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Irs 1040 Ez 2012

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Irs 1040 Ez 2012

Irs 1040 ez 2012 9. Irs 1040 ez 2012   Depletion Table of Contents Introduction Topics - This chapter discusses: Who Can Claim Depletion? Mineral PropertyCost Depletion Percentage Depletion Oil and Gas Wells Mines and Geothermal Deposits Lessor's Gross Income TimberTimber units. Irs 1040 ez 2012 Depletion unit. Irs 1040 ez 2012 Introduction Depletion is the using up of natural resources by mining, drilling, quarrying stone, or cutting timber. Irs 1040 ez 2012 The depletion deduction allows an owner or operator to account for the reduction of a product's reserves. Irs 1040 ez 2012 There are two ways of figuring depletion: cost depletion and percentage depletion. Irs 1040 ez 2012 For mineral property, you generally must use the method that gives you the larger deduction. Irs 1040 ez 2012 For standing timber, you must use cost depletion. Irs 1040 ez 2012 Topics - This chapter discusses: Who can claim depletion Mineral property Timber Who Can Claim Depletion? If you have an economic interest in mineral property or standing timber, you can take a deduction for depletion. Irs 1040 ez 2012 More than one person can have an economic interest in the same mineral deposit or timber. Irs 1040 ez 2012 In the case of leased property, the depletion deduction is divided between the lessor and the lessee. Irs 1040 ez 2012 You have an economic interest if both the following apply. Irs 1040 ez 2012 You have acquired by investment any interest in mineral deposits or standing timber. Irs 1040 ez 2012 You have a legal right to income from the extraction of the mineral or cutting of the timber to which you must look for a return of your capital investment. Irs 1040 ez 2012 A contractual relationship that allows you an economic or monetary advantage from products of the mineral deposit or standing timber is not, in itself, an economic interest. Irs 1040 ez 2012 A production payment carved out of, or retained on the sale of, mineral property is not an economic interest. Irs 1040 ez 2012 Individuals, corporations, estates, and trusts who claim depletion deductions may be liable for alternative minimum tax. Irs 1040 ez 2012 Basis adjustment for depletion. Irs 1040 ez 2012   You must reduce the basis of your property by the depletion allowed or allowable, whichever is greater. Irs 1040 ez 2012 Mineral Property Mineral property includes oil and gas wells, mines, and other natural deposits (including geothermal deposits). Irs 1040 ez 2012 For this purpose, the term “property” means each separate interest you own in each mineral deposit in each separate tract or parcel of land. Irs 1040 ez 2012 You can treat two or more separate interests as one property or as separate properties. Irs 1040 ez 2012 See section 614 of the Internal Revenue Code and the related regulations for rules on how to treat separate mineral interests. Irs 1040 ez 2012 There are two ways of figuring depletion on mineral property. Irs 1040 ez 2012 Cost depletion. Irs 1040 ez 2012 Percentage depletion. Irs 1040 ez 2012 Generally, you must use the method that gives you the larger deduction. Irs 1040 ez 2012 However, unless you are an independent producer or royalty owner, you generally cannot use percentage depletion for oil and gas wells. Irs 1040 ez 2012 See Oil and Gas Wells , later. Irs 1040 ez 2012 Cost Depletion To figure cost depletion you must first determine the following. Irs 1040 ez 2012 The property's basis for depletion. Irs 1040 ez 2012 The total recoverable units of mineral in the property's natural deposit. Irs 1040 ez 2012 The number of units of mineral sold during the tax year. Irs 1040 ez 2012 Basis for depletion. Irs 1040 ez 2012   To figure the property's basis for depletion, subtract all the following from the property's adjusted basis. Irs 1040 ez 2012 Amounts recoverable through: Depreciation deductions, Deferred expenses (including deferred exploration and development costs), and Deductions other than depletion. Irs 1040 ez 2012 The residual value of land and improvements at the end of operations. Irs 1040 ez 2012 The cost or value of land acquired for purposes other than mineral production. Irs 1040 ez 2012 Adjusted basis. Irs 1040 ez 2012   The adjusted basis of your property is your original cost or other basis, plus certain additions and improvements, and minus certain deductions such as depletion allowed or allowable and casualty losses. Irs 1040 ez 2012 Your adjusted basis can never be less than zero. Irs 1040 ez 2012 See Publication 551, Basis of Assets, for more information on adjusted basis. Irs 1040 ez 2012 Total recoverable units. Irs 1040 ez 2012   The total recoverable units is the sum of the following. Irs 1040 ez 2012 The number of units of mineral remaining at the end of the year (including units recovered but not sold). Irs 1040 ez 2012 The number of units of mineral sold during the tax year (determined under your method of accounting, as explained next). Irs 1040 ez 2012   You must estimate or determine recoverable units (tons, pounds, ounces, barrels, thousands of cubic feet, or other measure) of mineral products using the current industry method and the most accurate and reliable information you can obtain. Irs 1040 ez 2012 You must include ores and minerals that are developed, in sight, blocked out, or assured. Irs 1040 ez 2012 You must also include probable or prospective ores or minerals that are believed to exist based on good evidence. Irs 1040 ez 2012 But see Elective safe harbor for owners of oil and gas property , later. Irs 1040 ez 2012 Number of units sold. Irs 1040 ez 2012   You determine the number of units sold during the tax year based on your method of accounting. Irs 1040 ez 2012 Use the following table to make this determination. Irs 1040 ez 2012    IF you  use . Irs 1040 ez 2012 . Irs 1040 ez 2012 . Irs 1040 ez 2012 THEN the units sold during the year are . Irs 1040 ez 2012 . Irs 1040 ez 2012 . Irs 1040 ez 2012 The cash method of accounting The units sold for which you receive payment during the tax year (regardless of the year of sale). Irs 1040 ez 2012 An accrual method of accounting The units sold based on your inventories and method of accounting for inventory. Irs 1040 ez 2012   The number of units sold during the tax year does not include any for which depletion deductions were allowed or allowable in earlier years. Irs 1040 ez 2012 Figuring the cost depletion deduction. Irs 1040 ez 2012   Once you have figured your property's basis for depletion, the total recoverable