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2012 Tax Forms Ez

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2012 Tax Forms Ez

2012 tax forms ez 4. 2012 tax forms ez   Figuring Depreciation Under MACRS Table of Contents Introduction Useful Items - You may want to see: Which Depreciation System (GDS or ADS) Applies? Which Property Class Applies Under GDS?Rent-to-own dealer. 2012 tax forms ez Rent-to-own contract. 2012 tax forms ez What Is the Placed in Service Date? What Is the Basis for Depreciation? Which Recovery Period Applies?Recovery Periods Under GDS Recovery Periods Under ADS Additions and Improvements Which Convention Applies? Which Depreciation Method Applies?Depreciation Methods for Farm Property Electing a Different Method How Is the Depreciation Deduction Figured?Using the MACRS Percentage Tables Figuring the Deduction Without Using the Tables Figuring the Deduction for Property Acquired in a Nontaxable Exchange Figuring the Deduction for a Short Tax Year How Do You Use General Asset Accounts?Grouping Property Figuring Depreciation for a GAA Disposing of GAA Property Terminating GAA Treatment Electing To Use a GAA When Do You Recapture MACRS Depreciation? Introduction The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. 2012 tax forms ez MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). 2012 tax forms ez Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. 2012 tax forms ez To be sure you can use MACRS to figure depreciation for your property, see What Method Can You Use To Depreciate Your Property in chapter 1. 2012 tax forms ez This chapter explains how to determine which MACRS depreciation system applies to your property. 2012 tax forms ez It also discusses other information you need to know before you can figure depreciation under MACRS. 2012 tax forms ez This information includes the property's recovery class, placed in service date, and basis, as well as the applicable recovery period, convention, and depreciation method. 2012 tax forms ez It explains how to use this information to figure your depreciation deduction and how to use a general asset account to depreciate a group of properties. 2012 tax forms ez Finally, it explains when and how to recapture MACRS depreciation. 2012 tax forms ez Useful Items - You may want to see: Publication 225 Farmer's Tax Guide 463 Travel, Entertainment, Gift, and Car  Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization See chapter 6 for information about getting publications and forms. 2012 tax forms ez Which Depreciation System (GDS or ADS) Applies? Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. 2012 tax forms ez You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. 2012 tax forms ez If you placed your property in service in 2013, complete Part III of Form 4562 to report depreciation using MACRS. 2012 tax forms ez Complete section B of Part III to report depreciation using GDS, and complete section C of Part III to report depreciation using ADS. 2012 tax forms ez If you placed your property in service before 2013 and are required to file Form 4562, report depreciation using either GDS or ADS on line 17 in Part III. 2012 tax forms ez Required use of ADS. 2012 tax forms ez   You must use ADS for the following property. 2012 tax forms ez Listed property used 50% or less in a qualified business use. 2012 tax forms ez See chapter 5 for information on listed property. 2012 tax forms ez Any tangible property used predominantly outside the United States during the year. 2012 tax forms ez Any tax-exempt use property. 2012 tax forms ez Any tax-exempt bond-financed property. 2012 tax forms ez All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect. 2012 tax forms ez Any property imported from a foreign country for which an Executive Order is in effect because the country maintains trade restrictions or engages in other discriminatory acts. 2012 tax forms ez If you are required to use ADS to depreciate your property, you cannot claim any special depreciation allowance (discussed in chapter 3) for the property. 2012 tax forms ez Electing ADS. 2012 tax forms ez   Although your property may qualify for GDS, you can elect to use ADS. 2012 tax forms ez The election generally must cover all property in the same property class that you placed in service during the year. 2012 tax forms ez However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. 2012 tax forms ez Once you make this election, you can never revoke it. 2012 tax forms ez   You make the election by completing line 20 in Part III of Form 4562. 2012 tax forms ez Which Property Class Applies Under GDS? The following is a list of the nine property classifications under GDS and examples of the types of property included in each class. 2012 tax forms ez These property classes are also listed under column (a) in section B, Part III, of Form 4562. 2012 tax forms ez For detailed information on property classes, see Appendix B, Table of Class Lives and Recovery Periods, in this publication. 2012 tax forms ez 3-year property. 2012 tax forms ez Tractor units for over-the-road use. 2012 tax forms ez Any race horse over 2 years old when placed in service. 2012 tax forms ez (All race horses placed in service after December 31, 2008, and before January 1, 2014, are deemed to be 3-year property, regardless of age. 2012 tax forms ez ) Any other horse (other than a race horse) over 12 years old when placed in service. 2012 tax forms ez Qualified rent-to-own property (defined later). 2012 tax forms ez 5-year property. 2012 tax forms ez Automobiles, taxis, buses, and trucks. 2012 tax forms ez Computers and peripheral equipment. 2012 tax forms ez Office machinery (such as typewriters, calculators, and copiers). 2012 tax forms ez Any property used in research and experimentation. 2012 tax forms ez Breeding cattle and dairy cattle. 2012 tax forms ez Appliances, carpets, furniture, etc. 2012 tax forms ez , used in a residential rental real estate activity. 2012 tax forms ez Certain geothermal, solar, and wind energy property. 2012 tax forms ez 7-year property. 2012 tax forms ez Office furniture and fixtures (such as desks, files, and safes). 2012 tax forms ez Agricultural machinery and equipment. 2012 tax forms ez Any property that does not have a class life and has not been designated by law as being in any other class. 2012 tax forms ez Certain motorsports entertainment complex property (defined later) placed in service before January 1, 2014. 2012 tax forms ez Any natural gas gathering line placed in service after April 11, 2005. 2012 tax forms ez See Natural gas gathering line and electric transmission property , later. 2012 tax forms ez 10-year property. 2012 tax forms ez Vessels, barges, tugs, and similar water transportation equipment. 2012 tax forms ez Any single purpose agricultural or horticultural structure. 2012 tax forms ez Any tree or vine bearing fruits or nuts. 2012 tax forms ez Qualified small electric meter and qualified smart electric grid system (defined later) placed in service on or after October 3, 2008. 2012 tax forms ez 15-year property. 2012 tax forms ez Certain improvements made directly to land or added to it (such as shrubbery, fences, roads, sidewalks, and bridges). 2012 tax forms ez Any retail motor fuels outlet (defined later), such as a convenience store. 2012 tax forms ez Any municipal wastewater treatment plant. 2012 tax forms ez Any qualified leasehold improvement property (defined later) placed in service before January 1, 2014. 2012 tax forms ez Any qualified restaurant property (defined later) placed in service before January 1, 2014. 2012 tax forms ez Initial clearing and grading land improvements for gas utility property. 2012 tax forms ez Electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity placed in service after April 11, 2005. 2012 tax forms ez See Natural gas gathering line and electric transmission property , later. 2012 tax forms ez Any natural gas distribution line placed in service after April 11, 2005 and before January 1, 2011. 2012 tax forms ez Any qualified retail improvement property placed in service before January 1, 2014. 2012 tax forms ez 20-year property. 2012 tax forms ez Farm buildings (other than single purpose agricultural or horticultural structures). 2012 tax forms ez Municipal sewers not classified as 25-year property. 2012 tax forms ez Initial clearing and grading land improvements for electric utility transmission and distribution plants. 2012 tax forms ez 25-year property. 2012 tax forms ez This class is water utility property, which is either of the following. 2012 tax forms ez Property that is an integral part of the gathering, treatment, or commercial distribution of water, and that, without regard to this provision, would be 20-year property. 2012 tax forms ez Municipal sewers other than property placed in service under a binding contract in effect at all times since June 9, 1996. 2012 tax forms ez Residential rental property. 2012 tax forms ez This is any building or structure, such as a rental home (including a mobile home), if 80% or more of its gross rental income for the tax year is from dwelling units. 2012 tax forms ez A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. 2012 tax forms ez It does not include a unit in a hotel, motel, or other establishment where more than half the units are used on a transient basis. 2012 tax forms ez If you occupy any part of the building or structure for personal use, its gross rental income includes the fair rental value of the part you occupy. 2012 tax forms ez Nonresidential real property. 2012 tax forms ez This is section 1250 property, such as an office building, store, or warehouse, that is neither residential rental property nor property with a class life of less than 27. 2012 tax forms ez 5 years. 2012 tax forms ez Qualified rent-to-own property. 2012 tax forms ez   Qualified rent-to-own property is property held by a rent-to-own dealer for purposes of being subject to a rent-to-own contract. 2012 tax forms ez It is tangible personal property generally used in the home for personal use. 2012 tax forms ez It includes computers and peripheral equipment, televisions, videocassette recorders, stereos, camcorders, appliances, furniture, washing machines and dryers, refrigerators, and other similar consumer durable property. 2012 tax forms ez Consumer durable property does not include real property, aircraft, boats, motor vehicles, or trailers. 2012 tax forms ez   If some of the property you rent to others under a rent-to-own agreement is of a type that may be used by the renters for either personal or business purposes, you still can treat this property as qualified property as long as it does not represent a significant portion of your leasing property. 2012 tax forms ez However, if this dual-use property does represent a significant portion of your leasing property, you must prove that this property is qualified rent-to-own property. 2012 tax forms ez Rent-to-own dealer. 2012 tax forms ez   You are a rent-to-own dealer if you meet all the following requirements. 2012 tax forms ez You regularly enter into rent-to-own contracts (defined below) in the ordinary course of your business for the use of consumer property. 2012 tax forms ez A substantial portion of these contracts end with the customer returning the property before making all the payments required to transfer ownership. 2012 tax forms ez The property is tangible personal property of a type generally used within the home for personal use. 2012 tax forms ez Rent-to-own contract. 2012 tax forms ez   This is any lease for the use of consumer property between a rent-to-own dealer and a customer who is an individual which— Is titled “Rent-to-Own Agreement,” “Lease Agreement with Ownership Option,” or other similar language. 2012 tax forms ez Provides a beginning date and a maximum period of time, not to exceed 156 weeks or 36 months from the beginning date, for which the contract can be in effect (including renewals or options to extend). 2012 tax forms ez Provides for regular periodic (weekly or monthly) payments that can be either level or decreasing. 2012 tax forms ez If the payments are decreasing, no payment can be less than 40% of the largest payment. 2012 tax forms ez Provides for total payments that generally exceed the normal retail price of the property plus interest. 2012 tax forms ez Provides for total payments that do not exceed $10,000 for each item of property. 2012 tax forms ez Provides that the customer has no legal obligation to make all payments outlined in the contract and that, at the end of each weekly or monthly payment period, the customer can either continue to use the property by making the next payment or return the property in good working order with no further obligations and no entitlement to a return of any prior payments. 2012 tax forms ez Provides that legal title to the property remains with the rent-to-own dealer until the customer makes either all the required payments or the early purchase payments required under the contract to acquire legal title. 2012 tax forms ez Provides that the customer has no right to sell, sublease, mortgage, pawn, pledge, or otherwise dispose of the property until all contract payments have been made. 2012 tax forms ez Motorsports entertainment complex. 2012 tax forms ez   This is a racing track facility permanently situated on land that hosts one or more racing events for automobiles, trucks, or motorcycles during the 36-month period after the first day of the month in which the facility is placed in service. 2012 tax forms ez The events must be open to the public for the price of admission. 2012 tax forms ez Qualified smart electric grid system. 2012 tax forms ez   A qualified smart electric grid system means any smart grid property used as part of a system for electric distribution grid communications, monitoring, and management placed in service after October 3, 2008, by a taxpayer who is a supplier of electrical energy or a provider of electrical energy services. 2012 tax forms ez Smart grid property includes electronics and related equipment that is capable of: Sensing, collecting, and monitoring data of or from all portions of a utility's electric distribution grid, Providing real-time, two-way communications to monitor or to manage the grid, and Providing real-time analysis of an event prediction based on collected data that can be used to provide electric distribution system reliability, quality, and performance. 2012 tax forms ez Retail motor fuels outlet. 2012 tax forms ez   Real property is a retail motor fuels outlet if it is used to a substantial extent in the retail marketing of petroleum or petroleum products (whether or not it is also used to sell food or other convenience items) and meets any one of the following three tests. 2012 tax forms ez It is not larger than 1,400 square feet. 2012 tax forms ez 50% or more of the gross revenues generated from the property are derived from petroleum sales. 2012 tax forms ez 50% or more of the floor space in the property is devoted to petroleum marketing sales. 2012 tax forms ez A retail motor fuels outlet does not include any facility related to petroleum and natural gas trunk pipelines. 2012 tax forms ez Qualified leasehold improvement property. 2012 tax forms ez    Generally, this is any improvement to an interior part of a building (placed in service before January 1, 2014) that is nonresidential real property, provided all of the requirements discussed in chapter 3 under Qualified leasehold improvement property are met. 2012 tax forms ez   In addition, an improvement made by the lessor does not qualify as qualified leasehold improvement property to any subsequent owner unless it is acquired from the original lessor by reason of the lessor's death or in any of the following types of transactions. 2012 tax forms ez A transaction to which section 381(a) applies, A mere change in the form of conducting the trade or business so long as the property is retained in the trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in the trade or business, A like-kind exchange, involuntary conversion, or reacquisition of real property to the extent that the basis in the property represents the carryover basis, or Certain nonrecognition transactions to the extent that your basis in the property is determined by reference to the transferor's or distributor's basis in the property. 2012 tax forms ez Examples include the following. 2012 tax forms ez A complete liquidation of a subsidiary. 2012 tax forms ez A transfer to a corporation controlled by the transferor. 2012 tax forms ez An exchange of property by a corporation solely for stock or securities in another corporation in a reorganization. 2012 tax forms ez Qualified restaurant property. 2012 tax forms ez   Qualified restaurant property is any section 1250 property that is a building placed in service after December 31, 2008, and before January 1, 2014. 2012 tax forms ez Also, more than 50% of the building's square footage must be devoted to preparation of meals and seating for on-premises consumption of prepared meals. 2012 tax forms ez Qualified smart electric meter. 2012 tax forms ez   A qualified smart electric meter is any time-based meter and related communication equipment which is placed in service by a supplier of electric energy or a provider of electric energy services and which is capable of being used by you as part of a system that: Measures and records electricity usage data on a time-differentiated basis in at least 24 separate time segments per day; Provides for the exchange of information between the supplier or provider and the customer's smart electric meter in support of time-based rates or other forms of demand response; Provides data to the supplier or provider so that the supplier or provider can provide energy usage information to customers electronically, and Provides all commercial and residential customers of such supplier or provider with net metering. 2012 tax forms ez Net metering means allowing a customer a credit, if any, as complies with applicable federal and state laws and regulations for providing electricity to the supplier or provider. 