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2011 Income Tax Forms 1040ez

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2011 Income Tax Forms 1040ez

2011 income tax forms 1040ez 7. 2011 income tax forms 1040ez   Costs You Can Deduct or Capitalize Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Carrying Charges Research and Experimental CostsProduct. 2011 income tax forms 1040ez Costs not included. 2011 income tax forms 1040ez Intangible Drilling Costs Exploration CostsPartnerships and S corporations. 2011 income tax forms 1040ez Development Costs Circulation Costs Business Start-Up and Organizational Costs Reforestation Costs Retired Asset Removal Costs Barrier Removal CostsOther barrier removals. 2011 income tax forms 1040ez Film and Television Production Costs What's New Film and television productions costs. 2011 income tax forms 1040ez  The election to expense film and television production costs does not apply to productions that begin after December 31, 2013. 2011 income tax forms 1040ez See Film and Television Production Costs , later. 2011 income tax forms 1040ez Introduction This chapter discusses costs you can elect to deduct or capitalize. 2011 income tax forms 1040ez You generally deduct a cost as a current business expense by subtracting it from your income in either the year you incur it or the year you pay it. 2011 income tax forms 1040ez If you capitalize a cost, you may be able to recover it over a period of years through periodic deductions for amortization, depletion, or depreciation. 2011 income tax forms 1040ez When you capitalize a cost, you add it to the basis of property to which it relates. 2011 income tax forms 1040ez A partnership, corporation, estate, or trust makes the election to deduct or capitalize the costs discussed in this chapter except for exploration costs for mineral deposits. 2011 income tax forms 1040ez Each individual partner, shareholder, or beneficiary elects whether to deduct or capitalize exploration costs. 2011 income tax forms 1040ez You may be subject to the alternative minimum tax (AMT) if you deduct research and experimental, intangible drilling, exploration, development, circulation, or business organizational costs. 2011 income tax forms 1040ez For more information on the alternative minimum tax, see the instructions for the following forms. 2011 income tax forms 1040ez Form 6251, Alternative Minimum Tax—Individuals. 2011 income tax forms 1040ez Form 4626, Alternative Minimum Tax—Corporations. 2011 income tax forms 1040ez Topics - This chapter discusses: Carrying charges Research and experimental costs Intangible drilling costs Exploration costs Development costs Circulation costs Qualified disaster expenses Business start-up and organizational costs Reforestation costs Retired asset removal costs Barrier removal costs Film and television production costs Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 3468 Investment Credit 8826 Disabled Access Credit See chapter 12 for information about getting publications and forms. 2011 income tax forms 1040ez Carrying Charges Carrying charges include the taxes and interest you pay to carry or develop real property or to carry, transport, or install personal property. 2011 income tax forms 1040ez Certain carrying charges must be capitalized under the uniform capitalization rules. 2011 income tax forms 1040ez (For information on capitalization of interest, see chapter 4 . 2011 income tax forms 1040ez ) You can elect to capitalize carrying charges not subject to the uniform capitalization rules, but only if they are otherwise deductible. 2011 income tax forms 1040ez You can elect to capitalize carrying charges separately for each project you have and for each type of carrying charge. 2011 income tax forms 1040ez For unimproved and unproductive real property, your election is good for only 1 year. 2011 income tax forms 1040ez You must decide whether to capitalize carrying charges each year the property remains unimproved and unproductive. 2011 income tax forms 1040ez For other real property, your election to capitalize carrying charges remains in effect until construction or development is completed. 2011 income tax forms 1040ez For personal property, your election is effective until the date you install or first use it, whichever is later. 2011 income tax forms 1040ez How to make the election. 2011 income tax forms 1040ez   To make the election to capitalize a carrying charge, attach a statement to your original tax return for the year the election is to be effective indicating which charges you are electing to capitalize. 2011 income tax forms 1040ez However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2011 income tax forms 1040ez Attach the statement to the amended return and write “Filed pursuant to section 301. 2011 income tax forms 1040ez 9100-2” on the statement. 2011 income tax forms 1040ez File the amended return at the same address you filed the original return. 2011 income tax forms 1040ez Research and Experimental Costs The costs of research and experimentation are generally capital expenses. 2011 income tax forms 1040ez However, you can elect to deduct these costs as a current business expense. 2011 income tax forms 1040ez Your election to deduct these costs is binding for the year it is made and for all later years unless you get IRS approval to make a change. 2011 income tax forms 1040ez If you meet certain requirements, you may elect to defer and amortize research and experimental costs. 2011 income tax forms 1040ez For information on electing to defer and amortize these costs, see Research and Experimental Costs in chapter 8. 2011 income tax forms 1040ez Research and experimental costs defined. 2011 income tax forms 1040ez   Research and experimental costs are reasonable costs you incur in your trade or business for activities intended to provide information that would eliminate uncertainty about the development or improvement of a product. 2011 income tax forms 1040ez Uncertainty exists if the information available to you does not establish how to develop or improve a product or the appropriate design of a product. 2011 income tax forms 1040ez Whether costs qualify as research and experimental costs depends on the nature of the activity to which the costs relate rather than on the nature of the product or improvement being developed or the level of technological advancement. 2011 income tax forms 1040ez      The costs of obtaining a patent, including attorneys' fees paid or incurred in making and perfecting a patent application, are research and experimental costs. 2011 income tax forms 1040ez However, costs paid or incurred to obtain another's patent are not research and experimental costs. 2011 income tax forms 1040ez Product. 2011 income tax forms 1040ez   The term “product” includes any of the following items. 2011 income tax forms 1040ez Formula. 2011 income tax forms 1040ez Invention. 2011 income tax forms 1040ez Patent. 2011 income tax forms 1040ez Pilot model. 2011 income tax forms 1040ez Process. 2011 income tax forms 1040ez Technique. 2011 income tax forms 1040ez Property similar to the items listed above. 2011 income tax forms 1040ez It also includes products used by you in your trade or business or held for sale, lease, or license. 2011 income tax forms 1040ez Costs not included. 2011 income tax forms 1040ez   Research and experimental costs do not include expenses for any of the following activities. 2011 income tax forms 1040ez Advertising or promotions. 2011 income tax forms 1040ez Consumer surveys. 2011 income tax forms 1040ez Efficiency surveys. 2011 income tax forms 1040ez Management studies. 2011 income tax forms 1040ez Quality control testing. 2011 income tax forms 1040ez Research in connection with literary, historical, or similar projects. 2011 income tax forms 1040ez The acquisition of another's patent, model, production, or process. 2011 income tax forms 1040ez When and how to elect. 2011 income tax forms 1040ez   You make the election to deduct research and experimental costs by deducting them on your tax return for the year in which you first pay or incur research and experimental costs. 2011 income tax forms 1040ez If you do not make the election to deduct research and experimental costs in the first year in which you pay or incur the costs, you can deduct the costs in a later year only with approval from the IRS. 2011 income tax forms 1040ez Deducting or Amortizing Research and Experimentation Costs IF you . 2011 income tax forms 1040ez . 2011 income tax forms 1040ez . 2011 income tax forms 1040ez THEN . 2011 income tax forms 1040ez . 2011 income tax forms 1040ez . 2011 income tax forms 1040ez Elect to deduct research and experimental costs as a current business expense Deduct all research and experimental costs in the first year you pay or incur the costs and all later years. 2011 income tax forms 1040ez Do not deduct research and experimental costs as a current business expense If you meet the requirements, amortize them over at least 60 months, starting with the month you first receive an economic benefit from the research. 2011 income tax forms 1040ez See Research and Experimental Costs in chapter 8. 2011 income tax forms 1040ez Research credit. 2011 income tax forms 1040ez   If you pay or incur qualified research expenses, you may be able to take the research credit. 2011 income tax forms 1040ez For more information see Form 6765, Credit for Increasing Research Activities and its instructions. 