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2012 Tax Software Download

2012 tax software download Publication 514 - Main Content Table of Contents Choosing To Take Credit or DeductionChoice Applies to All Qualified Foreign Taxes Making or Changing Your Choice Why Choose the Credit?Credit for Taxes Paid or Accrued Foreign Currency and Exchange Rates Foreign Tax Redetermination Who Can Take the Credit?U. 2012 tax software download S. 2012 tax software download Citizens Resident Aliens Nonresident Aliens What Foreign Taxes Qualify for the Credit?Tax Must Be Imposed on You You Must Have Paid or Accrued the Tax Tax Must Be the Legal and Actual Foreign Tax Liability Tax Must Be an Income Tax (or Tax in Lieu of Income Tax) Foreign Taxes for Which You Cannot Take a CreditTaxes on Excluded Income Taxes for Which You Can Only Take an Itemized Deduction Taxes on Foreign Mineral Income Taxes From International Boycott Operations Taxes on Combined Foreign Oil and Gas Income Taxes of U. 2012 tax software download S. 2012 tax software download Persons Controlling Foreign Corporations and Partnerships Taxes Related to a Foreign Tax Credit Splitting Event How To Figure the CreditLimit on the Credit Separate Limit Income Allocation of Foreign Taxes Foreign Taxes From a Partnership or an S Corporation Figuring the Limit Qualified Dividends Capital Gains and Losses Allocation of Foreign and U. 2012 tax software download S. 2012 tax software download Losses Tax Treaties Carryback and CarryoverTime Limit on Tax Assessment Claim for Refund Taxes All Credited or All Deducted Married Couples How To Claim the CreditForm 1116 Records To Keep Simple Example — Filled-In Form 1116Part I—Taxable Income or Loss From Sources Outside the United States (for Category Checked Above) Part II—Foreign Taxes Paid or Accrued Part III—Figuring the Credit Part IV—Summary of Credits From Separate Parts III Comprehensive Example — Filled-In Form 1116Foreign earned income. 2012 tax software download Employee business expenses. 2012 tax software download Forms 1116 Computation of Taxable Income Part I—Taxable Income or Loss From Sources Outside the United States (for Category Checked Above) Part II—Foreign Taxes Paid or Accrued Part III—Figuring the Credit Part IV—Summary of Credits From Separate Parts III Unused Foreign Taxes How To Get Tax HelpLow Income Taxpayer Clinics Choosing To Take Credit or Deduction You can choose whether to take the amount of any qualified foreign taxes paid or accrued during the year as a foreign tax credit or as an itemized deduction. 2012 tax software download You can change your choice for each year's taxes. 2012 tax software download To choose the foreign tax credit, in most cases you must complete Form 1116 and attach it to your U. 2012 tax software download S. 2012 tax software download tax return. 2012 tax software download However, you may qualify for the exception that allows you to claim the foreign tax credit without using Form 1116. 2012 tax software download See How To Figure the Credit , later. 2012 tax software download To choose to claim the taxes as an itemized deduction, use Schedule A (Form 1040), Itemized Deductions. 2012 tax software download Figure your tax both ways—claiming the credit and claiming the deduction. 2012 tax software download Then fill out your return the way that benefits you more. 2012 tax software download See Why Choose the Credit, later. 2012 tax software download Choice Applies to All Qualified Foreign Taxes As a general rule, you must choose to take either a credit or a deduction for all qualified foreign taxes. 2012 tax software download If you choose to take a credit for qualified foreign taxes, you must take the credit for all of them. 2012 tax software download You cannot deduct any of them. 2012 tax software download Conversely, if you choose to deduct qualified foreign taxes, you must deduct all of them. 2012 tax software download You cannot take a credit for any of them. 2012 tax software download See What Foreign Taxes Qualify for the Credit , later, for the meaning of qualified foreign taxes. 2012 tax software download There are exceptions to this general rule, which are described next. 2012 tax software download Exceptions for foreign taxes not allowed as a credit. 2012 tax software download   Even if you claim a credit for other foreign taxes, you can deduct any foreign tax that is not allowed as a credit if: You paid the tax to a country for which a credit is not allowed because it provides support for acts of international terrorism, or because the United States does not have or does not conduct diplomatic relations with it or recognize its government and that government is not otherwise eligible to purchase defense articles or services under the Arms Export Control Act, You paid withholding tax on dividends from foreign corporations whose stock you did not hold for the required period of time, You paid withholding tax on income or gain (other than dividends) from property you did not hold for the required period of time, You paid withholding tax on income or gain to the extent you had to make related payments on positions in substantially similar or related property, You participated in or cooperated with an international boycott, You paid taxes in connection with the purchase or sale of oil or gas, or You paid or accrued taxes on income or gain in connection with a covered asset acquisition. 2012 tax software download Covered asset acquisitions include certain acquisitions that result in a stepped-up basis for U. 2012 tax software download S. 2012 tax software download tax purposes. 2012 tax software download For more information, see Internal Revenue Code section 901(m). 2012 tax software download The IRS intends to issue guidance that will explain this provision in greater detail. 2012 tax software download   For more information on these items, see Taxes for Which You Can Only Take an Itemized Deduction , later, under Foreign Taxes for Which You Cannot Take a Credit. 2012 tax software download Foreign taxes that are not income taxes. 2012 tax software download   In most cases, only foreign income taxes qualify for the foreign tax credit. 2012 tax software download Other taxes, such as foreign real and personal property taxes, do not qualify. 2012 tax software download But you may be able to deduct these other taxes even if you claim the foreign tax credit for foreign income taxes. 2012 tax software download   In most cases, you can deduct these other taxes only if they are expenses incurred in a trade or business or in the production of income. 2012 tax software download However, you can deduct foreign real property taxes that are not trade or business expenses as an itemized deduction on Schedule A (Form 1040). 2012 tax software download Carrybacks and carryovers. 2012 tax software download   There is a limit on the credit you can claim in a tax year. 2012 tax software download If your qualified foreign taxes exceed the credit limit, you may be able to carry over or carry back the excess to another tax year. 2012 tax software download If you deduct qualified foreign taxes in a tax year, you cannot use a carryback or carryover in that year. 2012 tax software download That is because you cannot take both a deduction and a credit for qualified foreign taxes in the same tax year. 2012 tax software download   For more information on the limit, see How To Figure the Credit , later. 2012 tax software download For more information on carrybacks and carryovers, see Carryback and Carryover , later. 2012 tax software download Making or Changing Your Choice You can make or change your choice to claim a deduction or credit at any time during the period within 10 years from the regular due date for filing the return (without regard to any extension of time to file) for the tax year in which the taxes were actually paid or accrued. 2012 tax software download You make or change your choice on your tax return (or on an amended return) for the year your choice is to be effective. 2012 tax software download Example. 2012 tax software download You paid foreign taxes for the last 13 years and chose to deduct them on your U. 2012 tax software download S. 2012 tax software download income tax returns. 2012 tax software download You were timely in both filing your returns and paying your U. 2012 tax software download S. 2012 tax software download tax liability. 2012 tax software download In February 2013, you file an amended return for tax year 2002 choosing to take a credit for your 2002 foreign taxes because you now realize that the credit is more advantageous than the deduction for that year. 2012 tax software download Because the regular due date of your 2002 return was April 15, 2003, this choice is timely (within 10 years). 2012 tax software download Because there is a limit on the credit for your 2002 foreign tax, you have unused 2002 foreign taxes. 2012 tax software download Ordinarily, you first carry back unused foreign taxes arising in 2002 to, and claim them as a credit in, the 2 preceding tax years. 2012 tax software download If you are unable to claim all of them in those 2 years, you carry them forward to the 10 years following the year in which they arose. 2012 tax software download Because you originally chose to deduct your foreign taxes and the 10-year period for changing the choice for 2000 and 2001 has passed, you cannot change your choice and carry the unused 2002 foreign taxes back to tax years 2000 and 2001. 2012 tax software download Because the 10-year periods for changing the choice have not passed for your 2003 through 2012 income tax returns, you can still choose to claim the credit for those years and carry forward any unused 2002 foreign taxes. 2012 tax software download However, you must reduce the unused 2002 foreign taxes that you carry forward by the amount that would have been allowed as a carryback if you had timely carried back the foreign tax to tax years 2000 and 2001. 2012 tax software download You cannot take a credit or a deduction for foreign taxes paid on income you exclude under the foreign earned income exclusion or the foreign housing exclusion. 2012 tax software download See Foreign Earned Income and Housing Exclusions under Foreign Taxes for Which You Cannot Take a Credit, later. 2012 tax software download Why Choose the Credit? The foreign tax credit is intended to relieve you of a double tax burden when your foreign source income is taxed by both the United States and the foreign country. 2012 tax software download In most cases, if the foreign tax rate is higher than the U. 2012 tax software download S. 2012 tax software download rate, there will be no U. 2012 tax software download S. 2012 tax software download tax on the foreign income. 2012 tax software download If the foreign tax rate is lower than the U. 2012 tax software download S. 2012 tax software download rate, U. 2012 tax software download S. 2012 tax software download tax on the foreign income will be limited to the difference between the rates. 2012 tax software download The foreign tax credit can only reduce U. 2012 tax software download S. 2012 tax software download taxes on foreign source income; it cannot reduce U. 2012 tax software download S. 2012 tax software download taxes on U. 2012 tax software download S. 2012 tax software download source income. 2012 tax software download Although no one rule covers all situations, in most cases it is better to take a credit for qualified foreign taxes than to deduct them as an itemized deduction. 2012 tax software download This is because: A credit reduces your actual U. 2012 tax software download S. 2012 tax software download income tax on a dollar-for-dollar basis, while a deduction reduces only your income subject to tax, You can choose to take the foreign tax credit even if you do not itemize your deductions. 