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1040a

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1040a

1040a Internal Revenue Bulletin:  2012-14  April 2, 2012  Rev. 1040a Proc. 1040a 2012-23 Table of Contents SECTION 1. 1040a PURPOSE SECTION 2. 1040a BACKGROUND SECTION 3. 1040a SCOPE SECTION 4. 1040a APPLICATION. 1040a 01 Limitations on Depreciation Deductions for Certain Automobiles. 1040a . 1040a 02 Inclusions in Income of Lessees of Passenger Automobiles. 1040a SECTION 5. 1040a EFFECTIVE DATE SECTION 6. 1040a DRAFTING INFORMATION SECTION 1. 1040a PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2012, including separate tables of limitations on depreciation deductions for trucks and vans; and (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2012, including a separate table of inclusion amounts for lessees of trucks and vans. 1040a The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. 1040a SECTION 2. 1040a BACKGROUND . 1040a 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. 1040a For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. 1040a The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. 1040a This change reflects the higher rate of price inflation for trucks and vans since 1988. 1040a . 1040a 02 Section 401(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. 1040a L. 1040a No. 1040a 111-312, 124 Stat. 1040a 3296 (Dec. 1040a 17, 2010) (the “Act”) extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2013, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2013. 1040a Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”) applies. 1040a . 1040a 03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). 1040a Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. 1040a Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax (“AMT”) credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2010, that is round 2 extension property (as defined in § 168(k)(4)(I)(iv)). 1040a Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. 1040a This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2012 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation. 1040a . 1040a 04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. 1040a The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. 1040a Under § 1. 1040a 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. 1040a One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. 1040a Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. 1040a SECTION 3. 1040a SCOPE . 1040a 01 The limitations on depreciation deductions in section 4. 1040a 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2012, and continue to apply for each taxable year that the passenger automobile remains in service. 1040a . 1040a 02 The tables in section 4. 1040a 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2012. 1040a Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. 1040a See Rev. 1040a Proc. 1040a 2007-30, 2007-1 C. 1040a B. 1040a 1104, for passenger automobiles first leased during calendar year 2007; Rev. 1040a Proc. 1040a 2008-22, 2008-1 C. 1040a B. 1040a 658, for passenger automobiles first leased during calendar year 2008; Rev. 1040a Proc. 1040a 2009-24, 2009-17 I. 1040a R. 1040a B. 1040a 885, for passenger automobiles first leased during calendar year 2009; Rev. 1040a Proc. 1040a 2010-18, 2010-9 I. 1040a R. 1040a B. 1040a 427, as amplified and modified by section 4. 1040a 03 of Rev. 1040a Proc. 1040a 2011-21, 2011-12 I. 1040a R. 1040a B. 1040a 560, for passenger automobiles first leased during calendar year 2010; and Rev. 1040a Proc. 1040a 2011-21, for passenger automobiles first leased during calendar year 2011. 1040a SECTION 4. 1040a APPLICATION . 1040a 01 Limitations on Depreciation Deductions for Certain Automobiles. 1040a (1) Amount of the inflation adjustment. 1040a (a) Passenger automobiles (other than trucks or vans). 1040a Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. 1040a Section 280F(d)(7)(B)(ii) defines the term “CPI automobile component” as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. 1040a The new car component of the CPI was 115. 1040a 2 for October 1987 and 143. 1040a 419 for October 2011. 