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Tax Software 2012

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Tax Software 2012

Tax software 2012 Publication 915 - Main Content Table of Contents Are Any of Your Benefits Taxable?Worksheet A. Tax software 2012 Exemption from withholding. Tax software 2012 How To Report Your Benefits How Much Is Taxable?Examples Lump-Sum ElectionExample Deductions Related to Your BenefitsRepayments More Than Gross Benefits Worksheets AppendixForm SSA-1099, Social Security Benefit Statement 2013 Form SSA-1042S, Social Security Benefit Statement 2013 (Nonresident Aliens) Form RRB-1099, Payments by the Railroad Retirement Board 2013 Form RRB-1042S, Payments by the Railroad Retirement Board 2013 (Nonresident Aliens) How To Get Tax HelpLow Income Taxpayer Clinics Are Any of Your Benefits Taxable? To find out whether any of your benefits shown on Forms SSA-1099 and RRB-1099 may be taxable, compare the base amount (explained later) for your filing status with the total of: One-half of your benefits, plus All your other income, including tax-exempt interest. Tax software 2012 When making this comparison, do not reduce your other income by any exclusions for: Interest from qualified U. Tax software 2012 S. Tax software 2012 savings bonds, Employer-provided adoption benefits, Foreign earned income or foreign housing, or Income earned by bona fide residents of American Samoa or Puerto Rico. Tax software 2012 Children's benefits. Tax software 2012   The rules in this publication apply to benefits received by children. Tax software 2012 See Who is taxed , later. Tax software 2012 The SSA issues Form SSA-1099 and Form SSA-1042S. Tax software 2012 The RRB issues Form RRB-1099 and Form RRB-1042S. Tax software 2012 These forms (tax statements) report the amounts paid and repaid, and taxes withheld for a tax year. Tax software 2012 You may receive more than one of these forms for the same tax year. Tax software 2012 See the Appendix at the end of this publication for more information. Tax software 2012 Each original Form RRB-1099 or Form RRB-1042S is valid unless it has been corrected. Tax software 2012 The RRB will issue a corrected Form RRB-1099 or Form RRB-1042S if there is an error in the original. Tax software 2012 A corrected Form RRB-1099 or Form RRB-1042S is indicated as “CORRECTED” and replaces the corresponding original Form RRB-1099 or Form RRB-1042S. Tax software 2012 You must use the latest corrected Form RRB-1099 or Form RRB-1042S you received and any original Form RRB-1099 or Form RRB-1042S that the RRB has not corrected when you determine what amounts to report on your tax return. Tax software 2012 Figuring total income. Tax software 2012   To figure the total of one-half of your benefits plus your other income, use Worksheet A, discussed later. Tax software 2012 If the total is more than your base amount, part of your benefits may be taxable. Tax software 2012   If you are married and file a joint return for 2013, you and your spouse must combine your incomes and your benefits to figure whether any of your combined benefits are taxable. Tax software 2012 Even if your spouse did not receive any benefits, you must add your spouse's income to yours to figure whether any of your benefits are taxable. Tax software 2012 If the only income you received during 2013 was your social security or the SSEB portion of tier 1 railroad retirement benefits, your benefits generally are not taxable and you probably do not have to file a return. Tax software 2012 If you have income in addition to your benefits, you may have to file a return even if none of your benefits are taxable. Tax software 2012 Base amount. Tax software 2012   Your base amount is: $25,000 if you are single, head of household, or qualifying widow(er), $25,000 if you are married filing separately and lived apart from your spouse for all of 2013, $32,000 if you are married filing jointly, or $-0- if you are married filing separately and lived with your spouse at any time during 2013. Tax software 2012 Worksheet A. Tax software 2012   You can use Worksheet A to figure the amount of income to compare with your base amount. Tax software 2012 This is a quick way to check whether some of your benefits may be taxable. Tax software 2012     Worksheet A. Tax software 2012 A Quick Way To Check if Your Benefits May Be Taxable Keep for your records A. Tax software 2012 Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Tax software 2012 Include the full amount of any lump-sum benefit payments received in 2013, for 2013 and earlier years. Tax software 2012 (If you received more than one form, combine the amounts from box 5 and enter the total. Tax software 2012 ) A. Tax software 2012   Note. Tax software 2012 If the amount on line A is zero or less, stop here; none of your benefits are taxable this year. Tax software 2012 B. Tax software 2012 Enter one-half of the amount on line A B. Tax software 2012   C. Tax software 2012 Enter your taxable pensions, wages, interest, dividends, and other taxable income C. Tax software 2012   D. Tax software 2012 Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income (listed earlier) D. Tax software 2012   E. Tax software 2012 Add lines B, C, and D E. Tax software 2012   Note. Tax software 2012 Compare the amount on line E to your base amount for your filing status. Tax software 2012 If the amount on line E equals or is less than the base amount for your filing status, none of your benefits are taxable this year. Tax software 2012 If the amount on line E is more than your base amount, some of your benefits may be taxable. Tax software 2012 You need to complete Worksheet 1, shown later. Tax software 2012 If none of your benefits are taxable, but you otherwise must file a tax return, see Benefits not taxable , later, under How To Report Your Benefits . Tax software 2012   Example. Tax software 2012 You and your spouse (both over 65) are filing a joint return for 2013 and you both received social security benefits during the year. Tax software 2012 In January 2014, you received a Form SSA-1099 showing net benefits of $7,500 in box 5. Tax software 2012 Your spouse received a Form SSA-1099 showing net benefits of $3,500 in box 5. Tax software 2012 You also received a taxable pension of $22,800 and interest income of $500. Tax software 2012 You did not have any tax-exempt interest income. Tax software 2012 Your benefits are not taxable for 2013 because your income, as figured in Worksheet A below, is not more than your base amount ($32,000) for married filing jointly. Tax software 2012   Even though none of your benefits are taxable, you must file a return for 2013 because your taxable gross income ($23,300) exceeds the minimum filing requirement amount for your filing status. Tax software 2012     Filled-in Worksheet A. Tax software 2012 A Quick Way To Check if Your Benefits May Be Taxable Keep for your records A. Tax software 2012 Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Tax software 2012 Include the full amount of any lump-sum benefit payments received in 2013, for 2013 and earlier years. Tax software 2012 (If you received more than one form, combine the amounts from box 5 and enter the total. Tax software 2012 ) A. Tax software 2012 $11,000 Note. Tax software 2012 If the amount on line A is zero or less, stop here; none of your benefits are taxable this year. Tax software 2012 B. Tax software 2012 Enter one-half of the amount on line A B. Tax software 2012 5,500 C. Tax software 2012 Enter your taxable pensions, wages, interest, dividends, and other taxable income C. Tax software 2012 23,300 D. Tax software 2012 Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income (listed earlier) D. Tax software 2012 -0- E. Tax software 2012 Add lines B, C, and D E. Tax software 2012 $28,800 Note. Tax software 2012 Compare the amount on line E to your base amount for your filing status. Tax software 2012 If the amount on line E equals or is less than the base amount for your filing status, none of your benefits are taxable this year. Tax software 2012 If the amount on line E is more than your base amount, some of your benefits may be taxable. Tax software 2012 You need to complete Worksheet 1, shown later. Tax software 2012 If none of your benefits are taxable, but you otherwise must file a tax return, see Benefits not taxable , later, under How To Report Your Benefits . Tax software 2012   Who is taxed. Tax software 2012   Benefits are included in the taxable income (to the extent they are taxable) of the person who has the legal right to receive the benefits. Tax software 2012 For example, if you and your child receive benefits, but the check for your child is made out in your name, you must use only your part of the benefits to see whether any benefits are taxable to you. Tax software 2012 One-half of the part that belongs to your child must be added to your child's other income to see whether any of those benefits are taxable to your child. Tax software 2012 Repayment of benefits. Tax software 2012   Any repayment of benefits you made during 2013 must be subtracted from the gross benefits you received in 2013. Tax software 2012 It does not matter whether the repayment was for a benefit you received in 2013 or in an earlier year. Tax software 2012 If you repaid more than the gross benefits you received in 2013, see Repayments More Than Gross Benefits , later. Tax software 2012   Your gross benefits are shown in box 3 of Form SSA-1099 or Form RRB-1099. Tax software 2012 Your repayments are shown in box 4. Tax software 2012 The amount in box 5 shows your net benefits for 2013 (box 3 minus box 4). Tax software 2012 Use the amount in box 5 to figure whether any of your benefits are taxable. Tax software 2012 Example. Tax software 2012 In 2012, you received $3,000 in social security benefits, and in 2013 you received $2,700. Tax software 2012 In March 2013, SSA notified you that you should have received only $2,500 in benefits in 2012. Tax software 2012 During 2013, you repaid $500 to SSA. Tax software 2012 The Form SSA-1099 you received for 2013 shows $2,700 in box 3 (gross amount) and $500 in box 4 (repayment). Tax software 2012 The amount in box 5 shows your net benefits of $2,200 ($2,700 minus $500). Tax software 2012 Tax withholding and estimated tax. Tax software 2012   You can choose to have federal income tax withheld from your social security benefits and/or the SSEB portion of your tier 1 railroad retirement benefits. Tax software 2012 If you choose to do this, you must complete a Form W-4V, Voluntary Withholding Statement. Tax software 2012   If you do not choose to have income tax withheld, you may have to request additional withholding from other income or pay estimated tax during the year. Tax software 2012 For details, see Publication 505, Tax Withholding and Estimated Tax, or the instructions for Form 1040-ES, Estimated Tax for Individuals. Tax software 2012 U. Tax software 2012 S. Tax software 2012 citizens residing abroad. Tax software 2012   U. Tax software 2012 S. Tax software 2012 citizens who are residents of the following countries are exempt from U. Tax software 2012 S. Tax software 2012 tax on their benefits. Tax software 2012 Canada. Tax software 2012 Egypt. Tax software 2012 Germany. Tax software 2012 Ireland. Tax software 2012 Israel. Tax software 2012 Italy. Tax software 2012 (You must also be a citizen of Italy for the exemption to apply. Tax software 2012 ) Romania. Tax software 2012 United Kingdom. Tax software 2012   The SSA will not withhold U. Tax software 2012 S. Tax software 2012 tax from your benefits if you are a U. Tax software 2012 S. Tax software 2012 citizen. Tax software 2012   The RRB will withhold U. Tax software 2012 S. Tax software 2012 tax from your benefits unless you file Form RRB-1001, Nonresident Questionnaire, with the RRB to provide citizenship and residency information. Tax software 2012 If you do not file Form RRB-1001, the RRB will consider you a nonresident alien and withhold tax from your railroad retirement benefits at a 30% rate. Tax software 2012 Contact the RRB to get this form. Tax software 2012 Lawful permanent residents. Tax software 2012   For U. Tax software 2012 S. Tax software 2012 income tax purposes, lawful permanent residents (green card holders) are considered resident aliens until their lawful permanent resident status under the immigration laws is either taken away or is administratively or judicially determined to have been abandoned. Tax software 2012 Social security benefits paid to a green card holder are not subject to 30% withholding. Tax software 2012 If you are a green card holder and tax was withheld in error on your social security benefits because you have a foreign address, the withholding tax is refundable by the Social Security Administration (SSA) or the IRS. Tax software 2012 SSA will refund taxes erroneously withheld if the refund can be processed during the same calendar year in which the tax was withheld. Tax software 2012 If SSA cannot refund the taxes withheld, you must file a Form 1040 or 1040A with the Internal Revenue Service Center, Austin, TX 73301 to determine if you are entitled to a refund. Tax software 2012 You must also attach the following information to your Form 1040 or 1040A: A copy of the Form SSA-1042S, Social Security Benefit Statement, A copy of the “green card,” and A signed declaration that includes the following statements:    “The SSA should not have withheld federal income tax from my social security benefits because I am a U. Tax software 2012 S. Tax software 2012 lawful permanent resident and my green card has been neither revoked nor administratively or judicially determined to have been abandoned. Tax software 2012 I am filing a U. Tax software 2012 S. Tax software 2012 income tax return for the tax year as a resident alien reporting all of my worldwide income. Tax software 2012 I have not