2012 tax software download You then are allowed the standard deduction in addition to the credit, and If you choose to take the foreign tax credit, and the taxes paid or accrued exceed the credit limit for the tax year, you may be able to carry over or carry back the excess to another tax year. 2012 tax software download (See Limit on credit under How To Figure the Credit, later. 2012 tax software download ) Example 1. 2012 tax software download For 2013, you and your spouse have adjusted gross income of $80,300, including $20,000 of dividend income from foreign sources. 2012 tax software download None of the dividends are qualified dividends. 2012 tax software download You file a joint return and can claim two $3,900 exemptions. 2012 tax software download You had to pay $2,000 in foreign income taxes on the dividend income. 2012 tax software download If you take the foreign taxes as an itemized deduction, your total itemized deductions are $15,000. 2012 tax software download Your taxable income then is $57,500 and your tax is $7,736. 2012 tax software download If you take the credit instead, your itemized deductions are only $13,000. 2012 tax software download Your taxable income then is $59,500 and your tax before the credit is $8,036. 2012 tax software download After the credit, however, your tax is only $6,036. 2012 tax software download Therefore, your tax is $1,700 lower ($7,736 − $6,036) by taking the credit. 2012 tax software download Example 2. 2012 tax software download In 2013, you receive investment income of $5,000 from a foreign country, which imposes a tax of $1,500 on that income. 2012 tax software download You report on your U. 2012 tax software download S. 2012 tax software download return this income as well as $56,000 of U. 2012 tax software download S. 2012 tax software download source wages and an allowable $49,000 partnership loss from a U. 2012 tax software download S. 2012 tax software download partnership. 2012 tax software download Your share of the partnership's gross income is $25,000 and your share of its expenses is $74,000. 2012 tax software download You are single, entitled to one $3,900 exemption, and have other itemized deductions of $6,850. 2012 tax software download If you deduct the foreign tax on your U. 2012 tax software download S. 2012 tax software download return, your taxable income is a negative $250 ($5,000 + $56,000 − $49,000 − $1,500 − $6,850 − $3,900) and your tax is $0. 2012 tax software download If you take the credit instead, your taxable income is $1,250 ($5,000 + $56,000 − $49,000 − $3,900 − $6,850) and your tax before the credit is $126. 2012 tax software download You can take a credit of only $113 because of limits discussed later. 2012 tax software download Your tax after the credit is $13 ($126 − $113), which is $13 more than if you deduct the foreign tax. 2012 tax software download If you choose the credit, you will have unused foreign taxes of $1,387 ($1,500 − $113). 2012 tax software download When deciding whether to take the credit or the deduction this year, you will need to consider whether you can benefit from a carryback or carryover of that unused foreign tax. 2012 tax software download Credit for Taxes Paid or Accrued You can claim the credit for a qualified foreign tax in the tax year in which you pay it or accrue it, depending on your method of accounting. 2012 tax software download “Tax year” refers to the tax year for which your U. 2012 tax software download S. 2012 tax software download return is filed, not the tax year for which your foreign return is filed. 2012 tax software download Accrual method of accounting. 2012 tax software download   If you use an accrual method of accounting, you can claim the credit only in the year in which you accrue the tax. 2012 tax software download You are using an accrual method of accounting if you report income when you earn it, rather than when you receive it, and you deduct your expenses when you incur them, rather than when you pay them. 2012 tax software download   In most cases, foreign taxes accrue when all the events have taken place that fix the amount of the tax and your liability to pay it. 2012 tax software download Generally, this occurs on the last day of the tax year for which your foreign return is filed. 2012 tax software download Contesting your foreign tax liability. 2012 tax software download   If you are contesting your foreign tax liability, you cannot accrue it and take a credit until the amount of foreign tax due is finally determined. 2012 tax software download However, if you choose to pay the tax liability you are contesting, you can take a credit for the amount you pay before a final determination of foreign tax liability is made. 2012 tax software download Once your liability is determined, the foreign tax credit is allowable for the year to which the foreign tax relates. 2012 tax software download If the amount of foreign taxes taken as a credit differs from the final foreign tax liability, you may have to adjust the credit, as discussed later under Foreign Tax Redetermination . 2012 tax software download You may have to post a bond. 2012 tax software download   If you claim a credit for taxes accrued but not paid, you may have to post an income tax bond to guarantee your payment of any tax due in the event the amount of foreign tax paid differs from the amount claimed. 2012 tax software download   The IRS can request this bond at any time without regard to the Time Limit on Tax Assessment discussed later under Carryback and Carryover. 2012 tax software download Cash method of accounting. 2012 tax software download   If you use the cash method of accounting, you can choose to take the credit either in the year you pay the tax or in the year you accrue it. 2012 tax software download You are using the cash method of accounting if you report income in the year you actually or constructively receive it, and deduct expenses in the year you pay them. 2012 tax software download Choosing to take credit in the year taxes accrue. 2012 tax software download   Even if you use the cash method of accounting, you can choose to take a credit for foreign taxes in the year they accrue. 2012 tax software download You make the choice by checking the box in Part II of Form 1116. 2012 tax software download Once you make that choice, you must follow it in all later years and take a credit for foreign taxes in the year they accrue. 2012 tax software download   In addition, the choice to take the credit when foreign taxes accrue applies to all foreign taxes qualifying for the credit. 2012 tax software download You cannot take a credit for some foreign taxes when paid and take a credit for others when accrued. 2012 tax software download   If you make the choice to take the credit when foreign taxes accrue and pay them in a later year, you cannot claim a deduction for any part of the previously accrued taxes. 2012 tax software download Credit based on taxes paid in earlier year. 2012 tax software download   If, in earlier years, you took the credit based on taxes paid, and this year you choose to take the credit based on taxes accrued, you may be able to take the credit this year for taxes from more than one year. 2012 tax software download Example. 2012 tax software download Last year you took the credit based on taxes paid. 2012 tax software download This year you chose to take the credit based on taxes accrued. 2012 tax software download During the year you paid foreign income taxes owed for last year. 2012 tax software download You also accrued foreign income taxes for this year that you did not pay by the end of the year. 2012 tax software download You can base the credit on your return for this year on both last year's taxes that you paid and this year's taxes that you accrued. 2012 tax software download Foreign Currency and Exchange Rates U. 2012 tax software download S. 2012 tax software download income tax is imposed on income expressed in U. 2012 tax software download S. 2012 tax software download dollars, while in most cases the foreign tax is imposed on income expressed in foreign currency. 2012 tax software download Therefore, fluctuations in the value of the foreign currency relative to the U. 2012 tax software download S. 2012 tax software download dollar may affect the foreign tax credit. 2012 tax software download Translating foreign currency into U. 2012 tax software download S. 2012 tax software download dollars. 2012 tax software download   If you receive all or part of your income or pay some or all of your expenses in foreign currency, you must translate the foreign currency into U. 2012 tax software download S. 2012 tax software download dollars. 2012 tax software download How and when you do this depends on your functional currency. 2012 tax software download In most cases, your functional currency is the U. 2012 tax software download S. 2012 tax software download dollar unless you are required to use the currency of a foreign country. 2012 tax software download   You must make all federal income tax determinations in your functional currency. 2012 tax software download The U. 2012 tax software download S. 2012 tax software download dollar is the functional currency for all taxpayers except some qualified business units. 2012 tax software download A qualified business unit is a separate and clearly identified unit of a trade or business that maintains separate books and records. 2012 tax software download Unless you are self-employed, your functional currency is the U. 2012 tax software download S. 2012 tax software download dollar. 2012 tax software download   Even if you are self-employed and have a qualified business unit, your functional currency is the U. 2012 tax software download S. 2012 tax software download dollar if any of the following apply. 2012 tax software download You conduct the business primarily in dollars. 2012 tax software download The principal place of business is located in the United States. 2012 tax software download You choose to or are required to use the dollar as your functional currency. 2012 tax software download The business books and records are not kept in the currency of the economic environment in which a significant part of the business activities is conducted. 2012 tax software download   If your functional currency is the U. 2012 tax software download S. 2012 tax software download dollar, you must immediately translate into dollars all items of income, expense, etc. 2012 tax software download , that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax. 2012 tax software download If there is more than one exchange rate, use the one that most properly reflects your income. 2012 tax software download In most cases, you can get exchange rates from banks and U. 2012 tax software download S. 2012 tax software download Embassies. 2012 tax software download   If your functional currency is not the U. 2012 tax software download S. 2012 tax software download dollar, make all income tax determinations in your functional currency. 2012 tax software download At the end of the year, translate the results, such as income or loss, into U. 2012 tax software download S. 2012 tax software download dollars to report on your income tax return. 2012 tax software download    For more information, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Rate of exchange for foreign taxes paid. 2012 tax software download   Use the rate of exchange in effect on the date you paid the foreign taxes to the foreign country unless you meet the exception discussed next. 2012 tax software download If your tax was withheld in foreign currency, use the rate of exchange in effect for the date on which the tax was withheld. 