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Irs Amended Returns

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Irs Amended Returns

Irs amended returns 12. Irs amended returns   Other Income Table of Contents Introduction Useful Items - You may want to see: Bartering Canceled DebtsInterest included in canceled debt. Irs amended returns Exceptions Host or Hostess Life Insurance ProceedsSurviving spouse. Irs amended returns Endowment Contract Proceeds Accelerated Death Benefits Public Safety Officer Killed in the Line of Duty Partnership Income S Corporation Income RecoveriesItemized Deduction Recoveries Rents from Personal Property RepaymentsMethod 1. Irs amended returns Method 2. Irs amended returns RoyaltiesDepletion. Irs amended returns Coal and iron ore. Irs amended returns Sale of property interest. Irs amended returns Part of future production sold. Irs amended returns Unemployment BenefitsTypes of unemployment compensation. Irs amended returns Governmental program. Irs amended returns Repayment of unemployment compensation. Irs amended returns Tax withholding. Irs amended returns Repayment of benefits. Irs amended returns Welfare and Other Public Assistance Benefits Other IncomeEmotional distress. Irs amended returns Deduction for costs involved in unlawful discrimination suits. Irs amended returns Energy conservation measure. Irs amended returns Dwelling unit. Irs amended returns Current income required to be distributed. Irs amended returns Current income not required to be distributed. Irs amended returns How to report. Irs amended returns Losses. Irs amended returns Grantor trust. Irs amended returns Nonemployee compensation. Irs amended returns Corporate director. Irs amended returns Personal representatives. Irs amended returns Manager of trade or business for bankruptcy estate. Irs amended returns Notary public. Irs amended returns Election precinct official. Irs amended returns Difficulty-of-care payments. Irs amended returns Maintaining space in home. Irs amended returns Reporting taxable payments. Irs amended returns Lotteries and raffles. Irs amended returns Form W-2G. Irs amended returns Reporting winnings and recordkeeping. Irs amended returns Inherited pension or IRA. Irs amended returns Employee awards or bonuses. Irs amended returns Pulitzer, Nobel, and similar prizes. Irs amended returns Payment for services. Irs amended returns VA payments. Irs amended returns Prizes. Irs amended returns Strike and lockout benefits. Irs amended returns Introduction You must include on your return all items of income you receive in the form of money, property, and services unless the tax law states that you do not include them. Irs amended returns Some items, however, are only partly excluded from income. Irs amended returns This chapter discusses many kinds of income and explains whether they are taxable or nontaxable. Irs amended returns Income that is taxable must be reported on your tax return and is subject to tax. Irs amended returns Income that is nontaxable may have to be shown on your tax return but is not taxable. Irs amended returns This chapter begins with discussions of the following income items. Irs amended returns Bartering. Irs amended returns Canceled debts. Irs amended returns Sales parties at which you are the host or hostess. Irs amended returns Life insurance proceeds. Irs amended returns Partnership income. Irs amended returns S Corporation income. Irs amended returns Recoveries (including state income tax refunds). Irs amended returns Rents from personal property. Irs amended returns Repayments. Irs amended returns Royalties. Irs amended returns Unemployment benefits. Irs amended returns Welfare and other public assistance benefits. Irs amended returns These discussions are followed by brief discussions of other income items. Irs amended returns Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 544 Sales and Other Dispositions of Assets 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Bartering Bartering is an exchange of property or services. Irs amended returns You must include in your income, at the time received, the fair market value of property or services you receive in bartering. Irs amended returns If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise. Irs amended returns Generally, you report this income on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Irs amended returns However, if the barter involves an exchange of something other than services, such as in Example 3 below, you may have to use another form or schedule instead. Irs amended returns Example 1. Irs amended returns You are a self-employed attorney who performs legal services for a client, a small corporation. Irs amended returns The corporation gives you shares of its stock as payment for your services. Irs amended returns You must include the fair market value of the shares in your income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) in the year you receive them. Irs amended returns Example 2. Irs amended returns You are self-employed and a member of a barter club. Irs amended returns The club uses “credit units” as a means of exchange. Irs amended returns It adds credit units to your account for goods or services you provide to members, which you can use to purchase goods or services offered by other members of the barter club. Irs amended returns The club subtracts credit units from your account when you receive goods or services from other members. Irs amended returns You must include in your income the value of the credit units that are added to your account, even though you may not actually receive goods or services from other members until a later tax year. Irs amended returns Example 3. Irs amended returns You own a small apartment building. Irs amended returns In return for 6 months rent-free use of an apartment, an artist gives you a work of art she created. Irs amended returns You must report as rental income on Schedule E (Form 1040), Supplemental Income and Loss, the fair market value of the artwork, and the artist must report as income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) the fair rental value of the apartment. Irs amended returns Form 1099-B from barter exchange. Irs amended returns   If you exchanged property or services through a barter exchange, Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a similar statement from the barter exchange should be sent to you by February 18, 2014. Irs amended returns It should show the value of cash, property, services, credits, or scrip you received from exchanges during 2013. Irs amended returns The IRS also will receive a copy of Form 1099-B. Irs amended returns Canceled Debts In most cases, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income. Irs amended returns You have no income from the canceled debt if it is intended as a gift to you. Irs amended returns A debt includes any indebtedness for which you are liable or which attaches to property you hold. Irs amended returns If the debt is a nonbusiness debt, report the canceled amount on Form 1040, line 21. Irs amended returns If it is a business debt, report the amount on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) (or on Schedule F (Form 1040), Profit or Loss From Farming, if the debt is farm debt and you are a farmer). Irs amended returns Form 1099-C. Irs amended returns   If a Federal Government agency, financial institution, or credit union cancels or forgives a debt you owe of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. Irs amended returns The amount of the canceled debt is shown in box 2. Irs amended returns Interest included in canceled debt. Irs amended returns   If any interest is forgiven and included in the amount of canceled debt in box 2, the amount of interest also will be shown in box 3. Irs amended returns Whether or not you must include the interest portion of the canceled debt in your income depends on whether the interest would be deductible when you paid it. Irs amended returns See Deductible debt under Exceptions, later. Irs amended returns   If the interest would not be deductible (such as interest on a personal loan), include in your income the amount from Form 1099-C, box 2. Irs amended returns If the interest would be deductible (such as on a business loan), include in your income the net amount of the canceled debt (the amount shown in box 2 less the interest amount shown in box 3). Irs amended returns Discounted mortgage loan. Irs amended returns   If your financial institution offers a discount for the early payment of your mortgage loan, the amount of the discount is canceled debt. Irs amended returns You must include the canceled amount in your income. Irs amended returns Mortgage relief upon sale or other disposition. Irs amended returns   If you are personally liable for a mortgage (recourse debt), and you are relieved of the mortgage when you dispose of the property, you may realize gain or loss up to the fair market value of the property. Irs amended returns To the extent the mortgage discharge exceeds the fair market value of the property, it is income from discharge of indebtedness unless it qualifies for exclusion under Excluded debt , later. Irs amended returns Report any income from discharge of indebtedness on nonbusiness debt that does not qualify for exclusion as other income on Form 1040, line 21. Irs amended returns    You may be able to exclude part of the mortgage relief on your principal residence. Irs amended returns See Excluded debt, later. Irs amended returns   If you are not personally liable for a mortgage (nonrecourse debt), and you are relieved of the mortgage when you dispose of the property (such as through foreclosure), that relief is included in the amount you realize. Irs amended returns You may have a taxable gain if the amount you realize exceeds your adjusted basis in the property. Irs amended returns Report any gain on nonbusiness property as a capital gain. Irs amended returns   See Publication 4681 for more information. Irs amended returns Stockholder debt. Irs amended returns   If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution that is generally dividend income to you. Irs amended returns For more information, see Publication 542, Corporations. Irs amended returns   If you are a stockholder in a corporation and you cancel a debt owed to you by the corporation, you generally do not realize income. Irs amended returns This is because the canceled debt is considered