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State taxes phone number Publication 541 - Main Content Table of Contents Forming a PartnershipOrganizations Classified as Partnerships Family Partnership Partnership Agreement Terminating a PartnershipIRS e-file (Electronic Filing) Exclusion From Partnership Rules Partnership Return (Form 1065) Partnership DistributionsSubstantially appreciated inventory items. State taxes phone number Partner's Gain or Loss Partner's Basis for Distributed Property Transactions Between Partnership and PartnersGuaranteed Payments Sale or Exchange of Property Contribution of Property Contribution of Services Basis of Partner's InterestAdjusted Basis Effect of Partnership Liabilities Disposition of Partner's InterestSale, Exchange, or Other Transfer Payments for Unrealized Receivables and Inventory Items Liquidation at Partner's Retirement or Death Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)Partnership Item. State taxes phone number Small Partnerships and the Small Partnership Exception Small Partnership TEFRA Election Role of Tax Matters Partner (TMP) in TEFRA Proceedings Statute of Limitations and TEFRA Amended Returns and Administrative Adjustment Requests (AARs) How To Get Tax Help Forming a Partnership The following sections contain general information about partnerships. State taxes phone number Organizations Classified as Partnerships An unincorporated organization with two or more members is generally classified as a partnership for federal tax purposes if its members carry on a trade, business, financial operation, or venture and divide its profits. State taxes phone number However, a joint undertaking merely to share expenses is not a partnership. State taxes phone number For example, co-ownership of property maintained and rented or leased is not a partnership unless the co-owners provide services to the tenants. State taxes phone number The rules you must use to determine whether an organization is classified as a partnership changed for organizations formed after 1996. State taxes phone number Organizations formed after 1996. State taxes phone number   An organization formed after 1996 is classified as a partnership for federal tax purposes if it has two or more members and it is none of the following. State taxes phone number An organization formed under a federal or state law that refers to it as incorporated or as a corporation, body corporate, or body politic. State taxes phone number An organization formed under a state law that refers to it as a joint-stock company or joint-stock association. State taxes phone number An insurance company. State taxes phone number Certain banks. State taxes phone number An organization wholly owned by a state, local, or foreign government. State taxes phone number An organization specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). State taxes phone number Certain foreign organizations identified in section 301. State taxes phone number 7701-2(b)(8) of the regulations. State taxes phone number A tax-exempt organization. State taxes phone number A real estate investment trust. State taxes phone number An organization classified as a trust under section 301. State taxes phone number 7701-4 of the regulations or otherwise subject to special treatment under the Internal Revenue Code. State taxes phone number Any other organization that elects to be classified as a corporation by filing Form 8832. State taxes phone number For more information, see the instructions for Form 8832. State taxes phone number Limited liability company. State taxes phone number   A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. State taxes phone number Unlike a partnership, none of the members of an LLC are personally liable for its debts. State taxes phone number An LLC may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in Regulations section 301. State taxes phone number 7701-3. State taxes phone number See Form 8832 and section 301. State taxes phone number 7701-3 of the regulations for more details. State taxes phone number A domestic LLC with at least two members that does not file Form 8832 is classified as a partnership for federal income tax purposes. State taxes phone number Organizations formed before 1997. State taxes phone number   An organization formed before 1997 and classified as a partnership under the old rules will generally continue to be classified as a partnership as long as the organization has at least two members and does not elect to be classified as a corporation by filing Form 8832. State taxes phone number Community property. State taxes phone number    Spouses who own a qualified entity (defined later) can choose to classify the entity as a partnership for federal tax purposes by filing the appropriate partnership tax returns. State taxes phone number They can choose to classify the entity as a sole proprietorship by filing a Schedule C (Form 1040) listing one spouse as the sole proprietor. State taxes phone number A change in reporting position will be treated for federal tax purposes as a conversion of the entity. State taxes phone number   A qualified entity is a business entity that meets all the following requirements. State taxes phone number The business entity is wholly owned by spouses as community property under the laws of a state, a foreign country, or a possession of the United States. State taxes phone number No person other than one or both spouses would be considered an owner for federal tax purposes. State taxes phone number The business entity is not treated as a corporation. State taxes phone number   For more information about community property, see Publication 555, Community Property. State taxes phone number Publication 555 discusses the community property laws of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. State taxes phone number Family Partnership Members of a family can be partners. State taxes phone number However, family members (or any other person) will be recognized as partners only if one of the following requirements is met. State taxes phone number If capital is a material income-producing factor, they acquired their capital interest in a bona fide transaction (even if by gift or purchase from another family member), actually own the partnership interest, and actually control the interest. State taxes phone number If capital is not a material income-producing factor, they joined together in good faith to conduct a business. State taxes phone number They agreed that contributions of each entitle them to a share in the profits, and some capital or service has been (or is) provided by each partner. State taxes phone number Capital is material. State taxes phone number   Capital is a material income-producing factor if a substantial part of the gross income of the business comes from the use of capital. State taxes phone number Capital is ordinarily an income-producing factor if the operation of the business requires substantial inventories or investments in plants, machinery, or equipment. State taxes phone number Capital is not material. State taxes phone number   In general, capital is not a material income-producing factor if the income of the business consists principally of fees, commissions, or other compensation for personal services performed by members or employees of the partnership. State taxes phone number Capital interest. State taxes phone number   A capital interest in a partnership is an interest in its assets that is distributable to the owner of the interest in either of the following situations. State taxes phone number The owner withdraws from the partnership. State taxes phone number The partnership liquidates. State taxes phone number   The mere right to share in earnings and profits is not a capital interest in the partnership. State taxes phone number Gift of capital interest. State taxes phone number   If a family member (or any other person) receives a gift of a capital interest in a partnership in which capital is a material income-producing factor, the donee's distributive share of partnership income is subject to both of the following restrictions. State taxes phone number It must be figured by reducing the partnership income by reasonable compensation for services the donor renders to the partnership. State taxes phone number The donee's distributive share of partnership income attributable to donated capital must not be proportionately greater than the donor's distributive share attributable to the donor's capital. State taxes phone number Purchase. State taxes phone number   For purposes of determining a partner's distributive share, an interest purchased by one family member from another family member is considered a gift from the seller. State taxes phone number The fair market value of the purchased interest is considered donated capital. State taxes phone number For this purpose, members of a family include only spouses, ancestors, and lineal descendants (or a trust for the primary benefit of those persons). State taxes phone number Example. State taxes phone number A father sold 50% of his business to his son. State taxes phone number The resulting partnership had a profit of $60,000. State taxes phone number Capital is a material income-producing factor. State taxes phone number The father performed services worth $24,000, which is reasonable compensation, and the son performed no services. State taxes phone number The $24,000 must be allocated to the father as compensation. State taxes phone number Of the remaining $36,000 of profit due to capital, at least 50%, or $18,000, must be allocated to the father since he owns a 50% capital interest. State taxes phone number The son's share of partnership profit cannot be more than $18,000. State taxes phone number Business owned and operated by spouses. State taxes phone number   If spouses carry on a business together and share in the profits and losses, they may be partners whether or not they have a formal partnership agreement. State taxes phone number If so, they should report income or loss from the business on Form 1065. State taxes phone number They should not report the income on a Schedule C (Form 1040) in the name of one spouse as a sole proprietor. State taxes phone number However, the spouses can elect not to treat the joint venture as a partnership by making a Qualified Joint Venture Election. State taxes phone number Qualified Joint Venture Election. State taxes phone number   A "qualified joint venture," whose only members are spouses filing a joint return, can elect not to be treated as a partnership for federal tax purposes. State taxes phone number A qualified joint venture conducts a trade or business where: the only members of the joint venture are spouses filing jointly; both spouses elect not to be treated as a partnership; both spouses materially participate in the trade or business (see Passive Activity Limitations in the Instructions for Form 1065 for a definition of material participation); and the business is co-owned by both spouses and is not held in the name of a state law entity such as a partnership or LLC. State taxes phone number   Under this election, a qualified joint venture conducted by spouses who file a joint return is not treated as a partnership for federal tax purposes and therefore does not have a Form 1065 filing requirement. State taxes phone number All items of income, gain, deduction, loss, and credit are divided between the spouses based on their respective interests in the venture. State taxes phone number Each spouse takes into account his or her respective share of these items as a sole proprietor. State taxes phone number Each spouse would account for his or her respective share on the appropriate form, such as Schedule C (Form 1040). State taxes phone number For purposes of determining net earnings from self-employment, each spouse's share of income or loss from a qualified joint venture is taken into account just as it is for federal income tax purposes (i. State taxes phone number e. State taxes phone number , based on their respective interests in the venture). State taxes phone number   If the spouses do not make the election to treat their respective interests in the joint venture as sole proprietorships, each spouse should carry his or her share of the partnership income or loss from Schedule K-1 (Form 1065) to their joint or separate Form(s) 1040. State taxes phone number Each spouse should include his or her respective share of self-employment income on a separate Schedule SE (Form 1040), Self-Employment Tax. State taxes phone number   This generally does not increase the total tax on the return, but it does give each spouse credit for social security earnings on which retirement benefits are based. State taxes phone number However, this may not be true if either spouse exceeds the social security tax limitation. State taxes phone number   For more information on qualified joint ventures, go to IRS. State taxes phone number gov, enter “Election for Qualified Joint Ventures” in the search box and select the link reading “Election for Husband and Wife Unincorporated Businesses. State taxes phone number ” Partnership Agreement The partnership agreement includes the original agreement and any modifications. State taxes phone number The modifications must be