claimed benefits for the tax year under an income tax treaty as a nonresident alien. Tax software 2012 ” Nonresident aliens. Tax software 2012   A nonresident alien is an individual who is not a citizen or resident of the United States. Tax software 2012 If you are a nonresident alien, the rules discussed in this publication do not apply to you. Tax software 2012 Instead, 85% of your benefits are taxed at a 30% rate, unless exempt (or subject to a lower rate) by treaty. Tax software 2012 You will receive a Form SSA-1042S or Form RRB-1042S showing the amount of your benefits. Tax software 2012 These forms will also show the tax rate and the amount of tax withheld from your benefits. Tax software 2012   Under tax treaties with the following countries, residents of these countries are exempt from U. Tax software 2012 S. Tax software 2012 tax on their benefits. Tax software 2012 Canada. Tax software 2012 Egypt. Tax software 2012 Germany. Tax software 2012 Ireland. Tax software 2012 Israel. Tax software 2012 Italy. Tax software 2012 Japan. Tax software 2012 Romania. Tax software 2012 United Kingdom. Tax software 2012   Under a treaty with India, benefits paid to individuals who are both residents and nationals of India are exempt from U. Tax software 2012 S. Tax software 2012 tax if the benefits are for services performed for the United States, its subdivisions, or local government authorities. Tax software 2012   If you are a resident of Switzerland, your total benefit amount will be taxed at a 15% rate. Tax software 2012   For more information on whether you are a nonresident alien, see Publication 519, U. Tax software 2012 S. Tax software 2012 Tax Guide for Aliens. Tax software 2012 Exemption from withholding. Tax software 2012   If your social security benefits are exempt from tax because you are a resident of one of the treaty countries listed, the SSA will not withhold U. Tax software 2012 S. Tax software 2012 tax from your benefits. Tax software 2012   If your railroad retirement benefits are exempt from tax because you are a resident of one of the treaty countries listed, you can claim an exemption from withholding by filing Form RRB-1001 with the RRB. Tax software 2012 Contact the RRB to get this form. Tax software 2012 Canadian or German social security benefits paid to U. Tax software 2012 S. Tax software 2012 residents. Tax software 2012   Under income tax treaties with Canada and Germany, social security benefits paid by those countries to U. Tax software 2012 S. Tax software 2012 residents are treated for U. Tax software 2012 S. Tax software 2012 income tax purposes as if they were paid under the social security legislation of the United States. Tax software 2012 If you receive social security benefits from Canada or Germany, include them on line 1 of Worksheet 1, shown later. Tax software 2012 How To Report Your Benefits If part of your benefits are taxable, you must use Form 1040 or Form 1040A. Tax software 2012 You cannot use Form 1040EZ. Tax software 2012 Reporting on Form 1040. Tax software 2012   Report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on line 20a and the taxable part on line 20b. Tax software 2012 If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 20a. Tax software 2012 Reporting on Form 1040A. Tax software 2012   Report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on line 14a and the taxable part on line 14b. Tax software 2012 If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 14a. Tax software 2012 Benefits not taxable. Tax software 2012   If you are filing Form 1040EZ, do not report any benefits on your tax return. Tax software 2012 If you are filing Form 1040 or Form 1040A, report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on Form 1040, line 20a, or Form 1040A, line 14a. Tax software 2012 Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Tax software 2012 If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Tax software 2012 How Much Is Taxable? If part of your benefits are taxable, how much is taxable depends on the total amount of your benefits and other income. Tax software 2012 Generally, the higher that total amount, the greater the taxable part of your benefits. Tax software 2012 Maximum taxable part. Tax software 2012   Generally, up to 50% of your benefits will be taxable. Tax software 2012 However, up to 85% of your benefits can be taxable if either of the following situations applies to you. Tax software 2012 The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly). Tax software 2012 You are married filing separately and lived with your spouse at any time during 2013. Tax software 2012 Which worksheet to use. Tax software 2012   A worksheet you can use to figure your taxable benefits is in the instructions for your Form 1040 or 1040A. Tax software 2012 You can use either that worksheet or Worksheet 1 in this publication, unless any of the following situations applies to you. Tax software 2012 You contributed to a traditional individual retirement arrangement (IRA) and you or your spouse is covered by a retirement plan at work. Tax software 2012 In this situation you must use the special worksheets in Appendix B of Publication 590 to figure both your IRA deduction and your taxable benefits. Tax software 2012 Situation (1) does not apply and you take an exclusion for interest from qualified U. Tax software 2012 S. Tax software 2012 savings bonds (Form 8815), for adoption benefits (Form 8839), for foreign earned income or housing (Form 2555 or Form 2555-EZ), or for income earned in American Samoa (Form 4563) or Puerto Rico by bona fide residents. Tax software 2012 In this situation, you must use Worksheet 1 in this publication to figure your taxable benefits. Tax software 2012 You received a lump-sum payment for an earlier year. Tax software 2012 In this situation, also complete Worksheet 2 or 3 and Worksheet 4 in this publication. Tax software 2012 See Lump-Sum Election , later. Tax software 2012 Examples A few examples you can use as a guide to figure the taxable part of your benefits follow. Tax software 2012 Filled-in Worksheet 1. Tax software 2012 Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Tax software 2012 Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Tax software 2012 None of your benefits are taxable for 2013. Tax software 2012 For more information, see Repayments More Than Gross Benefits . Tax software 2012 If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Tax software 2012 S. Tax software 2012 Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Tax software 2012 Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Tax software 2012 1. Tax software 2012 Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Tax software 2012 Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Tax software 2012 $5,980         2. Tax software 2012 Enter one-half of line 1 2. Tax software 2012 2,990     3. Tax software 2012 Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Tax software 2012 28,990     4. Tax software 2012 Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Tax software 2012 -0-     5. Tax software 2012 Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Tax software 2012 -0-     6. Tax software 2012 Combine lines 2, 3, 4, and 5 6. Tax software 2012 31,980     7. Tax software 2012 Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Tax software 2012  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Tax software 2012 -0-     8. Tax software 2012 Is the amount on line 7 less than the amount on line 6?             No. Tax software 2012 None of your social security benefits are taxable. Tax software 2012 Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Tax software 2012             Yes. Tax software 2012 Subtract line 7 from line 6 8. Tax software 2012 31,980     9. Tax software 2012 If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Tax software 2012 25,000       Note. Tax software 2012 If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Tax software 2012 85) and enter the result on line 17. Tax software 2012 Then go to line 18. Tax software 2012         10. Tax software 2012 Is the amount on line 9 less than the amount on line 8?             No. Tax software 2012 None of your benefits are taxable. Tax software 2012 Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Tax software 2012 If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Tax software 2012             Yes. Tax software 2012 Subtract line 9 from line 8 10. Tax software 2012 6,980     11. Tax software 2012 Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Tax software 2012 9,000     12. Tax software 2012 Subtract line 11 from line 10. Tax software 2012 If zero or less, enter -0- 12. Tax software 2012 -0-     13. Tax software 2012 Enter the smaller of line 10 or line 11 13. Tax software 2012 6,980     14. Tax software 2012 Enter one-half of line 13 14. Tax software 2012 3,490     15. Tax software 2012 Enter the smaller of line 2 or line 14 15. Tax software 2012 2,990     16. Tax software 2012 Multiply line 12 by 85% (. Tax software 2012 85). Tax software 2012 If line 12 is zero, enter -0- 16. Tax software 2012 -0-     17. Tax software 2012 Add lines 15 and 16 17. Tax software 2012 2,990     18. Tax software 2012 Multiply line 1 by 85% (. Tax software 2012 85) 18. Tax software 2012 5,083     19. Tax software 2012 Taxable benefits. Tax software 2012 Enter the smaller of line 17 or line 18. Tax software 2012 Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Tax software 2012 $2,990       If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Tax software 2012         Example 1. Tax software 2012 George White is single and files Form 1040 for 2013. Tax software 2012 In addition to receiving social security payments, he received a fully taxable pension of $18,600, wages from a part-time job of $9,400, and taxable interest income of $990, for a total of $28,990. Tax software 2012 He received a Form SSA-1099 in January 2014 that shows his net social security benefits of $5,980 in box 5. Tax software 2012   To figure his taxable benefits, George completes Worksheet 1, shown below. Tax software 2012 On line 20a of his Form 1040, George enters his net benefits of $5,980. Tax software 2012 On line 20b, he enters his taxable benefits of $2,990. Tax software 2012 Example 2. Tax software 2012 Ray and Alice Hopkins file a joint return on Form 1040A for 2013. Tax software 2012 Ray is retired and received a fully taxable pension of $15,500. Tax software 2012 He also received social security benefits and his Form SSA-1099 for 2013 shows net benefits of $5,600 in box 5. Tax software 2012 Alice worked during the year and had wages of $14,000. Tax software 2012 She made a deductible payment to her IRA account of $1,000. Tax software 2012 Ray and Alice have two savings accounts with a total of $250 in taxable interest income. Tax software 2012 They complete Worksheet 1, entering $29,750 ($15,500 + $14,000 + $250) on line 3. Tax software 2012 They find none of Ray's social security benefits are taxable. Tax software 2012 On Form 1040A, they enter $5,600 on line 14a and -0- on line 14b. Tax software 2012 Filled-in Worksheet 1. Tax software 2012 Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Tax software 2012 Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Tax software 2012 None of your benefits are taxable for 2013. Tax software 2012 For more information, see Repayments More Than Gross Benefits . Tax software 2012 If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Tax software 2012 S. Tax software 2012 Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Tax software 2012 Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Tax software 2012 1. Tax software 2012 Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Tax software 2012 Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Tax software 2012 $5,600         2. Tax software 2012 Enter one-half of line 1 2. Tax software 2012 2,800     3. Tax software 2012 Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Tax software 2012 29,750     4. Tax software 2012 Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Tax software 2012 -0-     5. Tax software 2012 Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Tax software 2012 -0-     6. Tax software 2012 Combine lines 2, 3, 4, and 5 6. Tax software 2012 32,550     7. Tax software 2012 Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Tax software 2012  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Tax software 2012 1,000     8. Tax software 2012 Is the amount on line 7 less than the amount on line 6?             No. Tax software 2012 None of your social security benefits are taxable. Tax software 2012 Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Tax software 2012             Yes. Tax software 2012 Subtract line 7 from line 6 8. Tax software 2012 31,550     9. Tax software 2012 If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Tax software 2012 32,000       Note. Tax software 2012 If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Tax software 2012 85) and enter the result on line 17. Tax software 2012 Then go to line 18. Tax software 2012         10. Tax software 2012 Is the amount on line 9 less than the amount on line 8?             