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2011 Irs Forms

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2011 Irs Forms

2011 irs forms 10. 2011 irs forms   Installment Sales Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Installment Sale of a Farm Installment MethodWhen to elect out. 2011 irs forms Revoking the election. 2011 irs forms More information. 2011 irs forms Figuring Installment Sale Income Payments Received or Considered Received ExampleSection 1231 gains. 2011 irs forms Summary. 2011 irs forms Introduction An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. 2011 irs forms If you realize a gain on an installment sale, you may be able to report part of your gain when you receive each payment. 2011 irs forms This method of reporting gain is called the installment method. 2011 irs forms You cannot use the installment method to report a loss. 2011 irs forms You can choose to report all of your gain in the year of sale. 2011 irs forms Installment obligation. 2011 irs forms   The buyer's obligation to make future payments to you can be in the form of a deed of trust, note, land contract, mortgage, or other evidence of the buyer's debt to you. 2011 irs forms Topics - This chapter discusses: The general rules that apply to using the installment method Installment sale of a farm Useful Items - You may want to see: Publication 523 Selling Your Home 535 Business Expenses 537 Installment Sales 538 Accounting Periods and Methods 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property 6252 Installment Sale Income See chapter 16 for information about getting publications and forms. 2011 irs forms Installment Sale of a Farm The installment sale of a farm for one overall price under a single contract is not the sale of a single asset. 2011 irs forms It generally includes the sale of real property and personal property reportable on the installment method. 2011 irs forms It may also include the sale of property for which you must maintain an inventory, which cannot be reported on the installment method. 2011 irs forms See Inventory , later. 2011 irs forms The selling price must be allocated to determine the amount received for each class of asset. 2011 irs forms The tax treatment of the gain or loss on the sale of each class of assets is determined by its classification as a capital asset, as property used in the business, or as property held for sale and by the length of time the asset was held. 2011 irs forms (See chapter 8 for a discussion of capital assets and chapter 9 for a discussion of property used in the business. 2011 irs forms ) Separate computations must be made to figure the gain or loss for each class of asset sold. 2011 irs forms See Sale of a Farm in chapter 8. 2011 irs forms If you report the sale of property on the installment method, any depreciation recapture under section 1245 or 1250 of the Internal Revenue Code is generally taxable as ordinary income in the year of sale. 2011 irs forms See Depreciation recapture , later. 2011 irs forms This applies even if no payments are received in that year. 2011 irs forms Installment Method An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. 2011 irs forms A farmer who is not required to maintain an inventory can use the installment method to report gain from the sale of property used or produced in farming. 2011 irs forms See Inventory , later, for information on the sale of farm property where inventory items are included in the assets sold. 2011 irs forms If a sale qualifies as an installment sale, the gain must be reported under the installment method unless you elect out of using the installment method. 2011 irs forms Electing out of the installment method. 2011 irs forms   If you elect not to use the installment method, you generally report the entire gain in the year of sale, even though you do not receive all the sale proceeds in that year. 2011 irs forms   To make this election, do not report your sale on Form 6252. 2011 irs forms Instead, report it on Schedule D (Form 1040), Form 4797, or both. 2011 irs forms When to elect out. 2011 irs forms   Make this election by the due date, including extensions, for filing your tax return for the year the sale takes place. 2011 irs forms   However, if you timely file your tax return for the year the sale takes place without making the election, you still can make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2011 irs forms Write “Filed pursuant to section 301. 2011 irs forms 9100-2” at the top of the amended return and file it where the original return was filed. 2011 irs forms Revoking the election. 2011 irs forms   Once made, the election can be revoked only with IRS approval. 2011 irs forms A revocation is retroactive. 2011 irs forms More information. 2011 irs forms   See Electing Out of the Installment Method in Publication 537 for more information. 2011 irs forms Inventory. 2011 irs forms   The sale of farm inventory items cannot be reported on the installment method. 2011 irs forms All gain or loss on their sale must be reported in the year of sale, even if you receive payment in later years. 2011 irs forms   If inventory items are included in an installment sale, you may have an agreement stating which payments are for inventory and which are for the other assets being sold. 2011 irs forms If you do not, each payment must be allocated between the inventory and the other assets sold. 2011 irs forms Sale at a loss. 2011 irs forms   If your sale results in a loss, you cannot use the installment method. 2011 irs forms If the loss is on an installment sale of business assets, you can deduct it only in the tax year of sale. 2011 irs forms Figuring Installment Sale Income Each payment on an installment sale usually consists of the following three parts. 2011 irs forms Interest income. 2011 irs forms Return of your adjusted basis in the property. 2011 irs forms Gain on the sale. 2011 irs forms In each year you receive a payment, you must include in income both the interest part and the part that is your gain on the sale. 2011 irs forms You do not include in income the part that is the return of your basis in the property. 2011 irs forms Basis is the amount of your investment in the property for installment sale purposes. 2011 irs forms Interest income. 2011 irs forms   You must report interest as ordinary income. 2011 irs forms Interest is generally not included in a down payment. 2011 irs forms However, you may have to treat part of each later payment as interest, even if it is not called interest in your agreement with the buyer. 2011 irs forms Interest provided in the agreement is called stated interest. 2011 irs forms If the agreement does not provide for enough stated interest, there may be unstated interest or original issue discount. 2011 irs forms See Unstated interest , later. 2011 irs forms    You must continue to report the interest income on payments you receive in subsequent years as interest income. 2011 irs forms Adjusted basis and installment sale income (gain on sale). 2011 irs forms   After you have determined how much of each payment to treat as interest, you treat the rest of each payment as if it were made up of two parts. 2011 irs forms A tax-free return of your adjusted basis in the property, and Your gain (referred to as “installment sale income” on Form 6252). 2011 irs forms Figuring adjusted basis for installment sale purposes. 2011 irs forms   You can use Worksheet 10-1 to figure your adjusted basis in the property for installment sale purposes. 2011 irs forms When you have completed the worksheet, you will also have determined the gross profit percentage necessary to figure your installment sale income (gain) for this year. 2011 irs forms    Worksheet 10-1. 2011 irs forms Figuring Adjusted Basis and Gross Profit Percentage 1. 2011 irs forms Enter the selling price for the property   2. 2011 irs forms Enter your adjusted basis for the property     3. 2011 irs forms Enter your selling expenses     4. 2011 irs forms Enter any depreciation recapture     5. 2011 irs forms Add lines 2, 3, and 4. 2011 irs forms  This is your adjusted basis  for installment sale purposes   6. 2011 irs forms Subtract line 5 from line 1. 2011 irs forms If zero or less, enter -0-. 2011 irs forms  This is your gross profit     If the amount entered on line 6 is zero, Stop here. 2011 irs forms You cannot use the installment method. 2011 irs forms   7. 2011 irs forms Enter the contract price for the property   8. 2011 irs forms Divide line 6 by line 7. 2011 irs forms This is your gross profit percentage   Selling price. 2011 irs forms   The selling price is the total cost of the property to the buyer and includes the following. 2011 irs forms Any money you are to receive. 2011 irs forms The fair market value (FMV) of any property you are to receive (FMV is discussed at Property used as a payment under Payments Received or Considered Received ). 2011 irs forms Any existing mortgage or other debt the buyer pays, assumes, or takes (a note, mortgage, or any other liability, such as a lien, accrued interest, or taxes you owe on the property). 2011 irs forms Any of your selling expenses the buyer pays. 2011 irs forms Do not include stated interest, unstated interest, any amount recomputed or recharacterized as interest, or original issue discount. 2011 irs forms Adjusted basis for installment sale purposes. 2011 irs forms   Your adjusted basis is the total of the following three items. 2011 irs forms Adjusted basis. 2011 irs forms Selling expenses. 2011 irs forms Depreciation recapture. 2011 irs forms Adjusted basis. 2011 irs forms   Basis is your investment in the property for installment sale purposes. 2011 irs forms The way you figure basis depends on how you acquire the property. 2011 irs forms The basis of property you buy is generally its cost. 2011 irs forms The basis of property you inherit, receive as a gift, build yourself, or receive in a tax-free exchange is figured differently. 2011 irs forms   While you own property, various events may change your original basis. 2011 irs forms Some events, such as adding rooms or making permanent improvements, increase basis. 