agreed to by all partners or adopted in any other manner provided by the partnership agreement. State taxes phone number The agreement or modifications can be oral or written. State taxes phone number Partners can modify the partnership agreement for a particular tax year after the close of the year but not later than the date for filing the partnership return for that year. State taxes phone number This filing date does not include any extension of time. State taxes phone number If the partnership agreement or any modification is silent on any matter, the provisions of local law are treated as part of the agreement. State taxes phone number Terminating a Partnership A partnership terminates when one of the following events takes place. State taxes phone number All its operations are discontinued and no part of any business, financial operation, or venture is continued by any of its partners in a partnership. State taxes phone number At least 50% of the total interest in partnership capital and profits is sold or exchanged within a 12-month period, including a sale or exchange to another partner. State taxes phone number Unlike other partnerships, an electing large partnership does not terminate on the sale or exchange of 50% or more of the partnership interests within a 12-month period. State taxes phone number See section 1. State taxes phone number 708-1(b) of the regulations for more information on the termination of a partnership. State taxes phone number For special rules that apply to a merger, consolidation, or division of a partnership, see sections 1. State taxes phone number 708-1(c) and 1. State taxes phone number 708-1(d) of the regulations. State taxes phone number Date of termination. State taxes phone number   The partnership's tax year ends on the date of termination. State taxes phone number For the event described in (1), above, the date of termination is the date the partnership completes the winding up of its affairs. State taxes phone number For the event described in (2), above, the date of termination is the date of the sale or exchange of a partnership interest that, by itself or together with other sales or exchanges in the preceding 12 months, transfers an interest of 50% or more in both capital and profits. State taxes phone number Short period return. State taxes phone number   If a partnership is terminated before the end of what would otherwise be its tax year, Form 1065 must be filed for the short period, which is the period from the beginning of the tax year through the date of termination. State taxes phone number The return is due the 15th day of the fourth month following the date of termination. State taxes phone number See Partnership Return (Form 1065), later, for information about filing Form 1065. State taxes phone number Conversion of partnership into limited liability company (LLC). State taxes phone number   The conversion of a partnership into an LLC classified as a partnership for federal tax purposes does not terminate the partnership. State taxes phone number The conversion is not a sale, exchange, or liquidation of any partnership interest; the partnership's tax year does not close; and the LLC can continue to use the partnership's taxpayer identification number. State taxes phone number   However, the conversion may change some of the partners' bases in their partnership interests if the partnership has recourse liabilities that become nonrecourse liabilities. State taxes phone number Because the partners share recourse and nonrecourse liabilities differently, their bases must be adjusted to reflect the new sharing ratios. State taxes phone number If a decrease in a partner's share of liabilities exceeds the partner's basis, he or she must recognize gain on the excess. State taxes phone number For more information, see Effect of Partnership Liabilities under Basis of Partner's Interest, later. State taxes phone number   The same rules apply if an LLC classified as a partnership is converted into a partnership. State taxes phone number IRS e-file (Electronic Filing) Please click here for the text description of the image. State taxes phone number e-file Certain partnerships with more than 100 partners are required to file Form 1065, Schedules K-1, and related forms and schedules electronically (e-file). State taxes phone number Other partnerships generally have the option to file electronically. State taxes phone number For details about IRS e-file, see the Form 1065 instructions. State taxes phone number Exclusion From Partnership Rules Certain partnerships that do not actively conduct a business can choose to be completely or partially excluded from being treated as partnerships for federal income tax purposes. State taxes phone number All the partners must agree to make the choice, and the partners must be able to compute their own taxable income without computing the partnership's income. State taxes phone number However, the partners are not exempt from the rule that limits a partner's distributive share of partnership loss to the adjusted basis of the partner's partnership interest. State taxes phone number Nor are they exempt from the requirement of a business purpose for adopting a tax year for the partnership that differs from its required tax year. State taxes phone number Investing partnership. State taxes phone number   An investing partnership can be excluded if the participants in the joint purchase, retention, sale, or exchange of investment property meet all the following requirements. State taxes phone number They own the property as co-owners. State taxes phone number They reserve the right separately to take or dispose of their shares of any property acquired or retained. State taxes phone number They do not actively conduct business or irrevocably authorize some person acting in a representative capacity to purchase, sell, or exchange the investment property. State taxes phone number Each separate participant can delegate authority to purchase, sell, or exchange his or her share of the investment property for the time being for his or her account, but not for a period of more than a year. State taxes phone number Operating agreement partnership. State taxes phone number   An operating agreement partnership group can be excluded if the participants in the joint production, extraction, or use of property meet all the following requirements. State taxes phone number They own the property as co-owners, either in fee or under lease or other form of contract granting exclusive operating rights. State taxes phone number They reserve the right separately to take in kind or dispose of their shares of any property produced, extracted, or used. State taxes phone number They do not jointly sell services or the property produced or extracted. State taxes phone number Each separate participant can delegate authority to sell his or her share of the property produced or extracted for the time being for his or her account, but not for a period of time in excess of the minimum needs of the industry, and in no event for more than one year. State taxes phone number However, this exclusion does not apply to an unincorporated organization one of whose principal purposes is cycling, manufacturing, or processing for persons who are not members of the organization. State taxes phone number Electing the exclusion. State taxes phone number   An eligible organization that wishes to be excluded from the partnership rules must make the election not later than the time for filing the partnership return for the first tax year for which exclusion is desired. State taxes phone number This filing date includes any extension of time. State taxes phone number See Regulations section 1. State taxes phone number 761-2(b) for the procedures to follow. State taxes phone number Partnership Return (Form 1065) Every partnership that engages in a trade or business or has gross income must file an information return on Form 1065 showing its income, deductions, and other required information. State taxes phone number The partnership return must show the names and addresses of each partner and each partner's distributive share of taxable income. State taxes phone number The return must be signed by a general partner. State taxes phone number If a limited liability company is treated as a partnership, it must file Form 1065 and one of its members must sign the return. State taxes phone number A partnership is not considered to engage in a trade or business, and is not required to file a Form 1065, for any tax year in which it neither receives income nor pays or incurs any expenses treated as deductions or credits for federal income tax purposes. State taxes phone number See the Instructions for Form 1065 for more information about who must file Form 1065. State taxes phone number Partnership Distributions Partnership distributions include the following. State taxes phone number A withdrawal by a partner in anticipation of the current year's earnings. State taxes phone number A distribution of the current year's or prior years' earnings not needed for working capital. State taxes phone number A complete or partial liquidation of a partner's interest. State taxes phone number A distribution to all partners in a complete liquidation of the partnership. State taxes phone number A partnership distribution is not taken into account in determining the partner's distributive share of partnership income or loss. State taxes phone number If any gain or loss from the distribution is recognized by the partner, it must be reported on his or her return for the tax year in which the distribution is received. State taxes phone number Money or property withdrawn by a partner in anticipation of the current year's earnings is treated as a distribution received on the last day of the partnership's tax year. State taxes phone number Effect on partner's basis. State taxes phone number   A partner's adjusted basis in his or her partnership interest is decreased (but not below zero) by the money and adjusted basis of property distributed to the partner. State taxes phone number See Adjusted Basis under Basis of Partner's Interest, later. State taxes phone number Effect on partnership. State taxes phone number   A partnership generally does not recognize any gain or loss because of distributions it makes to partners. State taxes phone number The partnership may be able to elect to adjust the basis of its undistributed property. State taxes phone number Certain distributions treated as a sale or exchange. State taxes phone number   When a partnership distributes the following items, the distribution may be treated as a sale or exchange of property rather than a distribution. State taxes phone number Unrealized receivables or substantially appreciated inventory items distributed in exchange for any part of the partner's interest in other partnership property, including money. State taxes phone number Other property (including money) distributed in exchange for any part of a partner's interest in unrealized receivables or substantially appreciated inventory items. State taxes phone number   See Payments for Unrealized Receivables and Inventory Items under Disposition of Partner's Interest, later. State taxes phone number   This treatment does not apply to the following distributions. State taxes phone number A distribution of property to the partner who contributed the property to the partnership. State taxes phone number Payments made to a retiring partner or successor in interest of a deceased partner that are the partner's distributive share of partnership income or guaranteed payments. State taxes phone number Substantially appreciated inventory items. State taxes phone number   Inventory items of the partnership are considered to have appreciated substantially in value if, at the time of the distribution, their total fair market value is more than 120% of the partnership's adjusted basis for the property. State taxes phone number However, if a principal purpose for acquiring inventory property is to avoid ordinary income treatment by reducing the appreciation to less than 120%, that property is excluded. State taxes phone number Partner's Gain or Loss A partner generally recognizes gain on a partnership distribution only to the extent any money (and marketable securities treated as money) included in the distribution exceeds the adjusted basis of the partner's interest in the partnership. State taxes phone number Any gain recognized is generally treated as capital gain from the sale of the partnership interest on the date of the distribution. State taxes phone number If partnership property (other than marketable securities treated as money) is distributed to a partner, he or she generally does not recognize any gain until the sale or other disposition of the property. State taxes phone number For exceptions to these rules, see Distribution of partner's debt and Net precontribution gain, later. State taxes phone number Also, see Payments for Unrealized Receivables and Inventory Items under Disposition of Partner's Interest, later. State taxes phone number Example. State taxes phone number The adjusted basis of Jo's partnership interest is $14,000. State taxes phone number She receives a distribution of $8,000 cash and land that has an adjusted basis of $2,000 