as a contribution to the capital of the corporation equal to the amount of debt principal that you canceled. Irs amended returns Repayment of canceled debt. Irs amended returns   If you included a canceled amount in your income and later pay the debt, you may be able to file a claim for refund for the year the amount was included in income. Irs amended returns You can file a claim on Form 1040X if the statute of limitations for filing a claim is still open. Irs amended returns The statute of limitations generally does not end until 3 years after the due date of your original return. Irs amended returns Exceptions There are several exceptions to the inclusion of canceled debt in income. Irs amended returns These are explained next. Irs amended returns Student loans. Irs amended returns   Certain student loans contain a provision that all or part of the debt incurred to attend the qualified educational institution will be canceled if you work for a certain period of time in certain professions for any of a broad class of employers. Irs amended returns   You do not have income if your student loan is canceled after you agreed to this provision and then performed the services required. Irs amended returns To qualify, the loan must have been made by: The Federal Government, a state or local government, or an instrumentality, agency, or subdivision thereof, A tax-exempt public benefit corporation that has assumed control of a state, county, or municipal hospital, and whose employees are considered public employees under state law, or An educational institution: Under an agreement with an entity described in (1) or (2) that provided the funds to the institution to make the loan, or As part of a program of the institution designed to encourage its students to serve in occupations with unmet needs or in areas with unmet needs and under which the services provided by the students (or former students) are for or under the direction of a governmental unit or a tax-exempt organization described in section 501(c)(3). Irs amended returns   A loan to refinance a qualified student loan also will qualify if it was made by an educational institution or a qualified tax-exempt organization under its program designed as described in (3)(b) above. Irs amended returns Education loan repayment assistance. Irs amended returns   Education loan repayments made to you by the National Health Service Corps Loan Repayment Program (NHSC Loan Repayment Program), a state education loan repayment program eligible for funds under the Public Health Service Act, or any other state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health services in underserved or health professional shortage areas are not taxable. Irs amended returns    The provision relating to the “other state loan repayment or loan forgiveness program” was added to this exclusion for amounts received in tax years beginning after December 31, 2008. Irs amended returns If you included these amounts in income in 2010, 2011, or 2012, you should file an amended tax return to exclude this income. Irs amended returns See Form 1040X and its instructions for details on filing. Irs amended returns Deductible debt. Irs amended returns   You do not have income from the cancellation of a debt if your payment of the debt would be deductible. Irs amended returns This exception applies only if you use the cash method of accounting. Irs amended returns For more information, see chapter 5 of Publication 334, Tax Guide for Small Business. Irs amended returns Price reduced after purchase. Irs amended returns   In most cases, if the seller reduces the amount of debt you owe for property you purchased, you do not have income from the reduction. Irs amended returns The reduction of the debt is treated as a purchase price adjustment and reduces your basis in the property. Irs amended returns Excluded debt. Irs amended returns   Do not include a canceled debt in your gross income in the following situations. Irs amended returns The debt is canceled in a bankruptcy case under title 11 of the U. Irs amended returns S. Irs amended returns Code. Irs amended returns See Publication 908, Bankruptcy Tax Guide. Irs amended returns The debt is canceled when you are insolvent. Irs amended returns However, you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent. Irs amended returns See Publication 908. Irs amended returns The debt is qualified farm debt and is canceled by a qualified person. Irs amended returns See chapter 3 of Publication 225, Farmer's Tax Guide. Irs amended returns The debt is qualified real property business debt. Irs amended returns See chapter 5 of Publication 334. Irs amended returns The cancellation is intended as a gift. Irs amended returns The debt is qualified principal residence indebtedness. Irs amended returns See Publication 525 for additional information. Irs amended returns Host or Hostess If you host a party or event at which sales are made, any gift or gratuity you receive for giving the event is a payment for helping a direct seller make sales. Irs amended returns You must report this item as income at its fair market value. Irs amended returns Your out-of-pocket party expenses are subject to the 50% limit for meal and entertainment expenses. Irs amended returns These expenses are deductible as miscellaneous itemized deductions subject to the 2%-of-AGI limit on Schedule A (Form 1040), but only up to the amount of income you receive for giving the party. Irs amended returns For more information about the 50% limit for meal and entertainment expenses, see chapter 26. Irs amended returns Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. Irs amended returns This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. Irs amended returns However, interest income received as a result of life insurance proceeds may be taxable. Irs amended returns Proceeds not received in installments. Irs amended returns   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. Irs amended returns If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. Irs amended returns Proceeds received in installments. Irs amended returns   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. Irs amended returns   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. Irs amended returns Include anything over this excluded part in your income as interest. Irs amended returns Surviving spouse. Irs amended returns   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude up to $1,000 a year of the interest included in the installments. Irs amended returns If you remarry, you can continue to take the exclusion. Irs amended returns Surrender of policy for cash. Irs amended returns   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Irs amended returns In most cases, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. Irs amended returns    You should receive a Form 1099-R showing the total proceeds and the taxable part. Irs amended returns Report these amounts on lines 16a and 16b of Form 1040 or lines 12a and 12b of Form 1040A. Irs amended returns More information. Irs amended returns   For more information, see Life Insurance Proceeds in Publication 525. Irs amended returns Endowment Contract Proceeds An endowment contract is a policy under which you are paid a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. Irs amended returns Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. Irs amended returns To determine your cost, subtract any amount that you previously received under the contract and excluded from your income from the total premiums (or other consideration) paid for the contract. Irs amended returns Include the part of the lump sum payment that is more than your cost in your income. Irs amended returns Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are excluded from income if the insured is terminally or chronically ill. Irs amended returns Viatical settlement. Irs amended returns   This is the sale or assignment of any part of the death benefit under a life insurance contract to a viatical settlement provider. Irs amended returns A viatical settlement provider is a person who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill and who meets the requirements of section 101(g)(2)(B) of the Internal Revenue Code. Irs amended returns Exclusion for terminal illness. Irs amended returns    Accelerated death benefits are fully excludable if the insured is a terminally ill individual. Irs amended returns This is a person who has been certified by a physician as having an illness or physical condition that can reasonably be expected to result in death within 24 months from the date of the certification. Irs amended returns Exclusion for chronic illness. Irs amended returns    If the insured is a chronically ill individual who is not terminally ill, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. Irs amended returns Accelerated death benefits paid on a per diem or other periodic basis are excludable up to a limit. Irs amended returns This limit applies to the total of the accelerated death benefits and any periodic payments received from long-term care insurance contracts. Irs amended returns For information on the limit and the definitions of chronically ill individual, qualified long-term care services, and long-term care insurance contracts, see Long-Term Care Insurance Contracts under Sickness and Injury Benefits in Publication 525. Irs amended returns Exception. Irs amended returns   The exclusion does not apply to any amount paid to a person (other than the insured) who has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the person, or Has a financial interest in the person's business. Irs amended returns Form 8853. Irs amended returns   To claim an exclusion for accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. Irs amended returns You do not have to file Form 8853 to exclude accelerated death benefits paid on the basis of actual expenses incurred. Irs amended returns Public Safety Officer Killed in the Line of Duty If you are a survivor of a public safety officer who was killed in the line of duty, you may be able to exclude from income certain amounts you receive. Irs amended returns For this purpose, the term public safety officer includes law enforcement officers, firefighters, chaplains, and rescue squad and ambulance crew members. Irs amended returns For more information, see Publication 559, Survivors, Executors, and Administrators. Irs amended returns Partnership Income A partnership