2012 tax forms ez Natural gas gathering line and electric transmission property. 2012 tax forms ez   Any natural gas gathering line placed in service after April 11, 2005, is treated as 7-year property, and electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity and any natural gas distribution line placed in service after April 11, 2005, are treated as 15-year property, if the following requirements are met. 2012 tax forms ez The original use of the property must have begun with you after April 11, 2005. 2012 tax forms ez Original use means the first use to which the property is put, whether or not by you. 2012 tax forms ez Therefore, property used by any person before April 12, 2005, is not original use. 2012 tax forms ez Original use includes additional capital expenditures you incurred to recondition or rebuild your property. 2012 tax forms ez However, original use does not include the cost of reconditioned or rebuilt property you acquired. 2012 tax forms ez Property containing used parts will not be treated as reconditioned or rebuilt if the cost of the used parts is not more than 20% of the total cost of the property. 2012 tax forms ez The property must not be placed in service under a binding contract in effect before April 12, 2005. 2012 tax forms ez The property must not be self-constructed property (property you manufacture, construct, or produce for your own use), if you began the manufacture, construction, or production of the property before April 12, 2005. 2012 tax forms ez Property that is manufactured, constructed, or produced for your use by another person under a written binding contract entered into by you or a related party before the manufacture, construction, or production of the property is considered to be manufactured, constructed, or produced by you. 2012 tax forms ez What Is the Placed in Service Date? You begin to claim depreciation when your property is placed in service for either use in a trade or business or the production of income. 2012 tax forms ez The placed in service date for your property is the date the property is ready and available for a specific use. 2012 tax forms ez It is therefore not necessarily the date it is first used. 2012 tax forms ez If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date. 2012 tax forms ez See Placed in Service under When Does Depreciation Begin and End in chapter 1 for examples illustrating when property is placed in service. 2012 tax forms ez What Is the Basis for Depreciation? The basis for depreciation of MACRS property is the property's cost or other basis multiplied by the percentage of business/investment use. 2012 tax forms ez For a discussion of business/investment use, see Partial business or investment use under Property Used in Your Business or Income-Producing Activity in chapter 1 . 2012 tax forms ez Reduce that amount by any credits and deductions allocable to the property. 2012 tax forms ez The following are examples of some credits and deductions that reduce basis. 2012 tax forms ez Any deduction for section 179 property. 2012 tax forms ez Any deduction under section 179B of the Internal Revenue Code for capital costs to comply with Environmental Protection Agency sulfur regulations. 2012 tax forms ez Any deduction under section 179C of the Internal Revenue Code for certain qualified refinery property placed in service after August 8, 2005, and before January 1, 2014. 2012 tax forms ez Any deduction under section 179D of the Internal Revenue Code for certain energy efficient commercial building property placed in service after December 31, 2005, and before January 1, 2014. 2012 tax forms ez Any deduction under section 179E of the Internal Revenue Code for qualified advanced mine safety equipment property placed in service after December 20, 2006, and before January 1, 2014 . 2012 tax forms ez Any deduction for removal of barriers to the disabled and the elderly. 2012 tax forms ez Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. 2012 tax forms ez Any special depreciation allowance. 2012 tax forms ez Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. 2012 tax forms ez For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. 2012 tax forms ez Enter the basis for depreciation under column (c) in Part III of Form 4562. 2012 tax forms ez For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property in chapter 1 . 2012 tax forms ez Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. 2012 tax forms ez It is determined based on the depreciation system (GDS or ADS) used. 2012 tax forms ez Recovery Periods Under GDS Under GDS, property that is not qualified Indian reservation property is depreciated over one of the following recovery periods. 2012 tax forms ez Property Class Recovery Period 3-year property   3 years 1   5-year property   5 years     7-year property   7 years     10-year property   10 years     15-year property   15 years 2   20-year property   20 years     25-year property   25 years 3   Residential rental property   27. 2012 tax forms ez 5 years     Nonresidential real property   39 years 4   15 years for qualified rent-to-own property placed in service before August 6, 1997. 2012 tax forms ez 239 years for property that is a retail motor fuels outlet placed in service before August 20, 1996 (31. 2012 tax forms ez 5 years if placed in service before May 13, 1993), unless you elected to depreciate it over 15 years. 2012 tax forms ez 320 years for property placed in service before June 13, 1996, or under a binding contract in effect before June 10, 1996. 2012 tax forms ez 431. 2012 tax forms ez 5 years for property placed in service before May 13, 1993 (or before January 1, 1994, if the purchase or construction of the property is under a binding contract in effect before May 13, 1993, or if construction began before May 13, 1993). 2012 tax forms ez The GDS recovery periods for property not listed above can be found in Appendix B, Table of Class Lives and Recovery Periods. 2012 tax forms ez Residential rental property and nonresidential real property are defined earlier under Which Depreciation System (GDS or ADS) Applies. 2012 tax forms ez Enter the appropriate recovery period on Form 4562 under column (d) in section B of Part III, unless already shown (for 25-year property, residential rental property, and nonresidential real property). 2012 tax forms ez Office in the home. 2012 tax forms ez   If your home is a personal-use single family residence and you begin to use part of your home as an office, depreciate that part of your home as nonresidential real property over 39 years (31. 2012 tax forms ez 5 years if you began using it for business before May 13, 1993). 2012 tax forms ez However, if your home is an apartment in an apartment building that you own and the building is residential rental property as defined earlier under Which Depreciation System (GDS or ADS) Applies , depreciate the part used as an office as residential rental property over 27. 2012 tax forms ez 5 years. 2012 tax forms ez See Publication 587 for a discussion of the tests you must meet to claim expenses, including depreciation, for the business use of your home. 2012 tax forms ez Home changed to rental use. 2012 tax forms ez   If you begin to rent a home that was your personal home before 1987, you depreciate it as residential rental property over 27. 2012 tax forms ez 5 years. 2012 tax forms ez Indian Reservation Property The recovery periods for qualified property you placed in service on an Indian reservation after 1993 and before 2014 are shorter than those listed earlier. 2012 tax forms ez The following table shows these shorter recovery periods. 2012 tax forms ez Property Class Recovery  Period 3-year property 2 years 5-year property 3 years 7-year property 4 years 10-year property 6 years 15-year property 9 years 20-year property 12 years Nonresidential real property 22 years Nonresidential real property is defined earlier under Which Property Class Applies Under GDS . 2012 tax forms ez Use this chart to find the correct percentage table to use for qualified Indian reservation property. 2012 tax forms ez IF your recovery period is: THEN use the following table in Appendix A: 2 years A-21 3 years A-1, A-2, A-3, A-4, or A-5 4 years A-22 6 years A-23 9 years A-14, A-15, A-16, A-17, or A-18 12 years A-14, A-15, A-16, A-17, or A-18 22 years A-24 Qualified property. 2012 tax forms ez   Property eligible for the shorter recovery periods are 3-, 5-, 7-, 10-, 15-, and 20-year property and nonresidential real property. 2012 tax forms ez You must use this property predominantly in the active conduct of a trade or business within an Indian reservation. 2012 tax forms ez The rental of real property that is located on an Indian reservation is treated as the active conduct of a trade or business within an Indian reservation. 2012 tax forms ez   The following property is not qualified property. 2012 tax forms ez Property used or located outside an Indian reservation on a regular basis, other than qualified infrastructure property. 2012 tax forms ez Property acquired directly or indirectly from a related person. 2012 tax forms ez Property placed in service for purposes of conducting or housing class I, II, or III gaming activities. 2012 tax forms ez These activities are defined in section 4 of the Indian Regulatory Act (25 U. 2012 tax forms ez S. 2012 tax forms ez C. 2012 tax forms ez 2703). 2012 tax forms ez Any property you must depreciate under ADS. 2012 tax forms ez Determine whether property is qualified without regard to the election to use ADS and after applying the special rules for listed property not used predominantly for qualified business use (discussed in chapter 5). 2012 tax forms ez Qualified infrastructure property. 2012 tax forms ez   Item (1) above does not apply to qualified infrastructure property located outside the reservation that is used to connect with qualified infrastructure property within the reservation. 2012 tax forms ez Qualified infrastructure property is property that meets all the following rules. 2012 tax forms ez It is qualified property, as defined earlier, except that it is outside the reservation. 2012 tax forms ez It benefits the tribal infrastructure. 2012 tax forms ez It is available to the general public. 2012 tax forms ez It is placed in service in connection with the active conduct of a trade or business within a reservation. 2012 tax forms ez Infrastructure property includes, but is not limited to, roads, power lines, water systems, railroad spurs, and communications facilities. 2012 tax forms ez Related person. 2012 tax forms ez   For purposes of item (2) above, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 for a description of related persons. 2012 tax forms ez Indian reservation. 2012 tax forms ez   The term Indian reservation means a reservation as defined in section 3(d) of the Indian Financing Act of 1974 (25 U. 2012 tax forms ez S. 2012 tax forms ez C. 2012 tax forms ez 1452(d)) or section 4(10) of the Indian Child Welfare Act of 1978 (25 U. 2012 tax forms ez S. 2012 tax forms ez C. 2012 tax forms ez 1903(10)). 2012 tax forms ez Section 3(d) of the Indian Financing Act of 1974 defines reservation to include former Indian reservations in Oklahoma. 2012 tax forms ez For a definition of the term “former Indian reservations in Oklahoma,” see Notice 98-45 in Internal Revenue Bulletin 1998-35. 2012 tax forms ez Recovery Periods Under ADS The recovery periods for most property generally are longer under ADS than they are under GDS. 2012 tax forms ez The following table shows some of the ADS recovery periods. 2012 tax forms ez Property Recovery  Period Rent-to-own property 4 years Automobiles and light duty trucks 5 years Computers and peripheral equipment 5 years High technology telephone station equipment installed on customer premises 5 years High technology medical equipment 5 years Personal property with no class life 12 years Natural gas gathering lines 14 years Single purpose agricultural and horticultural structures 15 years Any tree or vine bearing fruit or nuts 20 years Initial clearing and grading land  improvements for gas utility property 20 years Initial clearing and grading land  improvements for electric utility  transmission and distribution plants 25 years Electric transmission property used in the transmission at 69 or more kilovolts of electricity 30 years Natural gas distribution lines 35 years Any qualified leasehold improvement property 39 years Any qualified restaurant property 39 years Nonresidential real property 40 years Residential rental property 40 years Section 1245 real property not listed in Appendix B 40 years Railroad grading and tunnel bore 50 years The ADS recovery periods for property not listed above can be found in the tables in Appendix B. 2012 tax forms ez Rent-to-own property, qualified leasehold improvement property, qualified restaurant property, residential rental property, and nonresidential real property are defined earlier under Which Property Class Applies Under GDS . 2012 tax forms ez Tax-exempt use property subject to a lease. 2012 tax forms ez   The ADS recovery period for any property leased under a lease agreement to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership) cannot be less than 125% of the lease term. 2012 tax forms ez Additions and Improvements An addition or improvement you make to depreciable property is treated as separate depreciable property. 2012 tax forms ez See How Do You Treat Repairs and Improvements in chapter 1 for a definition of improvements. 2012 tax forms ez Its property class and recovery period are the same as those that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. 2012 tax forms ez The recovery period begins on the later of the following dates. 2012 tax forms ez The date you place the addition or improvement in service. 2012 tax forms ez The date you place in service the property to which you made the addition or improvement. 2012 tax forms ez If the improvement you make is qualified leasehold improvement property, qualified restaurant property, or qualified retail improvement property, the GDS recovery period is 15 years (39 years under ADS). 2012 tax forms ez Example. 2012 tax forms ez You own a rental home that you have been renting out since 1981. 2012 tax forms ez If you put an addition on the home and place the addition in service this year, you would use MACRS to figure your depreciation deduction for the addition. 2012 tax forms ez Under GDS, the property class for the addition is residential rental property and its recovery period is 27. 2012 tax forms ez 5 years because the home to which the addition is made would be residential rental property if you had placed it in service this year. 2012 tax forms ez Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. 2012 tax forms ez The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. 2012 tax forms ez The mid-month convention. 2012 tax forms ez   Use this convention for nonresidential real property, residential rental property, and any railroad grading or tunnel bore. 2012 tax forms ez   Under this convention, you treat all property placed in service or disposed of during a month as placed in service or disposed of at the midpoint of the month. 2012 tax forms ez This means that a one-half month of depreciation is allowed for the month the property is placed in service or disposed of. 2012 tax forms ez   Your use of the mid-month convention is indicated by the “MM” already shown under column (e) in Part III of Form 4562. 2012 tax forms ez The mid-quarter convention. 2012 tax forms ez   Use this convention if the mid-month convention does not apply and the total depreciable bases of MACRS property you placed in service during the last 3 months of the tax year (excluding nonresidential real property, residential rental property, any railroad grading or tunnel bore, property placed in service and disposed of in the same year, and property that is being depreciated under a method other than MACRS) are more than 40% of the total depreciable bases of all MACRS property you placed in service during the entire year. 2012 tax forms ez   Under this convention, you treat all property placed in service or disposed of during any quarter of the tax year as placed in service or disposed of at the midpoint of that quarter. 2012 tax forms ez This means that 1½ months of depreciation is allowed for the quarter the property is placed in service or disposed of. 2012 tax forms ez   If you use this convention, enter “MQ” under column (e) in Part III of Form 4562. 2012 tax forms ez    For purposes of determining whether the mid-quarter convention applies, the depreciable basis of property you placed in service during the tax year reflects the reduction in basis for amounts expensed under section 179 and the part of the basis of property attributable to personal use. 2012 tax forms ez However, it does not reflect any reduction in basis for any special depreciation allowance. 2012 tax forms ez The half-year convention. 2012 tax forms ez   Use this convention if neither the mid-quarter convention nor the mid-month convention applies. 2012 tax forms ez   Under this convention, you treat all property placed in service or disposed of during a tax year as placed in service or disposed of at the midpoint of the year. 2012 tax forms ez This means that a one-half year of depreciation is allowed for the year the property is placed in service or disposed of. 2012 tax forms ez   If you use this convention, enter “HY” under column (e) in Part III of Form 4562. 2012 tax forms ez Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. 2012 tax forms ez The 200% declining balance method over a GDS recovery period. 2012 tax forms ez The 150% declining balance method over a GDS recovery period. 2012 tax forms ez The straight line method over a GDS recovery period. 2012 tax forms ez The straight line method over an ADS recovery period. 2012 tax forms ez For property placed in service before 1999, you could have elected the 150% declining balance method using the ADS recovery periods for certain property classes. 2012 tax forms ez If you made this election, continue to use the same method and recovery period for that property. 