1040a The October 2011 index exceeded the October 1987 index by 28. 1040a 219. 1040a Therefore, the automobile price inflation adjustment for 2012 for passenger automobiles (other than trucks and vans) is 24. 1040a 5 percent (28. 1040a 219/115. 1040a 2 x 100%). 1040a The dollar limitations in § 280F(a) are multiplied by a factor of 0. 1040a 245, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2012. 1040a This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2012. 1040a (b) Trucks and vans. 1040a To determine the dollar limitations for trucks and vans first placed in service during calendar year 2012, the Service uses the new truck component of the CPI instead of the new car component. 1040a The new truck component of the CPI was 112. 1040a 4 for October 1987 and 146. 1040a 607 for October 2011. 1040a The October 2011 index exceeded the October 1987 index by 34. 1040a 207. 1040a Therefore, the automobile price inflation adjustment for 2012 for trucks and vans is 30. 1040a 43 percent (34. 1040a 207/112. 1040a 4 x 100%). 1040a The dollar limitations in § 280F(a) are multiplied by a factor of 0. 1040a 3043, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. 1040a This adjustment applies to all trucks and vans that are first placed in service in calendar year 2012. 1040a (2) Amount of the limitation. 1040a Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2012. 1040a Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2012 for which the § 168(k) additional first year depreciation deduction applies. 1040a Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2012 for which the § 168(k) additional first year depreciation deduction does not apply. 1040a REV. 1040a PROC. 1040a 2012-23 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. 1040a PROC. 1040a 2012-23 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,360 2nd Tax Year $5,300 3rd Tax Year $3,150 Each Succeeding Year $1,875 REV. 1040a PROC. 1040a 2012-23 TABLE 3 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. 1040a PROC. 1040a 2012-23 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,360 2nd Tax Year $5,300 3rd Tax Year $3,150 Each Succeeding Year $1,875 . 1040a 02 Inclusions in Income of Lessees of Passenger Automobiles. 1040a A taxpayer must follow the procedures in § 1. 1040a 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2012. 1040a In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure. 1040a REV. 1040a PROC. 1040a 2012-23 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $18,500 $19,000 2 4 5 6 8 19,000 19,500 2 4 7 7 9 19,500 20,000 2 5 8 8 10 20,000 20,500 3 5 9 10 11 20,500 21,000 3 6 9 12 12 21,000 21,500 3 7 10 12 14 21,500 22,000 3 8 11 13 16 22,000 23,000 4 8 13 15 17 23,000 24,000 4 10 15 17 20 24,000 25,000 5 11 17 19 23 25,000 26,000 6 12 19 21 26 26,000 27,000 6 14 20 24 28 27,000 28,000 7 15 22 26 31 28,000 29,000 7 16 25 28 33 29,000 30,000 8 18 25 32 35 30,000 31,000 9 19 27 34 38 31,000 32,000 9 20 30 36 41 32,000 33,000 10 21 32 38 43 33,000 34,000 10 23 33 41 46 34,000 35,000 11 24 35 43 49 35,000 36,000 12 25 37 45 52 36,000 37,000 12 27 39 47 54 37,000 38,000 13 28 41 49 57 38,000 39,000 13 29 43 52 59 39,000 40,000 14 30 45 54 62 40,000 41,000 14 32 47 56 65 41,000 42,000 15 33 49 58 68 42,000 43,000 16 34 51 61 70 43,000 44,000 16 36 52 63 73 44,000 45,000 17 37 54 66 75 45,000 46,000 17 38 57 67 78 46,000 47,000 18 39 59 70 80 47,000 48,000 19 40 61 72 83 48,000 49,000 19 42 62 75 86 49,000 50,000 20 43 64 77 89 50,000 51,000 20 45 66 79 91 51,000 52,000 21 46 68 81 94 52,000 53,000 21 47 70 84 96 53,000 54,000 22 48 72 86 99 54,000 55,000 23 49 74 88 102 55,000 56,000 23 51 76 90 104 56,000 57,000 24 52 78 92 107 57,000 58,000 24 54 79 95 110 58,000 59,000 25 55 81 97 113 59,000 60,000 26 56 83 100 115 60,000 62,000 26 58 86 103 119 62,000 64,000 28 60 90 108 124 64,000 66,000 29 63 94 112 129 66,000 68,000 30 66 97 117 135 68,000 70,000 31 68 102 121 140 70,000 72,000 32 71 105 126 145 72,000 74,000 33 74 109 130 151 74,000 76,000 35 76 113 135 156 76,000 78,000 36 78 117 140 161 78,000 80,000 37 81 120 145 166 80,000 85,000 39 86 127 152 176 85,000 90,000 42 92 137 163 