2011 irs forms Others, such as deductible casualty losses or depreciation previously allowed or allowable, decrease basis. 2011 irs forms The result is adjusted basis. 2011 irs forms See chapter 6 and Publication 551, Basis of Assets, for more information. 2011 irs forms Selling expenses. 2011 irs forms   Selling expenses relate to the sale of the property. 2011 irs forms They include commissions, attorney fees, and any other expenses paid on the sale. 2011 irs forms Selling expenses are added to the basis of the sold property. 2011 irs forms Depreciation recapture. 2011 irs forms   If the property you sold was depreciable property, you may need to recapture part of the gain on the sale as ordinary income. 2011 irs forms See Depreciation Recapture in chapter 9 and Depreciation Recapture Income in Publication 537. 2011 irs forms Gross profit. 2011 irs forms   Gross profit is the total gain you report on the installment method. 2011 irs forms   To figure your gross profit, subtract your adjusted basis for installment sale purposes from the selling price. 2011 irs forms If the property you sold was your home, subtract from the gross profit any gain you can exclude. 2011 irs forms Contract price. 2011 irs forms   Contract price equals: The selling price, minus The mortgages, debts, and other liabilities assumed or taken by the buyer, plus The amount by which the mortgages, debts, and other liabilities assumed or taken by the buyer exceed your adjusted basis for installment sale purposes. 2011 irs forms Gross profit percentage. 2011 irs forms   A certain percentage of each payment (after subtracting interest) is reported as installment sale income. 2011 irs forms This percentage is called the gross profit percentage and is figured by dividing your gross profit from the sale by the contract price. 2011 irs forms   The gross profit percentage generally remains the same for each payment you receive. 2011 irs forms However, see the example under Selling price reduced , later, for a situation where the gross profit percentage changes. 2011 irs forms Amount to report as installment sale income. 2011 irs forms   Multiply the payments you receive each year (less interest) by the gross profit percentage. 2011 irs forms The result is your installment sales income for the tax year. 2011 irs forms In certain circumstances, you may be treated as having received a payment, even though you received nothing directly. 2011 irs forms A receipt of property or the assumption of a mortgage on the property sold may be treated as a payment. 2011 irs forms For a detailed discussion, see Payments Received or Considered Received , later. 2011 irs forms Selling price reduced. 2011 irs forms   If the selling price is reduced at a later date, the gross profit on the sale also will change. 2011 irs forms You then must refigure the gross profit percentage for the remaining payments. 2011 irs forms Refigure your gross profit using Worksheet 10-2. 2011 irs forms New Gross Profit Percentage — Selling Price Reduced. 2011 irs forms You will spread any remaining gain over future installments. 2011 irs forms    Worksheet 10-2. 2011 irs forms New Gross Profit Percentage — Selling Price Reduced 1. 2011 irs forms Enter the reduced selling  price for the property   2. 2011 irs forms Enter your adjusted  basis for the  property     3. 2011 irs forms Enter your selling  expenses     4. 2011 irs forms Enter any depreciation  recapture     5. 2011 irs forms Add lines 2, 3, and 4. 2011 irs forms   6. 2011 irs forms Subtract line 5 from line 1. 2011 irs forms  This is your adjusted  gross profit   7. 2011 irs forms Enter any installment sale  income reported in  prior year(s)   8. 2011 irs forms Subtract line 7 from line 6   9. 2011 irs forms Future installments     10. 2011 irs forms Divide line 8 by line 9. 2011 irs forms  This is your new  gross profit percentage*. 2011 irs forms   * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. 2011 irs forms Example. 2011 irs forms In 2011, you sold land with a basis of $40,000 for $100,000. 2011 irs forms Your gross profit was $60,000. 2011 irs forms You received a $20,000 down payment and the buyer's note for $80,000. 2011 irs forms The note provides for monthly payments of $1,953 each, figured at 8% interest, amortized over four years, beginning in January 2012. 2011 irs forms Your gross profit percentage was 60%. 2011 irs forms You received the down payment of $20,000 in 2011 and total payments of $23,436 in 2012, of which $17,675 was principal and $5,761 was interest according to the amortization schedule. 2011 irs forms You reported a gain of $12,000 on the down payment received in 2011 and $10,605 ($17,675 X 60% (. 2011 irs forms 60)) in 2012. 2011 irs forms In January 2013, you and the buyer agreed to reduce the purchase price to $85,000 and payments during 2013, 2014, and 2015 are reduced to $1,483 a month amortized over the remaining three years. 2011 irs forms The new gross profit percentage, 47. 2011 irs forms 32%, is figured in Example — Worksheet 10-2. 2011 irs forms Example — Worksheet 10-2. 2011 irs forms New Gross Profit Percentage — Selling Price Reduced 1. 2011 irs forms Enter the reduced selling  price for the property 85,000 2. 2011 irs forms Enter your adjusted  basis for the  property 40,000   3. 2011 irs forms Enter your selling  expenses -0-   4. 2011 irs forms Enter any depreciation  recapture -0-   5. 2011 irs forms Add lines 2, 3, and 4. 2011 irs forms 40,000 6. 2011 irs forms Subtract line 5 from line 1. 2011 irs forms  This is your adjusted  gross profit 45,000 7. 2011 irs forms Enter any installment sale  income reported in  prior year(s) 22,605 8. 2011 irs forms Subtract line 7 from line 6 22,395 9. 2011 irs forms Future installments   47,325 10. 2011 irs forms Divide line 8 by line 9. 2011 irs forms  This is your new  gross profit percentage*. 2011 irs forms 47. 2011 irs forms 32% * Apply this percentage to all future payments to determine how much of each of those payments is installment sale income. 2011 irs forms You will report installment sale income of $6,878 (47. 2011 irs forms 32% of $14,535) in 2013, $7,449 (47. 2011 irs forms 32% of $15,742) in 2014, and $8,067 (47. 2011 irs forms 32% of $17,048) in 2015. 2011 irs forms Form 6252. 2011 irs forms   Use Form 6252 to report an installment sale in the year it takes place and to report payments received, or considered received because of related party resales, in later years. 2011 irs forms Attach it to your tax return for each year. 2011 irs forms Disposition of Installment Obligation If you are using the installment method and you dispose of the installment obligation, generally you will have a gain or loss to report. 2011 irs forms It is considered gain or loss on the sale of the property for which you received the installment obligation. 2011 irs forms Cancellation. 2011 irs forms   If an installment obligation is canceled or otherwise becomes unenforceable, it is treated as a disposition other than a sale or exchange. 2011 irs forms Your gain or loss is the difference between your basis in the obligation and its fair market value (FMV) at the time you cancel it. 2011 irs forms If the parties are related, the FMV of the obligation is considered to be no less than its full face value. 2011 irs forms Transfer due to death. 2011 irs forms   The transfer of an installment obligation (other than to a buyer) as a result of the death of the seller is not a disposition. 2011 irs forms Any unreported gain from the installment obligation is not treated as gross income to the decedent. 2011 irs forms No income is reported on the decedent's return due to the transfer. 2011 irs forms Whoever receives the installment obligation as a result of the seller's death is taxed on the installment payments the same as the seller would have been had the seller lived to receive the payments. 2011 irs forms   However, if the installment obligation is canceled, becomes unenforceable, or is transferred to the buyer because of the death of the holder of the obligation, it is a disposition. 2011 irs forms The estate must figure its gain or loss on the disposition. 2011 irs forms If the holder and the buyer were related, the FMV of the installment obligation is considered to be no less than its full face value. 2011 irs forms More information. 2011 irs forms   For more information on the disposition of an installment obligation, see Publication 537. 2011 irs forms Sale of depreciable property. 2011 irs forms   You generally cannot report gain from the sale of depreciable property to a related person on the installment method. 2011 irs forms See Sale to a Related Person in Publication 537. 2011 irs forms   You cannot use the installment method to report any depreciation recapture income up to the gain on the sale. 2011 irs forms However, report any gain greater than the recapture income on the installment method. 2011 irs forms   The recapture income reported in the year of sale is included in your installment sale basis to determine your gross profit on the installment sale. 2011 irs forms   Figure your depreciation recapture income (including the section 179 deduction and the section 179A deduction recapture) in Part III of Form 4797. 2011 irs forms Report the depreciation recapture income in Part II of Form 4797 as ordinary income in the year of sale. 2011 irs forms    If you sell depreciable business property, prepare Form 4797 first in order to figure the amount to enter on line 12 of Part I, Form 6252. 2011 irs forms See the Form 6252 instructions for details. 2011 irs forms   For more information on the section 179 deduction, see Section 179 Expense Deduction in chapter 7. 2011 irs forms For more information on depreciation recapture, see Depreciation Recapture in  chapter 9. 2011 irs forms Payments Received or Considered Received You must figure your gain each year on the payments you receive, or are treated as receiving, from an installment sale. 2011 irs forms In certain situations, you are considered to have received a payment, even though the buyer does not pay you directly. 2011 irs forms These situations occur when the buyer assumes or pays any of your debts, such as a loan, or pays any of your expenses, such as a sales commission. 