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Tax Forms 1040ez

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Tax Forms 1040ez

Tax forms 1040ez 5. Tax forms 1040ez   Additional Rules for Listed Property Table of Contents Introduction Useful Items - You may want to see: What Is Listed Property?Passenger Automobiles Other Property Used for Transportation Computers and Related Peripheral Equipment Can Employees Claim a Deduction? What Is the Business-Use Requirement?How To Allocate Use Qualified Business Use Recapture of Excess Depreciation Lessee's Inclusion Amount Do the Passenger Automobile Limits Apply?Maximum Depreciation Deduction Deductions After the Recovery Period Deductions For Passenger Automobiles Acquired in a Trade-in What Records Must Be Kept?Adequate Records How Is Listed Property Information Reported? Introduction This chapter discusses the deduction limits and other special rules that apply to certain listed property. Tax forms 1040ez Listed property includes cars and other property used for transportation, property used for entertainment, and certain computers. Tax forms 1040ez Deductions for listed property (other than certain leased property) are subject to the following special rules and limits. Tax forms 1040ez Deduction for employees. Tax forms 1040ez If your use of the property is not for your employer's convenience or is not required as a condition of your employment, you cannot deduct depreciation or rent expenses for your use of the property as an employee. Tax forms 1040ez Business-use requirement. Tax forms 1040ez If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. Tax forms 1040ez In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. Tax forms 1040ez You may also have to recapture (include in income) any excess depreciation claimed in previous years. Tax forms 1040ez A similar inclusion amount applies to certain leased property. Tax forms 1040ez Passenger automobile limits and rules. Tax forms 1040ez Annual limits apply to depreciation deductions (including section 179 deductions and any special depreciation allowance) for certain passenger automobiles. Tax forms 1040ez You can continue to deduct depreciation for the unrecovered basis resulting from these limits after the end of the recovery period. Tax forms 1040ez This chapter defines listed property and explains the special rules and depreciation deduction limits that apply, including the special inclusion amount rule for leased property. Tax forms 1040ez It also discusses the recordkeeping rules for listed property and explains how to report information about the property on your tax return. Tax forms 1040ez Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. Tax forms 1040ez What Is Listed Property? Listed property is any of the following. Tax forms 1040ez Passenger automobiles (as defined later). Tax forms 1040ez Any other property used for transportation, unless it is an excepted vehicle. Tax forms 1040ez Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video-recording equipment). Tax forms 1040ez Computers and related peripheral equipment, unless used only at a regular business establishment and owned or leased by the person operating the establishment. Tax forms 1040ez A regular business establishment includes a portion of a dwelling unit that is used both regularly and exclusively for business as discussed in Publication 587. Tax forms 1040ez Improvements to listed property. Tax forms 1040ez   An improvement made to listed property that must be capitalized is treated as a new item of depreciable property. Tax forms 1040ez The recovery period and method of depreciation that apply to the listed property as a whole also apply to the improvement. Tax forms 1040ez For example, if you must depreciate the listed property using the straight line method, you also must depreciate the improvement using the straight line method. Tax forms 1040ez Passenger Automobiles A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (6,000 pounds or less of gross vehicle weight for trucks and vans). Tax forms 1040ez It includes any part, component, or other item physically attached to the automobile at the time of purchase or usually included in the purchase price of an automobile. Tax forms 1040ez The following vehicles are not considered passenger automobiles for these purposes. Tax forms 1040ez An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business. Tax forms 1040ez A vehicle used directly in the trade or business of transporting persons or property for pay or hire. Tax forms 1040ez A truck or van that is a qualified nonpersonal use vehicle. Tax forms 1040ez Qualified nonpersonal use vehicles. Tax forms 1040ez   Qualified nonpersonal use vehicles are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Tax forms 1040ez They include the trucks and vans listed as excepted vehicles under Other Property Used for Transportation , next. Tax forms 1040ez They also include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Tax forms 1040ez For a detailed discussion of passenger automobiles, including leased passenger automobiles, see  Publication 463. Tax forms 1040ez Other Property Used for Transportation Although vehicles used to transport persons or property for pay or hire and vehicles rated at more than the 6,000-pound threshold are not passenger automobiles, they are still “other property used for transportation” and are subject to the special rules for listed property. Tax forms 1040ez Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles used to transport persons or goods. Tax forms 1040ez Excepted vehicles. Tax forms 1040ez   Other property used for transportation does not include the following qualified nonpersonal use vehicles (defined earlier under Passenger Automobiles ). Tax forms 1040ez Clearly marked police and fire vehicles. Tax forms 1040ez Unmarked vehicles used by law enforcement officers if the use is officially authorized. Tax forms 1040ez Ambulances used as such and hearses used as such. Tax forms 1040ez Any vehicle with a loaded gross vehicle weight of over 14,000 pounds that is designed to carry cargo. Tax forms 1040ez Bucket trucks (cherry pickers), cement mixers, dump trucks (including garbage trucks), flatbed trucks, and refrigerated trucks. Tax forms 1040ez Combines, cranes and derricks, and forklifts. Tax forms 1040ez Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat. Tax forms 1040ez Qualified moving vans. Tax forms 1040ez Qualified specialized utility repair trucks. Tax forms 1040ez School buses used in transporting students and employees of schools. Tax forms 1040ez Other buses with a capacity of at least 20 passengers that are used as passenger buses. Tax forms 1040ez Tractors and other special purpose farm vehicles. Tax forms 1040ez Clearly marked police and fire vehicle. Tax forms 1040ez   A clearly marked police or fire vehicle is a vehicle that meets all the following requirements. Tax forms 1040ez It is owned or leased by a governmental unit or an agency or instrumentality of a governmental unit. Tax forms 1040ez It is required to be used for commuting by a police officer or fire fighter who, when not on a regular shift, is on call at all times. Tax forms 1040ez It is prohibited from being used for personal use (other than commuting) outside the limit of the police officer's arrest powers or the fire fighter's obligation to respond to an emergency. Tax forms 1040ez It is clearly marked with painted insignia or words that make it readily apparent that it is a police or fire vehicle. Tax forms 1040ez A marking on a license plate is not a clear marking for these purposes. Tax forms 1040ez Qualified moving van. Tax forms 1040ez   A qualified moving van is any truck or van used by a professional moving company for moving household or business goods if the following requirements are met. Tax forms 1040ez No personal use of the van is allowed other than for travel to and from a move site or for minor personal use, such as a stop for lunch on the way from one move site to another. Tax forms 1040ez Personal use for travel to and from a move site happens no more than five times a month on average. Tax forms 1040ez Personal use is limited to situations in which it is more convenient to the employer, because of the location of the employee's residence in relation to the location of the move site, for the van not to be returned to the employer's business location. Tax forms 1040ez Qualified specialized utility repair truck. Tax forms 1040ez   A truck is a qualified specialized utility repair truck if it is not a van or pickup truck and all the following apply. Tax forms 1040ez The truck was specifically designed for and is used to carry heavy tools, testing equipment, or parts. Tax forms 1040ez Shelves, racks, or other permanent interior construction has been installed to carry and store the tools, equipment, or parts and would make it unlikely that the truck would be used, other than minimally, for personal purposes. Tax forms 1040ez The employer requires the employee to drive the truck home in order to be able to respond in emergency situations for purposes of restoring or maintaining electricity, gas, telephone, water, sewer, or steam utility services. Tax forms 1040ez Computers and Related Peripheral Equipment A computer is a programmable, electronically activated device capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention. Tax forms 1040ez It consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. Tax forms 1040ez Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. Tax forms 1040ez The following are neither computers nor related peripheral equipment. Tax forms 1040ez Any equipment that is an integral part of other property that is not a computer. Tax forms 1040ez Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment. Tax forms 1040ez Equipment of a kind used primarily for the user's amusement or entertainment, such as video games. Tax forms 1040ez Can Employees Claim a Deduction? If you are an employee, you can claim a depreciation deduction for the use of your listed property (whether owned or rented) in performing services as an employee only if your use is a business use. Tax forms 1040ez The use of your property in performing services as an employee is a business use only if both the following requirements are met. Tax forms 1040ez The use is for your employer's convenience. Tax forms 1040ez The use is required as a condition of your employment. Tax forms 1040ez If these requirements are not met, you cannot deduct depreciation (including the section 179 deduction) or rent expenses for your use of the property as an employee. Tax forms 1040ez Employer's convenience. Tax forms 1040ez   Whether the use of listed property is for your employer's convenience must be determined from all the facts. Tax forms 1040ez The use is for your employer's convenience if it is for a substantial business reason of the employer. Tax forms 1040ez The use of listed property during your regular working hours to carry on your employer's business generally is for the employer's convenience. Tax forms 1040ez Condition of employment. Tax forms 1040ez   Whether the use of listed property is a condition of your employment depends on all the facts and circumstances. Tax forms 1040ez The use of property must be required for you to perform your duties properly. Tax forms 1040ez Your employer does not have to require explicitly that you use the property. Tax forms 1040ez However, a mere statement by the employer that the use of the property is a condition of your employment is not sufficient. Tax forms 1040ez Example 1. Tax forms 1040ez Virginia Sycamore is employed as a courier with We Deliver, which provides local courier services. Tax forms 1040ez She owns and uses a motorcycle to deliver packages to downtown offices. Tax forms 1040ez We Deliver explicitly requires all delivery persons to own a car or motorcycle for use in their employment. Tax forms 1040ez Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. Tax forms 1040ez Example 2. Tax forms 1040ez Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. Tax forms 1040ez He must travel to these sites on a regular basis. Tax forms 1040ez Uplift does not furnish an automobile or explicitly require him to use his own automobile. Tax forms 1040ez However, it pays him for any costs he incurs in traveling to the various sites. Tax forms 1040ez The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. Tax forms 1040ez Example 3. Tax forms 1040ez Assume the same facts as in Example 2 except that Uplift furnishes a car to Bill, who chooses to use his own car and receive payment for using it. Tax forms 1040ez The use of his own car is neither for the convenience of Uplift nor required as a condition of employment. Tax forms 1040ez Example 4. Tax forms 1040ez Marilyn Lee is a pilot for Y Company, a small charter airline. Tax forms 1040ez Y requires pilots to obtain 80 hours of flight time annually in addition to flight time spent with the airline. Tax forms 1040ez Pilots usually can obtain these hours by flying with the Air Force Reserve or by flying part-time with another airline. Tax forms 1040ez Marilyn owns her own airplane. Tax forms 1040ez The use of her airplane to obtain the required flight hours is neither for the convenience of the employer nor required as a condition of employment. Tax forms 1040ez Example 5. Tax forms 1040ez David Rule is employed as an engineer with Zip, an engineering contracting firm. Tax forms 1040ez He occasionally takes work home at night rather than work late in the office. Tax forms 1040ez He owns and uses a home computer which is virtually identical to the office model. Tax forms 1040ez His use of the computer is neither for the convenience of his employer nor required as a condition of employment. Tax forms 1040ez What Is the Business-Use Requirement? You can claim the section 179 deduction and a special depreciation allowance for listed property and depreciate listed property using GDS and a declining balance method if the property meets the business-use requirement. Tax forms 1040ez To meet this requirement, listed property must be used predominantly (more than 50% of its total use) for qualified business use. Tax forms 1040ez If this requirement is not met, the following rules apply. Tax forms 1040ez Property not used predominantly for qualified business use during the year it is placed in service does not qualify for the section 179 deduction. Tax forms 1040ez Property not used predominantly for qualified business use during the year it is placed in service does not qualify for a special depreciation allowance. Tax forms 1040ez Any depreciation deduction under MACRS for property not used predominantly for qualified business use during any year must be figured using the straight line method over the ADS recovery period. Tax forms 1040ez This rule applies each year of the recovery period. Tax forms 1040ez Excess depreciation on property previously used predominantly for qualified business use must be recaptured (included in income) in the first year in which it is no longer used predominantly for qualified business use. Tax forms 1040ez A lessee must add an inclusion amount to income in the first year in which the leased property is not used predominantly for qualified business use. Tax forms 1040ez Being required to use the straight line method for an item of listed property not used predominantly for qualified business use is not the same as electing the straight line method. Tax forms 1040ez It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. Tax forms 1040ez Exception for leased property. Tax forms 1040ez   The business-use requirement generally does not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. Tax forms 1040ez   You are