No. Tax software 2012 None of your benefits are taxable. Tax software 2012 Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Tax software 2012 If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Tax software 2012             Yes. Tax software 2012 Subtract line 9 from line 8 10. Tax software 2012       11. Tax software 2012 Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Tax software 2012       12. Tax software 2012 Subtract line 11 from line 10. Tax software 2012 If zero or less, enter -0- 12. Tax software 2012       13. Tax software 2012 Enter the smaller of line 10 or line 11 13. Tax software 2012       14. Tax software 2012 Enter one-half of line 13 14. Tax software 2012       15. Tax software 2012 Enter the smaller of line 2 or line 14 15. Tax software 2012       16. Tax software 2012 Multiply line 12 by 85% (. Tax software 2012 85). Tax software 2012 If line 12 is zero, enter -0- 16. Tax software 2012       17. Tax software 2012 Add lines 15 and 16 17. Tax software 2012       18. Tax software 2012 Multiply line 1 by 85% (. Tax software 2012 85) 18. Tax software 2012       19. Tax software 2012 Taxable benefits. Tax software 2012 Enter the smaller of line 17 or line 18. Tax software 2012 Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Tax software 2012         If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Tax software 2012         Example 3. Tax software 2012 Joe and Betty Johnson file a joint return on Form 1040 for 2013. Tax software 2012 Joe is a retired railroad worker and in 2013 received the social security equivalent benefit (SSEB) portion of tier 1 railroad retirement benefits. Tax software 2012 Joe's Form RRB-1099 shows $10,000 in box 5. Tax software 2012 Betty is a retired government worker and received a fully taxable pension of $38,000. Tax software 2012 They had $2,300 in taxable interest income plus interest of $200 on a qualified U. Tax software 2012 S. Tax software 2012 savings bond. Tax software 2012 The savings bond interest qualified for the exclusion. Tax software 2012 They figure their taxable benefits by completing Worksheet 1 below. Tax software 2012 Because they have qualified U. Tax software 2012 S. Tax software 2012 savings bond interest, they follow the note at the beginning of the worksheet and use the amount from line 2 of their Schedule B (Form 1040A or 1040) on line 3 of the worksheet instead of the amount from line 8a of their Form 1040. Tax software 2012 On line 3 of the worksheet, they enter $40,500 ($38,000 + $2,500). Tax software 2012 More than 50% of Joe's net benefits are taxable because the income on line 8 of the worksheet ($45,500) is more than $44,000. Tax software 2012 (See Maximum taxable part under How Much Is Taxable earlier. Tax software 2012 ) Joe and Betty enter $10,000 on Form 1040, line 20a, and $6,275 on Form 1040, line 20b. Tax software 2012 Filled-in Worksheet 1. Tax software 2012 Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Tax software 2012 Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Tax software 2012 None of your benefits are taxable for 2013. Tax software 2012 For more information, see Repayments More Than Gross Benefits . Tax software 2012 If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Tax software 2012 S. Tax software 2012 Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Tax software 2012 Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Tax software 2012 1. Tax software 2012 Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Tax software 2012 Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Tax software 2012 $10,000         2. Tax software 2012 Enter one-half of line 1 2. Tax software 2012 5,000     3. Tax software 2012 Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Tax software 2012 40,500     4. Tax software 2012 Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Tax software 2012 -0-     5. Tax software 2012 Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Tax software 2012 -0-     6. Tax software 2012 Combine lines 2, 3, 4, and 5 6. Tax software 2012 45,500     7. Tax software 2012 Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Tax software 2012  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Tax software 2012 -0-     8. Tax software 2012 Is the amount on line 7 less than the amount on line 6?             No. Tax software 2012 None of your social security benefits are taxable. Tax software 2012 Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Tax software 2012             Yes. Tax software 2012 Subtract line 7 from line 6 8. Tax software 2012 45,500     9. Tax software 2012 If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Tax software 2012 32,000       Note. Tax software 2012 If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Tax software 2012 85) and enter the result on line 17. Tax software 2012 Then go to line 18. Tax software 2012         10. Tax software 2012 Is the amount on line 9 less than the amount on line 8?             No. Tax software 2012 None of your benefits are taxable. Tax software 2012 Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Tax software 2012 If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Tax software 2012             Yes. Tax software 2012 Subtract line 9 from line 8 10. Tax software 2012 13,500     11. Tax software 2012 Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Tax software 2012 12,000     12. Tax software 2012 Subtract line 11 from line 10. Tax software 2012 If zero or less, enter -0- 12. Tax software 2012 1,500     13. Tax software 2012 Enter the smaller of line 10 or line 11 13. Tax software 2012 12,000     14. Tax software 2012 Enter one-half of line 13 14. Tax software 2012 6,000     15. Tax software 2012 Enter the smaller of line 2 or line 14 15. Tax software 2012 5,000     16. Tax software 2012 Multiply line 12 by 85% (. Tax software 2012 85). Tax software 2012 If line 12 is zero, enter -0- 16. Tax software 2012 1,275     17. Tax software 2012 Add lines 15 and 16 17. Tax software 2012 6,275     18. Tax software 2012 Multiply line 1 by 85% (. Tax software 2012 85) 18. Tax software 2012 8,500     19. Tax software 2012 Taxable benefits. Tax software 2012 Enter the smaller of line 17 or line 18. Tax software 2012 Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Tax software 2012 $6,275       If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Tax software 2012         Filled-in Worksheet 1. Tax software 2012 Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Tax software 2012 Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Tax software 2012 None of your benefits are taxable for 2013. Tax software 2012 For more information, see Repayments More Than Gross Benefits . Tax software 2012 If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Tax software 2012 S. Tax software 2012 Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Tax software 2012 Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Tax software 2012 1. Tax software 2012 Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Tax software 2012 Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Tax software 2012 $4,000         2. Tax software 2012 Enter one-half of line 1 2. Tax software 2012 2,000     3. Tax software 2012 Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Tax software 2012 8,000     4. Tax software 2012 Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Tax software 2012 -0-     5. Tax software 2012 Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Tax software 2012 -0-     6. Tax software 2012 Combine lines 2, 3, 4, and 5 6. Tax software 2012 10,000     7. Tax software 2012 Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Tax software 2012  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Tax software 2012 -0-     8. Tax software 2012 Is the amount on line 7 less than the amount on line 6?             No. Tax software 2012 None of your social security benefits are taxable. Tax software 2012 Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Tax software 2012             Yes. Tax software 2012 Subtract line 7 from line 6 8. Tax software 2012 10,000     9. Tax software 2012 If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Tax software 2012         Note. Tax software 2012 If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Tax software 2012 85) and enter the result on line 17. Tax software 2012 Then go to line 18. Tax software 2012         10. Tax software 2012 Is the amount on line 9 less than the amount on line 8?             No. Tax software 2012 None of your benefits are taxable. Tax software 2012 Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Tax software 2012 If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Tax software 2012             Yes. Tax software 2012 Subtract line 9 from line 8 10. Tax software 2012       11. Tax software 2012 Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Tax software 2012       12. Tax software 2012 Subtract line 11 from line 10. Tax software 2012 If zero or less, enter -0- 12. Tax software 2012       13. Tax software 2012 Enter the smaller of line 10 or line 11 13. Tax software 2012       14. Tax software 2012 Enter one-half of line 13 14. Tax software 2012       15. Tax software 2012 Enter the smaller of line 2 or line 14 15. Tax software 2012       16. Tax software 2012 Multiply line 12 by 85% (. Tax software 2012 85). Tax software 2012 If line 12 is zero, enter -0- 16. Tax software 2012       17. Tax software 2012 Add lines 15 and 16 17. Tax software 2012 8,500     18. Tax software 2012 Multiply line 1 by 85% (. Tax software 2012 85) 18. Tax software 2012 3,400     19. Tax software 2012 Taxable benefits. Tax software 2012 Enter the smaller of line 17 or line 18. Tax software 2012 Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Tax software 2012 $3,400       If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Tax software 2012         Example 4. Tax software 2012 Bill and Eileen Jones are married and live together, but file separate Form 1040 returns for 2013. Tax software 2012 Bill earned $8,000 during 2013. Tax software 2012 The only other income he had for the year was $4,000 net social security benefits (box 5 of his Form SSA-1099). Tax software 2012 Bill figures his taxable benefits by completing Worksheet 1 below. Tax software 2012 He must include 85% of his social security benefits in his taxable income because he is married filing separately and lived with his spouse during 2013. Tax software 2012 See How Much Is Taxable earlier. Tax software 2012 Bill enters $4,000 on his Form 1040, line 20a, and $3,400 on Form 1040, line 20b. Tax software 2012 Lump-Sum Election You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2013 in your 2013 income, even if the payment includes benefits for an earlier year. Tax software 2012 This type of lump-sum benefit payment should not be confused with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. Tax software 2012 No part of the lump-sum death benefit is subject to tax. Tax software 2012 Generally, you use your 2013 income to figure the taxable part of the total benefits received in 2013. Tax software 2012 However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. Tax software 2012 You can elect this method if it lowers your taxable benefits. Tax software 2012 Under the lump-sum election method, you refigure the taxable part of all your benefits for the earlier year (including the lump-sum payment) using that year's income. Tax software 2012 Then you subtract any taxable benefits for that year that you previously reported. Tax software 2012 The remainder is the taxable part of the lump-sum payment. Tax software 2012 Add it to the taxable part of your benefits for 2013 (figured without the lump-sum payment for the earlier year). Tax software 2012 Because the earlier year's taxable benefits are included in your 2013 income, no adjustment is made to the earlier year's return. Tax software 2012 Do not file an amended return for the earlier year. Tax software 2012 Will the lump-sum election method lower your taxable benefits?   To find out, take the following steps. Tax software 2012 Complete Worksheet 1 in this publication. Tax software 2012 Complete Worksheet 2 and Worksheet 3 as appropriate. Tax software 2012 Use Worksheet 2 if your lump-sum payment was for a year after 1993. Tax software 2012 Use Worksheet 3 if it was for 1993 or an earlier year. Tax software 2012 Complete a separate Worksheet 2 or Worksheet 3 for each earlier year for which you received the lump-sum payment. Tax software 2012 Complete Worksheet 4. Tax software 2012 Compare the taxable benefits on line 19 of Worksheet 1 with the taxable benefits on line 21 of Worksheet 4. Tax software 2012 If the taxable benefits on Worksheet 4 are lower than the taxable benefits on Worksheet 1, you can elect to report the lower amount on your return. Tax software 2012 Making the election. Tax software 2012   If you elect to report your taxable benefits under the lump-sum election method, follow the instructions at the bottom of Worksheet 4. Tax software 2012 Do not attach the completed worksheets to your return. Tax software 2012 Keep them with your records. Tax software 2012    Once you elect this method of figuring the taxable part of a lump-sum payment, you can revoke your election only with the consent of the IRS. Tax software 2012 Lump-sum payment reported on Form SSA-1099 or RRB-1099. Tax software 2012   If you received a lump-sum payment in 2013 that includes benefits for one or more earlier years after 1983, it will be included in box 3 of either Form SSA-1099 or Form RRB-1099. Tax software 2012 That part of any lump-sum payment for years before 1984 is not taxed and will not be shown on the form. Tax software 2012 The form will also show the year (or years) the payment is for. Tax software 2012 However, Form RRB-1099 will not show a breakdown by year (or years) of any lump-sum payment for years before 2011. Tax software 2012 You must contact the RRB for a breakdown by year for any amount shown in box 9. Tax software 2012 Example Jane Jackson is single. Tax software 2012 In 2012 she applied for social security disability benefits but was told she was ineligible. Tax software 2012 She appealed the decision and won. Tax software 2012 In 2013, she received a lump-sum payment of $6,000, of which $2,000 was for 2012 and $4,000 was for 2013. Tax software 2012 Jane also received $5,000 in social security benefits in 2013, so her total benefits in 2013 were $11,000. Tax software 2012 Jane's other income for 2012 and 2013 is as follows. Tax software 2012   Income 2012 2013     Wages $20,000 $ 3,500     Interest income 2,000 2,500     