2011 irs forms However, as discussed later, the buyer's assumption of your debt is treated as a recovery of basis, rather than as a payment, in many cases. 2011 irs forms Buyer pays seller's expenses. 2011 irs forms   If the buyer pays any of your expenses related to the sale of your property, it is considered a payment to you in the year of sale. 2011 irs forms Include these expenses in the selling and contract prices when figuring the gross profit percentage. 2011 irs forms Buyer assumes mortgage. 2011 irs forms   If the buyer assumes or pays off your mortgage, or otherwise takes the property subject to the mortgage, the following rules apply. 2011 irs forms Mortgage less than basis. 2011 irs forms   If the buyer assumes a mortgage that is not more than your installment sale basis in the property, it is not considered a payment to you. 2011 irs forms It is considered a recovery of your basis. 2011 irs forms The contract price is the selling price minus the mortgage. 2011 irs forms Example. 2011 irs forms You sell property with an adjusted basis of $19,000. 2011 irs forms You have selling expenses of $1,000. 2011 irs forms The buyer assumes your existing mortgage of $15,000 and agrees to pay you $10,000 (a cash down payment of $2,000 and $2,000 (plus 8% interest) in each of the next 4 years). 2011 irs forms The selling price is $25,000 ($15,000 + $10,000). 2011 irs forms Your gross profit is $5,000 ($25,000 − $20,000 installment sale basis). 2011 irs forms The contract price is $10,000 ($25,000 − $15,000 mortgage). 2011 irs forms Your gross profit percentage is 50% ($5,000 ÷ $10,000). 2011 irs forms You report half of each $2,000 payment received as gain from the sale. 2011 irs forms You also report all interest you receive as ordinary income. 2011 irs forms Mortgage more than basis. 2011 irs forms   If the buyer assumes a mortgage that is more than your installment sale basis in the property, you recover your entire basis. 2011 irs forms The part of the mortgage greater than your basis is treated as a payment received in the year of sale. 2011 irs forms   To figure the contract price, subtract the mortgage from the selling price. 2011 irs forms This is the total amount (other than interest) you will receive directly from the buyer. 2011 irs forms Add to this amount the payment you are considered to have received (the difference between the mortgage and your installment sale basis). 2011 irs forms The contract price is then the same as your gross profit from the sale. 2011 irs forms    If the mortgage the buyer assumes is equal to or more than your installment sale basis, the gross profit percentage always will be 100%. 2011 irs forms Example. 2011 irs forms The selling price for your property is $9,000. 2011 irs forms The buyer will pay you $1,000 annually (plus 8% interest) over the next 3 years and assume an existing mortgage of $6,000. 2011 irs forms Your adjusted basis in the property is $4,400. 2011 irs forms You have selling expenses of $600, for a total installment sale basis of $5,000. 2011 irs forms The part of the mortgage that is more than your installment sale basis is $1,000 ($6,000 − $5,000). 2011 irs forms This amount is included in the contract price and treated as a payment received in the year of sale. 2011 irs forms The contract price is $4,000: Selling price $9,000 Minus: Mortgage (6,000) Amount actually received $3,000 Add difference:   Mortgage $6,000   Minus: Installment sale basis 5,000 1,000 Contract price $4,000   Your gross profit on the sale is also $4,000: Selling price $9,000 Minus: Installment sale basis (5,000) Gross profit $4,000   Your gross profit percentage is 100%. 2011 irs forms Report 100% of each payment (less interest) as gain from the sale. 2011 irs forms Treat the $1,000 difference between the mortgage and your installment sale basis as a payment and report 100% of it as gain in the year of sale. 2011 irs forms Buyer assumes other debts. 2011 irs forms   If the buyer assumes any other debts, such as a loan or back taxes, it may be considered a payment to you in the year of sale. 2011 irs forms   If the buyer assumes the debt instead of paying it off, only part of it may have to be treated as a payment. 2011 irs forms Compare the debt to your installment sale basis in the property being sold. 2011 irs forms If the debt is less than your installment sale basis, none of it is treated as a payment. 2011 irs forms If it is more, only the difference is treated as a payment. 2011 irs forms If the buyer assumes more than one debt, any part of the total that is more than your installment sale basis is considered a payment. 2011 irs forms These rules are the same as the rules discussed earlier under Buyer assumes mortgage . 2011 irs forms However, they apply only to the following types of debt the buyer assumes. 2011 irs forms Those acquired from ownership of the property you are selling, such as a mortgage, lien, overdue interest, or back taxes. 2011 irs forms Those acquired in the ordinary course of your business, such as a balance due for inventory you purchased. 2011 irs forms   If the buyer assumes any other type of debt, such as a personal loan or your legal fees relating to the sale, it is treated as if the buyer had paid off the debt at the time of the sale. 2011 irs forms The value of the assumed debt is then considered a payment to you in the year of sale. 2011 irs forms Property used as a payment. 2011 irs forms   If you receive property rather than money from the buyer, it is still considered a payment in the year received. 2011 irs forms However, see Trading property for like-kind property , later. 2011 irs forms Generally, the amount of the payment is the property's FMV on the date you receive it. 2011 irs forms Exception. 2011 irs forms   If the property the buyer gives you is payable on demand or readily tradable (see examples later), the amount you should consider as payment in the year received is: The FMV of the property on the date you receive it if you use the cash method of accounting, The face amount of the obligation on the date you receive it if you use an accrual method of accounting, or The stated redemption price at maturity less any original issue discount (OID) or, if there is no OID, the stated redemption price at maturity appropriately discounted to reflect total unstated interest. 2011 irs forms See Unstated interest , later. 2011 irs forms Examples. 2011 irs forms If you receive a note from the buyer as payment, and the note stipulates that you can demand payment from the buyer at any time, the note is payable on demand. 2011 irs forms If you receive marketable securities from the buyer as payment, and you can sell the securities on an established securities market (such as the New York Stock Exchange) at any time, the securities are readily tradable. 2011 irs forms In these examples, use the above rules to determine the amount you should consider as payment in the year received. 2011 irs forms Debt not payable on demand. 2011 irs forms   Any evidence of debt you receive from the buyer that is not payable on demand is not considered a payment. 2011 irs forms This is true even if the debt is guaranteed by a third party, including a government agency. 2011 irs forms Fair market value (FMV). 2011 irs forms   This is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having a reasonable knowledge of all the necessary facts. 2011 irs forms Third-party note. 2011 irs forms   If the property the buyer gives you is a third-party note (or other obligation of a third party), you are considered to have received a payment equal to the note's FMV. 2011 irs forms Because the FMV of the note is itself a payment on your installment sale, any payments you later receive from the third party are not considered payments on the sale. 2011 irs forms The excess of the note's face value over its FMV is interest. 2011 irs forms Exclude this interest in determining the selling price of the property. 2011 irs forms However, see Exception under Property used as a payment , earlier. 2011 irs forms Example. 2011 irs forms You sold real estate in an installment sale. 2011 irs forms As part of the down payment, the buyer assigned to you a $50,000, 8% third-party note. 2011 irs forms The FMV of the third-party note at the time of the sale was $30,000. 2011 irs forms This amount, not $50,000, is a payment to you in the year of sale. 2011 irs forms The third-party note had an FMV equal to 60% of its face value ($30,000 ÷ $50,000), so 60% of each principal payment you receive on this note is a nontaxable return of capital. 2011 irs forms The remaining 40% is interest taxed as ordinary income. 2011 irs forms Bond. 2011 irs forms   A bond or other evidence of debt you receive from the buyer that is payable on demand or readily tradable in an established securities market is treated as a payment in the year you receive it. 2011 irs forms For more information on the amount you should treat as a payment, see Exception under Property used as a payment , earlier. 2011 irs forms   If you receive a government or corporate bond for a sale before October 22, 2004, and the bond has interest coupons attached or can be readily traded in an established securities market, you are considered to have received payment equal to the bond's FMV. 2011 irs forms However, see Exception under Property used as a payment , earlier. 2011 irs forms Buyer's note. 2011 irs forms   The buyer's note (unless payable on demand) is not considered payment on the sale. 2011 irs forms However, its full face value is included when figuring the selling price and the contract price. 2011 irs forms Payments you receive on the note are used to figure your gain in the year received. 2011 irs forms Sale to a related person. 2011 irs forms   If you sell depreciable property to a related person and the sale is an installment sale, you may not be able to report the sale using the installment method. 2011 irs forms For information on these rules, see the Instructions for Form 6252 and Sale to a Related Person in Publication 537. 2011 irs forms Trading property for like-kind property. 