2012 tax forms ez Table 4–1 lists the types of property you can depreciate under each method. 2012 tax forms ez It also gives a brief explanation of the method, including any benefits that may apply. 2012 tax forms ez Depreciation Methods for Farm Property If you place personal property in service in a farming business after 1988, you generally must depreciate it under GDS using the 150% declining balance method unless you are a farmer who must depreciate the property under ADS using the straight line method or you elect to depreciate the property under GDS or ADS using the straight line method. 2012 tax forms ez You can depreciate real property using the straight line method under either GDS or ADS. 2012 tax forms ez Fruit or nut trees and vines. 2012 tax forms ez   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a recovery period of 10 years. 2012 tax forms ez ADS required for some farmers. 2012 tax forms ez   If you elect not to apply the uniform capitalization rules to any plant produced in your farming business, you must use ADS. 2012 tax forms ez You must use ADS for all property you place in service in any year the election is in effect. 2012 tax forms ez See the regulations under section 263A of the Internal Revenue Code for information on the uniform capitalization rules that apply to farm property. 2012 tax forms ez Electing a Different Method As shown in Table 4–1 , you can elect a different method for depreciation for certain types of property. 2012 tax forms ez You must make the election by the due date of the return (including extensions) for the year you placed the property in service. 2012 tax forms ez However, if you timely filed your return for the year 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). 2012 tax forms ez Attach the election to the amended return and write “Filed pursuant to section 301. 2012 tax forms ez 9100-2” on the election statement. 2012 tax forms ez File the amended return at the same address you filed the original return. 2012 tax forms ez Once you make the election, you cannot change it. 2012 tax forms ez If you elect to use a different method for one item in a property class, you must apply the same method to all property in that class placed in service during the year of the election. 2012 tax forms ez However, you can make the election on a property-by-property basis for nonresidential real and residential rental property. 2012 tax forms ez 150% election. 2012 tax forms ez   Instead of using the 200% declining balance method over the GDS recovery period for nonfarm property in the 3-, 5-, 7-, and 10-year property classes, you can elect to use the 150% declining balance method. 2012 tax forms ez Make the election by entering “150 DB” under column (f) in Part III of Form 4562. 2012 tax forms ez Straight line election. 2012 tax forms ez   Instead of using either the 200% or 150% declining balance methods over the GDS recovery period, you can elect to use the straight line method over the GDS recovery period. 2012 tax forms ez Make the election by entering  “S/L” under column (f) in Part III of Form 4562. 2012 tax forms ez Election of ADS. 2012 tax forms ez   As explained earlier under Which Depreciation System (GDS or ADS) Applies , you can elect to use ADS even though your property may come under GDS. 2012 tax forms ez ADS uses the straight line method of depreciation over fixed ADS recovery periods. 2012 tax forms ez Most ADS recovery periods are listed in Appendix B, or see the table under Recovery Periods Under ADS , earlier. 2012 tax forms ez   Make the election by completing line 20 in Part III of Form 4562. 2012 tax forms ez Farm property. 2012 tax forms ez   Instead of using the 150% declining balance method over a GDS recovery period for property you use in a farming business (other than real property), you can elect to depreciate it using either of the following methods. 2012 tax forms ez The straight line method over a GDS recovery period. 2012 tax forms ez The straight line method over an ADS recovery period. 2012 tax forms ez Table 4-1. 2012 tax forms ez Depreciation Methods Note. 2012 tax forms ez The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. 2012 tax forms ez Method Type of Property Benefit GDS using 200% DB • Nonfarm 3-, 5-, 7-, and 10-year property • Provides a greater deduction during the earlier recovery years • Changes to SL when that method provides an equal or greater deduction GDS using 150% DB • All farm property (except real property) • All 15- and 20-year property (except qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property placed in service before January 1, 2014) • Nonfarm 3-, 5-, 7-, and 10-year property • Provides a greater deduction during the earlier recovery years • Changes to SL when that method provides an equal or greater deduction1 GDS using SL • Nonresidential real property • Qualified leasehold improvement property placed in service before January 1, 2014 • Qualified restaurant property placed in service before January 1, 2014 • Qualified retail improvement property placed in service before January 1, 2014 • Residential rental property • Trees or vines bearing fruit or nuts • Water utility property • All 3-, 5-, 7-, 10-, 15-, and 20-year property2 • Property for which you elected section 168(k)(4) • Provides for equal yearly deductions (except for the first and last years) ADS using SL • Listed property used 50% or less for business • Property used predominantly outside the U. 2012 tax forms ez S. 2012 tax forms ez  • Tax-exempt property • Tax-exempt bond-financed property • Farm property used when an election not to apply the uniform capitalization rules is in effect • Imported property3 • Any property for which you elect to use this method4 • Provides for equal yearly deductions (except for the first and last years) 1The MACRS percentage tables in Appendix A have the switch to the straight line method built into their rates 2See section 168(b)(5) of the Internal Revenue Code. 2012 tax forms ez 3See section 168(g)(6) of the Internal Revenue Code 4See section 168(g)(7) of the Internal Revenue Code How Is the Depreciation Deduction Figured? To figure your depreciation deduction under MACRS, you first determine the depreciation system, property class, placed in service date, basis amount, recovery period, convention, and depreciation method that applies to your property. 2012 tax forms ez Then, you are ready to figure your depreciation deduction. 2012 tax forms ez You can figure it using a percentage table provided by the IRS, or you can figure it yourself without using the table. 2012 tax forms ez Using the MACRS Percentage Tables To help you figure your deduction under MACRS, the IRS has established percentage tables that incorporate the applicable convention and depreciation method. 2012 tax forms ez These percentage tables are in Appendix A near the end of this publication. 2012 tax forms ez Which table to use. 2012 tax forms ez    Appendix A contains the MACRS Percentage Table Guide, which is designed to help you locate the correct percentage table to use for depreciating your property. 2012 tax forms ez The percentage tables immediately follow the guide. 2012 tax forms ez Rules Covering the Use of the Tables The following rules cover the use of the percentage tables. 2012 tax forms ez You must apply the rates in the percentage tables to your property's unadjusted basis. 2012 tax forms ez You cannot use the percentage tables for a short tax year. 2012 tax forms ez See Figuring the Deduction for a Short Tax Year, later, for information on the short tax year rules. 2012 tax forms ez Once you start using the percentage tables for any item of property, you generally must continue to use them for the entire recovery period of the property. 2012 tax forms ez You must stop using the tables if you adjust the basis of the property for any reason other than— Depreciation allowed or allowable, or An addition or improvement to that property that is depreciated as a separate item of property. 2012 tax forms ez Basis adjustments other than those made due to the items listed in (4) include an increase in basis for the recapture of a clean-fuel deduction or credit and a reduction in basis for a casualty loss. 2012 tax forms ez Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. 2012 tax forms ez   If you increase the basis of your property because of the recapture of part or all of a deduction for clean-fuel vehicles or the credit for clean-fuel vehicle refueling property placed in service before January 1, 2006, you cannot continue to use the percentage tables. 2012 tax forms ez For the year of the adjustment and the remaining recovery period, you must figure the depreciation deduction yourself using the property's adjusted basis at the end of the year. 2012 tax forms ez See Figuring the Deduction Without Using the Tables, later. 2012 tax forms ez Basis adjustment due to casualty loss. 2012 tax forms ez   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. 2012 tax forms ez For the year of the adjustment and the remaining recovery period, you must figure the depreciation yourself using the property's adjusted basis at the end of the year. 2012 tax forms ez See Figuring the Deduction Without Using the Tables, later. 2012 tax forms ez Example. 2012 tax forms ez On October 26, 2012, Sandra Elm, a calendar year taxpayer, bought and placed in service in her business a new item of 7-year property. 2012 tax forms ez It cost $39,000 and she elected a section 179 deduction of $24,000. 2012 tax forms ez She also took a special depreciation allowance of $7,500 [50% of $15,000 ($39,000 − $24,000)]. 2012 tax forms ez Her unadjusted basis after the section 179 deduction and special depreciation allowance was $7,500 ($15,000 − $7,500). 2012 tax forms ez She figured her MACRS depreciation deduction using the percentage tables. 2012 tax forms ez For 2012, her MACRS depreciation deduction was $268. 2012 tax forms ez In July 2013, the property was vandalized and Sandra had a deductible casualty loss of $3,000. 2012 tax forms ez She must adjust the property's basis for the casualty loss, so she can no longer use the percentage tables. 2012 tax forms ez Her adjusted basis at the end of 2013, before figuring her 2013 depreciation, is $4,232. 2012 tax forms ez She figures that amount by subtracting the 2012 MACRS depreciation of $268 and the casualty loss of $3,000 from the unadjusted basis of $7,500. 2012 tax forms ez She must now figure her depreciation for 2013 without using the percentage tables. 2012 tax forms ez Figuring the Unadjusted Basis of Your Property You must apply the table rates to your property's unadjusted basis each year of the recovery period. 2012 tax forms ez Unadjusted basis is the same basis amount you would use to figure gain on a sale, but you figure it without reducing your original basis by any MACRS depreciation taken in earlier years. 2012 tax forms ez However, you do reduce your original basis by other amounts, including the following. 2012 tax forms ez Any amortization taken on the property. 2012 tax forms ez Any section 179 deduction claimed. 2012 tax forms ez Any special depreciation allowance taken on the property. 2012 tax forms ez For business property you purchase during the year, the unadjusted basis is its cost minus these and other applicable adjustments. 2012 tax forms ez If you trade property, your unadjusted basis in the property received is the cash paid plus the adjusted basis of the property traded minus these adjustments. 2012 tax forms ez MACRS Worksheet You can use this worksheet to help you figure your depreciation deduction using the percentage tables. 2012 tax forms ez Use a separate worksheet for each item of property. 2012 tax forms ez Then, use the information from this worksheet to prepare Form 4562. 2012 tax forms ez Do not use this worksheet for automobiles. 2012 tax forms ez Use the Depreciation Worksheet for Passenger Automobiles in chapter 5. 2012 tax forms ez MACRS Worksheet Part I   1. 2012 tax forms ez MACRS system (GDS or ADS)   2. 2012 tax forms ez Property class   3. 2012 tax forms ez Date placed in service   4. 2012 tax forms ez Recovery period   5. 2012 tax forms ez Method and convention   6. 2012 tax forms ez Depreciation rate (from tables)   Part II   7. 2012 tax forms ez Cost or other basis* $     8. 2012 tax forms ez Business/investment use   %   9. 2012 tax forms ez Multiply line 7 by line 8   $ 10. 2012 tax forms ez Total claimed for section 179 deduction and other items   $ 11. 2012 tax forms ez Subtract line 10 from line 9. 2012 tax forms ez This is your tentative basis for depreciation   $ 12. 2012 tax forms ez Multiply line 11 by . 2012 tax forms ez 50 if the 50% special depreciation allowance applies. 2012 tax forms ez This is your special depreciation allowance. 2012 tax forms ez Enter -0- if this is not the year you placed the property in service, the property is not qualified property, or you elected not to claim a special allowance   $ 13. 2012 tax forms ez Subtract line 12 from line 11. 2012 tax forms ez This is your basis for depreciation     14. 2012 tax forms ez Depreciation rate (from line 6)     15. 2012 tax forms ez Multiply line 13 by line 14. 2012 tax forms ez This is your MACRS depreciation deduction   $ *If real estate, do not include cost (basis) of land. 2012 tax forms ez The following example shows how to figure your MACRS depreciation deduction using the percentage tables and the MACRS worksheet. 2012 tax forms ez Example. 2012 tax forms ez You bought office furniture (7-year property) for $10,000 and placed it in service on August 11, 2013. 2012 tax forms ez You use the furniture only for business. 2012 tax forms ez This is the only property you placed in service this year. 2012 tax forms ez You did not elect a section 179 deduction and the property is not qualified property for purposes of claiming a special depreciation allowance so your property's unadjusted basis is its cost, $10,000. 2012 tax forms ez You use GDS and the half-year convention to figure your depreciation. 2012 tax forms ez You refer to the MACRS Percentage Table Guide in Appendix A and find that you should use Table A-1. 2012 tax forms ez Multiply your property's unadjusted basis each year by the percentage for 7-year property given in Table A-1. 2012 tax forms ez You figure your depreciation deduction using the MACRS worksheet as follows. 2012 tax forms ez MACRS Worksheet Part I 1. 2012 tax forms ez MACRS system (GDS or ADS) GDS 2. 2012 tax forms ez Property class 7-year 3. 2012 tax forms ez Date placed in service 8/11/13 4. 2012 tax forms ez Recovery period 7-Year 5. 2012 tax forms ez Method and convention 200%DB/Half-Year 6. 2012 tax forms ez Depreciation rate (from tables) . 2012 tax forms ez 1429 Part II 7. 2012 tax forms ez Cost or other basis* $10,000     8. 2012 tax forms ez Business/investment use 100 %   9. 2012 tax forms ez Multiply line 7 by line 8   $10,000 10. 2012 tax forms ez Total claimed for section 179 deduction and other items   -0- 11. 2012 tax forms ez Subtract line 10 from line 9. 2012 tax forms ez This is your tentative basis for depreciation   $10,000 12. 2012 tax forms ez Multiply line 11 by . 2012 tax forms ez 50 if the 50% special depreciation allowance applies. 2012 tax forms ez This is your special depreciation allowance. 2012 tax forms ez Enter -0- if this is not the year you placed the property in service, the property is not qualified property, or you elected not to claim a special allowance   -0- 13. 2012 tax forms ez Subtract line 12 from line 11. 2012 tax forms ez This is your basis for depreciation   $10,000 14. 2012 tax forms ez Depreciation rate (from line 6)   . 2012 tax forms ez 1429 15. 2012 tax forms ez Multiply line 13 by line 14. 2012 tax forms ez This is your MACRS depreciation deduction   $1,429 *If real estate, do not include cost (basis) of land. 2012 tax forms ez If there are no adjustments to the basis of the property other than depreciation, your depreciation deduction for each subsequent year of the recovery period will be as follows. 2012 tax forms ez Year   Basis Percentage Deduction 2014 $ 10,000 24. 2012 tax forms ez 49%   $2,449   2015   10,000 17. 2012 tax forms ez 49   1,749   2016   10,000 12. 2012 tax forms ez 49   1,249   2017   10,000 8. 2012 tax forms ez 93   893   2018   10,000 8. 2012 tax forms ez 92   892   2019   10,000 8. 2012 tax forms ez 93   893   2020   10,000 4. 2012 tax forms ez 46   446   Examples The following examples are provided to show you how to use the percentage tables. 2012 tax forms ez In both examples, assume the following. 2012 tax forms ez You use the property only for business. 2012 tax forms ez You use the calendar year as your tax year. 2012 tax forms ez You use GDS for all the properties. 2012 tax forms ez Example 1. 2012 tax forms ez You bought a building and land for $120,000 and placed it in service on March 8. 2012 tax forms ez The sales contract showed that the building cost $100,000 and the land cost $20,000. 2012 tax forms ez It is nonresidential real property. 2012 tax forms ez The building's unadjusted basis is its original cost, $100,000. 2012 tax forms ez You refer to the MACRS Percentage Table Guide in Appendix A and find that you should use Table A-7a. 2012 tax forms ez March is the third month of your tax year, so multiply the building's unadjusted basis, $100,000, by the percentages for the third month in Table A-7a. 2012 tax forms ez Your depreciation deduction for each of the first 3 years is as follows: Year   Basis Percentage Deduction 1st $ 100,000 2. 2012 tax forms ez 033%   $2,033   2nd   100,000 2. 2012 tax forms ez 564   2,564   3rd   100,000 2. 2012 tax forms ez 564   2,564   Example 2. 2012 tax forms ez During the year, you bought a machine (7-year property) for $4,000, office furniture (7-year property) for $1,000, and a computer (5-year property) for $5,000. 2012 tax forms ez You placed the machine in service in January, the furniture in September, and the computer in October. 2012 tax forms ez You do not elect a section 179 deduction and none of these items is qualified property for purposes of claiming a special depreciation allowance. 