considered regularly engaged in the business of leasing listed property only if you enter into contracts for the leasing of listed property with some frequency over a continuous period of time. Tax forms 1040ez This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of your business in its entirety. Tax forms 1040ez Occasional or incidental leasing activity is insufficient. Tax forms 1040ez For example, if you lease only one passenger automobile during a tax year, you are not regularly engaged in the business of leasing automobiles. Tax forms 1040ez An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. Tax forms 1040ez How To Allocate Use To determine whether the business-use requirement is met, you must allocate the use of any item of listed property used for more than one purpose during the year among its various uses. Tax forms 1040ez For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. Tax forms 1040ez You determine the percentage of qualified business use by dividing the number of miles you drove the vehicle for business purposes during the year by the total number of miles you drove the vehicle for all purposes (including business miles) during the year. Tax forms 1040ez For other listed property, allocate the property's use on the basis of the most appropriate unit of time the property is actually used (rather than merely being available for use). Tax forms 1040ez For example, you can determine the percentage of business use of a computer by dividing the number of hours you used the computer for business purposes during the year by the total number of hours you used the computer for all purposes (including business use) during the year. Tax forms 1040ez Entertainment use. Tax forms 1040ez   Treat the use of listed property for entertainment, recreation, or amusement purposes as a business use only to the extent you can deduct expenses (other than interest and property tax expenses) due to its use as an ordinary and necessary business expense. Tax forms 1040ez Commuting use. Tax forms 1040ez   The use of an automobile for commuting is not business use, regardless of whether work is performed during the trip. Tax forms 1040ez For example, a business telephone call made on a car telephone while commuting to work does not change the character of the trip from commuting to business. Tax forms 1040ez This is also true for a business meeting held in a car while commuting to work. Tax forms 1040ez Similarly, a business call made on an otherwise personal trip does not change the character of a trip from personal to business. Tax forms 1040ez The fact that an automobile is used to display material that advertises the owner's or user's trade or business does not convert an otherwise personal use into business use. Tax forms 1040ez Use of your automobile by another person. Tax forms 1040ez   If someone else uses your automobile, do not treat that use as business use unless one of the following conditions applies. Tax forms 1040ez That use is directly connected with your business. Tax forms 1040ez You properly report the value of the use as income to the other person and withhold tax on the income where required. Tax forms 1040ez You are paid a fair market rent. Tax forms 1040ez Treat any payment to you for the use of the automobile as a rent payment for purposes of item (3). Tax forms 1040ez Employee deductions. Tax forms 1040ez   If you are an employee, do not treat your use of listed property as business use unless it is for your employer's convenience and is required as a condition of your employment. Tax forms 1040ez See Can Employees Claim a Deduction , earlier. Tax forms 1040ez Qualified Business Use Qualified business use of listed property is any use of the property in your trade or business. Tax forms 1040ez However, it does not include the following uses. Tax forms 1040ez The leasing of property to any 5% owner or related person (to the extent the property is used by a 5% owner or person related to the owner or lessee of the property). Tax forms 1040ez The use of property as pay for the services of a 5% owner or related person. Tax forms 1040ez The use of property as pay for services of any person (other than a 5% owner or related person), unless the value of the use is included in that person's gross income and income tax is withheld on that amount where required. Tax forms 1040ez Property does not stop being used predominantly for qualified business use because of a transfer at death. Tax forms 1040ez Exception for leasing or compensatory use of aircraft. Tax forms 1040ez   Treat the leasing of any aircraft by a 5% owner or related person, or the compensatory use of any aircraft, as a qualified business use if at least 25% of the total use of the aircraft during the year is for a qualified business use. Tax forms 1040ez 5% owner. Tax forms 1040ez   For a business entity that is not a corporation, a 5% owner is any person who owns more than 5% of the capital or profits interest in the business. Tax forms 1040ez   For a corporation, a 5% owner is any person who owns, or is considered to own, either of the following. Tax forms 1040ez More than 5% of the outstanding stock of the corporation. Tax forms 1040ez Stock possessing more than 5% of the total combined voting power of all stock in the corporation. Tax forms 1040ez Related persons. Tax forms 1040ez   For a description of related persons, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 . Tax forms 1040ez For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. Tax forms 1040ez Examples. Tax forms 1040ez   The following examples illustrate whether the use of business property is qualified business use. Tax forms 1040ez Example 1. Tax forms 1040ez John Maple is the sole proprietor of a plumbing contracting business. Tax forms 1040ez John employs his brother, Richard, in the business. Tax forms 1040ez As part of Richard's pay, he is allowed to use one of the company automobiles for personal use. Tax forms 1040ez The company includes the value of the personal use of the automobile in Richard's gross income and properly withholds tax on it. Tax forms 1040ez The use of the automobile is pay for the performance of services by a related person, so it is not a qualified business use. Tax forms 1040ez Example 2. Tax forms 1040ez John, in Example 1, allows unrelated employees to use company automobiles for personal purposes. Tax forms 1040ez He does not include the value of the personal use of the company automobiles as part of their compensation and he does not withhold tax on the value of the use of the automobiles. Tax forms 1040ez This use of company automobiles by employees is not a qualified business use. Tax forms 1040ez Example 3. Tax forms 1040ez James Company Inc. Tax forms 1040ez owns several automobiles that its employees use for business purposes. Tax forms 1040ez The employees also are allowed to take the automobiles home at night. Tax forms 1040ez The fair market value of each employee's use of an automobile for any personal purpose, such as commuting to and from work, is reported as income to the employee and James Company withholds tax on it. Tax forms 1040ez This use of company automobiles by employees, even for personal purposes, is a qualified business use for the company. Tax forms 1040ez Investment Use The use of property to produce income in a nonbusiness activity (investment use) is not a qualified business use. Tax forms 1040ez However, you can treat the investment use as business use to figure the depreciation deduction for the property in a given year. Tax forms 1040ez Example 1. Tax forms 1040ez Sarah Bradley uses a home computer 50% of the time to manage her investments. Tax forms 1040ez She also uses the computer 40% of the time in her part-time consumer research business. Tax forms 1040ez Sarah's home computer is listed property because it is not used at a regular business establishment. Tax forms 1040ez She does not use the computer predominantly for qualified business use. Tax forms 1040ez Therefore, she cannot elect a section 179 deduction or claim a special depreciation allowance for the computer. Tax forms 1040ez She must depreciate it using the straight line method over the ADS recovery period. Tax forms 1040ez Her combined business/investment use for determining her depreciation deduction is 90%. Tax forms 1040ez Example 2. Tax forms 1040ez If Sarah uses her computer 30% of the time to manage her investments and 60% of the time in her consumer research business, it is used predominantly for qualified business use. Tax forms 1040ez She can elect a section 179 deduction and, if she does not deduct all the computer's cost, she can claim a special depreciation allowance and depreciate the computer using the 200% declining balance method over the GDS recovery period. Tax forms 1040ez Her combined business/investment use for determining her depreciation deduction is 90%. Tax forms 1040ez Recapture of Excess Depreciation If you used listed property more than 50% in a qualified business use in the year you placed it in service, you must recapture (include in income) excess depreciation in the first year you use it 50% or less. Tax forms 1040ez You also increase the adjusted basis of your property by the same amount. Tax forms 1040ez Excess depreciation is: The depreciation allowable for the property (including any section 179 deduction and special depreciation allowance claimed) for years before the first year you do not use the property predominantly for qualified business use, minus The depreciation that would have been allowable for those years if you had not used the property predominantly for qualified business use in the year you placed it in service. Tax forms 1040ez To determine the amount in (2) above, you must refigure the depreciation using the straight line method and the ADS recovery period. Tax forms 1040ez Example. Tax forms 1040ez In June 2009, Ellen Rye purchased and placed in service a pickup truck that cost $18,000. Tax forms 1040ez She used it only for qualified business use for 2009 through 2012. Tax forms 1040ez Ellen claimed a section 179 deduction of $10,000 based on the purchase of the truck. Tax forms 1040ez She began depreciating it using the 200% DB method over a 5-year GDS recovery period. Tax forms 1040ez The pickup truck's gross vehicle weight was over 6,000 pounds, so it was not subject to the passenger automobile limits discussed later under Do the Passenger Automobile Limits Apply. Tax forms 1040ez During 2013, she used the truck 50% for business and 50% for personal purposes. Tax forms 1040ez She includes $4,018 excess depreciation in her gross income for 2013. Tax forms 1040ez The excess depreciation is determined as follows. Tax forms 1040ez Total section 179 deduction ($10,000) and depreciation claimed ($6,618) for 2009 through 2012. Tax forms 1040ez (Depreciation is from Table A-1. Tax forms 1040ez ) $16,618 Minus: Depreciation allowable (Table A-8):     2009 – 10% of $18,000 $1,800   2010 – 20% of $18,000 3,600   2011 – 20% of $18,000 3,600   2012 – 20% of $18,000 3,600 12,600 Excess depreciation $4,018 If Ellen's use of the truck does not change to 50% for business and 50% for personal purposes until 2015, there will be no excess depreciation. Tax forms 1040ez The total depreciation allowable using Table A-8 through 2015 will be $18,000, which equals the total of the section 179 deduction and depreciation she will have claimed. Tax forms 1040ez Where to figure and report recapture. Tax forms 1040ez   Use Form 4797, Part IV, to figure the recapture amount. Tax forms 1040ez Report the recapture amount as other income on the same form or schedule on which you took the depreciation deduction. Tax forms 1040ez For example, report the recapture amount as other income on Schedule C (Form 1040) if you took the depreciation deduction on Schedule C. Tax forms 1040ez If you took the depreciation deduction on Form 2106, report the recapture amount as other income on Form 1040, line 21. Tax forms 1040ez Lessee's Inclusion Amount If you use leased listed property other than a passenger automobile for business/investment use, you must include an amount in your income in the first year your qualified business-use percentage is 50% or less. Tax forms 1040ez Your qualified business-use percentage is the part of the property's total use that is qualified business use (defined earlier). Tax forms 1040ez For the inclusion amount rules for a leased passenger automobile, see Leasing a Car in chapter 4 of Publication 463. Tax forms 1040ez The inclusion amount is the sum of Amount A and Amount B, described next. Tax forms 1040ez However, see the special rules for the inclusion amount, later, if your lease begins in the last 9 months of your tax year or is for less than one year. Tax forms 1040ez Amount A. Tax forms 1040ez   Amount A is: The fair market value of the property, multiplied by The business/investment use for the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A-19 in Appendix A . Tax forms 1040ez   The fair market value of the property is the value on the first day of the lease term. Tax forms 1040ez If the capitalized cost of an item of listed property is specified in the lease agreement, you must treat that amount as the fair market value. Tax forms 1040ez Amount B. Tax forms 1040ez   Amount B is: The fair market value of the property, multiplied by The average of the business/investment use for all tax years the property was leased that precede the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A–20 in Appendix A . Tax forms 1040ez Maximum inclusion amount. Tax forms 1040ez   The inclusion amount cannot be more than the sum of the deductible amounts of rent for the tax year in which the lessee must include the amount in gross income. Tax forms 1040ez Inclusion amount worksheet. Tax forms 1040ez   The following worksheet is provided to help you figure the inclusion amount for leased listed property. Tax forms 1040ez Inclusion Amount Worksheet for Leased Listed Property 1. Tax forms 1040ez Fair market value   2. Tax forms 1040ez Business/investment use for first year business use is 50% or less   3. Tax forms 1040ez Multiply line 1 by line 2. Tax forms 1040ez   4. Tax forms 1040ez Rate (%) from Table A-19   5. Tax forms 1040ez Multiply line 3 by line 4. Tax forms 1040ez This is Amount A. Tax forms 1040ez   6. Tax forms 1040ez Fair market value   7. Tax forms 1040ez Average business/investment use for years property leased before the first year business use is 50% or less . Tax forms 1040ez . Tax forms 1040ez . Tax forms 1040ez . Tax forms 1040ez . Tax forms 1040ez . Tax forms 1040ez . Tax forms 1040ez . Tax forms 1040ez . Tax forms 1040ez . Tax forms 1040ez . Tax forms 1040ez . Tax forms 1040ez . Tax forms 1040ez   8. Tax forms 1040ez Multiply line 6 by line 7   9. Tax forms 1040ez Rate (%) from Table A-20   10. Tax forms 1040ez Multiply line 8 by line 9. Tax forms 1040ez This is Amount B. Tax forms 1040ez   11. Tax forms 1040ez Add line 5 and line 10. Tax forms 1040ez This is your inclusion amount. Tax forms 1040ez Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Tax forms 1040ez )         Example. Tax forms 1040ez On February 1, 2011, Larry House, a calendar year taxpayer, leased and placed in service a computer with a fair market value of $3,000. Tax forms 1040ez The lease is for a period of 5 years. Tax forms 1040ez Larry does not use the computer at a regular business establishment, so it is listed property. Tax forms 1040ez His business use of the property (all of which is qualified business use) is 80% in 2011, 60% in 2012, and 40% in 2013. Tax forms 1040ez He must add an inclusion amount to gross income for 2013, the first tax year his qualified business-use percentage is 50% or less. Tax forms 1040ez The computer has