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Irse File

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Irse File

Irse file 3. Irse file   Ordinary or Capital Gain or Loss for Business Property Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Section 1231 Gains and LossesNonrecaptured section 1231 losses. Irse file Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sales Gifts Transfers at Death Like-Kind Exchanges and Involuntary Conversions Multiple Properties Introduction When you dispose of business property, your taxable gain or loss is usually a section 1231 gain or loss. Irse file Its treatment as ordinary or capital is determined under rules for section 1231 transactions. Irse file When you dispose of depreciable property (section 1245 property or section 1250 property) at a gain, you may have to recognize all or part of the gain as ordinary income under the depreciation recapture rules. Irse file Any remaining gain is a section 1231 gain. Irse file Topics - This chapter discusses: Section 1231 gains and losses Depreciation recapture Useful Items - You may want to see: Publication 534 Depreciating Property Placed in Service Before 1987 537 Installment Sales 547 Casualties, Disasters and Thefts 551 Basis of Assets 946 How To Depreciate Property Form (and Instructions) 4797 Sales of Business Property See chapter 5 for information about getting publications and forms. Irse file Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (discussed below). Irse file Their treatment as ordinary or capital depends on whether you have a net gain or a net loss from all your section 1231 transactions. Irse file If you have a gain from a section 1231 transaction, first determine whether any of the gain is ordinary income under the depreciation recapture rules (explained later). Irse file Do not take that gain into account as section 1231 gain. Irse file Section 1231 transactions. Irse file   The following transactions result in gain or loss subject to section 1231 treatment. Irse file Sales or exchanges of real property or depreciable personal property. Irse file This property must be used in a trade or business and held longer than 1 year. Irse file Generally, property held for the production of rents or royalties is considered to be used in a trade or business. Irse file Depreciable personal property includes amortizable section 197 intangibles (described in chapter 2 under Other Dispositions). Irse file Sales or exchanges of leaseholds. Irse file The leasehold must be used in a trade or business and held longer than 1 year. Irse file Sales or exchanges of cattle and horses. Irse file The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 2 years or longer. Irse file Sales or exchanges of other livestock. Irse file This livestock does not include poultry. Irse file It must be held for draft, breeding, dairy, or sporting purposes and held for 1 year or longer. Irse file Sales or exchanges of unharvested crops. Irse file The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person and the land must be held longer than 1 year. Irse file You cannot keep any right or option to directly or indirectly reacquire the land (other than a right customarily incident to a mortgage or other security transaction). Irse file Growing crops sold with a lease on the land, though sold to the same person in the same transaction, are not included. Irse file Cutting of timber or disposal of timber, coal, or iron ore. Irse file The cutting or disposal must be treated as a sale, as described in chapter 2 under Timber and Coal and Iron Ore. Irse file Condemnations. Irse file The condemned property must have been held longer than 1 year. Irse file It must be business property or a capital asset held in connection with a trade or business or a transaction entered into for profit, such as investment property. Irse file It cannot be property held for personal use. Irse file Casualties and thefts. Irse file The casualty or theft must have affected business property, property held for the production of rents and royalties, or investment property (such as notes and bonds). Irse file You must have held the property longer than 1 year. Irse file However, if your casualty or theft losses are more than your casualty or theft gains, neither the gains nor the losses are taken into account in the section 1231 computation. Irse file For more information on casualties and thefts, see Publication 547. Irse file Property for sale to customers. Irse file   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. Irse file If you will get back all, or nearly all, of your investment in the property by selling it rather than by using it up in your business, it is property held mainly for sale to customers. Irse file Example. Irse file You manufacture and sell steel cable, which you deliver on returnable reels that are depreciable property. Irse file Customers make deposits on the reels, which you refund if the reels are returned within a year. Irse file If they are not returned, you keep each deposit as the agreed-upon sales price. Irse file Most reels are returned within the 1-year period. Irse file You keep adequate records showing depreciation and other charges to the capitalized cost of the reels. Irse file Under these conditions, the reels are not property held for sale to customers in the ordinary course of your business. Irse file Any gain or loss resulting from their not being returned may be capital or ordinary, depending on your section 1231 transactions. Irse file Copyrights. Irse file    The sale of a copyright, a literary, musical, or artistic composition, or similar property is not a section 1231 transaction if your personal efforts created the property, or if you acquired the property in a way that entitled you to the basis of the previous owner whose personal efforts created it (for example, if you receive the property as a gift). Irse file The sale of such property results in ordinary income and generally is reported in Part II of Form 4797. Irse file Treatment as ordinary or capital. Irse file   To determine the treatment of section 1231 gains and losses, combine all your section 1231 gains and losses for the year. Irse file If you have a net section 1231 loss, it is ordinary loss. Irse file If you have a net section 1231 gain, it is ordinary income up to the amount of your nonrecaptured section 1231 losses from previous years. Irse file The rest, if any, is long-term capital gain. Irse file Nonrecaptured section 1231 losses. Irse file   Your nonrecaptured section 1231 losses are your net section 1231 losses for the previous 5 years that have not been applied against a net section 1231 gain. Irse file Therefore, if in any of your five preceding tax years you had section 1231 losses, a net gain for the current year from the sale of section 1231 assets is ordinary gain to the extent of your prior losses. Irse file These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. Irse file Example. Irse file In 2013, Ben has a $2,000 net section 1231 gain. Irse file To figure how much he has to report as ordinary income and long-term capital gain, he must first determine his section 1231 gains and losses from the previous 5-year period. Irse file From 2008 through 2012 he had the following section 1231 gains and losses. Irse file Year Amount 2008 -0- 2009 -0- 2010 ($2,500) 2011 -0- 2012 $1,800 Ben uses this information to figure how to report his net section 1231 gain for 2013 as shown below. Irse file 1) Net section 1231 gain (2013) $2,000 2) Net section 1231 loss (2010) ($2,500)   3) Net section 1231 gain (2012) 1,800   4) Remaining net section 1231 loss from prior 5 years ($700)   5) Gain treated as  ordinary income $700 6) Gain treated as long-term  capital gain $1,300 Depreciation Recapture If you dispose of depreciable or amortizable property at a gain, you may have to treat all or part of the gain (even if otherwise nontaxable) as ordinary income. Irse file To figure any gain that must be reported as ordinary income, you must keep permanent records of the facts necessary to figure the depreciation or amortization allowed or allowable on your property. Irse file This includes the date and manner of acquisition, cost or other basis, depreciation or amortization, and all other adjustments that affect basis. Irse file On property you acquired in a nontaxable exchange or as a gift, your records also must indicate the following information. Irse file Whether the adjusted basis was figured using depreciation or amortization you claimed on other property. Irse file Whether the adjusted basis was figured using depreciation or amortization another person claimed. Irse file Corporate distributions. Irse file   For information on property distributed by corporations, see Distributions to Shareholders in Publication 542, Corporations. Irse file General asset accounts. Irse file   Different rules apply to dispositions of property you depreciated using a general asset account. Irse file For information on these rules, see Publication 946. Irse file Section 1245 Property A gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable on the property. Irse file See Gain Treated as Ordinary Income, later. Irse file Any gain recognized that is more than the part that is ordinary income from depreciation is a section 1231 gain. Irse file See Treatment as ordinary or capital under Section 1231 Gains and Losses, earlier. Irse file Section 1245 property defined. Irse file   Section 1245 property includes any property that is or has been subject to an allowance for depreciation or amortization and that is any of the following types of property. Irse file Personal property (either tangible or intangible). Irse file Other tangible property (except buildings and their structural components) used as any of the following. Irse file See Buildings and structural components below. Irse file An integral part of manufacturing, production, or extraction, or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services. Irse file A research facility in any of the activities in (a). Irse file A facility in any of the activities in (a) for the bulk storage of fungible commodities (discussed on the next page). Irse file That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. Irse file Amortization of certified pollution control facilities. Irse file The section 179 expense deduction. Irse file Deduction for clean-fuel vehicles and certain refueling property. Irse file Deduction for capital costs incurred in complying with Environmental Protection Agency sulfur regulations. Irse file Deduction for certain qualified refinery property. Irse file Deduction for qualified energy efficient commercial building property. Irse file Amortization of railroad grading and tunnel bores, if in effect before the repeal by the Revenue Reconciliation Act of 1990. Irse file (Repealed by Public Law 99-514, Tax Reform Act of 1986, section 242(a). Irse file ) Certain expenditures for child care facilities if in effect before repeal by Public Law 101-58, Omnibus Budget Reconciliation Act of 1990, section 11801(a)(13) (except with regards to deductions made prior to November 5, 1990). Irse file Expenditures to remove architectural and transportation barriers to the handicapped and elderly. Irse file Deduction for qualified tertiary injectant expenses. Irse file Certain reforestation expenditures. Irse file Deduction for election to expense qualified advanced mine safety equipment property. Irse file Single purpose agricultural (livestock) or horticultural structures. Irse file Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. Irse file Any railroad grading or tunnel bore. Irse file Buildings and structural components. Irse file   Section 1245 property does not include buildings and structural components. Irse file The term building includes a house, barn, warehouse, or garage. Irse file The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. Irse file   Do not treat a structure that is essentially machinery or equipment as a building or structural component. Irse file Also, do not treat a structure that houses property used as an integral part of an activity as a building or structural component if the structure's use is so closely related to the property's use that the structure can be expected to be replaced when the property it initially houses is replaced. Irse file   The fact that the structure is specially designed to withstand the stress and other demands of the property and cannot be used economically for other purposes indicates it is closely related to the use of the property it houses. Irse file Structures such as oil and gas storage tanks, grain storage bins, silos, fractionating towers, blast furnaces, basic oxygen furnaces, coke ovens, brick kilns, and coal tipples are not treated as buildings, but as section 1245 property. Irse file Facility for bulk storage of fungible commodities. Irse file   This term includes oil or gas storage tanks and grain storage bins. Irse file Bulk storage means the storage of a commodity in a large mass before it is used. Irse file For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. Irse file To be fungible, a commodity must be such that one part may be used in place of another. Irse file   Stored materials that vary in composition, size, and weight are not fungible. Irse file Materials are not fungible if one part cannot be used in place of another part and the materials cannot be estimated and replaced by simple reference to weight, measure, and number. Irse file For example, the storage of different grades and forms of aluminum scrap is not storage of fungible commodities. Irse file Gain Treated as Ordinary Income The gain treated as ordinary income on the sale, exchange, or involuntary conversion of section 1245 property, including a sale and leaseback transaction, is the lesser of the following amounts. Irse file The depreciation and amortization allowed or allowable on the property. Irse file The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). Irse file A limit on this amount for gain on like-kind exchanges and involuntary conversions is explained later. Irse file For any other disposition of section 1245 property, ordinary income is the lesser of (1) earlier or the amount by which its fair market value is more than its adjusted basis. Irse file See Gifts and Transfers at Death, later. Irse file Use Part III of Form 4797 to figure the ordinary income part of the gain. Irse file Depreciation taken on other property or taken by other taxpayers. Irse file   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. Irse file Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. Irse file Amounts a previous owner of the section 1245 property claimed if your basis is determined with reference to that person's adjusted basis (for example, the donor's depreciation deductions on property you received as a gift). Irse file Depreciation and amortization. Irse file   Depreciation and amortization that must be recaptured as ordinary income include (but are not limited to) the following items. Irse file Ordinary depreciation deductions. Irse file Any special depreciation allowance you claimed. Irse file Amortization deductions for all the following costs. Irse file Acquiring a lease. Irse file Lessee improvements. Irse file Certified pollution control facilities. Irse file Certain reforestation expenses. Irse file Section 197 intangibles. Irse file Childcare facility expenses made before 1982, if in effect before the repeal of IRC 188. Irse file Franchises, trademarks, and trade names acquired before August 11, 1993. Irse file The section 179 deduction. Irse file Deductions for all the following costs. Irse file Removing barriers to the disabled and the elderly. Irse file Tertiary injectant expenses. Irse file Depreciable clean-fuel vehicles and refueling property (minus the amount of any recaptured deduction). Irse file Environmental cleanup costs. Irse file Certain reforestation expenses. Irse file Qualified disaster expenses. Irse file Any