for service in a combat zone. Hr block free edition Basic pay • Active duty   Bonus pay • Career status   • Attendance at a designated service school     • Enlistment  • Officer   • Back wages     • Overseas extension   • CONUS COLA       • Reenlistment   • Drills         • Reserve training         • Training duty   Other pay  • Accrued leave          • High deployment per diem Special • Aviation career incentives      • Personal money allowances paid to pay • Career sea     high-ranking officers   • Diving duty      • Student loan repayment from programs   • Foreign duty (outside the 48 contiguous     such as the Department of Defense   states and the District of Columbia)     Educational Loan Repayment Program   • Foreign language proficiency     when year's service (requirement) is not   • Hardship duty     attributable to a combat zone   • Hostile fire or imminent danger         • Medical and dental officers   Incentive pay  • Submarine   • Nuclear-qualified officers      • Flight   • Optometry      • Hazardous duty   • Pharmacy      • High altitude/Low Opening (HALO)   • Special compensation for assistance with activities of daily living (SCAADL)         • Special duty assignment pay         • Veterinarian         • Voluntary Separation Incentive       Basic allowance for housing (BAH). Hr block free edition   You can still deduct mortgage interest and real estate taxes on your home if you pay these expenses with your BAH. Hr block free edition Table 2. Hr block free edition Excluded Items The exclusion for certain items applies whether the item is furnished in kind or is a reimbursement or allowance. Hr block free edition There is no exclusion for the personal use of a government-provided vehicle. Hr block free edition Combat  zone pay • Compensation for active service while in a combat zone Note: Limited amount for officers     • Housing and cost-of-living allowances abroad paid by the U. Hr block free edition S. Hr block free edition Government or by a foreign government         • OHA (Overseas Housing Allowance)                     Other pay • Defense counseling         • Disability, including payments received for injuries incurred as a direct result of a terrorist or military action         • Group-term life insurance   Moving • Dislocation   • Professional education   allowances • Military base realignment and   • ROTC educational and subsistence     closure benefit    allowances     (the exclusion is limited as   • State bonus pay for service in a     described above)   combat zone     • Move-in housing   • Survivor and retirement protection     • Moving household and   plan premiums     personal items   • Uniform allowances     • Moving trailers or mobile homes   • Uniforms furnished to enlisted     • Storage   personnel     • Temporary lodging and         temporary lodging expenses                 Travel • Annual round trip for dependent Death • Burial services   allowances students allowances • Death gratuity payments to     • Leave between consecutive   eligible survivors     overseas tours   • Travel of dependents to burial site     • Reassignment in a dependent         restricted status Family • Certain educational expenses for     • Transportation for you or your allowances dependents     dependents during ship overhaul   • Emergencies     or inactivation   • Evacuation to a place of safety     • Per diem   • Separation             In-kind military • Dependent-care assistance program Living • BAH (Basic Allowance for Housing)   benefits • Legal assistance allowances • BAS (Basic Allowance for Subsistence)     • Medical/dental care         • Commissary/exchange discounts         • Space-available travel on government aircraft           Death gratuity. Hr block free edition   Any death gratuity paid to a survivor of a member of the Armed Forces is excluded from gross income. Hr block free edition Differential wage payments. Hr block free edition   Differential wage payments are any payments made by an employer to an individual for a period during which the individual is performing service in the uniformed services while on active duty for a period of more than 30 days and that represent all or a portion of the wages the individual would have received from the employer if the individual was performing services for the employer. Hr block free edition These amounts are taxable and cannot be excluded as combat pay. Hr block free edition Military base realignment and closure benefit. Hr block free edition   Payments made under the Homeowners Assistance Program (HAP) generally are excluded from income. Hr block free edition However, the excludable amount cannot be more than the maximum amount described in subsection (c) of 42 USC 3374 as in effect on November 6, 2009. Hr block free edition Any part of the payment that is more than this limit is included in gross income. Hr block free edition For more information about the HAP, see http://hap. Hr block free edition usace. Hr block free edition army. Hr block free edition mil/Overview. Hr block free edition html. Hr block free edition Qualified reservist distribution (QRD). Hr block free edition   A QRD is a distribution to an individual of all or part of the individual's balance in a cafeteria plan or health flexible spending arrangement if: The individual was a reservist who was ordered or called to active duty for more than 179 days or for an indefinite period, and The distribution is made no sooner than the date the reservist was ordered or called to active duty and no later than the last day reimbursements could otherwise be made under the arrangement for the plan year which includes the date of the order or the call to duty. Hr block free edition A QRD is included in gross income and is subject to employment taxes. Hr block free edition The employer must include the QRD (reduced by after-tax contributions to the health flexible spending arrangement) as wages on Form W-2, Wage and Tax Statement. Hr block free edition Thrift Savings Plan (TSP) distributions. Hr block free edition   If you participate in the Uniformed Services TSP and receive a distribution from your account, the distribution is generally included in your taxable income. Hr block free edition   If your contributions included tax-exempt combat zone pay, the part of the distribution attributable to those contributions is tax exempt. Hr block free edition However, the earnings on the tax-exempt portion of the distribution are taxable. Hr block free edition The TSP will provide a statement showing the taxable and non-taxable portions of the distribution. Hr block free edition Roth Thrift Savings Plan (TSP) balance. Hr block free edition   You may be able to contribute to a designated Roth Account through the TSP known as the Roth TSP. Hr block free edition Roth TSP contributions are after-tax contributions, subject to the same contribution limits as the traditional TSP. Hr block free edition Qualified distributions from a Roth TSP are not included in your income. Hr block free edition For more details, see Thrift Savings Accounts in Part II of Publication 721, Tax Guide to U. Hr block free edition S. Hr block free edition Civil Service Retirement Benefits. Hr block free edition State bonus payments. Hr block free edition   Bonus payments made by a state (or a political subdivision thereof) to a member or former member of the uniformed services of the United States or to a dependent of such member are considered combat pay (and therefore may not be taxable) if the payments are made only because of the member's service in a combat zone. Hr block free edition See Combat Zone , later, for a list of designated combat zones. Hr block free edition Foreign Source Income If you are a U. Hr block free edition S. Hr block free edition citizen with income from sources outside the United States (foreign income), you must report all of that income (except for amounts that U. Hr block free edition S. Hr block free edition law allows you to exclude) on your tax return. Hr block free edition This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2 or a Form 1099. Hr block free edition This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties). Hr block free edition Certain taxpayers can exclude income earned in foreign countries. Hr block free edition For 2013, this exclusion amount can be as much as $97,600. Hr block free edition However, the foreign earned income exclusion does not apply to the wages and salaries of military and civilian employees of the U. Hr block free edition S. Hr block free edition Government. Hr block free edition Employees of the U. Hr block free edition S. Hr block free edition Government include those who work at United States Armed Forces exchanges, commissioned and noncommissioned officers' messes, Armed Forces motion picture services, and similar personnel. Hr block free edition Other foreign income earned by military personnel or their spouses may be eligible for the foreign earned income exclusion. Hr block free edition For more information on the exclusion, see Publication 54. Hr block free edition Residents of American Samoa may be able to exclude income from American Samoa. Hr block free edition This possession exclusion does not apply to wages and salaries of military and civilian employees of the U. Hr block free edition S. Hr block free edition Government. Hr block free edition If you need information on the possession exclusion, see Publication 570, Tax Guide for Individuals With Income From U. Hr block free edition S. Hr block free edition Possessions. Hr block free edition Military Spouses Residency Relief Act (MSRRA) If you are the civilian spouse of an active duty U. Hr block free edition S. Hr block free edition military servicemember and your domicile is the same as the servicemember's, you can choose to keep your prior residence or domicile for tax purposes when you accompany the servicemember spouse, who is relocating under military orders to a new duty station in one of the 50 states, the District of Columbia, or a U. Hr block free edition S. Hr block free edition possession. Hr block free edition See Publication 570 for more information. Hr block free edition Domicile. Hr block free edition   Your domicile is the permanent legal home you intend to use for an indefinite or unlimited period, and to which, when absent, you intend to return. Hr block free edition It is not always where you presently live. Hr block free edition Community Property The pay you earn as a member of the Armed Forces may be subject to