a 5-year recovery period under both GDS and ADS. Tax forms 1040ez 2013 is the third tax year of the lease, so the applicable percentage from Table A-19 is −19. Tax forms 1040ez 8%. Tax forms 1040ez The applicable percentage from Table A-20 is 22. Tax forms 1040ez 0%. Tax forms 1040ez Larry's deductible rent for the computer for 2013 is $800. Tax forms 1040ez Larry uses the Inclusion amount worksheet. Tax forms 1040ez to figure the amount he must include in income for 2013. Tax forms 1040ez His inclusion amount is $224, which is the sum of −$238 (Amount A) and $462 (Amount B). Tax forms 1040ez Inclusion Amount Worksheet for Leased Listed Property 1. Tax forms 1040ez Fair market value $3,000   2. Tax forms 1040ez Business/investment use for first year business use is 50% or less 40 % 3. Tax forms 1040ez Multiply line 1 by line 2. Tax forms 1040ez 1,200   4. Tax forms 1040ez Rate (%) from Table A-19 −19. Tax forms 1040ez 8 % 5. Tax forms 1040ez Multiply line 3 by line 4. Tax forms 1040ez This is Amount A. Tax forms 1040ez −238   6. Tax forms 1040ez Fair market value 3,000   7. Tax forms 1040ez Average business/investment use for years property leased before the first year business use is 50% or less 70 % 8. Tax forms 1040ez Multiply line 6 by line 7 2,100   9. Tax forms 1040ez Rate (%) from Table A-20 22. Tax forms 1040ez 0 % 10. Tax forms 1040ez Multiply line 8 by line 9. Tax forms 1040ez This is Amount B. Tax forms 1040ez 462   11. Tax forms 1040ez Add line 5 and line 10. Tax forms 1040ez This is your inclusion amount. Tax forms 1040ez Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Tax forms 1040ez ) $224           Lease beginning in the last 9 months of your tax year. Tax forms 1040ez    The inclusion amount is subject to a special rule if all the following apply. Tax forms 1040ez The lease term begins within 9 months before the close of your tax year. Tax forms 1040ez You do not use the property predominantly (more than 50%) for qualified business use during that part of the tax year. Tax forms 1040ez The lease term continues into your next tax year. Tax forms 1040ez Under this special rule, add the inclusion amount to income in the next tax year. Tax forms 1040ez Figure the inclusion amount by taking into account the average of the business/investment use for both tax years (line 2 of the Inclusion Amount Worksheet for Leased Listed Property) and the applicable percentage for the tax year the lease term begins. Tax forms 1040ez Skip lines 6 through 9 of the worksheet and enter zero on line 10. Tax forms 1040ez Example 1. Tax forms 1040ez On August 1, 2012, Julie Rule, a calendar year taxpayer, leased and placed in service an item of listed property. Tax forms 1040ez The property is 5-year property with a fair market value of $10,000. Tax forms 1040ez Her property has a recovery period of 5 years under ADS. Tax forms 1040ez The lease is for 5 years. Tax forms 1040ez Her business use of the property was 50% in 2012 and 90% in 2013. Tax forms 1040ez She paid rent of $3,600 for 2012, of which $3,240 is deductible. Tax forms 1040ez She must include $147 in income in 2013. Tax forms 1040ez The $147 is the sum of Amount A and Amount B. Tax forms 1040ez Amount A is $147 ($10,000 × 70% × 2. Tax forms 1040ez 1%), the product of the fair market value, the average business use for 2012 and 2013, and the applicable percentage for year one from Table A-19 . Tax forms 1040ez Amount B is zero. Tax forms 1040ez Lease for less than one year. Tax forms 1040ez   A special rule for the inclusion amount applies if the lease term is less than one year and you do not use the property predominantly (more than 50%) for qualified business use. Tax forms 1040ez The amount included in income is the inclusion amount (figured as described in the preceding discussions) multiplied by a fraction. Tax forms 1040ez The numerator of the fraction is the number of days in the lease term and the denominator is 365 (or 366 for leap years). Tax forms 1040ez   The lease term for listed property other than residential rental or nonresidential real property includes options to renew. Tax forms 1040ez If you have two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property, treat them as one lease. Tax forms 1040ez Example 2. Tax forms 1040ez On October 1, 2012, John Joyce, a calendar year taxpayer, leased and placed in service an item of listed property that is 3-year property. Tax forms 1040ez This property had a fair market value of $15,000 and a recovery period of 5 years under ADS. Tax forms 1040ez The lease term was 6 months (ending on March 31, 2013), during which he used the property 45% in business. Tax forms 1040ez He must include $71 in income in 2013. Tax forms 1040ez The $71 is the sum of Amount A and Amount B. Tax forms 1040ez Amount A is $71 ($15,000 × 45% × 2. Tax forms 1040ez 1% × 183/365), the product of the fair market value, the average business use for both years, and the applicable percentage for year one from Table A-19 , prorated for the length of the lease. Tax forms 1040ez Amount B is zero. Tax forms 1040ez Where to report inclusion amount. Tax forms 1040ez   Report the inclusion amount figured as described in the preceding discussions as other income on the same form or schedule on which you took the deduction for your rental costs. Tax forms 1040ez For example, report the inclusion amount as other income on Schedule C (Form 1040) if you took the deduction on Schedule C. Tax forms 1040ez If you took the deduction for rental costs on Form 2106, report the inclusion amount as other income on Form 1040, line 21. Tax forms 1040ez Do the Passenger Automobile Limits Apply? The depreciation deduction, including the section 179 deduction and special depreciation allowance, you can claim for a passenger automobile (defined earlier) each year is limited. Tax forms 1040ez This section describes the maximum depreciation deduction amounts for 2013 and explains how to deduct, after the recovery period, the unrecovered basis of your property that results from applying the passenger automobile limit. Tax forms 1040ez Exception for leased cars. Tax forms 1040ez   The passenger automobile limits generally do not apply to passenger automobiles leased or held for leasing by anyone regularly engaged in the business of leasing passenger automobiles. Tax forms 1040ez For information on when you are considered regularly engaged in the business of leasing listed property, including passenger automobiles, see Exception for leased property , earlier, under What Is the Business-Use Requirement . Tax forms 1040ez Maximum Depreciation Deduction The passenger automobile limits are the maximum depreciation amounts you can deduct for a passenger automobile. Tax forms 1040ez They are based on the date you placed the automobile in service. Tax forms 1040ez Passenger Automobiles The maximum deduction amounts for most passenger automobiles are shown in the following table. Tax forms 1040ez Maximum Depreciation Deduction for Passenger Automobiles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,1601 $5,100 $3,050 $1,875 2012 11,1601 5,100 3,050 1,875 2011 11,0602 4,900 2,950 1,775 2010 11,0602  4,900 2,950 1,775 2009 10,9603 4,800 2,850 1,775 2008 10,9603  4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6104 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7105 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6606 4,900 2,950 1,775 1If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Tax forms 1040ez 2If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,060. Tax forms 1040ez 3If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $2,960. Tax forms 1040ez 4If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $2,960. Tax forms 1040ez 5If you acquired the vehicle before 5/06/03, the maximum deduction is $7,660. Tax forms 1040ez If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Tax forms 1040ez 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Tax forms 1040ez If your business/investment use of the automobile is less than 100%, you must reduce the maximum deduction amount by multiplying the maximum amount by the percentage of business/investment use determined on an annual basis during the tax year. Tax forms 1040ez If you have a short tax year, you must reduce the maximum deduction amount by multiplying the maximum amount by a fraction. Tax forms 1040ez The numerator of the fraction is the number of months and partial months in the short tax year and the denominator is 12. Tax forms 1040ez Example. Tax forms 1040ez On April 15, 2013, Virginia Hart bought and placed in service a new car for $14,500. Tax forms 1040ez She used the car only in her business. Tax forms 1040ez She files her tax return based on the calendar year. Tax forms 1040ez She does not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Tax forms 1040ez Under MACRS, a car is 5-year property. Tax forms 1040ez Since she placed her car in service on April 15 and used it only for business, she uses the percentages in Table A-1 to figure her MACRS depreciation on the car. Tax forms 1040ez Virginia multiplies the $14,500 unadjusted basis of her car by 0. Tax forms 1040ez 20 to get her MACRS depreciation of $2,900 for 2013. Tax forms 1040ez This $2,900 is below the maximum depreciation deduction of $3,160 for passenger automobiles placed in service in 2013. Tax forms 1040ez She can deduct the full $2,900. Tax forms 1040ez Electric Vehicles The maximum depreciation deductions for passenger automobiles that are produced to run primarily on electricity are higher than those for other automobiles. Tax forms 1040ez The maximum deduction amounts for electric vehicles placed in service after August 5, 1997, and before January 1, 2007, are shown in the following table. Tax forms 1040ez Owners of electric vehicles placed in service after December 31, 2006, should use the table of maximum deduction amounts later for electric vehicles classified as passenger automobiles or use the table of maximum deduction amounts for trucks and vans later, for electric vehicles classified as trucks and vans. Tax forms 1040ez Maximum Depreciation Deduction For Electric Vehicles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2006 $8,980 $14,400 $8,650 $5,225 2005 8,880 14,200 8,450 5,125 2004 31,8301 14,300 8,550 5,125 5/06/2003– 12/31/2003 32,0302 14,600 8,750 5,225 1/01/2003– 5/05/2003 22,8803 14,600 8,750 5,225 1If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $8,880. Tax forms 1040ez 2If you acquired the vehicle before 5/06/03, the maximum deduction is $22,880. Tax forms 1040ez If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Tax forms 1040ez 3 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Tax forms 1040ez Trucks and Vans The maximum depreciation deductions for trucks and vans placed in service after 2002 are higher than those for other passenger automobiles. Tax forms 1040ez The maximum deduction amounts for trucks and vans are shown in the following table. Tax forms 1040ez Maximum Depreciation Deduction For Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 11,3601 5,300 3,150 1,875 2011 11,2602 5,200 3,150 1,875 2010 11,1603 5,100 3,050 1,875 2009 11,0604 4,900 2,950 1,775 2008 11,1605 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2006 3,260 5,200 3,150 1,875 2005 3,260 5,200 3,150 1,875 2004 10,9106 5,300 3,150 1,875 5/06/2003– 12/31/2003 11,0107 5,400 3,250 1,975 1/01/2003– 5/05/2003 7,9608 5,400 3,250 1,975 1 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,360. Tax forms 1040ez 2 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,260. Tax forms 1040ez 3 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Tax forms 1040ez 4 If you elect not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,060. Tax forms 1040ez 5If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,160. Tax forms 1040ez 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, or the maximum deduction is $3,260. Tax forms 1040ez 7 If you acquired the vehicle before 5/06/03, the maximum deduction is $7,960. Tax forms 1040ez If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Tax forms 1040ez 8 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Tax forms 1040ez Depreciation Worksheet for Passenger Automobiles You can use the following worksheet to figure your depreciation deduction using the percentage tables. Tax forms 1040ez Then use the information from this worksheet to prepare Form 4562. Tax forms 1040ez Depreciation Worksheet for Passenger Automobiles   Part I   1. Tax forms 1040ez MACRS system (GDS or ADS)     2. Tax forms 1040ez Property class     3. Tax forms 1040ez Date placed in service     4. Tax forms 1040ez Recovery period     5. Tax forms 1040ez Method and convention     6. Tax forms 1040ez Depreciation rate (from tables)     7. Tax forms 1040ez Maximum depreciation deduction for this year from the appropriate table       8. Tax forms 1040ez Business/investment-use percentage       9. Tax forms 1040ez Multiply line 7 by line 8. Tax forms 1040ez This is your adjusted maximum depreciation deduction       10. Tax forms 1040ez Section 179 deduction claimed this year (not more than line 9). Tax forms 1040ez Enter -0- if this is not the year you placed the car in service. Tax forms 1040ez         Note. Tax forms 1040ez  1) If line 10 is equal to line 9, stop here. Tax forms 1040ez Your combined section 179 and depreciation deduction (including your special depreciation allowance) is limited to the amount on line 9. Tax forms 1040ez  2) If line 10 is less than line 9, complete Part II. Tax forms 1040ez   Part II   11. Tax forms 1040ez Subtract line 10 from line 9. Tax forms 1040ez This is the limit on the amount you can deduct for depreciation (including any special depreciation allowance )       12. Tax forms 1040ez Cost or other basis (reduced by any alternative motor vehicle credit 1or credit for electric vehicles 2)       13. Tax forms 1040ez Multiply line 12 by line 8. Tax forms 1040ez This is your business/investment cost       14. Tax forms 1040ez Section 179 deduction claimed in the year you placed the car in service       15. Tax forms 1040ez Subtract line 14 from line 13. Tax forms 1040ez This is your tentative basis for depreciation       16. Tax forms 1040ez Multiply line 15 by . Tax forms 1040ez 50 if the 50% special depreciation allowance applies. Tax forms 1040ez This is your special depreciation allowance. Tax forms 1040ez Enter -0- if this is not the year you placed the car in service, the car is not qualified property, or you elected not to claim a special depreciation allowance       Note 1) If line 16 is equal to line 11, stop here. Tax forms 1040ez Your depreciation deduction (including your special depreciation allowance) is limited to the amount on line 11. Tax forms 1040ez  2) If line 16 is less than line 11, complete Part III. Tax forms 1040ez   Part III   17. Tax forms 1040ez Subtract line 16 from 11. Tax forms 1040ez This is the limit on the amount you can deduct for MACRS depreciation       18. Tax forms 1040ez Subtract line 16 from line 15. Tax forms 1040ez This is your basis for depreciation. Tax forms 1040ez       19. Tax forms 1040ez Multiply line 18 by line 6. Tax forms 1040ez This is your tentative MACRS depreciation deduction. Tax forms 1040ez       20. Tax forms 1040ez Enter the lesser of line 17 or line 19. Tax forms 1040ez This is your MACRS depreciation deduction. Tax forms 1040ez     1 When figuring the amount to enter on line 12, do not reduce your cost or other basis by any section 179 deduction you claimed for your car. Tax forms 1040ez 2 Reduce the basis by the lesser of $4,000 or 10% of the cost of the vehicle even if the credit is less than that amount. Tax forms 1040ez             Deductions After the Recovery Period If the depreciation deductions for your