units, and the number of units sold during the tax year, you can figure your cost depletion deduction by taking the following steps. Irs 1040 ez 2012 Step Action Result 1 Divide your property's basis for depletion by total recoverable units. Irs 1040 ez 2012 Rate per unit. Irs 1040 ez 2012 2 Multiply the rate per unit by units sold during the tax year. Irs 1040 ez 2012 Cost depletion deduction. Irs 1040 ez 2012 You must keep accounts for the depletion of each property and adjust these accounts each year for units sold and depletion claimed. Irs 1040 ez 2012 Elective safe harbor for owners of oil and gas property. Irs 1040 ez 2012   Instead of using the method described earlier to determine the total recoverable units, you can use an elective safe harbor. Irs 1040 ez 2012 If you choose the elective safe harbor, the total recoverable units equal 105% of a property's proven reserves (both developed and undeveloped). Irs 1040 ez 2012 For details, see Revenue Procedure 2004-19 on page 563 of Internal Revenue Bulletin 2004-10, available at www. Irs 1040 ez 2012 irs. Irs 1040 ez 2012 gov/pub/irs-irbs/irb04-10. Irs 1040 ez 2012 pdf. Irs 1040 ez 2012   To make the election, attach a statement to your timely filed (including extensions) original return for the first tax year for which the safe harbor is elected. Irs 1040 ez 2012 The statement must indicate that you are electing the safe harbor provided by Revenue Procedure 2004-19. Irs 1040 ez 2012 The election, if made, is effective for the tax year in which it is made and all later years. Irs 1040 ez 2012 It cannot be revoked for the tax year in which it is elected, but may be revoked in a later year. Irs 1040 ez 2012 Once revoked, it cannot be re-elected for the next 5 years. Irs 1040 ez 2012 Percentage Depletion To figure percentage depletion, you multiply a certain percentage, specified for each mineral, by your gross income from the property during the tax year. Irs 1040 ez 2012 The rates to be used and other rules for oil and gas wells are discussed later under Independent Producers and Royalty Owners and under Natural Gas Wells . Irs 1040 ez 2012 Rates and other rules for percentage depletion of other specific minerals are found later in Mines and Geothermal Deposits . Irs 1040 ez 2012 Gross income. Irs 1040 ez 2012   When figuring percentage depletion, subtract from your gross income from the property the following amounts. Irs 1040 ez 2012 Any rents or royalties you paid or incurred for the property. Irs 1040 ez 2012 The part of any bonus you paid for a lease on the property allocable to the product sold (or that otherwise gives rise to gross income) for the tax year. Irs 1040 ez 2012 A bonus payment includes amounts you paid as a lessee to satisfy a production payment retained by the lessor. Irs 1040 ez 2012   Use the following fraction to figure the part of the bonus you must subtract. Irs 1040 ez 2012 No. Irs 1040 ez 2012 of units sold in the tax year Recoverable units from the property × Bonus Payments For oil and gas wells and geothermal deposits, more information about the definition of gross income from the property is under Oil and Gas Wells , later. Irs 1040 ez 2012 For other property, more information about the definition of gross income from the property is under Mines and Geothermal Deposits , later. Irs 1040 ez 2012 Taxable income limit. Irs 1040 ez 2012   The percentage depletion deduction generally cannot be more than 50% (100% for oil and gas property) of your taxable income from the property figured without the depletion deduction and the domestic production activities deduction. Irs 1040 ez 2012   Taxable income from the property means gross income from the property minus all allowable deductions (except any deduction for depletion or domestic production activities) attributable to mining processes, including mining transportation. Irs 1040 ez 2012 These deductible items include, but are not limited to, the following. Irs 1040 ez 2012 Operating expenses. Irs 1040 ez 2012 Certain selling expenses. Irs 1040 ez 2012 Administrative and financial overhead. Irs 1040 ez 2012 Depreciation. Irs 1040 ez 2012 Intangible drilling and development costs. Irs 1040 ez 2012 Exploration and development expenditures. Irs 1040 ez 2012 Deductible taxes (see chapter 5), but not taxes that you capitalize or take as a credit. Irs 1040 ez 2012 Losses sustained. Irs 1040 ez 2012   The following rules apply when figuring your taxable income from the property for purposes of the taxable income limit. Irs 1040 ez 2012 Do not deduct any net operating loss deduction from the gross income from the property. Irs 1040 ez 2012 Corporations do not deduct charitable contributions from the gross income from the property. Irs 1040 ez 2012 If, during the year, you dispose of an item of section 1245 property that was used in connection with mineral property, reduce any allowable deduction for mining expenses by the part of any gain you must report as ordinary income that is allocable to the mineral property. Irs 1040 ez 2012 See section 1. Irs 1040 ez 2012 613-5(b)(1) of the regulations for information on how to figure the ordinary gain allocable to the property. Irs 1040 ez 2012 Oil and Gas Wells You cannot claim percentage depletion for an oil or gas well unless at least one of the following applies. Irs 1040 ez 2012 You are either an independent producer or a royalty owner. Irs 1040 ez 2012 The well produces natural gas that is either sold under a fixed contract or produced from geopressured brine. Irs 1040 ez 2012 If you are an independent producer or royalty owner, see Independent Producers and Royalty Owners , next. Irs 1040 ez 2012 For information on the depletion deduction for wells that produce natural gas that is either sold under a fixed contract or produced from geopressured brine, see Natural Gas Wells , later. Irs 1040 ez 2012 Independent Producers and Royalty Owners If you are an independent producer or royalty owner, you figure percentage depletion using a rate of 15% of the gross income from the property based on your average daily production of domestic crude oil or domestic natural gas up to your depletable oil or natural gas quantity. Irs 1040 ez 2012 However, certain refiners, as explained next, and certain retailers and transferees of proven oil and gas properties, as explained next, cannot claim percentage depletion. Irs 1040 ez 2012 For information on figuring the deduction, see Figuring percentage depletion , later. Irs 1040 ez 2012 Refiners who cannot claim percentage depletion. Irs 1040 ez 2012   You cannot claim percentage depletion if you or a related person