2012 tax software download If you make foreign estimated tax payments, you use the rate of exchange in effect for the date on which you made the estimated tax payment. 2012 tax software download   The exchange rate rules discussed here apply even if the foreign taxes are paid or accrued with respect to a foreign tax credit splitting event (discussed later). 2012 tax software download Exception. 2012 tax software download   If you claim the credit for foreign taxes on an accrual basis, in most cases you must use the average exchange rate for the tax year to which the taxes relate. 2012 tax software download This rule applies to accrued taxes relating to tax years beginning after 1997 and only under the following conditions. 2012 tax software download The foreign taxes are paid on or after the first day of the tax year to which they relate. 2012 tax software download The foreign taxes are paid not later than 2 years after the close of the tax year to which they relate. 2012 tax software download The foreign tax liability is not denominated in an inflationary currency (defined in the Form 1116 instructions). 2012 tax software download (This condition applies to taxes paid or accrued in tax years beginning after November 6, 2007. 2012 tax software download )   For all other foreign taxes, you should use the exchange rate in effect on the date you paid them. 2012 tax software download Election to use exchange rate on date paid. 2012 tax software download   If you have accrued foreign taxes that you are otherwise required to convert using the average exchange rate, you may elect to use the exchange rate in effect on the date the foreign taxes are paid if the taxes are denominated in a nonfunctional foreign currency. 2012 tax software download If any of the accrued taxes are unpaid, you must translate them into U. 2012 tax software download S. 2012 tax software download dollars using the exchange rate on the last day of the U. 2012 tax software download S. 2012 tax software download tax year to which those taxes relate. 2012 tax software download You may make the election for all nonfunctional currency foreign income taxes or only those nonfunctional currency foreign income taxes that are attributable to qualified business units with a U. 2012 tax software download S. 2012 tax software download dollar functional currency. 2012 tax software download Once made, the election applies to the tax year for which made and all subsequent tax years unless revoked with the consent of the IRS. 2012 tax software download The election is available for tax years beginning after 2004. 2012 tax software download It must be made by the due date (including extensions) for filing the tax return for the first tax year to which the election applies. 2012 tax software download Make the election by attaching a statement to the applicable tax return. 2012 tax software download The statement must identify whether the election is made for all foreign taxes or only for foreign taxes attributable to qualified business units with a U. 2012 tax software download S. 2012 tax software download dollar functional currency. 2012 tax software download Foreign Tax Redetermination A foreign tax redetermination is any change in your foreign tax liability that may affect your U. 2012 tax software download S. 2012 tax software download foreign tax credit claimed. 2012 tax software download The year in which to claim the credit remains the year to which the foreign taxes paid or accrued relate, even if the change in foreign tax liability occurs in a later year. 2012 tax software download If a foreign tax redetermination occurs, a redetermination of your U. 2012 tax software download S. 2012 tax software download tax liability is required if any of the following conditions apply. 2012 tax software download The accrued taxes when paid differ from the amounts claimed as a credit. 2012 tax software download The accrued taxes you claimed as a credit in one tax year are not paid within 2 years after the end of that tax year. 2012 tax software download If this applies to you, you must reduce the credit previously claimed by the amount of the unpaid taxes. 2012 tax software download You will not be allowed a credit for the unpaid taxes until you pay them. 2012 tax software download When you pay the accrued taxes, a new foreign tax redetermination occurs and you must translate the taxes into U. 2012 tax software download S. 2012 tax software download dollars using the exchange rate as of the date they were paid. 2012 tax software download The foreign tax credit is allowed for the year to which the foreign tax relates. 2012 tax software download See Rate of exchange for foreign taxes paid , earlier, under Foreign Currency and Exchange Rates. 2012 tax software download The foreign taxes you paid are refunded in whole or in part. 2012 tax software download For taxes taken into account when accrued but translated into dollars on the date of payment, the dollar value of the accrued tax differs from the dollar value of the tax paid because of fluctuations in the exchange rate between the date of accrual and the date of payment. 2012 tax software download However, no redetermination is required if the change in foreign tax liability for each foreign country is solely attributable to exchange rate fluctuations and is less than the smaller of: $10,000, or 2% of the total dollar amount of the foreign tax initially accrued for that foreign country for the U. 2012 tax software download S. 2012 tax software download tax year. 2012 tax software download In this case, you must adjust your U. 2012 tax software download S. 2012 tax software download tax in the tax year in which the accrued foreign taxes are paid. 2012 tax software download Notice to the Internal Revenue Service (IRS) of Redetermination You are required to notify the IRS about a foreign tax credit redetermination that affects your U. 2012 tax software download S. 2012 tax software download tax liability for each tax year affected by the redetermination. 2012 tax software download In most cases, you must file Form 1040X, Amended U. 2012 tax software download S. 2012 tax software download Individual Income Tax Return, with a revised Form 1116 and a statement that contains information sufficient for the IRS to redetermine your U. 2012 tax software download S. 2012 tax software download tax liability for the year or years affected. 2012 tax software download See Contents of statement , later. 2012 tax software download You are not required to attach Form 1116 for a tax year affected by a redetermination if: The amount of your creditable taxes paid or accrued during the tax year is not more than $300 ($600 if married filing a joint return) as a result of the foreign tax redetermination, and You meet the requirements listed under Exemption from foreign tax credit limit under How To Figure the Credit, later. 2012 tax software download There are other exceptions to this requirement. 2012 tax software download They are discussed later under Due date of notification to IRS . 2012 tax software download Contents of statement. 2012 tax software download   The statement must include all of the following. 2012 tax software download Your name, address, and taxpayer identification number. 2012 tax software download The tax year or years that are affected by the foreign tax redetermination. 2012 tax software download The date or dates the foreign taxes were accrued, if applicable. 2012 tax software download The date or dates the foreign taxes were paid. 2012 tax software download The amount of foreign taxes paid or accrued on each date (in foreign currency) and the exchange rate used to translate each amount. 2012 tax software download Information sufficient to determine any interest due from or owing to you, including the amount of any interest paid to you by the foreign government and the dates received. 2012 tax software download   In the case of any foreign taxes that were not paid before the date two years after the close of the tax year to which those taxes relate, you must provide the amount of those taxes in foreign currency and the exchange rate that was used to translate that amount when originally claimed as a credit. 2012 tax software download   If any foreign tax was refunded in whole or in part, you must provide the date and amount (in foreign currency) of each refund, the exchange rate that was used to translate each amount when originally claimed as a credit, and the exchange rate for the date the refund was received (for purposes of computing foreign currency gain or loss under Internal Revenue Code section 988). 2012 tax software download Due date of notification to IRS. 2012 tax software download   If you pay less foreign tax than you originally claimed a credit for, in most cases you must file a notification by the due date (with extensions) of your original return for your tax year in which the foreign tax redetermination occurred. 2012 tax software download There is no limit on the time the IRS has to redetermine and assess the correct U. 2012 tax software download S. 2012 tax software download tax due. 2012 tax software download If you pay more foreign tax than you originally claimed a credit for, you have 10 years to file a claim for refund of U. 2012 tax software download S. 2012 tax software download taxes. 2012 tax software download See Time Limit on Refund Claims , later. 2012 tax software download   Exceptions to this due date are explained in the next two paragraphs. 2012 tax software download Multiple redeterminations of U. 2012 tax software download S. 2012 tax software download tax liability for same tax year. 2012 tax software download   Where more than one foreign tax redetermination requires a redetermination of U. 2012 tax software download S. 2012 tax software download tax liability for the same tax year and those redeterminations occur in the same tax year or within two consecutive tax years, you can file for that tax year one notification (Form 1040X with a Form 1116 and the required statement) that reflects all those tax redeterminations. 2012 tax software download If you choose to file one notification, the due date for that notification is the due date of the original return (with extensions) for the year in which the first foreign tax redetermination that reduced your foreign tax liability occurred. 2012 tax software download However, foreign tax redeterminations with respect to the tax year for which a redetermination of U. 2012 tax software download S. 2012 tax software download tax liability is required may occur after the due date for providing that notification. 2012 tax software download In this situation, you may have to file more than one Form 1040X for that tax year. 2012 tax software download Additional U. 2012 tax software download S. 2012 tax software download tax due eliminated by foreign tax credit carryback or carryover. 2012 tax software download   If a foreign tax redetermination requires a redetermination of U. 2012 tax software download S. 2012 tax software download tax liability that would otherwise result in an additional amount of U. 2012 tax software download S. 2012 tax software download tax due, but the additional tax is eliminated by a carryback or carryover of an unused foreign tax, you do not have to amend your tax return for the year affected by the redetermination. 2012 tax software download Instead, you can notify the IRS by attaching a statement to the original return for the tax year in which the foreign tax redetermination occurred. 2012 tax software download You must file the statement by the due date (with extensions) of that return. 