basis reduction for the investment credit (minus any basis increase for credit recapture). Irse file Any basis reduction for the qualified electric vehicle credit (minus any basis increase for credit recapture). Irse file Example. Irse file You file your returns on a calendar year basis. Irse file In February 2011, you bought and placed in service for 100% use in your business a light-duty truck (5-year property) that cost $10,000. Irse file You used the half-year convention and your MACRS deductions for the truck were $2,000 in 2011 and $3,200 in 2012. Irse file You did not take the section 179 deduction. Irse file You sold the truck in May 2013 for $7,000. Irse file The MACRS deduction in 2013, the year of sale, is $960 (½ of $1,920). Irse file Figure the gain treated as ordinary income as follows. Irse file 1) Amount realized $7,000 2) Cost (February 2011) $10,000   3) Depreciation allowed or allowable (MACRS deductions: $2,000 + $3,200 + $960) 6,160   4) Adjusted basis (subtract line 3 from line 2) $3,840 5) Gain realized (subtract line 4 from line 1) $3,160 6) Gain treated as ordinary income (lesser of line 3 or line 5) $3,160 Depreciation on other tangible property. Irse file   You must take into account depreciation during periods when the property was not used as an integral part of an activity or did not constitute a research or storage facility, as described earlier under Section 1245 property. Irse file   For example, if depreciation deductions taken on certain storage facilities amounted to $10,000, of which $6,000 is from the periods before their use in a prescribed business activity, you must use the entire $10,000 in determining ordinary income from depreciation. Irse file Depreciation allowed or allowable. Irse file   The greater of the depreciation allowed or allowable is generally the amount to use in figuring the part of gain to report as ordinary income. Irse file However, if in prior years, you have consistently taken proper deductions under one method, the amount allowed for your prior years will not be increased even though a greater amount would have been allowed under another proper method. Irse file If you did not take any deduction at all for depreciation, your adjustments to basis for depreciation allowable are figured by using the straight line method. Irse file   This treatment applies only when figuring what part of gain is treated as ordinary income under the rules for section 1245 depreciation recapture. Irse file Multiple asset accounts. Irse file   In figuring ordinary income from depreciation, you can treat any number of units of section 1245 property in a single depreciation account as one item if the total ordinary income from depreciation figured by using this method is not less than it would be if depreciation on each unit were figured separately. Irse file Example. Irse file In one transaction you sold 50 machines, 25 trucks, and certain other property that is not section 1245 property. Irse file All of the depreciation was recorded in a single depreciation account. Irse file After dividing the total received among the various assets sold, you figured that each unit of section 1245 property was sold at a gain. Irse file You can figure the ordinary income from depreciation as if the 50 machines and 25 trucks were one item. Irse file However, if five of the trucks had been sold at a loss, only the 50 machines and 20 of the trucks could be treated as one item in determining the ordinary income from depreciation. Irse file Normal retirement. Irse file   The normal retirement of section 1245 property in multiple asset accounts does not require recognition of gain as ordinary income from depreciation if your method of accounting for asset retirements does not require recognition of that gain. Irse file Section 1250 Property Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable on the property. Irse file To determine the additional depreciation on section 1250 property, see Additional Depreciation, below. Irse file Section 1250 property defined. Irse file   This includes all real property that is subject to an allowance for depreciation and that is not and never has been section 1245 property. Irse file It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. Irse file A fee simple interest in land is not included because it is not depreciable. Irse file   If your section 1250 property becomes section 1245 property because you change its use, you can never again treat it as section 1250 property. Irse file Additional Depreciation If you hold section 1250 property longer than 1 year, the additional depreciation is the actual depreciation adjustments that are more than the depreciation figured using the straight line method. Irse file For a list of items treated as depreciation adjustments, see Depreciation and amortization under Gain Treated as Ordinary Income, earlier. Irse file For the treatment of unrecaptured section 1250 gain, see Capital Gains Tax Rate, later. Irse file If you hold section 1250 property for 1 year or less, all the depreciation is additional depreciation. Irse file You will not have additional depreciation if any of the following conditions apply to the property disposed of. Irse file You figured depreciation for the property using the straight line method or any other method that does not result in depreciation that is more than the amount figured by the straight line method; you held the property longer than 1 year; and, if the property was qualified property, you made a timely election not to claim any special depreciation allowance. Irse file In addition, if the property was in a renewal community, you must not have elected to claim a commercial revitalization deduction for property placed in service before January 1, 2010. Irse file The property was residential low-income rental property you held for 162/3 years or longer. Irse file For low-income rental housing on which the special 60-month depreciation for rehabilitation expenses was allowed, the 162/3 years start when the rehabilitated property is placed in service. Irse file You chose the alternate ACRS method for the property, which was a type of 15-, 18-, or 19-year real property covered by the section 1250 rules. Irse file The property was residential rental property or nonresidential real property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made); you held it longer than 1 year; and, if the property was qualified property, you made a timely election not to claim any special depreciation allowance. Irse file These properties are depreciated using the straight line method. Irse file In addition, if the property was in a renewal community, you must not have elected to claim a commercial revitalization deduction. Irse file Depreciation taken by other taxpayers or on other property. Irse file   Additional depreciation includes all depreciation adjustments to the basis of section 1250 property whether allowed to you or another person (as carryover basis property). Irse file Example. Irse file Larry Johnson gives his son section 1250 property on which he took $2,000 in depreciation deductions, of which $500 is additional depreciation. Irse file Immediately after the gift, the son's adjusted basis in the property is the same as his father's and reflects the $500 additional depreciation. Irse file On January 1 of the next year, after taking depreciation deductions of $1,000 on the property, of which $200 is additional depreciation, the son sells the property. Irse file At the time of sale, the additional depreciation is $700 ($500 allowed the father plus $200 allowed the son). Irse file Depreciation allowed or allowable. Irse file   The greater of depreciation allowed or allowable (to any person who held the property if the depreciation was used in figuring its adjusted basis in your hands) generally is the amount to use in figuring the part of the gain to be reported as ordinary income. Irse file If you can show that the deduction allowed for any tax year was less than the amount allowable, the lesser figure will be the depreciation adjustment for figuring additional depreciation. Irse file Retired or demolished property. Irse file   The adjustments reflected in adjusted basis generally do not include deductions for depreciation on retired or demolished parts of section 1250 property unless these deductions are reflected in the basis of replacement property that is section 1250 property. Irse file Example. Irse file A wing of your building is totally destroyed by fire. Irse file The depreciation adjustments figured in the adjusted basis of the building after the wing is destroyed do not include any deductions for depreciation on the destroyed wing unless it is replaced and the adjustments for depreciation on it are reflected in the basis of the replacement property. Irse file Figuring straight line depreciation. Irse file   The useful life and salvage value you would have used to figure straight line depreciation are the same as those used under the depreciation method you actually used. Irse file If you did not use a useful life under the depreciation method actually used (such as with the units-of-production method) or if you did not take salvage value into account (such as with the declining balance method), the useful life or salvage value for figuring what would have been the straight line depreciation is the useful life and salvage value you would have used under the straight line method. Irse file   Salvage value and useful life are not used for the ACRS method of depreciation. Irse file Figure straight line depreciation for ACRS real property by using its 15-, 18-, or 19-year recovery period as the property's useful life. Irse file   The straight line method is applied without any basis reduction for the investment credit. Irse file Property held by lessee. Irse file   If a lessee makes a leasehold improvement, the lease period for figuring what would have been the straight line depreciation adjustments includes all renewal periods. Irse file This inclusion of the renewal periods cannot extend the lease period taken into account to a period that is longer than the remaining useful life of the improvement. Irse file The same rule applies to the cost of acquiring a lease. Irse file   The term renewal period means any period for which the lease may be renewed, extended, or continued under an option exercisable by the lessee. Irse file However, the inclusion of renewal periods cannot extend the lease by more than two-thirds of the period that was the basis on which the actual depreciation adjustments were allowed. Irse file Applicable Percentage The applicable percentage used to figure the ordinary income because of additional depreciation depends on whether the real property you disposed of is nonresidential real property, residential rental property, or low-income housing. Irse file The percentages for these types of real property are as follows. Irse file Nonresidential real property. Irse file   For real property that is not residential rental property, the applicable percentage for periods after 1969 is 100%. Irse file For periods before 1970, the percentage is zero and no ordinary income because of additional depreciation before 1970 will result from its disposition. Irse file Residential rental property. Irse file   For residential rental property (80% or more of the gross income is from dwelling units) other than low-income housing, the applicable percentage for periods after 1975 is 100%. Irse file The percentage for periods before 1976 is zero. Irse file Therefore, no ordinary income because of additional depreciation before 1976 will result from a disposition of residential rental property. Irse file Low-income housing. Irse file    Low-income housing includes all the following types of residential rental property. Irse file Federally assisted housing projects if the mortgage is insured under section 221(d)(3) or 236 of the National Housing Act or housing financed or assisted by direct loan or tax abatement under similar provisions of state or local laws. Irse file Low-income rental housing for which a depreciation deduction for rehabilitation expenses was allowed. Irse file Low-income rental housing held for occupancy by families or individuals eligible to receive subsidies under section 8 of the United States Housing Act of 1937, as amended, or under provisions of state or local laws that authorize similar subsidies for low-income families. Irse file Housing financed or assisted by direct loan or insured under Title V of the Housing Act of 1949. Irse file   The applicable percentage for low-income housing is 100% minus 1% for each full month the property was held over 100 full months. Irse file If you have held low-income housing at least 16 years and 8 months, the percentage is zero and no ordinary income will result from its disposition. Irse file Foreclosure. Irse file   If low-income housing is disposed of because of foreclosure or similar proceedings, the monthly applicable percentage reduction is figured as if you disposed of the property on the starting date of the proceedings. Irse file Example. Irse file On June 1, 2001, you acquired low-income housing property. Irse file On April 3, 2012 (130 months after the property was acquired), foreclosure proceedings were started on the property and on December 3, 2013 (150 months after the property was acquired), the property was disposed of as a result of the foreclosure proceedings. Irse file The property qualifies for a reduced applicable percentage because it was held more than 100 full months. Irse file The applicable percentage reduction is 30% (130 months minus 100 months) rather than 50% (150 months minus 100 months) because it does not apply after April 3, 2012, the starting date of the foreclosure proceedings. Irse file Therefore, 70% of the additional depreciation is treated as ordinary income. Irse file Holding period. Irse file   The holding period used to figure the applicable percentage for low-income housing generally starts on the day after you acquired it. Irse file For example, if you bought low-income housing on January 1, 1997, the holding period starts on January 2, 1997. Irse file If you sold it on January 2, 2013, the holding period is exactly 192 full months. Irse file The applicable percentage for additional depreciation is 8%, or 100% minus 1% for each full month the property was held over 100 full months. Irse file Holding period for constructed, reconstructed, or erected property. Irse file   The holding period used to figure the applicable percentage for low-income housing you constructed, reconstructed, or erected starts on the first day of the month it is placed in service in a trade or business, in an activity for the production of income, or in a personal activity. Irse file Property acquired by gift or received in a tax-free transfer. Irse file   For low-income housing you acquired by gift or in a tax-free transfer the basis of which is figured by reference to the basis in the hands of the transferor, the holding period for the applicable percentage includes the holding period of the transferor. Irse file   If the adjusted basis of the property in your hands just after acquiring it is more than its adjusted basis to the transferor just before transferring it, the holding period of the difference is figured as if it were a separate improvement. Irse file See Low-Income Housing With Two or More Elements, next. Irse file Low-Income Housing With Two or More Elements If you dispose of low-income housing property that has two or more separate elements, the applicable percentage used to figure ordinary income because of additional depreciation may be different for each element. Irse file The gain to be reported as ordinary income is the sum of the ordinary income figured for each element. Irse file The following are the types of separate elements. Irse file A separate improvement (defined below). Irse file The basic section 1250 property plus improvements not qualifying as separate improvements. Irse