community property laws depending on your marital status, your domicile, and the nature of the payment. Hr block free edition The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Hr block free edition Marital status. Hr block free edition   Community property rules apply to married persons whose domicile during the tax year was in a community property state. Hr block free edition The rules may affect your tax liability if you file separate returns or are divorced during the year. Hr block free edition Nevada, Washington, and California domestic partners. Hr block free edition   A registered domestic partner in Nevada, Washington, or California generally must report half the combined income of the individual and his or her domestic partner. Hr block free edition See Form 8958 and Publication 555, Community Property. Hr block free edition Nature of the payment. Hr block free edition   Active duty military pay is subject to community property laws. Hr block free edition Armed Forces retired or retainer pay may be subject to community property laws. Hr block free edition   For more information on community property laws, see Publication 555. Hr block free edition Form W-2 Codes Form W-2 shows your total pay and other compensation and the income tax, social security tax, and Medicare tax that was withheld during the year. Hr block free edition Form W-2 also shows other amounts that you may find important in box 12. Hr block free edition The amounts shown in box 12 are generally preceded by a code. Hr block free edition A list of codes used in box 12 is shown, next. Hr block free edition Form W-2 Reference Guide for Box 12 Codes A Uncollected social security or RRTA J Nontaxable sick pay T Adoption benefits   tax on tips             K 20% excise tax on excess golden V Income from exercise of B Uncollected Medicare tax on tips   parachute payments   nonstatutory stock option(s)             C Taxable cost of group-term life L Substantiated employee business W Employer contributions (including   insurance over $50,000   expense reimbursements   employee contributions through a           cafeteria plan) to an employee's D Elective deferrals under a section M Uncollected social security or RRTA   health savings account (HSA)   401(k) cash or deferred arrangement   tax on taxable cost of group-term life       plan (including a SIMPLE 401(k)   insurance over $50,000 (former Y Deferrals under a section 409A   arrangement)   employees only)   nonqualified deferred           compensation plan E Elective deferrals under a section N Uncollected Medicare tax on taxable       403(b) salary reduction agreement   cost of group-term life insurance Z Income under section 409A on a       over $50,000 (former employees only)   nonqualified deferred F Elective deferrals under a section       compensation plan   408(k)(6) salary reduction SEP P Excludable moving expense           reimbursements paid directly to AA Designated Roth contributions G Elective deferrals and employer   employee   under a section 401(k) plan   contributions (including nonelective           deferrals) to a section 457(b) Q Nontaxable combat pay BB Designated Roth contributions   deferred compensation plan       under a section 403(b) plan     R Employer contributions to an Archer     H Elective deferrals to a section   MSA DD Cost of employer-sponsored   501(c)(18)(D) tax-exempt       health coverage   organization plan S Employee salary reduction contributions under a section 408(p) SIMPLE  EE  Designated Roth contributions under a governmental section 457(b) plan  Note. Hr block free edition For more information on these codes, see your Form(s) W-2. Hr block free edition Adjustments to Income Adjusted gross income is your total income minus certain adjustments. Hr block free edition The following adjustments are of particular interest to members of the Armed Forces. Hr block free edition Armed Forces Reservists If you are a member of a reserve component of the Armed Forces and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your unreimbursed travel expenses as an adjustment to income on line 24 of Form 1040, U. Hr block free edition S. Hr block free edition Individual Income Tax Return, rather than as a miscellaneous itemized deduction. Hr block free edition Include all unreimbursed expenses from the time you leave home until the time you return home. Hr block free edition The deduction is limited to the amount the federal government generally reimburses its employees for travel expenses. Hr block free edition For more information about this limit, see Per Diem and Car Allowances in chapter 6 of Publication 463. Hr block free edition Member of a reserve component. Hr block free edition   You are a member of a reserve component of the Armed Forces if you are in the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service. Hr block free edition How to report. Hr block free edition   If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses. Hr block free edition Then enter on Form 1040, line 24, the part of your expenses, up to the federal rate, included on Form 2106, line 10, or Form 2106-EZ, line 6, that is for reserve-related travel more than 100 miles from your home. Hr block free edition Subtract this amount from the total on Form 2106, line 10, or Form 2106-EZ, line 6, and deduct the balance as an itemized deduction on Schedule A (Form 1040), line 21. Hr block free edition Example. Hr block free edition Captain Harris, a member of the Army Reserve, traveled to a location 220 miles from his home to perform his work in the reserves in April 2013. Hr block free edition He incurred $1,549 of unreimbursed expenses consisting of $249 for mileage (440 miles × 56. Hr block free edition 5 cents per mile), $300 for meals, and $1,000 for lodging. Hr block free edition He also had other deductible mileage expenses of $110 for several trips to a location 20 miles from his home. Hr block free edition Only 50% of his meal expenses are deductible. Hr block free edition He shows his total deductible travel expenses of $1,509 ($249 + $150 (50% of $300) + $1,000 + $110) on Form 2106, line 10. Hr block free edition He enters the $1,399 ($249 + $150 + $1,000) for travel over 100 miles from home on Form 1040, line 24. Hr block free edition He then subtracts that $1,399 from the amount on Form 2106, $1,509, and enters $110 on Schedule A (Form 1040), line 21. Hr block free edition Individual Retirement Arrangements Generally, you can deduct the lesser of the contributions to your traditional individual retirement arrangement (IRA) for the year or the general limit (or spousal IRA limit, if applicable). Hr block free edition However, if you or your spouse was covered by an employer-maintained retirement plan at any time during the year for which contributions were made, you may not be able to deduct all of the contributions. Hr block free edition The Form W-2 you or your spouse receives from an employer has a box used to indicate whether you were covered for the year. Hr block free edition The “Retirement plan” box should have a mark in it if you were covered. Hr block free edition For purposes of a deduction for contributions to a traditional IRA, Armed Forces members (including reservists on active duty for more than 90 days during the year) are considered covered by an employer-maintained retirement plan. Hr block free edition Individuals serving in the U. Hr block free edition S. Hr block free edition Armed Forces or in support of the U. Hr block free edition S. Hr block free edition Armed Forces in designated combat zones have additional time to make a qualified retirement contribution to an IRA. Hr block free edition For more information on this extension of deadline provision, see Extension of Deadlines , later. Hr block free edition For more information on IRAs, see Publication 590. Hr block free edition Combat Pay For IRA purposes, your compensation includes nontaxable combat pay. Hr block free edition This means that even though you do not have to include the combat pay in your gross income, you do include it in your compensation when figuring the limits on contributions and deductions of contributions to IRAs. Hr block free edition Qualified Reservist Distributions A qualified reservist distribution is defined below. Hr block free edition It is not subject to the 10% additional tax on early distributions from certain retirement plans. Hr block free edition Definition. Hr block free edition   A distribution you receive is a qualified reservist distribution if the following requirements are met. Hr block free edition You were ordered or called to active duty after September 11, 2001. Hr block free edition You were ordered or called to active duty for a period of more than 179 days or for an indefinite period because you are a member of a reserve component (see Member of a reserve component , earlier, under Armed Forces Reservists. Hr block free edition ) The distribution is from an IRA or from amounts attributable to elective deferrals under a section 401(k) or 403(b) plan or a similar arrangement. Hr block free edition The distribution was made no earlier than the date of the order or call to active duty and no later than the close of the active duty period. Hr block free edition Qualified Reservist Repayments You may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions (defined earlier) you received. Hr block free edition You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. Hr block free edition You make these repayment contributions to an IRA, even if you received the qualified reservist distribution from a section 401(k) or 403(b) plan or a similar arrangement. Hr block free edition Limit. Hr block free edition   Your qualified reservist repayments cannot be more than your qualified reservist distributions. Hr block free edition When repayment contributions can be made. Hr block free edition   You cannot make these repayment contributions after the date that is 2 years after your active duty period ends. Hr block free edition No deduction. Hr block free edition   You cannot deduct qualified reservist repayments. Hr block free edition Figuring your IRA deduction. Hr block free edition   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. Hr block free edition Reporting the repayment. Hr block free edition   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606, Nondeductible IRAs. Hr block free edition Moving Expenses To deduct moving expenses, you generally must meet certain time and distance tests. Hr