and a fair market value of $3,000. State taxes phone number Because the cash received does not exceed the basis of her partnership interest, Jo does not recognize any gain on the distribution. State taxes phone number Any gain on the land will be recognized when she sells or otherwise disposes of it. State taxes phone number The distribution decreases the adjusted basis of Jo's partnership interest to $4,000 [$14,000 − ($8,000 + $2,000)]. State taxes phone number Marketable securities treated as money. State taxes phone number   Generally, a marketable security distributed to a partner is treated as money in determining whether gain is recognized on the distribution. State taxes phone number This treatment, however, does not generally apply if that partner contributed the security to the partnership or an investment partnership made the distribution to an eligible partner. State taxes phone number   The amount treated as money is the security's fair market value when distributed, reduced (but not below zero) by the excess (if any) of: The partner's distributive share of the gain that would be recognized had the partnership sold all its marketable securities at their fair market value immediately before the transaction resulting in the distribution, over The partner's distributive share of the gain that would be recognized had the partnership sold all such securities it still held after the distribution at the fair market value in (1). State taxes phone number   For more information, including the definition of marketable securities, see section 731(c) of the Internal Revenue Code. State taxes phone number Loss on distribution. State taxes phone number   A partner does not recognize loss on a partnership distribution unless all the following requirements are met. State taxes phone number The adjusted basis of the partner's interest in the partnership exceeds the distribution. State taxes phone number The partner's entire interest in the partnership is liquidated. State taxes phone number The distribution is in money, unrealized receivables, or inventory items. State taxes phone number   There are exceptions to these general rules. State taxes phone number See the following discussions. State taxes phone number Also, see Liquidation at Partner's Retirement or Death under Disposition of Partner's Interest, later. State taxes phone number Distribution of partner's debt. State taxes phone number   If a partnership acquires a partner's debt and extinguishes the debt by distributing it to the partner, the partner will recognize capital gain or loss to the extent the fair market value of the debt differs from the basis of the debt (determined under the rules discussed in Partner's Basis for Distributed Property, later). State taxes phone number   The partner is treated as having satisfied the debt for its fair market value. State taxes phone number If the issue price (adjusted for any premium or discount) of the debt exceeds its fair market value when distributed, the partner may have to include the excess amount in income as canceled debt. State taxes phone number   Similarly, a deduction may be available to a corporate partner if the fair market value of the debt at the time of distribution exceeds its adjusted issue price. State taxes phone number Net precontribution gain. State taxes phone number   A partner generally must recognize gain on the distribution of property (other than money) if the partner contributed appreciated property to the partnership during the 7-year period before the distribution. State taxes phone number   The gain recognized is the lesser of the following amounts. State taxes phone number The excess of: The fair market value of the property received in the distribution, over The adjusted basis of the partner's interest in the partnership immediately before the distribution, reduced (but not below zero) by any money received in the distribution. State taxes phone number The “net precontribution gain” of the partner. State taxes phone number This is the net gain the partner would recognize if all the property contributed by the partner within 7 years of the distribution, and held by the partnership immediately before the distribution, were distributed to another partner, other than a partner who owns more than 50% of the partnership. State taxes phone number For information about the distribution of contributed property to another partner, see Contribution of Property , under Transactions Between Partnership and Partners, later. State taxes phone number   The character of the gain is determined by reference to the character of the net precontribution gain. State taxes phone number This gain is in addition to any gain the partner must recognize if the money distributed is more than his or her basis in the partnership. State taxes phone number For these rules, the term “money” includes marketable securities treated as money, as discussed earlier. State taxes phone number Effect on basis. State taxes phone number   The adjusted basis of the partner's interest in the partnership is increased by any net precontribution gain recognized by the partner. State taxes phone number Other than for purposes of determining the gain, the increase is treated as occurring immediately before the distribution. State taxes phone number See Basis of Partner's Interest , later. State taxes phone number   The partnership must adjust its basis in any property the partner contributed within 7 years of the distribution to reflect any gain that partner recognizes under this rule. State taxes phone number Exceptions. State taxes phone number   Any part of a distribution that is property the partner previously contributed to the partnership is not taken into account in determining the amount of the excess distribution or the partner's net precontribution gain. State taxes phone number For this purpose, the partner's previously contributed property does not include a contributed interest in an entity to the extent its value is due to property contributed to the entity after the interest was contributed to the partnership. State taxes phone number   Recognition of gain under this rule also does not apply to a distribution of unrealized receivables or substantially appreciated inventory items if the distribution is treated as a sale or exchange, as discussed earlier. State taxes phone number Partner's Basis for Distributed Property Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed to the partner by a partnership is its adjusted basis to the partnership immediately before the distribution. State taxes phone number However, the basis of the property to the partner cannot be more than the adjusted basis of his or her interest in the partnership reduced by any money received in the same transaction. State taxes phone number Example 1. State taxes phone number The adjusted basis of Emily's partnership interest is $30,000. State taxes phone number She receives a distribution of property that has an adjusted basis of $20,000 to the partnership and $4,000 in cash. State taxes phone number Her basis for the property is $20,000. State taxes phone number Example 2. State taxes phone number The adjusted basis of Steve's partnership interest is $10,000. State taxes phone number He receives a distribution of $4,000 cash and property that has an adjusted basis to the partnership of $8,000. State taxes phone number His basis for the distributed property is limited to $6,000 ($10,000 − $4,000, the cash he receives). State taxes phone number Complete liquidation of partner's interest. State taxes phone number   The basis of property received in complete liquidation of a partner's interest is the adjusted basis of the partner's interest in the partnership reduced by any money distributed to the partner in the same transaction. State taxes phone number Partner's holding period. State taxes phone number   A partner's holding period for property distributed to the partner includes the period the property was held by the partnership. State taxes phone number If the property was contributed to the partnership by a partner, then the period it was held by that partner is also included. State taxes phone number Basis divided among properties. State taxes phone number   If the basis of property received is the adjusted basis of the partner's interest in the partnership (reduced by money received in the same transaction), it must be divided among the properties distributed to the partner. State taxes phone number For property distributed after August 5, 1997, allocate the basis using the following rules. State taxes phone number Allocate the basis first to unrealized receivables and inventory items included in the distribution by assigning a basis to each item equal to the partnership's adjusted basis in the item immediately before the distribution. State taxes phone number If the total of these assigned bases exceeds the allocable basis, decrease the assigned bases by the amount of the excess. State taxes phone number Allocate any remaining basis to properties other than unrealized receivables and inventory items by assigning a basis to each property equal to the partnership's adjusted basis in the property immediately before the distribution. State taxes phone number If the allocable basis exceeds the total of these assigned bases, increase the assigned bases by the amount of the excess. State taxes phone number If the total of these assigned bases exceeds the allocable basis, decrease the assigned bases by the amount of the excess. State taxes phone number Allocating a basis increase. State taxes phone number   Allocate any basis increase required in rule (2), above, first to properties with unrealized appreciation to the extent of the unrealized appreciation. State taxes phone number If the basis increase is less than the total unrealized appreciation, allocate it among those properties in proportion to their respective amounts of unrealized appreciation. State taxes phone number Allocate any remaining basis increase among all the properties in proportion to their respective fair market values. State taxes phone number Example. State taxes phone number Eun's basis in her partnership interest is $55,000. State taxes phone number In a distribution in liquidation of her entire interest, she receives properties A and B, neither of which is inventory or unrealized receivables. State taxes phone number Property A has an adjusted basis to the partnership of $5,000 and a fair market value of $40,000. State taxes phone number Property B has an adjusted basis to the partnership of $10,000 and a fair market value of $10,000. State taxes phone number To figure her basis in each property, Eun first assigns bases of $5,000 to property A and $10,000 to property B (their adjusted bases to the partnership). State taxes phone number This leaves a $40,000 basis increase (the $55,000 allocable basis minus the $15,000 total of the assigned bases). State taxes phone number She first allocates $35,000 to property A (its unrealized appreciation). State taxes phone number The remaining $5,000 is allocated between the properties based on their fair market values. State taxes phone number $4,000 ($40,000/$50,000) is allocated to property A and $1,000 ($10,000/$50,000) is allocated to property B. State taxes phone number Eun's basis in property A is $44,000 ($5,000 + $35,000 + $4,000) and her basis in property B is $11,000 ($10,000 + $1,000). State taxes phone number Allocating a basis decrease. State taxes phone number   Use the following rules to allocate any basis decrease required in rule (1) or rule (2), earlier. State taxes phone number Allocate the basis decrease first to items with unrealized depreciation to the extent of the unrealized depreciation. State taxes phone number If the basis decrease is less than the total unrealized depreciation, allocate it among those items in proportion to their respective amounts of unrealized depreciation. State taxes phone number Allocate any remaining basis decrease among all the items in proportion to their respective assigned basis amounts (as decreased in (1)). State taxes phone number Example. State taxes phone number Armando's basis in his partnership interest is $20,000. State taxes phone number In a distribution in liquidation of his entire interest, he receives properties C and D, neither of which is inventory or unrealized receivables. State taxes phone number Property C has an adjusted basis to the partnership of $15,000 and a fair market value of $15,000. State taxes phone number Property D has an adjusted basis to the partnership of $15,000 and a fair market value of $5,000. State taxes phone number To figure his basis in each property, Armando first assigns bases of $15,000 to property C and $15,000 to property D (their adjusted bases to the partnership). State taxes phone number This leaves a $10,000 basis decrease (the $30,000 total of the assigned bases minus the $20,000 allocable basis). State taxes phone number He allocates the entire $10,000 to property D (its unrealized depreciation). State taxes phone number Armando's basis in property C is $15,000 and his basis in property D is $5,000 ($15,000 − $10,000). State taxes phone number Distributions before August 6, 1997. State taxes phone number   For property distributed before August 6, 1997, allocate the