generally is not a taxable entity. Irs amended returns The income, gains, losses, deductions, and credits of a partnership are passed through to the partners based on each partner's distributive share of these items. Irs amended returns Schedule K-1 (Form 1065). Irs amended returns    Although a partnership generally pays no tax, it must file an information return on Form 1065, U. Irs amended returns S. Irs amended returns Return of Partnership Income, and send Schedule K-1 (Form 1065) to each partner. Irs amended returns In addition, the partnership will send each partner a copy of the Partner's Instructions for Schedule K-1 (Form 1065) to help each partner report his or her share of the partnership's income, deductions, credits, and tax preference items. Irs amended returns Keep Schedule K-1 (Form 1065) for your records. Irs amended returns Do not attach it to your Form 1040, unless you are specifically required to do so. Irs amended returns For more information on partnerships, see Publication 541, Partnerships. Irs amended returns Qualified joint venture. Irs amended returns   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Irs amended returns To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Irs amended returns For further information on how to make the election and which schedule(s) to file, see the instructions for your individual tax return. Irs amended returns S Corporation Income In most cases, an S corporation does not pay tax on its income. Irs amended returns Instead, the income, losses, deductions, and credits of the corporation are passed through to the shareholders based on each shareholder's pro rata share. Irs amended returns Schedule K-1 (Form 1120S). Irs amended returns   An S corporation must file a return on Form 1120S, U. Irs amended returns S. Irs amended returns Income Tax Return for an S Corporation, and send Schedule K-1 (Form 1120S) to each shareholder. Irs amended returns In addition, the S corporation will send each shareholder a copy of the Shareholder's Instructions for Schedule K-1 (Form 1120S) to help each shareholder report his or her share of the S corporation's income, losses, credits, and deductions. Irs amended returns Keep Schedule K-1 (Form 1120S) for your records. Irs amended returns Do not attach it to your Form 1040, unless you are specifically required to do so. Irs amended returns For more information on S corporations and their shareholders, see the Instructions for Form 1120S. Irs amended returns Recoveries A recovery is a return of an amount you deducted or took a credit for in an earlier year. Irs amended returns The most common recoveries are refunds, reimbursements, and rebates of deductions itemized on Schedule A (Form 1040). Irs amended returns You also may have recoveries of non-itemized deductions (such as payments on previously deducted bad debts) and recoveries of items for which you previously claimed a tax credit. Irs amended returns Tax benefit rule. Irs amended returns   You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. Irs amended returns For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year. Irs amended returns For more information, see Publication 525. Irs amended returns Federal income tax refund. Irs amended returns   Refunds of federal income taxes are not included in your income because they are never allowed as a deduction from income. Irs amended returns State tax refund. Irs amended returns   If you received a state or local income tax refund (or credit or offset) in 2013, you generally must include it in income if you deducted the tax in an earlier year. Irs amended returns The payer should send Form 1099-G, Certain Government Payments, to you by January 31, 2014. Irs amended returns The IRS also will receive a copy of the Form 1099-G. Irs amended returns If you file Form 1040, use the State and Local Income Tax Refund Worksheet in the 2013 Form 1040 instructions for line 10 to figure the amount (if any) to include in your income. Irs amended returns See Publication 525 for when you must use another worksheet. Irs amended returns   If you could choose to deduct for a tax year either: State and local income taxes, or State and local general sales taxes, then the maximum refund that you may have to include in income is limited to the excess of the tax you chose to deduct for that year over the tax you did not choose to deduct for that year. Irs amended returns For examples, see Publication 525. Irs amended returns Mortgage interest refund. Irs amended returns    If you received a refund or credit in 2013 of mortgage interest paid in an earlier year, the amount should be shown in box 3 of your Form 1098, Mortgage Interest Statement. Irs amended returns Do not subtract the refund amount from the interest you paid in 2013. Irs amended returns You may have to include it in your income under the rules explained in the following discussions. Irs amended returns Interest on recovery. Irs amended returns   Interest on any of the amounts you recover must be reported as interest income in the year received. Irs amended returns For example, report any interest you received on state or local income tax refunds on Form 1040, line 8a. Irs amended returns Recovery and expense in same year. Irs amended returns   If the refund or other recovery and the expense occur in the same year, the recovery reduces the deduction or credit and is not reported as income. Irs amended returns Recovery for 2 or more years. Irs amended returns   If you receive a refund or other recovery that is for amounts you paid in 2 or more separate years, you must allocate, on a pro rata basis, the recovered amount between the years in which you paid it. Irs amended returns This allocation is necessary to determine the amount of recovery from any earlier years and to determine the amount, if any, of your allowable deduction for this item for the current year. Irs amended returns For information on how to compute the allocation, see Recoveries in Publication 525. Irs amended returns Itemized Deduction Recoveries If you recover any amount that you deducted in an earlier year on Schedule A (Form 1040), you generally must include the full amount of the recovery in your income in the year you receive it. Irs amended returns Where to report. Irs amended returns   Enter your state or local income tax refund on Form 1040, line 10, and the total of all other recoveries as other income on Form 1040, line 21. Irs amended returns You cannot use Form 1040A or Form 1040EZ. Irs amended returns Standard deduction limit. Irs amended returns   You generally are allowed to claim the standard deduction if you do not itemize your deductions. Irs amended returns Only your itemized deductions that are more than your standard deduction are subject to the recovery rule (unless you are required to itemize your deductions). Irs amended returns If your total deductions on the earlier year return were not more than your income for that year, include in your income this year the lesser of: Your recoveries, or The amount by which your itemized deductions exceeded the standard deduction. Irs amended returns Example. Irs amended returns For 2012, you filed a joint return. Irs amended returns Your taxable income was $60,000 and you were not entitled to any tax credits. Irs amended returns Your standard deduction was $11,900, and you had itemized deductions of $14,000. Irs amended returns In 2013, you received the following recoveries for amounts deducted on your 2012 return: Medical expenses $200 State and local income tax refund 400 Refund of mortgage interest 325 Total recoveries $925 None of the recoveries were more than the deductions taken for 2012. Irs amended returns The difference between the state and local income tax you deducted and your local general sales tax was more than $400. Irs amended returns Your total recoveries are less than the amount by which your itemized deductions exceeded the standard deduction ($14,000 − 11,900 = $2,100), so you must include your total recoveries in your income for 2013. Irs amended returns Report the state and local income tax refund of $400 on Form 1040, line 10, and the balance of your recoveries, $525, on Form 1040, line 21. Irs amended returns Standard deduction for earlier years. Irs amended returns   To determine if amounts recovered in 2013 must be included in your income, you must know the standard deduction for your filing status for the year the deduction was claimed. Irs amended returns Look in the instructions for your tax return from prior years to locate the standard deduction for the filing status for that prior year. Irs amended returns Example. Irs amended returns You filed a joint return on Form 1040 for 2012 with taxable income of $45,000. Irs amended returns Your itemized deductions were $12,350. Irs amended returns The standard deduction that you could have claimed was $11,900. Irs amended returns In 2013, you recovered $2,100 of your 2012 itemized deductions. Irs amended returns None of the recoveries were more than the actual deductions for 2012. Irs amended returns Include $450 of the recoveries in your 2013 income. Irs amended returns This is the smaller of your recoveries ($2,100) or the amount by which your itemized deductions were more than the standard deduction ($12,350 − $11,900 = $450). Irs amended returns Recovery limited to deduction. Irs amended returns   You do not include in your income any amount of your recovery that is more than the amount you deducted in the earlier year. Irs amended returns The amount you include in your income is limited to the smaller of: The amount deducted on Schedule A (Form 1040), or The amount recovered. Irs amended returns Example. Irs amended returns During 2012 you paid $1,700 for medical expenses. Irs amended returns From this amount you subtracted $1,500, which was 7. Irs amended returns 5% of your adjusted gross income. Irs amended returns Your actual medical expense deduction was $200. Irs amended returns In 2013, you received a $500 reimbursement from your medical insurance for your 2012 expenses. Irs amended returns The only amount of the $500 reimbursement that must be included in your income for 2013 is $200—the amount actually deducted. Irs amended returns Other recoveries. Irs amended returns   See Recoveries in Publication 525 if: You have recoveries of items other than itemized deductions, or You received a recovery for an item for which you claimed a tax credit (other than investment credit