block free edition However, if you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you do not have to meet these tests. Hr block free edition You can deduct your unreimbursed moving expenses on Form 3903. Hr block free edition Permanent change of station. Hr block free edition   A permanent change of station includes: A move from your home to your first post of active duty, A move from one permanent post of duty to another, and A move from your last post of duty to your home or to a nearer point in the United States. Hr block free edition The move must occur within 1 year of ending your active duty or within the period allowed under the Joint Federal Travel Regulations. Hr block free edition Spouse and dependents. Hr block free edition   If you are the spouse or dependent of a member of the Armed Forces who deserts, is imprisoned, or dies, a permanent change of station for you includes a move to: The member's place of enlistment or induction, Your, or the member's, home of record, or A nearer point in the United States. Hr block free edition   If the military moves you to or from a different location than the member, the moves are treated as a single move to your new main job location. Hr block free edition Services or reimbursements provided by the government. Hr block free edition   Do not include in your income the value of moving and storage services provided by the government because of a permanent change of station. Hr block free edition Similarly, do not include in income amounts received as a dislocation allowance, temporary lodging expense, temporary lodging allowance, or move-in housing allowance. Hr block free edition   Generally, if the total reimbursements or allowances that you receive from the government because of the move are more than your actual moving expenses, the excess is included in your wages on Form W-2. Hr block free edition However, if any reimbursements or allowances (other than dislocation, temporary lodging, temporary lodging expense, or move-in housing allowances) exceed the cost of moving and the excess is not included in your wages on Form W-2, the excess still must be included in gross income on Form 1040, line 7. Hr block free edition   Use Form 3903 to deduct qualified expenses that exceed your reimbursements and allowances (including dislocation, temporary lodging, temporary lodging expense, or move-in housing allowances that are excluded from gross income). Hr block free edition   If you must relocate and your spouse and dependents move to or from a different location, do not include in income reimbursements, allowances, or the value of moving and storage services provided by the government to move you and your spouse and dependents to and from the separate locations. Hr block free edition   Do not deduct any expenses for moving services that were provided by the government. Hr block free edition Also, do not deduct any expenses that were reimbursed by an allowance you did not include in income. Hr block free edition Deductible Moving Expenses If you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household. Hr block free edition You can deduct expenses (if not reimbursed or furnished in kind) for: Moving household goods and personal effects, and Travel. Hr block free edition Moving household goods and personal effects. Hr block free edition   You can deduct the expenses of moving your household goods and personal effects, including expenses for hauling a trailer, packing, crating, in-transit storage, and insurance. Hr block free edition You cannot deduct expenses for moving furniture or other goods you bought on the way from your old home to your new home. Hr block free edition Storing and insuring household goods and personal effects. Hr block free edition   You can include only the cost of storing and insuring your household goods and personal effects within any period of 30 consecutive days after the day these goods and effects are moved from your former home and before they are delivered to your new home. Hr block free edition Travel. Hr block free edition   You can deduct the expenses of traveling (including lodging but not meals) from your old home to your new home, including car expenses and air fare. Hr block free edition You can deduct as car expenses either: Your actual out-of-pocket expenses such as gas and oil, or The standard mileage rate of 24 cents a mile. Hr block free edition   You can add parking fees and tolls to the amount claimed under either method. Hr block free edition You cannot deduct any expenses for meals. Hr block free edition You cannot deduct the cost of unnecessary side trips or lavish and extravagant lodging. Hr block free edition Member of your household. Hr block free edition   A member of your household is anyone who has both your former home and your new home as his or her main home. Hr block free edition It does not include a tenant or employee unless you can claim that person as a dependent. Hr block free edition Foreign Moves A foreign move is a move from the United States or its possessions to a foreign country or from one foreign country to another foreign country. Hr block free edition A move from a foreign country to the United States or its possessions is not a foreign move. Hr block free edition For a foreign move, the deductible moving expenses described earlier are expanded to include the reasonable expenses of: Moving your household goods and personal effects to and from storage, and Storing these items for part or all of the time the new job location remains your main job location. Hr block free edition The new job location must be outside the United States. Hr block free edition Reporting Moving Expenses Figure moving expense deductions on Form 3903. Hr block free edition Carry the deduction from Form 3903 to Form 1040, line 26. Hr block free edition For more information, see Publication 521 and Form 3903. Hr block free edition Combat Zone Exclusion If you are a member of the U. Hr block free edition S. Hr block free edition Armed Forces who serves in a combat zone (defined later), you can exclude certain pay from your income. Hr block free edition This pay is generally referred to as “combat pay. Hr block free edition ” You do not actually need to show the exclusion on your tax return because income that qualifies for the combat zone exclusion is not included in the wages reported on your Form W-2. Hr block free edition (See Form W-2 , later. Hr block free edition ) The month for which you receive the pay must be a month in which you either served in a combat zone or were hospitalized as a result of wounds, disease, or injury incurred while serving in the combat zone. Hr block free edition You do not have to receive the excluded pay while you are in a combat zone, are hospitalized, or in the same year you served in a combat zone. Hr block free edition If you are an enlisted member, warrant officer, or commissioned warrant officer, you can exclude the following amounts from your income. Hr block free edition (Other officer personnel are discussed under Amount of Exclusion , later. Hr block free edition ) Active duty pay earned in any month you served in a combat zone. Hr block free edition Imminent danger/hostile fire pay. Hr block free edition A reenlistment bonus if the voluntary extension or reenlistment occurs in a month you served in a combat zone. Hr block free edition Pay for accrued leave earned in any month you served in a combat zone. Hr block free edition The Department of Defense must determine that the unused leave was earned during that period. Hr block free edition Pay received for duties as a member of the Armed Forces in clubs, messes, post and station theaters, and other nonappropriated fund activities. Hr block free edition The pay must be earned in a month you served in a combat zone. Hr block free edition Awards for suggestions, inventions, or scientific achievements you are entitled to because of a submission you made in a month you served in a combat zone. Hr block free edition Student loan repayments. Hr block free edition If the entire year of service required to earn the repayment was performed in a combat zone, the entire repayment made because of that year of service is excluded. Hr block free edition If only part of that year of service was performed in a combat zone, only part of the repayment qualifies for exclusion. Hr block free edition For example, if you served in a combat zone for 5 months, 5/12 of your repayment qualifies for exclusion. Hr block free edition Retirement pay and pensions do not qualify for the combat zone exclusion. Hr block free edition Partial (month) service. Hr block free edition   If you serve in a combat zone for any part of one or more days during a particular month, you are entitled to an exclusion for that entire month. Hr block free edition Form W-2. Hr block free edition   The wages shown in box 1 of your 2013 Form W-2 should not include military pay excluded from your income under the combat zone exclusion provisions. Hr block free edition If it does, you will need to get a corrected Form W-2 from your finance office. Hr block free edition   You cannot exclude as combat pay any wages shown in box 1 of Form W-2. Hr block free edition Combat Zone A combat zone is any area the President of the United States designates by Executive Order as an area in which the U. Hr block free edition S. Hr block free edition Armed Forces are engaging or have engaged in combat. Hr block free edition An area usually becomes a combat zone and ceases to be a combat zone on the dates the President designates by Executive Order. Hr block free edition Afghanistan area. Hr block free edition   By Executive Order No. Hr block free edition 13239, Afghanistan (and airspace above) was designated as a combat zone beginning September 19, 2001. Hr block free edition On December 14, 2001, the following countries were certified by the Department of Defense for combat zone tax benefits due to their direct support of military operations in the Afghanistan combat zone. Hr block free edition Djibouti. Hr block free edition Jordan. Hr block free edition Kyrgyzstan. Hr block free edition Pakistan. Hr block free edition Somalia. Hr block free edition Syria. Hr block free edition Tajikistan. Hr block free edition Uzbekistan. Hr block free edition Yemen. Hr block free edition The Philippines. Hr block free edition  Note. Hr block free edition For the Philippines only, the personnel must be deployed in conjunction with Operation Enduring Freedom supporting