2012 tax software download The statement must show the amount of the unused foreign taxes paid or accrued and a detailed schedule showing the computation of the carryback or carryover (including the amounts carried back or over to the year for which a redetermination on U. 2012 tax software download S. 2012 tax software download tax liability is required). 2012 tax software download Failure-to-notify penalty. 2012 tax software download   If you fail to notify the IRS of a foreign tax redetermination and cannot show reasonable cause for the failure, you may have to pay a penalty. 2012 tax software download   For each month, or part of a month, that the failure continues, you pay a penalty of 5% of the tax due resulting from a redetermination of your U. 2012 tax software download S. 2012 tax software download tax. 2012 tax software download This penalty cannot be more than 25% of the tax due. 2012 tax software download Foreign tax refund. 2012 tax software download   If you receive a foreign tax refund without interest from the foreign government, you will not have to pay interest on the amount of tax due resulting from the adjustment to your U. 2012 tax software download S. 2012 tax software download tax for the time before the date of the refund. 2012 tax software download   However, if you receive a foreign tax refund with interest, you must pay interest to the IRS up to the amount of the interest paid to you by the foreign government. 2012 tax software download The interest you must pay cannot be more than the interest you would have had to pay on taxes that were unpaid for any other reason for the same period. 2012 tax software download Interest also is owed from the time you receive a refund until you pay the additional tax due. 2012 tax software download Foreign tax imposed on foreign refund. 2012 tax software download   If your foreign tax refund is taxed by the foreign country, you cannot take a separate credit or deduction for this additional foreign tax. 2012 tax software download However, when you refigure the foreign tax credit taken for the original foreign tax, reduce the amount of the refund by the foreign tax paid on the refund. 2012 tax software download Example. 2012 tax software download You paid a foreign income tax of $3,000 in 2011, and received a foreign tax refund of $500 in 2013 on which a foreign tax of $100 was imposed. 2012 tax software download When you refigure your credit for 2011, you must reduce the $3,000 you paid by $400. 2012 tax software download Time Limit on Refund Claims You have 10 years to file a claim for refund of U. 2012 tax software download S. 2012 tax software download tax if you find that you paid or accrued a larger foreign tax than you claimed a credit for. 2012 tax software download The 10-year period begins the day after the regular due date for filing the return (without extensions) for the year in which the taxes were actually paid or accrued. 2012 tax software download You have 10 years to file your claim regardless of whether you claim the credit for taxes paid or taxes accrued. 2012 tax software download The 10-year period applies to claims for refund or credit based on: Fixing math errors in figuring qualified foreign taxes, Reporting qualified foreign taxes not originally reported on the return, or Any other change in the size of the credit (including one caused by correcting the foreign tax credit limit). 2012 tax software download The special 10-year period also applies to making or changing your choice to claim a deduction or credit for foreign taxes. 2012 tax software download See Making or Changing Your Choice discussed earlier under Choosing To Take Credit or Deduction. 2012 tax software download Who Can Take the Credit? U. 2012 tax software download S. 2012 tax software download citizens, resident aliens, and nonresident aliens who paid foreign income tax and are subject to U. 2012 tax software download S. 2012 tax software download tax on foreign source income may be able to take a foreign tax credit. 2012 tax software download U. 2012 tax software download S. 2012 tax software download Citizens If you are a U. 2012 tax software download S. 2012 tax software download citizen, you are taxed by the United States on your worldwide income wherever you live. 2012 tax software download You are normally entitled to take a credit for foreign taxes you pay or accrue. 2012 tax software download Resident Aliens If you are a resident alien of the United States, you can take a credit for foreign taxes subject to the same general rules as U. 2012 tax software download S. 2012 tax software download citizens. 2012 tax software download If you are a bona fide resident of Puerto Rico for the entire tax year, you also come under the same rules. 2012 tax software download Usually, you can take a credit only for those foreign taxes imposed on income you actually or constructively received while you had resident alien status. 2012 tax software download For information on alien status, see Publication 519. 2012 tax software download Nonresident Aliens If you are a nonresident alien, you cannot take the credit in most cases. 2012 tax software download However, you may be able to take the credit if: You were a bona fide resident of Puerto Rico during your entire tax year, or You pay or accrue tax to a foreign country or U. 2012 tax software download S. 2012 tax software download possession on income from foreign sources that is effectively connected with a trade or business in the United States. 2012 tax software download But if you must pay tax to a foreign country or U. 2012 tax software download S. 2012 tax software download possession on income from U. 2012 tax software download S. 2012 tax software download sources only because you are a citizen or a resident of that country or U. 2012 tax software download S. 2012 tax software download possession, do not use that tax in figuring the amount of your credit. 2012 tax software download For information on alien status and effectively connected income, see Publication 519. 2012 tax software download What Foreign Taxes Qualify for the Credit? In most cases, the following four tests must be met for any foreign tax to qualify for the credit. 2012 tax software download The tax must be imposed on you. 2012 tax software download You must have paid or accrued the tax. 2012 tax software download The tax must be the legal and actual foreign tax liability. 2012 tax software download The tax must be an income tax (or a tax in lieu of an income tax). 2012 tax software download Certain foreign taxes do not qualify for the credit even if the four tests are met. 2012 tax software download See Foreign Taxes for Which You Cannot Take a Credit, later. 2012 tax software download Tax Must Be Imposed on You You can claim a credit only for foreign taxes that are imposed on you by a foreign country or U. 2012 tax software download S. 2012 tax software download possession. 2012 tax software download For example, a tax that is deducted from your wages is considered to be imposed on you. 2012 tax software download You cannot shift the right to claim the credit by contract or other means. 2012 tax software download Foreign country. 2012 tax software download   A foreign country includes any foreign state and its political subdivisions. 2012 tax software download Income, war profits, and excess profits taxes paid or accrued to a foreign city or province qualify for the foreign tax credit. 2012 tax software download U. 2012 tax software download S. 2012 tax software download possessions. 2012 tax software download   For foreign tax credit purposes, all qualified taxes paid to U. 2012 tax software download S. 2012 tax software download possessions are considered foreign taxes. 2012 tax software download For this purpose, U. 2012 tax software download S. 2012 tax software download possessions include Puerto Rico and American Samoa. 2012 tax software download   When the term “foreign country” is used in this publication, it includes U. 2012 tax software download S. 2012 tax software download possessions unless otherwise stated. 2012 tax software download You Must Have Paid or Accrued the Tax In most cases, you can claim the credit only if you paid or accrued the foreign tax to a foreign country or U. 2012 tax software download S. 2012 tax software download possession. 2012 tax software download However, the paragraphs that follow describe some instances in which you can claim the credit even if you did not directly pay or accrue the tax yourself. 2012 tax software download Joint return. 2012 tax software download   If you file a joint return, you can claim the credit based on the total foreign income taxes paid or accrued by you and your spouse. 2012 tax software download Combined income. 2012 tax software download   If foreign tax is imposed on the combined income of two or more persons (for example, spouses), the tax is allocated among, and considered paid by, these persons on a pro rata basis in proportion to each person's portion of the combined income, as determined under foreign law and Regulations section 1. 2012 tax software download 901-2(f)(3)(iii). 2012 tax software download Combined income with respect to each foreign tax that is imposed on a combined basis (and combined income subject to tax exemption or preferential tax rates) is computed separately, and the tax on that combined income is allocated separately. 2012 tax software download   These rules apply to foreign taxes paid or accrued in tax years beginning after February 14, 2012. 2012 tax software download However, you can choose to apply the new rules to foreign taxes paid or accrued in tax years beginning after December 31, 2010, and before February 15, 2012. 2012 tax software download For more details, see paragraphs (f) and (h) of Regulations section 1. 2012 tax software download 901-2. 2012 tax software download For similar rules applicable to prior tax years, see Regulations section 1. 2012 tax software download 901-2 (revised as of April 1, 2011). 2012 tax software download Example. 2012 tax software download You and your spouse reside in Country X, which imposes income tax on your combined incomes. 2012 tax software download Both of you use the “u” as your functional currency. 2012 tax software download Country X apportions tax based on income. 2012 tax software download You had income of 30,000u and your spouse had income of 20,000u. 2012 tax software download Your filing status on your U. 2012 tax software download S. 2012 tax software download income tax return is married filing separately. 2012 tax software download You can claim only 60% (30,000u/50,000u) of the foreign taxes imposed on your income on your U. 2012 tax software download S income tax return. 2012 tax software download Your spouse can claim only 40% (20,000u/50,000u). 2012 tax software download Partner or S corporation shareholder. 2012 tax software download   If you are a member of a partnership, or a shareholder in an S corporation, you can claim the credit based on your proportionate share of the foreign income taxes paid or accrued by the partnership or the S corporation. 2012 tax software download These amounts will be shown on the Schedule K-1 you receive from the partnership or S corporation. 2012 tax software download However, if you are a shareholder in an S corporation that in turn owns stock in a foreign corporation, you cannot claim a credit for your share of foreign taxes paid by the foreign corporation. 2012 tax software download Beneficiary. 2012 tax software download   If you are a beneficiary of an estate or trust, you may be able to claim the credit based on your proportionate share of foreign income taxes paid or accrued by the estate or trust. 2012 tax software download This amount will be shown on the Schedule K-1 you receive from the estate or trust. 2012 tax software download However, you must show that the tax was imposed on income of the estate and not on income received by the decedent. 