or foreign tax credit) in a prior year. Irs amended returns Rents from Personal Property If you rent out personal property, such as equipment or vehicles, how you report your income and expenses is in most cases determined by: Whether or not the rental activity is a business, and Whether or not the rental activity is conducted for profit. Irs amended returns In most cases, if your primary purpose is income or profit and you are involved in the rental activity with continuity and regularity, your rental activity is a business. Irs amended returns See Publication 535, Business Expenses, for details on deducting expenses for both business and not-for-profit activities. Irs amended returns Reporting business income and expenses. Irs amended returns    If you are in the business of renting personal property, report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Irs amended returns The form instructions have information on how to complete them. Irs amended returns Reporting nonbusiness income. Irs amended returns   If you are not in the business of renting personal property, report your rental income on Form 1040, line 21. Irs amended returns List the type and amount of the income on the dotted line next to line 21. Irs amended returns Reporting nonbusiness expenses. Irs amended returns   If you rent personal property for profit, include your rental expenses in the total amount you enter on Form 1040, line 36. Irs amended returns Also enter the amount and “PPR” on the dotted line next to line 36. Irs amended returns   If you do not rent personal property for profit, your deductions are limited and you cannot report a loss to offset other income. Irs amended returns See Activity not for profit , under Other Income, later. Irs amended returns Repayments If you had to repay an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income for the year in which you repaid it. Irs amended returns Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. Irs amended returns Generally, you can claim a deduction or credit only if the repayment qualifies as an expense or loss incurred in your trade or business or in a for-profit transaction. Irs amended returns Type of deduction. Irs amended returns   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. Irs amended returns You generally deduct the repayment on the same form or schedule on which you previously reported it as income. Irs amended returns For example, if you reported it as self-employment income, deduct it as a business expense on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). Irs amended returns If you reported it as a capital gain, deduct it as a capital loss as explained in the Instructions for Schedule D (Form 1040). Irs amended returns If you reported it as wages, unemployment compensation, or other nonbusiness income, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040). Irs amended returns Repaid social security benefits. Irs amended returns   If you repaid social security benefits or equivalent railroad retirement benefits, see Repayment of benefits in chapter 11. Irs amended returns Repayment of $3,000 or less. Irs amended returns   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Irs amended returns If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 23. Irs amended returns Repayment over $3,000. Irs amended returns   If the amount you repaid was more than $3,000, you can deduct the repayment (as explained under Type of deduction , earlier). Irs amended returns However, you can choose instead to take a tax credit for the year of repayment if you included the income under a claim of right. Irs amended returns This means that at the time you included the income, it appeared that you had an unrestricted right to it. Irs amended returns If you qualify for this choice, figure your tax under both methods and compare the results. Irs amended returns Use the method (deduction or credit) that results in less tax. Irs amended returns When determining whether the amount you repaid was more or less than $3,000, consider the total amount being repaid on the return. Irs amended returns Each instance of repayment is not considered separately. Irs amended returns Method 1. Irs amended returns   Figure your tax for 2013 claiming a deduction for the repaid amount. Irs amended returns If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 28. Irs amended returns Method 2. Irs amended returns   Figure your tax for 2013 claiming a credit for the repaid amount. Irs amended returns Follow these steps. Irs amended returns Figure your tax for 2013 without deducting the repaid amount. Irs amended returns Refigure your tax from the earlier year without including in income the amount you repaid in 2013. Irs amended returns Subtract the tax in (2) from the tax shown on your return for the earlier year. Irs amended returns This is the credit. Irs amended returns Subtract the answer in (3) from the tax for 2013 figured without the deduction (Step 1). Irs amended returns   If method 1 results in less tax, deduct the amount repaid. Irs amended returns If method 2 results in less tax, claim the credit figured in (3) above on Form 1040, line 71, by adding the amount of the credit to any other credits on this line, and entering “I. Irs amended returns R. Irs amended returns C. Irs amended returns 1341” in the column to the right of line 71. Irs amended returns   An example of this computation can be found in Publication 525. Irs amended returns Repaid wages subject to social security and Medicare taxes. Irs amended returns   If you had to repay an amount that you included in your wages or compensation in an earlier year on which social security, Medicare, or tier 1 RRTA taxes were paid, ask your employer to refund the excess amount to you. Irs amended returns If the employer refuses to refund the taxes, ask for a statement indicating the amount of the overcollection to support your claim. Irs amended returns File a claim for refund using Form 843, Claim for Refund and Request for Abatement. Irs amended returns Repaid wages subject to Additional Medicare Tax. Irs amended returns   Employers cannot make an adjustment or file a claim for refund for Additional Medicare Tax withholding when there is a repayment of wages received by an employee in a prior year because the employee determines liability for Additional Medicare Tax on the employee's income tax return for the prior year. Irs amended returns If you had to repay an amount that you included in your wages or compensation in an earlier year, and on which Additional Medicare Tax was paid, you may be able to recover the Additional Medicare Tax paid on the amount. Irs amended returns To recover Additional Medicare Tax on the repaid wages or compensation, you must file Form 1040X, Amended U. Irs amended returns S. Irs amended returns Individual Income Tax Return, for the prior year in which the wages or compensation were originally received. Irs amended returns See the Instructions for Form 1040X. Irs amended returns Royalties Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income. Irs amended returns In most cases you report royalties in Part I of Schedule E (Form 1040). Irs amended returns However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc. Irs amended returns , report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Irs amended returns Copyrights and patents. Irs amended returns   Royalties from copyrights on literary, musical, or artistic works, and similar property, or from patents on inventions, are amounts paid to you for the right to use your work over a specified period of time. Irs amended returns Royalties generally are based on the number of units sold, such as the number of books, tickets to a performance, or machines sold. Irs amended returns Oil, gas, and minerals. Irs amended returns   Royalty income from oil, gas, and mineral properties is the amount you receive when natural resources are extracted from your property. Irs amended returns The royalties are based on units, such as barrels, tons, etc. Irs amended returns , and are paid to you by a person or company who leases the property from you. Irs amended returns Depletion. Irs amended returns   If you are the owner of an economic interest in mineral deposits or oil and gas wells, you can recover your investment through the depletion allowance. Irs amended returns For information on this subject, see chapter 9 of Publication 535. Irs amended returns Coal and iron ore. Irs amended returns   Under certain circumstances, you can treat amounts you receive from the disposal of coal and iron ore as payments from the sale of a capital asset, rather than as royalty income. Irs amended returns For information about gain or loss from the sale of coal and iron ore, see Publication 544. Irs amended returns Sale of property interest. Irs amended returns   If you sell your complete interest in oil, gas, or mineral rights, the amount you receive is considered payment for the sale of property used in a trade or business under section 1231, not royalty income. Irs amended returns Under certain circumstances, the sale is subject to capital gain or loss treatment as explained in the Instructions for Schedule D (Form 1040). Irs amended returns For more information on selling section 1231 property, see chapter 3 of Publication 544. Irs amended returns   If you retain a royalty, an overriding royalty, or a net profit interest in a mineral property for the life of the property, you have made a lease or a sublease, and any cash you receive for the assignment of other interests in the property is ordinary income subject to a depletion allowance. Irs amended returns Part of future production sold. Irs amended returns   If you own mineral property but sell part of the future production, in most cases you treat the money you receive from the buyer at the time of the sale as a loan from the buyer. Irs amended returns Do not include it in your income or take depletion based on it. Irs amended returns   When production begins, you include all the proceeds in your income, deduct all the production expenses, and deduct depletion from that amount to arrive at your taxable income from the property. Irs amended returns Unemployment Benefits The tax treatment of unemployment benefits you receive depends on the type of program paying the benefits. Irs amended returns Unemployment compensation. Irs amended returns   You must include in income all unemployment compensation you receive. Irs amended