military operations in the Afghanistan combat zone. Hr block free edition The Kosovo area. Hr block free edition   By Executive Order No. Hr block free edition 13119, the following locations (including airspace above) were designated as a combat zone beginning March 24, 1999. Hr block free edition Federal Republic of Yugoslavia (Serbia/Montenegro). Hr block free edition Albania. Hr block free edition Kosovo. Hr block free edition The Adriatic Sea. Hr block free edition The Ionian Sea—north of the 39th parallel. Hr block free edition Note. Hr block free edition The combat zone designation for Montenegro and Kosovo (previously a province within Serbia) under Executive Order 13119 remains in force even though Montenegro and Kosovo became independent nations since EO 13119 was signed. Hr block free edition Arabian peninsula. Hr block free edition   By Executive Order No. Hr block free edition 12744, the following locations (and airspace above) were designated as a combat zone beginning January 17, 1991. Hr block free edition The Persian Gulf. Hr block free edition The Red Sea. Hr block free edition The Gulf of Oman. Hr block free edition The part of the Arabian Sea that is north of 10 degrees north latitude and west of 68 degrees east longitude. Hr block free edition The Gulf of Aden. Hr block free edition The total land areas of Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, and the United Arab Emirates. Hr block free edition Jordan which is in direct support of the Arabian Peninsula. Hr block free edition Serving in a Combat Zone You are considered to be serving in a combat zone if you are either assigned on official temporary duty to a combat zone or you qualify for hostile fire/imminent danger pay while in a combat zone. Hr block free edition Service in a combat zone includes any periods you are absent from duty because of sickness, wounds, or leave. Hr block free edition If, as a result of serving in a combat zone, a person becomes a prisoner of war or is missing in action, that person is considered to be serving in the combat zone so long as he or she keeps that status for military pay purposes. Hr block free edition Hospitalized While Serving in a Combat Zone If you are hospitalized while serving in a combat zone, the wound, disease, or injury causing the hospitalization will be presumed to have been incurred while serving in the combat zone unless there is clear evidence to the contrary. Hr block free edition Example. Hr block free edition You are hospitalized for a specific disease in a combat zone where you have been serving for 3 weeks, and the disease for which you are hospitalized has an incubation period of 2 to 4 weeks. Hr block free edition The disease is presumed to have been incurred while you were serving in the combat zone. Hr block free edition On the other hand, if the incubation period of the disease is 1 year, the disease would not have been incurred while you were serving in the combat zone. Hr block free edition Hospitalized After Leaving a Combat Zone In some cases, the wound, disease, or injury may have been incurred while you were serving in the combat zone, even though you were not hospitalized until after you left. Hr block free edition In that case, you can exclude military pay earned while you are hospitalized as a result of the wound, disease, or injury. Hr block free edition Example. Hr block free edition You were hospitalized for a specific disease 3 weeks after you left the combat zone. Hr block free edition The incubation period of the disease is from 2 to 4 weeks. Hr block free edition The disease is presumed to have been incurred while serving in the combat zone. Hr block free edition Nonqualifying Presence in Combat Zone None of the following types of military service qualify as service in a combat zone. Hr block free edition Presence in a combat zone while on leave from a duty station located outside the combat zone. Hr block free edition Passage over or through a combat zone during a trip between two points that are outside a combat zone. Hr block free edition Presence in a combat zone solely for your personal convenience. Hr block free edition Service Outside Combat Zone Considered Service in Combat Zone Military service outside a combat zone is considered to be performed in a combat zone if: The Department of Defense designates that the service is in direct support of military operations in the combat zone, and The service qualifies you for special military pay for duty subject to hostile fire or imminent danger. Hr block free edition Military pay received for this service will qualify for the combat zone exclusion if all of the requirements (other than service in a combat zone) are met and the pay is verifiable by reference to military pay records. Hr block free edition Amount of Exclusion If you are an enlisted member, warrant officer, or commissioned warrant officer and you serve in a combat zone during any part of a month, you can exclude all of your military pay for that month. Hr block free edition It should not be included in the wages reported on your Form W-2. Hr block free edition You also can exclude military pay earned while you are hospitalized as a result of wounds, disease, or injury incurred in the combat zone. Hr block free edition If you are hospitalized, you cannot exclude any military pay received for any month of service that begins more than 2 years after the end of combat activities in the combat zone. Hr block free edition Your hospitalization does not have to be in the combat zone. Hr block free edition If you are a commissioned officer (other than a commissioned warrant officer), you can exclude your pay according to the rules just discussed. Hr block free edition However, the amount of your exclusion is limited to the highest rate of enlisted pay (plus imminent danger/hostile fire pay you received) for each month during any part of which you served in a combat zone or were hospitalized as a result of your service there. Hr block free edition Alien Status For tax purposes, an alien is an individual who is not a U. Hr block free edition S. Hr block free edition citizen. Hr block free edition An alien is in one of three categories: resident, nonresident, or dual-status. Hr block free edition Placement in the correct category is crucial in determining what income to report and what forms to file. Hr block free edition Under peacetime enlistment rules, you generally cannot enlist in the Armed Forces unless you are a citizen or have been legally admitted to the United States for permanent residence. Hr block free edition If you are an alien enlistee in the Armed Forces, you are probably a resident alien. Hr block free edition If, under an income tax treaty, you are considered a resident of a foreign country, see your base legal officer. Hr block free edition Other aliens who are in the United States only because of military assignments and who have a home outside the United States are nonresident aliens. Hr block free edition Guam and Puerto Rico have special rules. Hr block free edition Residents of those areas should contact their taxing authority with their questions. Hr block free edition Most members of the Armed Forces are U. Hr block free edition S. Hr block free edition citizens or resident aliens. Hr block free edition However, if you have questions about your alien status or the alien status of your dependents or spouse, you should read the information in the following paragraphs and see Publication 519. Hr block free edition Resident Aliens You are considered a resident alien of the United States for tax purposes if you meet either the “green card test” or the “substantial presence test” for the calendar year (January 1–December 31). Hr block free edition If you meet the substantial presence test for 2014, you did not meet either the green card test or the substantial presence test for 2012 or 2013, and you did not choose to be treated as a resident for part of 2012, you may be able to choose to be treated as a U. Hr block free edition S. Hr block free edition resident for part of 2013. Hr block free edition See First-Year Choice in Publication 519. Hr block free edition These tests are explained in Publication 519. Hr block free edition Generally, resident aliens are taxed on their worldwide income and file the same tax forms as U. Hr block free edition S. Hr block free edition citizens. Hr block free edition Treating nonresident alien spouse as resident alien. Hr block free edition   A nonresident alien spouse can be treated as a resident alien if all the following conditions are met. Hr block free edition One spouse is a U. Hr block free edition S. Hr block free edition citizen or resident alien at the end of the tax year. Hr block free edition That spouse is married to the nonresident alien at the end of the tax year. Hr block free edition You both choose to treat the nonresident alien spouse as a resident alien. Hr block free edition Making the choice. Hr block free edition   Both you and your spouse must sign a statement and attach it to your joint return for the first tax year for which the choice applies. Hr block free edition Include in the statement: A declaration that one spouse was a nonresident alien and the other was a U. Hr block free edition S. Hr block free edition citizen or resident alien on the last day of the year, A declaration that both spouses choose to be treated as U. Hr block free edition S. Hr block free edition residents for the entire tax year, and The name, address, and taxpayer identification number (social security number or individual taxpayer identification number) of each spouse. Hr block free edition If the nonresident alien spouse is not eligible to get a social security number, he or she should file Form W-7, Application for IRS Individual Taxpayer Identification Number. Hr block free edition    Once you make this choice, the nonresident alien spouse's worldwide income is subject to U. Hr block free edition S. Hr block free edition tax. Hr block free edition If the nonresident alien spouse has substantial foreign income, there may be no advantage to making this choice. Hr block free edition Ending the choice. Hr block free edition   Once you make this choice, it applies to all later years unless one of the following situations occurs. Hr block free edition You or your spouse revokes the choice. Hr block free edition You or your spouse dies. Hr block free edition You and your spouse become legally separated under a decree of divorce or separate maintenance. Hr