file The units placed in service at different times before all the section 1250 property is finished. Irse file For example, this happens when a taxpayer builds an apartment building of 100 units and places 30 units in service (available for renting) on January 4, 2011, 50 on July 18, 2011, and the remaining 20 on January 18, 2012. Irse file As a result, the apartment house consists of three separate elements. Irse file The 36-month test for separate improvements. Irse file   A separate improvement is any improvement (qualifying under The 1-year test, below) added to the capital account of the property, but only if the total of the improvements during the 36-month period ending on the last day of any tax year is more than the greatest of the following amounts. Irse file Twenty-five percent of the adjusted basis of the property at the start of the first day of the 36-month period, or the first day of the holding period of the property, whichever is later. Irse file Ten percent of the unadjusted basis (adjusted basis plus depreciation and amortization adjustments) of the property at the start of the period determined in (1). Irse file $5,000. Irse file The 1-year test. Irse file   An addition to the capital account for any tax year (including a short tax year) is treated as an improvement only if the sum of all additions for the year is more than the greater of $2,000 or 1% of the unadjusted basis of the property. Irse file The unadjusted basis is figured as of the start of that tax year or the holding period of the property, whichever is later. Irse file In applying the 36-month test, improvements in any one of the 3 years are omitted entirely if the total improvements in that year do not qualify under the 1-year test. Irse file Example. Irse file The unadjusted basis of a calendar year taxpayer's property was $300,000 on January 1 of this year. Irse file During the year, the taxpayer made improvements A, B, and C, which cost $1,000, $600, and $700, respectively. Irse file The sum of the improvements, $2,300, is less than 1% of the unadjusted basis ($3,000), so the improvements do not satisfy the 1-year test and are not treated as improvements for the 36-month test. Irse file However, if improvement C had cost $1,500, the sum of these improvements would have been $3,100. Irse file Then, it would be necessary to apply the 36-month test to figure if the improvements must be treated as separate improvements. Irse file Addition to the capital account. Irse file   Any addition to the capital account made after the initial acquisition or completion of the property by you or any person who held the property during a period included in your holding period is to be considered when figuring the total amount of separate improvements. Irse file   The addition to the capital account of depreciable real property is the gross addition not reduced by amounts attributable to replaced property. Irse file For example, if a roof with an adjusted basis of $20,000 is replaced by a new roof costing $50,000, the improvement is the gross addition to the account, $50,000, and not the net addition of $30,000. Irse file The $20,000 adjusted basis of the old roof is no longer reflected in the basis of the property. Irse file The status of an addition to the capital account is not affected by whether it is treated as a separate property for determining depreciation deductions. Irse file   Whether an expense is treated as an addition to the capital account may depend on the final disposition of the entire property. Irse file If the expense item property and the basic property are sold in two separate transactions, the entire section 1250 property is treated as consisting of two distinct properties. Irse file Unadjusted basis. Irse file   In figuring the unadjusted basis as of a certain date, include the actual cost of all previous additions to the capital account plus those that did not qualify as separate improvements. Irse file However, the cost of components retired before that date is not included in the unadjusted basis. Irse file Holding period. Irse file   Use the following guidelines for figuring the applicable percentage for property with two or more elements. Irse file The holding period of a separate element placed in service before the entire section 1250 property is finished starts on the first day of the month that the separate element is placed in service. Irse file The holding period for each separate improvement qualifying as a separate element starts on the day after the improvement is acquired or, for improvements constructed, reconstructed, or erected, the first day of the month that the improvement is placed in service. Irse file The holding period for each improvement not qualifying as a separate element takes the holding period of the basic property. Irse file   If an improvement by itself does not meet the 1-year test (greater of $2,000 or 1% of the unadjusted basis), but it does qualify as a separate improvement that is a separate element (when grouped with other improvements made during the tax year), determine the start of its holding period as follows. Irse file Use the first day of a calendar month that is closest to the middle of the tax year. Irse file If there are two first days of a month that are equally close to the middle of the year, use the earlier date. Irse file Figuring ordinary income attributable to each separate element. Irse file   Figure ordinary income attributable to each separate element as follows. Irse file   Step 1. Irse file Divide the element's additional depreciation after 1975 by the sum of all the elements' additional depreciation after 1975 to determine the percentage used in Step 2. Irse file   Step 2. Irse file Multiply the percentage figured in Step 1 by the lesser of the additional depreciation after 1975 for the entire property or the gain from disposition of the entire property (the difference between the fair market value or amount realized and the adjusted basis). Irse file   Step 3. Irse file Multiply the result in Step 2 by the applicable percentage for the element. Irse file Example. Irse file You sold at a gain of $25,000 low-income housing property subject to the ordinary income rules of section 1250. Irse file The property consisted of four elements (W, X, Y, and Z). Irse file Step 1. Irse file The additional depreciation for each element is: W-$12,000; X-None; Y-$6,000; and Z-$6,000. Irse file The sum of the additional depreciation for all the elements is $24,000. Irse file Step 2. Irse file The depreciation deducted on element X was $4,000 less than it would have been under the straight line method. Irse file Additional depreciation on the property as a whole is $20,000 ($24,000 − $4,000). Irse file $20,000 is lower than the $25,000 gain on the sale, so $20,000 is used in Step 2. Irse file Step 3. Irse file The applicable percentages to be used in Step 3 for the elements are: W-68%; X-85%; Y-92%; and Z-100%. Irse file From these facts, the sum of the ordinary income for each element is figured as follows. Irse file   Step 1 Step 2 Step 3 Ordinary Income W . Irse file 50 $10,000 68% $ 6,800 X -0- -0- 85% -0- Y . Irse file 25 5,000 92% 4,600 Z . Irse file 25 5,000 100% 5,000 Sum of ordinary income of separate elements $16,400 Gain Treated as Ordinary Income To find what part of the gain from the disposition of section 1250 property is treated as ordinary income, follow these steps. Irse file In a sale, exchange, or involuntary conversion of the property, figure the amount realized that is more than the adjusted basis of the property. Irse file In any other disposition of the property, figure the fair market value that is more than the adjusted basis. Irse file Figure the additional depreciation for the periods after 1975. Irse file Multiply the lesser of (1) or (2) by the applicable percentage, discussed earlier under Applicable Percentage. Irse file Stop here if this is residential rental property or if (2) is equal to or more than (1). Irse file This is the gain treated as ordinary income because of additional depreciation. Irse file Subtract (2) from (1). Irse file Figure the additional depreciation for periods after 1969 but before 1976. Irse file Add the lesser of (4) or (5) to the result in (3). Irse file This is the gain treated as ordinary income because of additional depreciation. Irse file A limit on the amount treated as ordinary income for gain on like-kind exchanges and involuntary conversions is explained later. Irse file Use Form 4797, Part III, to figure the ordinary income part of the gain. Irse file Corporations. Irse file   Corporations, other than S corporations, must recognize an additional amount as ordinary income on the sale or other disposition of section 1250 property. Irse file The additional amount treated as ordinary income is 20% of the excess of the amount that would have been ordinary income if the property were section 1245 property over the amount treated as ordinary income under section 1250. Irse file Report this additional ordinary income on Form 4797, Part III, line 26 (f). Irse file Installment Sales If you report the sale of property under the installment method, any depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale. Irse file This applies even if no payments are received in that year. Irse file If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. Irse file For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. Irse file If you dispose of more than one asset in a single transaction, you must figure the gain on each asset separately so that it may be properly reported. Irse file To do this, allocate the selling price and the payments you receive in the year of sale to each asset. Irse file Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. Irse file For a detailed discussion of installment sales, see Publication 537. Irse file Gifts If you make a gift of depreciable personal property or real property, you do not have to report income on the transaction. Irse file However, if the person who receives it (donee) sells or otherwise disposes of the property in a disposition subject to recapture, the donee must take into account the depreciation you deducted in figuring the gain to be reported as ordinary income. Irse file For low-income housing, the donee must take into account the donor's holding period to figure the applicable percentage. Irse file See Applicable Percentage and its discussion Holding period under Section 1250 Property, earlier. Irse file Part gift and part sale or exchange. Irse file   If you transfer depreciable personal property or real property for less than its fair market value in a transaction considered to be partly a gift and partly a sale or exchange and you have a gain because the amount realized is more than your adjusted basis, you must report ordinary income (up to the amount of gain) to recapture depreciation. Irse file If the depreciation (additional depreciation, if section 1250 property) is more than the gain, the balance is carried over to the transferee to be taken into account on any later disposition of the property. Irse file However, see Bargain sale to charity, later. Irse file Example. Irse file You transferred depreciable personal property to your son for $20,000. Irse file When transferred, the property had an adjusted basis to you of $10,000 and a fair market value of $40,000. Irse file You took depreciation of $30,000. Irse file You are considered to have made a gift of $20,000, the difference between the $40,000 fair market value and the $20,000 sale price to your son. Irse file You have a taxable gain on the transfer of $10,000 ($20,000 sale price minus $10,000 adjusted basis) that must be reported as ordinary income from depreciation. Irse file You report $10,000 of your $30,000 depreciation as ordinary income on the transfer of the property, so the remaining $20,000 depreciation is carried over to your son for him to take into account on any later disposition of the property. Irse file Gift to charitable organization. Irse file   If you give property to a charitable organization, you figure your deduction for your charitable contribution by reducing the fair market value of the property by the ordinary income and short-term capital gain that would have resulted had you sold the property at its fair market value at the time of the contribution. Irse file Thus, your deduction for depreciable real or personal property given to a charitable organization does not include the potential ordinary gain from depreciation. Irse file   You also may have to reduce the fair market value of the contributed property by the long-term capital gain (including any section 1231 gain) that would have resulted had the property been sold. Irse file For more information, see Giving Property That Has Increased in Value in Publication 526. Irse file Bargain sale to charity. Irse file   If you transfer section 1245 or section 1250 property to a charitable organization for less than its fair market value and a deduction for the contribution part of the transfer is allowable, your ordinary income from depreciation is figured under different rules. Irse file First, figure the ordinary income as if you had sold the property at its fair market value. Irse file Then, allocate that amount between the sale and the contribution parts of the transfer in the same proportion that you allocated your adjusted basis in the property to figure your gain. Irse file See Bargain Sale under Gain or Loss From Sales and Exchanges in chapter 1. Irse file Report as ordinary income the lesser of the ordinary income allocated to the sale or your gain from the sale. Irse file Example. Irse file You sold section 1245 property in a bargain sale to a charitable organization and are allowed a deduction for your contribution. Irse file Your gain on the sale was $1,200, figured by allocating 20% of your adjusted basis in the property to the part sold. Irse file If you had sold the property at its fair market value, your ordinary income would have been $5,000. Irse file Your ordinary income is $1,000 ($5,000 × 20%) and your section 1231 gain is $200 ($1,200 – $1,000). Irse file Transfers at Death When a taxpayer dies, no gain is reported on depreciable personal property or real property transferred to his or her estate or beneficiary. Irse file For information on the tax liability of a decedent, see Publication 559, Survivors, Executors, and Administrators. Irse file However, if the decedent disposed of the property while alive and, because of his or her method of accounting or for any other reason, the gain from the disposition is reportable by the estate or beneficiary, it must be reported in the same way the decedent would have had to report it if he or she were still alive. Irse file Ordinary income due to depreciation must be reported on a transfer from an executor, administrator, or trustee to an heir, beneficiary, or other individual if the transfer is a sale or exchange on which gain is realized. Irse file Example 1. Irse file Janet Smith owned depreciable property that, upon her death, was inherited by her son. Irse file No ordinary income from depreciation is reportable on the transfer, even though the value used for estate tax purposes is more than the adjusted basis of the property to Janet when she died. Irse file However, if she sold the property before her death and realized a gain and if, because of her method of accounting, the proceeds from the sale are income in respect of a decedent reportable by her son, he must report ordinary income from depreciation. Irse file Example 2. Irse file The trustee of a trust created by a will transfers depreciable property to a beneficiary in satisfaction of a specific bequest of $10,000. Irse file If the property had a value of $9,000 at the date used for estate tax valuation purposes, the $1,000 increase in value to the date of distribution is a gain realized by the trust. Irse file Ordinary income from depreciation must be reported by the trust on the transfer. Irse file Like-Kind