refine crude oil and you and the related person refined more than 75,000 barrels on any day during the tax year based on average (rather than actual) daily refinery runs for the tax year. Irs 1040 ez 2012 The average daily refinery run is computed by dividing total refinery runs for the tax year by the total number of days in the tax year. Irs 1040 ez 2012 Related person. Irs 1040 ez 2012   You and another person are related persons if either of you holds a significant ownership interest in the other person or if a third person holds a significant ownership interest in both of you. Irs 1040 ez 2012 For example, a corporation, partnership, estate, or trust and anyone who holds a significant ownership interest in it are related persons. Irs 1040 ez 2012 A partnership and a trust are related persons if one person holds a significant ownership interest in each of them. Irs 1040 ez 2012 For purposes of the related person rules, significant ownership interest means direct or indirect ownership of 5% or more in any one of the following. Irs 1040 ez 2012 The value of the outstanding stock of a corporation. Irs 1040 ez 2012 The interest in the profits or capital of a partnership. Irs 1040 ez 2012 The beneficial interests in an estate or trust. Irs 1040 ez 2012 Any interest owned by or for a corporation, partnership, trust, or estate is considered to be owned directly both by itself and proportionately by its shareholders, partners, or beneficiaries. Irs 1040 ez 2012 Retailers who cannot claim percentage depletion. Irs 1040 ez 2012   You cannot claim percentage depletion if both the following apply. Irs 1040 ez 2012 You sell oil or natural gas or their by-products directly or through a related person in any of the following situations. Irs 1040 ez 2012 Through a retail outlet operated by you or a related person. Irs 1040 ez 2012 To any person who is required under an agreement with you or a related person to use a trademark, trade name, or service mark or name owned by you or a related person in marketing or distributing oil, natural gas, or their by-products. Irs 1040 ez 2012 To any person given authority under an agreement with you or a related person to occupy any retail outlet owned, leased, or controlled by you or a related person. Irs 1040 ez 2012 The combined gross receipts from sales (not counting resales) of oil, natural gas, or their by-products by all retail outlets taken into account in (1) are more than $5 million for the tax year. Irs 1040 ez 2012   For the purpose of determining if this rule applies, do not count the following. Irs 1040 ez 2012 Bulk sales (sales in very large quantities) of oil or natural gas to commercial or industrial users. Irs 1040 ez 2012 Bulk sales of aviation fuels to the Department of Defense. Irs 1040 ez 2012 Sales of oil or natural gas or their by-products outside the United States if none of your domestic production or that of a related person is exported during the tax year or the prior tax year. Irs 1040 ez 2012 Related person. Irs 1040 ez 2012   To determine if you and another person are related persons, see Related person under Refiners who cannot claim percentage depletion, earlier. Irs 1040 ez 2012 Sales through a related person. Irs 1040 ez 2012   You are considered to be selling through a related person if any sale by the related person produces gross income from which you may benefit because of your direct or indirect ownership interest in the person. Irs 1040 ez 2012   You are not considered to be selling through a related person who is a retailer if all the following apply. Irs 1040 ez 2012 You do not have a significant ownership interest in the retailer. Irs 1040 ez 2012 You sell your production to persons who are not related to either you or the retailer. Irs 1040 ez 2012 The retailer does not buy oil or natural gas from your customers or persons related to your customers. Irs 1040 ez 2012 There are no arrangements for the retailer to acquire oil or natural gas you produced for resale or made available for purchase by the retailer. Irs 1040 ez 2012 Neither you nor the retailer knows of or controls the final disposition of the oil or natural gas you sold or the original source of the petroleum products the retailer acquired for resale. Irs 1040 ez 2012 Transferees who cannot claim percentage depletion. Irs 1040 ez 2012   You cannot claim percentage depletion if you received your interest in a proven oil or gas property by transfer after 1974 and before October 12, 1990. Irs 1040 ez 2012 For a definition of the term “transfer,” see section 1. Irs 1040 ez 2012 613A-7(n) of the regulations. Irs 1040 ez 2012 For a definition of the term “interest in proven oil or gas property,” see section 1. Irs 1040 ez 2012 613A-7(p) of the regulations. Irs 1040 ez 2012 Figuring percentage depletion. Irs 1040 ez 2012   Generally, as an independent producer or royalty owner, you figure your percentage depletion by computing your average daily production of domestic oil or gas and comparing it to your depletable oil or gas quantity. Irs 1040 ez 2012 If your average daily production does not exceed your depletable oil or gas quantity, you figure your percentage depletion by multiplying the gross income from the oil or gas property (defined later) by 15%. Irs 1040 ez 2012 If your average daily production of domestic oil or gas exceeds your depletable oil or gas quantity, you must make an allocation as explained later under Average daily production. Irs 1040 ez 2012   In addition, there is a limit on the percentage depletion deduction. Irs 1040 ez 2012 See Taxable income limit , later. Irs 1040 ez 2012 Average daily production. Irs 1040 ez 2012   Figure your average daily production by dividing your total domestic production of oil or gas for the tax year by the number of days in your tax year. Irs 1040 ez 2012 Partial interest. Irs 1040 ez 2012   If you have a partial interest in the production from a property, figure your share of the production by multiplying total production from the property by your percentage of interest in the revenues from the property. Irs 1040 ez 2012   You have a partial interest in the production from a property if you have a net profits interest in the property. Irs 1040 ez 2012 To figure the share of production for your net profits interest, you must first determine your percentage participation (as measured by the net profits) in the gross revenue from the property. Irs 1040 ez 2012 To figure this percentage, you divide the income you receive for your net profits interest by the gross revenue from the property. Irs 1040 ez 2012 Then multiply the total