automobile are reduced under the passenger automobile limits, you will have unrecovered basis in your automobile at the end of the recovery period. Tax forms 1040ez If you continue to use the automobile for business, you can deduct that unrecovered basis after the recovery period ends. Tax forms 1040ez You can claim a depreciation deduction in each succeeding tax year until you recover your full basis in the car. Tax forms 1040ez The maximum amount you can deduct each year is determined by the date you placed the car in service and your business/investment-use percentage. Tax forms 1040ez See Maximum Depreciation Deduction , earlier. Tax forms 1040ez Unrecovered basis is the cost or other basis of the passenger automobile reduced by any clean-fuel vehicle deduction, electric vehicle credit, depreciation, and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use and the passenger automobile limits had not applied. Tax forms 1040ez You cannot claim a depreciation deduction for listed property other than passenger automobiles after the recovery period ends. Tax forms 1040ez There is no unrecovered basis at the end of the recovery period because you are considered to have used this property 100% for business and investment purposes during all of the recovery period. Tax forms 1040ez Example. Tax forms 1040ez In May 2007, you bought and placed in service a car costing $31,500. Tax forms 1040ez The car was 5-year property under GDS (MACRS). Tax forms 1040ez You did not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Tax forms 1040ez You used the car exclusively for business during the recovery period (2007 through 2012). Tax forms 1040ez You figured your depreciation as shown below. Tax forms 1040ez Year Percentage Amount Limit   Allowed 2007 20. Tax forms 1040ez 0% $6,300 $2,960   $2,960 2008 32. Tax forms 1040ez 0 10,080 4,800   4,800 2009 19. Tax forms 1040ez 2 6,048 2,850   2,850 2010 11. Tax forms 1040ez 52 3,629 1,675   1,675 2011 11. Tax forms 1040ez 52 3,629 1,675   1,675 2012 5. Tax forms 1040ez 76 1,814 1,675   1,675 Total   $15,635 At the end of 2012, you had an unrecovered basis of $15,865 ($31,500 − $15,635). Tax forms 1040ez If in 2013 and later years you continue to use the car 100% for business, you can deduct each year the lesser of $1,675 or your remaining unrecovered basis. Tax forms 1040ez If your business use of the car had been less than 100% during any year, your depreciation deduction would have been less than the maximum amount allowable for that year. Tax forms 1040ez However, in figuring your unrecovered basis in the car, you would still reduce your basis by the maximum amount allowable as if the business use had been 100%. Tax forms 1040ez For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $9,519 ($15,865 × 60%), but you still would have to reduce your basis by $15,865 to determine your unrecovered basis. Tax forms 1040ez Deductions For Passenger Automobiles Acquired in a Trade-in If you acquire a passenger automobile in a trade-in, depreciate the carryover basis separately as if the trade-in did not occur. Tax forms 1040ez Depreciate the part of the new automobile's basis that exceeds its carryover basis (excess basis) as if it were newly placed in service property. Tax forms 1040ez This excess basis is the additional cash paid for the new automobile in the trade-in. Tax forms 1040ez The depreciation figured for the two components of the basis (carryover basis and excess basis) is subject to a single passenger automobile limit. Tax forms 1040ez Special rules apply in determining the passenger automobile limits. Tax forms 1040ez These rules and examples are discussed in section 1. Tax forms 1040ez 168(i)-6(d)(3) of the regulations. Tax forms 1040ez Instead of figuring depreciation for the carryover basis and the excess basis separately, you can elect to treat the old automobile as disposed of and both of the basis components for the new automobile as if placed in service at the time of the trade-in. Tax forms 1040ez For more information, including how to make this election, see Election out under Property Acquired in a Like-kind Exchange or Involuntary Conversion in chapter 4 and sections 1. Tax forms 1040ez 168(i)-6(i) and 1. Tax forms 1040ez 168(i)-6(j) of the regulations. Tax forms 1040ez What Records Must Be Kept? You cannot take any depreciation or section 179 deduction for the use of listed property unless you can prove your business/investment use with adequate records or with sufficient evidence to support your own statements. Tax forms 1040ez For listed property, you must keep records for as long as any recapture can still occur. Tax forms 1040ez Recapture can occur in any tax year of the recovery period. Tax forms 1040ez Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. Tax forms 1040ez You do not have to record information in an account book, diary, or similar record if the information is already shown on the receipt. Tax forms 1040ez However, your records should back up your receipts in an orderly manner. Tax forms 1040ez Elements of expenditure or use. Tax forms 1040ez   Your records or other documentary evidence must support all the following. Tax forms 1040ez The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses. Tax forms 1040ez The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year. Tax forms 1040ez The date of the expenditure or use. Tax forms 1040ez The business or investment purpose for the expenditure or use. Tax forms 1040ez   Written documents of your expenditure or use are generally better evidence than oral statements alone. Tax forms 1040ez You do not have to keep a daily log. Tax forms 1040ez However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time of the expenditure or use and backed up by other documents is preferable to a statement you prepare later. Tax forms 1040ez Timeliness. Tax forms 1040ez   You must record the elements of an expenditure or use at the time you have full knowledge of the elements. Tax forms 1040ez An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use generally is considered a timely record if, in the regular course of business: The statement is given by an employee to the employer, or The statement is given by an independent contractor to the client or customer. Tax forms 1040ez   For example, a log maintained on a weekly basis, that accounts for use during the week, will be considered a record made at or near the time of use. Tax forms 1040ez Business purpose supported. Tax forms 1040ez   Generally, an adequate record of business purpose must be in the form of a written statement. Tax forms 1040ez However, the amount of detail necessary to establish a business purpose depends on the facts and circumstances of each case. Tax forms 1040ez A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. Tax forms 1040ez For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. Tax forms 1040ez Business use supported. Tax forms 1040ez   An adequate record contains enough information on each element of every business or investment use. Tax forms 1040ez The amount of detail required to support the use depends on the facts and circumstances. Tax forms 1040ez For example, a taxpayer who uses a truck for both business and personal purposes and whose only business use of the truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. Tax forms 1040ez   Although you generally must prepare an adequate written record, you can prepare a record of the business use of listed property in a computer memory device that uses a logging program. Tax forms 1040ez Separate or combined expenditures or uses. Tax forms 1040ez   Each use by you normally is considered a separate use. Tax forms 1040ez However, you can combine repeated uses as a single item. Tax forms 1040ez   Record each expenditure as a separate item. Tax forms 1040ez Do not combine it with other expenditures. Tax forms 1040ez If you choose, however, you can combine amounts you spent for the use of listed property during a tax year, such as for gasoline or automobile repairs. Tax forms 1040ez If you combine these expenses, you do not need to support the business purpose of each expense. Tax forms 1040ez Instead, you can divide the expenses based on the total business use of the listed property. Tax forms 1040ez   You can account for uses that can be considered part of a single use, such as a round trip or uninterrupted business use, by a single record. Tax forms 1040ez For example, you can account for the use of a truck to make deliveries at several locations that begin and end at the business premises and can include a stop at the business in between deliveries by a single record of miles driven. Tax forms 1040ez You can account for the use of a passenger automobile by a salesperson for a business trip away from home over a period of time by a single record of miles traveled. Tax forms 1040ez Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. Tax forms 1040ez Confidential information. Tax forms 1040ez   If any of the information on the elements of an expenditure or use is confidential, you do not need to include it in the account book or similar record if you record it at or near the time of the expenditure or use. Tax forms 1040ez You must keep it elsewhere and make it available as support to the IRS director for your area on request. Tax forms 1040ez Substantial compliance. Tax forms 1040ez   If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the satisfaction of the IRS director for your area, you can establish this element by any evidence the IRS director for your area deems adequate. Tax forms 1040ez   If you fail to establish to the satisfaction of the IRS director for your area that you have substantially complied with the adequate records requirement for an element of an expenditure or use, you must establish the element as follows. Tax forms 1040ez By your own oral or written statement containing detailed information as to the element. Tax forms 1040ez By other evidence sufficient to establish the element. Tax forms 1040ez   If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct evidence, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. Tax forms 1040ez If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. Tax forms 1040ez Sampling. Tax forms 1040ez   You can maintain an adequate record for part of a tax year and use that record to support your business and investment use of listed property for the entire tax year if it can be shown by other evidence that the periods for which you maintain an adequate record are representative of the use throughout the year. Tax forms 1040ez Example 1. Tax forms 1040ez Denise Williams, a sole proprietor and calendar year taxpayer, operates an interior decorating business out of her home. Tax forms 1040ez She uses her automobile for local business visits to the homes or offices of clients, for meetings with suppliers and subcontractors, and to pick up and deliver items to clients. Tax forms 1040ez There is no other business use of the automobile, but she and family members also use it for personal purposes. Tax forms 1040ez She maintains adequate records for the first 3 months of the year showing that 75% of the automobile use was for business. Tax forms 1040ez Subcontractor invoices and paid bills show that her business continued at approximately the same rate for the rest of the year. Tax forms 1040ez If there is no change in circumstances, such as the purchase of a second car for exclusive use in her business, the determination that her combined business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Tax forms 1040ez Example 2. Tax forms 1040ez Assume the same facts as in Example 1, except that Denise maintains adequate records during the first week of every month showing that 75% of her use of the automobile is for business. Tax forms 1040ez Her business invoices show that her business continued at the same rate during the later weeks of each month so that her weekly records are representative of the automobile's business use throughout the month. Tax forms 1040ez The determination that her business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Tax forms 1040ez Example 3. Tax forms 1040ez Bill Baker, a sole proprietor and calendar year taxpayer, is a salesman in a large metropolitan area for a company that manufactures household products. Tax forms 1040ez For the first 3 weeks of each month, he occasionally uses his own automobile for business travel within the metropolitan area. Tax forms 1040ez During these weeks, his business use of the automobile does not follow a consistent pattern. Tax forms 1040ez During the fourth week of each month, he delivers all business orders taken during the previous month. Tax forms 1040ez The business use of his automobile, as supported by adequate records, is 70% of its total use during that fourth week. Tax forms 1040ez The determination based on the record maintained during the fourth week of the month that his business/investment use of the automobile for the tax year is 70% does not rest on sufficient supporting evidence because his use during that week is not representative of use during other periods. Tax forms 1040ez Loss of records. Tax forms 1040ez   When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. Tax forms 1040ez How Is Listed Property Information Reported? You must provide the information about your listed property requested in Part V of Form 4562, Section A, if you claim either of the following deductions. Tax forms 1040ez Any deduction for a vehicle. Tax forms 1040ez A depreciation deduction for any other listed property. Tax forms 1040ez If you claim any deduction for a vehicle, you also must provide the information requested in Section B. Tax forms 1040ez If you provide the vehicle for your employee's use, the employee must give you this information. Tax forms 1040ez If you provide any vehicle for use by an employee, you must first answer the questions in Section C to see if you meet an exception to completing Section B for that vehicle. Tax forms 1040ez Vehicles used by your employees. Tax forms 1040ez   You do not have to complete Section B, Part V, for vehicles used by your employees who are not more-than-5% owners or related persons if you meet at least one of the following requirements. Tax forms 1040ez You maintain a written policy statement that prohibits one of the following uses of the vehicles. Tax forms 1040ez All personal use including commuting. Tax forms 1040ez Personal use, other than commuting, by employees who are not officers, directors, or 1%-or-more owners. Tax forms 1040ez You treat all use of the vehicles by your employees as personal use. Tax forms 1040ez You provide more than five vehicles for use by your employees, and you keep in your records the information on their use given to you by the employees. Tax forms 1040ez For demonstrator automobiles provided to full-time salespersons, you maintain a written policy statement that limits the total mileage outside the salesperson's normal working hours and prohibits use of the automobile by anyone else, for vacation trips, or to store personal possessions. Tax forms 1040ez Exceptions. Tax forms 1040ez   If you file Form 2106, 2106-EZ, or Schedule C-EZ (Form 1040), and you are not required to file Form 4562, report information about listed property on that form and not on Form 4562. Tax forms 1040ez Also, if you file Schedule C (Form 1040) and are claiming the standard mileage rate or actual vehicle expenses (except depreciation) and you are not required to file Form 4562 for any other reason, report vehicle information in Part IV of Schedule C and not on Form 4562. Tax forms 1040ez Prev  Up  Next   Home   More Online Publications
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Understanding Your CP75C Notice