2012 tax forms ez You placed property in service during the last 3 months of the year, so you must first determine if you have to use the mid-quarter convention. 2012 tax forms ez The total bases of all property you placed in service during the year is $10,000. 2012 tax forms ez The $5,000 basis of the computer, which you placed in service during the last 3 months (the fourth quarter) of your tax year, is more than 40% of the total bases of all property ($10,000) you placed in service during the year. 2012 tax forms ez Therefore, you must use the mid-quarter convention for all three items. 2012 tax forms ez You refer to the MACRS Percentage Table Guide in Appendix A to determine which table you should use under the mid-quarter convention. 2012 tax forms ez The machine is 7-year property placed in service in the first quarter, so you use Table A-2. 2012 tax forms ez The furniture is 7-year property placed in service in the third quarter, so you use Table A-4. 2012 tax forms ez Finally, because the computer is 5-year property placed in service in the fourth quarter, you use Table A-6. 2012 tax forms ez Knowing what table to use for each property, you figure the depreciation for the first 2 years as follows. 2012 tax forms ez Year Property Basis Percentage Deduction 1st Machine $4,000 25. 2012 tax forms ez 00 $1,000   2nd Machine 4,000 21. 2012 tax forms ez 43 857   1st Furniture 1,000 10. 2012 tax forms ez 71 107   2nd Furniture 1,000 25. 2012 tax forms ez 51 255   1st Computer 5,000 5. 2012 tax forms ez 00 250   2nd Computer 5,000 38. 2012 tax forms ez 00 1,900   Sale or Other Disposition Before the Recovery Period Ends If you sell or otherwise dispose of your property before the end of its recovery period, your depreciation deduction for the year of the disposition will be only part of the depreciation amount for the full year. 2012 tax forms ez You have disposed of your property if you have permanently withdrawn it from use in your business or income-producing activity because of its sale, exchange, retirement, abandonment, involuntary conversion, or destruction. 2012 tax forms ez After you figure the full-year depreciation amount, figure the deductible part using the convention that applies to the property. 2012 tax forms ez Half-year convention used. 2012 tax forms ez   For property for which you used a half-year convention, the depreciation deduction for the year of the disposition is half the depreciation determined for the full year. 2012 tax forms ez Mid-quarter convention used. 2012 tax forms ez   For property for which you used the mid-quarter convention, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by the percentage listed below for the quarter in which you disposed of the property. 2012 tax forms ez Quarter Percentage First 12. 2012 tax forms ez 5% Second 37. 2012 tax forms ez 5 Third 62. 2012 tax forms ez 5 Fourth 87. 2012 tax forms ez 5 Example. 2012 tax forms ez On December 2, 2010, you placed in service an item of 5-year property costing $10,000. 2012 tax forms ez You did not claim a section 179 deduction and the property does not qualify for a special depreciation allowance. 2012 tax forms ez Your unadjusted basis for the property was $10,000. 2012 tax forms ez You used the mid-quarter convention because this was the only item of business property you placed in service in 2010 and it was placed in service during the last 3 months of your tax year. 2012 tax forms ez Your property is in the 5-year property class, so you used Table A-5 to figure your depreciation deduction. 2012 tax forms ez Your deductions for 2010, 2011, and 2012 were $500 (5% of $10,000), $3,800 (38% of $10,000), and $2,280 (22. 2012 tax forms ez 80% of $10,000). 2012 tax forms ez You disposed of the property on April 6, 2013. 2012 tax forms ez To determine your depreciation deduction for 2013, first figure the deduction for the full year. 2012 tax forms ez This is $1,368 (13. 2012 tax forms ez 68% of $10,000). 2012 tax forms ez April is in the second quarter of the year, so you multiply $1,368 by 37. 2012 tax forms ez 5% to get your depreciation deduction of $513 for 2013. 2012 tax forms ez Mid-month convention used. 2012 tax forms ez   If you dispose of residential rental or nonresidential real property, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by a fraction. 2012 tax forms ez The numerator of the fraction is the number of months (including partial months) in the year that the property is considered in service. 2012 tax forms ez The denominator is 12. 2012 tax forms ez Example. 2012 tax forms ez On July 2, 2011, you purchased and placed in service residential rental property. 2012 tax forms ez The property cost $100,000, not including the cost of land. 2012 tax forms ez You used Table A-6 to figure your MACRS depreciation for this property. 2012 tax forms ez You sold the property on March 2, 2013. 2012 tax forms ez You file your tax return based on the calendar year. 2012 tax forms ez A full year of depreciation for 2013 is $3,636. 2012 tax forms ez This is $100,000 multiplied by . 2012 tax forms ez 03636 (the percentage for the seventh month of the third recovery year) from Table A-6 . 2012 tax forms ez You then apply the mid-month convention for the 2½ months of use in 2013. 2012 tax forms ez Treat the month of disposition as one-half month of use. 2012 tax forms ez Multiply $3,636 by the fraction, 2. 2012 tax forms ez 5 over 12, to get your 2013 depreciation deduction of $757. 2012 tax forms ez 50. 2012 tax forms ez Figuring the Deduction Without Using the Tables Instead of using the rates in the percentage tables to figure your depreciation deduction, you can figure it yourself. 2012 tax forms ez Before making the computation each year, you must reduce your adjusted basis in the property by the depreciation claimed the previous year. 2012 tax forms ez Figuring MACRS deductions without using the tables generally will result in a slightly different amount than using the tables. 2012 tax forms ez Declining Balance Method When using a declining balance method, you apply the same depreciation rate each year to the adjusted basis of your property. 2012 tax forms ez You must use the applicable convention for the first tax year and you must switch to the straight line method beginning in the first year for which it will give an equal or greater deduction. 2012 tax forms ez The straight line method is explained later. 2012 tax forms ez You figure depreciation for the year you place property in service as follows. 2012 tax forms ez Multiply your adjusted basis in the property by the declining balance rate. 2012 tax forms ez Apply the applicable convention. 2012 tax forms ez You figure depreciation for all other years (before the year you switch to the straight line method) as follows. 2012 tax forms ez Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years. 2012 tax forms ez Multiply this new adjusted basis by the same declining balance rate used in earlier years. 2012 tax forms ez If you dispose of property before the end of its recovery period, see Using the Applicable Convention, later, for information on how to figure depreciation for the year you dispose of it. 2012 tax forms ez Figuring depreciation under the declining balance method and switching to the straight line method is illustrated in Example 1 , later, under Examples. 2012 tax forms ez Declining balance rate. 2012 tax forms ez   You figure your declining balance rate by dividing the specified declining balance percentage (150% or 200% changed to a decimal) by the number of years in the property's recovery period. 2012 tax forms ez For example, for 3-year property depreciated using the 200% declining balance method, divide 2. 2012 tax forms ez 00 (200%) by 3 to get 0. 2012 tax forms ez 6667, or a 66. 2012 tax forms ez 67% declining balance rate. 2012 tax forms ez For 15-year property depreciated using the 150% declining balance method, divide 1. 2012 tax forms ez 50 (150%) by 15 to get 0. 2012 tax forms ez 10, or a 10% declining balance rate. 2012 tax forms ez   The following table shows the declining balance rate for each property class and the first year for which the straight line method gives an equal or greater deduction. 2012 tax forms ez Property Class Method Declining Balance Rate Year 3-year 200% DB 66. 2012 tax forms ez 667% 3rd 5-year 200% DB 40. 2012 tax forms ez 0 4th 7-year 200% DB 28. 2012 tax forms ez 571 5th 10-year 200% DB 20. 2012 tax forms ez 0 7th 15-year 150% DB 10. 2012 tax forms ez 0 7th 20-year 150% DB 7. 2012 tax forms ez 5 9th Straight Line Method When using the straight line method, you apply a different depreciation rate each year to the adjusted basis of your property. 2012 tax forms ez You must use the applicable convention in the year you place the property in service and the year you dispose of the property. 2012 tax forms ez You figure depreciation for the year you place property in service as follows. 2012 tax forms ez Multiply your adjusted basis in the property by the straight line rate. 2012 tax forms ez Apply the applicable convention. 2012 tax forms ez You figure depreciation for all other years (including the year you switch from the declining balance method to the straight line method) as follows. 2012 tax forms ez Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years (under any method). 2012 tax forms ez Determine the depreciation rate for the year. 2012 tax forms ez Multiply the adjusted basis figured in (1) by the depreciation rate figured in (2). 2012 tax forms ez If you dispose of property before the end of its recovery period, see Using the Applicable Convention , later, for information on how to figure depreciation for the year you dispose of it. 2012 tax forms ez Straight line rate. 2012 tax forms ez   You determine the straight line depreciation rate for any tax year by dividing the number 1 by the years remaining in the recovery period at the beginning of that year. 2012 tax forms ez When figuring the number of years remaining, you must take into account the convention used in the year you placed the property in service. 2012 tax forms ez If the number of years remaining is less than 1, the depreciation rate for that tax year is 1. 2012 tax forms ez 0 (100%). 2012 tax forms ez Using the Applicable Convention The applicable convention (discussed earlier under Which Convention Applies ) affects how you figure your depreciation deduction for the year you place your property in service and for the year you dispose of it. 2012 tax forms ez It determines how much of the recovery period remains at the beginning of each year, so it also affects the depreciation rate for property you depreciate under the straight line method. 2012 tax forms ez See Straight line rate in the previous discussion. 2012 tax forms ez Use the applicable convention as explained in the following discussions. 2012 tax forms ez Half-year convention. 2012 tax forms ez   If this convention applies, you deduct a half-year of depreciation for the first year and the last year that you depreciate the property. 2012 tax forms ez You deduct a full year of depreciation for any other year during the recovery period. 2012 tax forms ez   Figure your depreciation deduction for the year you place the property in service by dividing the depreciation for a full year by 2. 2012 tax forms ez If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition the same way. 2012 tax forms ez If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final 6 months of the recovery period is the amount of your unrecovered basis in the property. 2012 tax forms ez Mid-quarter convention. 2012 tax forms ez   If this convention applies, the depreciation you can deduct for the first year you depreciate the property depends on the quarter in which you place the property in service. 2012 tax forms ez   A quarter of a full 12-month tax year is a period of 3 months. 2012 tax forms ez The first quarter in a year begins on the first day of the tax year. 2012 tax forms ez The second quarter begins on the first day of the fourth month of the tax year. 2012 tax forms ez The third quarter begins on the first day of the seventh month of the tax year. 2012 tax forms ez The fourth quarter begins on the first day of the tenth month of the tax year. 2012 tax forms ez A calendar year is divided into the following quarters. 2012 tax forms ez Quarter Months First January, February, March Second April, May, June Third July, August, September Fourth October, November, December   Figure your depreciation deduction for the year you place the property in service by multiplying the depreciation for a full year by the percentage listed below for the quarter you place the property in service. 2012 tax forms ez Quarter Percentage First 87. 2012 tax forms ez 5% Second 62. 2012 tax forms ez 5 Third 37. 2012 tax forms ez 5 Fourth 12. 2012 tax forms ez 5   If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by the percentage listed below for the quarter you dispose of the property. 2012 tax forms ez Quarter Percentage First 12. 2012 tax forms ez 5% Second 37. 2012 tax forms ez 5 Third 62. 2012 tax forms ez 5 Fourth 87. 2012 tax forms ez 5   If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final quarter of the recovery period is the amount of your unrecovered basis in the property. 2012 tax forms ez Mid-month convention. 2012 tax forms ez   If this convention applies, the depreciation you can deduct for the first year that you depreciate the property depends on the month in which you place the property in service. 2012 tax forms ez Figure your depreciation deduction for the year you place the property in service by multiplying the depreciation for a full year by a fraction. 2012 tax forms ez The numerator of the fraction is the number of full months in the year that the property is in service plus ½ (or 0. 2012 tax forms ez 5). 2012 tax forms ez The denominator is 12. 2012 tax forms ez   If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition the same way. 2012 tax forms ez If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final month of the recovery period is the amount of your unrecovered basis in the property. 2012 tax forms ez Example. 2012 tax forms ez You use the calendar year and place nonresidential real property in service in August. 2012 tax forms ez The property is in service 4 full months (September, October, November, and December). 2012 tax forms ez Your numerator is 4. 2012 tax forms ez 5 (4 full months plus 0. 2012 tax forms ez 5). 2012 tax forms ez You multiply the depreciation for a full year by 4. 2012 tax forms ez 5/12, or 0. 2012 tax forms ez 375. 2012 tax forms ez Examples The following examples show how to figure depreciation under MACRS without using the percentage tables. 2012 tax forms ez Figures are rounded for purposes of the examples. 2012 tax forms ez Assume for all the examples that you use a calendar year as your tax year. 2012 tax forms ez Example 1—200% DB method and half-year convention. 2012 tax forms ez In February, you placed in service depreciable property with a 5-year recovery period and a basis of $1,000. 2012 tax forms ez You do not elect to take the section 179 deduction and the property does not qualify for a special depreciation allowance. 2012 tax forms ez You use GDS and the 200% declining balance (DB) method to figure your depreciation. 2012 tax forms ez When the straight line (SL) method results in an equal or larger deduction, you switch to the SL method. 2012 tax forms ez You did not place any property in service in the last 3 months of the year, so you must use the half-year convention. 2012 tax forms ez First year. 2012 tax forms ez You figure the depreciation rate under the 200% DB method by dividing 2 (200%) by 5 (the number of years in the recovery period). 2012 tax forms ez The result is 40%. 2012 tax forms ez You multiply the adjusted basis of the property ($1,000) by the 40% DB rate. 2012 tax forms ez You apply the half-year convention by dividing the result ($400) by 2. 2012 tax forms ez Depreciation for the first year under the 200% DB method is $200. 2012 tax forms ez You figure the depreciation rate under the straight line (SL) method by dividing 1 by 5, the number of years in the recovery period. 2012 tax forms ez The result is 20%. 2012 tax forms ez You multiply the adjusted basis of the property ($1,000) by the 20% SL rate. 2012 tax forms ez You apply the half-year convention by dividing the result ($200) by 2. 2012 tax forms ez Depreciation for the first year under the SL method is $100. 2012 tax forms ez The DB method provides a larger deduction, so you deduct the $200 figured under the 200% DB method. 2012 tax forms ez Second year. 2012 tax forms ez You reduce the adjusted basis ($1,000) by the depreciation claimed in the first year ($200). 2012 tax forms ez You multiply the result ($800) by the DB rate (40%). 2012 tax forms ez Depreciation for the second year under the 200% DB method is $320. 2012 tax forms ez You figure the SL depreciation rate by dividing 1 by 4. 2012 tax forms ez 5, the number of years remaining in the recovery period. 2012 tax forms ez (Based on the half-year convention, you used only half a year of the recovery period in the first year. 2012 tax forms ez ) You multiply the reduced adjusted basis ($800) by the result (22. 2012 tax forms ez 22%). 2012 tax forms ez Depreciation under the SL method for the second year is $178. 2012 tax forms ez The DB method provides a larger deduction, so you deduct the $320 figured under the 200% DB method. 2012 tax forms ez Third year. 2012 tax forms ez You reduce the adjusted basis ($800) by the depreciation claimed in the second year ($320). 2012 tax forms ez You multiply the result ($480) by the DB rate (40%). 2012 tax forms ez Depreciation for the third year under the 200% DB method is $192. 2012 tax forms ez You figure the SL depreciation rate by dividing 1 by 3. 2012 tax forms ez 5. 2012 tax forms ez You multiply the reduced adjusted basis ($480) by the result (28. 2012 tax forms ez 57%). 2012 tax forms ez Depreciation under the SL method for the third year is $137. 2012 tax forms ez The DB method provides a larger deduction, so you deduct the $192 figured under the 200% DB method. 2012 tax forms ez Fourth year. 2012 tax forms ez You reduce the adjusted basis ($480) by the de
 