basis using the following rules. State taxes phone number Allocate the basis first to unrealized receivables and inventory items included in the distribution to the extent of the partnership's adjusted basis in those items. State taxes phone number If the partnership's adjusted basis in those items exceeded the allocable basis, allocate the basis among the items in proportion to their adjusted bases to the partnership. State taxes phone number Allocate any remaining basis to other distributed properties in proportion to their adjusted bases to the partnership. State taxes phone number Partner's interest more than partnership basis. State taxes phone number   If the basis of a partner's interest to be divided in a complete liquidation of the partner's interest is more than the partnership's adjusted basis for the unrealized receivables and inventory items distributed, and if no other property is distributed to which the partner can apply the remaining basis, the partner has a capital loss to the extent of the remaining basis of the partnership interest. State taxes phone number Special adjustment to basis. State taxes phone number   A partner who acquired any part of his or her partnership interest in a sale or exchange or upon the death of another partner may be able to choose a special basis adjustment for property distributed by the partnership. State taxes phone number To choose the special adjustment, the partner must have received the distribution within 2 years after acquiring the partnership interest. State taxes phone number Also, the partnership must not have chosen the optional adjustment to basis when the partner acquired the partnership interest. State taxes phone number   If a partner chooses this special basis adjustment, the partner's basis for the property distributed is the same as it would have been if the partnership had chosen the optional adjustment to basis. State taxes phone number However, this assigned basis is not reduced by any depletion or depreciation that would have been allowed or allowable if the partnership had previously chosen the optional adjustment. State taxes phone number   The choice must be made with the partner's tax return for the year of the distribution if the distribution includes any property subject to depreciation, depletion, or amortization. State taxes phone number If the choice does not have to be made for the distribution year, it must be made with the return for the first year in which the basis of the distributed property is pertinent in determining the partner's income tax. State taxes phone number   A partner choosing this special basis adjustment must attach a statement to his or her tax return that the partner chooses under section 732(d) of the Internal Revenue Code to adjust the basis of property received in a distribution. State taxes phone number The statement must show the computation of the special basis adjustment for the property distributed and list the properties to which the adjustment has been allocated. State taxes phone number Example. State taxes phone number Chin Ho purchased a 25% interest in X partnership for $17,000 cash. State taxes phone number At the time of the purchase, the partnership owned inventory having a basis to the partnership of $14,000 and a fair market value of $16,000. State taxes phone number Thus, $4,000 of the $17,000 he paid was attributable to his share of inventory with a basis to the partnership of $3,500. State taxes phone number Within 2 years after acquiring his interest, Chin Ho withdrew from the partnership and for his entire interest received cash of $1,500, inventory with a basis to the partnership of $3,500, and other property with a basis of $6,000. State taxes phone number The value of the inventory received was 25% of the value of all partnership inventory. State taxes phone number (It is immaterial whether the inventory he received was on hand when he acquired his interest. State taxes phone number ) Since the partnership from which Chin Ho withdrew did not make the optional adjustment to basis, he chose to adjust the basis of the inventory received. State taxes phone number His share of the partnership's basis for the inventory is increased by $500 (25% of the $2,000 difference between the $16,000 fair market value of the inventory and its $14,000 basis to the partnership at the time he acquired his interest). State taxes phone number The adjustment applies only for purposes of determining his new basis in the inventory, and not for purposes of partnership gain or loss on disposition. State taxes phone number The total to be allocated among the properties Chin Ho received in the distribution is $15,500 ($17,000 basis of his interest − $1,500 cash received). State taxes phone number His basis in the inventory items is $4,000 ($3,500 partnership basis + $500 special adjustment). State taxes phone number The remaining $11,500 is allocated to his new basis for the other property he received. State taxes phone number Mandatory adjustment. State taxes phone number   A partner does not always have a choice of making this special adjustment to basis. State taxes phone number The special adjustment to basis must be made for a distribution of property (whether or not within 2 years after the partnership interest was acquired) if all the following conditions existed when the partner received the partnership interest. State taxes phone number The fair market value of all partnership property (other than money) was more than 110% of its adjusted basis to the partnership. State taxes phone number If there had been a liquidation of the partner's interest immediately after it was acquired, an allocation of the basis of that interest under the general rules (discussed earlier under Basis divided among properties) would have decreased the basis of property that could not be depreciated, depleted, or amortized and increased the basis of property that could be. State taxes phone number The optional basis adjustment, if it had been chosen by the partnership, would have changed the partner's basis for the property actually distributed. State taxes phone number Required statement. State taxes phone number   Generally, if a partner chooses a special basis adjustment and notifies the partnership, or if the partnership makes a distribution for which the special basis adjustment is mandatory, the partnership must provide a statement to the partner. State taxes phone number The statement must provide information necessary for the partner to compute the special basis adjustment. State taxes phone number Marketable securities. State taxes phone number   A partner's basis in marketable securities received in a partnership distribution, as determined in the preceding discussions, is increased by any gain recognized by treating the securities as money. State taxes phone number See Marketable securities treated as money under Partner's Gain or Loss, earlier. State taxes phone number The basis increase is allocated among the securities in proportion to their respective amounts of unrealized appreciation before the basis increase. State taxes phone number Transactions Between Partnership and Partners For certain transactions between a partner and his or her partnership, the partner is treated as not being a member of the partnership. State taxes phone number These transactions include the following. State taxes phone number Performing services for, or transferring property to, a partnership if: There is a related allocation and distribution to a partner, and The entire transaction, when viewed together, is properly characterized as occurring between the partnership and a partner not acting in the capacity of a partner. State taxes phone number Transferring money or other property to a partnership if: There is a related transfer of money or other property by the partnership to the contributing partner or another partner, and The transfers together are properly characterized as a sale or exchange of property. State taxes phone number Payments by accrual basis partnership to cash basis partner. State taxes phone number   A partnership that uses an accrual method of accounting cannot deduct any business expense owed to a cash basis partner until the amount is paid. State taxes phone number However, this rule does not apply to guaranteed payments made to a partner, which are generally deductible when accrued. State taxes phone number Guaranteed Payments Guaranteed payments are those made by a partnership to a partner that are determined without regard to the partnership's income. State taxes phone number A partnership treats guaranteed payments for services, or for the use of capital, as if they were made to a person who is not a partner. State taxes phone number This treatment is for purposes of determining gross income and deductible business expenses only. State taxes phone number For other tax purposes, guaranteed payments are treated as a partner's distributive share of ordinary income. State taxes phone number Guaranteed payments are not subject to income tax withholding. State taxes phone number The partnership generally deducts guaranteed payments on line 10 of Form 1065 as a business expense. State taxes phone number They are also listed on Schedules K and K-1 of the partnership return. State taxes phone number The individual partner reports guaranteed payments on Schedule E (Form 1040) as ordinary income, along with his or her distributive share of the partnership's other ordinary income. State taxes phone number Guaranteed payments made to partners for organizing the partnership or syndicating interests in the partnership are capital expenses. State taxes phone number Generally, organizational and syndication expenses are not deductible by the partnership. State taxes phone number However, a partnership can elect to deduct a portion of its organizational expenses and amortize the remaining expenses (see Business start-up and organizational costs in the Instructions for Form 1065). State taxes phone number Organizational expenses (if the election is not made) and syndication expenses paid to partners must be reported on the partners' Schedule K-1 as guaranteed payments. State taxes phone number Minimum payment. State taxes phone number   If a partner is to receive a minimum payment from the partnership, the guaranteed payment is the amount by which the minimum payment is more than the partner's distributive share of the partnership income before taking into account the guaranteed payment. State taxes phone number Example. State taxes phone number Under a partnership agreement, Divya is to receive 30% of the partnership income, but not less than $8,000. State taxes phone number The partnership has net income of $20,000. State taxes phone number Divya's share, without regard to the minimum guarantee, is $6,000 (30% × $20,000). State taxes phone number The guaranteed payment that can be deducted by the partnership is $2,000 ($8,000 − $6,000). State taxes phone number Divya's income from the partnership is $8,000, and the remaining $12,000 of partnership income will be reported by the other partners in proportion to their shares under the partnership agreement. State taxes phone number If the partnership net income had been $30,000, there would have been no guaranteed payment since her share, without regard to the guarantee, would have been greater than the guarantee. State taxes phone number Self-employed health insurance premiums. State taxes phone number   Premiums for health insurance paid by a partnership on behalf of a partner, for services as a partner, are treated as guaranteed payments. State taxes phone number The partnership can deduct the payments as a business expense, and the partner must include them in gross income. State taxes phone number However, if the partnership accounts for insurance paid for a partner as a reduction in distributions to the partner, the partnership cannot deduct the premiums. State taxes phone number   A partner who qualifies can deduct 100% of the health insurance premiums paid by the partnership on his or her behalf as an adjustment to income. State taxes phone number The partner cannot deduct the premiums for any calendar month, or part of a month, in which the partner is eligible to participate in any subsidized health plan maintained by any employer of the partner, the partner's spouse, the partner's dependents, or any children under age 27 who are not dependents. State taxes phone number For more information on the self-employed health insurance deduction, see chapter 6 in Publication 535. State taxes phone number Including payments in partner's income. State taxes phone number   Guaranteed payments are included in income in the partner's tax year in which the partnership's tax year ends. State taxes phone number Example 1. State taxes phone number Under the terms of a partnership agreement, Erica is entitled to a fixed annual payment of $10,000 without regard to the income of the partnership. State taxes phone number Her distributive share of the partnership income is 10%. State taxes phone number The partnership has $50,000 of ordinary income after deducting the guaranteed payment. State taxes phone number She must include ordinary income of $15,000 ($10,000 guaranteed payment + $5,000 ($50,000 × 10%) distributive share) on her