2011 irs forms   If you trade business or investment property solely for the same kind of property to be held as business or investment property, you can postpone reporting the gain. 2011 irs forms See Like-Kind Exchanges in chapter 8 for a discussion of like-kind property. 2011 irs forms   If, in addition to like-kind property, you receive an installment obligation in the exchange, the following rules apply to determine installment sale income each year. 2011 irs forms The contract price is reduced by the FMV of the like-kind property received in the trade. 2011 irs forms The gross profit is reduced by any gain on the trade that can be postponed. 2011 irs forms Like-kind property received in the trade is not considered payment on the installment obligation. 2011 irs forms Unstated interest. 2011 irs forms   An installment sale contract may provide that each deferred payment on the sale will include interest or that there will be an interest payment in addition to the principal payment. 2011 irs forms Interest provided in the contract is called stated interest. 2011 irs forms   If an installment sale contract does not provide for adequate stated interest, part of the stated principal amount of the contract may be recharacterized as interest. 2011 irs forms If Internal Revenue Code section 483 applies to the contract, this interest is called unstated interest. 2011 irs forms   If Internal Revenue Code section 1274 applies to the contract, this interest is called original issue discount (OID). 2011 irs forms   Generally, if a buyer gives a debt in consideration for personal use property, the unstated interest rules do not apply. 2011 irs forms Therefore, the buyer cannot deduct the unstated interest. 2011 irs forms The seller must report the unstated interest as income. 2011 irs forms Personal-use property is any property in which substantially all of its use by the buyer is not in connection with a trade or business or an investment activity. 2011 irs forms   If the debt is subject to the Internal Revenue Code section 483 rules and is also subject to the below-market loan rules, such as a gift loan, compensation-related loan or corporation-shareholder loan, then both parties are subject to the below-market loan rules rather than the unstated interest rules. 2011 irs forms   Unstated interest reduces the stated selling price of the property and the buyer's basis in the property. 2011 irs forms It increases the seller's interest income and the buyer's interest expense. 2011 irs forms   In general, an installment sale contract provides for adequate stated interest if the stated interest rate (based on an appropriate compounding period) is at least equal to the applicable federal rate (AFR). 2011 irs forms    The AFRs are published monthly in the Internal Revenue Bulletin (IRB). 2011 irs forms You can get this information by contacting an IRS office. 2011 irs forms IRBs are also available at IRS. 2011 irs forms gov. 2011 irs forms More information. 2011 irs forms   For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. 2011 irs forms Example. 2011 irs forms You sell property at a contract price of $6,000 and your gross profit is $1,500. 2011 irs forms Your gross profit percentage is 25% ($1,500 ÷ $6,000). 2011 irs forms After subtracting interest, you report 25% of each payment, including the down payment, as installment sale income from the sale for the tax year you receive the payment. 2011 irs forms The remainder (balance) of each payment is the tax-free return of your adjusted basis. 2011 irs forms Example On January 3, 2013, you sold your farm, including the home, farm land and buildings. 2011 irs forms You received $50,000 down and the buyer's note for $200,000. 2011 irs forms In addition, the buyer assumed an outstanding $50,000 mortgage on the farm land. 2011 irs forms The total selling price was $300,000. 2011 irs forms The note payments of $25,000 each, plus adequate interest, are due every July 1 and January 1, beginning in July 2013. 2011 irs forms Your selling expenses were $15,000. 2011 irs forms Adjusted basis and depreciation. 2011 irs forms   The adjusted basis and depreciation claimed on each asset sold are as follows:   Depreciation Adjusted Asset Claimed Basis Home* -0- $33,743 Farm land -0- 73,610 Buildings $31,500 35,130 * Owned and used as main home for at least 2 of the 5 years prior to the sale Gain on each asset. 2011 irs forms   The following schedule shows the assets included in the sale, each asset's selling price based on its respective value, the selling expense allocated to each asset, the adjusted basis of each asset, and the gain on each asset. 2011 irs forms The selling expense for each asset is 5% of the selling price ($15,000 selling expense ÷ $300,000 selling price). 2011 irs forms   Selling Selling Adjusted     Price Expense Basis Gain Home* $60,000 $3,000 $33,743 $23,257 Farm land  165,000  8,250  73,610  83,140 Buildings 75,000 3,750 35,130 36,120   $300,000 $15,000 $142,483 $142,517 * Owned and used as main home for at least 2 of the 5 years prior to the sale Depreciation recapture. 2011 irs forms   The buildings are section 1250 property. 2011 irs forms There is no depreciation recapture income for them because they were depreciated using the straight line method. 2011 irs forms See chapter 9 for more information on depreciation recapture. 2011 irs forms   Special rules may apply when you sell section 1250 assets depreciated under the straight line method. 2011 irs forms See the Unrecaptured Section 1250 Gain Worksheet in the Instructions for Schedule D (Form 1040). 2011 irs forms See chapter 3 of Publication 544, Sales and Other Dispositions of Assets, for more information on section 1250 assets. 2011 irs forms Installment sale basis and gross profit. 2011 irs forms   The following table shows each asset reported on the installment method, its selling price, installment sale basis, and gross profit. 2011 irs forms     Installment     Selling Sale Gross   Price Basis Profit Farm land $165,000 $73,610 $83,140 Buildings 75,000 35,130 36,120   $240,000 $108,740 $119,260 Section 1231 gains. 2011 irs forms   The gain on the farm land and buildings is reported as section 1231 gains. 2011 irs forms See Section 1231 Gains and Losses in chapter 9. 2011 irs forms Contract price and gross profit percentage. 2011 irs forms   The contract price is $250,000 for the part of the sale reported on the installment method. 2011 irs forms This is the selling price ($300,000) minus the mortgage assumed ($50,000). 2011 irs forms   Gross profit percentage for the sale is 47. 2011 irs forms 70% ($119,260 gross profit ÷ $250,000 contract price). 2011 irs forms The gross profit percentage for each asset is figured as follows:   Percent Farm land ($83,140 ÷ $250,000) 33. 2011 irs forms 256 Buildings ($36,120 ÷ $250,000) 14. 2011 irs forms 448 Total 47. 2011 irs forms 70 Figuring the gain to report on the installment method. 2011 irs forms   One hundred percent (100%) of each payment is reported on the installment method. 2011 irs forms The total amount received on the sale in 2013 is $75,000 ($50,000 down payment + $25,000 payment on July 1). 2011 irs forms The installment sale part of the total payments received in 2013 is also $75,000. 2011 irs forms Figure the gain to report for each asset by multiplying its gross profit percentage times $75,000. 2011 irs forms   Income Farm land—33. 2011 irs forms 256% × $75,000 $24,942 Buildings—14. 2011 irs forms 448% × $75,000 10,836 Total installment income for 2013 $35,778 Reporting the sale. 2011 irs forms   Report the installment sale on Form 6252. 2011 irs forms Then report the amounts from Form 6252 on Form 4797 and Schedule D (Form 1040). 2011 irs forms Attach a separate page to Form 6252 that shows the computations in the example. 2011 irs forms If you sell depreciable business property, prepare Form 4797 first in order to figure the amount to enter on line 12 of Part I, Form 6252. 2011 irs forms Section 1231 gains. 2011 irs forms   The gains on the farm land and buildings are section 1231 gains. 2011 irs forms They may be reported as either capital or ordinary gain depending on the net balance when combined with other section 1231 losses. 2011 irs forms A net 1231 gain is capital gain and a net 1231 loss is an ordinary loss. 2011 irs forms Installment income for years after 2013. 2011 irs forms   You figure installment income for the years after 2013 by applying the same gross profit percentages to the payments you receive each year. 2011 irs forms If you receive $50,000 during the year, the entire $50,000 is considered received on the installment sale (100% × $50,000). 2011 irs forms You realize income as follows:   Income Farm land—33. 2011 irs forms 256% × $50,000 $16,628 Buildings—14. 2011 irs forms 448% × $50,000 7,224 Total installment income $23,852   In this example, no gain ever is recognized from the sale of your home. 2011 irs forms You will combine your section 1231 gains from this sale with section 1231 gains and losses from other sales in each of the later years to determine whether to report them as ordinary or capital gains. 2011 irs forms The interest received with each payment will be included in full as ordinary income. 2011 irs forms Summary. 2011 irs forms   The installment income (rounded to the nearest dollar) from the sale of the farm is reported as follows: Selling price $190,000 Minus: Installment basis (108,740) Gross profit $81,260     Gain reported in 2012 (year of sale) $35,778 Gain reported in 2013:   $50,000 × 47. 2011 irs forms 70% 23,850 Gain reported in 2014:   $50,000 × 47. 2011 irs forms 70% 23,850 Gain reported in 2015:   $50,000 × 47. 2011 irs forms 70% 23,850 Gain reported in 2016:   $25,000 × 47. 2011 irs forms 70% 11,925 Total gain reported $119,253 Prev  Up  Next   Home   More Online Publications
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Credits & Deductions for Individuals

EITC Home Page--It’s easier than ever to find out if you qualify for EITC
If you worked but earned less than $51,567 during 2013, you may qualify for EITC. The Earned Income Tax Credit, sometimes called EIC is a tax credit to help you keep more of what you earned. You must file a return and claim the credit to receive it. Find out more about EITC and links to helpful tools and resources.