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Page Last Reviewed or Updated: 28-Mar-2014

The 2012 Tax Forms Ez

2012 tax forms ez 8. 2012 tax forms ez   Paying Tax Through Withholding or Estimated Tax Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Notification of Alien Status Withholding From CompensationWithholding on Wages Withholding on Pensions Withholding on Tip Income Independent Contractors Withholding From Other IncomeTax Withheld on Partnership Income Withholding on Scholarships and Fellowship Grants Income Entitled to Tax Treaty BenefitsStudents, teachers, and researchers. 2012 tax forms ez Tax Withheld on Real Property Sales Social Security and Medicare TaxesStudents and Exchange Visitors Agricultural Workers Self-Employment Tax International Social Security Agreements Estimated Tax Form 1040-ES (NR)Fiscal year. 2012 tax forms ez Introduction This chapter discusses how to pay your U. 2012 tax forms ez S. 2012 tax forms ez income tax as you earn or receive income during the year. 2012 tax forms ez In general, the federal income tax is a pay as you go tax. 2012 tax forms ez There are two ways to pay as you go. 2012 tax forms ez Withholding. 2012 tax forms ez If you are an employee, your employer probably withholds income tax from your pay. 2012 tax forms ez Tax may also be withheld from certain other income—including pensions, bonuses, commissions, and gambling winnings. 2012 tax forms ez In each case, the amount withheld is paid to the U. 2012 tax forms ez S. 2012 tax forms ez Treasury in your name. 2012 tax forms ez Estimated tax. 2012 tax forms ez If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. 2012 tax forms ez People who are in business for themselves generally will have to pay their tax this way. 2012 tax forms ez You may have to pay estimated tax if you receive income such as dividends, interest, rent, and royalties. 2012 tax forms ez Estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well. 2012 tax forms ez Topics - This chapter discusses: How to notify your employer of your alien status, Income subject to withholding of income tax, Exemptions from withholding, Social security and Medicare taxes, and Estimated tax rules. 2012 tax forms ez Useful Items - You may want to see: Publication 515 Withholding of Tax on Nonresident Aliens and Foreign Entities 901 U. 2012 tax forms ez S. 2012 tax forms ez Tax Treaties Form (and Instructions) W-4 Employee's Withholding Allowance Certificate W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals) W-8ECI Certificate of Foreign Person's Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States W-9 Request for Taxpayer Identification Number and Certification 1040-ES (NR) U. 2012 tax forms ez S. 2012 tax forms ez Estimated Tax for Nonresident Alien Individuals 8233 Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual 8288-B Application for Withholding Certificate for Dispositions by Foreign Persons of U. 2012 tax forms ez S. 2012 tax forms ez Real Property Interests 13930 Application for Central Withholding Agreement See chapter 12 for information about getting these publications and forms. 2012 tax forms ez Notification of Alien Status You must let your employer know whether you are a resident or a nonresident alien so your employer can withhold the correct amount of tax from your wages. 2012 tax forms ez If you are a resident alien under the rules discussed in chapter 1, you must file Form W-9 or a similar statement with your employer. 2012 tax forms ez If you are a nonresident alien under those rules, you must furnish to your employer Form 8233 or Form W-8BEN, establishing that you are a foreign person, or Form W-4, establishing that your compensation is subject to graduated withholding at the same rates as resident aliens or U. 2012 tax forms ez S. 2012 tax forms ez citizens. 2012 tax forms ez If you are a resident alien and you receive income other than wages (such as dividends and royalties) from sources within the United States, file Form W-9 or similar statement with the withholding agent (generally, the payer of the income) so the agent will not withhold tax on the income at the 30% (or lower treaty) rate. 2012 tax forms ez If you receive this type of income as a nonresident alien, file Form W-8BEN with the withholding agent so that the agent will withhold tax at the 30% (or lower treaty) rate. 2012 tax forms ez However, if the income is effectively connected with a U. 2012 tax forms ez S. 2012 tax forms ez trade or business, file Form W-8ECI instead. 2012 tax forms ez Withholding From Compensation The following discussion generally applies only to nonresident aliens. 2012 tax forms ez Tax is withheld from resident aliens in the same manner as U. 2012 tax forms ez S. 2012 tax forms ez citizens. 2012 tax forms ez Wages and other compensation paid to a nonresident alien for services performed as an employee are usually subject to graduated withholding at the same rates as resident aliens and U. 2012 tax forms ez S. 2012 tax forms ez citizens. 2012 tax forms ez Therefore, your compensation, unless it is specifically excluded from the term “wages” by law, or is exempt from tax by treaty, is subject to graduated withholding. 2012 tax forms ez Withholding on Wages If you are an employee and you receive wages subject to graduated withholding, you will be required to fill out a Form W-4. 2012 tax forms ez Also fill out Form W-4 for a scholarship or fellowship grant to the extent it represents payment for past, present, or future services and for which you are not claiming a tax treaty withholding exemption on Form 8233 (discussed later under Income Entitled to Tax Treaty Benefits). 2012 tax forms ez These are services you are required to perform as an employee and as a condition of receiving the scholarship or fellowship (or tuition reduction). 2012 tax forms ez Nonresident aliens should fill out Form W-4 using the following instructions instead of the instructions on the Form W-4. 2012 tax forms ez This is because of the restrictions on a nonresident alien's filing status, the limited number of personal exemptions a nonresident alien is allowed, and because a nonresident alien cannot claim the standard deduction. 2012 tax forms ez Enter your social security number (SSN) on line 2. 2012 tax forms ez Do not enter an individual taxpayer identification number (ITIN). 2012 tax forms ez Check only “Single” marital status on line 3 (regardless of your actual marital status). 2012 tax forms ez Claim only one allowance on line 5, unless you are a resident of Canada, Mexico, or South Korea, or a U. 2012 tax forms ez S. 2012 tax forms ez national. 2012 tax forms ez Write “Nonresident Alien” or “NRA” on the dotted line on line 6. 2012 tax forms ez You can request additional withholding on line 6 at your option. 2012 tax forms ez Do not claim “Exempt” withholding status on line 7. 2012 tax forms ez A U. 2012 tax forms ez S. 2012 tax forms ez national is an individual who, although not a U. 2012 tax forms ez S. 2012 tax forms ez citizen, owes his or her allegiance to the United States. 2012 tax forms ez U. 2012 tax forms ez S. 2012 tax forms ez nationals include American Samoans, and Northern Mariana Islanders who chose to become U. 2012 tax forms ez S. 2012 tax forms ez nationals instead of U. 2012 tax forms ez S. 2012 tax forms ez citizens. 2012 tax forms ez See Withholding on Scholarships and Fellowship Grants later, for how to fill out Form W-4 if you receive a U. 2012 tax forms ez S. 2012 tax forms ez source scholarship or fellowship grant that is not a payment for services. 2012 tax forms ez Students and business apprentices from India. 2012 tax forms ez   If you are eligible for the benefits of Article 21(2) of the United States-India Income Tax Treaty, you may claim an additional withholding allowance for the standard deduction. 2012 tax forms ez You can claim an additional withholding allowance for your spouse only if your spouse will have no gross income for 2013 and cannot be claimed as a dependent on another U. 2012 tax forms ez S. 2012 tax forms ez taxpayer's 2013 return. 2012 tax forms ez You may also claim an additional withholding allowance for each of your dependents not admitted to the United States on “F-2,” “J-2,” or “M-2” visas if they meet the same rules that apply to U. 2012 tax forms ez S. 2012 tax forms ez citizens. 2012 tax forms ez Household employees. 2012 tax forms ez   If you work as a household employee, your employer does not have to withhold income tax. 2012 tax forms ez However, you may agree to voluntary income tax withholding by filing a Form W-4 with your employer. 2012 tax forms ez The agreement goes into effect when your employer accepts the agreement by beginning the withholding. 2012 tax forms ez You or your employer may end the agreement by letting the other know in writing. 2012 tax forms ez Agricultural workers. 2012 tax forms ez   If you are an agricultural worker on an H-2A visa, your employer does not have to withhold income tax. 2012 tax forms ez However, your employer will withhold income tax only if you and your employer agree to withhold. 2012 tax forms ez In that case, you must provide your employer with a properly completed Form W-4. 2012 tax forms ez You can find more information about not having tax withheld at www. 2012 tax forms ez irs. 2012 tax forms ez gov/Individuals/International-Taxpayers/Foreign-Agricultural-Workers. 2012 tax forms ez Wages Exempt From Withholding Wages that are exempt from U. 2012 tax forms ez S. 2012 tax forms ez income tax under an income tax treaty are generally exempt from withholding. 2012 tax forms ez For information on how to claim this exemption from withholding, see Income Entitled to Tax Treaty Benefits , later. 2012 tax forms ez Wages paid to aliens who are residents of American Samoa, Canada, Mexico, Puerto Rico, or the U. 2012 tax forms ez S. 2012 tax forms ez Virgin Islands may be exempt from withholding. 2012 tax forms ez The following paragraphs explain these exemptions. 2012 tax forms ez Residents of Canada or Mexico engaged in transportation-related employment. 2012 tax forms ez   Certain residents of Canada or Mexico who enter or leave the United States at frequent intervals are not subject to withholding on their wages. 2012 tax forms ez These persons either: Perform duties in transportation service between the United States and Canada or Mexico, or Perform duties connected to the construction, maintenance, or operation of a waterway, viaduct, dam, or bridge crossed by, or crossing, the boundary between the United States and Canada or the boundary between the United States and Mexico. 2012 tax forms ez    This employment is subject to withholding of social security and Medicare taxes unless the services are performed for a railroad. 2012 tax forms ez   To qualify for the exemption from withholding during a tax year, a Canadian or Mexican resident must give the employer a statement in duplicate with name, address, and identification number, certifying that the resident: Is not a U. 2012 tax forms ez S. 2012 tax forms ez citizen or resident, Is a resident of Canada or Mexico, whichever applies, and Expects to perform duties previously described during the tax year in question. 2012 tax forms ez   The statement can be in any form, but it must be dated and signed by the employee and must include a written declaration that it is made under the penalties of perjury. 2012 tax forms ez Residents of American Samoa and Puerto Rico. 2012 tax forms ez   If you are a nonresident alien employee who is a resident of American Samoa or Puerto Rico, wages for services performed in American Samoa or Puerto Rico are generally not subject to withholding unless you are an employee of the United States or any of its agencies in American Samoa or Puerto Rico. 2012 tax forms ez Residents of the U. 2012 tax forms ez S. 2012 tax forms ez Virgin Islands. 2012 tax forms ez   Nonresident aliens who are bona fide residents of the U. 2012 tax forms ez S Virgin Islands are not subject to withholding of U. 2012 tax forms ez S. 2012 tax forms ez tax on income earned while temporarily employed in the United States. 2012 tax forms ez This is because those persons pay their income tax to the U. 2012 tax forms ez S. 2012 tax forms ez Virgin Islands. 2012 tax forms ez To avoid having tax withheld on income earned in the United States, bona fide residents of the U. 2012 tax forms ez S. 2012 tax forms ez Virgin Islands should write a letter, in duplicate, to their employers, stating that they are bona fide residents of the U. 2012 tax forms ez S. 2012 tax forms ez Virgin Islands and expect to pay tax on all income to the U. 2012 tax forms ez S. 2012 tax forms ez Virgin Islands. 2012 tax forms ez Withholding on Pensions If you receive a pension as a result of personal services performed in the United States, the pension income is subject to the 30% (or lower treaty) rate of withholding. 2012 tax forms ez You may, however, have tax withheld at graduated rates on the portion of the pension that arises from the performance of services in the United States after December 31, 1986. 2012 tax forms ez You must fill out Form W-8BEN and give it to the withholding agent or payer before the income is paid or credited to you. 2012 tax forms ez Withholding on Tip Income Tips you receive during the year for services performed in the United States are subject to U. 2012 tax forms ez S. 2012 tax forms ez income tax. 2012 tax forms ez Include them in taxable income. 2012 tax forms ez In addition, tips received while working for one employer, amounting to $20 or more in a month, are subject to graduated withholding. 2012 tax forms ez Independent Contractors If there is no employee-employer relationship between you and the person for whom you perform services, your compensation is subject to the 30% (or lower treaty) rate of withholding. 2012 tax forms ez However, if you are engaged in a trade or business in the United States during the tax year, your compensation for personal services as an independent contractor (independent personal services) may be entirely or partly exempt from withholding if you reach an agreement with the Internal Revenue Service on the amount of withholding required. 2012 tax forms ez An agreement that you reach with the IRS regarding withholding from your compensation for independent personal services is effective for payments covered by the agreement after it is agreed to by all parties. 2012 tax forms ez You must agree to timely file an income tax return for the current tax year. 2012 tax forms ez Central withholding agreements. 2012 tax forms ez   If you are a nonresident alien entertainer or athlete performing or participating in athletic events in the United States, you may be able to enter into a withholding agreement with the IRS for reduced withholding provided certain requirements are met. 2012 tax forms ez Under no circumstances will such a withholding agreement reduce taxes withheld to less than the anticipated amount of income tax liability. 2012 tax forms ez   File Form 13930 and the required attachments with the IRS to request a central withholding agreement. 2012 tax forms ez Either you or your authorized representative can file the form. 2012 tax forms ez It should be sent to the IRS at least 45 days before the tour begins or the event occurs. 2012 tax forms ez Exceptions will be considered on a case by case basis. 2012 tax forms ez   For more information on the CWA program, go to www. 2012 tax forms ez irs. 2012 tax forms ez gov/Individuals/International-Taxpayers/Central-Withholding-Agreements. 2012 tax forms ez Final payment exemption. 2012 tax forms ez   Your final payment of compensation during the tax year for independent personal services may be entirely or partly exempt from withholding. 2012 tax forms ez This exemption is available only once during your tax year and applies to a maximum of $5,000 of compensation. 2012 tax forms ez To obtain this exemption, you or your agent must give the following statements and information to the Commissioner or his delegate. 2012 tax forms ez A statement by each withholding agent from whom you have received gross income effectively connected with a trade or business in the United States during the tax year, showing the amount of income paid and the tax withheld. 2012 tax forms ez Each statement must be signed by the withholding agent and verified by a declaration that it is made under penalties of perjury. 2012 tax forms ez A statement by the withholding agent from whom you expect to receive the final payment of compensation, showing the amount of the payment and the amount of tax that would be withheld if a final payment exemption were not granted. 2012 tax forms ez This statement must also be signed by the withholding agent and verified by a declaration that it is made under penalties of perjury. 2012 tax forms ez A statement by you that you do not intend to receive any other income effectively connected with a trade or business in the United States during the current tax year. 2012 tax forms ez The amount of tax that has been withheld or paid under any other provision of the Internal Revenue Code or regulations for any income effectively connected with your trade or business in the United States during the current tax year. 2012 tax forms ez The amount of your outstanding tax liabilities, if any, including interest and penalties, from the current tax year or prior tax periods. 2012 tax forms ez Any provision of an income tax treaty under which a partial or complete exemption from withholding may be claimed, the country of your residence, and a statement of sufficient facts to justify an exemption under the treaty. 2012 tax forms ez A statement signed by you, and verified by a declaration that it is made under penalties of perjury, that all the information given is true and that to your knowledge no relevant information has been omitted. 2012 tax forms ez   If satisfied with the information, the IRS will determine the amount of your tentative income tax for the tax year on gross income effectively connected with your trade or business in the United States. 