production from the property by your percentage participation to figure your share of the production. Irs 1040 ez 2012 Example. Irs 1040 ez 2012 Javier Robles owns oil property in which Pablo Olmos owns a 20% net profits interest. Irs 1040 ez 2012 During the year, the property produced 10,000 barrels of oil, which Javier sold for $200,000. Irs 1040 ez 2012 Javier had expenses of $90,000 attributable to the property. Irs 1040 ez 2012 The property generated a net profit of $110,000 ($200,000 − $90,000). Irs 1040 ez 2012 Pablo received income of $22,000 ($110,000 × . Irs 1040 ez 2012 20) for his net profits interest. Irs 1040 ez 2012 Pablo determined his percentage participation to be 11% by dividing $22,000 (the income he received) by $200,000 (the gross revenue from the property). Irs 1040 ez 2012 Pablo determined his share of the oil production to be 1,100 barrels (10,000 barrels × 11%). Irs 1040 ez 2012 Depletable oil or natural gas quantity. Irs 1040 ez 2012   Generally, your depletable oil quantity is 1,000 barrels. Irs 1040 ez 2012 Your depletable natural gas quantity is 6,000 cubic feet multiplied by the number of barrels of your depletable oil quantity that you choose to apply. Irs 1040 ez 2012 If you claim depletion on both oil and natural gas, you must reduce your depletable oil quantity (1,000 barrels) by the number of barrels you use to figure your depletable natural gas quantity. Irs 1040 ez 2012 Example. Irs 1040 ez 2012 You have both oil and natural gas production. Irs 1040 ez 2012 To figure your depletable natural gas quantity, you choose to apply 360 barrels of your 1000-barrel depletable oil quantity. Irs 1040 ez 2012 Your depletable natural gas quantity is 2. Irs 1040 ez 2012 16 million cubic feet of gas (360 × 6000). Irs 1040 ez 2012 You must reduce your depletable oil quantity to 640 barrels (1000 − 360). Irs 1040 ez 2012 If you have production from marginal wells, see section 613A(c)(6) of the Internal Revenue Code to figure your depletable oil or natural gas quantity. Irs 1040 ez 2012 Also, see Notice 2012-50, available at www. Irs 1040 ez 2012 irs. Irs 1040 ez 2012 gov/irb/2012–31_IRB/index. Irs 1040 ez 2012 html. Irs 1040 ez 2012 Business entities and family members. Irs 1040 ez 2012   You must allocate the depletable oil or gas quantity among the following related persons in proportion to each entity's or family member's production of domestic oil or gas for the year. Irs 1040 ez 2012 Corporations, trusts, and estates if 50% or more of the beneficial interest is owned by the same or related persons (considering only persons that own at least 5% of the beneficial interest). Irs 1040 ez 2012 You and your spouse and minor children. Irs 1040 ez 2012 A related person is anyone mentioned in the related persons discussion under Nondeductible loss in chapter 2 of Publication 544, except that for purposes of this allocation, item (1) in that discussion includes only an individual, his or her spouse, and minor children. Irs 1040 ez 2012 Controlled group of corporations. Irs 1040 ez 2012   Members of the same controlled group of corporations are treated as one taxpayer when figuring the depletable oil or natural gas quantity. Irs 1040 ez 2012 They share the depletable quantity. Irs 1040 ez 2012 A controlled group of corporations is defined in section 1563(a) of the Internal Revenue Code, except that, for this purpose, the stock ownership requirement in that definition is “more than 50%” rather than “at least 80%. Irs 1040 ez 2012 ” Gross income from the property. Irs 1040 ez 2012   For purposes of percentage depletion, gross income from the property (in the case of oil and gas wells) is the amount you receive from the sale of the oil or gas in the immediate vicinity of the well. Irs 1040 ez 2012 If you do not sell the oil or gas on the property, but manufacture or convert it into a refined product before sale or transport it before sale, the gross income from the property is the representative market or field price (RMFP) of the oil or gas, before conversion or transportation. Irs 1040 ez 2012   If you sold gas after you removed it from the premises for a price that is lower than the RMFP, determine gross income from the property for percentage depletion purposes without regard to the RMFP. Irs 1040 ez 2012   Gross income from the property does not include lease bonuses, advance royalties, or other amounts payable without regard to production from the property. Irs 1040 ez 2012 Average daily production exceeds depletable quantities. Irs 1040 ez 2012   If your average daily production for the year is more than your depletable oil or natural gas quantity, figure your allowance for depletion for each domestic oil or natural gas property as follows. Irs 1040 ez 2012 Figure your average daily production of oil or natural gas for the year. Irs 1040 ez 2012 Figure your depletable oil or natural gas quantity for the year. Irs 1040 ez 2012 Figure depletion for all oil or natural gas produced from the property using a percentage depletion rate of 15%. Irs 1040 ez 2012 Multiply the result figured in (3) by a fraction, the numerator of which is the result figured in (2) and the denominator of which is the result figured in (1). Irs 1040 ez 2012 This is your depletion allowance for that property for the year. Irs 1040 ez 2012 Taxable income limit. Irs 1040 ez 2012   If you are an independent producer or royalty owner of oil and gas, your deduction for percentage depletion is limited to the smaller of the following. Irs 1040 ez 2012 100% of your taxable income from the property figured without the deduction for depletion and the deduction for domestic production activities under section 199 of the Internal Revenue Code. Irs 1040 ez 2012 For a definition of taxable income from the property, see Taxable income limit , earlier, under Mineral Property. Irs 1040 ez 2012 65% of your taxable income from all sources, figured without the depletion allowance, the deduction for domestic production activities, any net operating loss carryback, and any capital loss carryback. Irs 1040 ez 2012 You can carry over to the following year any amount you cannot deduct because of the 65%-of-taxable-income limit. Irs 1040 ez 2012 Add it to your depletion allowance (before applying any limits) for the following year. Irs 1040 ez 2012 Partnerships and S Corporations Generally, each partner or S corporation shareholder, and not the partnership or S corporation, figures the depletion allowance separately. Irs 1040 ez 2012 (However, see Electing large partnerships must figure depletion allowance , later. Irs 1040 ez 2012 ) Each partner or