You were banned from claiming the Earned Income Credit (EIC) in a prior tax year due to your intentional disregard of the rules or a fraudulent claim. Since your ban is still in effect, we disallowed the EIC for your current tax year.


What you need to do

  • You don’t need to take further action.

You may want to

  • Review this notice with your tax preparer.
  • Review the rules for claiming EIC
  • Call us for assistance at the toll-free telephone number listed in the top right corner of your notice

Answers to Common Questions

What do I need to send?
If you believe we incorrectly applied the ban, you must provide documentation to show that you didn't intentionally disregard the EIC rules for the year we imposed the ban.

Can I file my tax return while I am being audited?
Yes, you should continue to file all required tax returns before the due date to avoid additional penalties and interest.


Tips for next year

If you are banned from claiming the EIC, you won’t be allowed to claim the credit until the year stated on your notice.

Page Last Reviewed or Updated: 07-Mar-2014

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Tax Forms 1040ez

Tax forms 1040ez Publication 556 - Main Content Table of Contents Examination of ReturnsIf Your Return Is Examined Interest Netting Abatement of Interest Due to Error or Delay by the IRS Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Offer in Compromise Appeal RightsAppeal Within the IRS Appeals to the Courts Refund or Credit of Overpayments Before Final Determination Claims for RefundTime for Filing a Claim for Refund Limit on Amount of Refund Processing Claims for Refund Reduced Refund How To Get Tax Help Examination of Returns Your return may be examined for a variety of reasons, and the examination may take place in any one of several ways. Tax forms 1040ez After the examination, if any changes to your tax are proposed, you can either agree with those changes and pay any additional tax you may owe, or you can disagree with the changes and appeal the decision. Tax forms 1040ez Examination selection criteria. Tax forms 1040ez   Your return may be selected for examination on the basis of computer scoring. Tax forms 1040ez A computer program called the Discriminant Inventory Function System (DIF) assigns a numeric score to each individual and some corporate tax returns after they have been processed. Tax forms 1040ez If your return is selected because of a high score under the DIF system, the potential is high that an examination of your return will result in a change to your income tax liability. Tax forms 1040ez   Your return may also be selected for examination on the basis of information received from third-party documentation, such as Forms 1099 and W-2, that does not match the information reported on your return. Tax forms 1040ez Or, your return may be selected to address both the questionable treatment of an item and to study the behavior of similar taxpayers (a market segment) in handling a tax issue. Tax forms 1040ez   In addition, your return may be selected as a result of information received from other sources on potential noncompliance with the tax laws or inaccurate filing. Tax forms 1040ez This information can come from a number of sources, including newspapers, public records, and individuals. Tax forms 1040ez The information is evaluated for reliability and accuracy before it is used as the basis of an examination or investigation. Tax forms 1040ez Notice of IRS contact of third parties. Tax forms 1040ez    The IRS must give you reasonable notice before contacting other persons about your tax matters. Tax forms 1040ez You must be given reasonable notice in advance that, in examining or collecting your tax liability, the IRS may contact third parties such as your neighbors, banks, employers, or employees. Tax forms 1040ez The IRS must also give you notice of specific contacts by providing you with a record of persons contacted on both a periodic basis and upon your request. Tax forms 1040ez    This provision does not apply: To any pending criminal investigation, When providing notice would jeopardize collection of any tax liability, Where providing notice may result in reprisal against any person, or When you authorized the contact. Tax forms 1040ez Taxpayer Advocate Service. Tax forms 1040ez   The Taxpayer Advocate Service is an independent organization within the IRS whose goal is to help taxpayers resolve problems with the IRS. Tax forms 1040ez If you have an ongoing issue with the IRS that has not been resolved through normal processes, or your problems with the IRS are causing financial difficulty, contact the Taxpayer Advocate Service. Tax forms 1040ez    Before contacting the Taxpayer Advocate Service, you should first discuss any problem with a supervisor. Tax forms 1040ez Your local Taxpayer Advocate will assist you if you are unable to resolve the problem with the supervisor. Tax forms 1040ez   For more information, see Publication 1546. Tax forms 1040ez See How To Get Tax Help , near the end of this publication, for more information about contacting the Taxpayer Advocate Service. Tax forms 1040ez Comments from small business. Tax forms 1040ez    The Small Business and Agricultural Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards have been established to receive comments from small business about federal agency enforcement actions. Tax forms 1040ez The Ombudsman will annually evaluate the enforcement activities of each agency and rate their responsiveness to small business. Tax forms 1040ez If you wish to comment on the enforcement actions of the IRS, you can take any of the following steps. Tax forms 1040ez Fax your comments to 1-202-481-5719. Tax forms 1040ez Write to the following address: Office of the National Ombudsman U. Tax forms 1040ez S. Tax forms 1040ez Small Business Administration 409 3rd Street, SW Washington, DC 20416 Call 1-888-734-3247. Tax forms 1040ez Send an email to ombudsman@sba. Tax forms 1040ez gov. Tax forms 1040ez File a comment or complaint online at www. Tax forms 1040ez sba. Tax forms 1040ez gov/ombudsman. Tax forms 1040ez If Your Return Is Examined Some examinations are handled entirely by mail. Tax forms 1040ez Examinations not handled by mail can take place in your home, your place of business, an Internal Revenue office, or the office of your authorized representative. Tax forms 1040ez If the time, place, or method is not convenient for you, the examiner will try to work out something more suitable. Tax forms 1040ez However, the IRS makes the final determination of when, where, and how the examination will take place. Tax forms 1040ez Throughout the examination, you can act on your own behalf or have someone represent you or accompany you. Tax forms 1040ez If you filed a joint return, either you or your spouse, or both, can meet with the IRS. Tax forms 1040ez The person representing you can be any federally authorized practitioner, including an attorney, a certified public accountant, an enrolled agent (a person enrolled to practice before the IRS), an enrolled actuary, or the person who prepared the return and signed it as the preparer. Tax forms 1040ez If you want someone to represent you in your absence, you must furnish that person with proper written authorization. Tax forms 1040ez You can use Form 2848 or any other properly written authorization. Tax forms 1040ez If you want to consult with an attorney, a certified public accountant, an enrolled agent, or any other person permitted to represent a taxpayer during an interview for examining a tax return or collecting tax, you should make arrangements with that person to be available for the interview. Tax forms 1040ez In most cases, the IRS must suspend the interview and reschedule it. Tax forms 1040ez The IRS cannot suspend the interview if you are there because of an administrative summons. Tax forms 1040ez Third party authorization. Tax forms 1040ez   If you checked the box in the signature area of your income tax return (Form 1040, Form 1040A, or Form 1040EZ) to allow the IRS to discuss your return with another person (a third party designee), this authorization does not replace Form 2848. Tax forms 1040ez The box you checked on your return only authorizes the other person to receive information about the processing of your return and the status of your refund during the period your return is being processed. Tax forms 1040ez For more information, see the instructions for your return. Tax forms 1040ez Confidentiality privilege. Tax forms 1040ez   Generally, the same confidentiality protection that you have with an attorney also applies to certain communications that you have with federally authorized practitioners. Tax forms 1040ez   Confidential communications are those that: Advise you on tax matters within the scope of the practitioner's authority to practice before the IRS, Would be confidential between an attorney and you, and Relate to noncriminal tax matters before the IRS, or Relate to noncriminal tax proceedings brought in federal court by or against the United States. Tax forms 1040ez   In the case of communications in connection with the promotion of a person's participation in a tax shelter, the confidentiality privilege does not apply to written communications between a federally authorized practitioner and that person, any director, officer, employee, agent, or representative of that person, or any other person holding a capital or profits interest in that person. Tax forms 1040ez   A tax shelter is any entity, plan, or arrangement, a significant purpose of which is the avoidance or evasion of income tax. Tax forms 1040ez Recordings. Tax forms 1040ez    You can make an audio recording of the examination interview. Tax forms 1040ez Your request to record the interview should be made in writing. Tax forms 1040ez You must notify the examiner 10 days in advance and bring your own recording equipment. Tax forms 1040ez The IRS also can record an interview. Tax forms 1040ez If the IRS initiates the recording, you must be notified 10 days in advance and you can get a copy of the recording at your expense. Tax forms 1040ez Transfers to another area. Tax forms 1040ez    Generally, your return is examined in the area where you live. Tax forms 1040ez But if your return can be examined more quickly and conveniently in another area, such as where your books and records are located, you can ask to have the case transferred to that area. Tax forms 1040ez Repeat examinations. Tax forms 1040ez    The IRS tries to avoid repeat examinations of the same items, but sometimes this happens. Tax forms 1040ez If your tax return was examined for the same items in either of the 2 previous years and no change was proposed to your tax liability, please contact the IRS as soon as possible to see if the examination should be discontinued. Tax forms 1040ez The Examination An examination usually begins when you are notified that your return has been selected. Tax forms 1040ez The IRS will tell you which records you will need. Tax forms 1040ez The examination can proceed more easily if you gather your records before any interview. Tax forms 1040ez Any proposed changes to your return will be explained to you or your authorized representative. Tax forms 1040ez It is important that you understand the reasons for any proposed changes. Tax forms 1040ez You should not hesitate to ask about anything that is unclear to you. Tax forms 1040ez The IRS must follow the tax laws set forth by Congress in the Internal Revenue Code. Tax forms 1040ez The IRS also follows Treasury Regulations, other rules, and procedures that were written to administer the tax laws and court decisions. Tax forms 1040ez However, the IRS can lose cases that involve taxpayers with the same issue and still apply its interpretation of the law to your situation. Tax forms 1040ez Most taxpayers agree to changes proposed by examiners, and the examinations are closed at this level. Tax forms 1040ez If you do not agree, you can appeal any proposed change by following the procedures provided to you by the IRS. Tax forms 1040ez A more complete discussion of appeal rights is found later under Appeal Rights . Tax forms 1040ez If You Agree If you agree with the proposed changes, you can sign an agreement form and pay any additional tax you may owe. Tax forms 1040ez You must pay interest on any additional tax. Tax forms 1040ez If you pay when you sign the agreement, the interest is generally figured from the due date of your return (excluding any extension of time to file) to the date of your payment. Tax forms 1040ez If you do not pay the additional tax when you sign the agreement, you will receive a bill that includes interest. Tax forms 1040ez If you pay the amount due within 10 business days of the billing date, you will not have to pay more interest or penalties. Tax forms 1040ez This period is extended to 21 calendar days if the amount due is less than $100,000. Tax forms 1040ez If you are due a refund, you will receive it sooner if you sign the agreement form. Tax forms 1040ez You will be paid interest on the refund. Tax forms 1040ez If the IRS accepts your tax return as filed, you will receive a letter in a few weeks stating that the examiner proposed no changes to your return. Tax forms 1040ez You should keep this letter with your tax records. Tax forms 1040ez If You Do Not Agree If you do not agree with the proposed changes, the examiner will explain your appeal rights. Tax forms 1040ez If your examination takes place in an IRS office, you can request an immediate meeting with the examiner's supervisor to explain your position. Tax forms 1040ez If an agreement is reached, your case will be closed. Tax forms 1040ez If you cannot reach an agreement with the supervisor at this meeting, or if the examination took place outside of an IRS office, the examiner will write up your case explaining your position and the IRS's position. Tax forms 1040ez The examiner will forward your case for processing. Tax forms 1040ez Fast track mediation. Tax forms 1040ez   The IRS offers fast track mediation services to help taxpayers resolve many disputes resulting from: Examinations (audits), Offers in compromise, Trust fund recovery penalties, and Other collection actions. Tax forms 1040ez   Most cases that are not docketed in any court qualify for fast track mediation. Tax forms 1040ez Mediation can take place at a conference you request with a supervisor, or later. Tax forms 1040ez The process involves an Appeals Officer who has been trained in mediation. Tax forms 1040ez You may represent yourself at the mediation session, or someone else can act as your representative. Tax forms 1040ez For more information, see Publication 3605. Tax forms 1040ez 30-day letter and 90-day letter. Tax forms 1040ez   Within a few weeks after your closing conference with the examiner and/or supervisor, you will receive a package with: A letter (known as a 30-day letter) notifying you of your right to appeal the proposed changes within 30 days, A copy of the examination report explaining the examiner's proposed changes, An agreement or waiver form, and A copy of Publication 5. Tax forms 1040ez You generally have 30 days from the date of the 30-day letter to tell the IRS whether you will accept or appeal the proposed changes. Tax forms 1040ez The letter will explain what steps you should take, depending on which action you choose. Tax forms 1040ez Be sure to follow the instructions carefully. Tax forms 1040ez Appeal Rights are explained later. Tax forms 1040ez 90-day letter. Tax forms 1040ez   If you do not respond to the 30-day letter, or if you later do not reach an agreement with an Appeals Officer, the IRS will send you a 90-day letter, which is also known as a notice of deficiency. Tax forms 1040ez You will have 90 days (150 days if it is addressed to you outside the United States) from the date of this notice to file a petition with the Tax Court. Tax forms 1040ez Filing a petition with the Tax Court is discussed later under Appeals to the Courts and Tax Court . Tax forms 1040ez The notice will show the 90th (or 150th) day by which you must file your petition with the Tax Court. Tax forms 1040ez Suspension of interest and penalties. Tax forms 1040ez   Generally, the IRS has 3 years from the date you filed your return (or the date the return was due, if later) to assess any additional tax. Tax forms 1040ez However, if you file your return timely (including extensions), interest and certain penalties will be suspended if the IRS does not mail a notice to you, stating your liability and the basis for that liability, within a 36-month period beginning on the later of: The date on which you filed your tax return, or The due date (without extensions) of your tax return. Tax forms 1040ez If the IRS mails a notice after the 36-month period, interest and certain penalties applicable to the suspension period will be suspended. Tax forms 1040ez   The suspension period begins the day after the close of the 36-month period and ends 21 days after the IRS mails a notice to you stating your liability and the basis for that liability. Tax forms 1040ez Also, the suspension period applies separately to each notice stating your liability and the basis for that liability received by you. Tax forms 1040ez    The suspension does not apply to a: Failure-to-pay penalty, Fraudulent tax return, Penalty, interest, addition to tax, or additional amount with respect to any tax liability shown on your return or with respect to any gross misstatement, Penalty, interest, addition to tax, or additional amount with respect to any reportable transaction that is not adequately disclosed or any listed transaction, or Criminal penalty. Tax forms 1040ez Seeking relief from improperly assessed interest. Tax forms 1040ez   You can seek relief if interest is assessed for periods during which interest should have been suspended because the IRS did not mail a notice to you in a timely manner. Tax forms 1040ez   If you believe that interest was assessed with respect to a period during which interest should have been suspended, submit Form 843, writing “Section 6404(g) Notification” at the top of the form, with the IRS Service Center where you filed your return. Tax forms 1040ez The IRS will review the Form 843 and notify you whether interest will be abated. Tax forms 1040ez If the IRS does not abate interest, you can pay the disputed interest assessment and file a claim for refund. Tax forms 1040ez If your claim is denied or not acted upon within 6 months from the date you filed it, you can file