block free edition The Internal Revenue Service ends the choice because you or your spouse kept inadequate records. Hr block free edition For specific details on these situations, see Publication 519. Hr block free edition   If the choice is ended for any of these reasons, neither spouse can make the choice for any later year. Hr block free edition Choice not made. Hr block free edition   If you and your nonresident alien spouse do not make this choice: You cannot file a joint return. Hr block free edition You can file as married filing separately, or head of household if you qualify. Hr block free edition You can claim an exemption for your nonresident alien spouse if he or she has no gross income for U. Hr block free edition S. Hr block free edition tax purposes and is not another taxpayer's dependent. Hr block free edition The nonresident alien spouse generally does not have to file a federal income tax return if he or she had no income from sources in the United States. Hr block free edition If a return has to be filed, see the next discussion. Hr block free edition The nonresident alien spouse is not eligible for the earned income credit if he or she has to file a return. Hr block free edition Nonresident Aliens If you are an alien who does not meet the requirements discussed earlier to be a resident alien, you are a nonresident alien. Hr block free edition If you are required to file a federal tax return, you must file either Form 1040NR, U. Hr block free edition S. Hr block free edition Nonresident Alien Income Tax Return, or Form 1040NR-EZ, U. Hr block free edition S. Hr block free edition Income Tax Return for Certain Nonresident Aliens With No Dependents. Hr block free edition See the form instructions for information on who must file and filing status. Hr block free edition If you are a nonresident alien, you generally must pay tax on income from sources in the United States. Hr block free edition Your income from conducting a trade or business in the United States is taxed at graduated U. Hr block free edition S. Hr block free edition tax rates. Hr block free edition Other income from U. Hr block free edition S. Hr block free edition sources is taxed at a flat 30% (or lower treaty) rate. Hr block free edition For example, dividends from a U. Hr block free edition S. Hr block free edition corporation paid to a nonresident alien generally are subject to a 30% (or lower treaty) rate. Hr block free edition Dual-Status Aliens You can be both a nonresident and resident alien during the same tax year. Hr block free edition This usually occurs in the year you arrive in or depart from the United States. Hr block free edition If you are a dual-status alien, you are taxed on income from all sources for the part of the year you are a resident alien. Hr block free edition Generally, for the part of the year you are a nonresident alien, you are taxed only on income from sources in the United States. Hr block free edition Sale of Home You may not have to pay tax on all or part of the gain from the sale of your main home. Hr block free edition Usually, your main home is the one you live in most of the time. Hr block free edition It can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Hr block free edition You generally can exclude up to $250,000 of gain ($500,000, in most cases, if married filing a joint return) realized on the sale or exchange of a main home in 2013. Hr block free edition The exclusion is allowed each time you sell or exchange a main home, but generally not more than once every 2 years. Hr block free edition To be eligible, during the 5-year period ending on the date of the sale, you must have owned the home for at least 2 years (the ownership test), and lived in the home as your main home for at least 2 years (the use test). Hr block free edition Exception to ownership and use tests. Hr block free edition   You can exclude gain, but the maximum amount of gain you can exclude will be reduced if you do not meet the ownership and use tests due to a move to a new permanent duty station. Hr block free edition 5-year test period suspended. Hr block free edition   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty as a member of the Armed Forces. Hr block free edition This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. Hr block free edition Example. Hr block free edition David bought and moved into a home in 2005. Hr block free edition He lived in it as his main home for 2½ years. Hr block free edition For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. Hr block free edition He then sold the home at a gain in 2013. Hr block free edition To meet the use test, David chooses to suspend the 5-year test period for the 6 years he was on qualifying official extended duty. Hr block free edition This means he can disregard those 6 years. Hr block free edition Therefore, David's 5-year test period consists of the 5 years before he went on qualifying official extended duty. Hr block free edition He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. Hr block free edition Period of suspension. Hr block free edition   The period of suspension cannot last more than 10 years. Hr block free edition You cannot suspend the 5-year period for more than one property at a time. Hr block free edition You can revoke your choice to suspend the 5-year period at any time. Hr block free edition Qualified official extended duty. Hr block free edition   You are on qualified official extended duty if you serve on extended duty either: At a duty station at least 50 miles from your main home, or While you live in Government quarters under Government orders. Hr block free edition   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. Hr block free edition Property used for rental or business. Hr block free edition   You may be able to exclude your gain from the sale of a home that you have used as a rental property or for business. Hr block free edition However, you must meet the ownership and use tests discussed in Publication 523. Hr block free edition Nonqualified use. Hr block free edition   If the sale of your main home results in a gain that is allocated to one or more period(s) of nonqualified use, you cannot exclude that gain from your income. Hr block free edition   Nonqualified use means any period after 2008 when neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions. Hr block free edition For example, a period of nonqualified use does not include any period (not to exceed a total of 10 years) during which you or your spouse is serving on qualified official extended duty. Hr block free edition Loss. Hr block free edition   You cannot deduct a loss from the sale of your main home. Hr block free edition More information. Hr block free edition   For more information, see Publication 523. Hr block free edition Foreclosures There may be tax consequences as a result of compensation payments for foreclosures. Hr block free edition Payments made for violations of the Service Members Civil Relief Act (SCRA). Hr block free edition   All service members who received a settlement payment reported on a Form 1099 may need to report the amount on their tax return. Hr block free edition Generally, you must include settlement payments in income. Hr block free edition However, the tax treatment of settlement payments will depend on the facts and circumstances. Hr block free edition Lump Sum Portion of Settlement Payment. Hr block free edition    Generally, you must include the lump sum payment in gross income. Hr block free edition In limited circumstances you may be able to exclude part or all of the lump sum payment from gross income. Hr block free edition For example, you may qualify to exclude part or all of the payment from gross income if you can show that the payment was made to reimburse specific nondeductible expenses (such as living expenses) you incurred because of the SCRA violation. Hr block free edition Interest Payment on Lump Sum Portion of Settlement Payment. Hr block free edition    You must include any interest on the lump sum portion of your settlement payment in your income. Hr block free edition Lost Equity Portion of Settlement Payment. Hr block free edition    If you lost your main home in foreclosure, you should treat the lost equity payment as an additional amount you received on the foreclosure of the home. Hr block free edition You will have a gain on the foreclosure only if the sum of the lost equity payment and the value of the main home at foreclosure is more than what you paid for the home. Hr block free edition In many cases, this gain may be excluded from income. Hr block free edition For more information on the rules for excluding all or part of any gain from the sale (including a foreclosure) of a main home, see Pub. Hr block free edition 523, Selling Your Home. Hr block free edition The rules that apply to a lost equity payment you received for the foreclosure of a property that was not your main home are different. Hr block free edition    To find rules for reporting gain or loss on the foreclosure of property that was not your main home, see Pub. Hr block free edition 544, Sales and Other Dispositions of Assets. Hr block free edition Interest Payment on Lost Equity Portion of Settlement Payment. Hr block free edition    You must include any interest on the lost equity portion of your settlement payment in your income. Hr block free edition Itemized Deductions To figure your taxable income, you must subtract either your standard deduction or your itemized deductions from adjusted gross income. Hr block free edition For information on the standard deduction, see Publication 501. Hr block free edition Itemized deductions are figured on Schedule A (Form 1040). Hr block free edition This chapter discusses miscellaneous itemized deductions of particular interest to members of the Armed Forces. Hr block free edition For information on other itemized deductions, see the publications listed below. Hr block free edition Publication 502, Medical and Dental Expenses. Hr block free edition Publication 526, Charitable Contributions. Hr block free edition Publication 547, Casualties, Disasters, and Thefts. Hr block free edition Publication 550, Investment Income and Expenses. Hr block free edition You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. Hr block free edition For information on deductions that are not subject to the 2% limit, see Publication 529. Hr block free edition Employee Business Expenses Deductible employee business