shareholder must decide whether to use cost or percentage depletion. Irs 1040 ez 2012 If a partner or shareholder uses percentage depletion, he or she must apply the 65%-of-taxable-income limit using his or her taxable income from all sources. Irs 1040 ez 2012 Partner's or shareholder's adjusted basis. Irs 1040 ez 2012   The partnership or S corporation must allocate to each partner or shareholder his or her share of the adjusted basis of each oil or gas property held by the partnership or S corporation. Irs 1040 ez 2012 The partnership or S corporation makes the allocation as of the date it acquires the oil or gas property. Irs 1040 ez 2012   Each partner's share of the adjusted basis of the oil or gas property generally is figured according to that partner's interest in partnership capital. Irs 1040 ez 2012 However, in some cases, it is figured according to the partner's interest in partnership income. Irs 1040 ez 2012   The partnership or S corporation adjusts the partner's or shareholder's share of the adjusted basis of the oil and gas property for any capital expenditures made for the property and for any change in partnership or S corporation interests. Irs 1040 ez 2012 Recordkeeping. Irs 1040 ez 2012 Each partner or shareholder must separately keep records of his or her share of the adjusted basis in each oil and gas property of the partnership or S corporation. Irs 1040 ez 2012 The partner or shareholder must reduce his or her adjusted basis by the depletion allowed or allowable on the property each year. Irs 1040 ez 2012 The partner or shareholder must use that reduced adjusted basis to figure cost depletion or his or her gain or loss if the partnership or S corporation disposes of the property. Irs 1040 ez 2012 Reporting the deduction. Irs 1040 ez 2012   Information that you, as a partner or shareholder, use to figure your depletion deduction on oil and gas properties is reported by the partnership or S corporation on Schedule K-1 (Form 1065) or on Schedule K-1 (Form 1120S). Irs 1040 ez 2012 Deduct oil and gas depletion for your partnership or S corporation interest on Schedule E (Form 1040). Irs 1040 ez 2012 The depletion deducted on Schedule E is included in figuring income or loss from rental real estate or royalty properties. Irs 1040 ez 2012 The instructions for Schedule E explain where to report this income or loss and whether you need to file either of the following forms. Irs 1040 ez 2012 Form 6198, At-Risk Limitations. Irs 1040 ez 2012 Form 8582, Passive Activity Loss Limitations. Irs 1040 ez 2012 Electing large partnerships must figure depletion allowance. Irs 1040 ez 2012   An electing large partnership, rather than each partner, generally must figure the depletion allowance. Irs 1040 ez 2012 The partnership figures the depletion allowance without taking into account the 65-percent-of-taxable-income limit and the depletable oil or natural gas quantity. Irs 1040 ez 2012 Also, the adjusted basis of a partner's interest in the partnership is not affected by the depletion allowance. Irs 1040 ez 2012   An electing large partnership is one that meets both the following requirements. Irs 1040 ez 2012 The partnership had 100 or more partners in the preceding year. Irs 1040 ez 2012 The partnership chooses to be an electing large partnership. Irs 1040 ez 2012 Disqualified persons. Irs 1040 ez 2012   An electing large partnership does not figure the depletion allowance of its partners that are disqualified persons. Irs 1040 ez 2012 Disqualified persons must figure it themselves, as explained earlier. Irs 1040 ez 2012   All the following are disqualified persons. Irs 1040 ez 2012 Refiners who cannot claim percentage depletion (discussed under Independent Producers and Royalty Owners , earlier). Irs 1040 ez 2012 Retailers who cannot claim percentage depletion (discussed under Independent Producers and Royalty Owners , earlier). Irs 1040 ez 2012 Any partner whose average daily production of domestic crude oil and natural gas is more than 500 barrels during the tax year in which the partnership tax year ends. Irs 1040 ez 2012 Average daily production is discussed earlier. Irs 1040 ez 2012 Natural Gas Wells You can use percentage depletion for a well that produces natural gas that is either Sold under a fixed contract, or Produced from geopressured brine. Irs 1040 ez 2012 Natural gas sold under a fixed contract. Irs 1040 ez 2012   Natural gas sold under a fixed contract qualifies for a percentage depletion rate of 22%. Irs 1040 ez 2012 This is domestic natural gas sold by the producer under a contract that does not provide for a price increase to reflect any increase in the seller's tax liability because of the repeal of percentage depletion for gas. Irs 1040 ez 2012 The contract must have been in effect from February 1, 1975, until the date of sale of the gas. Irs 1040 ez 2012 Price increases after February 1, 1975, are presumed to take the increase in tax liability into account unless demonstrated otherwise by clear and convincing evidence. Irs 1040 ez 2012 Natural gas from geopressured brine. Irs 1040 ez 2012   Qualified natural gas from geopressured brine is eligible for a percentage depletion rate of 10%. Irs 1040 ez 2012 This is natural gas that is both the following. Irs 1040 ez 2012 Produced from a well you began to drill after September 1978 and before 1984. Irs 1040 ez 2012 Determined in accordance with section 503 of the Natural Gas Policy Act of 1978 to be produced from geopressured brine. Irs 1040 ez 2012 Mines and Geothermal Deposits Certain mines, wells, and other natural deposits, including geothermal deposits, qualify for percentage depletion. Irs 1040 ez 2012 Mines and other natural deposits. Irs 1040 ez 2012   For a natural deposit, the percentage of your gross income from the property that you can deduct as depletion depends on the type of deposit. Irs 1040 ez 2012   The following is a list of the percentage depletion rates for the more common minerals. Irs 1040 ez 2012 DEPOSITS RATE Sulphur, uranium, and, if from deposits in the United States, asbestos, lead ore, zinc ore, nickel ore, and mica 22% Gold, silver, copper, iron ore, and certain oil shale, if from deposits in the United States 15% Borax, granite, limestone, marble, mollusk shells, potash, slate, soapstone, and carbon dioxide produced from a well 14% Coal, lignite, and sodium chloride 10% Clay and shale used or sold for use in making sewer pipe or bricks or used or sold for use as sintered or burned lightweight aggregates 7½% Clay used or sold for use in making drainage and roofing tile, flower pots, and kindred products, and