Dividend income 1,000 1,500     Fully taxable pension   18,000     Total $23,000 $25,500   To see if the lump-sum election method results in lower taxable benefits, she completes Worksheets 1, 2, and 4 from this publication. Tax software 2012 She does not need to complete Worksheet 3 because her lump-sum payment was for years after 1993. Tax software 2012 Jane completes Worksheet 1 to find the amount of her taxable benefits for 2013 under the regular method. Tax software 2012 She completes Worksheet 2 to find the taxable part of the lump-sum payment for 2012 under the lump-sum election method. Tax software 2012 She completes Worksheet 4 to decide if the lump-sum election method will lower her taxable benefits. Tax software 2012 After completing the worksheets, Jane compares the amounts from Worksheet 4, line 21, and Worksheet 1, line 19. Tax software 2012 Because the amount on Worksheet 4 is smaller, she chooses to use the lump-sum election method. Tax software 2012 To do this, she prints “LSE” to the left of Form 1040, line 20a. Tax software 2012 She then enters $11,000 on Form 1040, line 20a, and her taxable benefits of $2,500 on line 20b. Tax software 2012 Jane's filled-in worksheets (1, 2, and 4) follow. Tax software 2012 Jane Jackson's Filled-in Worksheet 1. Tax software 2012 Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Tax software 2012 Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Tax software 2012 None of your benefits are taxable for 2013. Tax software 2012 For more information, see Repayments More Than Gross Benefits . Tax software 2012 If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Tax software 2012 S. Tax software 2012 Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Tax software 2012 Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Tax software 2012 1. Tax software 2012 Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Tax software 2012 Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Tax software 2012 $11,000         2. Tax software 2012 Enter one-half of line 1 2. Tax software 2012 5,500     3. Tax software 2012 Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Tax software 2012 25,500     4. Tax software 2012 Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Tax software 2012 -0-     5. Tax software 2012 Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Tax software 2012 -0-     6. Tax software 2012 Combine lines 2, 3, 4, and 5 6. Tax software 2012 31,000     7. Tax software 2012 Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Tax software 2012  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Tax software 2012 -0-     8. Tax software 2012 Is the amount on line 7 less than the amount on line 6?             No. Tax software 2012 None of your social security benefits are taxable. Tax software 2012 Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Tax software 2012             Yes. Tax software 2012 Subtract line 7 from line 6 8. Tax software 2012 31,000     9. Tax software 2012 If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Tax software 2012 25,000       Note. Tax software 2012 If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Tax software 2012 85) and enter the result on line 17. Tax software 2012 Then go to line 18. Tax software 2012         10. Tax software 2012 Is the amount on line 9 less than the amount on line 8?             No. Tax software 2012 None of your benefits are taxable. Tax software 2012 Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Tax software 2012 If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Tax software 2012             Yes. Tax software 2012 Subtract line 9 from line 8 10. Tax software 2012 6,000     11. Tax software 2012 Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Tax software 2012 9,000     12. Tax software 2012 Subtract line 11 from line 10. Tax software 2012 If zero or less, enter -0- 12. Tax software 2012 -0-     13. Tax software 2012 Enter the smaller of line 10 or line 11 13. Tax software 2012 6,000     14. Tax software 2012 Enter one-half of line 13 14. Tax software 2012 3,000     15. Tax software 2012 Enter the smaller of line 2 or line 14 15. Tax software 2012 3,000     16. Tax software 2012 Multiply line 12 by 85% (. Tax software 2012 85). Tax software 2012 If line 12 is zero, enter -0- 16. Tax software 2012 -0-     17. Tax software 2012 Add lines 15 and 16 17. Tax software 2012 3,000     18. Tax software 2012 Multiply line 1 by 85% (. Tax software 2012 85) 18. Tax software 2012 9,350     19. Tax software 2012 Taxable benefits. Tax software 2012 Enter the smaller of line 17 or line 18. Tax software 2012 Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Tax software 2012 $3,000       If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Tax software 2012         Jane Jackson's Filled-in Worksheet 2. Tax software 2012 Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year After 1993)     Enter earlier year 2012 1. Tax software 2012 Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for the earlier year, plus the lump-sum payment for the earlier year received after that year 1. Tax software 2012 $2,000           Note. Tax software 2012 If line 1 is zero or less, skip lines 2 through 20 and enter -0- on line 21. Tax software 2012 Otherwise, go on to line 2. Tax software 2012             2. Tax software 2012 Enter one-half of line 1 2. Tax software 2012 1,000   3. Tax software 2012 Enter your adjusted gross income for the earlier year 3. Tax software 2012 23,000   4. Tax software 2012 Enter the total of any exclusions/adjustments you claimed in the earlier year for: Adoption benefits (Form 8839) Qualified U. Tax software 2012 S. Tax software 2012 savings bond interest (Form 8815) Student loan interest (Form 1040, page 1, or Form 1040A, page 1) Tuition and fees (Form 1040, page 1, or Form 1040A, page 1) Domestic production activities (for 2005 through 2012) (Form 1040, page 1) Foreign earned income or housing (Form 2555 or Form 2555-EZ) Certain income of bona fide residents of American Samoa (Form 4563) or Puerto Rico 4. Tax software 2012 -0-   5. Tax software 2012 Enter any tax-exempt interest received in the earlier year 5. Tax software 2012 -0-   6. Tax software 2012 Add lines 2 through 5 6. Tax software 2012 24,000   7. Tax software 2012 Enter your taxable benefits for the earlier year that you previously reported 7. Tax software 2012 -0-   8. Tax software 2012 Subtract line 7 from line 6 8. Tax software 2012 24,000   9. Tax software 2012 If, for the earlier year, you were:     Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), married filing separately and you lived apart from your spouse for all of the earlier year, enter $25,000 9. Tax software 2012 25,000     Note. Tax software 2012 If you were married filing separately and you lived with your spouse at any time during the earlier year, skip lines 9 through 16; multiply line 8 by 85% (. Tax software 2012 85) and enter the result on line 17. Tax software 2012 Then go to line 18. Tax software 2012         10. Tax software 2012 Is the amount on line 8 more than the amount on line 9?       No. Tax software 2012 Skip lines 10 through 20 and enter -0- on line 21. Tax software 2012       Yes. Tax software 2012 Subtract line 9 from line 8 10. Tax software 2012     11. Tax software 2012 Enter $12,000 if married filing jointly for the earlier year; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of the earlier year 11. Tax software 2012     12. Tax software 2012 Subtract line 11 from line 10. Tax software 2012 If zero or less, enter -0- 12. Tax software 2012     13. Tax software 2012 Enter the smaller of line 10 or line 11 13. Tax software 2012     14. Tax software 2012 Enter one-half of line 13 14. Tax software 2012     15. Tax software 2012 Enter the smaller of line 2 or line 14 15. Tax software 2012     16. Tax software 2012 Multiply line 12 by 85% (. Tax software 2012 85). Tax software 2012 If line 12 is zero, enter -0- 16. Tax software 2012     17. Tax software 2012 Add lines 15 and 16 17. Tax software 2012     18. Tax software 2012 Multiply line 1 by 85% (. Tax software 2012 85) 18. Tax software 2012     19. Tax software 2012 Refigured taxable benefits. Tax software 2012 Enter the smaller of line 17 or line 18 19. Tax software 2012     20. Tax software 2012 Enter your taxable benefits for the earlier year (or as refigured due to a previous lump-sum payment for the year) 20. Tax software 2012     21. Tax software 2012 Additional taxable benefits. Tax software 2012 Subtract line 20 from line 19. Tax software 2012 Also enter this amount on Worksheet 4, line 20 21. Tax software 2012 -0-     Do not file an amended return for this earlier year. Tax software 2012 Complete a separate Worksheet 2 or Worksheet 3 for each earlier year for which you received a lump-sum payment in 2013. Tax software 2012   Jane Jackson's Filled-in Worksheet 4. Tax software 2012 Figure Your Taxable Benefits Under the Lump-Sum Election Method (Use With Worksheet 2 or 3)     Complete Worksheet 1 and Worksheets 2 and 3 as appropriate before completing this worksheet. Tax software 2012 1. Tax software 2012 Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for 2013, minus the lump-sum payment for years before 2013 1. Tax software 2012 $9,000         Note. Tax software 2012 If line 1 is zero or less, skip lines 2 through 18, enter -0- on line 19 and go to line 20. Tax software 2012 Otherwise, go on to line 2. Tax software 2012           2. Tax software 2012 Enter one-half of line 1 2. Tax software 2012 4,500   3. Tax software 2012 Enter the amount from Worksheet 1, line 3 3. Tax software 2012 25,500   4. Tax software 2012 Enter the amount from Worksheet 1, line 4 4. Tax software 2012 -0-   5. Tax software 2012 Enter the amount from Worksheet 1, line 5 5. Tax software 2012 -0-   6. Tax software 2012 Combine lines 2, 3, 4, and 5 6. Tax software 2012 30,000   7. Tax software 2012 Enter the amount from Worksheet 1, line 7 7. Tax software 2012 -0-   8. Tax software 2012 Subtract line 7 from line 6 8. Tax software 2012 30,000   9. Tax software 2012 Enter the amount from Worksheet 1, line 9. Tax software 2012 But if you are married filing separately and lived with your spouse at any time during 2013, skip lines 9 through 16; multiply line 8 by 85% (. Tax software 2012 85) and enter the result on line 17. Tax software 2012 Then, go to line 18 9. Tax software 2012 25,000   10. Tax software 2012 Is the amount on line 8 more than the amount on line 9? No. Tax software 2012 Skip lines 10 through 18, enter -0- on line 19, and go to line 20. Tax software 2012  Yes. Tax software 2012 Subtract line 9 from line 8 10. Tax software 2012 5,000   11. Tax software 2012 Enter the amount from Worksheet 1, line 11 11. Tax software 2012 9,000   12. Tax software 2012 Subtract line 11 from line 10. Tax software 2012 If zero or less, enter -0- 12. Tax software 2012 -0-   13. Tax software 2012 Enter the smaller of line 10 or line 11 13. Tax software 2012 5,000   14. Tax software 2012 Enter one-half of line 13 14. Tax software 2012 2,500   15. Tax software 2012 Enter the smaller of line 2 or line 14 15. Tax software 2012 2,500   16. Tax software 2012 Multiply line 12 by 85% (. Tax software 2012 85). Tax software 2012 If line 12 is zero, enter -0- 16. Tax software 2012 -0-   17. Tax software 2012 Add lines 15 and 16 17. Tax software 2012 2,500   18. Tax software 2012 Multiply line 1 by 85% (. Tax software 2012 85) 18. Tax software 2012 7,650   19. Tax software 2012 Enter the smaller of line 17 or line 18 19. Tax software 2012 2,500   20. Tax software 2012 Enter the total of the amounts from Worksheet 2, line 21, and Worksheet 3, line 14, for all earlier years for which the lump-sum payment was received 20. Tax software 2012 -0-   21. Tax software 2012 Taxable benefits under lump-sum election method. Tax software 2012 Add lines 19 and 20 21. Tax software 2012 $2,500   Next. Tax software 2012 Is line 21 above smaller than Worksheet 1, line 19? No. Tax software 2012 Do not use this method to figure your taxable benefits. Tax software 2012 Follow the instructions on Worksheet 1 to report your benefits. Tax software 2012  Yes. Tax software 2012 You can elect to report your taxable benefits under this method. Tax software 2012 To elect this method:     Enter “LSE” to the left of Form 1040, line 20a, or Form 1040A, line 14a. Tax software 2012 If line 21 above is zero, follow the instructions in line 10 for “No” on Worksheet 1. Tax software 2012 Otherwise: Enter the amount from Worksheet 1, line 1, on Form 1040, line 20a, or on Form 1040A, line 14a. Tax software 2012 Enter the amount from line 21 above on Form 1040, line 20b, or on Form 1040A, line 14b. Tax software 2012 If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Tax software 2012   Deductions Related to Your Benefits You may be entitled to deduct certain amounts related to the benefits you receive. Tax software 2012 Disability payments. Tax software 2012   You may have received disability payments from your employer or an insurance company that you included as income on your tax return in an earlier year. Tax software 2012 If you received a lump-sum payment from SSA or RRB, and you had to repay the employer or insurance company for the disability payments, you can take an itemized deduction for the part of the payments you included in gross income in the earlier year. Tax software 2012 If the amount you repay is more than $3,000, you may be able to claim a tax credit instead. Tax software 2012 Claim the deduction or credit in the same way explained under Repayment of benefits received in an earlier year in the section Repayments More Than Gross Benefits , later. Tax software 2012 Legal expenses. Tax software 2012   You can usually deduct legal expenses that you pay or incur to produce or collect taxable income or in connection with the determination, collection, or refund of any tax. Tax software 2012   Legal expenses for collecting the