2011 income tax forms 1040ez Intangible Drilling Costs The costs of developing oil, gas, or geothermal wells are ordinarily capital expenditures. 2011 income tax forms 1040ez You can usually recover them through depreciation or depletion. 2011 income tax forms 1040ez However, you can elect to deduct intangible drilling costs (IDCs) as a current business expense. 2011 income tax forms 1040ez These are certain drilling and development costs for wells in the United States in which you hold an operating or working interest. 2011 income tax forms 1040ez You can deduct only costs for drilling or preparing a well for the production of oil, gas, or geothermal steam or hot water. 2011 income tax forms 1040ez You can elect to deduct only the costs of items with no salvage value. 2011 income tax forms 1040ez These include wages, fuel, repairs, hauling, and supplies related to drilling wells and preparing them for production. 2011 income tax forms 1040ez Your cost for any drilling or development work done by contractors under any form of contract is also an IDC. 2011 income tax forms 1040ez However, see Amounts paid to contractor that must be capitalized , later. 2011 income tax forms 1040ez You can also elect to deduct the cost of drilling exploratory bore holes to determine the location and delineation of offshore hydrocarbon deposits if the shaft is capable of conducting hydrocarbons to the surface on completion. 2011 income tax forms 1040ez It does not matter whether there is any intent to produce hydrocarbons. 2011 income tax forms 1040ez If you do not elect to deduct your IDCs as a current business expense, you can elect to deduct them over the 60-month period beginning with the month they were paid or incurred. 2011 income tax forms 1040ez Amounts paid to contractor that must be capitalized. 2011 income tax forms 1040ez   Amounts paid to a contractor must be capitalized if they are either: Amounts properly allocable to the cost of depreciable property, or Amounts paid only out of production or proceeds from production if these amounts are depletable income to the recipient. 2011 income tax forms 1040ez How to make the election. 2011 income tax forms 1040ez   You elect to deduct IDCs as a current business expense by taking the deduction on your income tax return for the first tax year you have eligible costs. 2011 income tax forms 1040ez No formal statement is required. 2011 income tax forms 1040ez If you file Schedule C (Form 1040), enter these costs under “Other expenses. 2011 income tax forms 1040ez ”   For oil and gas wells, your election is binding for the year it is made and for all later years. 2011 income tax forms 1040ez For geothermal wells, your election can be revoked by the filing of an amended return on which you do not take the deduction. 2011 income tax forms 1040ez You can file the amended return for the year up to the normal time of expiration for filing a claim for credit or refund, generally, within 3 years after the date you filed the original return or within 2 years after the date you paid the tax, whichever is later. 2011 income tax forms 1040ez Energy credit for costs of geothermal wells. 2011 income tax forms 1040ez   If you capitalize the drilling and development costs of geothermal wells that you place in service during the tax year, you may be able to claim a business energy credit. 2011 income tax forms 1040ez See the Instructions for Form 3468 for more information. 2011 income tax forms 1040ez Nonproductive well. 2011 income tax forms 1040ez   If you capitalize your IDCs, you have another option if the well is nonproductive. 2011 income tax forms 1040ez You can deduct the IDCs of the nonproductive well as an ordinary loss. 2011 income tax forms 1040ez You must indicate and clearly state your election on your tax return for the year the well is completed. 2011 income tax forms 1040ez Once made, the election for oil and gas wells is binding for all later years. 2011 income tax forms 1040ez You can revoke your election for a geothermal well by filing an amended return that does not claim the loss. 2011 income tax forms 1040ez Costs incurred outside the United States. 2011 income tax forms 1040ez   You cannot deduct as a current business expense all the IDCs paid or incurred for an oil, gas, or geothermal well located outside the United States. 2011 income tax forms 1040ez However, you can elect to include the costs in the adjusted basis of the well to figure depletion or depreciation. 2011 income tax forms 1040ez If you do not make this election, you can deduct the costs over the 10-year period beginning with the tax year in which you paid or incurred them. 2011 income tax forms 1040ez These rules do not apply to a nonproductive well. 2011 income tax forms 1040ez Exploration Costs The costs of determining the existence, location, extent, or quality of any mineral deposit are ordinarily capital expenditures if the costs lead to the development of a mine. 2011 income tax forms 1040ez You recover these costs through depletion as the mineral is removed from the ground. 2011 income tax forms 1040ez However, you can elect to deduct domestic exploration costs paid or incurred before the beginning of the development stage of the mine (except those for oil and gas wells). 2011 income tax forms 1040ez How to make the election. 2011 income tax forms 1040ez   You elect to deduct exploration costs by taking the deduction on your income tax return, or on an amended income tax return, for the first tax year for which you wish to deduct the costs paid or incurred during the tax year. 2011 income tax forms 1040ez Your return must adequately describe and identify each property or mine, and clearly state how much is being deducted for each one. 2011 income tax forms 1040ez The election applies to the tax year you make this election and all later tax years. 2011 income tax forms 1040ez Partnerships and S corporations. 2011 income tax forms 1040ez   Each partner, not the partnership, elects whether to capitalize or to deduct that partner's share of exploration costs. 2011 income tax forms 1040ez Each shareholder, not the S corporation, elects whether to capitalize or to deduct that shareholder's share of exploration costs. 2011 income tax forms 1040ez Reduced corporate deductions for exploration costs. 2011 income tax forms 1040ez   A corporation (other than an S corporation) can deduct only 70% of its domestic exploration costs. 2011 income tax forms 1040ez It must capitalize the remaining 30% of costs and amortize them over the 60-month period starting with the month the exploration costs are paid or incurred. 2011 income tax forms 1040ez A corporation may also elect to capitalize and amortize mining exploration costs over a 10-year period. 2011 income tax forms 1040ez For more information on this method of amortization, see Internal Revenue Code section 59(e). 2011 income tax forms 1040ez   The 30% the corporation capitalizes cannot be added to its basis in the property to figure cost depletion. 2011 income tax forms 1040ez However, the amount amortized is treated as additional depreciation and is subject to recapture as ordinary income on a disposition of the property. 2011 income tax forms 1040ez See Section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. 2011 income tax forms 1040ez   These rules also apply to the deduction of development costs by corporations. 2011 income tax forms 1040ez See Development Costs , later. 2011 income tax forms 1040ez Recapture of exploration expenses. 2011 income tax forms 1040ez   When your mine reaches the producing stage, you must recapture any exploration costs you elected to deduct. 2011 income tax forms 1040ez Use either of the following methods. 2011 income tax forms 1040ez Method 1—Include the deducted costs in gross income for the tax year the mine reaches the producing stage. 2011 income tax forms 1040ez Your election must be clearly indicated on the return. 2011 income tax forms 1040ez Increase your adjusted basis in the mine by the amount included in income. 2011 income tax forms 1040ez Generally, you must elect this recapture method by the due date (including extensions) of your return. 2011 income tax forms 1040ez However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2011 income tax forms 1040ez Make the election on your amended return and write “Filed pursuant to section 301. 2011 income tax forms 1040ez 9100-2” on the form where you are including the income. 2011 income tax forms 1040ez File the amended return at the same address you filed the original return. 2011 income tax forms 1040ez Method 2—Do not claim any depletion deduction for the tax year the mine reaches the producing stage and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. 2011 income tax forms 1040ez   You also must recapture deducted exploration costs if you receive a bonus or royalty from mine property before it reaches the producing stage. 2011 income tax forms 1040ez Do not claim any depletion deduction for the tax year you receive the bonus or royalty and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. 2011 income tax forms 1040ez   Generally, if you dispose of the mine before you have fully recaptured the exploration costs you deducted, recapture the balance by treating all or part of your gain as ordinary income. 