returns You should receive a Form 1099-G showing in box 1 the total unemployment compensation paid to you. Irs amended returns In most cases, you enter unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Irs amended returns Types of unemployment compensation. Irs amended returns   Unemployment compensation generally includes any amount received under an unemployment compensation law of the United States or of a state. Irs amended returns It includes the following benefits. Irs amended returns Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund. Irs amended returns State unemployment insurance benefits. Irs amended returns Railroad unemployment compensation benefits. Irs amended returns Disability payments from a government program paid as a substitute for unemployment compensation. Irs amended returns (Amounts received as workers' compensation for injuries or illness are not unemployment compensation. Irs amended returns See chapter 5 for more information. Irs amended returns ) Trade readjustment allowances under the Trade Act of 1974. Irs amended returns Unemployment assistance under the Disaster Relief and Emergency Assistance Act. Irs amended returns Unemployment assistance under the Airline Deregulation Act of 1974 Program. Irs amended returns Governmental program. Irs amended returns   If you contribute to a governmental unemployment compensation program and your contributions are not deductible, amounts you receive under the program are not included as unemployment compensation until you recover your contributions. Irs amended returns If you deducted all of your contributions to the program, the entire amount you receive under the program is included in your income. Irs amended returns Repayment of unemployment compensation. Irs amended returns   If you repaid in 2013 unemployment compensation you received in 2013, subtract the amount you repaid from the total amount you received and enter the difference on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Irs amended returns On the dotted line next to your entry enter “Repaid” and the amount you repaid. Irs amended returns If you repaid unemployment compensation in 2013 that you included in income in an earlier year, you can deduct the amount repaid on Schedule A (Form 1040), line 23, if you itemize deductions. Irs amended returns If the amount is more than $3,000, see Repayments , earlier. Irs amended returns Tax withholding. Irs amended returns   You can choose to have federal income tax withheld from your unemployment compensation. Irs amended returns To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. Irs amended returns Tax will be withheld at 10% of your payment. Irs amended returns    If you do not choose to have tax withheld from your unemployment compensation, you may be liable for estimated tax. Irs amended returns If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. Irs amended returns For more information on estimated tax, see chapter 4. Irs amended returns Supplemental unemployment benefits. Irs amended returns   Benefits received from an employer-financed fund (to which the employees did not contribute) are not unemployment compensation. Irs amended returns They are taxable as wages and are subject to withholding for income tax. Irs amended returns They may be subject to social security and Medicare taxes. Irs amended returns For more information, see Supplemental Unemployment Benefits in section 5 of Publication 15-A, Employer's Supplemental Tax Guide. Irs amended returns Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Irs amended returns Repayment of benefits. Irs amended returns   You may have to repay some of your supplemental unemployment benefits to qualify for trade readjustment allowances under the Trade Act of 1974. Irs amended returns If you repay supplemental unemployment benefits in the same year you receive them, reduce the total benefits by the amount you repay. Irs amended returns If you repay the benefits in a later year, you must include the full amount of the benefits received in your income for the year you received them. Irs amended returns   Deduct the repayment in the later year as an adjustment to gross income on Form 1040. Irs amended returns (You cannot use Form 1040A or Form 1040EZ. Irs amended returns ) Include the repayment on Form 1040, line 36, and enter “Sub-Pay TRA” and the amount on the dotted line next to line 36. Irs amended returns If the amount you repay in a later year is more than $3,000, you may be able to take a credit against your tax for the later year instead of deducting the amount repaid. Irs amended returns For more information on this, see Repayments , earlier. Irs amended returns Private unemployment fund. Irs amended returns   Unemployment benefit payments from a private (nonunion) fund to which you voluntarily contribute are taxable only if the amounts you receive are more than your total payments into the fund. Irs amended returns Report the taxable amount on Form 1040, line 21. Irs amended returns Payments by a union. Irs amended returns   Benefits paid to you as an unemployed member of a union from regular union dues are included in your income on Form 1040, line 21. Irs amended returns However, if you contribute to a special union fund and your payments to the fund are not deductible, the unemployment benefits you receive from the fund are includible in your income only to the extent they are more than your contributions. Irs amended returns Guaranteed annual wage. Irs amended returns   Payments you receive from your employer during periods of unemployment, under a union agreement that guarantees you full pay during the year, are taxable as wages. Irs amended returns Include them on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Irs amended returns State employees. Irs amended returns   Payments similar to a state's unemployment compensation may be made by the state to its employees who are not covered by the state's unemployment compensation law. Irs amended returns Although the payments are fully taxable, do not report them as unemployment compensation. Irs amended returns Report these payments on Form 1040, line 21. Irs amended returns Welfare and Other Public Assistance Benefits Do not include in your income governmental benefit payments from a public welfare fund based upon need, such as payments to blind individuals under a state public assistance law. Irs amended returns Payments from a state fund for the victims of crime should not be included in the victims' incomes if they are in the nature of welfare payments. Irs amended returns Do not deduct medical expenses that are reimbursed by such a fund. Irs amended returns You must include in your income any welfare payments that are compensation for services or that are obtained fraudulently. Irs amended returns Reemployment Trade Adjustment Assistance (RTAA) payments. Irs amended returns   RTAA payments received from a state must be included in your income. Irs amended returns The state must send you Form 1099-G to advise you of the amount you should include in income. Irs amended returns The amount should be reported on Form 1040, line 21. Irs amended returns Persons with disabilities. Irs amended returns   If you have a disability, you must include in income compensation you receive for services you perform unless the compensation is otherwise excluded. Irs amended returns However, you do not include in income the value of goods, services, and cash that you receive, not in return for your services, but for your training and rehabilitation because you have a disability. Irs amended returns Excludable amounts include payments for transportation and attendant care, such as interpreter services for the deaf, reader services for the blind, and services to help individuals with an intellectual disability do their work. Irs amended returns Disaster relief grants. Irs amended returns    Do not include post-disaster grants received under the Robert T. Irs amended returns Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, child care, or funeral expenses. Irs amended returns Do not deduct casualty losses or medical expenses that are specifically reimbursed by these disaster relief grants. Irs amended returns If you have deducted a casualty loss for the loss of your personal residence and you later receive a disaster relief grant for the loss of the same residence, you may have to include part or all of the grant in your taxable income. Irs amended returns See Recoveries , earlier. Irs amended returns Unemployment assistance payments under the Act are taxable unemployment compensation. Irs amended returns See Unemployment compensation under Unemployment Benefits, earlier. Irs amended returns Disaster relief payments. Irs amended returns   You can exclude from income any amount you receive that is a qualified disaster relief payment. Irs amended returns A qualified disaster relief payment is an amount paid to you: To reimburse or pay reasonable and necessary personal, family, living, or funeral expenses that result from a qualified disaster; To reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of your home or repair or replacement of its contents to the extent it is due to a qualified disaster; By a person engaged in the furnishing or sale of transportation as a common carrier because of the death or personal physical injuries incurred as a result of a qualified disaster; or By a federal, state, or local government, or agency, or instrumentality in connection with a qualified disaster in order to promote the general welfare. Irs amended returns You can exclude this amount only to the extent any expense it pays for is not paid for by insurance or otherwise. Irs amended returns The exclusion does not apply if you were a participant or conspirator in a terrorist action or a representative of one. Irs amended returns   A qualified disaster is: A disaster which results from a terrorist or military action; A federally declared disaster; or A disaster which results from an accident involving a common carrier, or from any other event, which is determined to be catastrophic by the Secretary of the Treasury or his or her delegate. Irs amended returns   For amounts paid under item (4), a disaster is qualified if it is determined by an applicable federal, state, or local authority to warrant assistance from the federal, state, or local government, agency, or instrumentality. Irs amended returns Disaster mitigation payments. Irs amended returns   