Exchanges and Involuntary Conversions A like-kind exchange of your depreciable property or an involuntary conversion of the property into similar or related property will not result in your having to report ordinary income from depreciation unless money or property other than like-kind, similar, or related property is also received in the transaction. Irse file For information on like-kind exchanges and involuntary conversions, see chapter 1. Irse file Depreciable personal property. Irse file   If you have a gain from either a like-kind exchange or an involuntary conversion of your depreciable personal property, the amount to be reported as ordinary income from depreciation is the amount figured under the rules explained earlier (see Section 1245 Property), limited to the sum of the following amounts. Irse file The gain that must be included in income under the rules for like-kind exchanges or involuntary conversions. Irse file The fair market value of the like-kind, similar, or related property other than depreciable personal property acquired in the transaction. Irse file Example 1. Irse file You bought a new machine for $4,300 cash plus your old machine for which you were allowed a $1,360 trade-in. Irse file The old machine cost you $5,000 two years ago. Irse file You took depreciation deductions of $3,950. Irse file Even though you deducted depreciation of $3,950, the $310 gain ($1,360 trade-in allowance minus $1,050 adjusted basis) is not reported because it is postponed under the rules for like-kind exchanges and you received only depreciable personal property in the exchange. Irse file Example 2. Irse file You bought office machinery for $1,500 two years ago and deducted $780 depreciation. Irse file This year a fire destroyed the machinery and you received $1,200 from your fire insurance, realizing a gain of $480 ($1,200 − $720 adjusted basis). Irse file You choose to postpone reporting gain, but replacement machinery cost you only $1,000. Irse file Your taxable gain under the rules for involuntary conversions is limited to the remaining $200 insurance payment. Irse file All your replacement property is depreciable personal property, so your ordinary income from depreciation is limited to $200. Irse file Example 3. Irse file A fire destroyed office machinery you bought for $116,000. Irse file The depreciation deductions were $91,640 and the machinery had an adjusted basis of $24,360. Irse file You received a $117,000 insurance payment, realizing a gain of $92,640. Irse file You immediately spent $105,000 of the insurance payment for replacement machinery and $9,000 for stock that qualifies as replacement property and you choose to postpone reporting the gain. Irse file $114,000 of the $117,000 insurance payment was used to buy replacement property, so the gain that must be included in income under the rules for involuntary conversions is the part not spent, or $3,000. Irse file The part of the insurance payment ($9,000) used to buy the nondepreciable property (the stock) also must be included in figuring the gain from depreciation. Irse file The amount you must report as ordinary income on the transaction is $12,000, figured as follows. Irse file 1) Gain realized on the transaction ($92,640) limited to depreciation ($91,640) $91,640 2) Gain includible in income (amount not spent) 3,000     Plus: fair market value of property other than depreciable personal property (the stock) 9,000 12,000 Amount reportable as ordinary income (lesser of (1) or (2)) $12,000   If, instead of buying $9,000 in stock, you bought $9,000 worth of depreciable personal property similar or related in use to the destroyed property, you would only report $3,000 as ordinary income. Irse file Depreciable real property. Irse file   If you have a gain from either a like-kind exchange or involuntary conversion of your depreciable real property, ordinary income from additional depreciation is figured under the rules explained earlier (see Section 1250 Property), limited to the greater of the following amounts. Irse file The gain that must be reported under the rules for like-kind exchanges or involuntary conversions plus the fair market value of stock bought as replacement property in acquiring control of a corporation. Irse file The gain you would have had to report as ordinary income from additional depreciation had the transaction been a cash sale minus the cost (or fair market value in an exchange) of the depreciable real property acquired. Irse file   The ordinary income not reported for the year of the disposition is carried over to the depreciable real property acquired in the like-kind exchange or involuntary conversion as additional depreciation from the property disposed of. Irse file Further, to figure the applicable percentage of additional depreciation to be treated as ordinary income, the holding period starts over for the new property. Irse file Example. Irse file The state paid you $116,000 when it condemned your depreciable real property for public use. Irse file You bought other real property similar in use to the property condemned for $110,000 ($15,000 for depreciable real property and $95,000 for land). Irse file You also bought stock for $5,000 to get control of a corporation owning property similar in use to the property condemned. Irse file You choose to postpone reporting the gain. Irse file If the transaction had been a sale for cash only, under the rules described earlier, $20,000 would have been reportable as ordinary income because of additional depreciation. Irse file The ordinary income to be reported is $6,000, which is the greater of the following amounts. Irse file The gain that must be reported under the rules for involuntary conversions, $1,000 ($116,000 − $115,000) plus the fair market value of stock bought as qualified replacement property, $5,000, for a total of $6,000. Irse file The gain you would have had to report as ordinary income from additional depreciation ($20,000) had this transaction been a cash sale minus the cost of the depreciable real property bought ($15,000), or $5,000. Irse file   The ordinary income not reported, $14,000 ($20,000 − $6,000), is carried over to the depreciable real property you bought as additional depreciation. Irse file Basis of property acquired. Irse file   If the ordinary income you have to report because of additional depreciation is limited, the total basis of the property you acquired is its fair market value (its cost, if bought to replace property involuntarily converted into money) minus the gain postponed. Irse file   If you acquired more than one item of property, allocate the total basis among the properties in proportion to their fair market value (their cost, in an involuntary conversion into money). Irse file However, if you acquired both depreciable real property and other property, allocate the total basis as follows. Irse file Subtract the ordinary income because of additional depreciation that you do not have to report from the fair market value (or cost) of the depreciable real property acquired. Irse file Add the fair market value (or cost) of the other property acquired to the result in (1). Irse file Divide the result in (1) by the result in (2). Irse file Multiply the total basis by the result in (3). Irse file This is the basis of the depreciable real property acquired. Irse file If you acquired more than one item of depreciable real property, allocate this basis amount among the properties in proportion to their fair market value (or cost). Irse file Subtract the result in (4) from the total basis. Irse file This is the basis of the other property acquired. Irse file If you acquired more than one item of other property, allocate this basis amount among the properties in proportion to their fair market value (or cost). Irse file Example 1. Irse file In 1988, low-income housing property that you acquired and placed in service in 1983 was destroyed by fire and you received a $90,000 insurance payment. Irse file The property's adjusted basis was $38,400, with additional depreciation of $14,932. Irse file On December 1, 1988, you used the insurance payment to acquire and place in service replacement low-income housing property. Irse file Your realized gain from the involuntary conversion was $51,600 ($90,000 − $38,400). Irse file You chose to postpone reporting the gain under the involuntary conversion rules. Irse file Under the rules for depreciation recapture on real property, the ordinary gain was $14,932, but you did not have to report any of it because of the limit for involuntary conversions. Irse file The basis of the replacement low-income housing property was its $90,000 cost minus the $51,600 gain you postponed, or $38,400. Irse file The $14,932 ordinary gain you did not report is treated as additional depreciation on the replacement property. Irse file If you sold the property in 2013, your holding period for figuring the applicable percentage of additional depreciation to report as ordinary income will have begun December 2, 1988, the day after you acquired the property. Irse file Example 2. Irse file John Adams received a $90,000 fire insurance payment for depreciable real property (office building) with an adjusted basis of $30,000. Irse file He uses the whole payment to buy property similar in use, spending $42,000 for depreciable real property and $48,000 for land. Irse file He chooses to postpone reporting the $60,000 gain realized on the involuntary conversion. Irse file Of this gain, $10,000 is ordinary income from additional depreciation but is not reported because of the limit for involuntary conversions of depreciable real property. Irse file The basis of the property bought is $30,000 ($90,000 − $60,000), allocated as follows. Irse file The $42,000 cost of depreciable real property minus $10,000 ordinary income not reported is $32,000. Irse file The $48,000 cost of other property (land) plus the $32,000 figured in (1) is $80,000. Irse file The $32,000 figured in (1) divided by the $80,000 figured in (2) is 0. Irse file 4. Irse file The basis of the depreciable real property is $12,000. Irse file This is the $30,000 total basis multiplied by the 0. Irse file 4 figured in (3). Irse file The basis of the other property (land) is $18,000. Irse file This is the $30,000 total basis minus the $12,000 figured in (4). Irse file The ordinary income that is not reported ($10,000) is carried over as additional depreciation to the depreciable real property that was bought and may be taxed as ordinary income on a later disposition. Irse file Multiple Properties If you dispose of depreciable property and other property in one transaction and realize a gain, you must allocate the amount realized between the two types of property in proportion to their respective fair market values to figure the part of your gain to be reported as ordinary income from depreciation. Irse file Different rules may apply to the allocation of the amount realized on the sale of a business that includes a group of assets. Irse file See chapter 2. Irse file In general, if a buyer and seller have adverse interests as to the allocation of the amount realized between the depreciable property and other property, any arm's length agreement between them will establish the allocation. Irse file In the absence of an agreement, the allocation should be made by taking into account the appropriate facts and circumstances. Irse file These include, but are not limited to, a comparison between the depreciable property and all the other property being disposed of in the transaction. Irse file The comparison should take into account all the following facts and circumstances. Irse file The original cost and reproduction cost of construction, erection, or production. Irse file The remaining economic useful life. Irse file The state of obsolescence. Irse file The anticipated expenditures required to maintain, renovate, or modernize the properties. Irse file Like-kind exchanges and involuntary conversions. Irse file   If you dispose of and acquire depreciable personal property and other property (other than depreciable real property) in a like-kind exchange or involuntary conversion, the amount realized is allocated in the following way. Irse file The amount allocated to the depreciable personal property disposed of is treated as consisting of, first, the fair market value of the depreciable personal property acquired and, second (to the extent of any remaining balance), the fair market value of the other property acquired. Irse file The amount allocated to the other property disposed of is treated as consisting of the fair market value of all property acquired that has not already been taken into account. Irse file   If you dispose of and acquire depreciable real property and other property in a like-kind exchange or involuntary conversion, the amount realized is allocated in the following way. Irse file The amount allocated to each of the three types of property (depreciable real property, depreciable personal property, or other property) disposed of is treated as consisting of, first, the fair market value of that type of property acquired and, second (to the extent of any remaining balance), any excess fair market value of the other types of property acquired. Irse file If the excess fair market value is more than the remaining balance of the amount realized and is from both of the other two types of property, you can apply the unallocated amount in any manner you choose. Irse file Example. Irse file A fire destroyed your property with a total fair market value of $50,000. Irse file It consisted of machinery worth $30,000 and nondepreciable property worth $20,000. Irse file You received an insurance payment of $40,000 and immediately used it with $10,000 of your own funds (for a total of $50,000) to buy machinery with a fair market value of $15,000 and nondepreciable property with a fair market value of $35,000. Irse file The adjusted basis of the destroyed machinery was $5,000 and your depreciation on it was $35,000. Irse file You choose to postpone reporting your gain from the involuntary conversion. Irse file You must report $9,000 as ordinary income from depreciation arising from this transaction, figured as follows. Irse file The $40,000 insurance payment must be allocated between the machinery and the other property destroyed in proportion to the fair market value of each. Irse file The amount allocated to the machinery is 30,000/50,000 × $40,000, or $24,000. Irse file The amount allocated to the other property is 20,000/50,000 × $40,000, or $16,000. Irse file Your gain on the involuntary conversion of the machinery is $24,000 minus $5,000 adjusted basis, or $19,000. Irse file The $24,000 allocated to the machinery disposed of is treated as consisting of the $15,000 fair market value of the replacement machinery bought and $9,000 of the fair market value of other property bought in the transaction. Irse file All $16,000 allocated to the other property disposed of is treated as consisting of the fair market value of the other property that was bought. Irse file Your potential ordinary income from depreciation is $19,000, the gain on the machinery, because it is less than the $35,000 depreciation. Irse file However, the amount you must report as ordinary income is limited to the $9,000 included in the amount realized for the machinery that represents the fair market value of property other than the depreciable property you bought. Irse file Prev  Up  Next   Home   More Online Publications
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The Irse File