2011 income tax forms 1040ez Under these circumstances, you generally treat as ordinary income all of your gain if it is less than your adjusted exploration costs with respect to the mine. 2011 income tax forms 1040ez If your gain is more than your adjusted exploration costs, treat as ordinary income only a part of your gain, up to the amount of your adjusted exploration costs. 2011 income tax forms 1040ez Foreign exploration costs. 2011 income tax forms 1040ez   If you pay or incur exploration costs for a mine or other natural deposit located outside the United States, you cannot deduct all the costs in the current year. 2011 income tax forms 1040ez You can elect to include the costs (other than for an oil, gas, or geothermal well) in the adjusted basis of the mineral property to figure cost depletion. 2011 income tax forms 1040ez (Cost depletion is discussed in chapter 9 . 2011 income tax forms 1040ez ) If you do not make this election, you must deduct the costs over the 10-year period beginning with the tax year in which you pay or incur them. 2011 income tax forms 1040ez These rules also apply to foreign development costs. 2011 income tax forms 1040ez Development Costs You can deduct costs paid or incurred during the tax year for developing a mine or any other natural deposit (other than an oil or gas well) located in the United States. 2011 income tax forms 1040ez These costs must be paid or incurred after the discovery of ores or minerals in commercially marketable quantities. 2011 income tax forms 1040ez Development costs also include depreciation on improvements used in the development of ores or minerals and costs incurred for you by a contractor. 2011 income tax forms 1040ez Development costs do not include the costs for the acquisition or improvement of depreciable property. 2011 income tax forms 1040ez Instead of deducting development costs in the year paid or incurred, you can elect to treat the cost as deferred expenses and deduct them ratably as the units of produced ores or minerals benefited by the expenses are sold. 2011 income tax forms 1040ez This election applies each tax year to expenses paid or incurred in that year. 2011 income tax forms 1040ez Once made, the election is binding for the year and cannot be revoked for any reason. 2011 income tax forms 1040ez How to make the election. 2011 income tax forms 1040ez   The election to deduct development costs ratably as the ores or minerals are sold must be made for each mine or other natural deposit by a clear indication on your return or by a statement filed with the IRS office where you file your return. 2011 income tax forms 1040ez Generally, you must make the election by the due date of the return (including extensions). 2011 income tax forms 1040ez However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2011 income tax forms 1040ez Clearly indicate the election on your amended return and write “Filed pursuant to section 301. 2011 income tax forms 1040ez 9100-2. 2011 income tax forms 1040ez ” File the amended return at the same address you filed the original return. 2011 income tax forms 1040ez Foreign development costs. 2011 income tax forms 1040ez   The rules discussed earlier for foreign exploration costs apply to foreign development costs. 2011 income tax forms 1040ez Reduced corporate deductions for development costs. 2011 income tax forms 1040ez   The rules discussed earlier for reduced corporate deductions for exploration costs also apply to corporate deductions for development costs. 2011 income tax forms 1040ez Circulation Costs A publisher can deduct as a current business expense the costs of establishing, maintaining, or increasing the circulation of a newspaper, magazine, or other periodical. 2011 income tax forms 1040ez For example, a publisher can deduct the cost of hiring extra employees for a limited time to get new subscriptions through telephone calls. 2011 income tax forms 1040ez Circulation costs are deductible even if they normally would be capitalized. 2011 income tax forms 1040ez This rule does not apply to the following costs that must be capitalized. 2011 income tax forms 1040ez The purchase of land or depreciable property. 2011 income tax forms 1040ez The acquisition of circulation through the purchase of any part of the business of another publisher of a newspaper, magazine, or other periodical, including the purchase of another publisher's list of subscribers. 2011 income tax forms 1040ez Other treatment of circulation costs. 2011 income tax forms 1040ez   If you do not want to deduct circulation costs as a current business expense, you can elect one of the following ways to recover these costs. 2011 income tax forms 1040ez Capitalize all circulation costs that are properly chargeable to a capital account (see chapter 1 ). 2011 income tax forms 1040ez Amortize circulation costs over the 3-year period beginning with the tax year they were paid or incurred. 2011 income tax forms 1040ez How to make the election. 2011 income tax forms 1040ez   You elect to capitalize circulation costs by attaching a statement to your return for the first tax year the election applies. 2011 income tax forms 1040ez Your election is binding for the year it is made and for all later years, unless you get IRS approval to revoke it. 2011 income tax forms 1040ez Business Start-Up and Organizational Costs Business start-up and organizational costs are generally capital expenditures. 2011 income tax forms 1040ez However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. 2011 income tax forms 1040ez The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. 2011 income tax forms 1040ez Any remaining costs must be amortized. 2011 income tax forms 1040ez For information about amortizing start-up and organizational costs, see chapter 8 . 2011 income tax forms 1040ez Start-up costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business. 2011 income tax forms 1040ez Organizational costs include the costs of creating a corporation. 2011 income tax forms 1040ez For more information on start-up and organizational costs, see chapter 8 . 2011 income tax forms 1040ez How to make the election. 2011 income tax forms 1040ez   You elect to deduct the start-up or organizational costs by claiming the deduction on your income tax return (filed by the due date including extensions) for the tax year in which the active trade or business begins. 2011 income tax forms 1040ez However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2011 income tax forms 1040ez Clearly indicate the election on your amended return and write “Filed pursuant to section 301. 2011 income tax forms 1040ez 9100-2. 2011 income tax forms 1040ez ” File the amended return at the same address you filed the original return. 2011 income tax forms 1040ez The election applies when computing taxable income for the current tax year and all subsequent years. 2011 income tax forms 1040ez Reforestation Costs Reforestation costs are generally capital expenditures. 2011 income tax forms 1040ez However, you can elect to deduct up to $10,000 ($5,000 if married filing separately; $0 for a trust) of qualifying reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. 2011 income tax forms 1040ez The remaining costs can be amortized over an 84-month period. 2011 income tax forms 1040ez For information about amortizing reforestation costs, see chapter 8 . 2011 income tax forms 1040ez Qualifying reforestation costs are the direct costs of planting or seeding for forestation or reforestation. 2011 income tax forms 1040ez Qualified timber property is property that contains trees in significant commercial quantities. 2011 income tax forms 1040ez See chapter 8 for more information on qualifying reforestation costs and qualified timber property. 2011 income tax forms 1040ez If you elect to deduct qualified reforestation costs, create and maintain separate timber accounts for each qualified timber property and include all reforestation costs and the dates each was applied. 2011 income tax forms 1040ez Do not include this qualified timber property in any account (for example, depletion block) for which depletion is allowed. 2011 income tax forms 1040ez How to make the election. 2011 income tax forms 1040ez   You elect to deduct qualifying reforestation costs by claiming the deduction on your timely filed income tax return (including extensions) for the tax year the expenses were paid or incurred. 2011 income tax forms 1040ez If Form T (Timber), Forest Activities Schedule, is required, complete Part IV of Form T. 2011 income tax forms 1040ez If Form T is not required, attach a statement containing the following information for each qualified timber property for which an election is being made. 2011 income tax forms 1040ez The unique stand identification numbers. 2011 income tax forms 1040ez The total number of acres reforested during the tax year. 2011 income tax forms 1040ez The nature of the reforestation treatments. 2011 income tax forms 1040ez The total amounts of qualified reforestation expenditures eligible to be amortized or deducted. 2011 income tax forms 1040ez   If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2011 income tax forms 1040ez Clearly indicate the election on your amended return and write “Filed pursuant to section 301. 2011 income tax forms 1040ez 9100-2. 2011 income tax forms 1040ez ” File the amended return at the same address you filed the original return. 2011 income tax forms 1040ez The election applies when computing taxable income for the current tax year and all subsequent years. 