taxable part of your benefits are deductible as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Tax software 2012 Repayments More Than Gross Benefits In some situations, your Form SSA-1099 or Form RRB-1099 will show that the total benefits you repaid (box 4) are more than the gross benefits (box 3) you received. Tax software 2012 If this occurred, your net benefits in box 5 will be a negative figure (a figure in parentheses) and none of your benefits will be taxable. Tax software 2012 Do not use Worksheet 1 in this case. Tax software 2012 If you receive more than one form, a negative figure in box 5 of one form is used to offset a positive figure in box 5 of another form for that same year. Tax software 2012 If you have any questions about this negative figure, contact your local SSA office or your local RRB field office. Tax software 2012 Joint return. Tax software 2012   If you and your spouse file a joint return, and your Form SSA-1099 or RRB-1099 has a negative figure in box 5, but your spouse's does not, subtract the amount in box 5 of your form from the amount in box 5 of your spouse's form. Tax software 2012 You do this to get your net benefits when figuring if your combined benefits are taxable. Tax software 2012 Example. Tax software 2012 John and Mary file a joint return for 2013. Tax software 2012 John received Form SSA-1099 showing $3,000 in box 5. Tax software 2012 Mary also received Form SSA-1099 and the amount in box 5 was ($500). Tax software 2012 John and Mary will use $2,500 ($3,000 minus $500) as the amount of their net benefits when figuring if any of their combined benefits are taxable. Tax software 2012 Repayment of benefits received in an earlier year. Tax software 2012   If the total amount shown in box 5 of all of your Forms SSA-1099 and RRB-1099 is a negative figure, you can take an itemized deduction for the part of this negative figure that represents benefits you included in gross income in an earlier year. Tax software 2012 Deduction $3,000 or less. Tax software 2012   If this deduction is $3,000 or less, it is subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions. Tax software 2012 Claim it on Schedule A (Form 1040), line 23. Tax software 2012 Deduction more than $3,000. Tax software 2012   If this deduction is more than $3,000, you should figure your tax two ways: Figure your tax for 2013 with the itemized deduction included on Schedule A, line 28. Tax software 2012 Figure your tax for 2013 in the following steps: Figure the tax without the itemized deduction included on Schedule A, line 28. Tax software 2012 For each year after 1983 for which part of the negative figure represents a repayment of benefits, refigure your taxable benefits as if your total benefits for the year were reduced by that part of the negative figure. Tax software 2012 Then refigure the tax for that year. Tax software 2012 Subtract the total of the refigured tax amounts in (b) from the total of your actual tax amounts. Tax software 2012 Subtract the result in (c) from the result in (a). Tax software 2012   Compare the tax figured in methods (1) and (2). Tax software 2012 Your tax for 2013 is the smaller of the two amounts. Tax software 2012 If method (1) results in less tax, take the itemized deduction on Schedule A (Form 1040), line 28. Tax software 2012 If method (2) results in less tax, claim a credit for the amount from step 2(c) above on Form 1040, line 71. Tax software 2012 Check box d and enter “I. Tax software 2012 R. Tax software 2012 C. Tax software 2012 1341” in the space next to that box. Tax software 2012 If both methods produce the same tax, deduct the repayment on Schedule A (Form 1040), line 28. Tax software 2012 Worksheets Blank Worksheets 1 through 4 are provided in this section: Worksheet 1, Figuring Your Taxable Benefits; Worksheet 2, Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year After 1993); Worksheet 3, Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year Before 1994); Worksheet 4, Figure Your Taxable Benefits Under the Lump-Sum Election Method (Use With Worksheet 2 or 3). Tax software 2012 Worksheet 1. Tax software 2012 Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Tax software 2012 Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Tax software 2012 None of your benefits are taxable for 2013. Tax software 2012 For more information, see Repayments More Than Gross Benefits . Tax software 2012 If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Tax software 2012 S. Tax software 2012 Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Tax software 2012 Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Tax software 2012 1. Tax software 2012 Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Tax software 2012 Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Tax software 2012           2. Tax software 2012 Enter one-half of line 1 2. Tax software 2012       3. Tax software 2012 Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Tax software 2012       4. Tax software 2012 Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Tax software 2012       5. Tax software 2012 Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Tax software 2012       6. Tax software 2012 Combine lines 2, 3, 4, and 5 6. Tax software 2012       7. Tax software 2012 Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Tax software 2012  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Tax software 2012       8. Tax software 2012 Is the amount on line 7 less than the amount on line 6?             No. Tax software 2012 None of your social security benefits are taxable. Tax software 2012 Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Tax software 2012             Yes. Tax software 2012 Subtract line 7 from line 6 8. Tax software 2012       9. Tax software 2012 If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Tax software 2012         Note. Tax software 2012 If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Tax software 2012 85) and enter the result on line 17. Tax software 2012 Then go to line 18. Tax software 2012         10. Tax software 2012 Is the amount on line 9 less than the amount on line 8?             No. Tax software 2012 None of your benefits are taxable. Tax software 2012 Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Tax software 2012 If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Tax software 2012             Yes. Tax software 2012 Subtract line 9 from line 8 10. Tax software 2012       11. Tax software 2012 Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Tax software 2012       12. Tax software 2012 Subtract line 11 from line 10. Tax software 2012 If zero or less, enter -0- 12. Tax software 2012       13. Tax software 2012 Enter the smaller of line 10 or line 11 13. Tax software 2012       14. Tax software 2012 Enter one-half of line 13 14. Tax software 2012       15. Tax software 2012 Enter the smaller of line 2 or line 14 15. Tax software 2012       16. Tax software 2012 Multiply line 12 by 85% (. Tax software 2012 85). Tax software 2012 If line 12 is zero, enter -0- 16. Tax software 2012       17. Tax software 2012 Add lines 15 and 16 17. Tax software 2012       18. Tax software 2012 Multiply line 1 by 85% (. Tax software 2012 85) 18. Tax software 2012       19. Tax software 2012 Taxable benefits. Tax software 2012 Enter the smaller of line 17 or line 18. Tax software 2012 Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Tax software 2012         If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Tax software 2012         Worksheet 2. Tax software 2012 Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year After 1993)     Enter earlier year 1. Tax software 2012 Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for the earlier year, plus the lump-sum payment for the earlier year received after that year 1. Tax software 2012             Note. Tax software 2012 If line 1 is zero or less, skip lines 2 through 20 and enter -0- on line 21. Tax software 2012 Otherwise, go on to line 2. Tax software 2012             2. Tax software 2012 Enter one-half of line 1 2. Tax software 2012     3. Tax software 2012 Enter your adjusted gross income for the earlier year 3. Tax software 2012     4. Tax software 2012 Enter the total of any exclusions/adjustments you claimed in the earlier year for: Adoption benefits (Form 8839) Qualified U. Tax software 2012 S. Tax software 2012 savings bond interest (Form 8815) Student loan interest (Form 1040, page 1, or Form 1040A, page 1) Tuition and fees (Form 1040, page 1, or Form 1040A, page 1) Domestic production activities (for 2005 through 2012) (Form 1040, page 1) Foreign earned income or housing (Form 2555 or Form 2555-EZ) Certain income of bona fide residents of American Samoa (Form 4563) or Puerto Rico 4. Tax software 2012     5. Tax software 2012 Enter any tax-exempt interest received in the earlier year 5. Tax software 2012     6. Tax software 2012 Add lines 2 through 5 6. Tax software 2012     7. Tax software 2012 Enter your taxable benefits for the earlier year that you previously reported 7. Tax software 2012     8. Tax software 2012 Subtract line 7 from line 6 8. Tax software 2012     9. Tax software 2012 If, for the earlier year, you were:     Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), married filing separately and you lived apart from your spouse for all of the earlier year, enter $25,000 9. Tax software 2012       Note. Tax software 2012 If you were married filing separately and you lived with your spouse at any time during the earlier year, skip lines 9 through 16; multiply line 8 by 85% (. Tax software 2012 85) and enter the result on line 17. Tax software 2012 Then go to line 18. Tax software 2012         10. Tax software 2012 Is the amount on line 8 more than the amount on line 9?       No. Tax software 2012 Skip lines 10 through 20 and enter -0- on line 21. Tax software 2012       Yes. Tax software 2012 Subtract line 9 from line 8 10. Tax software 2012     11. Tax software 2012 Enter $12,000 if married filing jointly for the earlier year; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of the earlier year 11. Tax software 2012     12. Tax software 2012 Subtract line 11 from line 10. Tax software 2012 If zero or less, enter -0- 12. Tax software 2012     13. Tax software 2012 Enter the smaller of line 10 or line 11 13. Tax software 2012     14. Tax software 2012 Enter one-half of line 13 14. Tax software 2012     15. Tax software 2012 Enter the smaller of line 2 or line 14 15. Tax software 2012     16. Tax software 2012 Multiply line 12 by 85% (. Tax software 2012 85). Tax software 2012 If line 12 is zero, enter -0- 16. Tax software 2012     17. Tax software 2012 Add lines 15 and 16 17. Tax software 2012     18. Tax software 2012 Multiply line 1 by 85% (. Tax software 2012 85) 18. Tax software 2012     19. Tax software 2012 Refigured taxable benefits. Tax software 2012 Enter the smaller of line 17 or line 18 19. Tax software 2012     20. Tax software 2012 Enter your taxable benefits for the earlier year (or as refigured due to a previous lump-sum payment for the year) 20. Tax software 2012     21. Tax software 2012 Additional taxable benefits. Tax software 2012 Subtract line 20 from line 19. Tax software 2012 Also enter this amount on Worksheet 4, line 20 21. Tax software 2012       Do not file an amended return for this earlier year. Tax software 2012 Complete a separate Worksheet 2 or Worksheet 3 for each earlier year for which you received a lump-sum payment in 2013. Tax software 2012   Worksheet 3. Tax software 2012 Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year Before 1994) Enter earlier year 1. Tax software 2012 Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for the earlier year, plus the lump-sum payment for the earlier year received after that year 1. Tax software 2012           Note. Tax software 2012 If line 1 is zero or less, skip lines 2 through 13 and enter -0- on line 14. Tax software 2012 Otherwise, go on to line 2. Tax software 2012           2. Tax software 2012 Enter one-half of line 1 2. Tax software 2012     3. Tax software 2012 Enter your adjusted gross income for the earlier year 3. Tax software 2012     4. Tax software 2012 Enter the total of any exclusions/adjustments you claimed in the earlier year for: Qualified U. Tax software 2012 S. Tax software 2012 savings bond interest (Form 8815) Foreign earned income or housing (Form 2555 or Form 2555-EZ) Certain income of bona fide residents of American Samoa (Form 4563) or Puerto Rico 4. Tax software 2012     5. Tax software 2012 Enter any tax-exempt interest received in the earlier year 5. Tax software 2012     6. Tax software 2012 Add lines 2 through 5 6. Tax software 2012     7. Tax software 2012 Enter your taxable benefits for the earlier year that you previously reported 7. Tax software 2012     8. Tax software 2012 Subtract line 7 from line 6 8. Tax software 2012     9. Tax software 2012 Enter $25,000 ($32,000 if married filing jointly for the earlier year; $-0- if married filing separately for the earlier year and you lived with your spouse at any time during the earlier year) 9. Tax software 2012     10. Tax software 2012 Is the amount on line 8 more than the amount on line 9? No. Tax software 2012 Skip lines 10 through 13 and enter -0- on line 14. Tax software 2012  Yes. Tax software 2012 Subtract line 9 from line 8. Tax software 2012 10. Tax software 2012     11. Tax software 2012 Enter one-half of line 10 11. Tax software 2012     12. Tax software 2012 Refigured taxable benefits. Tax software 2012 Enter the smaller of line 2 or line 11 12. Tax software 2012     13. Tax software 2012 Enter your taxable benefits for the earlier year (or as refigured due to a previous
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Collection Procedures for Taxpayers Filing and/or Paying Late

The Collection Process and Taxpayer Rights

What do I do if I Cannot File or Pay by the Due Date?