2012 tax software download Mutual fund shareholder. 2012 tax software download   If you are a shareholder of a mutual fund or other regulated investment company (RIC), you may be able to claim the credit based on your share of foreign income taxes paid by the fund if it chooses to pass the credit on to its shareholders. 2012 tax software download You should receive from the mutual fund or other RIC a Form 1099-DIV, or similar statement, showing your share of the foreign income, and your share of the foreign taxes paid. 2012 tax software download If you do not receive this information, you will need to contact the fund. 2012 tax software download Controlled foreign corporation shareholder. 2012 tax software download   If you are a shareholder of a controlled foreign corporation and choose to be taxed at corporate rates on the amount you must include in gross income from that corporation, you can claim the credit based on your share of foreign taxes paid or accrued by the controlled foreign corporation. 2012 tax software download If you make this election, you must claim the credit by filing Form 1118, Foreign Tax Credit—Corporations. 2012 tax software download Controlled foreign corporation. 2012 tax software download   A controlled foreign corporation is a foreign corporation in which U. 2012 tax software download S. 2012 tax software download shareholders own more than 50% of the voting power or value of the stock. 2012 tax software download You are considered a U. 2012 tax software download S. 2012 tax software download shareholder if you own, directly or indirectly, 10% or more of the total voting power of all classes of the foreign corporation's stock. 2012 tax software download See Internal Revenue Code sections 951(b) and 958(b) for more information. 2012 tax software download Tax Must Be the Legal and Actual Foreign Tax Liability The amount of foreign tax that qualifies is not necessarily the amount of tax withheld by the foreign country. 2012 tax software download Only the legal and actual foreign tax liability that you paid or accrued during the year qualifies for the credit. 2012 tax software download Foreign tax refund. 2012 tax software download   You cannot take a foreign tax credit for income taxes paid to a foreign country if it is reasonably certain the amount would be refunded, credited, rebated, abated, or forgiven if you made a claim. 2012 tax software download   For example, the United States has tax treaties with many countries allowing U. 2012 tax software download S. 2012 tax software download citizens and residents reductions in the rates of tax of those foreign countries. 2012 tax software download However, some treaty countries require U. 2012 tax software download S. 2012 tax software download citizens and residents to pay the tax figured without regard to the lower treaty rates and then claim a refund for the amount by which the tax actually paid is more than the amount of tax figured using the lower treaty rate. 2012 tax software download The qualified foreign tax is the amount figured using the lower treaty rate and not the amount actually paid, because the excess tax is refundable. 2012 tax software download Subsidy received. 2012 tax software download   Tax payments a foreign country returns to you in the form of a subsidy do not qualify for the foreign tax credit. 2012 tax software download This rule applies even if the subsidy is given to a person related to you, or persons who participated with you in a transaction or a related transaction. 2012 tax software download A subsidy can be provided by any means but must be determined, directly or indirectly, in relation to the amount of tax, or to the base used to figure the tax. 2012 tax software download   The term “subsidy” includes any type of benefit. 2012 tax software download Some ways of providing a subsidy are refunds, credits, deductions, payments, or discharges of obligations. 2012 tax software download Shareholder receiving refund for corporate tax in integrated system. 2012 tax software download   Under some foreign tax laws and treaties, a shareholder is considered to have paid part of the tax that is imposed on the corporation. 2012 tax software download You may be able to claim a refund of these taxes from the foreign government. 2012 tax software download You must include the refund (including any amount withheld) in your income in the year received. 2012 tax software download Any tax withheld from the refund is a qualified foreign tax. 2012 tax software download Example. 2012 tax software download You are a shareholder of a French corporation. 2012 tax software download You receive a $100 refund of the tax paid to France by the corporation on the earnings distributed to you as a dividend. 2012 tax software download The French government imposes a 15% withholding tax ($15) on the refund you received. 2012 tax software download You receive a check for $85. 2012 tax software download You include $100 in your income. 2012 tax software download The $15 of tax withheld is a qualified foreign tax. 2012 tax software download Tax Must Be an Income Tax (or Tax in Lieu of Income Tax) In most cases, only income, war profits, and excess profits taxes (income taxes) qualify for the foreign tax credit. 2012 tax software download Foreign taxes on wages, dividends, interest, and royalties qualify for the credit in most cases. 2012 tax software download Furthermore, foreign taxes on income can qualify even though they are not imposed under an income tax law if the tax is in lieu of an income, war profits, or excess profits tax. 2012 tax software download See Taxes in Lieu of Income Taxes , later. 2012 tax software download Income Tax Simply because the levy is called an income tax by the foreign taxing authority does not make it an income tax for this purpose. 2012 tax software download A foreign levy is an income tax only if it meets both of the following requirements. 2012 tax software download It is a tax; that is, you have to pay it and you get no specific economic benefit (discussed below) from paying it. 2012 tax software download The predominant character of the tax is that of an income tax in the U. 2012 tax software download S. 2012 tax software download sense. 2012 tax software download A foreign levy may meet these requirements even if the foreign tax law differs from U. 2012 tax software download S. 2012 tax software download tax law. 2012 tax software download The foreign law may include in income items that U. 2012 tax software download S. 2012 tax software download law does not include, or it may allow certain exclusions or deductions that U. 2012 tax software download S. 2012 tax software download law does not allow. 2012 tax software download Specific economic benefit. 2012 tax software download   In most cases, you get a specific economic benefit if you receive, or are considered to receive, an economic benefit from the foreign country imposing the levy, and: If there is a generally imposed income tax, the economic benefit is not available on substantially the same terms to all persons subject to the income tax, or If there is no generally imposed income tax, the economic benefit is not available on substantially the same terms to the population of the foreign country in general. 2012 tax software download   You are considered to receive a specific economic benefit if you have a business transaction with a person who receives a specific economic benefit from the foreign country and, under the terms and conditions of the transaction, you receive directly or indirectly all or part of the benefit. 2012 tax software download   However, see the exception discussed later under Pension, unemployment, and disability fund payments . 2012 tax software download Economic benefits. 2012 tax software download   Economic benefits include the following. 2012 tax software download Goods. 2012 tax software download Services. 2012 tax software download Fees or other payments. 2012 tax software download Rights to use, acquire, or extract resources, patents, or other property the foreign country owns or controls. 2012 tax software download Discharges of contractual obligations. 2012 tax software download   In most cases, the right or privilege merely to engage in business is not an economic benefit. 2012 tax software download Dual-capacity taxpayers. 2012 tax software download   If you are subject to a foreign country's levy and you also receive a specific economic benefit from that foreign country, you are a “dual-capacity taxpayer. 2012 tax software download ” As a dual-capacity taxpayer, you cannot claim a credit for any part of the foreign levy, unless you establish that the amount paid under a distinct element of the foreign levy is a tax, rather than a compulsory payment for a direct or indirect specific economic benefit. 2012 tax software download    For more information on how to establish amounts paid under separate elements of a levy, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Pension, unemployment, and disability fund payments. 2012 tax software download   A foreign tax imposed on an individual to pay for retirement, old-age, death, survivor, unemployment, illness, or disability benefits, or for substantially similar purposes, is not payment for a specific economic benefit if the amount of the tax does not depend on the age, life expectancy, or similar characteristics of that individual. 2012 tax software download    No deduction or credit is allowed, however, for social security taxes paid or accrued to a foreign country with which the United States has a social security agreement. 2012 tax software download For more information about these agreements, see Publication 54. 2012 tax software download Soak-up taxes. 2012 tax software download   A foreign tax is not predominantly an income tax and does not qualify for credit to the extent it is a soak-up tax. 2012 tax software download A tax is a soak-up tax to the extent that liability for it depends on the availability of a credit for it against income tax imposed by another country. 2012 tax software download This rule applies only if and to the extent that the foreign tax would not be imposed if the credit were not available. 2012 tax software download Penalties and interest. 2012 tax software download   Amounts paid to a foreign government to satisfy a liability for interest, fines, penalties, or any similar obligation are not taxes and do not qualify for the credit. 2012 tax software download Taxes not based on income. 2012 tax software download   Foreign taxes based on gross receipts or the number of units produced, rather than on realized net income, do not qualify unless they are imposed in lieu of an income tax, as discussed next. 2012 tax software download Taxes based on assets, such as property taxes, do not qualify for the credit. 2012 tax software download Taxes in Lieu of Income Taxes A tax paid or accrued to a foreign country qualifies for the credit if it is imposed in lieu of an income tax otherwise generally imposed. 2012 tax software download A foreign levy is a tax in lieu of an income tax only if: It is not payment for a specific economic benefit as discussed earlier, and The tax is imposed in place of, and not in addition to, an income tax otherwise generally imposed. 2012 tax software download A tax in lieu of an income tax does not have to be based on realized net income. 2012 tax software download A foreign tax imposed on gross income, gross receipts or sales, or the number of units produced or exported can qualify for the credit. 2012 tax software download In most cases, a soak-up tax (discussed earlier) does not qualify as a tax in lieu of an income tax. 2012 tax software download However, if the foreign country imposes a soak-up tax in lieu of an income tax, the amount that does not qualify for foreign tax credit is the lesser of the following amounts. 