Irse file Publication 516 - Main Content Table of Contents U. Irse file S. Irse file Tax ReturnFiling Information Foreign Bank Accounts U. Irse file S. Irse file Government Payments Foreign Earned Income Exclusion Tax Treaty Benefits Allowances, Differentials, and Special Pay Other Income Deductions and Credits — Business Expenses Deductions and Credits — Nonbusiness Expenses Foreign Taxes Local (Foreign) Tax ReturnTax Treaty Benefits Other Agreements Double Withholding How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Irse file U. Irse file S. Irse file Tax Return Filing Information If you are a U. Irse file S. Irse file citizen or green card holder living or traveling outside the United States, you are generally required to file income tax returns in the same way as those residing in the United States. Irse file However, the special rules explained in the following discussions may apply to you. Irse file See also Tax Treaty Benefits, later. Irse file When To File and Pay Most individual tax returns cover a calendar year, January through December. Irse file The regular due date for these tax returns is April 15 of the following year. Irse file If April 15 falls on a Saturday, Sunday, or legal holiday, your tax return is considered timely filed if it is filed by the next business day that is not a Saturday, Sunday, or legal holiday. Irse file If you get an extension, you are allowed additional time to file and, in some circumstances, pay your tax. Irse file You must pay interest on any tax not paid by the regular due date. Irse file Your return is considered filed on time if it is mailed from and officially postmarked in a foreign country on or before the due date (including extensions), or given to a designated international private delivery service before midnight of the last date prescribed for filing. Irse file See your tax form instructions for a list of private delivery services that have been designated by the IRS to meet this “timely mailing as timely filing/paying” rule for tax returns and payments. Irse file If your return is filed late, the postmark or delivery service date does not determine the date of filing. Irse file In that case, your return is considered filed when it is received by the IRS. Irse file Extensions You may be able to get an extension of time to file your return and pay your tax. Irse file Automatic 2-month extension. Irse file   You can get an automatic 2-month extension (to June 15, for a calendar year return) to file your return and pay your tax if you are a U. Irse file S. Irse file citizen or resident and, on the regular due date of your return, you are living outside the United States and Puerto Rico and your main place of business or post of duty is outside the United States and Puerto Rico. Irse file To get this extension, you must attach a statement to your return explaining how you qualified. Irse file You will owe interest on any tax not paid by the regular due date of your return. Irse file Married taxpayers. Irse file   If you file a joint return, either you or your spouse can qualify for the automatic extension. Irse file If you and your spouse file separate returns, the extension applies only to the spouse who qualifies. Irse file Additional extension. Irse file   You can apply for an additional extension of time to file your return by filing Form 4868. Irse file You must file Form 4868 by the due date for your income tax return. Irse file   Generally, you must file it by April 15. Irse file However, if you qualify for the automatic 2-month extension, you generally must file Form 4868 by June 15. Irse file Check the box on line 8 of Form 4868. Irse file Payment of tax. Irse file   You should estimate and pay any additional tax you owe when you file Form 4868 to avoid being charged a late-payment penalty. Irse file The late-payment penalty applies if, through withholding, etc. Irse file , you paid less than 90% of your actual tax liability by the original due date of your income tax return. Irse file Even if the late-payment penalty does not apply, you will be charged interest on any unpaid tax liability from the original due date of the return until the tax is paid. Irse file Electronic filing. Irse file   You can file for the additional extension by phone, using your home computer, or through a tax professional. Irse file See Form 4868 for more information. Irse file Limit on additional extensions. Irse file   You generally cannot get a total extension of more than 6 months. Irse file However, if you are outside the United States and meet certain tests, you may be able to get a longer extension. Irse file   For more information, see Publication 54. Irse file Foreign Bank Accounts You must file Form TD F 90-22. Irse file 1 if at any time during the year you had an interest in, or signature or other authority over, a bank account, securities account, or other financial account in a foreign country. Irse file This applies if the combined assets in the account(s) were more than $10,000. Irse file Do not include accounts in a U. Irse file S. Irse file military banking facility operated by a U. Irse file S. Irse file financial institution. Irse file File the completed form by June 30 of the following year with the Department of the Treasury at the address shown on that form. Irse file Do not attach it to Form 1040. Irse file If you are required to file Form TD F 90-22. Irse file 1 but do not do so, you may have to pay a penalty of up to $10,000 (more if the failure to file is willful). Irse file You also may be required to file Form 8938 with your U. Irse file S. Irse file income tax return to report your interest in foreign bank accounts and other specified foreign financial assets. Irse file For taxpayers living abroad, you generally do not have to file Form 8938 unless the total value of your specified foreign financial assets is more than $200,000 ($400,000 if married filing jointly) on the last day of the tax year or more than $300,000 ($600,000 if married filing jointly) at any time during the tax year. Irse file For more information, see Form 8938 and its instructions. Irse file U. Irse file S. Irse file Government Payments Wages earned for performing services outside the United States is foreign income, regardless of your employer. Irse file If you are a U. Irse file S. Irse file citizen or resident alien, you must report all income from worldwide sources on your tax return unless it is exempt by U. Irse file S. Irse file law. Irse file This applies to earned income (such as wages) as well as unearned income (such as interest, dividends, and capital gains). Irse file If you are a nonresident alien, your income from sources outside the United States is not subject to U. Irse file S. Irse file tax. Irse file Foreign Earned Income Exclusion Employees of the U. Irse file S. Irse file Government are not entitled to the foreign earned income exclusion or the foreign housing exclusion/deduction under section 911 because “foreign earned income ”does not include amounts paid by the U. Irse file S. Irse file Government as an employee. Irse file But see Other Employment, later. Irse file Special Situations In the following two situations, your pay is from the U. Irse file S. Irse file Government and does not qualify for the foreign earned income exclusion. Irse file U. Irse file S. Irse file agency reimbursed by foreign country. Irse file   If you are a U. Irse file S. Irse file Government employee paid by a U. Irse file S. Irse file agency to perform services in a foreign country, your pay is from the U. Irse file S. Irse file Government and does not qualify the foreign earned income exclusion or the foreign housing exclusion/deduction. Irse file This is true even if the U. Irse file S. Irse file agency is reimbursed by the foreign government. Irse file Employees of post exchanges, etc. Irse file   If you are an employee of an Armed Forces post exchange, officers' and enlisted personnel club, Embassy commissary, or similar instrumentality of the U. Irse file S. Irse file Government, the earnings you receive are paid by the U. Irse file S. Irse file Government. Irse file This is true whether they are paid from appropriated or nonappropriated funds. Irse file These earnings are not eligible for the foreign earned income exclusion or the foreign housing exclusion/deduction. Irse file Tax Treaty Benefits Most income tax treaties contain an article relating to remuneration from government services. Irse file Even if you are working in a foreign country with which the United States has an income tax treaty in force and the treaty article that applies to government services says that your government pay is taxable only in the foreign country, the treaty will likely contain a “saving clause”, which provides that the United States may tax its citizens and its residents as if the treaty had not come into effect. Irse file In some treaties, the government service article is an exception to the saving clause, but often only for individuals who are not U. Irse file S. Irse file citizens or green card holders. Irse file Consequently, if you are a U. Irse file S. Irse file citizen or green card holder, you will generally not be entitled to reduce your U. Irse file S. Irse file tax on your government pay. Irse file If you are neither a U. Irse file S. Irse file citizen nor green card holder, and you are treated as a resident of the treaty country under the treaty residence article (after application of the so-called “tie-breaker” rule), then you may be entitled to benefits under the government service article. Irse file Review the treaty text carefully. Irse file U. Irse file S. Irse file citizens must always file Form 1040. Irse file Non-U. Irse file S. Irse file citizens who are treated as a resident of a treaty country under the treaty residence article (after application of the so-called “tie-breaker” rule) may file Form 1040NR and attach Form 8833. Irse file If you pay or accrue taxes to the foreign country on your pay, you may be able to relieve double taxation with a foreign tax credit. Irse file Most income tax treaties contain an article providing relief from double taxation. Irse file Many treaties contain special foreign tax credit rules for U. Irse file S. Irse file citizens who are residents of a treaty country. Irse file For more information on the mechanics of the foreign tax credit, see Foreign Taxes, later. Irse file Allowances, Differentials, and Special Pay Most payments received by U. Irse file S. Irse file Government civilian employees for working abroad, including pay differentials, are taxable. Irse file However, certain foreign areas allowances, cost of living allowances, and travel allowances are tax free. Irse file The following discussions explain the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. Irse file Pay differentials. Irse file   Pay differentials you receive as financial incentives for employment abroad are taxable. Irse file Your employer should have included these differentials as wages on your Form W-2, Wage and Tax Statement. Irse file   Generally, pay differentials are given for employment under adverse conditions (such as severe climate) or because the post of duty is located in a hazardous or isolated area that may be outside the United States. Irse file The area does not have to be a qualified hazardous duty area as discussed in Publication 3. Irse file Pay differentials include: Post differentials, Special incentive differentials, and Danger pay. Irse file Foreign areas allowances. Irse file   Certain foreign areas allowances are tax free. Irse file Your employer should not have included these allowances as wages on your Form W-2. Irse file   Tax-free foreign areas allowances are allowances (other than post differentials) received under the following laws. Irse file Title I, chapter 9, of the Foreign Service Act of 1980. Irse file Section 4 of the Central Intelligence Agency Act of 1949, as amended. Irse file Title II of the Overseas Differentials and Allowances Act. Irse file Subsection (e) or (f) of the first section of the Administrative Expenses Act of 1946, as amended, or section 22 of that Act. Irse file These allowances cover such expenses as: Certain repairs to a leased home, Education of dependents in special situations, Motor vehicle shipment, Separate maintenance for dependents, Temporary quarters, Transportation for medical treatment, and Travel, moving, and storage. Irse file Allowances received by foreign service employees for representation expenses are also tax free under the above provisions. Irse file Cost-of-living allowances. Irse file   If you are stationed outside the continental United States or in Alaska, your gross income does not include cost-of-living allowances (other than amounts received under Title II of the Overseas Differentials and Allowances Act) granted by regulations approved by the President of the United States. Irse file The cost-of-living portion of any other allowance (for example, a living and quarters allowance) is not included even if the underlying allowance is included in gross income. Irse file Cost-of-living allowances are not included on your Form W-2. Irse file Federal court employees. Irse file   If you are a federal court employee, the preceding paragraph also applies to you. Irse file The cost-of-living allowance must be granted by rules similar to regulations approved by the President. Irse file American Institute in Taiwan. Irse file   If you are an employee of the American Institute in Taiwan, allowances you receive are exempt from U. Irse file S. Irse file tax if they are equivalent to tax-exempt allowances received by civilian employees of the U. Irse file S. Irse file Government. Irse file Federal reemployment payments after serving with an international organization. Irse file   If you are a federal employee who is reemployed by a federal agency after serving with an international organization, you must include in income any reemployment payments you receive. Irse file These payments are equal to the difference between the pay, allowances, post differential, and other monetary benefits paid by the international organization and the pay and other benefits that would have been paid by the federal agency had you been detailed to the international agency. Irse file Allowances or reimbursements for travel and transportation expenses. Irse file   See How To Report Business Expenses, later, for a discussion on whether a reimbursement or allowance for travel or transportation is included in your income. Irse file Lodging furnished to a principal representative of the United States. Irse file   If you are a principal representative of the United States stationed in a foreign country, you do not have to include in income the value of lodging (including utilities) provided to you as an official residence. Irse file However, amounts paid by the U. Irse file S. Irse file government for your usual costs of operating and maintaining your household are taxable. Irse file If amounts are withheld from your pay to cover these expenses, you cannot exclude or deduct those amounts from your income. Irse file Peace Corps. Irse file   If you are a Peace Corps volunteer or volunteer leader, some allowances you receive are taxable and others are not. Irse file Taxable allowances. Irse file   The following allowances must be included on your Form W-2 and reported on your return as wages. Irse file If you are a volunteer leader, allowances paid to your spouse and minor children while you are training in the United States. Irse file The part of living allowances designated by the Director of the Peace Corps as basic compensation. Irse file This is the part for personal items such as domestic help, laundry and clothing maintenance, entertainment and recreation, transportation, and other miscellaneous expenses. Irse file Leave allowances. Irse file Readjustment allowances or “termination payments. Irse file ” Taxable allowances are considered received by you when credited to your account. Irse file Example. Irse file Gary Carpenter, a Peace Corps volunteer, gets $175 a month during his period of service, to be paid to him in a lump sum at the end of his tour of duty. Irse file Although the allowance is not available to him until the end of his service, Gary must include it in his income on a monthly basis as it is credited to his account. Irse file Nontaxable allowances. Irse file   These generally include travel allowances