2011 income tax forms 1040ez   For additional information on reforestation costs, see chapter 8 . 2011 income tax forms 1040ez Recapture. 2011 income tax forms 1040ez   This deduction may have to be recaptured as ordinary income under section 1245 when you sell or otherwise dispose of the property that would have received an addition to basis if you had not elected to deduct the expenditure. 2011 income tax forms 1040ez For more information on recapturing the deduction, see Depreciation Recapture in Publication 544. 2011 income tax forms 1040ez Retired Asset Removal Costs If you retire and remove a depreciable asset in connection with the installation or production of a replacement asset, you can deduct the costs of removing the retired asset. 2011 income tax forms 1040ez However, if you replace a component (part) of a depreciable asset, capitalize the removal costs if the replacement is an improvement and deduct the costs if the replacement is a repair. 2011 income tax forms 1040ez Barrier Removal Costs The cost of an improvement to a business asset is normally a capital expense. 2011 income tax forms 1040ez However, you can elect to deduct the costs of making a facility or public transportation vehicle more accessible to and usable by those who are disabled or elderly. 2011 income tax forms 1040ez You must own or lease the facility or vehicle for use in connection with your trade or business. 2011 income tax forms 1040ez A facility is all or any part of buildings, structures, equipment, roads, walks, parking lots, or similar real or personal property. 2011 income tax forms 1040ez A public transportation vehicle is a vehicle, such as a bus or railroad car, that provides transportation service to the public (including service for your customers, even if you are not in the business of providing transportation services). 2011 income tax forms 1040ez You cannot deduct any costs that you paid or incurred to completely renovate or build a facility or public transportation vehicle or to replace depreciable property in the normal course of business. 2011 income tax forms 1040ez Deduction limit. 2011 income tax forms 1040ez   The most you can deduct as a cost of removing barriers to the disabled and the elderly for any tax year is $15,000. 2011 income tax forms 1040ez However, you can add any costs over this limit to the basis of the property and depreciate these excess costs. 2011 income tax forms 1040ez Partners and partnerships. 2011 income tax forms 1040ez   The $15,000 limit applies to a partnership and also to each partner in the partnership. 2011 income tax forms 1040ez A partner can allocate the $15,000 limit in any manner among the partner's individually incurred costs and the partner's distributive share of partnership costs. 2011 income tax forms 1040ez If the partner cannot deduct the entire share of partnership costs, the partnership can add any costs not deducted to the basis of the improved property. 2011 income tax forms 1040ez   A partnership must be able to show that any amount added to basis was not deducted by the partner and that it was over a partner's $15,000 limit (as determined by the partner). 2011 income tax forms 1040ez If the partnership cannot show this, it is presumed that the partner was able to deduct the distributive share of the partnership's costs in full. 2011 income tax forms 1040ez Example. 2011 income tax forms 1040ez Emilio Azul's distributive share of ABC partnership's deductible expenses for the removal of architectural barriers was $14,000. 2011 income tax forms 1040ez Emilio had $12,000 of similar expenses in his sole proprietorship. 2011 income tax forms 1040ez He elected to deduct $7,000 of them. 2011 income tax forms 1040ez Emilio allocated the remaining $8,000 of the $15,000 limit to his share of ABC's expenses. 2011 income tax forms 1040ez Emilio can add the excess $5,000 of his own expenses to the basis of the property used in his business. 2011 income tax forms 1040ez Also, if ABC can show that Emilio could not deduct $6,000 ($14,000 – $8,000) of his share of the partnership's expenses because of how Emilio applied the limit, ABC can add $6,000 to the basis of its property. 2011 income tax forms 1040ez Qualification standards. 2011 income tax forms 1040ez   You can deduct your costs as a current expense only if the barrier removal meets the guidelines and requirements issued by the Architectural and Transportation Barriers Compliance Board under the Americans with Disabilities Act (ADA) of 1990. 2011 income tax forms 1040ez You can view the Americans with Disabilities Act at www. 2011 income tax forms 1040ez ada. 2011 income tax forms 1040ez gov/pubs/ada. 2011 income tax forms 1040ez htm. 2011 income tax forms 1040ez   The following is a list of some architectural barrier removal costs that can be deducted. 2011 income tax forms 1040ez Ground and floor surfaces. 2011 income tax forms 1040ez Walks. 2011 income tax forms 1040ez Parking lots. 2011 income tax forms 1040ez Ramps. 2011 income tax forms 1040ez Entrances. 2011 income tax forms 1040ez Doors and doorways. 2011 income tax forms 1040ez Stairs. 2011 income tax forms 1040ez Floors. 2011 income tax forms 1040ez Toilet rooms. 2011 income tax forms 1040ez Water fountains. 2011 income tax forms 1040ez Public telephones. 2011 income tax forms 1040ez Elevators. 2011 income tax forms 1040ez Controls. 2011 income tax forms 1040ez Signage. 2011 income tax forms 1040ez Alarms. 2011 income tax forms 1040ez Protruding objects. 2011 income tax forms 1040ez Symbols of accessibility. 2011 income tax forms 1040ez You can find the ADA guidelines and requirements for architectural barrier removal at www. 2011 income tax forms 1040ez usdoj. 2011 income tax forms 1040ez gov/crt/ada/reg3a. 2011 income tax forms 1040ez html. 2011 income tax forms 1040ez   The costs for removal of transportation barriers from rail facilities, buses, and rapid and light rail vehicles are deductible. 2011 income tax forms 1040ez You can find the guidelines and requirements for transportation barrier removal at www. 2011 income tax forms 1040ez fta. 2011 income tax forms 1040ez dot. 2011 income tax forms 1040ez gov. 2011 income tax forms 1040ez   Also, you can access the ADA website at www. 2011 income tax forms 1040ez ada. 2011 income tax forms 1040ez gov for additional information. 2011 income tax forms 1040ez Other barrier removals. 2011 income tax forms 1040ez   To be deductible, expenses of removing any barrier not covered by the above standards must meet all three of the following tests. 2011 income tax forms 1040ez The removed barrier must be a substantial barrier to access or use of a facility or public transportation vehicle by persons who have a disability or are elderly. 2011 income tax forms 1040ez The removed barrier must have been a barrier for at least one major group of persons who have a disability or are elderly (such as people who are blind, deaf, or wheelchair users). 2011 income tax forms 1040ez The barrier must be removed without creating any new barrier that significantly impairs access to or use of the facility or vehicle by a major group of persons who have a disability or are elderly. 2011 income tax forms 1040ez How to make the election. 2011 income tax forms 1040ez   If you elect to deduct your costs for removing barriers to the disabled or the elderly, claim the deduction on your income tax return (partnership return for partnerships) for the tax year the expenses were paid or incurred. 2011 income tax forms 1040ez Identify the deduction as a separate item. 2011 income tax forms 1040ez The election applies to all the qualifying costs you have during the year, up to the $15,000 limit. 2011 income tax forms 1040ez If you make this election, you must maintain adequate records to support your deduction. 2011 income tax forms 1040ez   For your election to be valid, you generally must file your return by its due date, including extensions. 2011 income tax forms 1040ez However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2011 income tax forms 1040ez Clearly indicate the election on your amended return and write “Filed pursuant to section 301. 2011 income tax forms 1040ez 9100-2. 2011 income tax forms 1040ez ” File the amended return at the same address you filed the original return. 2011 income tax forms 1040ez Your election is irrevocable after the due date, including extensions, of your return. 2011 income tax forms 1040ez Disabled access credit. 2011 income tax forms 1040ez   If you make your business accessible to persons with disabilities and your business is an eligible small business, you may be able to claim the disabled access credit. 2011 income tax forms 1040ez If you choose to claim the credit, you must reduce the amount you deduct or capitalize by the amount of the credit. 2011 income tax forms 1040ez   For more information, see Form 8826, Disabled Access Credit. 2011 income tax forms 1040ez Film and Television Production Costs Film and television production costs are generally capital expenses. 2011 income tax forms 1040ez However, you can elect to deduct costs paid or incurred for certain productions commencing before January 1, 2014. 2011 income tax forms 1040ez For more information, see section 181 of the Internal Revenue Code and the related Treasury Regulations. 2011 income tax forms 1040ez Prev  Up  Next   Home   More Online Publications
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Understanding your CP180/CP181 Notice