The Health Coverage Tax Credit (HCTC) Program
The Health Coverage Tax Credit helps make health insurance more affordable for eligible individuals and their families by paying 72.5% of health insurance premiums. Find out if you're eligible for this tax credit, and how you can receive it.

Adoption Credit
Taxpayers who adopt an eligible child may qualify for the adoption tax credit.

Deducting Business Expenses
Find out what qualifies as a deductible business expense, including depreciation.

Page Last Reviewed or Updated: 05-Mar-2014

The 2011 Irs Forms

2011 irs forms 13. 2011 irs forms   Employment Taxes Table of Contents What's New for 2013 What's New for 2014 Reminders Important Dates for 2014 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Farm Employment Family Employees Crew Leaders Social Security and Medicare TaxesReligious exemption. 2011 irs forms Wage limit. 2011 irs forms Federal Income Tax WithholdingNew Form W-4 for 2014. 2011 irs forms Required Notice to Employees About Earned Income Credit (EIC) Reporting and Paying Social Security, Medicare, and Withheld Federal Income TaxesElectronic deposit requirement. 2011 irs forms Federal Unemployment (FUTA) TaxReporting and Paying FUTA Tax What's New for 2013 Social security and Medicare tax for 2013. 2011 irs forms  The employee tax rate for social security is 6. 2011 irs forms 2%. 2011 irs forms Previously, the employee tax rate for social security was 4. 2011 irs forms 2%. 2011 irs forms The employer tax rate for social security remains unchanged at 6. 2011 irs forms 2%. 2011 irs forms The social security wage base limit is $113,700. 2011 irs forms The Medicare tax rate is 1. 2011 irs forms 45% each for the employee and employer, unchanged from 2012. 2011 irs forms There is no wage base limit for Medicare tax. 2011 irs forms Additional Medicare Tax. 2011 irs forms  In addition to withholding Medicare tax at 1. 2011 irs forms 45%, you must withhold a 0. 2011 irs forms 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 2011 irs forms You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. 2011 irs forms Additional Medicare Tax is only imposed on the employee. 2011 irs forms There is no employer share of Additional Medicare Tax. 2011 irs forms All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold. 2011 irs forms For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E), Employer's Tax Guide. 2011 irs forms For more information on Additional Medicare Tax, visit IRS. 2011 irs forms gov and enter “Additional Medicare Tax” in the search box. 2011 irs forms Leave-based donation programs to aid victims of Hurricane Sandy. 2011 irs forms  Under these programs, employees may donate their vacation, sick, or personal leave in exchange for employer cash payments made before January 1, 2014, to qualified tax-exempt organizations providing relief for the victims of Hurricane Sandy. 2011 irs forms The donated leave will not be included in the income or wages of the employee. 2011 irs forms The employer may deduct the cash payments as business expenses or charitable contributions. 2011 irs forms For more information, see Notice 2012-69, 2012-51 I. 2011 irs forms R. 2011 irs forms B. 2011 irs forms 712, available at www. 2011 irs forms irs. 2011 irs forms gov/irb/2012-51_IRB/ar09. 2011 irs forms html. 2011 irs forms Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans extended. 2011 irs forms  The work opportunity tax credit is now available for eligible unemployed veterans who begin work before January 1, 2014. 2011 irs forms Previously, the credit was available for unemployed veterans who began work on or after November 22, 2011, and before January 1, 2013. 2011 irs forms Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. 2011 irs forms For more information, visit IRS. 2011 irs forms gov and enter “work opportunity credit” in the search box. 2011 irs forms What's New for 2014 Social security and Medicare tax for 2014. 2011 irs forms  The employee and employer tax rates for social security and the maximum amount of wages subject to social security tax for 2014 will be discussed in Publication 51 (Circular A), Agricultural Employer's Tax Guide (For use in 2014). 2011 irs forms The Medicare tax rate for 2014 will also be discussed in Publication 51 (Circular A) (For use in 2014). 2011 irs forms There is no limit on the amount of wages subject to Medicare tax. 2011 irs forms Reminders Additional employment tax information for farmers. 2011 irs forms  See Publication 51 (Circular A) for more detailed guidance on employment taxes. 2011 irs forms For the latest information about employment tax developments impacting farmers, go to www. 2011 irs forms irs. 2011 irs forms gov/pub51. 2011 irs forms Correcting a previously filed Form 943. 2011 irs forms  If you discover an error on a previously filed Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, make the correction using Form 943-X, Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund. 2011 irs forms Form 943-X is filed separately from Form 943. 2011 irs forms For more information on correcting Form 943, see the Instructions for Form 943-X. 2011 irs forms Federal tax deposits must be made by electronic funds transfer. 2011 irs forms  You must use electronic funds transfer to make all federal tax deposits. 2011 irs forms Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). 2011 irs forms If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. 2011 irs forms Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 2011 irs forms EFTPS is a free service provided by the Department of Treasury. 2011 irs forms Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 2011 irs forms For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). 2011 irs forms To get more information about EFTPS or to enroll in EFTPS, visit www. 2011 irs forms eftps. 2011 irs forms gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). 2011 irs forms Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. 2011 irs forms Important Dates for 2014 You should take the action indicated by the dates listed. 2011 irs forms See By February 15 and On February 16 for Form W-4, Employee's Withholding Allowance Certificate, information. 2011 irs forms Due dates for deposits of withheld federal income taxes, social security taxes, and Medicare taxes are not listed here. 2011 irs forms For these dates, see Publication 509, Tax Calendars (For use in 2014). 2011 irs forms Note. 2011 irs forms  If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. 2011 irs forms A statewide legal holiday delays a filing or furnishing due date only if the IRS office where you are required to file a return or furnish a form is located in that state. 2011 irs forms For any due date, you will meet the “file” or “furnish” date requirement if the envelope containing the tax return or form is properly addressed, contains sufficient postage, and is postmarked by the U. 2011 irs forms S. 2011 irs forms Postal Service by the due date, or sent by an IRS-designated delivery service by the due date. 2011 irs forms See Private delivery services in Publication 51 (Circular A). 2011 irs forms Federal tax deposits can only be made by electronic funds transfer and are governed by legal holidays in the District of Columbia. 2011 irs forms Statewide holidays no longer apply. 2011 irs forms For a list of legal holidays that delay the due date of a federal tax deposit, see section 7 of Publication 51 (Circular A). 2011 irs forms Fiscal year taxpayers. 2011 irs forms  The due dates listed below apply whether you use a calendar or a fiscal year. 2011 irs forms By January 31. 2011 irs forms   File Form 943 with the IRS. 2011 irs forms If you deposited all Form 943 taxes when due, you have 10 additional days to file. 2011 irs forms Furnish each employee with a completed Form W-2, Wage and Tax Statement. 2011 irs forms Furnish each recipient to whom you paid $600 or more in nonemployee compensation with a completed Form 1099 (for example, Form 1099-MISC). 2011 irs forms File Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, with the IRS. 2011 irs forms If you deposited all the FUTA tax when due, you have 10 additional days to file. 2011 irs forms File Form 945, Annual Return of Withheld Federal Income Tax, with the IRS to report any nonpayroll income tax withheld during 2013. 2011 irs forms If you deposited all Form 945 taxes when due, you have 10 additional days to file. 2011 irs forms By February 15. 2011 irs forms  Ask for a new Form W-4 or Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, from each employee who claimed exemption from federal income tax withholding last year. 2011 irs forms On February 16. 2011 irs forms  Any Form W-4 claiming exemption from withholding for the previous year has now expired. 2011 irs forms Begin withholding for any employee who previously claimed exemption from withholding but has not given you a new Form W-4 for the current year. 2011 irs forms If the employee does not give you a new Form W-4, withhold taxes based on the last valid Form W-4 you have for the employee that does not claim exemption from withholding or, if one does not exist, as if he or she is single with zero withholding allowances. 2011 irs forms If the employee furnishes a new Form W-4 claiming exemption from withholding after February 15, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. 2011 irs forms By February 28. 2011 irs forms   File paper Forms 1099 and 1096. 2011 irs forms File Copy A of all paper Forms 1099 with Form 1096, Annual Summary and Transmittal of U. 2011 irs forms S. 2011 irs forms Information Returns, with the IRS. 2011 irs forms For electronically filed returns, see By March 31 below. 2011 irs forms File paper Forms W-2 and W-3. 2011 irs forms File Copy A of all paper Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration (SSA). 2011 irs forms For electronically filed returns, see By March 31 below. 2011 irs forms By March 31. 2011 irs forms   File electronic Forms W-2 and 1099. 2011 irs forms File electronic Forms W-2 with the SSA and Forms 1099 with the IRS. 2011 irs forms For more information on reporting Form W-2 information to the SSA electronically, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. 2011 irs forms socialsecurity. 2011 irs forms gov/employer. 