189 90,000 95,000 45 98 147 175 202 95,000 100,000 48 105 155 187 215 100,000 110,000 52 115 170 203 235 110,000 120,000 58 127 189 227 262 120,000 130,000 64 140 208 250 288 130,000 140,000 70 153 227 272 315 140,000 150,000 75 166 246 296 340 150,000 160,000 81 179 265 318 368 160,000 170,000 87 192 284 341 394 170,000 180,000 93 204 304 364 420 180,000 190,000 99 217 323 387 446 190,000 200,000 105 230 342 409 473 200,000 210,000 111 243 361 432 499 210,000 220,000 116 256 380 455 526 220,000 230,000 122 269 399 478 552 230,000 240,000 128 282 418 501 578 240,000 and up 134 294 437 524 605 REV. 1040a PROC. 1040a 2012-23 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012 Fair Market Value of Truck or Van Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $19,000 $19,500 1 4 5 6 7 19,500 20,000 2 4 6 7 9 20,000 20,500 2 5 7 8 10 20,500 21,000 2 5 8 10 11 21,000 21,500 3 6 9 10 13 21,500 22,000 3 6 10 12 14 22,000 23,000 3 8 11 14 15 23,000 24,000 4 9 13 16 18 24,000 25,000 4 10 15 19 21 25,000 26,000 5 11 17 21 24 26,000 27,000 6 12 19 23 26 27,000 28,000 6 14 21 25 29 28,000 29,000 7 15 23 27 32 29,000 30,000 7 17 24 30 34 30,000 31,000 8 18 26 32 37 31,000 32,000 9 19 28 34 40 32,000 33,000 9 20 31 36 42 33,000 34,000 10 21 33 39 44 34,000 35,000 10 23 34 41 48 35,000 36,000 11 24 36 44 50 36,000 37,000 12 25 38 46 53 37,000 38,000 12 27 40 48 55 38,000 39,000 13 28 42 50 58 39,000 40,000 13 29 44 53 60 40,000 41,000 14 31 45 55 63 41,000 42,000 14 32 48 57 66 42,000 43,000 15 33 50 59 69 43,000 44,000 16 34 52 61 72 44,000 45,000 16 36 53 64 74 45,000 46,000 17 37 55 66 77 46,000 47,000 17 38 58 68 79 47,000 48,000 18 40 59 70 82 48,000 49,000 19 41 61 73 84 49,000 50,000 19 42 63 75 87 50,000 51,000 20 43 65 78 89 51,000 52,000 20 45 66 80 93 52,000 53,000 21 46 68 83 95 53,000 54,000 21 48 70 84 98 54,000 55,000 22 49 72 87 100 55,000 56,000 23 50 74 89 103 56,000 57,000 23 51 76 92 105 57,000 58,000 24 52 78 94 108 58,000 59,000 24 54 80 96 111 59,000 60,000 25 55 82 98 114 60,000 62,000 26 57 85 101 118 62,000 64,000 27 60 88 106 123 64,000 66,000 28 62 93 110 128 66,000 68,000 29 65 96 115 134 68,000 70,000 30 67 100 120 139 70,000 72,000 32 70 103 125 144 72,000 74,000 33 72 108 129 149 74,000 76,000 34 75 111 134 155 76,000 78,000 35 78 115 138 160 78,000 80,000 36 80 119 143 165 80,000 85,000 38 85 125 151 175 85,000 90,000 41 91 135 163 187 90,000 95,000 44 98 144 174 201 95,000 100,000 47 104 154 185 214 100,000 110,000 52 113 169 202 234 110,000 120,000 57 127 187 225 261 120,000 130,000 63 139 207 248 287 130,000 140,000 69 152 226 271 313 140,000 150,000 75 165 245 294 339 150,000 160,000 81 178 264 316 366 160,000 170,000 87 190 283 340 392 170,000 180,000 92 204 302 362 419 180,000 190,000 98 216 322 385 445 190,000 200,000 104 229 340 409 471 200,000 210,000 110 242 359 431 498 210,000 220,000 116 255 378 454 524 220,000 230,000 122 267 398 477 551 230,000 240,000 127 281 416 500 577 240,000 and up 133 294 435 523 603 SECTION 5. 1040a EFFECTIVE DATE This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2012. 1040a SECTION 6. 1040a DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. 1040a Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). 1040a For further information regarding this revenue procedure, contact Mr. 1040a Harvey at (202) 622-4930 (not a toll-free call). 1040a Prev  Up  Next   Home   More Internal Revenue Bulletins
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Page Last Reviewed or Updated: 26-Mar-2014

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The 1040a