individual income tax return for her tax year in which the partnership's tax year ends. State taxes phone number Example 2. State taxes phone number Lamont is a calendar year taxpayer who is a partner in a partnership. State taxes phone number The partnership uses a fiscal year that ended January 31, 2013. State taxes phone number Lamont received guaranteed payments from the partnership from February 1, 2012, until December 31, 2012. State taxes phone number He must include these guaranteed payments in income for 2013 and report them on his 2013 income tax return. State taxes phone number Payments resulting in loss. State taxes phone number   If guaranteed payments to a partner result in a partnership loss in which the partner shares, the partner must report the full amount of the guaranteed payments as ordinary income. State taxes phone number The partner separately takes into account his or her distributive share of the partnership loss, to the extent of the adjusted basis of the partner's partnership interest. State taxes phone number Sale or Exchange of Property Special rules apply to a sale or exchange of property between a partnership and certain persons. State taxes phone number Losses. State taxes phone number   Losses will not be allowed from a sale or exchange of property (other than an interest in the partnership) directly or indirectly between a partnership and a person whose direct or indirect interest in the capital or profits of the partnership is more than 50%. State taxes phone number   If the sale or exchange is between two partnerships in which the same persons directly or indirectly own more than 50% of the capital or profits interests in each partnership, no deduction of a loss is allowed. State taxes phone number   The basis of each partner's interest in the partnership is decreased (but not below zero) by the partner's share of the disallowed loss. State taxes phone number   If the purchaser later sells the property, only the gain realized that is greater than the loss not allowed will be taxable. State taxes phone number If any gain from the sale of the property is not recognized because of this rule, the basis of each partner's interest in the partnership is increased by the partner's share of that gain. State taxes phone number Gains. State taxes phone number   Gains are treated as ordinary income in a sale or exchange of property directly or indirectly between a person and a partnership, or between two partnerships, if both of the following tests are met. State taxes phone number More than 50% of the capital or profits interest in the partnership(s) is directly or indirectly owned by the same person(s). State taxes phone number The property in the hands of the transferee immediately after the transfer is not a capital asset. State taxes phone number Property that is not a capital asset includes accounts receivable, inventory, stock-in-trade, and depreciable or real property used in a trade or business. State taxes phone number More than 50% ownership. State taxes phone number   To determine if there is more than 50% ownership in partnership capital or profits, the following rules apply. State taxes phone number An interest directly or indirectly owned by, or for, a corporation, partnership, estate, or trust is considered to be owned proportionately by, or for, its shareholders, partners, or beneficiaries. State taxes phone number An individual is considered to own the interest directly or indirectly owned by, or for, the individual's family. State taxes phone number For this rule, “family” includes only brothers, sisters, half-brothers, half-sisters, spouses, ancestors, and lineal descendants. State taxes phone number If a person is considered to own an interest using rule (1), that person (the “constructive owner”) is treated as if actually owning that interest when rules (1) and (2) are applied. State taxes phone number However, if a person is considered to own an interest using rule (2), that person is not treated as actually owning that interest in reapplying rule (2) to make another person the constructive owner. State taxes phone number Example. State taxes phone number Individuals A and B and Trust T are equal partners in Partnership ABT. State taxes phone number A's husband, AH, is the sole beneficiary of Trust T. State taxes phone number Trust T's partnership interest will be attributed to AH only for the purpose of further attributing the interest to A. State taxes phone number As a result, A is a more-than-50% partner. State taxes phone number This means that any deduction for losses on transactions between her and ABT will not be allowed, and gain from property that in the hands of the transferee is not a capital asset is treated as ordinary, rather than capital, gain. State taxes phone number More information. State taxes phone number   For more information on these special rules, see Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. State taxes phone number Contribution of Property Usually, neither the partner nor the partnership recognizes a gain or loss when property is contributed to the partnership in exchange for a partnership interest. State taxes phone number This applies whether a partnership is being formed or is already operating. State taxes phone number The partnership's holding period for the property includes the partner's holding period. State taxes phone number The contribution of limited partnership interests in one partnership for limited partnership interests in another partnership qualifies as a tax-free contribution of property to the second partnership if the transaction is made for business purposes. State taxes phone number The exchange is not subject to the rules explained later under Disposition of Partner's Interest. State taxes phone number Disguised sales. State taxes phone number   A contribution of money or other property to the partnership followed by a distribution of different property from the partnership to the partner is treated not as a contribution and distribution, but as a sale of property, if both of the following tests are met. State taxes phone number The distribution would not have been made but for the contribution. State taxes phone number The partner's right to the distribution does not depend on the success of partnership operations. State taxes phone number   All facts and circumstances are considered in determining if the contribution and distribution are more properly characterized as a sale. State taxes phone number However, if the contribution and distribution occur within 2 years of each other, the transfers are presumed to be a sale unless the facts clearly indicate that the transfers are not a sale. State taxes phone number If the contribution and distribution occur more than 2 years apart, the transfers are presumed not to be a sale unless the facts clearly indicate that the transfers are a sale. State taxes phone number Form 8275 required. State taxes phone number   A partner must attach Form 8275, Disclosure Statement, (or other statement) to his or her return if the partner contributes property to a partnership and, within 2 years (before or after the contribution), the partnership transfers money or other consideration to the partner. State taxes phone number For exceptions to this requirement, see section 1. State taxes phone number 707-3(c)(2) of the regulations. State taxes phone number   A partnership must attach Form 8275 (or other statement) to its return if it distributes property to a partner, and, within 2 years (before or after the distribution), the partner transfers money or other consideration to the partnership. State taxes phone number   Form 8275 must include the following information. State taxes phone number A caption identifying the statement as a disclosure under section 707 of the Internal Revenue Code. State taxes phone number A description of the transferred property or money, including its value. State taxes phone number A description of any relevant facts in determining if the transfers are properly viewed as a disguised sale. State taxes phone number See section 1. State taxes phone number 707-3(b)(2) of the regulations for a description of the facts and circumstances considered in determining if the transfers are a disguised sale. State taxes phone number Contribution to partnership treated as investment company. State taxes phone number   Gain is recognized when property is contributed (in exchange for an interest in the partnership) to a partnership that would be treated as an investment company if it were incorporated. State taxes phone number   A partnership is generally treated as an investment company if over 80% of the value of its assets is held for investment and consists of certain readily marketable items. State taxes phone number These items include money, stocks and other equity interests in a corporation, and interests in regulated investment companies and real estate investment trusts. State taxes phone number For more information, see section 351(e)(1) of the Internal Revenue Code and the related regulations. State taxes phone number Whether a partnership is treated as an investment company under this test is ordinarily determined immediately after the transfer of property. State taxes phone number   This rule applies to limited partnerships and general partnerships, regardless of whether they are privately formed or publicly syndicated. State taxes phone number Contribution to foreign partnership. State taxes phone number   A domestic partnership that contributed property after August 5, 1997, to a foreign partnership in exchange for a partnership interest may have to file Form 8865 if either of the following apply. State taxes phone number Immediately after the contribution, the partnership owned, directly or indirectly, at least a 10% interest in the foreign partnership. State taxes phone number The fair market value of the property contributed to the foreign partnership, when added to other contributions of property made to the partnership during the preceding 12-month period, is greater than $100,000. State taxes phone number   The partnership may also have to file Form 8865, even if no contributions are made during the tax year, if it owns a 10% or more interest in a foreign partnership at any time during the year. State taxes phone number See the form instructions for more information. State taxes phone number Basis of contributed property. State taxes phone number   If a partner contributes property to a partnership, the partnership's basis for determining depreciation, depletion, gain, or loss for the property is the same as the partner's adjusted basis for the property when it was contributed, increased by any gain recognized by the partner at the time of contribution. State taxes phone number Allocations to account for built-in gain or loss. State taxes phone number   The fair market value of property at the time it is contributed may be different from the partner's adjusted basis. State taxes phone number The partnership must allocate among the partners any income, deduction, gain, or loss on the property in a manner that will account for the difference. State taxes phone number This rule also applies to contributions of accounts payable and other accrued but unpaid items of a cash basis partner. State taxes phone number   The partnership can use different allocation methods for different items of contributed property. State taxes phone number A single reasonable method must be consistently applied to each item, and the overall method or combination of methods must be reasonable. State taxes phone number See section 1. State taxes phone number 704-3 of the regulations for allocation methods generally considered reasonable. State taxes phone number   If the partnership sells contributed property and recognizes gain or loss, built-in gain or loss is allocated to the contributing partner. State taxes phone number If contributed property is subject to depreciation or other cost recovery, the allocation of deductions for these items takes into account built-in gain or loss on the property. State taxes phone number However, the total depreciation, depletion, gain, or loss allocated to partners cannot be more than the depreciation or depletion allowable to the partnership or the gain or loss realized by the partnership. State taxes phone number Example. State taxes phone number Areta and Sofia formed an equal partnership. State taxes phone number Areta contributed $10,000 in cash to the partnership and Sofia contributed depreciable property with a fair market value of $10,000 and an adjusted basis of $4,000. State taxes phone number The partnership's basis for depreciation is limited to the adjusted basis of the property in Sofia's hands, $4,000. State taxes phone number In effect, Areta purchased an undivided one-half interest in the depreciable property with her contribution of $10,000. State taxes phone number Assuming that the depreciation rate is 10% a year under the General Depreciation System (GDS), she would have been entitled to a depreciation deduction of $500 per year, based on her interest in the partnership, if the adjusted basis of the property equaled its fair market value when contributed. State taxes phone number To simplify this example, the depreciation deductions are determined without