expenses generally are miscellaneous itemized deductions subject to the 2% limit. Hr block free edition Certain employee business expenses are deductible as adjustments to income. Hr block free edition For information on many employee business expenses, see Publication 463. Hr block free edition Generally, you must file Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses, to claim these expenses. Hr block free edition You do not have to file Form 2106 or Form 2106-EZ if you are claiming only unreimbursed expenses for uniforms, professional society dues, and work-related educational expenses (all discussed later). Hr block free edition You can deduct these expenses directly on Schedule A (Form 1040). Hr block free edition Reimbursement. Hr block free edition   Generally, to receive advances, reimbursements, or other allowances from the government, you must adequately account for your expenses and return any excess reimbursement. Hr block free edition Your reimbursed expenses are not deductible. Hr block free edition   If your expenses are more than your reimbursement, the excess expenses are deductible (subject to the 2% limit) if you can prove them. Hr block free edition You must file Form 2106 to report these expenses. Hr block free edition   You can use the shorter Form 2106-EZ if you meet all three of the following conditions. Hr block free edition You are an employee deducting expenses related to your job. Hr block free edition You were not reimbursed by your employer for your expenses. Hr block free edition (Amounts included in box 1 of Form W-2 are not considered reimbursements. Hr block free edition ) If you claim car expenses, you use the standard mileage rate. Hr block free edition    For 2013, the standard mileage rate is 56. Hr block free edition 5 cents a mile for all business miles driven. Hr block free edition This rate is adjusted periodically. Hr block free edition Travel Expenses You can deduct unreimbursed travel expenses only if they are incurred while you are traveling away from home. Hr block free edition If you are a member of the U. Hr block free edition S. Hr block free edition Armed Forces on a permanent duty assignment overseas, you are not traveling away from home. Hr block free edition You cannot deduct your expenses for meals and lodging while at your permanent duty station. Hr block free edition You cannot deduct these expenses even if you have to maintain a home in the United States for your family members who are not allowed to accompany you overseas. Hr block free edition A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a home aboard ship for travel expense purposes. Hr block free edition To be deductible, your travel expenses must be work related. Hr block free edition You cannot deduct any expenses for personal travel, such as visits to family while on furlough, leave, or liberty. Hr block free edition Away from home. Hr block free edition   Home is your permanent duty station (which can be a ship or base), regardless of where you or your family live. Hr block free edition You are away from home if you are away from your permanent duty station substantially longer than an ordinary day's work and you need to get sleep or rest to meet the demands of your work while away from home. Hr block free edition   Examples of deductible travel expenses include: Expenses for business-related meals (generally limited to 50% of your unreimbursed cost), lodging, taxicabs, business telephone calls, tips, laundry, and dry cleaning while you are away from home on temporary duty or temporary additional duty, and Expenses of carrying out official business while on “No Cost” orders. Hr block free edition    You cannot deduct any expenses for travel away from home if the temporary assignment in a single location is realistically expected to last (and does in fact last) for more than 1 year. Hr block free edition This rule may not apply if you are participating in a federal crime investigation or prosecution. Hr block free edition For more information, see Publication 463 and the Form 2106 instructions. Hr block free edition Transportation Expenses These expenses include the ordinary and necessary costs of: Getting from one workplace to another when you are not away from home, Going to a business meeting away from your regular workplace, and Getting from your home to a temporary workplace when you have a regular place of work. Hr block free edition These expenses include the costs of transportation by air, bus, rail, taxi, and driving and maintaining your car. Hr block free edition Transportation expenses incurred while traveling away from home are included with your travel expenses, discussed earlier. Hr block free edition However, if you use your car while traveling away from home overnight, see the rules in chapter 4 of Publication 463 to figure your car expense deduction. Hr block free edition If you must go from one workplace to another while on duty (for example, as a courier or to attend meetings) without being away from home, your unreimbursed transportation expenses are deductible. Hr block free edition However, the expenses of getting to and from your regular place of work (commuting) are not deductible. Hr block free edition Temporary work location. Hr block free edition   If you have one or more regular places of business away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location. Hr block free edition   Generally, if your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary. Hr block free edition   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. Hr block free edition If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. Hr block free edition    If you do not have a regular place of business, but you ordinarily work in the metropolitan area where you live, you can deduct daily transportation expenses between your home and a temporary work site outside your metropolitan area. Hr block free edition However, you cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. Hr block free edition These are nondeductible commuting costs. Hr block free edition Armed Forces reservists. Hr block free edition   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. Hr block free edition You can deduct the expense of getting from one workplace to the other. Hr block free edition You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. Hr block free edition In this case, your transportation generally is a nondeductible commuting expense. Hr block free edition However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. Hr block free edition   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. Hr block free edition If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. Hr block free edition See Armed Forces Reservists under Adjustments to Income, earlier. Hr block free edition Uniforms You usually cannot deduct the expenses for uniform cost and upkeep. Hr block free edition Generally, you must wear uniforms when on duty and you are allowed to wear them when off duty. Hr block free edition If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of the uniforms, but you must reduce your expenses by any allowance or reimbursement you receive. Hr block free edition Unreimbursed expenses for the cost and upkeep of the following articles are deductible. Hr block free edition Military battle dress uniforms and utility uniforms that you cannot wear when off duty. Hr block free edition Articles not replacing regular clothing, including insignia of rank, corps devices, epaulets, aiguillettes, and swords. Hr block free edition Reservists' uniforms if you can wear the uniform only while performing duties as a reservist. Hr block free edition Professional Dues You can deduct unreimbursed dues paid to professional societies directly related to your military position. Hr block free edition However, you cannot deduct amounts paid to an officers' club or a noncommissioned officers' club. Hr block free edition Example. Hr block free edition Lieutenant Margaret Allen, an electrical engineer at Maxwell Air Force Base, can deduct professional dues paid to the American Society of Electrical Engineers. Hr block free edition Educational Expenses You can deduct the unreimbursed costs of qualifying work-related education. Hr block free edition This is education that meets at least one of the following two tests. Hr block free edition The education is required by your employer or the law to keep your present salary, status, or job. Hr block free edition The required education must serve a bona fide business purpose of your employer. Hr block free edition The education maintains or improves skills needed in your present work. Hr block free edition However, even if the education meets one or both of the above tests, it is not qualifying education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. Hr block free edition You can deduct the expenses for qualifying work-related education even if the education could lead to a degree. Hr block free edition Example 1. Hr block free edition Lieutenant Colonel Mason has a degree in financial management and is in charge of base finances at her post of duty. Hr block free edition She took an advanced finance course. Hr block free edition She already meets the minimum qualifications for her job. Hr block free edition By taking the course, she is improving skills in her current position. Hr block free edition The course does not qualify her for a new trade or business. Hr block free edition She can deduct educational expenses that are more than the educational allowance she received. Hr block free edition Example 2. Hr block free edition Major Williams worked in the military base legal office as a legal intern. Hr block free edition He was placed in excess leave status by his employer to attend law school. Hr block free edition He paid all his educational expenses and was not reimbursed. Hr block free edition After obtaining his law degree, he passed the state bar exam and worked as a judge advocate. Hr block free edition His educational expenses are not deductible because the law degree qualified him for a new trade or business, even though the education maintained and improved his skills in his work. Hr block free edition Travel to obtain education. Hr block free edition   If your work-related education qualifies, you can deduct the costs of travel, including meals (subject to the 50% limit), and lodging, if the main purpose of the trip is to obtain the education. Hr block free edition   You cannot deduct the cost of travel