We sent you this notice because your tax return is missing a schedule or form.


What you need to do

  • Read the notice carefully to determine the required schedule or form needed to complete your return.
  • Download the required schedule or form or call 1-800-829-3676.
  • Fill out the Contact Information section of the notice, detach, and send it to us with your completed schedule or form so we receive it by the date indicated on the notice.

You may want to...

  • Review the filing requirements and instructions for the missing schedule or form to determine whether your organization needs to file.
  • Review your records to ensure all applicable schedules and forms were attached when filed.

Answers to Common Questions

What happens if I don't respond by the due date?
If you don't respond by the due date of the notice, your tax and/or credits may be adjusted which may result in a balance due.

Who do I call for assistance?
For assistance with your business return, call 1-800-829-0115 or, for assistance with Form 990-T, call 1-877-829-5500.


Tips for next year

Refer to the instructions for your tax return for required documentation. Attach all required forms and schedules to your tax return when filing.

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.


Understanding your notice

Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

CP180

Notice CP180, Page 1
 

Notice CP180, Page 2
 

CP181

Notice CP181, Page 1
 

Notice CP181, Page 2
 

Page Last Reviewed or Updated: 01-Jul-2013

How to get help

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

The 2011 Income Tax Forms 1040ez

2011 income tax forms 1040ez Listed Property Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Listed Property DefinedPassenger Automobile Defined Dwelling Unit Other Property Used for Transportation Computers and Related Peripheral Equipment Predominant Use TestMeeting the Predominant Use Test Qualified Business Use Method of Allocating Use Applying the Predominant Use Test Deductions After Recovery Period Leased PropertyLessor Lessee What Records Must Be KeptAdequate Records Reporting Information on Form 4562 Deductions in Later Years Appendix Topics - This chapter discusses: Listed property defined The predominant use test What records must be kept Useful Items - You may want to see: Publication 463 Travel, Entertainment, and Gift Expenses 587 Business Use of Your Home (Including Use by Day-Care Providers) 917 Business Use of a Car 946 How To Depreciate Property Form (and Instructions) 2106–EZ Unreimbursed Employee Business Expenses 2106 Employee Business Expenses 4255 Recapture of Investment Credit 4562 Depreciation and Amortization This chapter discusses some special rules and recordkeeping requirements for listed property. 2011 income tax forms 1040ez For complete coverage of the rules, including the rules concerning passenger automobiles, see Publication 946. 2011 income tax forms 1040ez If listed property is not used predominantly (more than 50%) in a qualified business use as discussed inPredominant Use Test, later, the section 179 deduction is not allowable and the property must be depreciated using the straight line method. 2011 income tax forms 1040ez Listed Property Defined Listed property is any of the following: Any passenger automobile (defined later), Any other property used for transportation, Any property of a type generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video recording equipment), Any computer and related peripheral equipment, defined later, unless it is used only at a regular business establishment and owned or leased by the person operating the establishment. 2011 income tax forms 1040ez A regular business establishment includes a portion of a dwelling unit (defined later), if, and only if, that portion is used both regularly and exclusively for business as discussed in Publication 587. 2011 income tax forms 1040ez Any cellular telephone (or similar telecommunication equipment) placed in service or leased in a tax year beginning after 1989. 2011 income tax forms 1040ez Passenger Automobile Defined A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (at 6,000 pounds or less of gross vehicle weight for trucks and vans). 2011 income tax forms 1040ez It includes any part, component, or other item physically attached to the automobile or usually included in the purchase price of an automobile. 2011 income tax forms 1040ez A passenger automobile does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business, and A vehicle used directly in the trade or business of transporting persons or property for compensation or hire. 2011 income tax forms 1040ez Dwelling Unit A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. 2011 income tax forms 1040ez It does not include a unit in a hotel, motel, inn, or other establishment where more than half the units are used on a transient basis. 2011 income tax forms 1040ez Other Property Used for Transportation Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles for transporting persons or goods. 2011 income tax forms 1040ez Listed property does not include: Any vehicle which, by reason of its design, is not likely to be used more than a minimal amount for personal purposes, such as clearly marked police and fire vehicles, ambulances, or hearses used for those purposes, Any vehicle that is designed to carry cargo and that has a loaded gross vehicle weight over 14,000 pounds, bucket trucks (cherry pickers), cement mixers, combines, cranes and derricks, delivery trucks with seating only for the driver (or only for the driver plus a folding jump seat), dump trucks (including garbage trucks), flatbed trucks, forklifts, qualified moving vans, qualified specialized utility repair trucks, and refrigerated trucks, Any passenger bus used for that purpose with a capacity of at least 20 passengers and school buses, Any tractor or other special purpose farm vehicle, and unmarked vehicles used by law enforcement officers if the use is officially authorized, and Any vehicle, such as a taxicab, if substantially all its use is in the trade or business of providing services to transport persons or property for compensation or hire by unrelated persons. 2011 income tax forms 1040ez Computers and Related Peripheral Equipment A computer is a programmable electronically activated device that: Is capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention, and Consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. 2011 income tax forms 1040ez Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. 2011 income tax forms 1040ez Computer or peripheral equipment does not include: Any equipment which is an integral part of property which is not a computer, Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment, and Equipment of a kind, used primarily for the user's amusement or entertainment, such as video games. 2011 income tax forms 1040ez Predominant Use Test If “listed property,” defined earlier, placed in service after June 18, 1984, is not used predominantly (more than 50%) in a qualified business use during any tax year: The section 179 deduction on the property is not allowable, and You must depreciate the property using the straight line method. 2011 income tax forms 1040ez Listed property placed in service before 1987. 2011 income tax forms 1040ez   For listed property placed in service before 1987, depreciate the property over the following period: Class of Property Listed Property Recovery Period 3-year property 5 years 5-year property 12 years 10-year property 25 years 18-year real property 40 years 19-year real property 40 years If you must use the above recovery periods for listed property not used predominantly in a trade or business, use the percentages from Table 16 titled Listed Property Not Used Predominantly (Other Than 18- or 19-year Real Property), and Table 17 for 18- or 19-year real property, near the end of this publication in the Appendix. 2011 income tax forms 1040ez Listed property placed in service after 1986. 2011 income tax forms 1040ez   For information on listed property placed in service after 1986, see Publication 946. 