2011 irs forms For information on filing information returns electronically with the IRS, see Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically. 2011 irs forms By April 30, July 31, October 31, and January 31. 2011 irs forms   Deposit FUTA taxes. 2011 irs forms Deposit FUTA tax due if it is more than $500. 2011 irs forms Before December 1. 2011 irs forms  Remind employees to submit a new Form W-4 if their withholding allowances have changed or will change for the next year. 2011 irs forms Introduction You are generally required to withhold federal income tax from the wages of your employees. 2011 irs forms You may also be subject to social security and Medicare taxes under the Federal Insurance Contributions Act (FICA) and federal unemployment tax under the Federal Unemployment Tax Act (FUTA). 2011 irs forms You must also withhold Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 2011 irs forms This chapter includes information about these taxes. 2011 irs forms You must also pay self-employment tax on your net earnings from farming. 2011 irs forms See chapter 12 for information on self-employment tax. 2011 irs forms Topics - This chapter discusses: Farm employment, Family employees, Crew leaders, Social security and Medicare taxes, Additional Medicare Tax withholding, Federal income tax withholding, Reporting and paying social security, Medicare, and withheld federal income taxes, and FUTA tax. 2011 irs forms Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits 51 (Circular A), Agricultural Employer's Tax Guide 926 Household Employer's Tax Guide Form (and Instructions) W-2 Wage and Tax Statement W-4 Employee's Withholding Allowance Certificate W-9 Request for Taxpayer Identification Number and Certification 940 Employer's Annual Federal Unemployment (FUTA) Tax Return 943 Employer's Annual Federal Tax Return for Agricultural Employees 943-X Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund See chapter 16 for information about getting publications and forms. 2011 irs forms Farm Employment In general, you are an employer of farmworkers if your employees do any of the following types of work. 2011 irs forms Raising or harvesting agricultural or horticultural products on a farm, including raising and feeding of livestock. 2011 irs forms Operating, managing, conserving, improving, or maintaining your farm and its tools and equipment. 2011 irs forms Services performed in salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor). 2011 irs forms Handling, processing, or packaging any agricultural or horticultural commodity if you produced more than half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity). 2011 irs forms Work related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. 2011 irs forms For more information, see Publication 51 (Circular A). 2011 irs forms Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. 2011 irs forms This is so even when you give the employee freedom of action. 2011 irs forms What matters is that you have the right to control the details of how the services are performed. 2011 irs forms You are responsible for withholding and paying employment taxes for your employees. 2011 irs forms You are also required to file employment tax returns. 2011 irs forms These requirements do not apply to amounts that you pay to independent contractors. 2011 irs forms See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. 2011 irs forms If you employ a family of workers, each worker subject to your control (not just the head of the family) is an employee. 2011 irs forms Special rules apply to crew leaders. 2011 irs forms See Crew Leaders , later. 2011 irs forms Employer identification number (EIN). 2011 irs forms   If you have employees, you must have an EIN. 2011 irs forms If you do not have an EIN, you may apply for one online. 2011 irs forms Go to IRS. 2011 irs forms gov and click on the Apply for an EIN Online link under Tools. 2011 irs forms You may also apply for an EIN by calling 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). 2011 irs forms The hours of operation for both numbers are Monday–Friday form 7:00 a. 2011 irs forms m. 2011 irs forms –7:00 p. 2011 irs forms m. 2011 irs forms local time (Alaska and Hawaii follow Pacific time). 2011 irs forms You can also fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. 2011 irs forms Employee's social security number (SSN). 2011 irs forms   An employee who does not have an SSN should submit Form SS-5, Application for a Social Security Card, to the Social Security Administration (SSA). 2011 irs forms Form SS-5 is available from any SSA office or by calling 1-800-772-1213 (operates 24 hours per day). 2011 irs forms It is also available from the SSA's website at www. 2011 irs forms socialsecurity. 2011 irs forms gov. 2011 irs forms   The employee must furnish evidence of age, identity, and U. 2011 irs forms S. 2011 irs forms citizenship or lawful immigration status permitting employment with the Form SS-5. 2011 irs forms An employee who is age 18 or older must appear in person with this evidence at an SSA office. 2011 irs forms Form I-9. 2011 irs forms    You must verify that each new employee is legally eligible to work in the United States. 2011 irs forms This includes completing the Form I-9, Employment Eligibility Verification. 2011 irs forms Form I-9 is available from the U. 2011 irs forms S. 2011 irs forms Citizenship and Immigration Services (USCIS) offices or by calling the Bureau of Citizenship and Immigration Services Forms Request Line at 1-800-870-3676. 2011 irs forms Form I-9 is also available from the USCIS website at www. 2011 irs forms uscis. 2011 irs forms gov. 2011 irs forms You can also contact the USCIS at 1-800-375-5283 for more information. 2011 irs forms New hire reporting. 2011 irs forms   You are required to report any new employee to a designated state new hire registry. 2011 irs forms Many states accept a copy of Form W-4 with employer information added. 2011 irs forms Visit the Office of Child Support Enforcement website at www. 2011 irs forms acf. 2011 irs forms hhs. 2011 irs forms gov/programs/cse/newhire for more information. 2011 irs forms Family Employees Generally, the wages you pay to family members who are your employees are subject to employment taxes. 2011 irs forms However, certain exemptions may apply to wages paid to your child, spouse, or parent. 2011 irs forms Exemptions for your child. 2011 irs forms   Payments for the services of your child under age 18 who works for you in your trade or business (including a farm) are not subject to social security and Medicare taxes. 2011 irs forms However, see Nonexempt services of a child or spouse , later. 2011 irs forms Payments for the services of your child under age 21 employed by you in other than a trade or business, such as payments for household services in your home, are also not subject to social security or Medicare taxes. 2011 irs forms Payments for the services of your child under age 21 employed by you, whether or not in your trade or business, are not subject to FUTA tax. 2011 irs forms Although not subject to social security, Medicare, or FUTA tax, the child's wages still may be subject to federal income tax withholding. 2011 irs forms Exemptions for your spouse. 2011 irs forms   Payments for the services of your spouse who works for you in your trade or business are subject to federal income tax withholding and social security and Medicare taxes, but not FUTA tax. 2011 irs forms   Payments for the services of your spouse employed by you in other than a trade or business, such as payments for household services in your home, are not subject to social security, Medicare, or FUTA taxes. 2011 irs forms Nonexempt services of a child or spouse. 2011 irs forms   Payments for the services of your child or spouse are subject to federal income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for any of the following entities. 2011 irs forms A corporation, even if it is controlled by you. 2011 irs forms A partnership, even if you are a partner. 2011 irs forms This does not apply to wages paid to your child if each partner is a parent of the child. 2011 irs forms An estate or trust, even if it is the estate of a deceased parent. 2011 irs forms In these situations, the child or spouse is considered to work for the corporation, partnership, or estate, not you. 2011 irs forms Exemptions for your parent. 2011 irs forms   Payments for the services of your parent employed by you in your trade or business are subject to federal income tax withholding and social security and Medicare taxes. 2011 irs forms Social security and Medicare taxes do not apply to wages paid to your parent for services not in your trade or business, but they do apply to payments for household services in your home if both the following conditions are satisfied. 2011 irs forms You have a child living in your home who is under age 18 or has a physical or mental condition that requires care by an adult for at least 4 continuous weeks in a calendar quarter. 2011 irs forms You are a widow or widower; or divorced and not remarried; or have a spouse in the home who, because of a physical or mental condition, cannot care for your child for at least 4 continuous weeks in the quarter. 2011 irs forms   Wages you pay to your parent are not subject to FUTA tax, regardless of the type of services provided. 2011 irs forms Qualified joint venture. 2011 irs forms   If spouses elect to be treated as a qualified joint venture instead of a partnership, either spouse may report and pay the employment taxes due on the wages paid to employees using the EIN of that spouse's sole proprietorship. 2011 irs forms For more information about qualified joint ventures, see chapter 12. 2011 irs forms Crew Leaders If farmworkers are provided by a crew leader, the crew leader may be the employer of the workers. 2011 irs forms Social security and Medicare taxes. 2011 irs forms   For social security and Medicare tax purposes, the crew leader is the employer of the workers if both of the following requirements are met. 2011 irs forms The crew leader pays (either on his or her own behalf or on behalf of the farmer) the workers for their farm labor. 2011 irs forms The crew leader has not entered into a written agreement with the farmer under which the crew leader is designated as an employee of the farmer. 2011 irs forms Federal income tax withholding. 