that is itself a form of education, even if it is directly related to your duties in your work or business. Hr block free edition Transportation for education. Hr block free edition   If your work-related education qualifies for a deduction, you can deduct the costs of transportation to obtain that education. Hr block free edition However, you cannot deduct the cost of services provided in kind, such as base-provided transportation to or from class. Hr block free edition Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. Hr block free edition   If you need more information on educational expenses, see Publication 970. Hr block free edition Repayments If you had to repay to your employer an amount that you included in your income in an earlier year, you may be able to deduct the repaid amount from your income for the year in which you repaid it. Hr block free edition Repayment of $3,000 or less. Hr block free edition   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Hr block free edition If you reported it as wages, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Hr block free edition Repayment over $3,000. Hr block free edition   If the amount you repaid was more than $3,000, see Repayments in Publication 525. Hr block free edition Credits After you have figured your taxable income and tax liability, you can determine if you are entitled to any tax credits. Hr block free edition This publication discusses the first-time homebuyer credit, child tax credit, earned income credit, and credit for excess social security tax withheld. Hr block free edition For information on other credits, see your tax form instructions. Hr block free edition First-Time Homebuyer Credit The first-time homebuyer credit is not available for homes purchased after 2011. Hr block free edition In 2011, this credit had already expired for most taxpayers, however, certain members of the uniformed services and Foreign Service and certain employees of the intelligence community could claim the credit for homes purchased in 2011. Hr block free edition If you bought the home (and claimed the credit) after 2008, you generally must repay the credit if you dispose of the home or the home stops being your main home within the 36-month period beginning on the purchase date. Hr block free edition If the home continues to be your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit. Hr block free edition If you bought your home in 2008, you generally must repay the credit over a 15-year period in 15 equal installments. Hr block free edition For more information, see Form 5405, Repayment of the First-Time Homebuyer Credit, and its instructions. Hr block free edition Child Tax Credit The child tax credit is a credit that may reduce your tax by as much as $1,000 for each of your qualifying children. Hr block free edition The additional child tax credit is a credit you may be able to take if you are not able to claim the full amount of the child tax credit. Hr block free edition The child tax credit is not the same as the credit for child and dependent care expenses. Hr block free edition See Publication 503 for information on the credit for child and dependent care expenses. Hr block free edition Qualifying Child A qualifying child for purposes of the child tax credit is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was under age 17 at the end of 2013, Did not provide over half of his or her own support for 2013, Lived with you for more than half of 2013 (see Exceptions to time lived with you, later), Is claimed as a dependent on your return, Does not file a joint return for the year (or files it only as a claim for refund), and Was a U. Hr block free edition S. Hr block free edition citizen, a U. Hr block free edition S. Hr block free edition national, or a U. Hr block free edition S. Hr block free edition resident alien. Hr block free edition If the child was adopted, see Adopted child . Hr block free edition For each qualifying child you must check the box on Form 1040 or Form 1040A, line 6c, column (4). Hr block free edition Exceptions to time lived with you. Hr block free edition   A child is considered to have lived with you for all of 2013 if the child was born or died in 2013 and your home was this child's home for the entire time he or she was alive. Hr block free edition Temporary absences by you or the child for special circumstances, such as school, vacation, business, medical care, military service, or detention in a juvenile facility, count as time the child lived with you. Hr block free edition   There are also exceptions for kidnapped children and children of divorced or separated parents. Hr block free edition For details, see Publication 501. Hr block free edition Qualifying child of more than one person. Hr block free edition   A special rule applies if your qualifying child is the qualifying child of more than one person. Hr block free edition For details, see Publication 501. Hr block free edition Adopted child. Hr block free edition   An adopted child is always treated as your own child. Hr block free edition An adopted child includes a child lawfully placed with you for legal adoption. Hr block free edition   If you are a U. Hr block free edition S. Hr block free edition citizen or U. Hr block free edition S. Hr block free edition national and your adopted child lived with you as a member of your household all year, that child meets condition (7) above to be a qualifying child for the child tax credit. Hr block free edition Amount of Credit The maximum amount you can claim for the credit is $1,000 for each qualifying child. Hr block free edition Limits on the credit. Hr block free edition   You must reduce your child tax credit if either (1) or (2), below, applies. Hr block free edition The amount on Form 1040, line 46, or Form 1040A, line 28, is less than the credit. Hr block free edition If the amount is zero, you cannot take this credit because there is no tax to reduce. Hr block free edition However, you may be able to take the additional child tax credit. Hr block free edition See Additional Child Tax Credit , later. Hr block free edition Your modified adjusted gross income (AGI) is more than the amount shown below for your filing status. Hr block free edition Married filing jointly — $110,000. Hr block free edition Single, head of household,  or qualifying widow(er) — $75,000. Hr block free edition Married filing separately — $55,000. Hr block free edition Modified AGI. Hr block free edition   For purposes of the child tax credit, your modified AGI is the amount on Form 1040, line 38, or Form 1040A, line 22, plus the following amounts that may apply to you. Hr block free edition Any amount excluded from income because of the exclusion of income from Puerto Rico. Hr block free edition Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income. Hr block free edition Any amount on line 18 of Form 2555-EZ, Foreign Earned Income Exclusion. Hr block free edition Any amount on line 15 of Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa. Hr block free edition   If you do not have any of the above, your modified AGI is the same as your AGI. Hr block free edition Claiming the Credit To claim the child tax credit, you must file Form 1040 or Form 1040A. Hr block free edition For more information on the child tax credit, see the instructions for Form 1040 or Form 1040A. Hr block free edition Also attach Schedule 8812, Child Tax Credit, if required. Hr block free edition Additional Child Tax Credit This credit is for certain individuals who get less than the full amount of the child tax credit. Hr block free edition The additional child tax credit may give you a refund even if you do not owe any tax. Hr block free edition For more information, see the instructions for Form 1040 or Form 1040A, and Schedule 8812. Hr block free edition Earned Income Credit The earned income credit (EIC) is a cr
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What Can You Expect from Appeals?

If your case qualifies for an appeal, an Appeals employee will review the issues of your case with a fresh, objective perspective and schedule a conference with you. Appeals conferences are informal and conducted by correspondence, telephone or in person. Most differences are settled in these appeals without expensive and time-consuming court trials. Appeals will consider any reason you have for disagreement, except for moral, religious, political, constitutional, conscientious objection, or similar grounds.

Our Commitments


  • Explain your appeal rights and the Appeals process
  • Listen to your concerns, be courteous and professional
  • Be timely and responsive
  • Be fair and impartial

Your Responsibilities


  • In your protest requesting an appeal, list all issues with which you disagree and why, and tell us how you understand the facts and the law.
  • Listen to our explanation of your appeal rights and the Appeals process, including the timeframe to resolve your case.
  • Give us any additional information or documentation that will be helpful to your case within the timeframe specified. If you present new information that you did not provide to the auditor or revenue officer, we may refer that information for further consideration. You will receive their comments, and have an opportunity to respond.
  • Let us know the best time to contact you.

General Timeframe

First Notice from Appeals

Response times from Appeals can vary, depending on the type of case and the time needed to review the file. Normally, you can expect to hear from an Appeals employee within 90 days after you file your request. If it has been more than 90 days since you filed your request, you should contact the office where you sent your appeal request. They can tell you when they forwarded your case to Appeals. Please allow 90 days from when your file was sent to Appeals for a reply. If the IRS office to which you sent your request cannot provide a reason for the delay you have two options: (1) have that office contact Appeals for an approximate date when Appeals might contact you, (2) call the Appeals Account Resolution Specialist (AARS) at 559-233-1267. The AARS can tell you if your case has been assigned to an Appeals employee and how to contact that employee directly.

Timeframe for Resolving Your Case

The time it takes to resolve your case depends on the facts and circumstances. It could take anywhere from 90 days to a year. Please contact your Appeals Officer or Settlement Officer for a more specific timeframe.