What if the IRS Asks for Financial Information to Determine How Much I Can Pay?

What Options Do I Have if I Cannot Full Pay?

What Can the IRS do if I Will Not File or Pay?

How Can I Prevent Future Tax Liabilities?

Page Last Reviewed or Updated: 27-Jan-2014

The Tax Software 2012

Tax software 2012 6. Tax software 2012   Basis of Assets Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Cost BasisReal Property Allocating the Basis Uniform Capitalization Rules Adjusted BasisIncreases to Basis Decreases to Basis Basis Other Than CostTaxable Exchanges Involuntary Conversions Nontaxable Exchanges Property Received as a Gift Property Transferred From a Spouse Inherited Property Property Distributed From a Partnership or Corporation Introduction Your basis is the amount of your investment in property for tax purposes. Tax software 2012 Use basis to figure the gain or loss on the sale, exchange, or other disposition of property. Tax software 2012 Also use basis to figure depreciation, amortization, depletion, and casualty losses. Tax software 2012 If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. Tax software 2012 Only the basis allocated to the business or investment use of the property can be depreciated. Tax software 2012 Your original basis in property is adjusted (increased or decreased) by certain events. Tax software 2012 For example, if you make improvements to the property, increase your basis. Tax software 2012 If you take deductions for depreciation, or casualty losses, or claim certain credits, reduce your basis. Tax software 2012 Keep accurate records of all items that affect the basis of your assets. Tax software 2012 For information on keeping records, see chapter 1. Tax software 2012 Topics - This chapter discusses: Cost basis Adjusted basis Basis other than cost Useful Items - You may want to see: Publication 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property See chapter 16 for information about getting publications and forms. Tax software 2012 Cost Basis The basis of property you buy is usually its cost. Tax software 2012 Cost is the amount you pay in cash, debt obligations, other property, or services. Tax software 2012 Your cost includes amounts you pay for sales tax, freight, installation, and testing. Tax software 2012 The basis of real estate and business assets will include other items, discussed later. Tax software 2012 Basis generally does not include interest payments. Tax software 2012 However, see Carrying charges and Capitalized interest in chapter 4 of Publication 535. Tax software 2012 You also may have to capitalize (add to basis) certain other costs related to buying or producing property. Tax software 2012 Under the uniform capitalization rules, discussed later, you may have to capitalize direct costs and certain indirect costs of producing property. Tax software 2012 Loans with low or no interest. Tax software 2012   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price minus the amount considered to be unstated interest. Tax software 2012 You generally have unstated interest if your interest rate is less than the applicable federal rate. Tax software 2012 See the discussion of unstated interest in Publication 537, Installment Sales. Tax software 2012 Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. Tax software 2012 If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. Tax software 2012 Some of these expenses are discussed next. Tax software 2012 Lump sum purchase. Tax software 2012   If you buy improvements, such as buildings, and the land on which they stand for a lump sum, allocate your cost basis between the land and improvements. Tax software 2012 Allocate the cost basis according to the respective fair market values (FMVs) of the land and improvements at the time of purchase. Tax software 2012 Figure the basis of each asset by multiplying the lump sum by a fraction. Tax software 2012 The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Tax software 2012 Fair market value (FMV). Tax software 2012   FMV is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Tax software 2012 Sales of similar property on or about the same date may help in figuring the FMV of the property. Tax software 2012 If you are not certain of the FMV of the land and improvements, you can allocate the basis according to their assessed values for real estate tax purposes. Tax software 2012 Real estate taxes. Tax software 2012   If you pay the real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. Tax software 2012   If you reimburse the seller for taxes the seller paid for you, you generally can deduct that amount as a tax expense. Tax software 2012 Whether or not you reimburse the seller, do not include that amount in the basis of your property. Tax software 2012 Settlement costs. Tax software 2012   Your basis includes the settlement fees and closing costs for buying the property. Tax software 2012 See Publication 551 for a detailed list of items you can and cannot include in basis. Tax software 2012   Do not include fees and costs for getting a loan on the property. Tax software 2012 Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Tax software 2012 Points. Tax software 2012   If you pay points to get a loan (including a mortgage, second mortgage, or line-of-credit), do not add the points to the basis of the related property. Tax software 2012 You may be able to deduct the points currently or over the term of the loan. Tax software 2012 For more information about deducting points, see Points in chapter 4 of Publication 535. Tax software 2012 Assumption of a mortgage. Tax software 2012   If you buy property and assume (or buy the property subject to) an existing mortgage, your basis includes the amount you pay for the property plus the amount you owe on the mortgage. Tax software 2012 Example. Tax software 2012 If you buy a farm for $100,000 cash and assume a mortgage of $400,000, your basis is $500,000. Tax software 2012 Constructing assets. Tax software 2012   If you build property or have assets built for you, your expenses for this construction are part of your basis. Tax software 2012 Some of these expenses include the following costs: Land, Labor and materials, Architect's fees, Building permit charges, Payments to contractors, Payments for rental equipment, and Inspection fees. Tax software 2012   In addition, if you use your own employees, farm materials, and equipment to build an asset, do not deduct the following expenses. Tax software 2012 You must capitalize them (include them in the asset's basis). Tax software 2012 Employee wages paid for the construction work, reduced by any employment credits allowed. Tax software 2012 Depreciation on equipment you own while it is used in the construction. Tax software 2012 Operating and maintenance costs for equipment used in the construction. Tax software 2012 The cost of business supplies and materials used in the construction. Tax software 2012    Do not include the value of your own labor, or any other labor you did not pay for, in the basis of any property you construct. Tax software 2012 Allocating the Basis In some instances, the rules for determining basis apply to a group of assets acquired in the same transaction or to property that consists of separate items. Tax software 2012 To determine the basis of these assets or separate items, there must be an allocation of basis. Tax software 2012 Group of assets acquired. Tax software 2012   If you buy multiple assets for a lump sum, allocate the amount you pay among the assets. Tax software 2012 Use this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. Tax software 2012 You and the seller may agree in the sales contract to a specific allocation of the purchase price among the assets. Tax software 2012 If this allocation is based on the value of each asset and you and the seller have adverse tax interests, the allocation generally will be accepted. Tax software 2012 Farming business acquired. Tax software 2012   If you buy a group of assets that makes up a farming business, there are special rules you must use to allocate the purchase price among the assets. Tax software 2012 Generally, reduce the purchase price by any cash received. Tax software 2012 Allocate the remaining purchase price to the other business assets received in proportion to (but not more than) their FMV and in a certain order. Tax software 2012 See Trade or Business Acquired under Allocating the Basis in Publication 551 for more information. Tax software 2012 Transplanted embryo. Tax software 2012   If you buy a cow that is pregnant with a transplanted embryo, allocate to the basis of the cow the part of the purchase price equal to the FMV of the cow without the implant. Tax software 2012 Allocate the rest of the purchase price to the basis of the calf. Tax software 2012 Neither the cost allocated to the cow nor the cost allocated to the calf is deductible as a current business expense. Tax software 2012 Uniform Capitalization Rules Under the uniform capitalization rules, you must include certain direct and indirect costs in the basis of property you produce or in your inventory costs, rather than claim them as a current deduction. Tax software 2012 You recover these costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Tax software 2012 Generally, you are subject to the uniform capitalization rules if you do any of the following: Produce real or tangible personal property, or Acquire property for resale. Tax software 2012 However, this rule does not apply to personal property if your average annual gross receipts for the 3-tax-year period ending with the year preceding the current tax year are $10 million or less. Tax software 2012 You produce property if you construct, build, install, manufacture, develop, improve, or create the property. Tax software 2012 You are not subject to the uniform capitalization rules if the property is produced for personal use. Tax software 2012 In a farming business, you produce property if you raise or grow any agricultural or horticultural commodity, including plants and animals. Tax software 2012 Plants. Tax software 2012   A plant produced in a farming business includes the following items: A fruit, nut, or other crop-bearing tree; An ornamental tree; A vine; A bush; Sod; and The crop or yield of a plant that will have more than one crop or yield. Tax software 2012 Animals. Tax software 2012   An animal produced in a farming business includes any stock, poultry or other bird, and fish or other sea life. Tax software 2012 The direct and indirect costs of producing plants or animals include preparatory costs and preproductive period costs. Tax software 2012 Preparatory costs include the acquisition costs of the seed, seedling, plant, or animal. Tax software 2012 For plants, preproductive period costs include the costs of items such as irrigation, pruning, frost protection, spraying, and harvesting. Tax software 2012 For animals, preproductive period costs include the costs of items such as feed, maintaining pasture or pen areas, breeding, veterinary services, and bedding. Tax software 2012 Exceptions. Tax software 2012   In a farming business, the uniform capitalization rules do not apply to: Any animal, Any plant with a preproductive period of 2 years or less, or Any costs of replanting certain plants lost or damaged due to casualty. Tax software 2012   Exceptions (1) and (2) do not apply to a corporation, partnership, or tax shelter required to use an accrual method of accounting. Tax software 2012 See Accrual Method Required under Accounting Methods in chapter 2. Tax software 2012   In addition, you can elect not to use the uniform capitalization rules for plants with a preproductive period of more than 2 years. Tax software 2012 If you make this election, special rules apply. Tax software 2012 This election cannot be made by a corporation, partnership, or tax shelter required to use an accrual method of accounting. Tax software 2012 This election also does not apply to any costs incurred for the planting, cultivation, maintenance, or development of any citrus or almond grove (or any part thereof) within the first 4 years the trees were planted. Tax software 2012    If you elect not to use the uniform capitalization rules, you must use the alternative depreciation system for all property used in any of your farming businesses and placed in service in any tax year during which the election is in effect. Tax software 2012 See chapter 7, for additional information on depreciation. Tax software 2012 Example. Tax software 2012 You grow trees that have a preproductive period of more than 2 years. Tax software 2012 The trees produce an annual crop. Tax software 2012 You are an individual and the uniform capitalization rules apply to your farming business. Tax software 2012 You must capitalize the direct costs and an allocable part of indirect costs incurred due to the production of the trees. Tax software 2012 You are not required to capitalize the costs of producing the annual crop because its preproductive period is 2 years or less. Tax software 2012 Preproductive period of more than 2 years. Tax software 2012   The preproductive period of plants grown in commercial quantities in the United States is based on their nationwide weighted average preproductive period. Tax software 2012 Plants producing the crops or yields shown in Table 6-1 have a nationwide weighted average preproductive period of more than 2 years. Tax software 2012 Other plants (not shown in Table 6-1) may also have a nationwide weighted average preproductive period of more than 2 years. Tax software 2012 More information. Tax software 2012   For more information on the uniform capitalization rules that apply to property produced in a farming business, see Regulations section 1. Tax software 2012 263A-4. Tax software 2012 Table 6-1. Tax software 2012 Plants With a Preproductive Period of More Than 2 Years Plants producing the following crops or yields have a nationwide weighted average preproductive period of more than 2 years. Tax software 2012 Almonds Apples Apricots Avocados Blueberries Cherries Chestnuts Coffee beans Currants Dates Figs Grapefruit Grapes Guavas Kiwifruit Kumquats Lemons Limes Macadamia nuts Mangoes Nectarines Olives Oranges Peaches Pears Pecans Persimmons Pistachio nuts Plums Pomegranates Prunes Tangelos Tangerines Tangors Walnuts Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments to the cost basis or basis other than cost (discussed later) of the property. Tax software 2012 The adjustments to the original basis are increases or decreases to the cost basis or other basis which result in the adjusted basis of the property. Tax software 2012 Increases to Basis Increase the basis of any property by all items properly added to a capital account. Tax software 2012 These include the cost of any improvements having a useful life of more than 1 year. Tax software 2012 The following costs increase the basis of property. Tax software 