2012 tax forms ez Ordinary and necessary business expenses can be taken into account if proven to the satisfaction of the Commissioner or his delegate. 2012 tax forms ez   The Commissioner or his delegate will send you a letter, directed to the withholding agent, showing the amount of the final payment of compensation that is exempt from withholding and the amount that can be paid to you because of the exemption. 2012 tax forms ez You must give two copies of the letter to the withholding agent and must also attach a copy of the letter to your income tax return for the tax year for which the exemption is effective. 2012 tax forms ez Allowance for Personal Exemption Withholding on payments for independent personal services is generally based on the amount of your compensation payment minus the value of one exemption ($3,950 for 2014). 2012 tax forms ez To determine the income for independent personal services performed in the United States to which the 30% (or lower treaty) rate will apply, you are allowed one personal exemption if you are not a U. 2012 tax forms ez S. 2012 tax forms ez national and are not a resident of Canada, Mexico, or South Korea. 2012 tax forms ez For purposes of 30% withholding, the exemption is prorated at $10. 2012 tax forms ez 82 a day in 2014 for the period that labor or personal services are performed in the United States. 2012 tax forms ez To claim an exemption from withholding on the personal exemption amount, fill out the applicable parts of Form 8233 and give it to the withholding agent. 2012 tax forms ez Example. 2012 tax forms ez Eric Johannsen, who is a resident of Country X worked under a contract with a U. 2012 tax forms ez S. 2012 tax forms ez firm (not as an employee) in the United States for 100 days during 2014 before returning to his country. 2012 tax forms ez He earned $6,000 for the services performed (not considered wages) in the United States. 2012 tax forms ez Eric is married and has three dependent children. 2012 tax forms ez His wife is not employed and has no income subject to U. 2012 tax forms ez S. 2012 tax forms ez tax. 2012 tax forms ez The amount of the personal exemption to be allowed against the income for his personal services performed within the United States in 2014 is $1,082 (100 days × $10. 2012 tax forms ez 82), and withholding at 30% is applied against the balance. 2012 tax forms ez Thus, $1,475. 2012 tax forms ez 40 in tax is withheld from Eric's earnings (30% of $4,918 ($6,000 − $1,082). 2012 tax forms ez U. 2012 tax forms ez S. 2012 tax forms ez nationals or residents of Canada, Mexico, or South Korea. 2012 tax forms ez   If you are a nonresident alien who is a resident of Canada, Mexico, or South Korea, or who is a national of the United States, you are subject to the same 30% withholding on your compensation for independent personal services performed in the United States. 2012 tax forms ez However, if you are a U. 2012 tax forms ez S. 2012 tax forms ez national or a resident of Canada or Mexico, you are allowed the same personal exemptions as U. 2012 tax forms ez S. 2012 tax forms ez citizens. 2012 tax forms ez For the 30% (or lower treaty) rate withholding, you can take $10. 2012 tax forms ez 82 per day for each allowable exemption in 2014. 2012 tax forms ez If you are a resident of South Korea, you are allowed personal exemptions for yourself and for your spouse and children who live with you in the United States at any time during the tax year. 2012 tax forms ez However, the additional exemptions for your spouse and children must be further prorated as explained in chapter 5 under Exemptions . 2012 tax forms ez Students and business apprentices from India. 2012 tax forms ez   If you are eligible for the benefits of Article 21(2) of the United States-India Income Tax Treaty, you are allowed an exemption for your spouse only if your spouse will have no gross income for 2014 and cannot be claimed as a dependent on another U. 2012 tax forms ez S. 2012 tax forms ez taxpayer's 2014 return. 2012 tax forms ez You are also allowed an exemption for each dependent not admitted to the United States on “F-2,” “J-2,” or “M-2” visas if they meet the same rules that apply to U. 2012 tax forms ez S. 2012 tax forms ez citizens. 2012 tax forms ez For the 30% (or lower treaty rate) withholding on compensation for independent personal services performed in the United States, you are allowed $10. 2012 tax forms ez 82 per day for each allowable exemption in 2014. 2012 tax forms ez Refund of Taxes Withheld in Error Multi-level marketing. 2012 tax forms ez   If you are a distributor for a multi-level marketing company who had taxes withheld in error, file a U. 2012 tax forms ez S. 2012 tax forms ez income tax return (Form 1040NR, Form 1040NR-EZ, or Form 1120-F) or, if a tax return has already been filed, a claim for refund (Form 1040X or amended Form 1120-F) to recover the amount withheld in error. 2012 tax forms ez You must also attach to the U. 2012 tax forms ez S. 2012 tax forms ez income tax return or claim for refund supporting information that includes, but is not limited to, the following items. 2012 tax forms ez A copy of your Form W-2, Form 1042-S, or Form 1099 to prove the amount of taxes withheld. 2012 tax forms ez A statement explaining why income reported on your Form W-2, Form 1042-S, or Form 1099 is not subject to U. 2012 tax forms ez S. 2012 tax forms ez taxation. 2012 tax forms ez A statement listing all the dates you entered and left the United States during the taxable year. 2012 tax forms ez If the compensation is multi-year compensation, the statement must list all the dates you entered and left the United States during each of the taxable years to which the compensation is attributable. 2012 tax forms ez A copy of any documents or records that show the number of days you actually were present in the United States during the years listed. 2012 tax forms ez A statement providing: (a) the number of days (or unit of time less than a day, if appropriate) that personal services were performed in the United States in connection with recruiting, training, and supporting your lower-tier distributors; and (b) the total number of days (or unit of time less than a day, if appropriate) that personal services were performed globally in connection with recruiting, training, and supporting your lower-tier distributors. 2012 tax forms ez Any further relevant document or record supporting your claim that the taxes were withheld in error. 2012 tax forms ez Withholding From Other Income Other income subject to 30% withholding generally includes fixed or determinable income such as interest (other than portfolio interest), dividends, pensions and annuities, and gains from certain sales and exchanges, discussed in chapter 4. 2012 tax forms ez It also includes 85% of social security benefits paid to nonresident aliens. 2012 tax forms ez Refund of taxes withheld in error on social security benefits paid to resident aliens. 2012 tax forms ez   Social security benefits paid to a lawful permanent resident (green card holder) are not subject to 30% withholding. 2012 tax forms ez For U. 2012 tax forms ez S. 2012 tax forms ez income tax purposes, green card holders continue to be resident aliens until their lawful permanent resident status under immigration laws is either taken away or is administratively or judicially determined to have been abandoned. 2012 tax forms ez See Green Card Test in chapter 1. 2012 tax forms ez If you are a green card holder and tax was withheld in error on your social security benefits because you have a foreign address, the withholding tax is refundable by the Social Security Administration (SSA) or the IRS. 2012 tax forms ez SSA will refund taxes erroneously withheld if the refund can be processed during the same calendar year in which the tax was withheld. 2012 tax forms ez If SSA cannot refund the taxes withheld, you must file a Form 1040 or 1040A with the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301 to determine if you are entitled to a refund. 2012 tax forms ez You must also attach the following to your Form 1040 or 1040A. 2012 tax forms ez A copy of Form SSA-1042S, Social Security Benefit Statement. 2012 tax forms ez A copy of the “green card. 2012 tax forms ez ” A signed declaration that includes the following statements: The SSA should not have withheld income tax from my social security benefits because I am a U. 2012 tax forms ez S. 2012 tax forms ez lawful permanent resident and my green card has been neither revoked nor administratively or judicially determined to have been abandoned. 2012 tax forms ez I am filing a U. 2012 tax forms ez S. 2012 tax forms ez income tax return for the tax year as a resident alien reporting all of my worldwide income. 2012 tax forms ez I have not claimed benefits for the tax year under an income tax treaty as the resident of a country other than the United States. 2012 tax forms ez Other income not subject to withholding of 30% (or lower treaty) rate. 2012 tax forms ez   The following income is not subject to withholding at the 30% (or lower treaty) rate if you file Form W-8ECI with the payer of the income. 2012 tax forms ez Income (other than compensation) that is effectively connected with your U. 2012 tax forms ez S. 2012 tax forms ez trade or business. 2012 tax forms ez Income from real property that you choose to treat as effectively connected with a U. 2012 tax forms ez S. 2012 tax forms ez trade or business. 2012 tax forms ez See Income From Real Property in chapter 4 for details about this choice. 2012 tax forms ez   Special rules for withholding on partnership income, scholarships, and fellowships are explained next. 2012 tax forms ez Tax Withheld on Partnership Income If you are a foreign partner in a U. 2012 tax forms ez S. 2012 tax forms ez or foreign partnership, the partnership will withhold tax on your share of effectively connected taxable income (ECTI) from the partnership. 2012 tax forms ez You may be able to reduce your ECTI subject to withholding by certain partner-level deductions. 2012 tax forms ez Generally, you must use Form 8804-C for this purpose. 2012 tax forms ez See the Instructions for Form 8804-C for more information. 2012 tax forms ez The withholding rate on your share of effectively connected income is generally the highest rate of tax specified under section 1 of the Code (39. 2012 tax forms ez 6% for 2014). 2012 tax forms ez However, the partnership may withhold at the highest rate that applies to a particular type of income allocable to you if you gave the partnership the appropriate documentation. 2012 tax forms ez Long-term capital gain is an example of a particular type of income to which the highest tax rate applies. 2012 tax forms ez Claim the tax withheld as a credit on your 2014 Form 1040NR. 2012 tax forms ez The partnership will give you a statement on Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, showing the tax withheld. 2012 tax forms ez A partnership that is publicly traded will withhold tax on your actual distributions of effectively connected income. 2012 tax forms ez In this case the partnership will give you a statement on Form 1042-S, Foreign Person's U. 2012 tax forms ez S. 2012 tax forms ez Source Income Subject to Withholding. 2012 tax forms ez Withholding on Scholarships and Fellowship Grants There is no withholding on a qualified scholarship received by a candidate for a degree. 2012 tax forms ez See chapter 3. 2012 tax forms ez If you are a nonresident alien student or grantee with an “F,” “J,” “M,” or “Q” visa and you receive a U. 2012 tax forms ez S. 2012 tax forms ez source grant or scholarship that is not fully exempt, the withholding agent (usually the payer of the scholarship) withholds tax at 14% (or lower treaty rate) of the taxable part of the grant or scholarship that is not a payment for services. 2012 tax forms ez However, if you are not a candidate for a degree and the grant does not meet certain requirements, tax will be withheld at the 30% (or lower treaty) rate. 2012 tax forms ez Any part of a scholarship or fellowship grant that is a payment for services is subject to graduated withholding as discussed earlier under Withholding on Wages. 2012 tax forms ez Alternate Withholding Procedure Your withholding agent may choose to use an alternate procedure by asking you to fill out Form W-4 and the Personal Allowances Worksheet (attached to Form W-4). 2012 tax forms ez Use the following instructions instead of the Form W-4 instructions to complete the worksheet. 2012 tax forms ez Line A. 2012 tax forms ez   Enter the total of the following amounts on line A. 2012 tax forms ez Personal exemption. 2012 tax forms ez   Include the prorated part of your allowable personal exemption. 2012 tax forms ez Figure the amount by multiplying the number of days you expect to be in the United States in 2014 by the daily exemption amount ($10. 2012 tax forms ez 82). 2012 tax forms ez Expenses. 2012 tax forms ez   Include expenses that will be deductible on your return. 2012 tax forms ez These include away-from-home expenses (meals, lodging, and transportation), certain state and local income taxes, charitable contributions, and casualty losses, discussed earlier under Itemized Deductions in chapter 5. 2012 tax forms ez They also include business expenses, moving expenses, and the IRA deduction discussed under Deductions in chapter 5. 2012 tax forms ez Nontaxable grant or scholarship. 2012 tax forms ez   Include the part of your grant or scholarship that is not taxable under U. 2012 tax forms ez S. 2012 tax forms ez law or under a tax treaty. 2012 tax forms ez Line B. 2012 tax forms ez   Enter -0- unless the following paragraph applies to you. 2012 tax forms ez   If you are a student who qualifies under Article 21(2) of the United States-India Income Tax Treaty, and you are not claiming deductions for away-from-home expenses or other itemized deductions (discussed earlier), enter the standard deduction on line B. 2012 tax forms ez The standard deduction amount for 2013 is $6,100. 2012 tax forms ez Lines C and D. 2012 tax forms ez   Enter -0- on both lines unless the following paragraphs apply to you. 2012 tax forms ez   If you are a resident of Canada, Mexico, South Korea, or a U. 2012 tax forms ez S. 2012 tax forms ez national, an additional daily exemption amount may be allowed for your spouse and each of your dependents. 2012 tax forms ez   If you are a resident of India who is eligible for the benefits of Article 21(2) of the United States-India Income Tax Treaty, you can claim an additional daily exemption amount for your spouse only if your spouse will have no gross income for 2014 and cannot be claimed as a dependent on another U. 2012 tax forms ez S. 2012 tax forms ez taxpayer's 2014 return. 2012 tax forms ez You can also claim an additional amount for each of your dependents not admitted to the United States on “F-2,” “J-2,” or “M-2” visas if they meet the same rules that apply to U. 2012 tax forms ez S. 2012 tax forms ez citizens. 2012 tax forms ez   Enter any additional amount for your spouse on line C. 2012 tax forms ez Enter any additional amount for your dependents on line D. 2012 tax forms ez Lines E, F, and G. 2012 tax forms ez   No entries should be made on lines E, F, and G. 2012 tax forms ez Line H. 2012 tax forms ez   Add the amounts on lines A through D and enter the total on line H. 2012 tax forms ez Form W-4. 2012 tax forms ez   Complete lines 1 through 4 of Form W-4. 2012 tax forms ez Sign and date the form and give it with the Personal Allowances Worksheet to your withholding agent. 2012 tax forms ez   If you file a Form W-4 to reduce or eliminate the withholding on your scholarship or grant, you must file an annual U. 2012 tax forms ez S. 2012 tax forms ez income tax return to be allowed the exemptions and deductions you claimed on that form. 2012 tax forms ez If you are in the United States during more than one tax year, you must attach a statement to your yearly Form W-4 indicating that you have filed a U. 2012 tax forms ez S. 2012 tax forms ez income tax return for the previous year. 2012 tax forms ez If you have not been in the United States long enough to be required to file a return, you must attach a statement to your Form W-4 saying you will file a U. 2012 tax forms ez S. 2012 tax forms ez income tax return when required. 2012 tax forms ez After the withholding agent has accepted your Form W-4, tax will be withheld on your scholarship or grant at the graduated rates that apply to wages. 2012 tax forms ez The gross amount of the income is reduced by the amount on line H of the worksheet and the withholding tax is figured on the remainder. 2012 tax forms ez You will receive a Form 1042-S from the withholding agent (usually the payer of your grant) showing the gross amount of your taxable scholarship or fellowship grant less the withholding allowance amount, the tax rate, and the amount of tax withheld. 2012 tax forms ez Use this form to prepare your annual U. 2012 tax forms ez S. 2012 tax forms ez income tax return. 2012 tax forms ez Income Entitled to Tax Treaty Benefits If a tax treaty between the United States and your country provides an exemption from, or a reduced rate of, tax for certain items of income, you should notify the payor of the income (the withholding agent) of your foreign status to claim a tax treaty withholding exemption. 2012 tax forms ez Generally, you do this by filing either Form W-8BEN or Form 8233 with the withholding agent. 2012 tax forms ez File Form W-8BEN for income that is not personal services income. 2012 tax forms ez File Form 8233 for personal services income as discussed next. 2012 tax forms ez Employees and independent contractors. 2012 tax forms ez   If you perform personal services as an employee or as an independent contractor and you can claim an exemption from withholding on that personal service income because of a tax treaty, give Form 8233 to each withholding agent from whom amounts will be received. 2012 tax forms ez   Even if you submit Form 8233, the withholding agent may have to withhold tax from your income. 