Page Last Reviewed or Updated: 16-Jan-2014

The Hr Block Free Edition

Hr block free edition Index Symbols 401(k) Plan Elective Deferrals, Elective Deferrals (401(k) Plans) Safe harbor, Safe harbor 401(k) plan. Hr block free edition A Annual additions, Annual additions. Hr block free edition Annual benefits, Annual benefits. Hr block free edition Assistance (see Tax help) Automatic Enrollment, Automatic Enrollment B Business, definition, Business. Hr block free edition C Common-law employee, Common-law employee. Hr block free edition Compensation, Compensation. Hr block free edition Contribution Defined, Contribution. Hr block free edition Limits Qualified plans, Limits on Contributions and Benefits SEP-IRAs, Contribution Limits SIMPLE IRA plan, Contribution Limits D Deduction Defined, SIMPLE plans. Hr block free edition , Deduction. Hr block free edition Deduction worksheet for self-employed, Figuring your deduction. Hr block free edition Defined benefit plan Deduction limits, Defined benefit plans. Hr block free edition Limits on contributions, Defined benefit plan. Hr block free edition Defined contribution plan Automatic Enrollment, Automatic Enrollment Deduction limits, Defined contribution plans. Hr block free edition Eligible automatic contribution arrangement, Eligible automatic contribution arrangement. Hr block free edition Forfeitures, Forfeiture. Hr block free edition Limits on contributions, Defined contribution plan. Hr block free edition Money purchase pension plan, Money purchase pension plan. Hr block free edition Profit-sharing plan, Profit-sharing plan. Hr block free edition Qualified automatic contribution arrangement, Qualified automatic contribution arrangement. Hr block free edition Definitions you need to know, Definitions You Need To Know Disqualified person, Prohibited Transactions Distributions (withdrawals), Distributions (Withdrawals) E EACA, Eligible automatic contribution arrangement. Hr block free edition Earned income, Earned income. Hr block free edition Eligible automatic contribution arrangement, Eligible automatic contribution arrangement. Hr block free edition Employees Eligible, Eligible employee. Hr block free edition Excludable, Excludable employees. Hr block free edition Highly compensated, Highly compensated employee. Hr block free edition Leased, Leased employee. Hr block free edition Employer Defined, Employer. Hr block free edition Excess Deferrals, Treatment of Excess Deferrals Excise tax, Excise Tax on Reversion of Plan Assets Nondeductible (excess) contributions, Excise Tax for Nondeductible (Excess) Contributions Reduced benefit accrual, Notification of Significant Benefit Accrual Reduction SEP excess contributions, Excise tax. Hr block free edition Excludable employees, Excludable employees. Hr block free edition F Form 1040, Where To Deduct Contributions, Reporting the tax. Hr block free edition 1099-R, Reporting corrective distributions on Form 1099-R. Hr block free edition 5304–SIMPLE, How To Set Up a SIMPLE IRA Plan 5305–S, Setting up a SIMPLE IRA. Hr block free edition 5305–SA, Setting up a SIMPLE IRA. Hr block free edition 5305–SEP, Formal written agreement. Hr block free edition 5305–SIMPLE, How To Set Up a SIMPLE IRA Plan 5310, Form 5310. Hr block free edition 5329, Reporting the tax. Hr block free edition 5330, Reporting the tax. Hr block free edition , Tax on excess contributions of highly compensated employees. Hr block free edition , Excise Tax on Reversion of Plan Assets, Payment of the 15% tax. Hr block free edition 5500, Form 5500. Hr block free edition , Electronic filing of Forms 5500 and 5500-SF. Hr block free edition 5500-EZ, Form 5500-EZ. Hr block free edition Form W-2, Reporting on Form W-2. Hr block free edition Schedule K (Form 1065), Where To Deduct Contributions Free tax services, Free help with your return. Hr block free edition H Highly compensated employee, Highly compensated employee. Hr block free edition K Keogh plans (see Qualified plans) L Leased employee, Leased employee. Hr block free edition N Net earnings from self-employment, Net earnings from self-employment. Hr block free edition Notification requirements, Notification Requirement P Participant, definition, Participant. Hr block free edition Participation, Participation. Hr block free edition Partner, definition, Partner. Hr block free edition Publications (see Tax help) Q QACA, Qualified automatic contribution arrangement. Hr block free edition Qualified automatic contribution arrangement, Qualified automatic contribution arrangement. Hr block free edition Qualified Plan, definition, Qualified plan. Hr block free edition Qualified plans, Limits on Contributions and Benefits Assignment of benefits, Benefits must not be assigned or alienated. Hr block free edition Benefits starting date, Benefit payment must begin when required. Hr block free edition Contributions, Contributions, Employer Contributions, Limits on Contributions and Benefits, When Contributions Are Considered Made, Where To Deduct Contributions Deduction limits, Deduction Limits, Defined contribution plans. Hr block free edition , Defined benefit plans. Hr block free edition , Deduction Limit for Self-Employed Individuals, Carryover of Excess Contributions, Excise Tax for Nondeductible (Excess) Contributions Deduction Worksheet for Self-Employed, Table and Worksheets for the Self-Employed Deductions, Employer Deduction Deferrals, Treatment of contributions. Hr block free edition , Reporting on Form W-2. Hr block free edition Defined benefit plan, Defined Benefit Plan Defined contribution plan, Defined Contribution Plan Distributions, Distributions Minimum, Required Distributions Required beginning date, Required beginning date. Hr block free edition Rollover, Rollover. Hr block free edition Tax on excess benefits, Tax on Excess Benefits Tax on premature, Tax on Early Distributions Tax treatment, Tax Treatment of Distributions Elective Deferrals, Elective Deferrals (401(k) Plans) Limits, Limit on Elective Deferrals Employee nondeductible contributions, Employee Contributions Excess Deferrals, Treatment of Excess Deferrals Investing plan assets, Investing Plan Assets Kinds of plans, Kinds of Plans Leased employees, Leased employee. Hr block free edition Minimum requirements Coverage, Minimum coverage requirement must be met. Hr block free edition Funding, Minimum Funding Requirement Vesting, Minimum vesting standard must be met. Hr block free edition Prohibited transactions, Prohibited Transactions Qualification rules, Qualification Rules Rate Table for Self-Employed, Table and Worksheets for the Self-Employed Rate Worksheet for Self-Employed, Table and Worksheets for the Self-Employed Reporting requirements, Reporting Requirements Setting up, Setting Up a Qualified Plan Qualified Plans Survivor benefits, Survivor benefits. Hr block free edition Qualified Roth Contribution Program, Qualified Roth Contribution Program R Rate Table for Self-Employed, Rate table for self-employed. Hr block free edition Rate Worksheet for Self-Employed, Rate worksheet for self-employed. Hr block free edition Required distributions, Required Distributions Rollovers, Rollover. Hr block free edition S Safe harbor 401(k) plan, Safe harbor 401(k) plan. Hr block free edition Salary reduction arrangement, Deferral percentage. Hr block free edition , Limit on Elective Deferrals Salary Reduction Simplified Employee Pension(SARSEP), Salary Reduction Simplified Employee Pensions (SARSEPs) SARSEP ADP test, SARSEP ADP test. Hr block free edition Section 402(f) notice, Section 402(f) Notice. Hr block free edition Self-employed individual, Self-employed individual. Hr block free edition SEP plans Deduction Worksheet for Self-Employed, Table and Worksheets for the Self-Employed Rate Table for Self-Employed, Table and Worksheets for the Self-Employed Rate Worksheet for Self-Employed, Table and Worksheets for the Self-Employed Reporting and Disclosure, Reporting and Disclosure Requirements SEP-IRAs Contributions, Contributions for yourself. Hr block free edition Deductible contributions, Deducting Contributions, Excise tax. Hr block free edition Carryover of excess contributions, Carryover of Excess SEP Contributions Deduction limits, Deduction Limit for Contributions for Participants Limits for self-employed, Deduction Limit for Self-Employed Individuals When to deduct, When To Deduct Contributions Where to deduct, Where To Deduct Contributions Distributions (withdrawals), Distributions (Withdrawals) Eligible employee, Eligible employee. Hr block free edition Excludable employees, Excludable employees. Hr block free edition SIMPLE IRA plan Compensation, Compensation. Hr block free edition Contributions, Contribution Limits Deductions, Nonelective contributions. Hr block free edition Distributions(withdrawals), Distributions (Withdrawals) Employee election period, Election period. Hr block free edition Employer matching contributions, Employer matching contributions. Hr block free edition Excludable employees, Excludable employees. Hr block free edition Notification requirements, Notification Requirement When to deduct contributions, When To Deduct Contributions SIMPLE plans, Who Can Set Up a SIMPLE IRA Plan?, Reporting on Form W-2. Hr block free edition SIMPLE 401(k), SIMPLE 401(k) Plan SIMPLE IRA plan, SIMPLE IRA Plan Simplified employee pension (SEP), Salary Reduction Simplified Employee Pensions (SARSEPs) Salary reduction arrangement Compensation of self-employed individuals, Compensation of self-employed individuals. Hr block free edition Employee compensation, Employee compensation. Hr block free edition Who can have a SARSEP, Who can have a SARSEP? SEP-IRA contributions, How Much Can I Contribute? Setting up a SEP, Setting Up a SEP Sixty-day employee election period, Election period. Hr block free edition Sole proprietor, definition, Sole proprietor. Hr block free edition T Tax help, How To Get Tax Help U User fee, User fee. Hr block free edition W Worksheets Deduction Worksheet for Self-Employed, Table and Worksheets for the Self-Employed Rate Worksheet for Self-Employed, Table and Worksheets for the Self-Employed Prev  Up     Home   More Online Publications