2012 The cost of extending utility service lines to property. Tax software 2012 Legal fees, such as the cost of defending and perfecting title. Tax software 2012 Legal fees for seeking a decrease in an assessment levied against property to pay for local improvements. Tax software 2012 Assessments for items such as paving roads and building ditches that increase the value of the property assessed. Tax software 2012 Do not deduct these expenses as taxes. Tax software 2012 However, you can deduct as taxes amounts assessed for maintenance or repairs, or for meeting interest charges related to the improvements. Tax software 2012 If you make additions or improvements to business property, depreciate the basis of each addition or improvement as separate depreciable property using the rules that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. Tax software 2012 See chapter 7. Tax software 2012 Deducting vs. Tax software 2012 capitalizing costs. Tax software 2012   Do not add to your basis costs you can deduct as current expenses. Tax software 2012 For example, amounts paid for incidental repairs or maintenance are deductible as business expenses and are not added to basis. Tax software 2012 However, you can elect either to deduct or to capitalize certain other costs. Tax software 2012 See chapter 7 in Publication 535. Tax software 2012 Decreases to Basis The following are some items that reduce the basis of property. Tax software 2012 Section 179 deduction. Tax software 2012 Deductions previously allowed or allowable for amortization, depreciation, and depletion. Tax software 2012 Alternative motor vehicle credit. Tax software 2012 See Form 8910. Tax software 2012 Alternative fuel vehicle refueling property credit. Tax software 2012 See Form 8911. Tax software 2012 Residential energy efficient property credits. Tax software 2012 See Form 5695. Tax software 2012 Investment credit (part or all) taken. Tax software 2012 Casualty and theft losses and insurance reimbursements. Tax software 2012 Payments you receive for granting an easement. Tax software 2012 Exclusion from income of subsidies for energy conservation measures. Tax software 2012 Certain canceled debt excluded from income. Tax software 2012 Rebates from a manufacturer or seller. Tax software 2012 Patronage dividends received from a cooperative association as a result of a purchase of property. Tax software 2012 See Patronage Dividends in chapter 3. Tax software 2012 Gas-guzzler tax. Tax software 2012 See Form 6197. Tax software 2012 Some of these items are discussed next. Tax software 2012 For a more detailed list of items that decrease basis, see section 1016 of the Internal Revenue Code and Publication 551. Tax software 2012 Depreciation and section 179 deduction. Tax software 2012   The adjustments you must make to the basis of the property if you take the section 179 deduction or depreciate the property are explained next. Tax software 2012 For more information on these deductions, see chapter 7. Tax software 2012 Section 179 deduction. Tax software 2012   If you take the section 179 expense deduction for all or part of the cost of qualifying business property, decrease the basis of the property by the deduction. Tax software 2012 Depreciation. Tax software 2012   Decrease the basis of property by the depreciation you deducted or could have deducted on your tax returns under the method of depreciation you chose. Tax software 2012 If you took less depreciation than you could have under the method chosen, decrease the basis by the amount you could have taken under that method. Tax software 2012 If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. Tax software 2012   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted plus the part of the excess depreciation you deducted that actually reduced your tax liability for any year. Tax software 2012   See chapter 7 for information on figuring the depreciation you should have claimed. Tax software 2012   In decreasing your basis for depreciation, take into account the amount deducted on your tax returns as depreciation and any depreciation you must capitalize under the uniform capitalization rules. Tax software 2012 Casualty and theft losses. Tax software 2012   If you have a casualty or theft loss, decrease the basis of the property by any insurance or other reimbursement. Tax software 2012 Also, decrease it by any deductible loss not covered by insurance. Tax software 2012 See chapter 11 for information about figuring your casualty or theft loss. Tax software 2012   You must increase your basis in the property by the amount you spend on clean-up costs (such as debris removal) and repairs that restore the property to its pre-casualty condition. Tax software 2012 To make this determination, compare the repaired property to the property before the casualty. Tax software 2012 Easements. Tax software 2012   The amount you receive for granting an easement is usually considered to be proceeds from the sale of an interest in the real property. Tax software 2012 It reduces the basis of the affected part of the property. Tax software 2012 If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. Tax software 2012 See Easements and rights-of-way in chapter 3. Tax software 2012 Exclusion from income of subsidies for energy conservation measures. Tax software 2012   You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of an energy conservation measure for a dwelling unit. Tax software 2012 Reduce the basis of the property by the excluded amount. Tax software 2012 Canceled debt excluded from income. Tax software 2012   If a debt you owe is canceled or forgiven, other than as a gift or bequest, you generally must include the canceled amount in your gross income for tax purposes. Tax software 2012 A debt includes any indebtedness for which you are liable or which attaches to property you hold. Tax software 2012   You can exclude your canceled debt from income if the debt is any of the following. Tax software 2012 Debt canceled in a bankruptcy case or when you are insolvent. Tax software 2012 Qualified farm debt. Tax software 2012 Qualified real property business debt (provided you are not a C corporation). Tax software 2012 Qualified principal residence indebtedness. Tax software 2012 Discharge of certain indebtedness of a qualified individual because of Midwestern disasters. Tax software 2012 If you exclude canceled debt described in (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. Tax software 2012 If you exclude canceled debt described in (3), you must only reduce the basis of your depreciable property by the excluded amount. Tax software 2012   For more information about canceled debt in a bankruptcy case, see Publication 908, Bankruptcy Tax Guide. Tax software 2012 For more information about insolvency and canceled debt that is qualified farm debt or qualified principal residence indebtedness, see chapter 3. Tax software 2012 For more information about qualified real property business debt, see Publication 334, Tax Guide for Small Business. Tax software 2012 For more information about canceled debt in Midwestern disaster areas, see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. Tax software 2012 Basis Other Than Cost There are times when you cannot use cost as basis. Tax software 2012 In these situations, the fair market value or the adjusted basis of property may be used. Tax software 2012 Examples are discussed next. Tax software 2012 Property changed from personal to business or rental use. Tax software 2012   When you hold property for personal use and then change it to business use or use it to produce rent, you must figure its basis for depreciation. Tax software 2012 An example of changing property from personal to business use would be changing the use of your pickup truck that you originally purchased for your personal use to use in your farming business. Tax software 2012   The basis for depreciation is the lesser of: The FMV of the property on the date of the change, or Your adjusted basis on the date of the change. Tax software 2012   If you later sell or dispose of this property, the basis you use will depend on whether you are figuring a gain or loss. Tax software 2012 The basis for figuring a gain is your adjusted basis in the property when you sell the property. Tax software 2012 Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. Tax software 2012 Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . Tax software 2012 Property received for services. Tax software 2012   If you receive property for services, include the property's FMV in income. Tax software 2012 The amount you include in income becomes your basis. Tax software 2012 If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. Tax software 2012 Example. Tax software 2012 George Smith is an accountant and also operates a farming business. Tax software 2012 George agreed to do some accounting work for his neighbor in exchange for a dairy cow. Tax software 2012 The accounting work and the cow are each worth $1,500. Tax software 2012 George must include $1,500 in income for his accounting services. Tax software 2012 George's basis in the cow is $1,500. Tax software 2012 Taxable Exchanges A taxable exchange is one in which the gain is taxable, or the loss is deductible. Tax software 2012 A taxable gain or deductible loss also is known as a recognized gain or loss. Tax software 2012 A taxable exchange occurs when you receive cash or get property that is not similar or related in use to the property exchanged. Tax software 2012 If you receive property in exchange for other property in a taxable exchange, the basis of the property you receive is usually its FMV at the time of the exchange. Tax software 2012 Example. Tax software 2012 You trade a tract of farmland with an adjusted basis of $2,000 for a tractor that has an FMV of $6,000. Tax software 2012 You must report a taxable gain of $4,000 for the land. Tax software 2012 The tractor has a basis of $6,000. Tax software 2012 Involuntary Conversions If you receive property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, figure the basis of the replacement property you receive using the basis of the converted property. Tax software 2012 Similar or related property. Tax software 2012   If the replacement property is similar or related in service or use to the converted property, the replacement property's basis is the same as the old property's basis on the date of the conversion. Tax software 2012 However, make the following adjustments. Tax software 2012 Decrease the basis by the following amounts. Tax software 2012 Any loss you recognize on the involuntary conversion. Tax software 2012 Any money you receive that you do not spend on similar property. Tax software 2012 Increase the basis by the following amounts. Tax software 2012 Any gain you recognize on the involuntary conversion. Tax software 2012 Any cost of acquiring the replacement property. Tax software 2012 Money or property not similar or related. Tax software 2012   If you receive money or property not similar or related in service or use to the converted property and you buy replacement property similar or related in service or use to the converted property, the basis of the replacement property is its cost decreased by the gain not recognized on the involuntary conversion. Tax software 2012 Allocating the basis. Tax software 2012   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Tax software 2012 Basis for depreciation. Tax software 2012   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. Tax software 2012 For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. Tax software 2012 For more information about involuntary conversions, see chapter 11. Tax software 2012 Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Tax software 2012 A nontaxable gain or loss also is known as an unrecognized gain or loss. Tax software 2012 If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. Tax software 2012 Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Tax software 2012 For an exchange to qualify as a like-kind exchange, you must hold for business or investment purposes both the property you transfer and the property you receive. Tax software 2012 There must also be an exchange of like-kind property. Tax software 2012 For more information, see Like-Kind Exchanges in  chapter 8. Tax software 2012 The basis of the property you receive generally is the same as the adjusted basis of the property you gave up. Tax software 2012 Example 1. Tax software 2012 You traded a truck you used in your farming business for a new smaller truck to use in farming. Tax software 2012 The adjusted basis of the old truck was $10,000. Tax software 2012 The FMV of the new truck is $30,000. Tax software 2012 Because this is a nontaxable exchange, you do not recognize any gain, and your basis in the new truck is $10,000, the same as the adjusted basis of the truck you traded. Tax software 2012 Example 2. Tax software 2012 You trade a field cultivator (adjusted basis of $8,000) for a planter (FMV of $9,000). Tax software 2012 You use both the field cultivator and the planter in your farming business. Tax software 2012 The basis of the planter you receive is $8,000, the same as the field cultivator traded Exchange expenses. Tax software 2012   Exchange expenses generally are the closing costs that you pay. Tax software 2012 They include such items as brokerage commissions, attorney fees, and deed preparation fees. Tax software 2012 Add them to the basis of the like-kind property you receive. Tax software 2012 Property plus cash. Tax software 2012   If you trade property in a like-kind exchange and also pay money, the basis of the property you receive is the adjusted basis of the property you gave up plus the money you paid. Tax software 2012 Example. Tax software 2012 You trade in a truck (adjusted basis of $3,000) for another truck (FMV of $7,500) and pay $4,000. Tax software 2012 Your basis in the new truck is $7,000 (the $3,000 adjusted basis of the old truck plus the $4,000 cash). Tax software 2012 Special rules for related persons. Tax software 2012   If a like-kind exchange takes place directly or indirectly between related persons and either party disposes of the property within 2 years after the exchange, the exchange no longer qualifies for like-kind exchange treatment. Tax software 2012 Each person must report any gain or loss not recognized on the original exchange unless the loss is not deductible under the related party rules. Tax software 2012 Each person reports it on the tax return filed for the year in which the later disposition occurred. Tax software 2012 If this rule applies, the basis of the property received in the original exchange will be its FMV. Tax software 2012 For more information, see chapter 8. Tax software 2012 Exchange of business property. Tax software 2012   Exchanging the property of one business for the property of another business generally is a multiple