2012 tax software download The soak-up tax. 2012 tax software download The foreign tax you paid that is more than the amount you would have paid if you had been subject to the generally imposed income tax. 2012 tax software download Foreign Taxes for Which You Cannot Take a Credit This part discusses the foreign taxes for which you cannot take a credit. 2012 tax software download These are: Taxes on excluded income, Taxes for which you can only take an itemized deduction, Taxes on foreign mineral income, Taxes from international boycott operations, A portion of taxes on combined foreign oil and gas income, Taxes of U. 2012 tax software download S. 2012 tax software download persons controlling foreign corporations and partnerships who fail to file required information returns, and Taxes related to a foreign tax splitting event. 2012 tax software download Taxes on Excluded Income You cannot take a credit for foreign taxes paid or accrued on certain income that is excluded from U. 2012 tax software download S. 2012 tax software download gross income. 2012 tax software download Foreign Earned Income and Housing Exclusions You must reduce your foreign taxes available for the credit by the amount of those taxes paid or accrued on income that is excluded from U. 2012 tax software download S. 2012 tax software download income under the foreign earned income exclusion or the foreign housing exclusion. 2012 tax software download See Publication 54 for more information on the foreign earned income and housing exclusions. 2012 tax software download Wages completely excluded. 2012 tax software download   If your wages are completely excluded, you cannot take a credit for any of the foreign taxes paid or accrued on these wages. 2012 tax software download Wages partly excluded. 2012 tax software download   If only part of your wages is excluded, you cannot take a credit for the foreign income taxes allocable to the excluded part. 2012 tax software download You find the amount allocable to your excluded wages by multiplying the foreign tax paid or accrued on foreign earned income received or accrued during the tax year by a fraction. 2012 tax software download   The numerator of the fraction is your foreign earned income and housing amounts excluded under the foreign earned income and housing exclusions for the tax year minus otherwise deductible expenses definitely related and properly apportioned to that income. 2012 tax software download Deductible expenses do not include the foreign housing deduction. 2012 tax software download   The denominator is your total foreign earned income received or accrued during the tax year minus all deductible expenses allocable to that income (including the foreign housing deduction). 2012 tax software download If the foreign law taxes foreign earned income and some other income (for example, earned income from U. 2012 tax software download S. 2012 tax software download sources or a type of income not subject to U. 2012 tax software download S. 2012 tax software download tax), and the taxes on the other income cannot be segregated, the denominator of the fraction is the total amount of income subject to the foreign tax minus deductible expenses allocable to that income. 2012 tax software download Example. 2012 tax software download You are a U. 2012 tax software download S. 2012 tax software download citizen and a cash basis taxpayer, employed by Company X and living in Country A. 2012 tax software download Your records show the following: Foreign earned income received $125,000 Unreimbursed business travel expenses 20,000 Income tax paid to Country A 30,000 Exclusion of foreign earned  income and housing allowance 97,600     Because you can exclude part of your wages, you cannot claim a credit for part of the foreign taxes. 2012 tax software download To find that part, do the following. 2012 tax software download First, find the amount of business expenses allocable to excluded wages and therefore not deductible. 2012 tax software download To do this, multiply the otherwise deductible expenses by a fraction. 2012 tax software download That fraction is the excluded wages over your foreign earned income. 2012 tax software download   $20,000 × $97,600 $125,000 = $15,616             Next, find the numerator of the fraction by which you will multiply the foreign taxes paid. 2012 tax software download To do this, subtract business expenses allocable to excluded wages ($15,616) from excluded wages ($97,600). 2012 tax software download The result is $81,984. 2012 tax software download Then, find the denominator of the fraction by subtracting all your deductible expenses from all your foreign earned income ($125,000 − $20,000 = $105,000). 2012 tax software download Finally, multiply the foreign tax you paid by the resulting fraction. 2012 tax software download   $30,000 × $81,984  $105,000 = $23,424 The amount of Country A tax you cannot take a credit for is $23,424. 2012 tax software download Taxes on Income From Puerto Rico Exempt From U. 2012 tax software download S. 2012 tax software download Tax If you have income from Puerto Rican sources that is not taxable, you must reduce your foreign taxes paid or accrued by the taxes allocable to the exempt income. 2012 tax software download For information on figuring the reduction, see Publication 570. 2012 tax software download Possession Exclusion If you are a bona fide resident of American Samoa and exclude income from sources in American Samoa, you cannot take a credit for the taxes you pay or accrue on the excluded income. 2012 tax software download For more information on this exclusion, see Publication 570. 2012 tax software download Extraterritorial Income Exclusion You cannot take a credit for taxes you pay on qualifying foreign trade income excluded on Form 8873, Extraterritorial Income Exclusion. 2012 tax software download However, see Internal Revenue Code section 943(d) for an exception for certain withholding taxes. 2012 tax software download Taxes for Which You Can Only Take an Itemized Deduction You cannot claim a foreign tax credit for foreign income taxes paid or accrued under the following circumstances. 2012 tax software download However, you can claim an itemized deduction for these taxes. 2012 tax software download See Choosing To Take Credit or Deduction , earlier. 2012 tax software download Taxes Imposed By Sanctioned Countries (Section 901(j) Income) You cannot claim a foreign tax credit for income taxes paid or accrued to any country if the income giving rise to the tax is for a period (the sanction period) during which: The Secretary of State has designated the country as one that repeatedly provides support for acts of international terrorism, The United States has severed or does not conduct diplomatic relations with the country, or The United States does not recognize the country's government, and that government is not otherwise eligible to purchase defense articles or services under the Arms Export Control Act. 2012 tax software download The following countries meet this description for 2013. 2012 tax software download Income taxes paid or accrued to these countries in 2013 do not qualify for the credit. 2012 tax software download Cuba. 2012 tax software download Iran. 2012 tax software download Libya (but see Note later). 2012 tax software download North Korea. 2012 tax software download Sudan. 2012 tax software download Syria. 2012 tax software download Waiver of denial of the credit. 2012 tax software download   A waiver can be granted to a sanctioned country if the President of the United States determines that granting the waiver is in the national interest of the United States and will expand trade and investment opportunities for U. 2012 tax software download S. 2012 tax software download companies in the sanctioned country. 2012 tax software download The President must report to Congress his intentions to grant the waiver and his reasons for granting the waiver not less than 30 days before the date on which the waiver is granted. 2012 tax software download Note. 2012 tax software download Effective December 10, 2004, the President granted a waiver to Libya. 2012 tax software download Income taxes arising on or after this date qualify for the credit if they meet the other requirements in this publication. 2012 tax software download Limit on credit. 2012 tax software download   In figuring the foreign tax credit limit, discussed later, income from a sanctioned country is a separate category of foreign income unless a Presidential waiver is granted. 2012 tax software download You must fill out a separate Form 1116 for this income. 2012 tax software download This will prevent you from claiming a credit for foreign taxes paid or accrued to the sanctioned country. 2012 tax software download Example. 2012 tax software download You lived and worked in Iran until August, when you were transferred to Italy. 2012 tax software download You paid taxes to each country on the income earned in that country. 2012 tax software download You cannot claim a foreign tax credit for the foreign taxes paid on the income earned in Iran. 2012 tax software download Because the income earned in Iran is a separate category of foreign income, you must fill out a separate Form 1116 for that income. 2012 tax software download You cannot take a credit for taxes paid on the income earned in Iran, but that income is taxable by the United States. 2012 tax software download Figuring the credit when a sanction ends. 2012 tax software download    Table 1 lists the countries for which sanctions have ended or for which a Presidential waiver has been granted. 2012 tax software download For any of these countries, you can claim a foreign tax credit for the taxes paid or accrued to that country on the income for the period that begins after the end of the sanction period or the date the Presidential waiver was granted. 2012 tax software download Example. 2012 tax software download The sanctions against Country X ended on July 31. 2012 tax software download On August 19, you receive a distribution from a mutual fund of Country X income. 2012 tax software download The fund paid Country X income tax for you on the distribution. 2012 tax software download Because the distribution was made after the sanction ended, you may include the foreign tax paid on the distribution to compute your foreign tax credit. 2012 tax software download Amounts for the nonsanctioned period. 2012 tax software download   If a sanction period ends (or a Presidential waiver is granted) during your tax year and you are not able to determine the actual income and taxes for that period, you can allocate amounts to that period based on the number of days in the period that fall in your tax year. 2012 tax software download Multiply the income or taxes for the year by the following fraction to determine the amounts allocable to that period. 2012 tax software download   Number of nonsanctioned days in year  Number of days in year Example. 2012 tax software download You are a calendar year filer and received $20,000 of income from Country X in 2013 on which you paid tax of $4,500. 2012 tax software download Sanctions against Country X ended on July 11, 2013. 2012 tax software download You are unable to determine how much of the income or tax is for the nonsanctioned period. 2012 tax software download Because your tax year starts on January 1, and the Country X sanction ended on July 11, 2013, 173 days of your tax year are in the nonsanctioned period. 2012 tax software download You would compute the income for the nonsanctioned period as follows. 2012 tax software download 173 365 × $20,000 = $9,479             You would figure the tax for the nonsanctioned period as follows. 