suit for a refund in your United States District Court or in the United States Court of Federal Claims. Tax forms 1040ez   If you believe that an IRS officer or employee has made an unreasonable error or delay in performing a ministerial or managerial act (discussed later under Abatement of Interest Due to Error or Delay by the IRS ), file Form 843 with the IRS Service Center where you filed the tax return. Tax forms 1040ez If the IRS denies your claim, the Tax Court may be able to review that determination. Tax forms 1040ez See Tax Court can review failure to abate interest later under Abatement of Interest Due to Error or Delay by the IRS . Tax forms 1040ez If you later agree. Tax forms 1040ez    If you agree with the examiner's changes after receiving the examination report or the 30-day letter, sign and return either the examination report or the waiver form. Tax forms 1040ez Keep a copy for your records. Tax forms 1040ez You can pay any additional amount you owe without waiting for a bill. Tax forms 1040ez Include interest on the additional tax at the applicable rate. Tax forms 1040ez This interest rate is usually for the period from the due date of the return (excluding any extension of time to file) to the date of payment. Tax forms 1040ez The examiner can tell you the interest rate(s) or help you figure the amount. Tax forms 1040ez   You must pay interest on penalties and additions to tax for failing to file returns, for overstating valuations, for understating valuations on estate and gift tax returns, and for substantially understating tax liability. Tax forms 1040ez Interest is generally figured from the date (including extensions) the tax return is required to be filed to the date you pay the penalty and/or additions to tax. Tax forms 1040ez   If you pay the amount due within 10 business days after the date of notice and demand for immediate payment, you will not have to pay any additional penalties and interest. Tax forms 1040ez This period is extended to 21 calendar days if the amount due is less than $100,000. Tax forms 1040ez How To Stop Interest From Accruing If you think that you will owe additional tax at the end of the examination, you can stop the further accrual of interest by sending money to the IRS to cover all or part of the amount you think you will owe. Tax forms 1040ez Interest on part or all of any amount you owe will stop accruing on the date the IRS receives your money. Tax forms 1040ez You can send an amount either in the form of a deposit in the nature of a cash bond or as a payment of tax. Tax forms 1040ez Both a deposit and a payment stop any further accrual of interest. Tax forms 1040ez However, making a deposit or payment will stop the accrual of interest on only the amount you sent. Tax forms 1040ez Because of compounding rules, interest will continue to accrue on accrued interest, even though you have paid the underlying tax. Tax forms 1040ez To stop the accrual of interest on both tax and interest, you must make a deposit or payment for both the tax and interest that has accrued as of the date of deposit or payment. Tax forms 1040ez Payment or Deposit Deposits differ from payments in two ways: You can have all or part of your deposit returned to you without filing for a refund. Tax forms 1040ez However, if you request and receive your deposit and the IRS later assesses a deficiency for that period and type of tax, interest will be figured as if the funds were never on deposit. Tax forms 1040ez Also, your deposit will not be returned if one of the following situations applies: The IRS assesses a tax liability. Tax forms 1040ez The IRS determines that, by returning the deposit, it may not be able to collect a future deficiency. Tax forms 1040ez The IRS determines that the deposit should be applied against another tax liability. Tax forms 1040ez Deposits returned to you will include interest based on the Federal short-term rate determined under section 6621(b). Tax forms 1040ez The deposit returned will be treated as a tax payment to the extent of the disputed tax. Tax forms 1040ez A disputed tax means the amount of tax specified at the time of deposit as a reasonable estimate of the maximum amount of any tax owed by you, such as the deficiency proposed in the 30-day letter. Tax forms 1040ez Notice not mailed. Tax forms 1040ez    If you send money before the IRS mails you a notice of deficiency, you can ask the IRS to treat it as a deposit. Tax forms 1040ez You must make your request in writing. Tax forms 1040ez   If, after being notified of a proposed liability but before the IRS mails you a notice of deficiency, you send an amount large enough to cover the proposed liability, it will be considered a payment unless you request in writing that it be treated as a deposit. Tax forms 1040ez Keep copies of all correspondence you send to the IRS. Tax forms 1040ez   If the amount you send is at least as much as the proposed liability and you do not request that it be treated as a deposit, the IRS will not send you a notice of deficiency. Tax forms 1040ez If you do not receive a notice of deficiency, you cannot take your case to the Tax Court. Tax forms 1040ez See Tax Court , later under Appeal Rights . Tax forms 1040ez Notice mailed. Tax forms 1040ez    If, after the IRS mails the notice of deficiency, you send money without written instructions, it will be treated as a payment. Tax forms 1040ez You will still be able to petition the Tax Court. Tax forms 1040ez   If you send money after receiving a notice of deficiency and you have specified in writing that it is a “deposit in the nature of a cash bond,” the IRS will treat it as a deposit if you send it before either: The close of the 90-day or 150-day period for filing a petition with the Tax Court to appeal the deficiency, or The date the Tax Court decision is final, if you have filed a petition. Tax forms 1040ez Using a Deposit To Pay the Tax If you agree with the examiner's proposed changes after the examination, your deposit will be applied against any amount you may owe. Tax forms 1040ez The IRS will not mail you a notice of deficiency and you will not have the right to take your case to the Tax Court. Tax forms 1040ez If you do not agree to the full amount of the deficiency after the examination, the IRS will mail you a notice of deficiency. Tax forms 1040ez Your deposit will be applied against the proposed deficiency unless you write to the IRS before the end of the 90-day or 150-day period stating that you still want the money to be treated as a deposit. Tax forms 1040ez You will still have the right to take your case to the Tax Court. Tax forms 1040ez Installment Agreement Request You can request a monthly installment plan if you cannot pay the full amount you owe. Tax forms 1040ez To be valid, your request must be approved by the IRS. Tax forms 1040ez However, if you owe $10,000 or less in tax and you meet certain other criteria, the IRS must accept your request. Tax forms 1040ez Before you request an installment agreement, you should consider other less costly alternatives, such as a bank loan. Tax forms 1040ez You will continue to be charged interest and penalties on the amount you owe until it is paid in full. Tax forms 1040ez Unless your income is below a certain level, the fee for an approved installment agreement has increased to $105 ($52 if you make your payments by electronic funds withdrawal). Tax forms 1040ez If your income is below a certain level, you may qualify to pay a reduced fee of $43. Tax forms 1040ez For more information about installment agreements, see Form 9465, Installment Agreement Request. Tax forms 1040ez Interest Netting If you owe interest to the IRS on an underpayment for the same period the IRS owes you interest on an overpayment, the IRS will figure interest on the underpayment and overpayment at the same interest rate (up to the amount of the overpayment). Tax forms 1040ez As a result, the net rate is zero for that period. Tax forms 1040ez Abatement of Interest Due to Error or Delay by the IRS The IRS may abate (reduce) the amount of interest you owe if the interest is due to an unreasonable error or delay by an IRS officer or employee in performing a ministerial or managerial act (discussed later). Tax forms 1040ez Only the amount of interest on income, estate, gift, generation-skipping, and certain excise taxes can be reduced. Tax forms 1040ez The amount of interest will not be reduced if you or anyone related to you contributed significantly to the error or delay. Tax forms 1040ez Also, the interest will be reduced only if the error or delay happened after the IRS contacted you in writing about the deficiency or payment on which the interest is based. Tax forms 1040ez An audit notification letter is such a contact. Tax forms 1040ez The IRS cannot reduce the amount of interest due to a general administrative decision, such as a decision on how to organize the processing of tax returns. Tax forms 1040ez Ministerial act. Tax forms 1040ez    This is a procedural or mechanical act, not involving the exercise of judgment or discretion, during the processing of a case after all prerequisites (for example, conferences and review by supervisors) have taken place. Tax forms 1040ez A decision concerning the proper application of federal tax law (or other federal or state law) is not a ministerial act. Tax forms 1040ez Example 1. Tax forms 1040ez You move from one state to another before the IRS selects your tax return for examination. Tax forms 1040ez A letter stating that your return has been selected is sent to your old address and then forwarded to your new address. Tax forms 1040ez When you get the letter, you respond with a request that the examination be transferred to the area office closest to your new address. Tax forms 1040ez The examination group manager approves your request. Tax forms 1040ez After your request has been approved, the transfer is a ministerial act. Tax forms 1040ez The IRS can reduce the interest because of any unreasonable delay in transferring the case. Tax forms 1040ez Example 2. Tax forms 1040ez An examination of your return reveals tax due for which a notice of deficiency (90-day letter) will be issued. Tax forms 1040ez After you and the IRS discuss the issues, the notice is prepared and reviewed. Tax forms 1040ez After the review process, issuing the notice of deficiency is a ministerial act. Tax forms 1040ez If there is an unreasonable delay in sending the notice of deficiency to you, the IRS can reduce the interest resulting from the delay. Tax forms 1040ez Managerial act. Tax forms 1040ez    This is an administrative act during the processing of a case that involves the loss of records or the exercise of judgment or discretion concerning the management of personnel. Tax forms 1040ez A decision concerning the proper application of federal tax law (or other federal or state law) is not a managerial act. Tax forms 1040ez Example. Tax forms 1040ez A revenue agent is examining your tax return. Tax forms 1040ez During the middle of the examination, the agent is sent to an extended training course. Tax forms 1040ez The agent's supervisor decides not to reassign your case, so the work is unreasonably delayed until the agent returns. Tax forms 1040ez Interest from the unreasonable delay can be abated since both the decision to send the agent to the training class and not to reassign the case are managerial acts. Tax forms 1040ez How to request abatement of interest. Tax forms 1040ez    You request an abatement (reduction) of interest on Form 843. Tax forms 1040ez You should file the claim with the IRS Service Center where you filed the tax return that was affected by the error or delay. Tax forms 1040ez   If you have already paid the interest and you would like a credit or refund of interest paid, you must file Form 843 within 3 years from the date you filed your original return or 2 years from the date you paid the interest, whichever is later. Tax forms 1040ez If you have not paid any of the interest, these time limitations for filing Form 843 do not apply. Tax forms 1040ez   Generally, you should file a separate Form 843 for each tax period and each type of tax. Tax forms 1040ez However, complete only one Form 843 if the interest is from an IRS error or delay that affected your tax for more than one tax period or for more than one type of tax (for example, where 2 or more tax years were being examined). Tax forms 1040ez   If your request for abatement of interest is denied, you can appeal the decision to the IRS Appeals Office. Tax forms 1040ez Tax Court can review failure to abate interest. Tax forms 1040ez    The Tax Court can review the IRS's refusal to abate (reduce) interest if all of the following requirements are met: You filed a request for abatement of interest (Form 843) with the IRS after July 30,1996. Tax forms 1040ez The IRS has mailed you a notice of final determination or a notice of disallowance. Tax forms 1040ez You file a petition with the Tax Court within 180 days of the mailing of the notice of final determination or the notice of disallowance. Tax forms 1040ez   The following requirements must also be met: For individual and estate taxpayers — your net worth must not exceed $2 million as of the filing date of your petition for review. Tax forms 1040ez For this purpose, individuals filing a joint return shall be treated as separate individuals. Tax forms 1040ez For charities and certain cooperatives — you must not have more than 500 employees as of the filing date of your petition for review. Tax forms 1040ez For all other taxpayers — your net worth must not exceed $7 million, and you must not have more than 500 employees as of the filing date of your petition for review. Tax forms 1040ez Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions If you are (or were) affected by a Presidentially declared disaster occurring after 1996 or a terrorist or military action occurring after September 10, 2001, the IRS may abate (reduce) the amount of interest you owe on certain taxes. Tax forms 1040ez The IRS may abate interest for the period of any additional time to file or pay that the IRS provides on account of the disaster or the terrorist or military action. Tax forms 1040ez The IRS will issue a notice or news release indicating who are affected taxpayers and stating the period of relief. Tax forms 1040ez If you are eligible for relief from interest, but were charged interest for the period of relief, the IRS may retroactively abate your interest. Tax forms 1040ez To the extent possible, the IRS can take the following actions: Make appropriate adjustments to your account. Tax forms 1040ez Notify you when the adjustments are made. Tax forms 1040ez Refund any interest paid by you where appropriate. Tax forms 1040ez For more information on disaster area losses, see Disaster Area Losses in Publication 547. Tax forms 1040ez For more information on other tax relief for victims of terrorist attacks, see Publication 3920. Tax forms 1040ez Offer in Compromise In certain circumstances, the IRS will allow you to pay less than the full amount you owe. Tax forms 1040ez If you think you may qualify, you should submit your offer by filing Form 656, Offer in Compromise. Tax forms 1040ez The IRS may accept your offer for any of the following reasons: There is doubt about the amount you owe (or whether you owe it). Tax forms 1040ez There is doubt as to whether you can pay the amount you owe based on your financial situation. Tax forms 1040ez An economic hardship would result if you had to pay the full amount owed. Tax forms 1040ez Your case presents compelling reasons that the IRS determines are a sufficient basis for compromise. Tax forms 1040ez If your offer is rejected, you have 30 days to ask the Appeals Office of the IRS to reconsider your offer. Tax forms 1040ez The IRS offers fast track mediation services to help taxpayers resolve many issues including a dispute regarding an offer in compromise. Tax forms 1040ez For more information, see Publication 3605. Tax forms 1040ez Generally, if you submit an offer in compromise, the IRS will delay certain collection activities. Tax forms 1040ez The IRS usually will not levy (take) your property to settle your tax bill during the following periods: While the IRS is evaluating your offer in compromise. Tax forms 1040ez The 30 days immediately after the offer is rejected. Tax forms 1040ez While your timely-filed appeal is being considered by Appeals. Tax forms 1040ez Also, if the IRS rejects your original offer and you submit a revised offer within 30 days of the rejection, the IRS generally will not levy your property while it considers your revised offer. Tax forms 1040ez For more information about submitting an offer in compromise, see Form 656. Tax forms 1040ez Appeal Rights Because people sometimes disagree on tax matters, the IRS has an appeals system. Tax forms 1040ez Most differences can be settled within this system without expensive and time-consuming court trials. Tax forms 1040ez However, your reasons for disagreeing must come within the scope of the tax laws. Tax forms 1040ez For example, you cannot appeal your case based only on moral, religious, political, constitutional, conscientious, or similar grounds. Tax forms 1040ez In most instances, you may be eligible to take your case to court if you do not reach an agreement at your appeals conference, or if you do not want to appeal your case to the IRS Office of Appeals. Tax forms 1040ez See Appeals to the Courts , later, for more information. Tax forms 1040ez Appeal Within the IRS You can appeal an IRS tax decision to a local Appeals Office, which is separate from and independent of the IRS office taking the action you disagree with. Tax forms 1040ez The Appeals Office is the only level of appeal within the IRS. Tax forms 1040ez Conferences with Appeals Office personnel are held in an informal manner by correspondence, by telephone, or at a personal conference. Tax forms 1040ez If you want an appeals conference, follow the instructions in the letter you received. Tax forms 1040ez Your request will be sent to the Appeals Office to arrange a conference at a convenient time and place. Tax forms 1040ez You or your representative should be prepared to discuss all disputed issues at the conference. Tax forms 1040ez Most differences are settled at this level. Tax forms 1040ez If agreement is not reached at your appeals conference, you may be eligible to take your case to court. Tax forms 1040ez See Appeals to the Courts , later. Tax forms 1040ez Protests and Small Case Requests