and the part of living allowances for housing, utilities, food, clothing, and household supplies. Irse file These allowances should not be included on your Form W-2. Irse file These allowances are tax free whether paid by the U. Irse file S. Irse file Government or the foreign country in which you are stationed. Irse file Other Income Other employment. Irse file   If, in addition to your U. Irse file S. Irse file government pay, you receive income from a private employer or self-employment, you may qualify to claim the foreign earned income exclusion and the foreign housing exclusion and deduction under section 911 based on this other income provided you meet either the bona fide residence test or the physical presence test. Irse file In addition, if your spouse is a U. Irse file S. Irse file citizen or resident alien who earns income in a foreign country that is paid by a private employer or is from self-employment, he or she may also qualify for the exclusion or the deduction. Irse file For more information, see Publication 54. Irse file The tax treaty rules relating to income from personal services generally apply to income from private employment. Irse file As discussed above, the saving clause applies to you if you are a U. Irse file S. Irse file citizen or if you are a resident of the United States under the treaty residence article (after application of the so-called “tie-breaker” rule). Irse file Sale of personal property. Irse file   If you have a gain from the sale of your personal property (such as an automobile or a home appliance), whether directly or through a favorable exchange rate in converting the proceeds to U. Irse file S. Irse file dollars, the excess of the amount received in U. Irse file S. Irse file dollars over the cost or other basis of the property is a capital gain. Irse file Capital gains are reported on Schedule D (Form 1040), Capital Gains and Losses. Irse file However, losses from sales of your personal property, whether directly or through an unfavorable exchange rate, are not deductible. Irse file Sale of your home. Irse file   All or part of the gain on the sale of your main home, within or outside the United States, may be taxable. Irse file Losses are not deductible. Irse file   You may be able to exclude from income any gain up to $250,000 ($500,000 on a joint return). Irse file Generally, you must have owned and used the home as your main residence for two of the five years preceding the date of sale. Irse file   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse is serving on qualified official extended duty as a member of the Foreign Service of the United States, as an employee of the intelligence community, or as an employee or volunteer of the Peace Corps. Irse file   For detailed information on selling your home, see Publication 523. Irse file Deductions and Credits — Business Expenses You may deduct certain expenses such as travel expenses, transportation expenses, and other expenses connected to your employment. Irse file Travel Expenses Subject to certain limits, you can deduct your unreimbursed ordinary and necessary expenses of traveling away from home in connection with the performance of your official duties. Irse file These expenses include such items as travel costs, meals, lodging, baggage charges, local transportation costs (such as taxi fares), tips, and dry cleaning and laundry fees. Irse file Your home for tax purposes (tax home) is your regular post of duty regardless of where you maintain your family home. Irse file Your tax home is not limited to the Embassy, consulate, or duty station. Irse file It includes the entire city or general area in which your principal place of employment is located. Irse file Traveling away from home. Irse file   You are traveling away from home if you meet both of the following requirements. Irse file Your duties require you to be away from the general area of your tax home substantially longer than an ordinary day's work. Irse file You need to get sleep or rest to meet the demands of your work while away from home. Irse file This requirement is not satisfied by merely napping in your car. Irse file You do not have to be away from your tax home for a whole day or from dusk to dawn as long as your relief from duty is long enough to get necessary sleep or rest. Irse file Temporary assignment. Irse file   If your assignment or job away from your tax home is temporary, your tax home does not change. Irse file You are considered to be away from home for the whole period, and your travel expenses are deductible. Irse file Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for one year or less. Irse file   However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home and you cannot deduct your travel expenses while there. Irse file An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than one year, whether or not it actually lasts for more than one year. Irse file   You must determine whether your assignment is temporary or indefinite when you start work. Irse file If you expect employment to last for one year or less, it is temporary unless there are facts and circumstances that indicate otherwise. Irse file Employment that is initially temporary may become indefinite due to changed circumstances. Irse file A series of assignments to the same location, all for short periods but that together cover a long period, may be considered an indefinite assignment. Irse file Exception for federal crime investigations or prosecutions. Irse file   If you are a federal employee participating in a federal crime investigation or prosecution, you may be able to deduct travel expenses even if you are away from your tax home for more than one year. Irse file This exception to the one-year rule applies if the Attorney General certifies that you are traveling for the federal government in a temporary duty status to prosecute, or provide support services for the investigation or prosecution of, a federal crime. Irse file Limit on meals and entertainment. Irse file   You can generally deduct only 50% of the cost of your unreimbursed business-related meals and entertainment. Irse file However, the limit does not apply to expenses reimbursed under a U. Irse file S. Irse file Government expense allowance arrangement. Irse file Individuals subject to hours of service limits. Irse file   You can deduct 80% of your unreimbursed business-related meal expenses if the meals take place during or incident to any period subject to the Department of Transportation's hours of service limits. Irse file   Individuals subject to the Department of Transportation's “hours of service” limits include the following. Irse file Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations. Irse file Interstate truck operators and bus drivers who are under Department of Transportation regulations. Irse file Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations. Irse file Certain merchant mariners who are under Coast Guard regulations. Irse file Primary purpose of trip must be for business. Irse file   If your trip was entirely for business, your unreimbursed travel expenses are generally deductible. Irse file However, if you spend some of your time on nonbusiness activities, part of your expenses may not be deductible. Irse file   If your trip was mainly personal, you cannot deduct your travel expenses to and from your destination. Irse file This applies even if you engage in business activities while there. Irse file However, you can deduct any expenses while at your destination that are directly related to your business. Irse file Expenses paid for others. Irse file   You generally cannot deduct travel expenses of your spouse, dependents, or other individuals who go with you on a trip. Irse file Home leave. Irse file   The Foreign Service Act requires U. Irse file S. Irse file citizens who are members of the foreign service to take a leave of absence after completing 3 years of continuous service abroad. Irse file This period is called “home leave” and can be used to take care of certain personal matters such as medical and dental checkups, buying a new wardrobe, and visiting relatives. Irse file   The amounts paid for your travel, meals, and lodging while on home leave are deductible as travel or business expenses subject to the rules and limits discussed earlier. Irse file You must be able to verify these amounts in order to claim them. Irse file Amounts paid on behalf of your family while on home leave are personal living expenses and are not deductible. Irse file More information. Irse file   See chapter 1 of Publication 463 for more information on travel expenses. Irse file Transportation Expenses You can deduct allowable transportation expenses that are directly related to your official duties. Irse file Transportation expenses include the cost of transportation by air, rail, bus, or taxi, and the cost of driving and maintaining your car. Irse file They do not include expenses you have when traveling away from home overnight. Irse file Those expenses are deductible as travel expenses and are discussed earlier. Irse file Commuting. Irse file   You cannot deduct your transportation costs of going between your home and your regular business location. Irse file These costs are personal commuting expenses. Irse file   If you have one or more regular business locations but must work at a temporary location, you can deduct the costs of commuting to that temporary place of work. Irse file   If you work at two or more places in the same day, you can deduct your expenses of getting from one place of work to the other. Irse file More information. Irse file   For more information on transportation expenses, see chapter 4 of Publication 463. Irse file Other Employee Business Expenses You may be able to deduct other unreimbursed expenses that are connected with your employment. Irse file Membership dues. Irse file   You can deduct membership dues you pay to professional societies that relate to your business or profession. Irse file Subscriptions. Irse file   You can deduct subscriptions to professional publications that relate to your business or profession. Irse file Educational expenses. Irse file   Generally, educational expenses are considered to be personal expenses and are not deductible. Irse file However, under some circumstances, educational expenses are deductible as business expenses. Irse file   You can deduct educational expenses as business expenses if the education: Maintains or improves skills needed in your present position, or Meets the express requirements of your agency to keep your present position, salary, or status. Irse file   You cannot deduct educational expenses as business expenses if the education: Is needed to enable you to meet minimum educational requirements for qualification in your present position, Is a part of a program of study that can qualify you for a new position, or Is for travel as a form of education. Irse file These rules apply even if the education is required by your agency or it maintains or improves skills required in your work. Irse file   See Publication 970, Tax Benefits for Education, for more information on educational expenses. Irse file    Educational expenses that are not work related, such as costs of sending children to college, are personal expenses that you cannot deduct. Irse file However, you may be eligible for other tax benefits such as the American opportunity and lifetime learning credits; contributions to a Coverdell education savings account or qualified tuition program; deduction for student loan interest; and exclusion from income of certain savings bond interest. Irse file These benefits are explained in Publication 970. Irse file Foreign service representation expenses. Irse file   If you are an employee of the U. Irse file S. Irse file Foreign Service and your position requires you to establish and maintain favorable relations in foreign countries, you may receive a nontaxable allowance for representation expenses. Irse file If your expenses are more than the allowance you receive, you can deduct the excess expenses as an itemized deduction on Schedule A (Form 1040) if you meet one of the following conditions. Irse file You have a certificate from the Secretary of State attesting that the expenses were incurred for the benefit of the United States, and would be reimbursable under appropriate legislation if the agency had sufficient funds for these reimbursements. Irse file The expenses, while specifically not reimbursable under State Department regulations, were ordinary and necessary business expenses incurred in the performance of your official duties. Irse file    To deduct any expenses for travel, entertainment, and gifts, including those certified by the Secretary of State, you must meet the rules for recordkeeping and accounting to your employer. Irse file These rules are explained in Publication 463. Irse file Representation expenses. Irse file   These are expenses that further the interest of the United States abroad. Irse file They include certain entertainment, gifts, costs of official functions, and rental of ceremonial dress. Irse file They generally do not include costs of passenger vehicles (such as cars or aircraft), printing or engraving, membership fees, or amounts a principal representative must pay personally to cover the usual costs of operating and maintaining an official residence. Irse file   Chapters 300 and 400 of the Standardized Regulations (Government Civilians, Foreign Area) provide more detail on what expenses are allowable as representation expenses. Irse file These regulations are available on the Internet at www. Irse file state. Irse file gov/m/a/als. Irse file Look under “Standardized Regulations (DSSR)” and click on “DSSR Table of Contents. Irse file ” Publication 463 and Publication 529, Miscellaneous Deductions, provide more detail on what expenses are allowable as ordinary and necessary business expenses. Irse file Impairment-related work expenses. Irse file   If you are an employee with a physical or mental disability, you can deduct attendant-care services at your place of work and other expenses in connection with work that are necessary for you to be able to work. Irse file Attendant care includes a reader for a blind person and a helper for a person with a physical disability. Irse file These expenses are reported on Form 2106 or 2106-EZ and carried to Schedule A (Form 1040). Irse file They are not subject to the 2%-of-adjusted- gross-income limit on miscellaneous itemized deductions. Irse file Loss on conversion of U. Irse file S. Irse file dollars into foreign currency. Irse file   The conversion of U. Irse file S. Irse file dollars into foreign currency at an official rate of exchange that is not as favorable as the free market rate does not result in a deductible loss. Irse file Recordkeeping Rules If you claim a deduction for unreimbursed business expenses, you must keep timely and adequate records of all your business expenses. Irse file For example, you must keep records and supporting evidence to prove the following elements about deductions for travel expenses (including meals and lodging while away from home). Irse file The amount of each separate expense for travel away from home, such as the cost of your transportation, lodging, or meals. Irse file You may total your incidental expenses if you list them in reasonable categories such as daily meals, gasoline and oil, and taxi fares. Irse file For each trip away from home, the dates you left and returned and the number of days spent on business. Irse file The destination or area of your travel, described by the name of the city, town, or similar designation. Irse file The business reason for your travel or the business benefit gained or expected to be gained from your travel. Irse file How to record your expenses. Irse file   Records for proof of your expenses should be kept in an account book, diary, statement of expense, or similar record. Irse file They should be supported by other