2012 tax software download 173 365 × $4,500 = $2,133 To figure your foreign tax credit, you would use $9,479 as the income from Country X and $2,133 as the tax. 2012 tax software download Further information. 2012 tax software download   The rules for figuring the foreign tax credit after a country's sanction period ends are more fully explained in Revenue Ruling 92-62, Cumulative Bulletin 1992-2, page 193. 2012 tax software download This Cumulative Bulletin can be found in many libraries and IRS offices. 2012 tax software download Table 1. 2012 tax software download Countries Removed From the Sanction List or Granted Presidential Waiver   Sanction Period Country Starting Date Ending Date Iraq February 1, 1991 June 27, 2004 Libya January 1, 1987 December 9, 2004* *Presidential waiver granted for qualified income taxes arising after December 9, 2004. 2012 tax software download Taxes Imposed on Certain Dividends You cannot claim a foreign tax credit for withholding tax (defined later ) on dividends paid or accrued if either of the following applies to the dividends. 2012 tax software download The dividends are on stock you held for less than 16 days during the 31-day period that begins 15 days before the ex-dividend date (defined later). 2012 tax software download The dividends are for a period or periods totaling more than 366 days on preferred stock you held for less than 46 days during the 91-day period that begins 45 days before the ex-dividend date. 2012 tax software download If the dividend is not for more than 366 days, rule (1) applies to the preferred stock. 2012 tax software download When figuring how long you held the stock, count the day you sold it, but do not count the day you acquired it or any days on which you were protected from risk of loss. 2012 tax software download Regardless of how long you held the stock, you cannot claim the credit to the extent you have an obligation under a short sale or otherwise to make payments related to the dividend for positions in substantially similar or related property. 2012 tax software download Withholding tax. 2012 tax software download   For this purpose, withholding tax includes any tax determined on a gross basis. 2012 tax software download It does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. 2012 tax software download Ex-dividend date. 2012 tax software download   The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of a stock is not entitled to receive the next dividend payment. 2012 tax software download Example 1. 2012 tax software download You bought common stock from a foreign corporation on November 3. 2012 tax software download You sold the stock on November 19. 2012 tax software download You received a dividend on this stock because you owned it on the ex-dividend date of November 5. 2012 tax software download To claim the credit, you must have held the stock for at least 16 days within the 31-day period that began on October 21 (15 days before the ex-dividend date). 2012 tax software download Because you held the stock for 16 days, from November 4 until November 19, you are entitled to the credit. 2012 tax software download Example 2. 2012 tax software download The facts are the same as in Example 1 except that you sold the stock on November 14. 2012 tax software download You held the stock for only 11 days. 2012 tax software download You are not entitled to the credit. 2012 tax software download Exception. 2012 tax software download   If you are a securities dealer who actively conducts business in a foreign country, you may be able to claim a foreign tax credit for qualified taxes paid on dividends regardless of how long you held the stock or whether you were obligated to make payments for positions in substantially similar or related property. 2012 tax software download See section 901(k)(4) of the Internal Revenue Code for more information. 2012 tax software download Taxes Withheld on Income or Gain (Other Than Dividends) For income or gain (other than dividends) paid or accrued on property, you cannot claim a foreign tax credit for withholding tax (defined later): If you have not held the property for at least 16 days during the 31-day period that begins 15 days before the date on which the right to receive the payment arises, or To the extent you have to make related payments on positions in substantially similar or related property. 2012 tax software download When figuring how long you held the property, count the day you sold it, but do not count the day you acquired it or any days on which you were protected from risk of loss. 2012 tax software download Withholding tax. 2012 tax software download   For this purpose, withholding tax includes any tax determined on a gross basis. 2012 tax software download It does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. 2012 tax software download Exception for dealers. 2012 tax software download   If you are a dealer in property who actively conducts business in a foreign country, you may be able to claim a foreign tax credit for qualified taxes withheld on income or gain from that property regardless of how long you held it or whether you have to make related payments on positions in substantially similar or related property. 2012 tax software download See section 901(I)(2) of the Internal Revenue Code for more information. 2012 tax software download Covered Asset Acquisition ???You cannot take a credit for the disqualified portion of any foreign tax paid or accrued in connection with a covered asset acquisition. 2012 tax software download A covered asset acquisition includes certain acquisitions that result in a stepped-up basis for U. 2012 tax software download S. 2012 tax software download tax purposes but not for foreign tax purposes. 2012 tax software download For more information, see Internal Revenue Code section 901(m). 2012 tax software download The IRS intends to issue guidance that will explain this provision in greater detail. 2012 tax software download Taxes in Connection With the Purchase or Sale of Oil or Gas You cannot claim a foreign tax credit for taxes paid or accrued to a foreign country in connection with the purchase or sale of oil or gas extracted in that country if you do not have an economic interest in the oil or gas, and the purchase price or sales price is different from the fair market value of the oil or gas at the time of purchase or sale. 2012 tax software download Taxes on Foreign Mineral Income You must reduce any taxes paid or accrued to a foreign country or possession on mineral income from that country or possession if you were allowed a deduction for percentage depletion for any part of the mineral income. 2012 tax software download For details, see Regulations section 1. 2012 tax software download 901-3. 2012 tax software download Taxes From International Boycott Operations If you participate in or cooperate with an international boycott during the tax year, your foreign taxes resulting from boycott activities will reduce the total taxes available for credit. 2012 tax software download See the instructions for line 12 in the Form 1116 instructions to figure this reduction. 2012 tax software download In most cases, this rule does not apply to employees with wages who are working and living in boycotting countries, or to retirees with pensions who are living in these countries. 2012 tax software download List of boycotting countries. 2012 tax software download   A list of the countries which may require participation in or cooperation with an international boycott is published by the Department of the Treasury. 2012 tax software download As of November 2013, the following countries are listed. 2012 tax software download Iraq. 2012 tax software download Kuwait. 2012 tax software download Lebanon. 2012 tax software download Libya. 2012 tax software download Qatar. 2012 tax software download Saudi Arabia. 2012 tax software download Syria. 2012 tax software download United Arab Emirates. 2012 tax software download Yemen. 2012 tax software download    For information concerning changes to the list, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Determinations of whether the boycott rule applies. 2012 tax software download   You may request a determination from the Internal Revenue Service as to whether a particular operation constitutes participation in or cooperation with an international boycott. 2012 tax software download The procedures for obtaining a determination from the Service are outlined in Revenue Procedure 77-9 in Cumulative Bulletin 1977-1. 2012 tax software download Cumulative Bulletins are available in most IRS offices and you are welcome to read them there. 2012 tax software download Public inspection. 2012 tax software download   A determination and any related background file is open to public inspection. 2012 tax software download However, your identity and certain other information will remain confidential. 2012 tax software download Reporting requirements. 2012 tax software download   You must file a report with the IRS if you or any of the following persons have operations in or related to a boycotting country or with the government, a company, or a national of a boycotting country. 2012 tax software download A foreign corporation in which you own 10% or more of the voting power of all voting stock but only if you own the stock of the foreign corporation directly or through foreign entities. 2012 tax software download A partnership in which you are a partner. 2012 tax software download A trust you are treated as owning. 2012 tax software download Form 5713 required. 2012 tax software download   If you have to file a report, you must use Form 5713, International Boycott Report, and attach all supporting schedules. 2012 tax software download See the Instructions for Form 5713 for information on when and where to file the form. 2012 tax software download Penalty for failure to file. 2012 tax software download   If you willfully fail to make a report, in addition to other penalties, you may be fined $25,000 or imprisoned for no more than one year, or both. 2012 tax software download Taxes on Combined Foreign Oil and Gas Income You must reduce your foreign taxes by a portion of any foreign taxes imposed on combined foreign oil and gas income. 2012 tax software download The amount of the reduction is the amount by which your foreign oil and gas taxes exceed the amount of your combined foreign oil and gas income multiplied by a fraction equal to your pre-credit U. 2012 tax software download S. 2012 tax software download tax liability (Form 1040, line 44) divided by your worldwide taxable income. 2012 tax software download You may be entitled to carry over to other years taxes reduced under this rule. 2012 tax software download See Internal Revenue Code section 907(f). 2012 tax software download Combined foreign oil and gas income means the sum of foreign oil related income and foreign oil and gas extraction income. 2012 tax software download Foreign oil and gas taxes are the sum of foreign oil and gas extraction taxes and foreign oil related taxes. 2012 tax software download Taxes of U. 2012 tax software download S. 2012 tax software download Persons Controlling Foreign Corporations and Partnerships If you had control of a foreign corporation or a foreign partnership for the annual accounting period of that corporation or partnership that ended with or within your tax year, you may have to file an annual information return. 2012 tax software download If you do not file the required information return, you may have to reduce the foreign taxes that may be used for the foreign tax credit. 2012 tax software download See Penalty for not filing Form 5471 or Form 8865 , later. 2012 tax software download U. 2012 tax software download S. 2012 tax software download persons controlling foreign corporations. 2012 tax software download   If you are a U. 2012 tax software download S. 2012 tax software download citizen or resident who had control of a foreign corporation for an uninterrupted period of at least 30 days during the annual accounting period of that corporation, you may have to file an annual information return on Form 5471, Information Return of U. 2012 tax software download S. 2012 tax software download Persons With Respect To Certain Foreign Corporations. 2012 tax software download Under this rule, you generally had control of a foreign corporation if at any time during your tax year you owned: Stock possessing more than 50% of the total combined voting power of all classes of stock entitled to vote, or More than 50% of the total value of shares of all classes of stock of the foreign corporation. 2012 tax software download U. 2012 tax software download S. 2012 tax software download persons controlling foreign partnerships. 2012 tax software download   If you are a U. 2012 tax software download S. 2012 tax software download citizen or resident who had control of a foreign partnership at any time during the partnership's tax year, you may have to file