When you request an Appeals conference, you may also need to file either a formal written protest or a small case request with the office named in the letter you received. Tax forms 1040ez Also, see the special appeal request procedures in Publication 1660. Tax forms 1040ez Written protest. Tax forms 1040ez   You need to file a written protest in the following cases: All employee plan and exempt organization cases without regard to the dollar amount at issue. Tax forms 1040ez All partnership and S corporation cases without regard to the dollar amount at issue. Tax forms 1040ez All other cases, unless you qualify for the small case request procedure, or other special appeal procedures such as requesting Appeals consideration of liens, levies, seizures, or installment agreements. Tax forms 1040ez   If you must submit a written protest, see the instructions in Publication 5 about the information you need to provide. Tax forms 1040ez The IRS urges you to provide as much information as you can, as it will help speed up your appeal. Tax forms 1040ez That will save you both time and money. Tax forms 1040ez    Be sure to send the protest within the time limit specified in the letter you received. Tax forms 1040ez Small case request. Tax forms 1040ez   If the total amount for any tax period is not more than $25,000, you may make a small case request instead of filing a formal written protest. Tax forms 1040ez In figuring the total amount, include a proposed increase or decrease in tax (including penalties), or claimed refund. Tax forms 1040ez If you are making an offer in compromise, include total unpaid tax, penalty, and interest due. Tax forms 1040ez For a small case request, follow the instructions in our letter to you by sending a letter: Requesting Appeals consideration, Indicating the changes you do not agree with, and Indicating the reasons why you do not agree. Tax forms 1040ez Representation You can represent yourself at your appeals conference, or you can be represented by any federally authorized practitioner, including an attorney, a certified public accountant, an enrolled actuary, or an enrolled agent. Tax forms 1040ez If your representative attends a conference without you, he or she can receive or inspect confidential information only if you have filed a power of attorney or a tax information authorization. Tax forms 1040ez You can use a Form 2848 or any other properly written power of attorney or authorization. Tax forms 1040ez You can also bring witnesses to support your position. Tax forms 1040ez Confidentiality privilege. Tax forms 1040ez   Generally, the same confidentiality protection that you have with an attorney also applies to certain communications that you have with federally authorized practitioners. Tax forms 1040ez See Confidentiality privilege under If Your Return Is Examined , earlier. Tax forms 1040ez Appeals to the Courts If you and the IRS still disagree after the appeals conference, you may be entitled to take your case to the United States Tax Court, the United States Court of Federal Claims, or a United States District Court. Tax forms 1040ez These courts are independent of the IRS. Tax forms 1040ez If you elect to bypass the IRS's appeals system, you may be able to take your case to one of the courts listed above. Tax forms 1040ez However, a case petitioned to the United States Tax Court will normally be considered for settlement by an Appeals Officer before the Tax Court hears the case. Tax forms 1040ez If you unreasonably fail to pursue the IRS's appeals system, or if your case is intended primarily to cause a delay, or your position is frivolous or groundless, the Tax Court may impose a penalty of up to $25,000. Tax forms 1040ez See Appeal Within the IRS, earlier. Tax forms 1040ez Prohibition on requests to taxpayers to give up rights to bring civil action. Tax forms 1040ez   The Government cannot ask you to waive your right to sue the United States or a Government officer or employee for any action taken in connection with the tax laws. Tax forms 1040ez However, your right to sue can be waived if: You knowingly and voluntarily waive that right, The request to waive that right is made in writing to your attorney or other federally authorized practitioner, or The request is made in person and your attorney or other representative is present. Tax forms 1040ez Burden of proof. Tax forms 1040ez   For court proceedings resulting from examinations started after July 22, 1998, the IRS generally has the burden of proof for any factual issue if you have met the following requirements: You introduced credible evidence relating to the issue. Tax forms 1040ez You complied with all substantiation requirements of the Internal Revenue Code. Tax forms 1040ez You maintained all records required by the Internal Revenue Code. Tax forms 1040ez You cooperated with all reasonable requests by the IRS for information regarding the preparation and related tax treatment of any item reported on your tax return. Tax forms 1040ez You had a net worth of $7 million or less and not more than 500 employees at the time your tax liability is contested in any court proceeding if your tax return is for a corporation, partnership, or trust. Tax forms 1040ez    The burden of proof does not change on an issue when another provision of the tax laws requires a specific burden of proof with respect to that issue. Tax forms 1040ez Use of statistical information. Tax forms 1040ez   In the case of an individual, the IRS has the burden of proof in court proceedings based on any IRS reconstruction of income solely through the use of statistical information on unrelated taxpayers. Tax forms 1040ez Penalties. Tax forms 1040ez   The IRS has the burden of initially producing evidence in court proceedings with respect to the liability of any individual taxpayer for any penalty, addition to tax, or additional amount imposed by the tax laws. Tax forms 1040ez Recovering litigation or administrative costs. Tax forms 1040ez   These are the expenses that you pay to defend your position to the IRS or the courts. Tax forms 1040ez You may be able to recover reasonable litigation or administrative costs if all of the following conditions apply: You are the prevailing party. Tax forms 1040ez You exhaust all administrative remedies within the IRS. Tax forms 1040ez Your net worth is below a certain limit (see Net worth requirements , later). Tax forms 1040ez You do not unreasonably delay the proceeding. Tax forms 1040ez You apply for administrative costs within 90 days of the date on which the final decision of the IRS Office of Appeals as to the determination of the tax, interest, or penalty was mailed to you. Tax forms 1040ez You apply for litigation costs within the time frames provided by Tax Court Rule 231, found at http://www. Tax forms 1040ez ustaxcourt. Tax forms 1040ez gov  www. Tax forms 1040ez ustaxcourt. Tax forms 1040ez gov . Tax forms 1040ez   Prevailing party, reasonable litigation costs, and reasonable administrative costs are explained later. Tax forms 1040ez Note. Tax forms 1040ez If the IRS denies your award of administrative costs, and you want to appeal, you must petition the Tax Court within 90 days of the date on which the IRS mails the denial notice. Tax forms 1040ez Prevailing party. Tax forms 1040ez   Generally, you are the prevailing party if: You substantially prevail with respect to the amount in controversy or on the most significant tax issue or set of issues in question, and You meet the net worth requirements, discussed later. Tax forms 1040ez   You will not be treated as the prevailing party if the United States establishes that its position was substantially justified. Tax forms 1040ez The position of the United States is presumed not to be substantially justified if the IRS: Did not follow its applicable published guidance (such as regulations, revenue rulings, notices, announcements, private letter rulings, technical advice memoranda, and determination letters issued to the taxpayer) in the proceeding (This presumption can be overcome by evidence. Tax forms 1040ez ), or Has lost in courts of appeal for other circuits on substantially similar issues. Tax forms 1040ez   The court will generally decide who is the prevailing party. Tax forms 1040ez Reasonable litigation costs. Tax forms 1040ez   These include the following costs: Reasonable court costs. Tax forms 1040ez The reasonable costs of studies, analyses, engineering reports, tests, or projects found by the court to be necessary for the preparation of your case. Tax forms 1040ez The reasonable costs of expert witnesses. Tax forms 1040ez Attorney fees that generally may not exceed $125 maximum hourly rate as set by statute and indexed for inflation. Tax forms 1040ez See Attorney fees , later. Tax forms 1040ez Reasonable administrative costs. Tax forms 1040ez   These include the following costs: Any administrative fees or similar charges imposed by the IRS. Tax forms 1040ez The reasonable costs of studies, analyses, engineering reports, tests, or projects. Tax forms 1040ez The reasonable costs of expert witnesses. Tax forms 1040ez Attorney fees that generally may not exceed $125 per hour. Tax forms 1040ez See Attorney fees , later. Tax forms 1040ez Timing of costs. Tax forms 1040ez    Administrative costs can be awarded for costs incurred after the earliest of: The date the first letter of proposed deficiency is sent that allows you an opportunity to request administrative review in the IRS Office of Appeals, The date you receive notice of the IRS Office of Appeals' decision, or The date of the notice of deficiency. Tax forms 1040ez Net worth requirements. Tax forms 1040ez   An individual taxpayer may be able to recover litigation or administrative costs if the following requirements are met: For individuals — your net worth does not exceed $2 million as of the filing date of your petition for review. Tax forms 1040ez For this purpose, individuals filing a joint return are treated as separate individuals. Tax forms 1040ez For estates — your net worth does not exceed $2 million as of the date of the decedent's death. Tax forms 1040ez For charities and certain cooperatives — you do not have more than 500 employees as of the filing date of your petition for review. Tax forms 1040ez For all other taxpayers — as of the filing date of your petition for review, your net worth does not exceed $7 million, and you must not have more than 500 employees. Tax forms 1040ez Qualified offer rule. Tax forms 1040ez    You can also receive reasonable costs and fees and be treated as a prevailing party in a civil action or proceeding if: You make a qualified offer to the IRS to settle your case, The IRS does not accept that offer, and The tax liability (not including interest, unless interest is at issue) later determined by the court is equal to or less than the amount of your qualified offer. Tax forms 1040ez You must also meet the remaining requirements, including the exhaustion of administrative remedies and the net worth requirement, discussed earlier, to get the benefit of the qualified offer rule. Tax forms 1040ez Qualified offer. Tax forms 1040ez    This is a written offer made by you during the qualified offer period. Tax forms 1040ez It must specify both the offered amount of your liability (not including interest) and that it is a qualified offer. Tax forms 1040ez   To be a qualified offer, it must remain open from the date it is made until the earliest of: The date it is rejected, The date the trial begins, or 90 days from the date it is made. Tax forms 1040ez Qualified offer period. Tax forms 1040ez    This period begins on the day the IRS mails you the first letter of proposed deficiency that allows you to request review by the IRS Office of Appeals. Tax forms 1040ez It ends 30 days before your case is first set for trial. Tax forms 1040ez Attorney fees. Tax forms 1040ez   Attorney fees generally may not exceed $125 maximum hourly rate as set by statute and indexed for inflation. Tax forms 1040ez However, this amount can be higher in certain limited circumstances depending on the level of difficulty of the issues in the case and the local availability of tax expertise. Tax forms 1040ez See IRS. Tax forms 1040ez gov for more information. Tax forms 1040ez    Attorney fees include the fees paid by a taxpayer for the services of anyone who is authorized to practice before the Tax Court or before the IRS. Tax forms 1040ez In addition, attorney fees can be awarded in civil actions for unauthorized inspection or disclosure of a taxpayer's return or return information. Tax forms 1040ez   Fees can be awarded in excess of the actual amount charged if: You are represented for no fee, or for a nominal fee, as a pro bono service, and The award is paid to your representative or to your representative's employer. Tax forms 1040ez Jurisdiction for determination of employment status. Tax forms 1040ez    The Tax Court can review IRS employment status determinations (for example, whether individuals hired by you are in fact your employees or independent contractors) and the amount of employment tax under such determinations. Tax forms 1040ez Tax Court review can take place only if, in connection with an audit of any person, there is a controversy involving a determination by the IRS that either: One or more individuals performing services for that person are employees of that person, or That person is not entitled to relief under Section 530(a) of the Revenue Act of 1978 (discussed later). Tax forms 1040ez   The following rules also apply to a Tax Court review of employment status: A Tax Court petition to review these determinations can be filed only by the person for whom the services are performed, If you receive a Notice of Determination by certified or registered mail, you must file a petition for Tax Court review within 90 days of the date of mailing that notice (150 days if the notice is addressed to you outside the United States), If during the Tax Court proceeding, you begin to treat as an employee an individual whose employment status is at issue, the Tax Court will not consider that change in its decision, Assessment and collection of tax is suspended while the Tax Court review is taking place, Payment of the asserted employment tax deficiency is not required to petition the U. Tax forms 1040ez S. Tax forms 1040ez Tax Court for a determination of employment status. Tax forms 1040ez There can be a de novo review by the Tax Court (a review which does not consider IRS administrative findings), and At your request and with the Tax Court's agreement, small tax case procedures (discussed later) are available to simplify the case resolution process when the amount at issue (including additions to tax and penalties) is $50,000 or less for each tax period involved. Tax forms 1040ez   For further information, see Publication 3953, Questions and Answers About Tax Court Proceedings for Determination of Employment Status Under IRC Section 7436. Tax forms 1040ez Section 530(a) of the Revenue Act of 1978. Tax forms 1040ez   This section relieves an employer of certain employment tax responsibilities for individuals not treated as employees. Tax forms 1040ez It also provides relief to taxpayers under audit or involved in administrative or judicial proceedings. Tax forms 1040ez Tax Court review of request for relief from joint and several liability on a joint return. Tax forms 1040ez    As discussed later, at Relief from joint and several liability on a joint return under Claims for Refund, you can request relief from liability for tax you owe, plus related penalties and interest, that you believe should be paid by your spouse (or former spouse). Tax forms 1040ez You also can petition (ask) the Tax Court to review your request for innocent spouse relief or separation of liability if either: The IRS sends you a determination notice denying, in whole or in part, your request, or You do not receive a determination notice from the IRS within 6 months from the date you file Form 8857. Tax forms 1040ez   If you receive a determination notice, you must petition the Tax Court to review your request during the 90-day period that begins on the date the IRS mails the notice. Tax forms 1040ez See Publication 971 for more information. Tax forms 1040ez Note. Tax forms 1040ez Your spouse or former spouse may file a written protest and request an Appeals conference to protest your claim of innocent spouse relief or separation of liability. Tax forms 1040ez See Rev. Tax forms 1040ez Proc. Tax forms 1040ez 2003-19, which is on page 371 of the Internal Revenue Bulletin 2003-5 at  www. Tax forms 1040ez irs. Tax forms 1040ez gov/pub/irs-irbs/irb03-05. Tax forms 1040ez pdf. Tax forms 1040ez Tax Court You can take your case to the United States Tax Court if you disagree with the IRS over: Income tax, Estate tax, Gift tax, Employment tax involving IRS employment status determinations, or Certain excise taxes of private foundations, public charities, qualified pension and other retirement plans, or real estate investment trusts. Tax forms 1040ez For information on Tax Court review of a determination of employment status, see Jurisdiction for determination of employment status, earlier. Tax forms 1040ez For information on Tax Court review of an IRS refusal to abate interest, see Tax Court can review failure to abate interest, earlier under Examination of Returns. Tax forms 1040ez For information on Tax Court review of Appeals determinations with respect to lien notices and proposed levies, see Publication 1660. Tax forms 1040ez You cannot take your case to the Tax Court before the IRS sends you a notice of deficiency. Tax forms 1040ez You can only appeal your case if you file a petition within 90 days from the date the notice is mailed to you (150 days if it is addressed to you outside the United States). Tax forms 1040ez The notice will show the 90th (or 150th) day by which you must file your petition with the Tax Court. Tax forms 1040ez Withdrawal of notice of deficiency. Tax forms 1040ez If you consent, the IRS can withdraw a notice of deficiency. Tax forms 1040ez A notice of deficiency may be rescinded if the notice was issued as a result of an administrative error; the taxpayer submits information establishing the actual tax due is less than the amount shown in the notice; the taxpayer specifically requests a conference with the appropriate Appeals office for the purpose of entering into settlement negotiations. Tax forms 1040ez However, the notice may be rescinded only if the appropriate Appeals office first decides that the