regard to any first-year depreciation conventions. State taxes phone number However, since the partnership is allowed only $400 per year of depreciation (10% of $4,000), no more than $400 can be allocated between the partners. State taxes phone number The entire $400 must be allocated to Areta. State taxes phone number Distribution of contributed property to another partner. State taxes phone number   If a partner contributes property to a partnership and the partnership distributes the property to another partner within 7 years of the contribution, the contributing partner must recognize gain or loss on the distribution. State taxes phone number   The recognized gain or loss is the amount the contributing partner would have recognized if the property had been sold for its fair market value when it was distributed. State taxes phone number This amount is the difference between the property's basis and its fair market value at the time of contribution. State taxes phone number The character of the gain or loss will be the same as the character of the gain or loss that would have resulted if the partnership had sold the property to the distributee partner. State taxes phone number Appropriate adjustments must be made to the adjusted basis of the contributing partner's partnership interest and to the adjusted basis of the property distributed to reflect the recognized gain or loss. State taxes phone number Disposition of certain contributed property. State taxes phone number   The following rules determine the character of the partnership's gain or loss on a disposition of certain types of contributed property. State taxes phone number Unrealized receivables. State taxes phone number If the property was an unrealized receivable in the hands of the contributing partner, any gain or loss on its disposition by the partnership is ordinary income or loss. State taxes phone number Unrealized receivables are defined later under Payments for Unrealized Receivables and Inventory Items. State taxes phone number When reading the definition, substitute “partner” for “partnership. State taxes phone number ” Inventory items. State taxes phone number If the property was an inventory item in the hands of the contributing partner, any gain or loss on its disposition by the partnership within 5 years after the contribution is ordinary income or loss. State taxes phone number Inventory items are defined later in Payments for Unrealized Receivables and Inventory Items. State taxes phone number Capital loss property. State taxes phone number If the property was a capital asset in the contributing partner's hands, any loss on its disposition by the partnership within 5 years after the contribution is a capital loss. State taxes phone number The capital loss is limited to the amount by which the partner's adjusted basis for the property exceeded the property's fair market value immediately before the contribution. State taxes phone number Substituted basis property. State taxes phone number If the disposition of any of the property listed in (1), (2), or (3) is a nonrecognition transaction, these rules apply when the recipient of the property disposes of any substituted basis property (other than certain corporate stock) resulting from the transaction. State taxes phone number Contribution of Services A partner can acquire an interest in partnership capital or profits as compensation for services performed or to be performed. State taxes phone number Capital interest. State taxes phone number   A capital interest is an interest that would give the holder a share of the proceeds if the partnership's assets were sold at fair market value and the proceeds were distributed in a complete liquidation of the partnership. State taxes phone number This determination generally is made at the time of receipt of the partnership interest. State taxes phone number The fair market value of such an interest received by a partner as compensation for services must generally be included in the partner's gross income in the first tax year in which the partner can transfer the interest or the interest is not subject to a substantial risk of forfeiture. State taxes phone number The capital interest transferred as compensation for services is subject to the rules for restricted property discussed in Publication 525 under Employee Compensation. State taxes phone number   The fair market value of an interest in partnership capital transferred to a partner as payment for services to the partnership is a guaranteed payment, discussed earlier. State taxes phone number Profits interest. State taxes phone number   A profits interest is a partnership interest other than a capital interest. State taxes phone number If a person receives a profits interest for providing services to, or for the benefit of, a partnership in a partner capacity or in anticipation of being a partner, the receipt of such an interest is not a taxable event for the partner or the partnership. State taxes phone number However, this does not apply in the following situations. State taxes phone number The profits interest relates to a substantially certain and predictable stream of income from partnership assets, such as income from high-quality debt securities or a high-quality net lease. State taxes phone number Within 2 years of receipt, the partner disposes of the profits interest. State taxes phone number The profits interest is a limited partnership interest in a publicly traded partnership. State taxes phone number   A profits interest transferred as compensation for services is not subject to the rules for restricted property that apply to capital interests. State taxes phone number Basis of Partner's Interest The basis of a partnership interest is the money plus the adjusted basis of any property the partner contributed. State taxes phone number If the partner must recognize gain as a result of the contribution, this gain is included in the basis of his or her interest. State taxes phone number Any increase in a partner's individual liabilities because of an assumption of partnership liabilities is considered a contribution of money to the partnership by the partner. State taxes phone number Interest acquired by gift, etc. State taxes phone number   If a partner acquires an interest in a partnership by gift, inheritance, or under any circumstance other than by a contribution of money or property to the partnership, the partner's basis must be determined using the basis rules described in Publication 551. State taxes phone number Adjusted Basis There is a worksheet for adjusting the basis of a partner's interest in the partnership in the Partner's Instructions for Schedule K-1 (Form 1065). State taxes phone number The basis of an interest in a partnership is increased or decreased by certain items. State taxes phone number Increases. State taxes phone number   A partner's basis is increased by the following items. State taxes phone number The partner's additional contributions to the partnership, including an increased share of, or assumption of, partnership liabilities. State taxes phone number The partner's distributive share of taxable and nontaxable partnership income. State taxes phone number The partner's distributive share of the excess of the deductions for depletion over the basis of the depletable property, unless the property is oil or gas wells whose basis has been allocated to partners. State taxes phone number Decreases. State taxes phone number   The partner's basis is decreased (but never below zero) by the following items. State taxes phone number The money (including a decreased share of partnership liabilities or an assumption of the partner's individual liabilities by the partnership) and adjusted basis of property distributed to the partner by the partnership. State taxes phone number The partner's distributive share of the partnership losses (including capital losses). State taxes phone number The partner's distributive share of nondeductible partnership expenses that are not capital expenditures. State taxes phone number This includes the partner's share of any section 179 expenses, even if the partner cannot deduct the entire amount on his or her individual income tax return. State taxes phone number The partner's deduction for depletion for any partnership oil and gas wells, up to the proportionate share of the adjusted basis of the wells allocated to the partner. State taxes phone number Partner's liabilities assumed by partnership. State taxes phone number   If contributed property is subject to a debt or if a partner's liabilities are assumed by the partnership, the basis of that partner's interest is reduced (but not below zero) by the liability assumed by the other partners. State taxes phone number This partner must reduce his or her basis because the assumption of the liability is treated as a distribution of money to that partner. State taxes phone number The other partners' assumption of the liability is treated as a contribution by them of money to the partnership. State taxes phone number See Effect of Partnership Liabilities , later. State taxes phone number Example 1. State taxes phone number Ivan acquired a 20% interest in a partnership by contributing property that had an adjusted basis to him of $8,000 and a $4,000 mortgage. State taxes phone number The partnership assumed payment of the mortgage. State taxes phone number The basis of Ivan's interest is: Adjusted basis of contributed property $8,000 Minus: Part of mortgage assumed by other partners (80% × $4,000) 3,200 Basis of Ivan's partnership interest $4,800 Example 2. State taxes phone number If, in Example 1, the contributed property had a $12,000 mortgage, the basis of Ivan's partnership interest would be zero. State taxes phone number The $1,600 difference between the mortgage assumed by the other partners, $9,600 (80% × $12,000), and his basis of $8,000 would be treated as capital gain from the sale or exchange of a partnership interest. State taxes phone number However, this gain would not increase the basis of his partnership interest. State taxes phone number Book value of partner's interest. State taxes phone number   The adjusted basis of a partner's interest is determined without considering any amount shown in the partnership books as a capital, equity, or similar account. State taxes phone number Example. State taxes phone number Enzo contributes to his partnership property that has an adjusted basis of $400 and a fair market value of $1,000. State taxes phone number His partner contributes $1,000 cash. State taxes phone number While each partner has increased his capital account by $1,000, which will be re
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A Brief Overview of Depreciation

Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property. It is an annual allowance for the wear and tear, deterioration, or obsolescence of the property.

Most types of tangible property (except, land), such as buildings, machinery, vehicles, furniture, and equipment are depreciable. Likewise, certain intangible property, such as patents, copyrights, and computer software is depreciable.

In order for a taxpayer to be allowed a depreciation deduction for a property, the property must meet all the following requirements:

  • The taxpayer must own the property. Taxpayers may also depreciate any capital improvements for property the taxpayer leases.
  • A taxpayer must use the property in business or in an income-producing activity. If a taxpayer uses a property for business and for personal purposes, the taxpayer can only deduct depreciation based only on the business use of that property.
  • The property must have a determinable useful life of more than one year.

Even if a taxpayer meets the preceding requirements for a property, a taxpayer cannot depreciate the following property:

  • Property placed in service and disposed of in same year.
  • Equipment used to build capital improvements. A taxpayer must add otherwise allowable depreciation on the equipment during the period of construction to the basis of the improvements.
  • Certain term interests.

Depreciation begins when a taxpayer places property in service for use in a trade or business or for the production of income. The property ceases to be depreciable when the taxpayer has fully recovered the property’s cost or other basis or when the taxpayer retires it from service, whichever happens first.

A taxpayer must identify several items to ensure the proper depreciation of a property, including:

  • The depreciation method for the property
  • The class life of the asset
  • Whether the property is “Listed Property”
  • Whether the taxpayer elects to expense any portion of the asset
  • Whether the taxpayer qualifies for any “bonus” first year depreciation
  • The depreciable basis of the property

The Modified Accelerated Cost Recovery System (MACRS) is the proper depreciation method for most property. Additional information about MACRS, and the other components of depreciation are in Publication 946, How to Depreciate Property.

A taxpayer must use Form 4562, Depreciation and Amortization, to report depreciation on a tax return. Form 4562 is divided into six sections and the Instructions for Form 4562 contain information on how, and when to fill out each section.