property exchange. Tax software 2012 For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. Tax software 2012 Basis for depreciation. Tax software 2012   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind transaction. Tax software 2012 For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. Tax software 2012 Partially Nontaxable Exchanges A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. Tax software 2012 The basis of the property you receive is the same as the adjusted basis of the property you gave up with the following adjustments. Tax software 2012 Decrease the basis by the following amounts. Tax software 2012 Any money you receive. Tax software 2012 Any loss you recognize on the exchange. Tax software 2012 Increase the basis by the following amounts. Tax software 2012 Any additional costs you incur. Tax software 2012 Any gain you recognize on the exchange. Tax software 2012 If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Tax software 2012 Example 1. Tax software 2012 You trade farmland (basis of $100,000) for another tract of farmland (FMV of $110,000) and $30,000 cash. Tax software 2012 You realize a gain of $40,000. Tax software 2012 This is the FMV of the land received plus the cash minus the basis of the land you traded ($110,000 + $30,000 − $100,000). Tax software 2012 Include your gain in income (recognize gain) only to the extent of the cash received. Tax software 2012 Your basis in the land you received is figured as follows. Tax software 2012 Basis of land traded $100,000 Minus: Cash received (adjustment 1(a)) − 30,000   $70,000 Plus: Gain recognized (adjustment 2(b)) + 30,000 Basis of land received $100,000 Example 2. Tax software 2012 You trade a truck (adjusted basis of $22,750) for another truck (FMV of $20,000) and $10,000 cash. Tax software 2012 You realize a gain of $7,250. Tax software 2012 This is the FMV of the truck received plus the cash minus the adjusted basis of the truck you traded ($20,000 + $10,000 − $22,750). Tax software 2012 You include all the gain in your income (recognize gain) because the gain is less than the cash you received. Tax software 2012 Your basis in the truck you received is figured as follows. Tax software 2012 Adjusted basis of truck traded $22,750 Minus: Cash received (adjustment 1(a)) −10,000   $12,750 Plus: Gain recognized (adjustment 2(b)) + 7,250 Basis of truck received $20,000 Allocation of basis. Tax software 2012   If you receive like-kind and unlike properties in the exchange, allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. Tax software 2012 The rest is the basis of the like-kind property. Tax software 2012 Example. Tax software 2012 You traded a tractor with an adjusted basis of $15,000 for another tractor that had an FMV of $12,500. Tax software 2012 You also received $1,000 cash and a truck that had an FMV of $3,000. Tax software 2012 The truck is unlike property. Tax software 2012 You realized a gain of $1,500. Tax software 2012 This is the FMV of the tractor received plus the FMV of the truck received plus the cash minus the adjusted basis of the tractor you traded ($12,500 + $3,000 + $1,000 − $15,000). Tax software 2012 You include in income (recognize) all $1,500 of the gain because it is less than the FMV of the unlike property plus the cash received. Tax software 2012 Your basis in the properties you received is figured as follows. Tax software 2012 Adjusted basis of old tractor $15,000 Minus: Cash received (adjustment 1(a)) − 1,000   $14,000 Plus: Gain recognized (adjustment 2(b)) + 1,500 Total basis of properties received $15,500 Allocate the total basis of $15,500 first to the unlike property—the truck ($3,000). Tax software 2012 This is the truck's FMV. Tax software 2012 The rest ($12,500) is the basis of the tractor. Tax software 2012 Sale and Purchase If you sell property and buy similar property in two mutually dependent transactions, you may have to treat the sale and purchase as a single nontaxable exchange. Tax software 2012 Example. Tax software 2012 You used a tractor on your farm for 3 years. Tax software 2012 Its adjusted basis is $22,000 and its FMV is $40,000. Tax software 2012 You are interested in a new tractor, which sells for $60,000. Tax software 2012 Ordinarily, you would trade your old tractor for the new one and pay the dealer $20,000. Tax software 2012 Your basis for depreciating the new tractor would then be $42,000 ($20,000 + $22,000, the adjusted basis of your old tractor). Tax software 2012 However, you want a higher basis for depreciating the new tractor, so you agree to pay the dealer $60,000 for the new tractor if he will pay you $40,000 for your old tractor. Tax software 2012 Because the two transactions are dependent on each other, you are treated as having exchanged your old tractor for the new one and paid $20,000 ($60,000 − $40,000). Tax software 2012 Your basis for depreciating the new tractor is $42,000, the same as if you traded the old tractor. Tax software 2012 Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined earlier) to the donor just before it was given to you. Tax software 2012 You also must know its FMV at the time it was given to you and any gift tax paid on it. Tax software 2012 FMV equal to or greater than donor's adjusted basis. Tax software 2012   If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis when you received the gift. Tax software 2012 Increase your basis by all or part of any gift tax paid, depending on the date of the gift. Tax software 2012   Also, for figuring gain or loss from a sale or other disposition of the property, or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis (the donor's adjusted basis) by any required adjustments to basis while you held the property. Tax software 2012 See Adjusted Basis , earlier. Tax software 2012   If you received a gift during the tax year, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it due to the net increase in value of the gift. Tax software 2012 Figure the increase by multiplying the gift tax paid by the following fraction. Tax software 2012 Net increase in value of the gift Amount of the gift   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. Tax software 2012 The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Tax software 2012 Example. Tax software 2012 In 2013, you received a gift of property from your mother that had an FMV of $50,000. Tax software 2012 Her adjusted basis was $20,000. Tax software 2012 The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). Tax software 2012 She paid a gift tax of $7,320. Tax software 2012 Your basis, $26,076, is figured as follows. Tax software 2012 Fair market value $50,000 Minus: Adjusted basis −20,000 Net increase in value $30,000 Gift tax paid $7,320 Multiplied by ($30,000 ÷ $36,000) × . Tax software 2012 83 Gift tax due to net increase in value $6,076 Adjusted basis of property to your mother +20,000 Your basis in the property $26,076 Note. Tax software 2012 If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. Tax software 2012 However, your basis cannot exceed the FMV of the gift when it was given to you. Tax software 2012 FMV less than donor's adjusted basis. Tax software 2012   If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Tax software 2012 Your basis for figuring gain is the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. Tax software 2012 Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property. Tax software 2012 (See Adjusted Basis , earlier. Tax software 2012 )   If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither gain nor loss on the sale or other disposition of the property. Tax software 2012 Example. Tax software 2012 You received farmland as a gift from your parents when they retired from farming. Tax software 2012 At the time of the gift, the land had an FMV of $80,000. Tax software 2012 Your parents' adjusted basis was $100,000. Tax software 2012 After you received the land, no events occurred that would increase or decrease your basis. Tax software 2012 If you sell the land for $120,000, you will have a $20,000 gain because you must use the donor's adjusted basis at the time of the gift ($100,000) as your basis to figure a gain. Tax software 2012 If you sell the land for $70,000, you will have a $10,000 loss because you must use the FMV at the time of the gift ($80,000) as your basis to figure a loss. Tax software 2012 If the sales price is between $80,000 and $100,000, you have neither gain nor loss. Tax software 2012 For instance, if the sales price was $90,000 and you tried to figure a gain using the donor's adjusted basis ($100,000), you would get a $10,000 loss. Tax software 2012 If you then tried to figure a loss using the FMV ($80,000), you would get a $10,000 gain. Tax software 2012 Business property. Tax software 2012   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deductions is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. Tax software 2012 Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse is the same as your spouse's adjusted basis. Tax software 2012 The same rule applies to a transfer by your former spouse if the transfer is incident to divorce. Tax software 2012 However, for property transferred in trust, adjust your basis for any gain recognized by your spouse or former spouse if the liabilities assumed plus the liabilities to which the property is subject are more than the adjusted basis of the property transferred. Tax software 2012 The transferor must give you the records needed to determine the adjusted basis and holding period of the property as of the date of the transfer. Tax software 2012 For more information, see Property Settlements in Publication 504, Divorced or Separated Individuals. Tax software 2012 Inherited Property Your basis in property you inherited from a decedent, who died before January 1, 2010, or after December 31, 2010, is generally one of the following: The FMV of the property at the date of the decedent's death. Tax software 2012 If a federal estate return is filed, you can use its appraised value. Tax software 2012 The FMV on the alternate valuation date, if the personal representative for the estate elects to use alternate valuation. Tax software 2012 For information on the alternate valuation, see the Instructions for Form 706. Tax software 2012 The decedent's adjusted basis in land to the extent of the value that is excluded from the decedent's taxable estate as a qualified conservation easement. Tax software 2012 If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. Tax software 2012 Special-use valuation method. Tax software 2012   Under certain conditions, when a person dies, the executor or personal representative of that person's estate may elect to value qualified real property at other than its FMV. Tax software 2012 If so, the executor or personal representative values the qualified real property based on its use as a farm or other closely held business. Tax software 2012 If the executor or personal representative elects this method of valuation for estate tax purposes, this value is the basis of the property for the qualified heirs. Tax software 2012 The qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. Tax software 2012   If you are a qualified heir who received special-use valuation property, increase your basis by any gain recognized by the estate or trust because of post-death appreciation. Tax software 2012 Post-death appreciation is the property's FMV on the date of distribution minus the property's FMV either on the date of the individual's death or on the alternate valuation date. Tax software 2012 Figure all FMVs without regard to the special-use valuation. Tax software 2012   You may be liable for an additional estate tax if, within 10 years after the death of the decedent, you transfer the property or the property stops being used as a farm. Tax software 2012 This tax does not apply if you dispose of the property in a like-kind exchange or in an involuntary conversion in which all of the proceeds are reinvested in qualified replacement property. Tax software 2012 The tax also does not apply if you transfer the property to a member of your family and certain requirements are met. Tax software 2012   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. Tax software 2012 To increase your basis, you must make an irrevocable election and pay interest on the additional estate tax figured from the date 9 months after the decedent's death until the date of payment of the additional estate tax. Tax software 2012 If you meet these requirements, increase your basis in the property to its FMV on the date of the decedent's death or the alternate valuation date. Tax software 2012 The increase in your basis is considered to have occurred immediately before the event that resulted in the additional estate tax. Tax software 2012   You make the election by filing, with Form 706-A, United States Additional Estate Tax Return, a statement that: Contains your (and the estate's) name, address, and taxpayer identification number; Identifies the election as an election under section 1016(c) of the Internal Revenue Code; Specifies the property for which you are making the election; and Provides any additional information required by the Form 706-A instructions. Tax software 2012   For more information, see Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, Form 706-A, and the related instructions. Tax software 2012 Property inherited from a decedent who died in 2010. Tax software 2012   If you inherited property from a decedent who died in 2010, different rules may apply. Tax software 2012 See Publication 4895, Tax Treatment of Property Acquired From a Decendent Dying in 2010, for details. Tax software 2012 Property Distributed From a Partnership or Corporation The following rules apply to determine a partner's basis and a shareholder's basis in property distributed respectively from a partnership to the partner with respect to the partner's interest in the partnership and from a corporation to the shareholder with respect to the shareholder's ownership of stock in the corporation. Tax software 2012 Partner's basis. Tax software 2012   Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed by a partnership to the partner is its adjusted basis to the partnership immediately before the distribution. Tax software 2012 However, the basis of the property to the partner cannot be more than the adjusted basis of his or her interest in the partnership reduced by any money received in the same transaction. Tax software 2012 For more information, see Partner's Basis for Distributed Property in Publication 541, Partnerships. Tax software 2012 Shareholder's basis. Tax software 2012   The basis of property distributed by a corporation to a shareholder is its fair market value. Tax software 2012 For more information about corporate distributions, see Distributions to Shareholders in Publication 542, Corporations. Tax software 2012 Prev  Up  Next   Home   More Online Publications