records, such as receipts or canceled checks, in sufficient detail to establish the elements for these expenses. Irse file You do not need to duplicate information in an account book or diary that is shown on a receipt as long as your records and receipts complement each other in an orderly manner. Irse file   Each expense should be recorded separately in your records. Irse file However, some items can be totaled in reasonable categories. Irse file You can make one daily entry for categories such as taxi fares, telephone calls, meals while away from home, gas and oil, and other incidental costs of travel. Irse file You may record tips separately or with the cost of the service. Irse file    Documentary evidence generally is required to support all lodging expenses while traveling away from home. Irse file It is also required for any other expense of $75 or more, except transportation charges if the evidence is not readily available. Irse file Documentary evidence is a receipt, paid bill, or similar proof sufficient to support an expense. Irse file It ordinarily will be considered adequate if it shows the amount, date, place, and essential business character of the expense. Irse file    A canceled check by itself does not prove a business cost. Irse file You must have other evidence to show that the check was used for a business purpose. Irse file Your records must be timely. Irse file   Record the elements for the expense in your account book or other record at or near the time of the expense. Irse file A timely-kept record has more value than statements prepared later when, generally, there is a lack of accurate recall. Irse file Confidential information. Irse file   You do not need to put confidential information relating to an element of a deductible expense (such as the place, business purpose, or business relationship) in your account book, diary, or other record. Irse file However, you do have to record the information elsewhere at or near the time of the expense and have it available to fully prove that element of the expense. Irse file How To Report Business Expenses As a U. Irse file S. Irse file Government employee, your business expense reimbursements are generally paid under an accountable plan and are not included in your wages on your Form W-2. Irse file If your expenses are not more than the reimbursements, you do not need to show your expenses or reimbursements on your return. Irse file However, if you do not account to your employer for a travel advance or if you do not return any excess advance within a reasonable period of time, the advance (or excess) will be included in your wages on your Form W-2. Irse file If you are entitled to a reimbursement from your employer but you do not claim it, you cannot deduct the expenses to which that unclaimed reimbursement applies. Irse file Form 2106 or Form 2106-EZ. Irse file   You must complete Form 2106 or 2106-EZ to deduct your expenses. Irse file Also, if your actual expenses are more than your reimbursements, you can complete Form 2106 or 2106-EZ to deduct your excess expenses. Irse file Generally, you must include all of your expenses and reimbursements on Form 2106 or 2106-EZ and carry your allowable expense to Schedule A (Form 1040). Irse file Your allowable expense is then generally subject to the 2%-of-adjusted-gross-income limit. Irse file Form 2106-EZ. Irse file   You may be able to use Form 2106-EZ instead of the more complex Form 2106 for reporting unreimbursed employee business expenses. Irse file You can use Form 2106-EZ if you meet both of the following conditions. Irse file You are not reimbursed by your employer for any expenses. Irse file (Amounts your employer included in your wages on your Form W-2 are not considered reimbursements. Irse file ) If you claim car expenses, you use the standard mileage rate. Irse file Deductions and Credits — Nonbusiness Expenses In addition to deductible business expenses, you may be entitled to deduct certain other expenses. Irse file Moving Expenses If you changed job locations or started a new job, you may be able to deduct the reasonable expenses of moving yourself, your family, and your household goods and personal effects to your new home. Irse file However, you cannot deduct any expenses for which you received a tax-free allowance as a U. Irse file S. Irse file Government employee. Irse file To deduct moving expenses, your move must be closely related to the start of work and you must meet the distance test and the time test. Irse file Closely related to the start of work. Irse file   The move must be closely related, both in time and in place, to the start of work at the new location. Irse file In general, you must have incurred your moving expenses within one year from the time you first report to your new job or business. Irse file   A move generally is not considered closely related in place to the start of work if the distance from your new home to the new job location is more than the distance from your former home to the new job location. Irse file A move that does not meet this requirement may qualify if you can show that you must live at the new home as a condition of employment, or you will spend less time or money commuting from the new home to the new job. Irse file Distance test. Irse file   Your new main job location must be at least 50 miles farther from your former home than your old main job location was. Irse file If you did not have an old job location, your new job location must be at least 50 miles from your former home. Irse file Time test. Irse file   If you are an employee, you must work full time for at least 39 weeks during the first 12 months after you arrive in the general area of your new job location. Irse file Deductible moving expenses. Irse file   Moving expenses that can be deducted include the reasonable costs of: Moving household goods and personal effects (including packing, crating, in-transit storage, and insurance) of both you and members of your household, and Transportation and lodging for yourself and members of your household for one trip from your former home to your new home (including costs of getting passports). Irse file    The cost of your meals is not a deductible moving expense. Irse file   The costs of moving household goods include the reasonable expenses of moving household goods and personal effects to and from storage. Irse file For a foreign move, the costs also include expenses of storing the goods and effects for part or all of the period that your new job location abroad continues to be your main job location. Irse file Expenses must be reasonable. Irse file   You can deduct only those expenses that are reasonable for the circumstances of your move. Irse file For example, the costs of traveling from your former home to your new one should be by the shortest, most direct route available by conventional transportation. Irse file Members of your household. Irse file   A member of your household includes anyone who has both your former home and new home as his or her home. Irse file It does not include a tenant or employee unless you can claim that person as a dependent. Irse file Retirees. Irse file   You can deduct the costs of moving to the United States when you permanently retire if both your former main job location and former home were outside the United States and its possessions. Irse file You do not have to meet the time test described earlier. Irse file Survivors. Irse file   You can deduct moving expenses for a move to the United States if you are the spouse or dependent of a person whose main job location at the time of death was outside the United States and its possessions. Irse file The move must begin within 6 months after the decedent's death. Irse file It must be from the decedent's former home outside the United States, and that home must also have been your home. Irse file You do not have to meet the time test described earlier. Irse file How to report moving expenses. Irse file   Use Form 3903 to report your moving expenses and figure your allowable deduction. Irse file Claim the deduction as an adjustment to income on Form 1040. Irse file (You cannot deduct moving expenses on Form 1040A or Form 1040EZ. Irse file ) Reimbursements. Irse file   Generally, you must include reimbursements of, or payments for, nondeductible moving expenses in gross income for the year paid. Irse file You also must include in gross income reimbursements paid to you under a nonaccountable plan. Irse file However, there is an exception for the tax-free foreign areas allowances described earlier under Allowances, Differentials, and Special Pay. Irse file Additional information. Irse file   For additional information about moving expenses, see Publication 521. Irse file Other Itemized Deductions You may be able to claim other itemized deductions not connected to your employment. Irse file Contributions. Irse file   You can deduct contributions to qualified organizations created or organized in or under the laws of the United States or its possessions. Irse file You cannot deduct contributions you make directly to foreign organizations (except for certain Canadian, Israeli, and Mexican charities), churches, and governments. Irse file For more information, see Publication 526, Charitable Contributions. Irse file Real estate tax and home mortgage interest. Irse file   If you receive a tax-free housing allowance, your itemized deductions for real estate taxes and home mortgage interest are limited. Irse file You must reduce the amount of each deduction that would otherwise be allowable by the amount of each expense that is related to the tax-free allowance. Irse file Example. Irse file Adam is an IRS employee working overseas who receives a $6,300 tax-free housing and utility allowance. Irse file During the year, Adam used the allowance, with other funds, to provide a home for himself. Irse file His expenses for this home totaled $8,400 and consisted of mortgage principal ($500), insurance ($400), real estate taxes ($1,400), mortgage interest ($4,000), and utility costs ($2,100). Irse file Adam did not have any other expenses related to providing a home for himself. Irse file Adam must reduce his deductions for home mortgage interest and real estate taxes. Irse file He figures a reasonable way to reduce them is to multiply them by a fraction: its numerator is $6,300 (the total housing and utility allowance) and its denominator is $8,400 (the total of all payments to which the housing and utility allowance applies). Irse file The result is 3/4. Irse file Adam reduces his otherwise allowable home mortgage interest deduction by $3,000 (the $4,000 he paid ×3/4) and his otherwise allowable real estate tax deduction by $1,050 (the $1,400 he paid × 3/4). Irse file He can deduct $1,000 of his mortgage interest ($4,000 − $3,000) and $350 of his real estate taxes ($1,400 − $1,050) when he itemizes his deductions. Irse file Exception to the reduction. Irse file   If you receive a tax-free housing allowance as a member of the military or the clergy, you do not have to reduce your deductions for real estate tax and home mortgage interest expenses you are otherwise entitled to deduct. Irse file Required statement. Irse file   If you receive a tax-free housing allowance and have real estate tax or home mortgage interest expenses, attach a statement to your tax return. Irse file The statement must contain all of the following information. Irse file The amount of each type of tax-free income you received, such as a tax-free housing allowance or tax-free representation allowance. Irse file The amount of otherwise deductible expenses attributable to each type of tax-free income. Irse file The amount attributable to each type of tax-free income that was not directly attributable to that type of tax-free income. Irse file An explanation of how you determined the amounts not directly attributable to each type of tax-free income. Irse file   The statement must also indicate that none of the amounts deducted on your return are in any way attributable to tax-free income. Irse file Foreign Taxes If you pay or accrue taxes to a foreign government, you generally can choose to either claim them as a credit against your U. Irse file S. Irse file income tax liability or deduct them as an itemized deduction when figuring your taxable income. Irse file Do not include the foreign taxes paid or accrued as withheld income taxes in the Payments section of Form 1040. Irse file Foreign tax credit. Irse file   Your foreign tax credit is subject to a limit based on your taxable income from foreign sources. Irse file If you choose to figure a credit against your U. Irse file S. Irse file tax liability for the foreign taxes, you generally must complete Form 1116 and attach it to your U. Irse file S. Irse file income tax return. Irse file    You cannot claim a credit for foreign taxes paid on amounts excluded from gross income under the foreign earned income or housing exclusions. Irse file If all your foreign income is exempt from U. Irse file S. Irse file tax, you will not be able to claim a foreign tax credit. Irse file   If, because of the limit on the credit, you cannot use the full amount of qualified foreign taxes paid or accrued in the tax year, you are allowed to carry the excess back 1 year and then forward 10 years. Irse file Exemption from limit. Irse file   You can elect to not be subject to the foreign tax limit if you meet all the following conditions. Irse file Your only foreign income is passive income, such as interest, dividends, and royalties. Irse file The total of all your foreign taxes is not more than $300 ($600 for joint tax returns). Irse file The foreign income and taxes are reported to you on a payee statement, such as Form 1099-DIV, Dividends and Distributions, or 1099-INT, Interest Income. Irse file If you make the election, you can claim a foreign tax credit without filing Form 1116. Irse file However, you cannot carry back or carry over any unused foreign tax to or from this year. Irse file See the instructions for the appropriate line in the Tax and Credits section of Form 1040. Irse file Foreign tax deduction. Irse file   If you choose to deduct all foreign income taxes on your U. Irse file S. Irse file income tax return, itemize the deduction on Schedule A (Form 1040). Irse file You cannot deduct foreign taxes paid on income you exclude under the foreign earned income or housing exclusions. Irse file Example. Irse file Dennis and Christina are married and live and work in Country X. Irse file Dennis works for the U. Irse file S. Irse file Government and Christina is employed by a private company. Irse file They pay income tax to Country X on Christina's income only. Irse file Dennis and Christina file a joint tax return and exclude all of Christina's income. Irse file They cannot claim a foreign tax credit or take a deduction for the taxes paid to Country X. Irse file Deduction for other foreign taxes. Irse file   The deduction for foreign taxes other than foreign income taxes is not related to the foreign tax credit. Irse file You can take deductions for these miscellaneous foreign taxes and also claim the foreign tax credit for income taxes paid to a foreign country. Irse file   You can deduct real property taxes you pay that are imposed on you by a foreign country. Irse file You take this deduction on Schedule A (Form 1040). Irse file You cannot deduct other foreign taxes, such as personal property taxes, unless you incurred the expenses in a trade or business or in the production of income. Irse file More information. Irse file   The foreign tax credit and deduction, their limits, and carryback and carryover provisions are discussed in detail in Publication 514. Irse file Local (Foreign) Tax Return As a U. Irse file S. Irse file Government employee, you are expected to observe and fulfill all tax obligations imposed by the host country government. Irse file Check with local tax authorities to determine whether you are considered a tax resident of your