Page Last Reviewed or Updated: 16-Sep-2013

The State Taxes Phone Number

State taxes phone number Publication 907 - Main Content Table of Contents IncomeDependent Care Benefits Social Security and Railroad Retirement Benefits Disability Pensions Military and Government Disability Pensions Other Payments Itemized DeductionsMedical Expenses Impairment-Related Work Expenses Tax CreditsChild and Dependent Care Credit Credit for the Elderly or the Disabled Earned Income Credit Household Employers Business Tax Incentives How To Get Tax Help Income All income is taxable unless it is specifically excluded by law. State taxes phone number The following discussions highlight some income items (both taxable and nontaxable) that are of particular interest to people with disabilities and those who care for people with disabilities. State taxes phone number Dependent Care Benefits Dependent care benefits include: Amounts your employer paid directly to either you or your care provider for the care of your qualifying person(s) while you worked, The fair market value of care in a daycare facility provided or sponsored by your employer, and Pre-tax contributions you made under a dependent care flexible spending arrangement. State taxes phone number Exclusion or deduction. State taxes phone number   If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. State taxes phone number Your employer can tell you whether your benefit plan qualifies. State taxes phone number To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. State taxes phone number You cannot use Form 1040EZ. State taxes phone number   If you are self-employed and receive benefits from a qualified dependent care benefit plan, you are treated as both employer and employee. State taxes phone number Therefore, you would not get an exclusion from wages. State taxes phone number Instead, you would get a deduction on Form 1040, Schedule C, line 14; Schedule E, line 19 or 28; or Schedule F, line 15. State taxes phone number To claim the deduction, you must use Form 2441. State taxes phone number   The amount you can exclude or deduct is limited to the smallest of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). State taxes phone number Statement for employee. State taxes phone number   Your employer must give you a Form W-2 (or similar statement), showing in box 10 the total amount of dependent care benefits provided to you during the year under a qualified plan. State taxes phone number Your employer will also include any dependent care benefits over $5,000 in your wages shown on your Form W-2 in box 1. State taxes phone number Qualifying person(s). State taxes phone number   A qualifying person is: A qualifying child who is under age 13 whom you can claim as a dependent. State taxes phone number If the child turned 13 during the year, the child is a qualifying person for the part of the year he or she was under age 13. State taxes phone number Your disabled spouse who is not physically or mentally able to care for himself or herself. State taxes phone number Any disabled person who was not physically or mentally able to care for himself or herself whom you can claim as a dependent (or could claim as a dependent except that the person had gross income of $3,900 or more or filed a joint return). State taxes phone number Any disabled person who was not physically or mentally able to care for himself or herself whom you could claim as a dependent except that you (or your spouse if filing jointly) could be claimed as a dependent on another taxpayer's 2013 return. State taxes phone number For information about excluding benefits on Form 1040, Form 1040NR, or Form 1040A, see Form 2441 and its instructions. State taxes phone number Social Security and Railroad Retirement Benefits If you received social security or equivalent Tier 1 railroad retirement (RRTA) benefits during the year, part of the amount you received may be taxable. State taxes phone number Are any of your benefits taxable?   If the only income you received during the year was your social security or equivalent Tier 1 railroad retirement (RRTA) benefits, your benefits generally are not taxable. State taxes phone number   If you received income during the year in addition to social security or equivalent Tier 1 railroad retirement (RRTA) benefits, part of your benefits may be taxable if all of your other income, including tax-exempt interest, plus half of your benefits are more than: $25,000 if you are single, head of household, or qualifying widow(er), $25,000 if you are married filing separately and lived apart from your spouse for all of 2013, $32,000 if you are married filing jointly, or $-0- if you are married filing separately and lived with your spouse at any time during 2013. State taxes phone number   For more information, see the instructions for Form 1040, lines 20a and 20b, or Form 1040A, lines 14a and 14b. State taxes phone number Publication 915, Social Security and Equivalent Railroad Retirement Benefits, contains more detailed information. State taxes phone number Supplemental security income (SSI) payments. State taxes phone number   Social security benefits do not include SSI payments, which are not taxable. State taxes phone number Do not include these payments in your income. State taxes phone number Disability Pensions If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. State taxes phone number You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A until you reach minimum retirement age. State taxes phone number Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. State taxes phone number You may be entitled to a tax credit if you were permanently and totally disabled when you retired. State taxes phone number For information on this credit, see Publication 524, Credit for the Elderly or the Disabled. State taxes phone number Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. State taxes phone number Report the payments on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. State taxes phone number For more information on pensions and annuities, see Publication 575, Pension and Annuity Income. State taxes phone number Retirement and profit-sharing plans. State taxes phone number   If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat the payments as a disability pension. State taxes phone number The payments must be reported as a pension or annuity. State taxes phone number Accrued leave payment. State taxes phone number   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. State taxes phone number The payment is not a disability payment. State taxes phone number Include it in your income in the tax year you receive it. State taxes phone number See Publication 525, Taxable and Nontaxable Income, for more information. State taxes phone number Military and Government Disability Pensions Generally, you must report disability pensions as income, but do not include certain military and government disability pensions. State taxes phone number For information about military and government disability pensions, see Publication 525. State taxes phone number VA disability benefits. State taxes phone number   Do not include disability benefits you receive from the Department of Veterans Affairs (VA) in your gross income. State taxes phone number If you are a military retiree and do not receive your disability benefits from the VA, see Publication 525 for more information. State taxes phone number   Do not include in your income any veterans' benefits paid under any law, regulation, or administrative practice administered by the VA. State taxes phone number These include: Education, training, and subsistence allowances, Disability compensation and pension payments for disabilities paid either to veterans or their families, Grants for homes designed for wheelchair living, Grants for motor vehicles for veterans who lost their sight or the use of their limbs, Veterans' insurance proceeds and dividends paid either to veterans or their beneficiaries, including the proceeds of a veteran's endowment policy paid before death, Interest on insurance dividends left on deposit with the VA, Benefits under a dependent-care assistance program, The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001, or Payments made under the VA's compensated work therapy program. State taxes phone number Other Payments You may receive other payments that are related to your disability. State taxes phone number The following payments are not taxable. State taxes phone number Benefit payments from a public welfare fund, such as payments due to blindness. State taxes phone number Workers' compensation for an occupational sickness or injury if paid under a workers' compensation act or similar law. State taxes phone number Compensatory (but not punitive) damages for physical injury or physical sickness. State taxes phone number Disability benefits under a “no-fault” car insurance policy for loss of income or earning capacity as a result of injuries. State taxes phone number Compensation for permanent loss or loss of use of a part or function of your body, or for your permanent disfigurement. State taxes phone number Long-Term Care Insurance Long-term care insurance contracts generally are treated as accident and health insurance contracts. State taxes phone number Amounts you receive from them (other than policyholder dividends or premium refunds) generally are excludable from income as amounts received for personal injury or sickness. State taxes phone number More detailed information can be found in Publication 525. State taxes phone number Accelerated Death Benefits You can exclude from income accelerated death benefits you receive on the life of an insured individual if certain requirements are met. State taxes phone number Accelerated death benefits are amounts received under a life insurance contract before the death of the insured. State taxes phone number These benefits also include amounts received on the sale or assignment of the contract to a viatical settlement provider. State taxes phone number This exclusion applies only if the insured was a terminally ill individual or a chronically ill individual. State taxes phone number For more information, see Publication 525. State taxes phone number Itemized Deductions If you file Form 1040, you generally can either claim the standard deduction or itemize your deductions. State taxes phone number You must use Schedule A (Form 1040) to itemize your deductions. State taxes phone number See your form instructions for information on the standard deduction and the deductions you can itemize. State taxes phone number The following discussions highlight some itemized deductions that are of particular interest to persons with disabilities. State taxes phone number Medical Expenses When figuring your deduction for medical expenses, you can generally include medical and dental expenses you pay for yourself, your spouse, and your dependents. State taxes phone number Medical expenses are the cost of diagnosis, cure, mitigation, treatment, or prevention of disease and the costs for treatments affecting any part or function of the body. State taxes phone number They include the costs of equipment, supplies, diagnostic devices, and transportation for needed medical care and payments for medical insurance. State taxes phone number You can deduct only the amount of your medical and dental expenses that is more than 10% (7. State taxes phone number 5% if either you or your spouse was born before January 2, 1949) of your adjusted gross income shown on Form 1040, line 38. State taxes phone number The following list highlights some of the medical expenses you can include in figuring your medical expense deduction. State taxes phone number For more detailed information, see Publication 502, Medical and Dental Expenses (Including the Health Coverage Tax Credit). State taxes phone number Artificial limbs, contact lenses, eyeglasses, and hearing aids. State taxes phone number The part of the cost of Braille books and magazines that is more than the price of regular printed editions. State taxes phone number Cost and repair of special telephone equipment for hearing-impaired persons. State taxes phone number Cost and maintenance of a wheelchair or a three-wheel motor vehicle commercially known as an “autoette. State taxes phone number ” Cost and care of a guide dog or other animal aiding a person with a physical disability. State taxes phone number Costs for a school that furnishes special education if a principal reason for using the school is its resources for relieving a mental or physical disability. State taxes phone number This includes the cost of teaching Braille and lip reading and the cost of remedial language training to correct a condition caused by a birth defect. State taxes phone number Premiums for qualified long-term care insurance, up to certain amounts. State taxes phone number Improvements to a home that do not increase its value if the main purpose is medical care. State taxes phone number An example is constructing entrance or exit ramps. State taxes phone number Improvements that increase a home's value, if the main purpose is medical care, may be partly included as a medical expense. State taxes phone number See Publication 502 for more information. State taxes phone number Impairment-Related Work Expenses If you are disabled, you can take a business deduction for expenses that are necessary for you to be able to work. State taxes phone number If you take a business deduction for these impairment-related work expenses, they are not subject to the 10% (7. State taxes phone number 5% if you or your spouse is age 65 or older) limit that applies to medical expenses. State taxes phone number You are disabled if you have: A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed, or A physical or mental impairment (including, but not limited to, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working. State taxes phone number Impairment-related expenses defined. State taxes phone number   Impairment-related expenses are those ordinary and necessary business expenses that are: Necessary for you to do your work satisfactorily, For goods and services not required or used, other than incidentally, in your personal activities, and Not specifically covered under other income tax laws. State taxes phone number Publication 502 contains more detailed information. State taxes phone number Tax Credits This discussion highlights three tax credits that may be of interest to people with disabilities and those who care for people with disabilities. State taxes phone number Child and Dependent Care Credit If you pay someone to care for either your dependent under age 13 or your spouse or dependent who is not able to care for himself or herself, you may be able to get a credit of up to 35% of your expenses. State taxes phone number To qualify, you must pay these expenses so you can work or look for work. State taxes phone number The care must be provided for: Your qualifying child who is your dependent and who was under age 13 when the care was provided, Your spouse who was not physically or mentally able to care for himself or herself and lived with you for more than half the year, or A person who was not physically or mentally able to care for himself or herself, lived with you for more than half the year, and either: Was your dependent, or Would have been your dependent except that: He or she received gross income of $3,900 or more, He or she filed a joint return, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. State taxes phone number You can claim the credit on Form 1040 or 1040A. State taxes phone number You cannot claim the credit on Form 1040EZ or Form 1040NR-EZ. State taxes phone number You figure the credit on Form 2441. State taxes phone number For more information, see the instructions for Form 1040, line 48, or Form 1040A, line 29. State taxes phone number Publication 503, Child and Dependent Care Expenses, contains more detailed information. State taxes phone number