2011 irs forms   If the crew leader is the employer for social security and Medicare tax purposes, the crew leader is the employer for federal income tax withholding purposes. 2011 irs forms Federal unemployment (FUTA) tax. 2011 irs forms   For FUTA tax purposes, the crew leader is the employer of the workers if, in addition to the earlier requirements, either of the following requirements are met. 2011 irs forms The crew leader is registered under the Migrant and Seasonal Agricultural Worker Protection Act. 2011 irs forms Substantially all crew members operate or maintain mechanized equipment provided by the crew leader as part of the service to the farmer. 2011 irs forms   The farmer is the employer of workers furnished by a crew leader in all other situations. 2011 irs forms In addition, the farmer is the employer of workers furnished by a registered crew leader if the workers are the employees of the farmer under the common-law test. 2011 irs forms For example, some farmers employ individuals to recruit farmworkers exclusively for them. 2011 irs forms Although these individuals may be required to register under the Migrant and Seasonal Agricultural Worker Protection Act, the workers are employed directly by the farmer. 2011 irs forms The farmer is the employer in these cases. 2011 irs forms For information about common-law employees, see section 1 of Publication 15-A. 2011 irs forms For information about crew leaders, see the Department of Labor website at www. 2011 irs forms dol. 2011 irs forms gov/whd/regs/compliance/whdfs49. 2011 irs forms htm. 2011 irs forms Social Security and Medicare Taxes All cash wages you pay to an employee during the year for farmwork are subject to social security and Medicare taxes if you meet either of the following tests. 2011 irs forms You pay the employee $150 or more in cash wages (count all wages paid on a time, piecework, or other basis) during the year for farmwork (the $150 test). 2011 irs forms The $150 test applies separately to each farmworker that you employ. 2011 irs forms If you employ a family of workers, each member is treated separately. 2011 irs forms Do not count wages paid by other employers. 2011 irs forms You pay cash and noncash wages of $2,500 or more during the year to all your employees for farmwork (the $2,500 test). 2011 irs forms If the $2,500 test for the group is not met, the $150 test for an employee still applies. 2011 irs forms Exceptions. 2011 irs forms   Annual cash wages of less than $150 you pay to a seasonal farmworker are not subject to social security and Medicare taxes, even if you pay $2,500 or more to all your farmworkers. 2011 irs forms However, these wages count toward the $2,500 test for determining whether other farmworkers' wages are subject to social security and Medicare taxes. 2011 irs forms   A seasonal farmworker is a worker who: Works as a hand-harvest laborer, Is paid piece rates in an operation usually paid on this basis in the region of employment, Commutes daily from his or her permanent home to the farm, and Worked in agriculture less than 13 weeks in the preceding calendar year. 2011 irs forms   See Family Employees , earlier, for certain exemptions from social security and Medicare taxes that apply to your child, spouse, and parent. 2011 irs forms Religious exemption. 2011 irs forms   An exemption from social security and Medicare taxes is available to members of a recognized religious group or division opposed to public insurance. 2011 irs forms This exemption is available only if both the employee and the employer are members of the group or division. 2011 irs forms   For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. 2011 irs forms Cash wages. 2011 irs forms   Only cash wages paid to farmworkers are subject to social security and Medicare taxes. 2011 irs forms Cash wages include checks, money orders, and any kind of money or cash. 2011 irs forms   Only cash wages subject to social security and Medicare taxes are credited to your employees for social security benefit purposes. 2011 irs forms Payments not subject to these taxes, such as commodity wages, do not contribute to your employees' social security coverage. 2011 irs forms For information about social security benefits, contact the SSA at 1-800-772-1213 or online at www. 2011 irs forms socialsecurity. 2011 irs forms gov. 2011 irs forms Noncash wages. 2011 irs forms    Noncash wages include food, lodging, clothing, transportation passes, and other goods and services. 2011 irs forms Noncash wages paid to farmworkers, including commodity wages, are not subject to social security and Medicare taxes. 2011 irs forms However, they are subject to these taxes if the substance of the transaction is a cash payment. 2011 irs forms For information on lodging provided as a condition of employment, see Publication 15-B. 2011 irs forms   Report the value of noncash wages in box 1 of Form W-2 together with cash wages. 2011 irs forms Do not show noncash wages in box 3 or in box 5, (unless the substance of the transaction is a cash payment). 2011 irs forms Tax rates and social security wage limit. 2011 irs forms   For 2013, the employer and the employee will pay the following taxes. 2011 irs forms The employer and employee each pay 6. 2011 irs forms 2% of cash wages for social security tax (old-age, survivors, and disability insurance). 2011 irs forms The employer and employee each pay 1. 2011 irs forms 45% of cash wages for Medicare tax (hospital insurance). 2011 irs forms The employee pays 0. 2011 irs forms 9% of cash wages in excess of $200,000 for Additional Medicare Tax. 2011 irs forms Wage limit. 2011 irs forms   The limit on wages subject to the social security tax for 2013 is $113,700. 2011 irs forms There is no limit on wages subject to the Medicare tax. 2011 irs forms All covered wages are subject to the Medicare tax. 2011 irs forms Additionally, all wages in excess of $200,000 are subject to Additional Medicare Tax withholding. 2011 irs forms Paying employee's share. 2011 irs forms   If you would rather pay the employee's share of social security and Medicare taxes without deducting it from his or her wages, you may do so. 2011 irs forms It is additional income to the employee. 2011 irs forms You must include it in box 1 of the employee's Form W-2, but do not count it as social security and Medicare wages (boxes 3 and 5 on Form W-2) or as wages for federal unemployment (FUTA) tax purposes. 2011 irs forms Example. 2011 irs forms Jane operates a small family fruit farm. 2011 irs forms She employs day laborers in the picking season to enable her to timely get her crop to market. 2011 irs forms She does not deduct the employees' share of social security and Medicare taxes from their pay; instead, she pays it on their behalf. 2011 irs forms When her accountant, Susan, prepares the employees' Forms W-2, she adds each employee's share of social security and Medicare taxes paid by Jane to the employee's wage income (box 1 of Form W-2), but does not include it in box 3 (social security wages) or box 5 (Medicare wages and tips). 2011 irs forms For 2013, Jane paid Mary $1,000 during the year. 2011 irs forms Susan enters $1,076. 2011 irs forms 50 in box 1 of Mary's Form W-2 ($1,000 wages plus $76. 2011 irs forms 50 social security and Medicare taxes paid for Mary). 2011 irs forms She enters $1,000 in boxes 3 and 5 of Mary's Form W-2. 2011 irs forms Additional Medicare Tax. 2011 irs forms   In addition to withholding Medicare tax at 1. 2011 irs forms 45%, you must withhold a 0. 2011 irs forms 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 2011 irs forms You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. 2011 irs forms Additional Medicare Tax is only imposed on the employee. 2011 irs forms There is no employer share of Additional Medicare Tax. 2011 irs forms All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold. 2011 irs forms   For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E). 2011 irs forms For more information on Additional Medicare Tax, visit IRS. 2011 irs forms gov and enter “Additional Medicare Tax” in the search box. 2011 irs forms Federal Income Tax Withholding If the cash wages you pay to farmworkers are subject to social security and Medicare taxes, they are also subject to federal income tax withholding. 2011 irs forms Although noncash wages are subject to federal income tax, withhold income tax only if you and the employee agree to do so. 2011 irs forms The amount to withhold is figured on gross wages without taking out social security and Medicare taxes, union dues, insurance, etc. 2011 irs forms Form W-4. 2011 irs forms   Generally, the amount of federal income tax you withhold is based on the employee's marital status and withholding allowances claimed on the employee's Form W-4. 2011 irs forms In general, an employee can claim withholding allowances on Form W-4 equal to the number of exemptions the employee will be entitled to claim on his or her tax return. 2011 irs forms An employee may also be able to claim a special withholding allowance and allowances for estimated deductions and credits. 2011 irs forms   Do not withhold federal income tax from the wages of an employee who, by filing Form W-4, certifies that he or she had no federal income tax liability last year and anticipates no liability for the current year. 2011 irs forms   You should give each new employee a Form W-4 as soon as you hire the employee. 2011 irs forms For Spanish-speaking employees, you may use Formulario W-4(SP) which is the Spanish translation of Form W-4. 2011 irs forms Have the employee complete and return the form to you before the first payday. 2011 irs forms If the employee does not return the completed form, you must withhold federal income tax as if the employee is single and claims no withholding allowances. 2011 irs forms New Form W-4 for 2014. 2011 irs forms   You should make the 2014 Form W-4 available to your employees and encourage them to check their income tax withholding for 2014. 2011 irs forms Those employees who owed a large amount of tax or received a large refund for 2013 may want to submit a new Form W-4. 2011 irs forms You cannot accept substitute Forms W-4 developed by employees. 2011 irs forms How to figure withholding. 2011 irs forms   You can use one of several methods to determine the amount to withhold. 