gravel, sand, and stone (other than stone used or sold for use by a mine owner or operator as dimension or ornamental stone) 5%   You can find a complete list of minerals and their percentage depletion rates in section 613(b) of the Internal Revenue Code. Irs 1040 ez 2012 Corporate deduction for iron ore and coal. Irs 1040 ez 2012   The percentage depletion deduction of a corporation for iron ore and coal (including lignite) is reduced by 20% of: The percentage depletion deduction for the tax year (figured without this reduction), minus The adjusted basis of the property at the close of the tax year (figured without the depletion deduction for the tax year). Irs 1040 ez 2012 Gross income from the property. Irs 1040 ez 2012   For property other than a geothermal deposit or an oil or gas well, gross income from the property means the gross income from mining. Irs 1040 ez 2012 Mining includes all the following. Irs 1040 ez 2012 Extracting ores or minerals from the ground. Irs 1040 ez 2012 Applying certain treatment processes described later. Irs 1040 ez 2012 Transporting ores or minerals (generally, not more than 50 miles) from the point of extraction to the plants or mills in which the treatment processes are applied. Irs 1040 ez 2012 Excise tax. Irs 1040 ez 2012   Gross income from mining includes the separately stated excise tax received by a mine operator from the sale of coal to compensate the operator for the excise tax the mine operator must pay to finance black lung benefits. Irs 1040 ez 2012 Extraction. Irs 1040 ez 2012   Extracting ores or minerals from the ground includes extraction by mine owners or operators of ores or minerals from the waste or residue of prior mining. Irs 1040 ez 2012 This does not apply to extraction from waste or residue of prior mining by the purchaser of the waste or residue or the purchaser of the rights to extract ores or minerals from the waste or residue. Irs 1040 ez 2012 Treatment processes. Irs 1040 ez 2012   The processes included as mining depend on the ore or mineral mined. Irs 1040 ez 2012 To qualify as mining, the treatment processes must be applied by the mine owner or operator. Irs 1040 ez 2012 For a listing of treatment processes considered as mining, see section 613(c)(4) of the Internal Revenue Code and the related regulations. Irs 1040 ez 2012 Transportation of more than 50 miles. Irs 1040 ez 2012   If the IRS finds that the ore or mineral must be transported more than 50 miles to plants or mills to be treated because of physical and other requirements, the additional authorized transportation is considered mining and included in the computation of gross income from mining. Irs 1040 ez 2012    If you wish to include transportation of more than 50 miles in the computation of gross income from mining, request an advance ruling from the IRS. Irs 1040 ez 2012 Include in the request the facts about the physical and other requirements that prevented the construction and operation of the plant within 50 miles of the point of extraction. Irs 1040 ez 2012 For more information about requesting an advance ruling, see Revenue Procedure 2013-1, available at www. Irs 1040 ez 2012 irs. Irs 1040 ez 2012 gov/irb/2013-01_IRB/ar11. Irs 1040 ez 2012 html. Irs 1040 ez 2012 Disposal of coal or iron ore. Irs 1040 ez 2012   You cannot take a depletion deduction for coal (including lignite) or iron ore mined in the United States if both the following apply. Irs 1040 ez 2012 You disposed of it after holding it for more than 1 year. Irs 1040 ez 2012 You disposed of it under a contract under which you retain an economic interest in the coal or iron ore. Irs 1040 ez 2012 Treat any gain on the disposition as a capital gain. Irs 1040 ez 2012 Disposal to related person. Irs 1040 ez 2012   This rule does not apply if you dispose of the coal or iron ore to one of the following persons. Irs 1040 ez 2012 A related person (as listed in chapter 2 of Publication 544). Irs 1040 ez 2012 A person owned or controlled by the same interests that own or control you. Irs 1040 ez 2012 Geothermal deposits. Irs 1040 ez 2012   Geothermal deposits located in the United States or its possessions qualify for a percentage depletion rate of 15%. Irs 1040 ez 2012 A geothermal deposit is a geothermal reservoir of natural heat stored in rocks or in a watery liquid or vapor. Irs 1040 ez 2012 For percentage depletion purposes, a geothermal deposit is not considered a gas well. Irs 1040 ez 2012   Figure gross income from the property for a geothermal steam well in the same way as for oil and gas wells. Irs 1040 ez 2012 See Gross income from the property , earlier, under Oil and Gas Wells. Irs 1040 ez 2012 Percentage depletion on a geothermal deposit cannot be more than 50% of your taxable income from the property. Irs 1040 ez 2012 Lessor's Gross Income In the case of leased property, the depletion deduction is divided between the lessor and the lessee. Irs 1040 ez 2012 A lessor's gross income from the property that qualifies for percentage depletion usually is the total of the royalties received from the lease. Irs 1040 ez 2012 Bonuses and advanced royalties. Irs 1040 ez 2012   Bonuses and advanced royalties are payments a lessee makes before production to a lessor for the grant of rights in a lease or for minerals, gas, or oil to be extracted from leased property. Irs 1040 ez 2012 If you are the lessor, your income from bonuses and advanced royalties received is subject to an allowance for depletion, as explained in the next two paragraphs. Irs 1040 ez 2012 Figuring cost depletion. Irs 1040 ez 2012   To figure cost depletion on a bonus, multiply your adjusted basis in the property by a fraction, the numerator of which is the bonus and the denominator of which is the total bonus and royalties expected to be received. Irs 1040 ez 2012 To figure cost depletion on advanced royalties, use the computation explained earlier under Cost Depletion , treating the number of units for which the advanced royalty is received as the number of units sold. Irs 1040 ez 2012 Figuring percentage depletion. Irs 1040 ez 2012   In the case of mines, wells, and other natural deposits other than gas, oil, or geothermal property, you may use the percentage rates discussed earlier under Mines and Geothermal Deposits . Irs 1040 ez 2012 Any bonus or advanced royalty payments are generally part of the gross income from the property to which the rates are applied in making the calculation. Irs 1040 ez 2012 However, for oil, gas, or geothermal property, gross income does not include lease bonuses, advanced royalties, or other amounts payable without regard to