1040a 5. 1040a   Illustrated Examples Table of Contents Illustrated Example of Form 4563Line 1. 1040a Line 2. 1040a Lines 3a and 3b. 1040a Lines 4a and 4b. 1040a Line 5. 1040a Line 6. 1040a Line 7. 1040a Line 9. 1040a Line 15. 1040a Illustrated Example of Form 5074Part I. 1040a Part II. 1040a Part III. 1040a Illustrated Example of Form 8689Part I. 1040a Part II. 1040a Part III. 1040a Part IV. 1040a Use the following examples to help you complete the correct attachment to your Form 1040. 1040a The completed form for each example is shown on the pages that follow. 1040a Illustrated Example of Form 4563 John Black is a U. 1040a S. 1040a citizen, single, and under 65. 1040a He was a bona fide resident of American Samoa during all of 2013. 1040a John must file Form 1040 because his gross income from sources outside the possessions ($10,000 of dividends from U. 1040a S. 1040a corporations) is more than his adjusted filing requirement for single filers under 65. 1040a (See Filing Requirement if Possession Income Is Excluded in chapter 4. 1040a ) Because he must file Form 1040 (not illustrated), he fills out Form 4563 to determine the amount of income from American Samoa he can exclude. 1040a See Bona Fide Resident of American Samoa in chapter 3. 1040a Completing Form 4563. 1040a   John enters his name and social security number at the top of the form. 1040a Line 1. 1040a   On Form 4563 (see later), John enters the date his bona fide residence began in American Samoa, June 2, 2012. 1040a Because he is still a bona fide resident, he enters “not ended” in the second blank space. 1040a Line 2. 1040a   He checks the box labeled “Rented house or apartment” to describe his type of living quarters in American Samoa. 1040a Lines 3a and 3b. 1040a   He checks “No” on line 3a because no family members lived with him. 1040a He leaves line 3b blank. 1040a Lines 4a and 4b. 1040a   He checks “No” on line 4a because he did not maintain a home outside American Samoa. 1040a He leaves line 4b blank. 1040a Line 5. 1040a   He enters the name and address of his employer, Samoa Products Co. 1040a It is a private American Samoa corporation. 1040a Line 6. 1040a   He enters the dates of his 2-week vacation to New Zealand from November 11 to November 25. 1040a That was his only trip outside American Samoa during the year. 1040a Line 7. 1040a   He enters the $24,000 in wages he received from Samoa Products Co. 1040a Line 9. 1040a   He received $220 in dividends from an American Samoa corporation, which he enters here. 1040a He also received $10,000 of dividends from a U. 1040a S. 1040a corporation, but he will enter that amount only on his Form 1040 because the U. 1040a S. 1040a dividends do not qualify for the possession exclusion. 1040a Line 15. 1040a   John totals the amounts on lines 7 and 9 to get the amount he can exclude from his gross income in 2013. 1040a He will not enter his excluded income on Form 1040. 1040a However, he will attach his completed Form 4563 to his Form 1040. 1040a Illustrated Example of Form 5074 Tracy Grey is a U. 1040a S. 1040a citizen who is a self-employed fisheries consultant with a tax home in New York. 1040a Her only income for 2013 was net self-employment income of $80,000. 1040a Of the $80,000, $20,000 was from consulting work in Guam and the rest was earned in the United States. 1040a Thinking she would owe tax to Guam on the $20,000, Tracy made estimated tax payments of $1,409 to Guam. 1040a She was not a bona fide resident of Guam during 2013. 1040a Tracy completes Form 1040 (not illustrated), reporting her worldwide income. 1040a Because the adjusted gross income on her Form 1040 was $50,000 or more and at least $5,000 of her gross income is from Guam, Tracy must file Form 5074 with her Form 1040. 1040a All amounts reported on Form 5074 are also reported on her Form 1040. 1040a See U. 1040a S. 1040a Citizen or Resident Alien (Other Than a Bona Fide Resident of Guam) in chapter 3. 1040a Completing Form 5074. 1040a   Tracy enters her name and social security number at the top of the form. 1040a Part I. 1040a   On Form 5074 (see later), Tracy enters her self-employment income from Guam ($20,000) on line 6. 1040a She has no other income from Guam, so the total on line 16 is $20,000. 1040a Part II. 1040a   Tracy's only adjustment in Part II is the deductible part of the self-employment tax on her net income earned in Guam. 1040a She enters $1,413 on line 21 and line 28. 1040a Her adjusted gross income on line 29 is $18,587. 1040a Part III. 1040a   Tracy made estimated tax payments of $1,409. 1040a She enters this amount on line 30, and again on line 34 as the total payments. 1040a Illustrated Example of Form 8689 Juan and Carla Moreno live and work in the United States. 