You also can exclude from income any amount you receive that is a qualified disaster mitigation payment. Irs amended returns Qualified disaster mitigation payments are also most commonly paid to you in the period immediately following damage to property as a result of a natural disaster. Irs amended returns However, disaster mitigation payments are used to mitigate (reduce the severity of) potential damage from future natural disasters. Irs amended returns They are paid to you through state and local governments based on the provisions of the Robert T. Irs amended returns Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act. Irs amended returns   You cannot increase the basis or adjusted basis of your property for improvements made with nontaxable disaster mitigation payments. Irs amended returns Home Affordable Modification Program (HAMP). Irs amended returns   If you benefit from Pay-for-Performance Success Payments under HAMP, the payments are not taxable. Irs amended returns Mortgage assistance payments under section 235 of the National Housing Act. Irs amended returns   Payments made under section 235 of the National Housing Act for mortgage assistance are not included in the homeowner's income. Irs amended returns Interest paid for the homeowner under the mortgage assistance program cannot be deducted. Irs amended returns Medicare. Irs amended returns   Medicare benefits received under title XVIII of the Social Security Act are not includible in the gross income of the individuals for whom they are paid. Irs amended returns This includes basic (part A (Hospital Insurance Benefits for the Aged)) and supplementary (part B (Supplementary Medical Insurance Benefits for the Aged)). Irs amended returns Old-age, survivors, and disability insurance benefits (OASDI). Irs amended returns   Generally, OASDI payments under section 202 of title II of the Social Security Act are not includible in the gross income of the individuals to whom they are paid. Irs amended returns This applies to old-age insurance benefits, and insurance benefits for wives, husbands, children, widows, widowers, mothers and fathers, and parents, as well as the lump-sum death payment. Irs amended returns Nutrition Program for the Elderly. Irs amended returns    Food benefits you receive under the Nutrition Program for the Elderly are not taxable. Irs amended returns If you prepare and serve free meals for the program, include in your income as wages the cash pay you receive, even if you are also eligible for food benefits. Irs amended returns Payments to reduce cost of winter energy. Irs amended returns   Payments made by a state to qualified people to reduce their cost of winter energy use are not taxable. Irs amended returns Other Income The following brief discussions are arranged in alphabetical order. Irs amended returns Other income items briefly discussed below are referenced to publications which provide more topical information. Irs amended returns Activity not for profit. Irs amended returns   You must include on your return income from an activity from which you do not expect to make a profit. Irs amended returns An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. Irs amended returns Enter this income on Form 1040, line 21. Irs amended returns Deductions for expenses related to the activity are limited. Irs amended returns They cannot total more than the income you report and can be taken only if you itemize deductions on Schedule A (Form 1040). Irs amended returns See Not-for-Profit Activities in chapter 1 of Publication 535 for information on whether an activity is considered carried on for a profit. Irs amended returns Alaska Permanent Fund dividend. Irs amended returns   If you received a payment from Alaska's mineral income fund (Alaska Permanent Fund dividend), report it as income on line 21 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Irs amended returns The state of Alaska sends each recipient a document that shows the amount of the payment with the check. Irs amended returns The amount also is reported to IRS. Irs amended returns Alimony. Irs amended returns   Include in your income on Form 1040, line 11, any alimony payments you receive. Irs amended returns Amounts you receive for child support are not income to you. Irs amended returns Alimony and child support payments are discussed in chapter 18. Irs amended returns Bribes. Irs amended returns   If you receive a bribe, include it in your income. Irs amended returns Campaign contributions. Irs amended returns   These contributions are not income to a candidate unless they are diverted to his or her personal use. Irs amended returns To be exempt from tax, the contributions must be spent for campaign purposes or kept in a fund for use in future campaigns. Irs amended returns However, interest earned on bank deposits, dividends received on contributed securities, and net gains realized on sales of contributed securities are taxable and must be reported on Form 1120-POL, U. Irs amended returns S. Irs amended returns Income Tax Return for Certain Political Organizations. Irs amended returns Excess campaign funds transferred to an office account must be included in the officeholder's income on Form 1040, line 21, in the year transferred. Irs amended returns Car pools. Irs amended returns   Do not include in your income amounts you receive from the passengers for driving a car in a car pool to and from work. Irs amended returns These amounts are considered reimbursement for your expenses. Irs amended returns However, this rule does not apply if you have developed car pool arrangements into a profit-making business of transporting workers for hire. Irs amended returns Cash rebates. Irs amended returns   A cash rebate you receive from a dealer or manufacturer of an item you buy is not income, but you must reduce your basis by the amount of the rebate. Irs amended returns Example. Irs amended returns You buy a new car for $24,000 cash and receive a $2,000 rebate check from the manufacturer. Irs amended returns The $2,000 is not income to you. Irs amended returns Your basis in the car is $22,000. Irs amended returns This is the basis on which you figure gain or loss if you sell the car and depreciation if you use it for business. Irs amended returns Casualty insurance and other reimbursements. Irs amended returns   You generally should not report these reimbursements on your return unless you are figuring gain or loss from the casualty or theft. Irs amended returns See chapter 25 for more information. Irs amended returns Child support payments. Irs amended returns   You should not report these payments on your return. Irs amended returns See chapter 18 for more information. Irs amended returns Court awards and damages. Irs amended returns   To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. Irs amended returns The character of the income as ordinary income or capital gain depends on the nature of the underlying claim. Irs amended returns Include the following as ordinary income. Irs amended returns Interest on any award. Irs amended returns Compensation for lost wages or lost profits in most cases. Irs amended returns Punitive damages, in most cases. Irs amended returns It does not matter if they relate to a physical injury or physical sickness. Irs amended returns Amounts received in settlement of pension rights (if you did not contribute to the plan). Irs amended returns Damages for: Patent or copyright infringement, Breach of contract, or Interference with business operations. Irs amended returns Back pay and damages for emotional distress received to satisfy a claim under title VII of the Civil Rights Act of 1964. Irs amended returns Attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income. Irs amended returns   Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments). Irs amended returns Emotional distress. Irs amended returns   Emotional distress itself is not a physical injury or physical sickness, but damages you receive for emotional distress due to a physical injury or sickness are treated as received for the physical injury or sickness. Irs amended returns Do not include them in your income. Irs amended returns   If the emotional distress is due to a personal injury that is not due to a physical injury or sickness (for example, employment discrimination or injury to reputation), you must include the damages in your income, except for any damages you receive for medical care due to that emotional distress. Irs amended returns Emotional distress includes physical symptoms that result from emotional distress, such as headaches, insomnia, and stomach disorders. Irs amended returns Deduction for costs involved in unlawful discrimination suits. Irs amended returns   You may be able to deduct attorney fees and court costs paid to recover a judgment or settlement for a claim of unlawful discrimination under various provisions of federal, state, and local law listed in Internal Revenue Code section 62(e), a claim against the United States government, or a claim under section 1862(b)(3)(A) of the Social Security Act. Irs amended returns For more information, see Publication 525. Irs amended returns Credit card insurance. Irs amended returns   In most cases, if you receive benefits under a credit card disability or unemployment insurance plan, the benefits are taxable to you. Irs amended returns These plans make the minimum monthly payment on your credit card account if you cannot make the payment due to injury, illness, disability, or unemployment. Irs amended returns Report on Form 1040, line 21, the amount of benefits you received during the year that is more than the amount of the premiums you paid during the year. Irs amended returns Down payment assistance. Irs amended returns   If you purchase a home and receive assistance from a nonprofit corporation to make the down payment, that assistance is not included in your income. Irs amended returns If the corporation qualifies as a tax-exempt charitable organization, the assistance is treated as a gift and is included in your basis of the house. Irs amended returns If the corporation does not qualify, the assistance is treated as a rebate or reduction of the purchase price and is not included in your basis. Irs amended returns Employment agency fees. Irs amended returns   If you get a job through an employment agency, and the fee is paid by your employer, the fee is not includible in your income if you are not liable for