production from the property. Irs 1040 ez 2012 Ending the lease. Irs 1040 ez 2012   If you receive a bonus on a lease that ends or is abandoned before you derive any income from mineral extraction, include in income the depletion deduction you took. Irs 1040 ez 2012 Do this for the year the lease ends or is abandoned. Irs 1040 ez 2012 Also increase your adjusted basis in the property to restore the depletion deduction you previously subtracted. Irs 1040 ez 2012   For advanced royalties, include in income the depletion claimed on minerals for which the advanced royalties were paid if the minerals were not produced before the lease ended. Irs 1040 ez 2012 Include this amount in income for the year the lease ends. Irs 1040 ez 2012 Increase your adjusted basis in the property by the amount you include in income. Irs 1040 ez 2012 Delay rentals. Irs 1040 ez 2012   These are payments for deferring development of the property. Irs 1040 ez 2012 Since delay rentals are ordinary rent, they are ordinary income that is not subject to depletion. Irs 1040 ez 2012 These rentals can be avoided by either abandoning the lease, beginning development operations, or obtaining production. Irs 1040 ez 2012 Timber You can figure timber depletion only by the cost method. Irs 1040 ez 2012 Percentage depletion does not apply to timber. Irs 1040 ez 2012 Base your depletion on your cost or other basis in the timber. Irs 1040 ez 2012 Your cost does not include the cost of land or any amounts recoverable through depreciation. Irs 1040 ez 2012 Depletion takes place when you cut standing timber. Irs 1040 ez 2012 You can figure your depletion deduction when the quantity of cut timber is first accurately measured in the process of exploitation. Irs 1040 ez 2012 Figuring cost depletion. Irs 1040 ez 2012   To figure your cost depletion allowance, you multiply the number of timber units cut by your depletion unit. Irs 1040 ez 2012 Timber units. Irs 1040 ez 2012   When you acquire timber property, you must make an estimate of the quantity of marketable timber that exists on the property. Irs 1040 ez 2012 You measure the timber using board feet, log scale, cords, or other units. Irs 1040 ez 2012 If you later determine that you have more or less units of timber, you must adjust the original estimate. Irs 1040 ez 2012   The term “timber property” means your economic interest in standing timber in each tract or block representing a separate timber account. Irs 1040 ez 2012 Depletion unit. Irs 1040 ez 2012   You figure your depletion unit each year by taking the following steps. Irs 1040 ez 2012 Determine your cost or adjusted basis of the timber on hand at the beginning of the year. Irs 1040 ez 2012 Adjusted basis is defined under Cost Depletion in the discussion on Mineral Property. Irs 1040 ez 2012 Add to the amount determined in (1) the cost of any timber units acquired during the year and any additions to capital. Irs 1040 ez 2012 Figure the number of timber units to take into account by adding the number of timber units acquired during the year to the number of timber units on hand in the account at the beginning of the year and then adding (or subtracting) any correction to the estimate of the number of timber units remaining in the account. Irs 1040 ez 2012 Divide the result of (2) by the result of (3). Irs 1040 ez 2012 This is your depletion unit. Irs 1040 ez 2012 Example. Irs 1040 ez 2012 You bought a timber tract for $160,000 and the land was worth as much as the timber. Irs 1040 ez 2012 Your basis for the timber is $80,000. Irs 1040 ez 2012 Based on an estimated one million board feet (1,000 MBF) of standing timber, you figure your depletion unit to be $80 per MBF ($80,000 ÷ 1,000). Irs 1040 ez 2012 If you cut 500 MBF of timber, your depletion allowance would be $40,000 (500 MBF × $80). Irs 1040 ez 2012 When to claim depletion. Irs 1040 ez 2012   Claim your depletion allowance as a deduction in the year of sale or other disposition of the products cut from the timber, unless you choose to treat the cutting of timber as a sale or exchange (explained below). Irs 1040 ez 2012 Include allowable depletion for timber products not sold during the tax year the timber is cut as a cost item in the closing inventory of timber products for the year. Irs 1040 ez 2012 The inventory is your basis for determining gain or loss in the tax year you sell the timber products. Irs 1040 ez 2012 Example. Irs 1040 ez 2012 The facts are the same as in the previous example except that you sold only half of the timber products in the cutting year. Irs 1040 ez 2012 You would deduct $20,000 of the $40,000 depletion that year. Irs 1040 ez 2012 You would add the remaining $20,000 depletion to your closing inventory of timber products. Irs 1040 ez 2012 Electing to treat the cutting of timber as a sale or exchange. Irs 1040 ez 2012   You can elect, under certain circumstances, to treat the cutting of timber held for more than 1 year as a sale or exchange. Irs 1040 ez 2012 You must make the election on your income tax return for the tax year to which it applies. Irs 1040 ez 2012 If you make this election, subtract the adjusted basis for depletion from the fair market value of the timber on the first day of the tax year in which you cut it to figure the gain or loss on the cutting. Irs 1040 ez 2012 You generally report the gain as long-term capital gain. Irs 1040 ez 2012 The fair market value then becomes your basis for figuring your ordinary gain or loss on the sale or other disposition of the products cut from the timber. Irs 1040 ez 2012 For more information, see Timber in chapter 2 of Publication 544, Sales and Other Dispositions of Assets. Irs 1040 ez 2012   You may revoke an election to treat the cutting of timber as a sale or exchange without IRS's consent. Irs 1040 ez 2012 The prior election (and revocation) is disregarded for purposes of making a subsequent election. Irs 1040 ez 2012 See Form T (Timber), Forest Activities Schedule, for more information. Irs 1040 ez 2012 Form T. Irs 1040 ez 2012   Complete and attach Form T (Timber) to your income tax return if you claim a deduction for timber depletion, choose to treat the cutting of timber as a sale or exchange, or make an outright sale of timber. Irs 1040 ez 2012 Prev  Up  Next   Home   More Online Publications
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How to Forward the Header of a Phishing Email

It is important that the original communication you received is included, as well as Internet headers. The following instructions will assist you in forwarding a phishing communication to us at phishing@irs.gov.