2012 tax forms ez This is because the factors on which the treaty exemption is based may not be determinable until after the close of the tax year. 2012 tax forms ez In this case, you must file Form 1040NR (or Form 1040NR-EZ if you qualify) to recover any overwithheld tax and to provide the IRS with proof that you are entitled to the treaty exemption. 2012 tax forms ez Students, teachers, and researchers. 2012 tax forms ez   Students, teachers, and researchers must attach the appropriate statement shown in Appendix A (for students) or Appendix B (for teachers and researchers) at the end of this publication to the Form 8233 and give it to the withholding agent. 2012 tax forms ez For treaties not listed in the appendices, attach a statement in a format similar to those for other treaties. 2012 tax forms ez   If you received a scholarship or fellowship and personal services income from the same withholding agent, use Form 8233 to claim an exemption from withholding based on a tax treaty for both types of income. 2012 tax forms ez Special events and promotions. 2012 tax forms ez   Withholding at the full 30% rate is required for payments made to a nonresident alien or foreign corporation for gate receipts (or television or other receipts) from rock music festivals, boxing promotions, and other entertainment or sporting events, unless the withholding agent has been specifically advised otherwise by letter from the IRS. 2012 tax forms ez Form 13930 is used to request a reduction in withholding. 2012 tax forms ez Withholding may be required even if the income may be exempt from taxation by provisions of a tax treaty. 2012 tax forms ez One reason for this is that the partial or complete exemption is usually based on factors that cannot be determined until after the close of the tax year. 2012 tax forms ez You will be required to pay U. 2012 tax forms ez S. 2012 tax forms ez tax, at the time of your departure from the United States, on any income for which you incorrectly claimed a treaty exemption. 2012 tax forms ez For more details on treaty provisions that apply to compensation, see Publication 901. 2012 tax forms ez Tax Withheld on Real Property Sales If you are a nonresident alien and you dispose of a U. 2012 tax forms ez S. 2012 tax forms ez real property interest, the transferee (buyer) of the property generally must withhold a tax equal to 10% of the amount realized on the disposition. 2012 tax forms ez A distribution by a qualified investment entity to a nonresident alien shareholder that is treated as gain from the sale or exchange of a U. 2012 tax forms ez S. 2012 tax forms ez real property interest by the shareholder is subject to withholding at 35%. 2012 tax forms ez Withholding is also required on certain distributions and other transactions by domestic or foreign corporations, partnerships, trusts, and estates. 2012 tax forms ez These rules are covered in Publication 515. 2012 tax forms ez For information on the tax treatment of dispositions of U. 2012 tax forms ez S. 2012 tax forms ez real property interests, see Real Property Gain or Loss in chapter 4. 2012 tax forms ez If you are a partner in a domestic partnership, and the partnership disposes of a U. 2012 tax forms ez S. 2012 tax forms ez real property interest at a gain, the partnership will withhold tax on the amount of gain allocable to its foreign partners. 2012 tax forms ez Your share of the income and tax withheld will be reported to you on Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, or Form 1042-S, Foreign Person's U. 2012 tax forms ez S. 2012 tax forms ez Source Income Subject to Withholding (in the case of a publicly traded partnership). 2012 tax forms ez Withholding is not required in the following situations. 2012 tax forms ez The property is acquired by the buyer for use as a residence and the amount realized (sales price) is not more than $300,000. 2012 tax forms ez The property disposed of is an interest in a domestic corporation if any class of stock of the corporation is regularly traded on an established securities market. 2012 tax forms ez However, this exception does not apply to certain dispositions of substantial amounts of non-publicly traded interests in publicly traded corporations. 2012 tax forms ez The property disposed of is an interest in a U. 2012 tax forms ez S. 2012 tax forms ez corporation that is not regularly traded on an established market and you (the seller) give the buyer a copy of a statement issued by the corporation certifying that the interest is not a U. 2012 tax forms ez S. 2012 tax forms ez real property interest. 2012 tax forms ez You (the seller) give the buyer a certification stating, under penalties of perjury, that you are not a foreign person, and containing your name, U. 2012 tax forms ez S. 2012 tax forms ez taxpayer identification number, and home address. 2012 tax forms ez You can give the certification to a qualified substitute. 2012 tax forms ez The qualified substitute gives the buyer a statement, under penalties of perjury, that the certification is in the possession of the qualified substitute. 2012 tax forms ez For this purpose, a qualified substitute is (a) the person (including any attorney or title company) responsible for closing the transaction, other than your agent, and (b) the buyer's agent. 2012 tax forms ez The buyer receives a withholding certificate from the Internal Revenue Service. 2012 tax forms ez You give the buyer written notice that you are not required to recognize any gain or loss on the transfer because of a nonrecognition provision in the Internal Revenue Code or a provision in a U. 2012 tax forms ez S. 2012 tax forms ez tax treaty. 2012 tax forms ez The buyer must file a copy of the notice with the Ogden Service Center, P. 2012 tax forms ez O. 2012 tax forms ez Box 409101, Ogden, UT 84409. 2012 tax forms ez You must verify the notice as true and sign it under penalties of perjury. 2012 tax forms ez The notice must contain the following information. 2012 tax forms ez A statement that the notice is a notice of nonrecognition under regulation section 1. 2012 tax forms ez 1445-2(d)(2). 2012 tax forms ez Your name, taxpayer identification number, and home address. 2012 tax forms ez A statement that you are not required to recognize any gain or loss on the transfer. 2012 tax forms ez A brief description of the transfer. 2012 tax forms ez A brief summary of the law and facts supporting your claim that recognition of gain or loss is not required. 2012 tax forms ez You may not give the buyer a written notice for any of the following transfers: the sale of your main home on which you exclude gain, a like-kind exchange that does not qualify for nonrecognition treatment in its entirety, or a deferred like-kind exchange that has not been completed at the time the buyer must file Form 8288. 2012 tax forms ez Instead, a withholding certificate (described next) must be obtained. 2012 tax forms ez The amount you realize on the transfer of a U. 2012 tax forms ez S. 2012 tax forms ez real property interest is zero. 2012 tax forms ez The property is acquired by the United States, a U. 2012 tax forms ez S. 2012 tax forms ez state or possession, a political subdivision, or the District of Columbia. 2012 tax forms ez The distribution is from a domestically controlled qualified investment entity (QIE) and is treated as a distribution of a U. 2012 tax forms ez S. 2012 tax forms ez real property interest only because an interest in the entity was disposed of in an applicable wash sale transaction. 2012 tax forms ez For the definition of a QIE, see Qualified investment entities under Real Property Gain or Loss, earlier. 2012 tax forms ez See Wash sale under Real Property Gain or Loss in chapter 4. 2012 tax forms ez The certifications in (3) and (4) must be disregarded by the buyer if the buyer or qualified substitute has actual knowledge, or receives notice from a seller's or buyer's agent (or substitute), that they are false. 2012 tax forms ez This also applies to the qualified substitute's statement under (4). 2012 tax forms ez Withholding certificates. 2012 tax forms ez   The tax required to be withheld on a disposition can be reduced or eliminated under a withholding certificate issued by the IRS. 2012 tax forms ez Either you or the buyer can request a withholding certificate. 2012 tax forms ez   A withholding certificate can be issued due to any of the following. 2012 tax forms ez The IRS determines that reduced withholding is appropriate because either: The amount required to be withheld would be more than your maximum tax liability, or Withholding of the reduced amount would not jeopardize collection of the tax. 2012 tax forms ez All of your realized gain is exempt from U. 2012 tax forms ez S. 2012 tax forms ez tax. 2012 tax forms ez You or the buyer enters into an agreement for the payment of tax providing security for the tax liability. 2012 tax forms ez   Get Publication 515 and Form 8288-B for information on procedures to request a withholding certificate. 2012 tax forms ez Credit for tax withheld. 2012 tax forms ez   The buyer must report and pay over the withheld tax within 20 days after the transfer using Form 8288, U. 2012 tax forms ez S. 2012 tax forms ez Withholding Tax Return for Dispositions by Foreign Persons of U. 2012 tax forms ez S. 2012 tax forms ez Real Property Interests. 2012 tax forms ez This form is filed with the IRS with copies A and B of Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U. 2012 tax forms ez S. 2012 tax forms ez Real Property Interests. 2012 tax forms ez Copy B of this statement will be stamped received by the IRS and returned to you (the seller) if the statement is complete and includes your taxpayer identification number (TIN). 2012 tax forms ez You must file Copy B with your tax return to take credit for the tax withheld. 2012 tax forms ez   A stamped copy of Form 8288-A will not be provided to you if your TIN is not included on that form. 2012 tax forms ez The IRS will send you a letter requesting the TIN and providing instructions for how to get a TIN. 2012 tax forms ez When you provide the IRS with a TIN, the IRS will provide you with a stamped Copy B of Form 8288-A. 2012 tax forms ez Social Security and Medicare Taxes If you work as an employee in the United States, you must pay social security and Medicare taxes in most cases. 2012 tax forms ez Your payments of these taxes contribute to your coverage under the U. 2012 tax forms ez S. 2012 tax forms ez social security system. 2012 tax forms ez Social security coverage provides retirement benefits, survivors and disability benefits, and medical insurance (Medicare) benefits to individuals who meet certain eligibility requirements. 2012 tax forms ez In most cases, the first $113,700 of taxable wages received in 2013 for services performed in the United States is subject to social security tax. 2012 tax forms ez All taxable wages are subject to Medicare tax. 2012 tax forms ez Your employer deducts these taxes from each wage payment. 2012 tax forms ez Your employer must deduct these taxes even if you do not expect to qualify for social security or Medicare benefits. 2012 tax forms ez You can claim a credit for excess social security tax on your income tax return if you have more than one employer and the amount deducted from your combined wages for 2013 is more than $7,049. 2012 tax forms ez 40. 2012 tax forms ez Use the appropriate worksheet in chapter 3 of Publication 505, Tax Withholding and Estimated Tax, to figure your credit. 2012 tax forms ez If any one employer deducted more than $7,049. 2012 tax forms ez 40, you cannot claim a credit for that amount. 2012 tax forms ez Ask your employer to refund the excess. 2012 tax forms ez If your employer does not refund the excess, you can file a claim for refund using Form 843. 2012 tax forms ez In general, U. 2012 tax forms ez S. 2012 tax forms ez social security and Medicare taxes apply to payments of wages for services performed as an employee in the United States, regardless of the citizenship or residence of either the employee or the employer. 2012 tax forms ez In limited situations, these taxes apply to wages for services performed outside the United States. 2012 tax forms ez Your employer should be able to tell you if social security and Medicare taxes apply to your wages. 2012 tax forms ez You cannot make voluntary payments if no taxes are due. 2012 tax forms ez Additional Medicare Tax. 2012 tax forms ez   Beginning in 2013, in addition to the Medicare tax, a 0. 2012 tax forms ez 9% Additional Medicare Tax applies to Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income that are more than: $250,000 if married filing jointly, $125,000 if married filing separately, or $200,000 for any other filing status. 2012 tax forms ez   There are no special rules for nonresident aliens for purposes of Additional Medicare Tax. 2012 tax forms ez Wages, RRTA compensation, and self-employment income that are subject to Medicare tax will also be subject to Additional Medicare Tax if in excess of the applicable threshold. 2012 tax forms ez   Your employer is responsible for withholding the 0. 2012 tax forms ez 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000 in the calendar year. 2012 tax forms ez If you intend to file a joint return and you anticipate that you and your spouse's individual wages are not going to be more than $200,000 but your combined wages and self-employment income are going to be more than $250,000, you may want to request additional withholding on Form W-4 and/or make estimated tax payments. 2012 tax forms ez   If you file Form 1040NR, you must pay Additional Medicare Tax if the total of your wages and your self-employment income was more than $125,000 if married (Box 3, 4, or 5 on page 1 of Form 1040NR), or $200,000 if single or qualifying widow(er) (Box 1, 2, or 6 on page 1 of Form 1040NR). 2012 tax forms ez    See Form 8959, Additional Medicare Tax, and the Instructions for Form 8959 to determine whether you are required to pay Additional Medicare Tax. 2012 tax forms ez For more information on Additional Medicare Tax, go to IRS. 2012 tax forms ez gov and enter “Additional Medicare Tax” in the search box. 2012 tax forms ez   Self-employed individuals may also be required to pay Additional Medicare Tax. 2012 tax forms ez See Self-Employment Tax , later. 2012 tax forms ez Students and Exchange Visitors Generally, services performed by you as a nonresident alien temporarily in the United States as a nonimmigrant under subparagraph (F), (J), (M), or (Q) of section 101(a)(15) of the Immigration and Nationality Act are not covered under the social security program if the services are performed to carry out the purpose for which you were admitted to the United States. 2012 tax forms ez This means that there will be no withholding of social security or Medicare taxes from the pay you receive for these services. 2012 tax forms ez These types of services are very limited, and generally include only on-campus work, practical training, and economic hardship employment. 2012 tax forms ez Social security and Medicare taxes will be withheld from your pay for these services if you are considered a resident alien as discussed in chapter 1, even though your nonimmigrant classification (“F,” “J,” “M,” or “Q”) remains the same. 2012 tax forms ez Services performed by a spouse or minor child of nonimmigrant aliens with the classification of “F-2,” “J-2,” “M-2,” and “Q-3” are covered under social security. 2012 tax forms ez Nonresident Alien Students If you are a nonresident alien temporarily admitted to the United States as a student, you generally are not permitted to work for a wage or salary or to engage in business while you are in the United States. 2012 tax forms ez In some cases, a student admitted to the United States in “F-1,” “M-1,” or “J-1” status is granted permission to work. 2012 tax forms ez Social security and Medicare taxes are not withheld from pay for the work unless the student is considered a resident alien. 2012 tax forms ez Any student who is enrolled and regularly attending classes at a school may be exempt from social security and Medicare taxes on pay for services performed for that school. 2012 tax forms ez The U. 2012 tax forms ez S. 2012 tax forms ez Citizenship and Immigration Services (USCIS) permits on-campus work for students in “F-1” status if it does not displace a U. 2012 tax forms ez S. 2012 tax forms ez resident. 2012 tax forms ez On-campus work means work performed on the school's premises. 2012 tax forms ez On-campus work includes work performed at an off-campus location that is educationally affiliated with the school. 2012 tax forms ez On-campus work under the terms of a scholarship, fellowship, or assistantship is considered part of the academic program of a student taking a full course of study and is permitted by the USCIS. 2012 tax forms ez Social security and Medicare taxes are not withheld from pay for this work unless the student is considered a resident alien. 2012 tax forms ez If services performed by a nonresident alien student are not considered as performed to carry out the purpose for which the student was admitted to the United States, social security and Medicare taxes will be withheld from pay for the services unless the pay is exempt under the Internal Revenue Code. 2012 tax forms ez Exchange Visitors Exchange visitors are temporarily admitted to the United States under section 101(a)(15)(J) of the Immigration and Nationality Act. 2012 tax forms ez Social security and Medicare taxes are not withheld on pay for services of an exchange visitor who has been given permission to work and who possesses or obtains a letter of authorization from the sponsor unless the exchange visitor is considered a resident alien. 2012 tax forms ez If services performed by an exchange visitor are not considered as performed to carry out the purpose for which the visitor was admitted to the United States, social security and Medicare taxes are withheld from pay for the services unless the pay is exempt under the Internal Revenue Code. 2012 tax forms ez Nonresident aliens temporarily admitted to the United States as participants in international cultural exchange programs under section 101(a)(15)(Q) of the Immigration and Nationality Act may be exempt from social security and Medicare taxes. 