Credit for the Elderly or the Disabled You may be able to claim this credit if you are a U. State taxes phone number S. State taxes phone number citizen or a resident alien and either of the following apply. State taxes phone number You were 65 or older at the end of 2013, You were under 65 at the end of 2013, and retired on permanent or total disability. State taxes phone number You can claim the credit on Form 1040 or 1040A. State taxes phone number You figure the credit on Schedule R. State taxes phone number For more information, see the instructions for Form 1040, line 53, or Form 1040A, line 30. State taxes phone number Publication 524, Credit for the Elderly or the Disabled, contains more detailed information. State taxes phone number Earned Income Credit This credit is based on the amount of your earned income. State taxes phone number You can get the credit if your adjusted gross income for 2013 is less than: $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, or $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children. State taxes phone number To figure the credit, use the worksheet in the instructions for Form 1040, 1040A, or 1040EZ. State taxes phone number If you have a qualifying child, also complete Schedule EIC, Earned Income Credit, and attach it to your Form 1040 or 1040A. State taxes phone number You cannot use Form 1040EZ if you have a qualifying child. State taxes phone number Qualifying child. State taxes phone number   To be a qualifying child, your child must be younger than you (or your spouse if married filing jointly) and under age 19 or a full-time student under age 24 at the end of 2013, or permanently and totally disabled at any time during 2013, regardless of age. State taxes phone number Earned income. State taxes phone number   If you are retired on disability, benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. State taxes phone number However, payments you received from a disability insurance policy that you paid the premiums for are not earned income. State taxes phone number More information. State taxes phone number   For more information, including all the requirements to claim the earned income credit, see the instructions for Form 1040, line 64a; Form 1040A, line 38a; or Form 1040EZ, line 8a. State taxes phone number Publication 596, Earned Income Credit (EIC), contains more detailed information. State taxes phone number Household Employers If you pay someone to work in your home, such as a babysitter or housekeeper, you may be a household employer who has to pay employment taxes. State taxes phone number A person you hire through an agency is not your employee if the agency controls what work is done and how it is done. State taxes phone number This control could include setting the fee, requiring regular reports, and providing rules of conduct and appearance. State taxes phone number In this case you do not have to pay employment taxes on the amount you pay. State taxes phone number But if you control what work is done and how it is done, the worker is your employee. State taxes phone number If you possess the right to discharge a worker, that worker is generally considered to be your employee. State taxes phone number If a worker is your employee, it does not matter that you hired the worker through an agency or from a list provided by an agency. State taxes phone number To find out if you have to pay employment taxes, see Publication 926, Household Employer's Tax Guide For Wages Paid in 2013. State taxes phone number Business Tax Incentives If you own or operate a business, or you are looking for work, you should be aware of the following tax incentives for businesses to help persons with disabilities. State taxes phone number Deduction for costs of removing barriers to the disabled and the elderly—This is a deduction a business can take for making a facility or public transportation vehicle more accessible to and usable by persons who are disabled or elderly. State taxes phone number For more information, see chapter 7 of Publication 535, Business Expenses. State taxes phone number Disabled access credit—This is a nonrefundable tax credit for an eligible small business that pays or incurs expenses to provide access to persons with disabilities. State taxes phone number The expenses must be to enable the eligible small business to comply with the Americans With Disabilities Act of 1990. State taxes phone number See Form 8826, Disabled Access Credit, for more information. State taxes phone number Work opportunity credit—This credit provides businesses with an incentive to hire individuals from targeted groups that have a particularly high unemployment rate or other special employment needs. State taxes phone number One targeted group consists of vocational rehabilitation referrals. State taxes phone number These are individuals who have a physical or mental disability that results in a substantial handicap to employment. State taxes phone number See Form 5884, Work Opportunity Credit. State taxes phone number How To Get Tax Help Go online, use a smart phone, call or walk in to an office near you. State taxes phone number Whether it's help with a tax issue, preparing your tax return or picking up a free publication or form, get the help you need the way you want it. State taxes phone number Free help with your tax return. State taxes phone number   Free help in preparing your return is available nationwide from IRS-certified volunteers. State taxes phone number The Volunteer Income Tax Assistance (VITA) program is designed to help low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers. State taxes phone number The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. State taxes phone number 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. State taxes phone number Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. State taxes phone number To find the nearest VITA or TCE site, visit IRS. State taxes phone number gov or call 1-800-906-9887. State taxes phone number   As part of the TCE program, AARP offers the Tax-Aide counseling program. State taxes phone number To find the nearest AARP Tax-Aide site, visit AARP's website at www. State taxes phone number aarp. State taxes phone number org/money/taxaide or call 1-888-227-7669. State taxes phone number   For more information on these programs, go to IRS. State taxes phone number gov and enter “VITA” in the search box. State taxes phone number Internet. State taxes phone number IRS. State taxes phone number gov and IRS2Go are ready when you are — every day, every night, 24 hours a day, 7 days a week. State taxes phone number Apply for an Employer Identification Number (EIN). State taxes phone number Go to IRS. State taxes phone number gov and enter Apply for an EIN in the search box. State taxes phone number Request an Electronic Filing PIN by going to IRS. State taxes phone number gov and entering Electronic Filing PIN in the search box. State taxes phone number Check the status of your 2013 refund with Where's My Refund? Go to IRS. State taxes phone number gov or the IRS2Go app, and click on Where's My Refund? You'll get a personalized refund date as soon as the IRS processes your tax return and approves your refund. State taxes phone number If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. State taxes phone number Check the status of your amended return. State taxes phone number Go to IRS. State taxes phone number gov and enter Where's My Amended Return in the search box. State taxes phone number Download forms, instructions, and publications, including some accessible versions. State taxes phone number Order free transcripts of your tax returns or tax account using the Order a Transcript tool on IRS. State taxes phone number gov or IRS2Go. State taxes phone number Tax return and tax account transcripts are generally available for the current year and past three years. State taxes phone number Figure your income tax withholding with the IRS Withholding Calculator on IRS. State taxes phone number gov. State taxes phone number Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. State taxes phone number Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. State taxes phone number gov. State taxes phone number Locate the nearest Taxpayer Assistance Center using the Office Locator tool on IRS. State taxes phone number gov or IRS2Go. State taxes phone number Stop by most business days for face-to-face tax help, no appointment necessary — just walk in. State taxes phone number An employee can explain IRS letters, request adjustments to your tax account or help you set up a payment plan. State taxes phone number Before you visit, check the Office Locator for the address, phone number, hours of operation and the services provided. State taxes phone number If you have an ongoing tax account problem or a special need, such as a disability, you can request an appointment. State taxes phone number Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. State taxes phone number Locate the nearest volunteer help site with the VITA Locator Tool on IRS. State taxes phone number gov. State taxes phone number Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. State taxes phone number The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. State taxes phone number Most VITA and TCE sites offer free electronic filing and some provide IRS-certified volunteers who can help prepare your tax return. State taxes phone number AARP offers the Tax-Aide counseling program as part of the TCE program. State taxes phone number Visit AARP's website to find the nearest Tax-Aide location. State taxes phone number Research your tax questions. State taxes phone number Search publications and instructions by topic or keyword. State taxes phone number Read the Internal Revenue Code, regulations, or other official guidance. State taxes phone number Read Internal Revenue Bulletins. State taxes phone number Sign up to receive local and national tax news by email. State taxes phone number Phone. State taxes phone number You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. State taxes phone number Download the free IRS2Go mobile app from the iTunes app store or from Google Play. State taxes phone number Use it to watch the IRS YouTube channel, get IRS news as soon as it's released to the public, order transcripts of your tax returns or tax account, check your refund status, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. State taxes phone number Call to locate the nearest volunteer help site, 1-800-906-9887. State taxes phone number Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. State taxes phone number The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. State taxes phone number Most VITA and TCE sites offer free electronic filing. State taxes phone number Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. State taxes phone number Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. State taxes phone number Call to check the status of your 2013 refund, 1-800-829-1954 or 1-800-829-4477. State taxes phone number The automated Where's My Refund? information is available 24 hours a day, 7 days a week. State taxes phone number If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. State taxes phone number Before you call, have your 2013 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. State taxes phone number Where's My Refund? can give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. State taxes phone number Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. State taxes phone number Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. State taxes phone number Call to order forms, instructions and publications, 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). State taxes phone number You should receive your order within 10 business days. State taxes phone number Call to order transcripts of your tax returns or tax account, 1-800-908-9946. State taxes phone number Follow the prompts to provide your Social Security Number or Individual Taxpayer Identification Number, date of birth, street address and ZIP code. State taxes phone number Call for TeleTax topics, 1-800-829-4477, to listen to pre-recorded messages covering various tax topics. State taxes phone number Call to ask tax questions, 1-800-829-1040. State taxes phone number Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. State taxes phone number The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. State taxes phone number These individuals can also contact the IRS through relay services such as the Federal Relay Service available at www. State taxes phone number gsa. State taxes phone number gov/fedrelay. State taxes phone number Walk-in. State taxes phone number You can find a selection of forms, publications and services — in-person, face-to-face. State taxes phone number Products. State taxes phone number You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. State taxes phone number Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. State taxes phone number Services. State taxes phone number You can walk in to your local TAC most business days for personal, face-to-face tax help. State taxes phone number An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. State taxes phone number 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. State taxes phone number No appointment is necessary—just walk in. State taxes phone number Before visiting, check www. State taxes phone number irs. State taxes phone number gov/localcontacts for hours of operation and services provided. State taxes phone number Mail. State taxes phone number You can send your order for forms, instructions, and publications to the address below. State taxes phone number You should receive a response within 10 business days after your request is received. State taxes phone number  Internal Revenue Service 1201 N. State taxes phone number Mitsubishi Motorway Bloomington, IL 61705-6613 The Taxpayer Advocate Service Is Here to Help You. State taxes phone number   The Taxpayer Advocate Service (TAS) is your voice at the IRS. State taxes phone number Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. State taxes phone number What can TAS do for you?   We can offer you free help with IRS problems that you can't resolve on your own. State taxes phone number We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. State taxes phone number You face (or your business is facing) an immediate threat of adverse action. State taxes phone number You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. State taxes phone number   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. State taxes phone number Here's why we can help: TAS is an independent organization within the IRS. State taxes phone number Our advocates know how to work with the IRS. State taxes phone number Our services are free and tailored to meet your needs. State taxes phone number We have offices in every state, the District of Columbia, and Puerto Rico. State taxes phone number How can you reach us?   If you think TAS can help you, call your local advocate, whose number is in your local directory and at www. State taxes phone number irs. State taxes phone number gov/advocate, or call us toll-free at 1-877-777-4778. State taxes phone number How else does TAS help taxpayers?   TAS also works to resolve large-scale, systemic problems that affect many taxpayers. State taxes phone number If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. State taxes phone number irs. State taxes phone number gov/sams. State taxes phone number Low Income Taxpayer Clinics. State taxes phone number   Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. State taxes phone number Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. State taxes phone number Visit www. State taxes phone number TaxpayerAdvocate. State taxes phone number irs. State taxes phone number gov or see IRS Publication 4134, Low Income Taxpayer Clinic List. State taxes phone number Prev  Up  Next   Home   More Online Publications