2011 income tax forms 1040ez Meeting the Predominant Use Test Listed property meets the predominant use test for any tax year if its business use is more than 50% of its total use. 2011 income tax forms 1040ez You must allocate the use of any item of listed property used for more than one purpose during the tax year among its various uses. 2011 income tax forms 1040ez The percentage of investment use of listed property cannot be used as part of the percentage of qualified business use to meet the predominant use test. 2011 income tax forms 1040ez However, the combined total of business and investment use is taken into account to figure your depreciation deduction for the property. 2011 income tax forms 1040ez Note: Property does not stop being predominantly used in a qualified business use because of a transfer at death. 2011 income tax forms 1040ez Example. 2011 income tax forms 1040ez Sarah Bradley uses a home computer 50% of the time to manage her investments. 2011 income tax forms 1040ez She also uses the computer 40% of the time in her part-time consumer research business. 2011 income tax forms 1040ez Sarah's home computer is listed property because it is not used at a regular business establishment. 2011 income tax forms 1040ez Because her business use of the computer does not exceed 50%, the computer is not predominantly used in a qualified business use for the tax year. 2011 income tax forms 1040ez Because she does not meet the predominant use test, she cannot elect a section 179 deduction for this property. 2011 income tax forms 1040ez Her combined rate of business/investment use for determining her depreciation deduction is 90%. 2011 income tax forms 1040ez Qualified Business Use A qualified business use is any use in your trade or business. 2011 income tax forms 1040ez However, it does not include: The use of property held merely to produce income (investment use), The leasing of property to any 5% owner or related person (to the point that the property is used by a 5% owner or person related to the owner or lessee of the property), The use of property as compensation for the performance of services by a 5% owner or related person, or The use of property as compensation for the performance of services by any person (other than a5% owner or related person) unless the value of the use is included in that person's gross income for the use of the property and income tax is withheld on that amount where required. 2011 income tax forms 1040ez See Employees, later. 2011 income tax forms 1040ez 5% owner. 2011 income tax forms 1040ez   A 5% owner of a business, other than a corporation, is any person who owns more than 5% of the capital or profits interest in the business. 2011 income tax forms 1040ez   A 5% owner of a corporation is any person who owns, or is considered to own: More than 5% of the outstanding stock of the corporation, or Stock possessing more than 5% of the total combined voting power of all stock in the corporation. 2011 income tax forms 1040ez Related person. 2011 income tax forms 1040ez   A related person is anyone related to a taxpayer as discussed under Related persons, in chapter 2 under Nonqualifying Property in Publication 946. 2011 income tax forms 1040ez Entertainment Use The use of listed property for entertainment, recreation, or amusement purposes is treated as a qualified business use only to the extent that expenses (other than interest and property tax expenses) for its use are deductible as ordinary and necessary business expenses. 2011 income tax forms 1040ez See Publication 463. 2011 income tax forms 1040ez Leasing or Compensatory Use of Aircraft If at least 25% of the total use of any aircraft during the tax year is for a qualified business use, the leasing or compensatory use of the aircraft by a 5% owner or related person is treated as a qualified business use. 2011 income tax forms 1040ez Commuting The use of a vehicle for commuting is not business use, regardless of whether work is performed during the trip. 2011 income tax forms 1040ez Use of Your Passenger Automobile by Another Person If someone else uses your automobile, that use is not business use unless: That use is directly connected with your business, The value of the use is property reported by you as income to the other person and tax is withheld on the income where required, or The value of the use results in a payment of fair market rent. 2011 income tax forms 1040ez Any payment to you for the use of the automobile is treated as a rent payment for 3). 2011 income tax forms 1040ez Employees Any use by an employee of his or her own listed property (or listed property rented by an employee) in performing services as an employee is not business use unless: The use is for the employer's convenience, and The use is required as a condition of employment. 2011 income tax forms 1040ez Use for the employer's convenience. 2011 income tax forms 1040ez   Whether the use of listed property is for the employer's convenience must be determined from all the facts. 2011 income tax forms 1040ez The use is for the employer's convenience if it is for a substantial business reason of the employer. 2011 income tax forms 1040ez The use of listed property during the employee's regular working hours to carry on the employer's business is generally for the employer's convenience. 2011 income tax forms 1040ez Use required as a condition of employment. 2011 income tax forms 1040ez   Whether the use of listed property is a condition of employment depends on all the facts and circumstances. 2011 income tax forms 1040ez The use of property must be required for the employee to perform duties properly. 2011 income tax forms 1040ez The employer need not explicitly require the employee to use the property. 2011 income tax forms 1040ez A mere statement by the employer that the use of the property is a condition of employment is not sufficient. 2011 income tax forms 1040ez Example 1. 2011 income tax forms 1040ez Virginia Sycamore is employed as a courier with We Deliver which provides local courier services. 2011 income tax forms 1040ez She owns and uses a motorcycle to deliver packages to downtown offices. 2011 income tax forms 1040ez We Deliver explicitly requires all delivery persons to own a small car or motorcycle for use in their employment. 2011 income tax forms 1040ez The company reimburses delivery persons for their costs. 2011 income tax forms 1040ez Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. 2011 income tax forms 1040ez Example 2. 2011 income tax forms 1040ez Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. 2011 income tax forms 1040ez He must travel to these sites on a regular basis. 2011 income tax forms 1040ez Uplift does not furnish an automobile or explicitly require him to use his own automobile. 2011 income tax forms 1040ez However, it reimburses him for any costs he incurs in traveling to the various sites. 2011 income tax forms 1040ez The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. 2011 income tax forms 1040ez Method of Allocating Use For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. 2011 income tax forms 1040ez You determine the percentage of qualified business use by dividing the number of miles the vehicle is driven for business purposes during the year by the total number of miles the vehicle is driven for all purposes (including business miles) during the year. 2011 income tax forms 1040ez For other items of listed property, allocate the property's use on the basis of the most appropriate unit of time. 2011 income tax forms 1040ez For example, you can determine the percentage of business use of a computer by dividing the number of hours the computer is used for business purposes during the year by the total number of hours the computer is used for all purposes (including business hours) during the year. 2011 income tax forms 1040ez Applying the Predominant Use Test You must apply the predominant use test for an item of listed property each year of the recovery period. 