2012 tax forms ez The employer must be the petitioner through whom the alien obtained the “Q” visa. 2012 tax forms ez Social security and Medicare taxes are not withheld from pay for this work unless the alien is considered a resident alien. 2012 tax forms ez Refund of Taxes Withheld in Error If social security or Medicare taxes were withheld in error from pay that is not subject to these taxes, contact the employer who withheld the taxes for a refund. 2012 tax forms ez If you are unable to get a full refund of the amount from your employer, file a claim for refund with the Internal Revenue Service on Form 843, Claim for Refund and Request for Abatement. 2012 tax forms ez Attach the following items to Form 843. 2012 tax forms ez A copy of your Form W-2 to prove the amount of social security and Medicare taxes withheld. 2012 tax forms ez A copy of your visa. 2012 tax forms ez Form I-94 (or other documentation showing your dates of arrival or departure). 2012 tax forms ez If you have an F-1 visa, documentation showing permission to work in the U. 2012 tax forms ez S. 2012 tax forms ez If you have a J-1 visa, documentation showing permission to work in the U. 2012 tax forms ez S. 2012 tax forms ez If you are engaged in optional practical training or employment due to severe economic necessity, documentation showing permission to work in the U. 2012 tax forms ez S. 2012 tax forms ez A statement from your employer indicating the amount of the reimbursement your employer provided and the amount of the credit or refund your employer claimed or you authorized your employer to claim. 2012 tax forms ez If you cannot obtain this statement from your employer, you must provide this information on your own statement and explain why you are not attaching a statement from your employer or on Form 8316 claiming your employer will not issue the refund. 2012 tax forms ez If you were exempt from social security and Medicare tax for only part of the year, pay statements showing the tax paid during the period you were exempt. 2012 tax forms ez File Form 843 (with attachments) with the Department of the Treasury, Internal Revenue Service Center, Ogden, UT 84201-0038. 2012 tax forms ez Do not use Form 843 to request a refund of Additional Medicare Tax. 2012 tax forms ez If Additional Medicare Tax was withheld from your pay in error, you can claim a credit for any withheld Additional Medicare Tax against the total tax liability shown on your tax return by filing Form 8959 with Form 1040 or 1040NR. 2012 tax forms ez If Additional Medicare Tax was withheld in error in a prior year for which you already filed Form 1040 or 1040NR, you must file Form 1040X, Amended U. 2012 tax forms ez S. 2012 tax forms ez Individual Income Tax Return, for the prior year in which the wages or compensation were originally received to recover the Additional Medicare Tax withheld in error. 2012 tax forms ez See the Instructions for Form 1040X. 2012 tax forms ez Agricultural Workers Agricultural workers temporarily admitted into the United States on H-2A visas are exempt from social security and Medicare taxes on compensation paid to them for services performed in connection with the H-2A visa. 2012 tax forms ez You can find more information about not having tax withheld at www. 2012 tax forms ez irs. 2012 tax forms ez gov/Individuals/International-Taxpayers/Foreign-Agricultural-Workers. 2012 tax forms ez Self-Employment Tax Self-employment tax is the social security and Medicare taxes for individuals who are self-employed. 2012 tax forms ez Nonresident aliens are not subject to self-employment tax unless an international social security agreement in effect determines that they are covered under the U. 2012 tax forms ez S. 2012 tax forms ez social security system. 2012 tax forms ez Residents of the U. 2012 tax forms ez S. 2012 tax forms ez Virgin Islands, Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, or American Samoa are considered U. 2012 tax forms ez S. 2012 tax forms ez residents for this purpose and are subject to the self-employment tax. 2012 tax forms ez Resident aliens must pay self-employment tax under the same rules that apply to U. 2012 tax forms ez S. 2012 tax forms ez citizens. 2012 tax forms ez However, a resident alien employed by an international organization, a foreign government, or a wholly-owned instrumentality of a foreign government is not subject to the self-employment tax on income earned in the United States. 2012 tax forms ez Self-employment income you receive while you are a resident alien is subject to self-employment tax even if it was paid for services you performed as a nonresident alien. 2012 tax forms ez Example. 2012 tax forms ez Bill Jones is an author engaged in the business of writing books. 2012 tax forms ez Bill had several books published in a foreign country while he was a citizen and resident of that country. 2012 tax forms ez During 2013, Bill entered the United States as a resident alien. 2012 tax forms ez After becoming a U. 2012 tax forms ez S. 2012 tax forms ez resident, he continued to receive royalties from his foreign publisher. 2012 tax forms ez Bill reports his income and expenses on the cash basis (he reports income on his tax return when received and deducts expenses when paid). 2012 tax forms ez Bill's 2013 self-employment income includes the royalties received after he became a U. 2012 tax forms ez S. 2012 tax forms ez resident even though the books were published while he was a nonresident alien. 2012 tax forms ez This royalty income is subject to self-employment tax. 2012 tax forms ez Reporting self-employment tax. 2012 tax forms ez   Use Schedule SE (Form 1040) to report and figure your self-employment tax. 2012 tax forms ez Then enter the tax on Form 1040, line 56, or Form 1040NR, line 54. 2012 tax forms ez Attach Schedule SE to Form 1040 or Form 1040NR. 2012 tax forms ez Additional Medicare Tax. 2012 tax forms ez   Self-employed individuals must pay a 0. 2012 tax forms ez 9% Additional Medicare Tax on self-employment income that exceeds one of the following threshold amounts (based on your filing status): Married filing jointly — $250,000; Married filing separately — $125,000; Single, Head of household, or Qualifying widow(er) — $200,000. 2012 tax forms ez   If you have both wages and self-employment income, the threshold amount for applying the Additional Medicare Tax on the self-employment income is reduced (but not below zero) by the amount of wages subject to Additional Medicare Tax. 2012 tax forms ez A self-employment loss should not be considered for purposes of this tax   If you file Form 1040NR, you must pay Additional Medicare Tax if the total of your wages and your self-employment income was more than $125,000 if married (Box 3, 4, or 5 on page 1 of Form 1040NR), or $200,000 if single or qualifying widow(er) (Box 1, 2, or 6 on page 1 of Form 1040NR). 2012 tax forms ez   See Form 8959, Additional Medicare Tax, and the Instructions for Form 8959 to determine whether you are required to pay Additional Medicare Tax. 2012 tax forms ez For more information on Additional Medicare Tax, go to IRS. 2012 tax forms ez gov and enter “Additional Medicare Tax” in the search box. 2012 tax forms ez Deduction for employer-equivalent portion of self-employment tax. 2012 tax forms ez   If you must pay self-employment tax, you can deduct a portion of the self-employment tax paid in figuring your adjusted gross income. 2012 tax forms ez This deduction is figured on Schedule SE (Form 1040). 2012 tax forms ez Note. 2012 tax forms ez No portion of the Additional Medicare Tax is deductible for self-employment tax. 2012 tax forms ez More information. 2012 tax forms ez   Get Publication 334, Tax Guide for Small Business, for more information about self-employment tax. 2012 tax forms ez International Social Security Agreements The United States has entered into social security agreements with foreign countries to coordinate social security coverage and taxation of workers employed for part or all of their working careers in one of the countries. 2012 tax forms ez These agreements are commonly referred to as totalization agreements. 2012 tax forms ez Under these agreements, dual coverage and dual contributions (taxes) for the same work are eliminated. 2012 tax forms ez The agreements generally make sure that social security taxes (including self-employment tax) are paid only to one country. 2012 tax forms ez Agreements are in effect with the following countries. 2012 tax forms ez Australia. 2012 tax forms ez Austria. 2012 tax forms ez Belgium. 2012 tax forms ez Canada. 2012 tax forms ez Chile. 2012 tax forms ez Czech Republic. 2012 tax forms ez Denmark. 2012 tax forms ez Finland. 2012 tax forms ez France. 2012 tax forms ez Germany. 2012 tax forms ez Greece. 2012 tax forms ez Ireland. 2012 tax forms ez Italy. 2012 tax forms ez Japan. 2012 tax forms ez Korea, South. 2012 tax forms ez Luxembourg. 2012 tax forms ez The Netherlands. 2012 tax forms ez Norway. 2012 tax forms ez Poland. 2012 tax forms ez Portugal. 2012 tax forms ez Spain. 2012 tax forms ez Sweden. 2012 tax forms ez Switzerland. 2012 tax forms ez The United Kingdom. 2012 tax forms ez Agreements with other countries are expected to enter into force in the future. 2012 tax forms ez Employees. 2012 tax forms ez   Generally, under these agreements, you are subject to social security taxes only in the country where you are working. 2012 tax forms ez However, if you are temporarily sent to work for the same employer in the United States and your pay would normally be subject to social security taxes in both countries, most agreements provide that you remain covered only by the social security system of the country from which you were sent. 2012 tax forms ez You can get more information on any agreement by contacting the U. 2012 tax forms ez S. 2012 tax forms ez Social Security Administration at the address given later. 2012 tax forms ez If you have access to the Internet, you can get more information at www. 2012 tax forms ez socialsecurity. 2012 tax forms ez gov/international. 2012 tax forms ez   To establish that your pay is subject only to foreign social security taxes and is exempt from U. 2012 tax forms ez S. 2012 tax forms ez social security taxes (including the Medicare tax) under an agreement, you or your employer should request a certificate of coverage from the appropriate agency of the foreign country. 2012 tax forms ez This will usually be the same agency to which you or your employer pays your foreign social security taxes. 2012 tax forms ez The foreign agency will be able to tell you what information is needed for them to issue the certificate. 2012 tax forms ez Your employer should keep a copy of the certificate because it may be needed to show why you are exempt from U. 2012 tax forms ez S. 2012 tax forms ez social security taxes. 2012 tax forms ez Only wages paid on or after the effective date of the agreement can be exempt from U. 2012 tax forms ez S. 2012 tax forms ez social security taxes. 2012 tax forms ez    Some of the countries with which the United States has agreements will not issue certificates of coverage. 2012 tax forms ez In this case, either you or your employer should request a statement that your wages are not covered by the U. 2012 tax forms ez S. 2012 tax forms ez social security system. 2012 tax forms ez Request the statement from the following address. 2012 tax forms ez U. 2012 tax forms ez S. 2012 tax forms ez Social Security Administration Office of International Programs P. 2012 tax forms ez O. 2012 tax forms ez Box 17741 Baltimore, MD 21235-7741 Self-employed individuals. 2012 tax forms ez   Under most agreements, self-employed individuals are covered by the social security system of the country where they reside. 2012 tax forms ez However, under some agreements, you may be exempt from U. 2012 tax forms ez S. 2012 tax forms ez self-employment tax if you temporarily transfer your business activity to or from the United States. 2012 tax forms ez   If you believe that your self-employment income is subject only to U. 2012 tax forms ez S. 2012 tax forms ez self-employment tax and is exempt from foreign social security taxes, request a certificate of coverage from the U. 2012 tax forms ez S. 2012 tax forms ez Social Security Administration at the address given earlier. 2012 tax forms ez This certificate will establish your exemption from foreign social security taxes. 2012 tax forms ez   To establish that your self-employment income is subject only to foreign social security taxes and is exempt from U. 2012 tax forms ez S. 2012 tax forms ez self-employment tax, request a certificate of coverage from the appropriate agency of the foreign country. 2012 tax forms ez If the foreign country will not issue the certificate, you should request a statement that your income is not covered by the U. 2012 tax forms ez S. 2012 tax forms ez social security system. 2012 tax forms ez Request it from the U. 2012 tax forms ez S. 2012 tax forms ez Social Security Administration at the address given earlier. 2012 tax forms ez Attach a photocopy of either statement to Form 1040 each year you are exempt. 2012 tax forms ez Also print “Exempt, see attached statement” on the line for self-employment tax. 2012 tax forms ez Estimated Tax Form 1040-ES (NR) You may have income from which no U. 2012 tax forms ez S. 2012 tax forms ez income tax is withheld. 2012 tax forms ez Or the amount of tax withheld may be less than the income tax you estimate you will owe at the end of the year. 2012 tax forms ez If so, you may have to pay estimated tax. 2012 tax forms ez Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax and you expect your withholding and certain refundable credits to be less than the smaller of: 90% of the tax to be shown on your 2014 income tax return, or 100% of the tax shown on your 2013 income tax return (if your 2013 return covered all 12 months of the year). 2012 tax forms ez If your adjusted gross income for 2013 was more than $150,000 ($75,000 if your filing status for 2014 is married filing separately), substitute 110% for 100% in (2) above if you are not a farmer or fisherman. 2012 tax forms ez Item (2) does not apply if you did not file a 2013 return. 2012 tax forms ez A nonresident alien should use Form 1040-ES (NR) to figure and pay estimated tax. 2012 tax forms ez If you pay by check, make it payable to the "United States Treasury. 2012 tax forms ez " How to estimate your tax for 2014. 2012 tax forms ez   If you filed a 2013 return on Form 1040NR or Form 1040NR-EZ and expect your income, number of exemptions, and total deductions for 2014 to be nearly the same, you should use your 2013 return as a guide to complete the Estimated Tax Worksheet in the Form 1040-ES (NR) instructions. 2012 tax forms ez If you did not file a return for 2013, or if your income, exemptions, deductions, or credits will be different for 2014, you must estimate these amounts. 2012 tax forms ez Figure your estimated tax liability using the Tax Rate Schedule in the 2014 Form 1040-ES (NR) instructions for your filing status. 2012 tax forms ez Note. 2012 tax forms ez If you expect to be a resident of Puerto Rico during the entire year, use Form 1040-ES or Formulario 1040-ES (PR). 2012 tax forms ez When to pay estimated tax. 2012 tax forms ez   Make your first estimated tax payment by the due date for filing the previous year's Form 1040NR or Form 1040NR-EZ. 2012 tax forms ez If you have wages subject to the same withholding rules that apply to U. 2012 tax forms ez S. 2012 tax forms ez citizens, you must file Form 1040NR or Form 1040NR-EZ and make your first estimated tax payment by April 15, 2014. 2012 tax forms ez If you do not have wages subject to withholding, file your income tax return and make your first estimated tax payment by June 16, 2014. 2012 tax forms ez   If your first estimated tax payment is due April 15, 2014, you can pay your estimated tax in full at that time or in four equal installments by the dates shown next. 2012 tax forms ez 1st installment April 15, 2014 2nd installment June 16, 2014 3rd installment Sept. 2012 tax forms ez 15, 2014 4th installment Jan. 2012 tax forms ez 15, 2015 If your first payment is not due until June 16, 2014, you can pay your estimated tax in full at that time or: ½ of your estimated tax by June 16, 2014, 1/4 of the tax by September 15, 2014, and 1/4 by January 15, 2015. 2012 tax forms ez    You do not have to make the payment due January 15, 2015, if you file your 2014 Form 1040NR or 1040NR-EZ by February 2, 2015, and pay the entire balance due with your return. 2012 tax forms ez Fiscal year. 2012 tax forms ez   If your return is not on a calendar year basis, your due dates are the 15th day of the 4th, 6th, and 9th months of your fiscal year, and the 1st month of the following fiscal year. 2012 tax forms ez If any date falls on a Saturday, Sunday, or legal holiday, use the next day that is not a Saturday, Sunday, or legal holiday. 2012 tax forms ez Changes in income, deductions, or exemptions. 2012 tax forms ez   Even if you are not required to make an estimated tax payment in April or June, your circumstances may change so that you will have to make estimated tax payments later. 2012 tax forms ez This can happen if you receive additional income or if any of your deductions are reduced or eliminated. 2012 tax forms ez If so, see the instructions for Form 1040-ES (NR) and Publication 505 for information on figuring your estimated tax. 2012 tax forms ez Amended estimated tax. 2012 tax forms ez   If, after you have made estimated tax payments, you find your estimated tax is substantially increased or decreased because of a change in your income or exemptions, you should adjust your remaining estimated tax payments. 2012 tax forms ez To do this, see the instructions for Form 1040-ES (NR) and Publication 505. 2012 tax forms ez Penalty for failure to pay estimated income tax. 2012 tax forms ez   You will be subject to a penalty for underpayment of installments of estimated tax except in certain situations. 2012 tax forms ez These situations are explained on Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts. 2012 tax forms ez Prev  Up  Next   Home   More Online Publications