it. Irs amended returns However, if you pay it and your employer reimburses you for it, it is includible in your income. Irs amended returns Energy conservation subsidies. Irs amended returns   You can exclude from gross income any subsidy provided, either directly or indirectly, by public utilities for the purchase or installation of an energy conservation measure for a dwelling unit. Irs amended returns Energy conservation measure. Irs amended returns   This includes installations or modifications that are primarily designed to reduce consumption of electricity or natural gas, or improve the management of energy demand. Irs amended returns Dwelling unit. Irs amended returns   This includes a house, apartment, condominium, mobile home, boat, or similar property. Irs amended returns If a building or structure contains both dwelling and other units, any subsidy must be properly allocated. Irs amended returns Estate and trust income. Irs amended returns    An estate or trust, unlike a partnership, may have to pay federal income tax. Irs amended returns If you are a beneficiary of an estate or trust, you may be taxed on your share of its income distributed or required to be distributed to you. Irs amended returns However, there is never a double tax. Irs amended returns Estates and trusts file their returns on Form 1041, U. Irs amended returns S. Irs amended returns Income Tax Return for Estates and Trusts, and your share of the income is reported to you on Schedule K-1 (Form 1041). Irs amended returns Current income required to be distributed. Irs amended returns   If you are the beneficiary of an estate or trust that must distribute all of its current income, you must report your share of the distributable net income, whether or not you actually received it. Irs amended returns Current income not required to be distributed. Irs amended returns    If you are the beneficiary of an estate or trust and the fiduciary has the choice of whether to distribute all or part of the current income, you must report: All income that is required to be distributed to you, whether or not it is actually distributed, plus All other amounts actually paid or credited to you, up to the amount of your share of distributable net income. Irs amended returns How to report. Irs amended returns   Treat each item of income the same way that the estate or trust would treat it. Irs amended returns For example, if a trust's dividend income is distributed to you, you report the distribution as dividend income on your return. Irs amended returns The same rule applies to distributions of tax-exempt interest and capital gains. Irs amended returns   The fiduciary of the estate or trust must tell you the type of items making up your share of the estate or trust income and any credits you are allowed on your individual income tax return. Irs amended returns Losses. Irs amended returns   Losses of estates and trusts generally are not deductible by the beneficiaries. Irs amended returns Grantor trust. Irs amended returns   Income earned by a grantor trust is taxable to the grantor, not the beneficiary, if the grantor keeps certain control over the trust. Irs amended returns (The grantor is the one who transferred property to the trust. Irs amended returns ) This rule applies if the property (or income from the property) put into the trust will or may revert (be returned) to the grantor or the grantor's spouse. Irs amended returns   Generally, a trust is a grantor trust if the grantor has a reversionary interest valued (at the date of transfer) at more than 5% of the value of the transferred property. Irs amended returns Expenses paid by another. Irs amended returns   If your personal expenses are paid for by another person, such as a corporation, the payment may be taxable to you depending upon your relationship with that person and the nature of the payment. Irs amended returns But if the payment makes up for a loss caused by that person, and only restores you to the position you were in before the loss, the payment is not includible in your income. Irs amended returns Fees for services. Irs amended returns   Include all fees for your services in your income. Irs amended returns Examples of these fees are amounts you receive for services you perform as: A corporate director, An executor, administrator, or personal representative of an estate, A manager of a trade or business you operated before declaring Chapter 11 bankruptcy, A notary public, or An election precinct official. Irs amended returns Nonemployee compensation. Irs amended returns   If you are not an employee and the fees for your services from the same payer total $600 or more for the year, you may receive a Form 1099-MISC. Irs amended returns You may need to report your fees as self-employment income. Irs amended returns See Self-Employed Persons , in chapter 1, for a discussion of when you are considered self-employed. Irs amended returns Corporate director. Irs amended returns   Corporate director fees are self-employment income. Irs amended returns Report these payments on Schedule C or Schedule C-EZ (Form 1040). Irs amended returns Personal representatives. Irs amended returns   All personal representatives must include in their gross income fees paid to them from an estate. Irs amended returns If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on Form 1040, line 21. Irs amended returns If you are in the trade or business of being an executor, report these fees as self-employment income on Schedule C or Schedule C-EZ (Form 1040). Irs amended returns The fee is not includible in income if it is waived. Irs amended returns Manager of trade or business for bankruptcy estate. Irs amended returns   Include in your income all payments received from your bankruptcy estate for managing or operating a trade or business that you operated before you filed for bankruptcy. Irs amended returns Report this income on Form 1040, line 21. Irs amended returns Notary public. Irs amended returns    Report payments for these services on Schedule C or Schedule C-EZ (Form 1040). Irs amended returns These payments are not subject to self-employment tax. Irs amended returns See the separate instructions for Schedule SE (Form 1040) for details. Irs amended returns Election precinct official. Irs amended returns    You should receive a Form W-2 showing payments for services performed as an election official or election worker. Irs amended returns Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Irs amended returns Foster care providers. Irs amended returns   Payments you receive from a state, political subdivision, or a qualified foster care placement agency for providing care to qualified foster individuals in your home generally are not included in your income. Irs amended returns However, you must include in your income payments received for the care of more than 5 individuals age 19 or older and certain difficulty-of-care payments. Irs amended returns   A qualified foster individual is a person who: Is living in a foster family home, and Was placed there by: An agency of a state or one of its political subdivisions, or A qualified foster care placement agency. Irs amended returns Difficulty-of-care payments. Irs amended returns   These are additional payments that are designated by the payer as compensation for providing the additional care that is required for physically, mentally, or emotionally handicapped qualified foster individuals. Irs amended returns A state must determine that the additional compensation is needed, and the care for which the payments are made must be provided in your home. Irs amended returns   You must include in your income difficulty-of-care payments received for more than: 10 qualified foster individuals under age 19, or 5 qualified foster individuals age 19 or older. Irs amended returns Maintaining space in home. Irs amended returns   If you are paid to maintain space in your home for emergency foster care, you must include the payment in your income. Irs amended returns Reporting taxable payments. Irs amended returns    If you receive payments that you must include in your income, you are in business as a foster care provider and you are self-employed. Irs amended returns Report the payments on Schedule C or Schedule C-EZ (Form 1040). Irs amended returns See Publication 587, Business Use of Your Home, to help you determine the amount you can deduct for the use of your home. Irs amended returns Found property. Irs amended returns   If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession. Irs amended returns Free tour. Irs amended returns   If you received a free tour from a travel agency for organizing a group of tourists, you must include its value in your income. Irs amended returns Report the fair market value of the tour on Form 1040, line 21, if you are not in the trade or business of organizing tours. Irs amended returns You cannot deduct your expenses in serving as the voluntary leader of the group at the group's request. Irs amended returns If you organize tours as a trade or business, report the tour's value on Schedule C or Schedule C-EZ (Form 1040). Irs amended returns Gambling winnings. Irs amended returns   You must include your gambling winnings in income on Form 1040, line 21. Irs amended returns If you itemize your deductions on Schedule A (Form 1040), you can deduct gambling losses you had during the year, but only up to the amount of your winnings. Irs amended returns Lotteries and raffles. Irs amended returns   Winnings from lotteries and raffles are gambling winnings. Irs amended returns In addition to cash winnings, you must include in your income the fair market value of bonds, cars, houses, and other noncash prizes. Irs amended returns    If you win a state lottery prize payable in installments, see Publication 525 for more information. Irs amended returns Form W-2G. Irs amended returns   You may have received a Form W-2G, Certain Gambling Winnings, showing the amount of your gambling winnings and any tax taken out of them. Irs amended returns Include the amount from box 1 on Form 1040, line 21. Irs amended returns Include the amount shown in box 4 on Form 1040, line 62, as federal income tax withheld. Irs amended returns Reporting winnings and recordkeeping. Irs amended returns   For more information on reporting gam
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Optional expedited process for section 501 (c)(4) applications (120 days old as of May 28, 2013)