host country, whether you are required to file a host country tax return and whether you owe taxes to the host country. Irse file Tax Treaty Benefits As discussed earlier, most income tax treaties contain an article relating to remuneration from government services. Irse file Review the treaty text carefully to determine whether your U. Irse file S. Irse file Government remuneration is taxable in the host country. Irse file You will first have to determine whether you are a resident of your host country under the treaty residence article (after application of the so-called “tie-breaker” rule). Irse file If you or your spouse receives income from a private employer or self-employment, review the tax treaty rules relating to income from personal services to determine whether that income is taxable in the host country. Irse file If you pay or accrue taxes to both the host country and the United States, you may be able to relieve double taxation with a foreign tax credit. Irse file Most income tax treaties contain an article providing relief from double taxation. Irse file Many treaties contain special foreign tax credit rules for U. Irse file S. Irse file citizens who are residents of a treaty country. Irse file For more information about the foreign tax credit, see Foreign Taxes, earlier. Irse file Other Agreements The United States may be a party to agreements other than income tax treaties that may affect your tax obligations to the host country. Irse file For example, consular employees may be exempt from host country tax under the Vienna Convention on Consular Relations or bilateral consular agreements. Irse file Similarly, certain diplomatic staff may be exempt from host country tax under the Vienna Convention on Diplomatic Relations. Irse file Check with the appropriate U. Irse file S. Irse file Embassy for more information. Irse file Double Withholding If your U. Irse file S. Irse file government pay is subject to withholding in both the United States and the foreign country, you may reduce the amount of U. Irse file S. Irse file tax that is withheld from your pay if you expect to be entitled to a foreign tax credit on your U. Irse file S. Irse file income tax return on this income. Irse file Complete Worksheet 1-6 in Publication 505, Tax Withholding and Estimated Tax, to determine how to revise Form W-4, Employee’s Withholding Allowance Certificate. Irse file How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. Irse file By selecting the method that is best for you, you will have quick and easy access to tax help. Irse file Free help with your tax return. Irse file   Free help in preparing your return is available nationwide from IRS-certified volunteers. Irse file The Volunteer Income Tax Assistance (VITA) program is designed to help low-moderate income, elderly, disabled, and limited English proficient taxpayers. Irse file The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Irse file Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Irse file Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. Irse file To find the nearest VITA or TCE site, visit IRS. Irse file gov or call 1-800-906-9887 or 1-800-829-1040. Irse file   As part of the TCE program, AARP offers the Tax-Aide counseling program. Irse file To find the nearest AARP Tax-Aide site, visit AARP's website at www. Irse file aarp. Irse file org/money/taxaide or call 1-888-227-7669. Irse file   For more information on these programs, go to IRS. Irse file gov and enter “VITA” in the search box. Irse file Internet. Irse file You can access the IRS website at IRS. Irse file gov 24 hours a day, 7 days a week to: E-file your return. Irse file Find out about commercial tax preparation and e-file services available free to eligible taxpayers. Irse file Check the status of your 2012 refund. Irse file Go to IRS. Irse file gov and click on Where’s My Refund. Irse file Information about your return will generally be available within 24 hours after the IRS receives your e-filed return, or 4 weeks after you mail your paper return. Irse file If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Irse file Have your 2012 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Irse file Where's My Refund? has a new look this year! The tool will include a tracker that displays progress through three stages: (1) return received, (2) refund approved, and (3) refund sent. Irse file Where's My Refund? will provide an actual personalized refund date as soon as the IRS processes your tax return and approves your refund. Irse file So in a change from previous filing seasons, you won't get an estimated refund date right away. Irse file Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. Irse file You can obtain a free transcript online at IRS. Irse file gov by clicking on Order a Return or Account Transcript under “Tools. Irse file ” For a transcript by phone, call 1-800-908-9946 and follow the prompts in the recorded message. Irse file You will be prompted to provide your SSN or Individual Taxpayer Identification Number (ITIN), date of birth, street address and ZIP code. Irse file Download forms, including talking tax forms, instructions, and publications. Irse file Order IRS products. Irse file Research your tax questions. Irse file Search publications by topic or keyword. Irse file Use the Internal Revenue Code, regulations, or other official guidance. Irse file View Internal Revenue Bulletins (IRBs) published in the last few years. Irse file Figure your withholding allowances using the IRS Withholding Calculator at www. Irse file irs. Irse file gov/individuals. Irse file Determine if Form 6251 (Alternative Minimum Tax— Individuals), must be filed by using our Alternative Minimum Tax (AMT) Assistant available at IRS. Irse file gov by typing Alternative Minimum Tax Assistant in the search box. Irse file Sign up to receive local and national tax news by email. Irse file Get information on starting and operating a small business. Irse file Phone. Irse file Many services are available by phone. Irse file   Ordering forms, instructions, and publications. Irse file Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions (limited to 5 years). Irse file You should receive your order within 10 days. Irse file Asking tax questions. Irse file Call the IRS with your tax questions at 1-800-829-1040. Irse file Solving problems. Irse file You can get face-to-face help solving tax problems most business days in IRS Taxpayer Assistance Centers (TAC). Irse file An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Irse file Call your local Taxpayer Assistance Center for an appointment. Irse file To find the number, go to www. Irse file irs. Irse file gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Irse file TTY/TDD equipment. Irse file If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. Irse file The TTY/TDD telephone number is for individuals who are deaf, hard of hearing, or have a speech disability. Irse file These individuals can also access the IRS through relay services such as the Federal Relay Service at www. Irse file gsa. Irse file gov/fedrelay. Irse file TeleTax topics. Irse file Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. Irse file Checking the status of your 2012 refund. Irse file To check the status of your 2012 refund, call 1-800-829-1954 or 1-800-829-4477 (automated Where's My Refund? information 24 hours a day, 7 days a week). Irse file Information about your return will generally be available within 24 hours after the IRS receives your e-filed return, or 4 weeks after you mail your paper return. Irse file If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Irse file Have your 2012 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Irse file Where's My Refund? will provide an actual personalized refund date as soon as the IRS processes your tax return and approves your refund. Irse file Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. Irse file Outside the U. Irse file S. Irse file If you are outside the United States, taxpayer assistance is available at the following U. Irse file S Embassies or consulate. Irse file Beijing, China (86) (10) 8531-3983 Frankfurt, Germany (49) (69) 7535-3834 London, England (44) (20) 7894-0476 Paris, France (33) (1) 4312-2555 Please contact the office for times when assistance will be available. Irse file If you cannot get to one of these offices, taxpayer assistance is available at (267) 941-1000 (not a toll free call). Irse file If you are in a U. Irse file S. Irse file territory (American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and U. Irse file S. Irse file Virgin Islands) and have a tax question, you can call 1-800-829-1040. Irse file Evaluating the quality of our telephone services. Irse file To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. Irse file One method is for a second IRS representative to listen in on or record random telephone calls. Irse file Another is to ask some callers to complete a short survey at the end of the call. Irse file Walk-in. Irse file Some products and services are available on a walk-in basis. Irse file   Products. Irse file You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Irse file Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Irse file Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. Irse file Services. Irse file You can walk in to your local TAC most business days for personal, face-to-face tax help. Irse file An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Irse file If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local TAC where you can talk with an IRS representative face-to-face. Irse file No appointment is necessary—just walk in. Irse file Before visiting, check www. Irse file irs. Irse file gov/localcontacts for hours of operation and services provided. Irse file If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested by calling your local TAC. Irse file You can leave a message and a representative will call you back within 2 business days. Irse file All other issues will be handled without an appointment. Irse file To call your local TAC, go to  www. Irse file irs. Irse file gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Irse file Outside the U. Irse file S. Irse file If you are outside the United States during the filing period (January to mid-June), you can get the necessary federal tax forms and publications from most U. Irse file S. Irse file Embassies and consulates. Irse file Mail. Irse file You can send your order for forms, instructions, and publications to the address below. Irse file You should receive a response within 10 days after your request is received. Irse file  Internal Revenue Service 1201 N. Irse file Mitsubishi Motorway Bloomington, IL 61705-6613 Outside the U. Irse file S. Irse file If you are outside the United States, you can get tax assistance by writing to the address below. Irse file  Internal Revenue Service International Accounts Philadelphia, PA 19255-0725 Taxpayer Advocate Service. Irse file   The Taxpayer Advocate Service (TAS) is your voice at the IRS. Irse file Its job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights. Irse file TAS offers free help to guide you through the often-confusing process of resolving tax problems that you haven’t been able to solve on your own. Irse file Remember, the worst thing you can do is nothing at all. Irse file   TAS can help if you can’t resolve your problem with the IRS and: Your problem is causing financial difficulties for you, your family, or your business. Irse file You face (or your business is facing) an immediate threat of adverse action. Irse file You have tried repeatedly to contact the IRS but no one has responded, or the IRS has not responded to you by the date promised. Irse file   If you qualify for help, they will do everything they can to get your problem resolved. Irse file You will be assigned to one advocate who will be with you at every turn. Irse file TAS has offices in every state, the District of Columbia, and Puerto Rico. Irse file Although TAS is independent within the IRS, their advocates know how to work with the IRS to get your problems resolved. Irse file And its services are always free. Irse file   As a taxpayer, you have rights that the IRS must abide by in its dealings with you. Irse file The TAS tax toolkit at www. Irse file TaxpayerAdvocate. Irse file irs. Irse file gov can help you understand these rights. Irse file   If you think TAS might be able to help you, call your local advocate, whose number is in your phone book and on our website at www. Irse file irs. Irse file gov/advocate. Irse file You can also call the toll-free number at 1-877-777-4778. Irse file Deaf and hard of hearing individuals who have access to TTY/TDD equipment can call 1-800-829-4059. Irse file These individuals can also access the IRS through relay services such as the Federal Relay Service at www. Irse file gsa. Irse file gov/fedrelay. Irse file   TAS also handles large-scale or systemic problems that affect many taxpayers. Irse file If you know of one of these broad issues, please report it through the Systemic Advocacy Management System at www. Irse file irs. Irse file gov/advocate. Irse file    Outside the U. Irse file S. Irse file If you live outside of the United States, you can call the Taxpayer Advocate at (787) 522-8601 in English or (787) 522-8600 in Spanish. Irse file You can contact the Taxpayer Advocate at: Internal Revenue Service Taxpayer Advocate Service City View Plaza, 48 Carr 165, Suite 2000 Guaynabo, P. Irse file R. Irse file 00968-8000 Low Income Taxpayer Clinics (LITCs). Irse file   Low Income Taxpayer Clinics (LITCs) are independent from the IRS. Irse file Some clinics serve individuals whose income is below a certain level and who need to resolve a tax problem. Irse file These clinics provide professional representation before the IRS or in court on audits, appeals, tax collection disputes, and other issues for free or for a small fee. Irse file Some clinics can provide information about taxpayer rights and responsibilities in many different languages for individuals who speak English as a second language. Irse file For more information and to find a clinic near you, see the LITC page on www. Irse file irs. Irse file gov/advocate or IRS Publication 4134, Low Income Taxpayer Clinic List. Irse file This publication is also available by calling 1-800-TAX-FORM (1-800-829-3676) or at your local IRS office. Irse file Free tax services. Irse file   Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. Irse file Learn about free tax information from the IRS, including publications, services, and education and assistance programs. Irse file The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. Irse file The majority of the information and services listed in this publication are available to you free of charge. Irse file If there is a fee associated with a resource or service, it is listed in the publication. Irse file   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. Irse file DVD for tax products. Irse file You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. Irse file Prior-year forms, instructions, and publications. Irse file Tax Map: an electronic research tool and finding aid. Irse file Tax law frequently asked questions. Irse file Tax Topics from the IRS telephone response system. Irse file Internal Revenue Code—Title 26 of the U. Irse file S. Irse file Code. Irse file Links to other Internet-based tax research materials. Irse file Fill-in, print, and save features for most tax forms. Irse file Internal Revenue Bulletins. Irse file Toll-free and email technical support. Irse file Two releases during the year. Irse file  – The first release will ship the beginning of January 2013. Irse file  – The final release will ship the beginning of March 2013. Irse file Purchase the DVD from National Technical Information Service (NTIS) at www. Irse file irs. Irse file gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee). Irse file Prev  Up  Next   Home   More Online Publications