2011 income tax forms 1040ez First Recovery Year If any item of listed property is not used predominantly in a qualified business use in the year it is placed in service: The property is not eligible for a section 179 deduction, and The depreciation deduction must be figured using the straight line method. 2011 income tax forms 1040ez Note: The required use of the straight line method for an item of listed property that does not meet the predominant use test is not the same as electing the straight line method. 2011 income tax forms 1040ez It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. 2011 income tax forms 1040ez Years After the First Recovery Year If you use listed property predominantly (more than 50%) in a qualified business use in the tax year you place it in service, but not in a subsequent tax year during the recovery period, the following rules apply: Figure depreciation using the straight line method. 2011 income tax forms 1040ez Do this for each year, beginning with the year you no longer use the property predominantly in a qualified business use, and Figure any excess depreciation on the property and add it to: Your gross income, and The adjusted basis of your property. 2011 income tax forms 1040ez See Recapture of excess depreciation, next. 2011 income tax forms 1040ez Recapture of excess depreciation. 2011 income tax forms 1040ez   You must include any excess depreciation in your gross income for the first tax year the property is not predominantly used in a qualified business use. 2011 income tax forms 1040ez Any excess depreciation must also be added to the adjusted basis of your property. 2011 income tax forms 1040ez Excess depreciation is the excess (if any) of: The amount of depreciation allowable for the property (including any section 179 deduction claimed) for tax years before the first tax year the property was not predominantly used in a qualified business use, over The amount of depreciation that would have been allowable for those years if the property were not used predominantly in a qualified business use for the year it was placed in service. 2011 income tax forms 1040ez This means you figure your depreciation using the percentages fromTable 16 or 17. 2011 income tax forms 1040ez For information on investment credit recapture, see the instructions for Form 4255. 2011 income tax forms 1040ez Deductions After Recovery Period When listed property (other than passenger automobiles) is used for business, investment, and personal purposes, no deduction is ever allowable for the personal use. 2011 income tax forms 1040ez In tax years after the recovery period, you must determine if there is any unrecovered basis remaining before you compute the depreciation deduction for that tax year. 2011 income tax forms 1040ez To make this determination, figure the depreciation for earlier tax years as if your property were used 100% for business or investment purposes, beginning with the first tax year in which some or all use is for business or investment. 2011 income tax forms 1040ez See Car Used 50% or Less for Business in Publication 917. 2011 income tax forms 1040ez Leased Property The limitations on cost recovery deductions apply to the rental of listed property. 2011 income tax forms 1040ez The following discussion covers the rules that apply to the lessor (the owner of the property) and the lessee (the person who rents the property from the owner). 2011 income tax forms 1040ez SeeLeasing a Car in Publication 917 for a discussion of leased passenger automobiles. 2011 income tax forms 1040ez Lessor The limitations on cost recovery generally do not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. 2011 income tax forms 1040ez A person is considered regularly engaged in the business of leasing listed property only if contracts for leasing of listed property are entered into with some frequency over a continuous period of time. 2011 income tax forms 1040ez This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of the person's business in its entirety. 2011 income tax forms 1040ez Occasional or incidental leasing activity is insufficient. 2011 income tax forms 1040ez For example, a person leasing only one passenger automobile during a tax year is not regularly engaged in the business of leasing automobiles. 2011 income tax forms 1040ez An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. 2011 income tax forms 1040ez Lessee A lessee of listed property (other than passenger automobiles), must include an amount in gross income called the inclusion amount for the first tax year the property is not used predominantly in a qualified business use. 2011 income tax forms 1040ez Inclusion amount for property leased before 1987. 2011 income tax forms 1040ez   You determine the inclusion amount for property leased after June 18, 1984 and before 1987 by multiplying the fair market value of the property by both the average business/investment use percentage and the applicable percentage. 2011 income tax forms 1040ez You can find the applicable percentages for listed property that is 5- or 10-year recovery property in Tables 19 or 20 in Appendix A of Publication 946. 2011 income tax forms 1040ez   The lease term for listed property other than 18- or 19-year real property, and residential rental or nonresidential real property, includes options to renew. 2011 income tax forms 1040ez For 18- or 19-year real property and residential rental or nonresidential real property that is listed property, the period of the lease does not include any option to renew at fair market value, determined at the time of renewal. 2011 income tax forms 1040ez You treat two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property as one lease. 2011 income tax forms 1040ez Special rules. 2011 income tax forms 1040ez   The lessee adds the inclusion amount to gross income in the next tax year if: The lease term begins within 9 months before the close of the lessee's tax year, The lessee does not use the property predominantly in a qualified business use during that portion of the tax year, and The lease term continues into the lessee's next tax year. 2011 income tax forms 1040ez The lessee determines the inclusion amount by taking into account the average of the business/investment use for both tax years and the applicable percentage for the tax year the lease term begins. 2011 income tax forms 1040ez   If the lease term is less than one year, the amount included in gross income is the amount that bears the same ratio to the additional inclusion amount as the number of days in the lease term bears to 365. 2011 income tax forms 1040ez Maximum inclusion amount. 2011 income tax forms 1040ez   The inclusion amount cannot be more than the sum of the deductible amounts of rent allocable to the lessee's tax year in which the amount must be included in gross income. 2011 income tax forms 1040ez What Records Must Be Kept You cannot take any depreciation or section 179 deduction for the use of listed property (including passenger automobiles) unless you can prove business/investment use with adequate records or sufficient evidence to support your own statements. 2011 income tax forms 1040ez How long to keep records. 2011 income tax forms 1040ez   For listed property, records must be kept for as long as any excess depreciation can be recaptured (included in income). 2011 income tax forms 1040ez Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. 2011 income tax forms 1040ez It is not necessary to record information in an account book, diary, or similar record if the information is already shown on the receipt. 2011 income tax forms 1040ez However, your records should back up your receipts in an orderly manner. 2011 income tax forms 1040ez Elements of Expenditure or Use The records or other documentary evidence must support: The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses, The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year, The date of the expenditure or use, and The business or investment purpose for the expenditure or use. 2011 income tax forms 1040ez Written documents of your expenditure or use are generally better evidence than oral statements alone. 