case is susceptible to agreement. Tax forms 1040ez See Revenue Procedure 98-54 for a more detailed explanation of the requirements. Tax forms 1040ez Once withdrawn, the limits on credits, refunds, and assessments concerning the notice are void, and you and the IRS have the rights and obligations that you had before the notice was issued. Tax forms 1040ez The suspension of any time limitation while the notice of deficiency was issued will not change when the notice is withdrawn. Tax forms 1040ez After the notice is withdrawn, you cannot file a petition with the Tax Court based on the notice. Tax forms 1040ez Also, the IRS can later issue a notice of deficiency in a greater or lesser amount than the amount in the withdrawn deficiency. Tax forms 1040ez Generally, the Tax Court hears cases before any tax has been assessed and paid; however, you can pay the tax after the notice of deficiency has been issued and still petition the Tax Court for review. Tax forms 1040ez If you do not file your petition on time, the proposed tax will be assessed, a bill will be sent, and you will not be able to take your case to the Tax Court. Tax forms 1040ez Under the law, you must pay the tax within 21 days (10 business days if the amount is $100,000 or more). Tax forms 1040ez Collection can proceed even if you think that the amount is excessive. Tax forms 1040ez Publication 594 explains IRS collection procedures. Tax forms 1040ez If you filed your petition on time, the court will schedule your case for trial at a location convenient to you. Tax forms 1040ez You can represent yourself before the Tax Court or you can be represented by anyone admitted to practice before that court. Tax forms 1040ez Small tax case procedure. Tax forms 1040ez   If the amount in your case is $50,000 or less for any 1 tax year or period, you can request that your case be handled under the small tax case procedure. Tax forms 1040ez If the Tax Court approves, you can present your case to the Tax Court for a decision that is final and that you cannot appeal. Tax forms 1040ez You can get more information regarding the small tax case procedure and other Tax Court matters from the United States Tax Court, 400 Second Street, N. Tax forms 1040ez W. Tax forms 1040ez , Washington, DC 20217. Tax forms 1040ez More information can be found on the Tax Court's website at www. Tax forms 1040ez ustaxcourt. Tax forms 1040ez gov. Tax forms 1040ez Motion to request redetermination of interest. Tax forms 1040ez   In certain cases, you can file a motion asking the Tax Court to redetermine the amount of interest on either an underpayment or an overpayment. Tax forms 1040ez You can do this only in a situation that meets all of the following requirements: The IRS has assessed a deficiency that was determined by the Tax Court. Tax forms 1040ez The assessment included interest. Tax forms 1040ez You have paid the entire amount of the deficiency plus the interest claimed by the IRS. Tax forms 1040ez The Tax Court has found that you made an overpayment. Tax forms 1040ez You must file the motion within one year after the decision of the Tax Court becomes final. Tax forms 1040ez District Court and Court of Federal Claims Generally, the District Courts and the Court of Federal Claims hear tax cases only after you have paid the entire tax and penalties, and filed a claim for a credit or refund. Tax forms 1040ez The taxpayer may litigate certain types of employment tax cases in either the United States District Court or the United States Court of Federal Claims. Tax forms 1040ez Before taxpayers can initiate suit in either of these courts with respect to certain employment taxes, they will have to pay, at a minimum, the employment tax assessment attributable to one employee for any one quarter and file a claim for refund of the tax. Tax forms 1040ez Once the claim for refund is denied or 6 months elapse without any action by the IRS, the taxpayer may initiate suit. Tax forms 1040ez As explained later under Claims for Refund, you can file a claim with the IRS for a credit or refund if you think that the tax you paid is incorrect or excessive. Tax forms 1040ez If your claim is totally or partially disallowed by the IRS, you should receive a notice of claim disallowance. Tax forms 1040ez If the IRS does not act on your claim within 6 months from the date you filed it, you can then file suit for a refund. Tax forms 1040ez You generally must file suit for a credit or refund no later than 2 years after the IRS informs you that your claim has been rejected. Tax forms 1040ez However, you can file suit if it has been 6 months since you filed your claim and the IRS has not yet delivered a decision. Tax forms 1040ez You can file suit for a credit or refund in your United States District Court or in the United States Court of Federal Claims. Tax forms 1040ez However, you cannot appeal to the United States Court of Federal Claims if your claim is for credit or refund of a penalty that relates to promoting an abusive tax shelter or to aiding and abetting the understatement of tax liability on someone else's return. Tax forms 1040ez For information about procedures for filing suit in either court, contact the Clerk of your District Court or of the United States Court of Federal Claims. Tax forms 1040ez Refund or Credit of Overpayments Before Final Determination Any court with proper jurisdiction, including the Tax Court, can order the IRS to refund any part of a tax deficiency that the IRS collects from you during a period when the IRS is not permitted to assess that deficiency, or to levy or engage in any court proceeding to collect that deficiency. Tax forms 1040ez In addition, the court can order a refund of any part of an overpayment determined by the Tax Court that is not at issue on appeal to a higher court. Tax forms 1040ez The court can order these refunds before its decision on the case is final. Tax forms 1040ez Taxpayers should thoroughly review IRS settlement offers before signing a Tax Court Decision document to ensure that all adjustments are correct, including the inclusion of any tax credits that the taxpayer is allowed to claim. Tax forms 1040ez Note. Tax forms 1040ez The court may no longer order a refund of an overpayment after the case is final. Tax forms 1040ez Generally, the IRS is not permitted to take action on a tax deficiency during: The 90-day (or 150-day if outside the United States) period that you have to petition a notice of deficiency to the Tax Court, or The period that the case is under appeal if a bond is provided. Tax forms 1040ez Claims for Refund If you believe you have overpaid your tax, you have a limited amount of time in which to file a claim for a credit or refund. Tax forms 1040ez You can claim a credit or refund by filing Form 1040X. Tax forms 1040ez See Time for Filing a Claim for Refund , later. Tax forms 1040ez File your claim by mailing it to the IRS Service Center where you filed your original return. Tax forms 1040ez File a separate form for each year or period involved. Tax forms 1040ez Include an explanation of each item of income, deduction, or credit on which you are basing your claim. Tax forms 1040ez Corporations should file Form 1120X, Amended U. Tax forms 1040ez S. Tax forms 1040ez Corporation Income Tax Return, or other form appropriate to the type of credit or refund claimed. Tax forms 1040ez See Publication 3920 for information on filing claims for tax forgiveness for individuals affected by terrorist attacks. Tax forms 1040ez Requesting a copy of your tax return. Tax forms 1040ez   You can obtain a copy of the actual return and all attachments you filed with the IRS for an earlier year. Tax forms 1040ez This includes a copy of the Form W-2 or Form 1099 filed with your return. Tax forms 1040ez Use Form 4506 to make your request. Tax forms 1040ez You will be charged a fee, which you must pay when you submit Form 4506. Tax forms 1040ez Requesting a copy of your tax account information. Tax forms 1040ez   Use Form 4506-T, Request for Transcript of Tax Return, to request free copies of your tax return transcript, tax account transcript, record of account, verification of nonfiling, or Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript. Tax forms 1040ez The tax return transcript contains most of the line items of a tax return. Tax forms 1040ez A tax account transcript contains information on the financial status of the account, such as payments, penalty assessments, and adjustments. Tax forms 1040ez A record of account is a combination of line item information and later adjustments to the account. Tax forms 1040ez Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript contains data from these information returns. Tax forms 1040ez Penalty for erroneous claim for refund. Tax forms 1040ez   If you claim an excessive amount of tax refund or credit relating to income tax (other than a claim relating to the earned income credit), you may be liable for a penalty of 20% of the amount that is determined to be excessive. Tax forms 1040ez An excessive amount is the amount of the claim for refund or credit that is more than the amount of claim allowable for the tax year. Tax forms 1040ez The penalty may be waived if you can show that you had a reasonable basis for making the claim. Tax forms 1040ez Time for Filing a Claim for Refund Generally, you must file a claim for a credit or refund within 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later. Tax forms 1040ez If you do not file a claim within this period, you may no longer be entitled to a credit or a refund. Tax forms 1040ez If the due date to file a return or a claim for a credit or refund is a Saturday, Sunday, or legal holiday, it is filed on time if it is filed on the next business day. Tax forms 1040ez Returns you filed before the due date are considered filed on the due date. Tax forms 1040ez This is true even when the due date is a Saturday, Sunday, or legal holiday. Tax forms 1040ez Disaster area claims for refund. Tax forms 1040ez   If you live in a Presidentially declared disaster area or are affected by terroristic or military action, the deadline to file a claim for a refund may be postponed. Tax forms 1040ez This section discusses the special rules that apply to Presidentially declared disaster area refunds. Tax forms 1040ez    A Presidentially declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Disaster Relief and Emergency Assistance Act. Tax forms 1040ez Postponed refund deadlines. Tax forms 1040ez   The IRS may postpone for up to 1 year the deadlines for filing a claim for refund. Tax forms 1040ez The postponement can be used by taxpayers who are affected by a Presidentially declared disaster. Tax forms 1040ez The IRS may also postpone deadlines for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. Tax forms 1040ez For more information, see Publication 547. Tax forms 1040ez   If any deadline is postponed, the IRS will publicize the postponement in your area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin. Tax forms 1040ez A list of the areas eligible for assistance under the Disaster Relief and Emergency Assistance Act is available at the Federal Emergency Management Agency (FEMA) website at www. Tax forms 1040ez fema. Tax forms 1040ez gov and at the IRS website at www. Tax forms 1040ez irs. Tax forms 1040ez gov. Tax forms 1040ez Nonfilers can get refund of overpayments paid within 3-year period. Tax forms 1040ez   The Tax Court can consider taxes paid during the 3-year period preceding the date of a notice of deficiency for determining any refund due to a nonfiler. Tax forms 1040ez This means that if you do not file your return, and you receive a notice of deficiency in the third year after the due date (with extensions) of your return and file suit with the Tax Court to contest the notice of deficiency, you may be able to receive a refund of excessive amounts paid within the 3-year period preceding the date of the notice of deficiency. Tax forms 1040ez The IRS may postpone for up to 1 year certain tax deadlines, including the time for filing claims for refund, for taxpayers who are affected by a terrorist attack occurring after September 10, 2001. Tax forms 1040ez For more information, see Publication 3920. Tax forms 1040ez Claim for refund by estates electing the installment method of payment. Tax forms 1040ez   In certain cases where an estate has elected to make tax payments through the installment method, the executor can file a suit for refund with a U. Tax forms 1040ez S. Tax forms 1040ez District Court or the U. Tax forms 1040ez S. Tax forms 1040ez Court of Federal Claims before all the installment payments have been made. Tax forms 1040ez However, all the following must be true before a suit can be filed: The estate consists largely of an interest in a closely-held business. Tax forms 1040ez All installment payments due on or before the date the suit is filed have been made. Tax forms 1040ez No accelerated installment payments have been made. Tax forms 1040ez No Tax Court case is pending with respect to any estate tax liability. Tax forms 1040ez If a notice of deficiency was issued to the estate regarding its liability for estate tax, the time for petitioning the Tax Court has passed. Tax forms 1040ez No proceeding is pending for a declaratory judgment by the Tax Court on whether the estate is eligible to pay tax in installments. Tax forms 1040ez The executor has not included any previously litigated issues in the current suit for refund. Tax forms 1040ez The executor does not discontinue making installment payments timely, while the court considers the suit for refund. Tax forms 1040ez    If in its final decision on the suit for refund the court redetermines the estate's tax liability, the IRS must refund any part of the estate tax amount that is disallowed. Tax forms 1040ez This includes any part of the disallowed amount previously collected by the IRS. Tax forms 1040ez Protective claim for refund. Tax forms 1040ez   If your right to a refund is contingent on future events and may not be determinable until after the time period for filing a claim for refund expires, you can file a protective claim for refund. Tax forms 1040ez A protective claim can be either a formal claim or an amended return for credit or refund. Tax forms 1040ez Protective claims are often based on current litigation or expected changes in the tax law, other legislation, or regulations. Tax forms 1040ez A protective claim preserves your right to claim a refund when the contingency is resolved. Tax forms 1040ez A protective claim does not have to state a particular dollar amount or demand an immediate refund. Tax forms 1040ez However, to be valid, a protective claim must: Be in writing and be signed, Include your name, address, social security number or individual taxpayer identification number, and other contact information, Identify and describe the contingencies affecting the claim, Clearly alert the IRS to the essential nature of the claim, and Identify the specific year(s) for which a refund is sought. Tax forms 1040ez   Generally, the IRS will delay action on the protective claim until the contingency is resolved. Tax forms 1040ez Once the contingency is resolved, the IRS may obtain additional information necessary to process the claim and then either allow or disallow the claim. Tax forms 1040ez   Mail your protective claim for refund to the address listed in the instructions for Form 1040X, under Where To File. Tax forms 1040ez Exceptions The limits on your claim for refund can be affected by the type of item that forms the basis of your claim. Tax forms 1040ez Special refunds. Tax forms 1040ez   If you file a claim for refund based on one of the items listed below, the limits discussed earlier under Time for Filing a Claim for Refund may not apply. Tax forms 1040ez These special items are: A bad debt, A worthless security, A payment or accrual of foreign tax, A net operating loss carryback, and A carryback of certain tax credits. Tax forms 1040ez   The limits discussed earlier also may not apply if you have signed an agreement to extend the period of assessment of tax. Tax forms 1040ez For information on special rules on filing claims for an individual affected by a terrorist attack, see Publication 3920. Tax forms 1040ez Periods of financial disability. Tax forms 1040ez   If you are an individual (not a corporation or other taxpaying entity), the period of limitations on credits and refunds can be suspended during periods when you cannot manage your financial affairs because of physical or mental impairment that is medically determinable and either: Has lasted or can be expected to last continuously for at least 12 months, or Can be expected to result in death. Tax forms 1040ez    The period for filing a claim for refund will not be suspended for any time that someone else, such as your spouse or guardian, was authorized to act for you in financial matters. Tax forms 1040ez   To claim financial disability, you generally must submit the following statements with your claim for credit or refund: A written statement signed by a physician, qualified to make the determination, that sets forth: The name and a description of your physical or mental impairment, The physician's medical opinion that your physical or mental impairment prevented you from managing your financial affairs, The physician's medical opinion that your physical or mental impairment was or can be expected to result in death, or that it has lasted (or can be expected to last) for a continuous period of not less than 12 months, and To the best of the physician's knowledge, the specific time period during which you were prevented by such physical or mental impairment from managing your financial affairs, and A written statement by the person signing the claim for credit or refund that no person, including your spouse, was authorized to act on your behalf in financial matters during the period described in paragraph (1)(d) of the physician's statement. Tax forms 1040ez Alternatively, if a person was authorized to act on your behalf in financial matters during any part of the period described in that paragraph, the beginning and ending dates of the period of time the person was so authorized. Tax forms 1040ez    The period of limitations will not be suspended on any claim for refund that (without regard to this provision) was barred as of July 22, 1998. Tax forms 1040ez Limit on Amount of Refund If you file your claim within 3 years after filing your return, the credit or refund cannot be more than the part of the tax paid wi