An optional expedited process is available for certain Section 501(c)(4) applicants. If your organization’s application has been pending for more than 120 days as of May 28, 2013, and your organization’s activities involve possible political campaign intervention or issue advocacy, you may receive a Letter 5228, Application Notification of Expedited 501(c)(4) Option.

As of December 23, 2013, this optional, expedited processing is being offered to all Section 501(c)(4) applicants whose applications indicate that the organization may be involved in political campaign intervention or in providing private benefit to a political party and that otherwise do not present any issue with regard to exempt status.

This webpage is for organizations who were eligible for the original optional expedited process. If you are eligible for the expanded optional expedited process offered on December 23, 2013, see additional information.

If you receive Letter 5228

You will be able to self-certify your organization if you represent to the following:

  • Your organization devotes 60% or more of both spending and time to activities that promote social welfare as defined by Section 501(c)(4).
  • Your organization devotes less than 40% of both spending and time to political campaign intervention.
  • Your organization ensures the above thresholds apply for past, current and future activities.

Self-certify your organization

Please review Letter 5228 and follow the instructions. Sign and return pages 4-5 within 45 days from the date of your letter. IRS will send you a favorable determination letter within two weeks after we receive your signed representations.

If you think you should have received a letter

If you did not receive Letter 5228 but believe your organization is eligible for the expedited 501(c)(4) option because your case was older than 120 days old as of May 28, 2013 and involved the issues discussed above, you should make sure you meet the eligibility criteria listed in Letter 5228, then call 877-829-5500.

Related Item

Expanded Optional Expedited Approval Process for 501(c)(4)s

Page Last Reviewed or Updated: 03-Jan-2014

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