2011 irs forms The methods are described in Publication 51 (Circular A), which contains tables showing the correct amount of federal income tax you should withhold. 2011 irs forms Publication 51 (Circular A) also contains additional information about federal income tax withholding. 2011 irs forms Nonemployee compensation. 2011 irs forms   Generally, you do not have to withhold federal income tax on payments for services to individuals who are not your employees. 2011 irs forms However, you may be required to report these payments on Form 1099-MISC, Miscellaneous Income, and to withhold under the backup withholding rules. 2011 irs forms For more information, see the Instructions for Form 1099-MISC. 2011 irs forms Required Notice to Employees About Earned Income Credit (EIC) You must provide notification about EIC to each employee who worked for you at any time during the year and from whom you did not withhold any federal income tax. 2011 irs forms However, you do not have to notify employees who claim exemption from federal income tax withholding on Form W-4. 2011 irs forms You meet the notification requirement by giving each employee any of the following. 2011 irs forms Form W-2, which contains EIC notification on the back of Copy B. 2011 irs forms A substitute Form W-2 with the exact EIC wording shown on the back of copy B of Form W-2. 2011 irs forms Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC). 2011 irs forms Your own written statement with the exact wording of Notice 797. 2011 irs forms For more information, see Publication 51 (Circular A). 2011 irs forms Reporting and Paying Social Security, Medicare, and Withheld Federal Income Taxes You must withhold federal income, social security, and Medicare taxes required to be withheld from the salaries and wages of your employees. 2011 irs forms You are liable for the payment of these taxes to the federal government whether or not you collect them from your employees. 2011 irs forms If, for example, you withhold less than the correct tax from an employee's wages, you are still liable for the full amount. 2011 irs forms You must also pay the employer's share of social security and Medicare taxes. 2011 irs forms There is no employer share of Additional Medicare Tax. 2011 irs forms Form 943. 2011 irs forms   Report withheld federal income tax, social security tax, and Medicare tax on Form 943. 2011 irs forms Your 2013 Form 943 is due by January 31, 2014 (or February 10, 2014, if you made deposits on time in full payment of the taxes due for the year). 2011 irs forms Deposits. 2011 irs forms   Generally, you must deposit both the employer and employee shares of social security and Medicare taxes and federal income tax withheld during the year. 2011 irs forms However, you may make payments with Form 943 instead of depositing them if you accumulate less than a $2,500 tax liability (“Total taxes after adjustments” line on Form 943) during the year and you pay in full with a timely filed return. 2011 irs forms   For more information on deposit rules, see Publication 51 (Circular A). 2011 irs forms Electronic deposit requirement. 2011 irs forms   You must use electronic funds transfer to make all federal tax deposits. 2011 irs forms Generally, electronic funds transfers are made using EFTPS. 2011 irs forms If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. 2011 irs forms Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 2011 irs forms EFTPS is a free service provided by the Department of Treasury. 2011 irs forms Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 2011 irs forms   For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). 2011 irs forms To get more information about EFTPS or to enroll in EFTPS, visit www. 2011 irs forms eftps. 2011 irs forms gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). 2011 irs forms Additional information about EFTPS is also available in Publication 966. 2011 irs forms Form W-2. 2011 irs forms   By January 31, you must furnish each employee a Form W-2 showing total wages for the previous year and total federal income tax, social security tax, and Medicare tax withheld. 2011 irs forms However, if an employee stops working for you and requests the form earlier, you must give it to the employee within 30 days of the later of the following dates. 2011 irs forms The date the employee requests the form. 2011 irs forms The date you make your final payment of wages to the employee. 2011 irs forms Compensation paid to H-2A visa holders. 2011 irs forms   Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2. 2011 irs forms Compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes, and therefore should not be reported as wages subject to social security tax (line 2), Medicare tax (line 4), or Additional Medicare Tax (line 6) on Form 943, and should not be reported as social security wages (box 3) or Medicare wages (box 5) on Form W-2. 2011 irs forms   An employer is not required to withhold federal income tax from compensation it pays to an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. 2011 irs forms In this case, the worker must give the employer a completed Form W-4. 2011 irs forms Federal income tax withheld should be reported on Form 943, line 8, and in box 2 of Form W-2. 2011 irs forms   These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. 2011 irs forms For the rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945. 2011 irs forms Trust fund recovery penalty. 2011 irs forms   If you are responsible for withholding, accounting for, depositing, or paying federal withholding taxes and willfully fail to do so, you can be held liable for a penalty equal to the withheld tax not paid. 2011 irs forms A responsible person can be an officer of a corporation, a partner, a sole proprietor, or an employee of any form of business. 2011 irs forms A trustee or agent with authority over the funds of the business can also be held responsible for the penalty. 2011 irs forms   Willfully means voluntarily, consciously, and intentionally. 2011 irs forms Paying other expenses of the business instead of the taxes due is acting willfully. 2011 irs forms Consequences of treating an employee as an independent contractor. 2011 irs forms   If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker. 2011 irs forms See Publication 15-A for more information. 2011 irs forms Federal Unemployment (FUTA) Tax You must pay FUTA tax if you meet either of the following tests. 2011 irs forms You paid cash wages of $20,000 or more to farmworkers in any calendar quarter during the current or preceding calendar year. 2011 irs forms You employed 10 or more farmworkers for some part of at least 1 day during any 20 or more different calendar weeks during the current or preceding calendar year. 2011 irs forms These rules do not apply to exempt services of your spouse, your parents, or your children under age 21. 2011 irs forms See Family Employees , earlier. 2011 irs forms Alien farmworkers. 2011 irs forms   Wages paid to aliens admitted on a temporary basis to the United States to perform farmwork (also known as “H-2A visa workers”) are exempt from FUTA tax. 2011 irs forms However, include your employment of these workers and the wages you paid them to determine whether you meet either of the above tests. 2011 irs forms Commodity wages. 2011 irs forms   Payments in kind for farm labor are not cash wages. 2011 irs forms Do not count them to figure whether you are subject to FUTA tax or to figure how much tax you owe. 2011 irs forms Tax rate and credit. 2011 irs forms   The gross FUTA tax rate is 6. 2011 irs forms 0% of the first $7,000 cash wages you pay to each employee during the year. 2011 irs forms However, you are given a credit of up to 5. 2011 irs forms 4% of the first $7,000 cash wages you pay to each employee for the state unemployment tax you pay. 2011 irs forms If your state tax rate (experience rate) is less than 5. 2011 irs forms 4%, you may still be allowed the full 5. 2011 irs forms 4% credit. 2011 irs forms   If you do not pay the state tax, you cannot take the credit. 2011 irs forms If you are exempt from state unemployment tax for any reason, the full 6. 2011 irs forms 0% rate applies. 2011 irs forms See the Instructions for Form 940 for additional information. 2011 irs forms More information. 2011 irs forms   For more information on FUTA tax, see Publication 51 (Circular A). 2011 irs forms Reporting and Paying FUTA Tax The FUTA tax is imposed on you as the employer. 2011 irs forms It must not be collected or deducted from the wages of your employees. 2011 irs forms Form 940. 2011 irs forms   Report FUTA tax on Form 940. 2011 irs forms The 2013 Form 940 is due January 31, 2014 (or February 10, 2014, if you timely deposited the full amount of your 2013 FUTA tax). 2011 irs forms Deposits. 2011 irs forms   If at the end of any calendar quarter you owe, but have not yet deposited, more than $500 in FUTA tax for the year, you must make a deposit by the end of the following month. 2011 irs forms If the undeposited tax is $500 or less at the end of a quarter, you do not have to deposit it. 2011 irs forms You can add it to the tax for the next quarter. 2011 irs forms If the total undeposited tax is more than $500 at the end of the next quarter, a deposit will be required. 2011 irs forms If the total undeposited tax at the end of the 4th quarter is $500 or less, you can either make a deposit or pay it with your return by the January 31, 2014, due date. 2011 irs forms Electronic deposit requirement. 2011 irs forms   You must use electronic funds transfer to make all federal tax deposits. 2011 irs forms Generally, electronic funds transfers are made using EFTPS. 2011 irs forms If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. 2011 irs forms Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 2011 irs forms EFTPS is a free service provided by the Department of Treasury. 2011 irs forms Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 2011 irs forms   For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). 2011 irs forms To get more information about EFTPS or to enroll in EFTPS, visit www. 2011 irs forms eftps. 2011 irs forms gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). 2011 irs forms Additional information about EFTPS is also available in Publication 966. 2011 irs forms Prev  Up  Next   Home   More Online Publications