2011 income tax forms 1040ez A written record prepared at or near the time of the expenditure or use has greater value as proof of the expenditure or use. 2011 income tax forms 1040ez A daily log is not required. 2011 income tax forms 1040ez However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time and backed up by other documents is preferable to a statement prepared later. 2011 income tax forms 1040ez Timeliness The elements of an expenditure or use must be recorded at the time you have full knowledge of the elements. 2011 income tax forms 1040ez An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use is generally considered a timely record if in the regular course of business: The statement is submitted by an employee to the employer, or The statement is submitted by an independent contractor to the client or customer. 2011 income tax forms 1040ez For example, a log maintained on a weekly basis, which accounts for use during the week, will be considered a record made at or near the time of use. 2011 income tax forms 1040ez Business Purpose Supported An adequate record of business purpose must generally be in the form of a written statement. 2011 income tax forms 1040ez However, the amount of backup necessary to establish a business purpose depends on the facts and circumstances of each case. 2011 income tax forms 1040ez A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. 2011 income tax forms 1040ez For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. 2011 income tax forms 1040ez Business Use Supported An adequate record contains enough information on each element of every business or investment use. 2011 income tax forms 1040ez The amount of detail required to support the use depends on the facts and circumstances. 2011 income tax forms 1040ez For example, a taxpayer whose only business use of a truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. 2011 income tax forms 1040ez Although an adequate record generally must be written, a record of the business use of listed property, such as a computer or automobile, can be prepared in a computer memory device using a logging program. 2011 income tax forms 1040ez Separate or Combined Expenditures or Uses Each use by you is normally considered a separate use. 2011 income tax forms 1040ez However, repeated uses can be combined as a single item. 2011 income tax forms 1040ez Each expenditure is recorded as a separate item and not combined with other expenditures. 2011 income tax forms 1040ez If you choose, however, amounts spent for the use of listed property during a tax year, such as for gasoline or automobile repairs, can be combined. 2011 income tax forms 1040ez If these expenses are combined, you do not need to support the business purpose of each expense. 2011 income tax forms 1040ez Instead, you can divide the expenses based on the total business use of the listed property. 2011 income tax forms 1040ez Uses which can be considered part of a single use, such as a round trip or uninterrupted business use, can be accounted for by a single record. 2011 income tax forms 1040ez For example, use of a truck to make deliveries at several locations which begin and end at the business premises and can include a stop at the business in between deliveries can be accounted for by a single record of miles driven. 2011 income tax forms 1040ez Use of a passenger automobile by a salesperson for a business trip away from home over a period of time can be accounted for by a single record of miles traveled. 2011 income tax forms 1040ez Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. 2011 income tax forms 1040ez Confidential Information If any of the information on the elements of an expenditure or use is confidential, it does not need to be in the account book or similar record if it is recorded at or near the time of the expenditure or use. 2011 income tax forms 1040ez It must be kept elsewhere and made available as support to the district director on request. 2011 income tax forms 1040ez Substantial Compliance If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the district director's satisfaction, you can establish this element by any evidence the district director deems adequate. 2011 income tax forms 1040ez If you fail to establish that you have substantially complied with the adequate records requirement for an element of an expenditure or use to the district director's satisfaction, you must establish the element: By your own oral or written statement containing detailed information as to the element, and By other evidence sufficient to establish the element. 2011 income tax forms 1040ez If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. 2011 income tax forms 1040ez If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. 2011 income tax forms 1040ez Sampling You can maintain an adequate record for portions of a tax year and use that record to support your business and investment use for the entire tax year if it can be shown by other evidence that the periods for which an adequate record is maintained are representative of use throughout the year. 2011 income tax forms 1040ez Loss of Records When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. 2011 income tax forms 1040ez Reporting Information on Form 4562 If you claim a deduction for any listed property, you must provide the requested information on page 2, Section B of Form 4562. 2011 income tax forms 1040ez If you claim a deduction for any vehicle, you must answer certain questions onpage 2 of Form 4562 to provide information about the vehicle use. 2011 income tax forms 1040ez Employees. 2011 income tax forms 1040ez   Employees claiming the standard mileage rate or actual expenses (including depreciation) must use Form 2106 instead of Part V of Form 4562. 2011 income tax forms 1040ez Employees claiming the standard mileage rate may be able to use Form 2106–EZ. 2011 income tax forms 1040ez Employer who provides vehicles to employees. 2011 income tax forms 1040ez   An employer who provides vehicles to employees must obtain enough information from those employees to provide the requested information onForm 4562. 2011 income tax forms 1040ez   An employer who provides more than five vehicles to employees need not include any information on his or her tax return. 2011 income tax forms 1040ez Instead, the employer must obtain the information from his or her employees and indicate on his or her return that the information was obtained and is being retained. 2011 income tax forms 1040ez   You do not need to provide the information requested on page 2 of Form 4562 if, as an employer: You can satisfy the requirements of a written policy statement for vehicles either not used for personal purposes, or not used for personal purposes other than commuting, or You treat all vehicle use by employees as personal use. 2011 income tax forms 1040ez See the instructions for Form 4562. 2011 income tax forms 1040ez Deductions in Later Years When listed property is used for business, investment, and personal purposes, no deduction is allowable for its personal use either in the current year or any later tax year. 2011 income tax forms 1040ez In later years, you must determine if there is any remaining unadjusted or unrecovered basis before you compute the depreciation deduction for that tax year. 2011 income tax forms 1040ez In making this determination, figure the depreciation deductions for earlier tax years as if the listed property were used 100% for business or investment purposes in those years, beginning with the first tax year in which some or all of the property use is for business or investment. 2011 income tax forms 1040ez For more information about deductions after the recovery period for automobiles, see Publication 917. 2011 income tax forms 1040ez Appendix The following tables are for use in figuring depreciation deductions under the ACRS system. 2011 income tax forms 1040ez Table 1. 2011 income tax forms 1040ez 15-Year Real Property* (Other Than Low-Inclome Housing) Table 3. 2011 income tax forms 1040ez Low-Income Housing* Table 6 - Table 9 Table 6 - Table 9 Table 10 - Table 13 Table 14 - Table 17 Prev  Up  Next   Home   More Online Publications