1040a In 2013, they received $14,400 in income from the rental of a condominium they own in the U. 1040a S. 1040a Virgin Islands (USVI). 1040a The rental income was deposited in a bank in the USVI and they received $500 of interest on this income. 1040a They were not bona fide residents of the USVI during the entire tax year. 1040a The Morenos complete Form 1040 (not illustrated), reporting their income from all sources, including their interest income and the income and expenses from their USVI rental property (reported on Schedule E (Form 1040)). 1040a The Morenos take the standard deduction for married filing jointly, both are under 65, and they have no dependents. 1040a The Morenos also complete Form 8689 to determine how much of their U. 1040a S. 1040a tax shown on Form 1040, line 61 (with certain adjustments), must be paid to the U. 1040a S. 1040a Virgin Islands. 1040a See U. 1040a S. 1040a Citizen or Resident Alien (Other Than a Bona Fide Resident of the USVI) in chapter 3. 1040a The Morenos file their Form 1040, attaching Form 8689 and all other schedules, with the Internal Revenue Service. 1040a At the same time, they send a copy of their Form 1040 with all attachments, including Form 8689, to the Virgin Islands Bureau of Internal Revenue. 1040a The Virgin Islands Bureau of Internal Revenue will process this copy. 1040a Completing Form 8689. 1040a   Juan and Carla enter their names and Juan's social security number at the top of the form. 1040a Part I. 1040a   The Morenos enter their income from the USVI in Part I (see later). 1040a The interest income is entered on line 2 and the net rental income of $6,200 ($14,400 of rental income minus $8,200 of rental expenses) is entered on line 11. 1040a The Morenos' total USVI income of $6,700 is entered on line 16. 1040a Part II. 1040a   The Morenos have no adjustments to their USVI income, so they enter zero (-0-) on line 28, and $6,700 on line 29. 1040a Their USVI adjusted gross income (AGI) is $6,700. 1040a Part III. 1040a   On line 30, the Morenos enter the amount from Form 1040, line 61 ($4,539). 1040a Their Form 1040 does not show any entries required on line 31, so they leave that line blank and enter $4,539 on line 32. 1040a   The Morenos enter their worldwide AGI, $54,901 (Form 1040, line 38), on line 33. 1040a Next, they find what percentage of their AGI is from USVI sources ($6,700 ÷ $54,901 = 0. 1040a 122) and enter that as a decimal on line 34. 1040a They then apply that percentage to the U. 1040a S. 1040a tax entered on line 32 to find the amount of U. 1040a S. 1040a tax allocated to USVI income ($4,539 x 0. 1040a 122 = $554), and enter that amount on line 35. 1040a Part IV. 1040a   Part IV is used to show payments of income tax to the USVI only. 1040a The Morenos had no tax withheld by the U. 1040a S. 1040a Virgin Islands, but made estimated tax payments to the USVI of $400, which they entered on lines 37 and 39. 1040a They include this amount ($400) in the total payments on Form 1040, line 72. 1040a On the dotted line next to the entry space for line 72, they enter “Form 8689” and show the amount. 1040a The Morenos do not complete Form 1116 because they receive credit on Form 1040, line 72, for the tax paid to the USVI. 1040a   The income tax they owe to the USVI ($154) is shown on Form 8689, line 44. 1040a They enter this amount on line 45. 1040a They also include this additional amount ($154) on the dotted line next to the entry space and in the total on Form 1040, line 72. 1040a The Morenos will pay their USVI tax at the same time they file the copy of their U. 1040a S. 1040a income tax return with the U. 1040a S. 1040a Virgin Islands. 1040a This image is too large to be displayed in the current screen. 1040a Please click the link to view the image. 1040a Form 4563, page 1 for John Black This image is too large to be displayed in the current screen. 1040a Please click the link to view the image. 1040a Form 5074, for Tracy Grey This image is too large to be displayed in the current screen. 1040a Please click the link to view the image. 1040a Form 8689, page 1 for Juan and Carla Moreno Prev  Up  Next   Home   More Online Publications