If you receive an email or find a website you think is claiming to be the IRS

  1. Do not reply.
  2. Do not open any attachments. Attachments may contain malicious code that will infect your computer.
  3. Do not click on any links. If you clicked on links in a suspicious email or phishing website and entered confidential information, visit our identity protection page.

    Report email claiming to be from the IRS or bogus IRS websites to us by using the following steps
  4. Forward the email or the URL of the website to the IRS at phishing@irs.gov.
  5. You can forward the email message as received or provide the Internet header of the e-mail. The Internet header has additional information to help us locate the sender.
  6. After you forward the email or header information to us, delete the message you received.

If the methods above do not work, at a minimum, please send the underlying link of the phishing website.

If the suspicious e-mail includes a file attachment, it is safer to simply highlight the message and forward it. Some configurations, especially in Windows environments, may allow the execution of arbitrary code upon opening and viewing a malicious email message.

The IRS can use the information, URLs and links in the suspicious e-mails you forward to trace the hosting website and alert authorities to help shut down the fraudulent sites.

Main phishing resource page:
How to Report and Identify Phishing, E-mail Scams and Bogus IRS Web sites

Page Last Reviewed or Updated: 06-Dec-2013

The Irs 1040 Ez 2012

Irs 1040 ez 2012 Publication 559 - Introductory Material Table of Contents Future Developments Reminders Introduction Useful Items - You may want to see: Future Developments For the latest information about developments affecting Publication 559, such as legislation enacted after we release it, go to www. Irs 1040 ez 2012 irs. Irs 1040 ez 2012 gov/pub559. Irs 1040 ez 2012 Reminders Throughout this publication, section references are to the Internal Revenue Code unless otherwise noted. Irs 1040 ez 2012 Consistent treatment of estate and trust items. Irs 1040 ez 2012  Beneficiaries must generally treat estate items the same way on their individual returns as they are treated on the estate's return. Irs 1040 ez 2012 Photographs of missing children. Irs 1040 ez 2012  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Irs 1040 ez 2012 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Irs 1040 ez 2012 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Irs 1040 ez 2012 Introduction This publication is designed to help those in charge (personal representatives) of the property (estate) of an individual who has died (decedent). Irs 1040 ez 2012 It shows them how to complete and file federal income tax returns and explains their responsibility to pay any taxes due on behalf of the decedent. Irs 1040 ez 2012 A comprehensive example of the decedent's final tax return, Form 1040, and estate's income tax return, Form 1041, are included in this publication. Irs 1040 ez 2012 The publication also explains how much money or property a taxpayer can give away during their lifetime or leave to their heirs at their death before any tax will be owed. Irs 1040 ez 2012 A discussion of Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, and Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, is included. Irs 1040 ez 2012 Also included in this publication are the following items: A checklist of the forms you may need and their due dates. Irs 1040 ez 2012 A worksheet to reconcile amounts reported in the decedent's name on information returns including Forms W-2, 1099-INT, 1099-DIV, etc. Irs 1040 ez 2012 The worksheet will help you correctly determine the income to report on the decedent's final return and on the return for either the estate or a beneficiary. Irs 1040 ez 2012 Comments and suggestions. Irs 1040 ez 2012   We welcome your comments about this publication and your suggestions for future editions. Irs 1040 ez 2012   You can send us comments from http://www. Irs 1040 ez 2012 irs. Irs 1040 ez 2012 gov/formspubs. Irs 1040 ez 2012 Click on “More Information” and then on “Give us Feedback. Irs 1040 ez 2012 ” Or you can also send your comments to the Internal Revenue Service, Tax Forms and Publications Division, 1111 Constitution Ave. Irs 1040 ez 2012 NW, IR-6526, Washington, DC 20224. Irs 1040 ez 2012 Useful Items - You may want to see: Publication 3 Armed Forces' Tax Guide Form (and Instructions) SS-4 Application for Employer Identification Number 56 Notice Concerning Fiduciary Relationship 1040 U. Irs 1040 ez 2012 S. Irs 1040 ez 2012 Individual Income Tax Return 1041 U. Irs 1040 ez 2012 S. Irs 1040 ez 2012 Income Tax Return for Estates and Trusts 706 United States Estate (and Generation-Skipping Transfer) Tax Return 709 United States Gift (and Generation-Skipping Transfer) Tax Return 1310 Statement of Person Claiming Refund Due a Deceased Taxpayer  See How To Get Tax Help near the end of this publication for information about getting publications and forms. Irs 1040 ez 2012 Also near the end of this publication is Table A, a checklist of forms and their due dates for the executor, administrator, or personal representative. Irs 1040 ez 2012 Prev  Up  Next   Home   More Online Publications