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2012 tax software download Index A Abortion, Abortion Acupuncture, Acupuncture Adopted child's medical expenses, Adopted child. 2012 tax software download AGI limitation, Introduction, Community property states. 2012 tax software download Alcoholism, Alcoholism Ambulances, Ambulance Archer MSAs Health coverage tax credit, How To Take the Credit Medical expenses paid for decedent from, Decedent Artificial limbs, Artificial Limb Artificial teeth, Artificial Teeth Aspirin, Nonprescription Drugs and Medicines Assistance (see Tax help) Assisted living homes, Nursing Home Athletic club dues, Health Club Dues Automobiles (see Cars) B Baby sitting, Baby Sitting, Childcare, and Nursing Services for a Normal, Healthy Baby Bandages, Bandages Basis Medical equipment or property (Worksheet D), Worksheet D. 2012 tax software download Adjusted Basis of Medical Equipment or Property Sold Birth control pills, Birth Control Pills Body scan, Body Scan Braille books and magazines, Braille Books and Magazines Breast pumps and supplies, Breast Pumps and Supplies Breast reconstruction surgery, Breast Reconstruction Surgery C Calculation of deduction, What If You Are Reimbursed for Medical Expenses You Did Not Deduct? Capital expenses, Capital Expenses Improvements to rented property, Improvements to property rented by a person with a disability. 2012 tax software download Operation and upkeep, Operation and upkeep. 2012 tax software download Worksheet A, Capital expense worksheet. 2012 tax software download Cars, Car Out-of-pocket expenses, Car expenses. 2012 tax software download Standard medical mileage rates, Car expenses. 2012 tax software download Child care, Baby Sitting, Childcare, and Nursing Services for a Normal, Healthy Baby Children's medical expenses Adopted child, Adopted child. 2012 tax software download Dependents, Dependent Chiropractor, Chiropractor Christian Scientist practitioner, Christian Science Practitioner Chronically ill persons, Chronically ill individual. 2012 tax software download COBRA assistance Recapture of COBRA premium assistance, Worksheet F. 2012 tax software download Recapture of COBRA Premium Assistance for Higher Income Taxpayers COBRA premium assistance, COBRA Premium Assistance Community property states, Community property states. 2012 tax software download Computer banks to track medical information, Medical Information Plan Contact lenses, Contact Lenses Controlled substances, Controlled Substances Cosmetic surgery, Cosmetic Surgery Credit (see Health coverage tax credit) Crutches, Crutches D Dancing lessons, Dancing Lessons Decedent's medical expenses, Decedent, What if you pay medical expenses of a deceased spouse or dependent? Deductible amount, How Much of the Expenses Can You Deduct? Deductible expenses, Whose Medical Expenses Can You Include?, X-ray Definition of medical expenses Doctor, What Are Medical Expenses? Physician, What Are Medical Expenses? Dental treatment, Dental Treatment Artificial teeth, Artificial Teeth Teeth whitening, Teeth Whitening Dentures, Artificial Teeth Dependent's medical expenses Adopted child, Adopted child. 2012 tax software download Multiple support agreement, Support claimed under a multiple support agreement. 2012 tax software download Qualifying child, Dependent Qualifying relative, Dependent Dependents Disabled dependent care, Disabled Dependent Care Expenses, Dependents with disabilities. 2012 tax software download Diagnostic devices, Diagnostic Devices Diaper services, Diaper Service Disabilities, persons with Dependent care expenses, Disabled Dependent Care Expenses, Dependents with disabilities. 2012 tax software download Improvements to rented property, Improvements to property rented by a person with a disability. 2012 tax software download Special education, Special Education Divorced taxpayers Medical expenses of child, Child of divorced or separated parents. 2012 tax software download Drug addiction, Drug Addiction Drugs (see Medicines) Dues Health club, Health Club Dues E Education, special, Special Education Electrolysis, Cosmetic Surgery Employer-sponsored health insurance plans, Employer-Sponsored Health Insurance Plan Employment taxes, Employment taxes. 2012 tax software download Excluded expenses Insurance premiums, Insurance Premiums You Cannot Include Eye surgery, Eye Surgery Eyeglasses, Eyeglasses F Fertility enhancement Eggs, temporary storage of, Fertility Enhancement Fertility, Fertility Enhancement In vitro fertilization, Fertility Enhancement Figuring the deduction, How Do You Figure and Report the Deduction on Your Tax Return? Final return for decedent Medical expenses paid, Decedent Flexible spending account, Flexible Spending Account Food (see Weight-loss programs) Form 1040 Health coverage tax credit, How To Take the Credit Self-employed persons, health insurance costs, Health Insurance Costs for Self-Employed Persons Form 1040, Schedule A Impairment-related work expenses, Where to report. 2012 tax software download Medical and dental expenses, Introduction, What Tax Form Do You Use? Self-employed persons, health insurance costs, Health Insurance Costs for Self-Employed Persons Form 1040, Schedule C Impairment-related work expenses, Where to report. 2012 tax software download Form 1040, Schedule C-EZ Impairment-related work expenses, Where to report. 2012 tax software download Form 1040, Schedule E Impairment-related work expenses, Where to report. 2012 tax software download Form 1040, Schedule F Impairment-related work expenses, Where to report. 2012 tax software download Form 1040NR Health coverage tax credit, How To Take the Credit Form 1040X Amended return, What Expenses Can You Include This Year? Deceased taxpayer, What if the decedent's return had been filed and the medical expenses were not included? Form 1099-H Self-employed persons, health insurance costs, Health Insurance Costs for Self-Employed Persons Form 2106 Impairment-related work expenses, Where to report. 2012 tax software download Form 2106-EZ Impairment-related work expenses, Where to report. 2012 tax software download Form 2555 Self-employed persons, health insurance costs, Health Insurance Costs for Self-Employed Persons Form 2555-EZ Self-employed persons, health insurance costs, Health Insurance Costs for Self-Employed Persons Form 8453 Health coverage tax credit, How To Take the Credit Form 8885 Health coverage tax credit, How To Take the Credit Self-employed persons, health insurance costs, Health Insurance Costs for Self-Employed Persons Founder's fee (see Lifetime care, advance payments) Free tax services, Free help with your tax return. 2012 tax software download Funeral expenses, Funeral Expenses Future medical care, Payments for future medical care. 2012 tax software download , Future Medical Care G Glasses, Eyeglasses Guide dog or other animal, Guide Dog or Other Service Animal H Hair Removal, Cosmetic Surgery Transplants, Cosmetic Surgery Wigs, Wig Health club dues, Health Club Dues Health coverage tax credit, Health Coverage Tax Credit Advanced payments, Monthly HCTC Alternative TAA recipient, Health Coverage Tax Credit Archer MSAs, How To Take the Credit Both spouses eligible, Qualifying Family Member Children of divorced parents, Health Coverage Tax Credit, Qualifying Family Member Eligible coverage month, Eligible Coverage Month Insurance that covers other individuals, Insurance that covers other individuals. 2012 tax software download Legally separated, Legally separated. 2012 tax software download Married persons filing separate returns, Qualifying Family Member Monthly HCTC, Monthly HCTC Nonqualified health insurance, Nonqualified Health Insurance Other specified coverage Benefits from the Veterans Administration, Other Specified Coverage Pension Benefit Guaranty Corporation (PBGC) recipient, Health Coverage Tax Credit Qualified health insurance, Qualified Health Insurance Qualifying family member, Qualifying Family Member Reimbursement credit, Monthly HCTC Reporting, How To Take the Credit State-qualified health insurance, State-qualified health insurance. 2012 tax software download TAA recipient, Health Coverage Tax Credit Yearly HCTC, Yearly HCTC Health Coverage Tax Credit Alternative TAA recipient, Who Can Take This Credit? PBGC pension payee, Who Can Take This Credit? TAA recipient, Who Can Take This Credit? Health institutes, Health Institute Health insurance Credit (see Health coverage tax credit) Employer-sponsored plan, Employer-Sponsored Health Insurance Plan Premiums Deductible, Insurance Premiums Nondeductible, Insurance Premiums You Cannot Include Paid by employer, Premiums paid by your employer. 2012 tax software download Paid by employer and you, Premiums paid by you and your employer. 2012 tax software download Paid by you, Premiums paid by you. 2012 tax software download Prepaid, Prepaid Insurance Premiums Unused sick leave used to pay, Unused Sick Leave Used To Pay Premiums Reimbursements (see Reimbursements) Self-employed persons, Health Insurance Costs for Self-Employed Persons Health maintenance organizations (HMOs), Health Maintenance Organization (HMO) Health reimbursement arrangements (HRAs), Health reimbursement arrangement (HRA). 2012 tax software download Health savings accounts (HSAs) Payments from, Health Savings Accounts Hearing aids, Hearing Aids Hearing-impaired persons Guide dog or other animal for, Guide Dog or Other Service Animal Help (see Tax help) HMOs (Health maintenance organizations), Health Maintenance Organization (HMO) Home care (see Nursing services) Home improvements (see Capital expenses:) Hospital services, Hospital Services Hotels, Lodging Household help, Household Help HRAs (Health reimbursement arrangements), Health reimbursement arrangement (HRA). 2012 tax software download I Illegal operations and treatments, Illegal Operations and Treatments Illegal substances, Controlled Substances Impairment-related work expenses, Workers' compensation. 2012 tax software download , Impairment-related expenses defined. 2012 tax software download Reporting of, Where to report. 2012 tax software download Insulin, Nonprescription Drugs and Medicines Insurance (see Health insurance) Intellectually and developmentally disabled persons Mentally retarded, Intellectually and Developmentally Disabled, Special Home for Special homes for, Intellectually and Developmentally Disabled, Special Home for L Laboratory fees, Laboratory Fees Lactation expenses (see Breast pumps and supplies) Laser eye surgery, Eye Surgery Lead-based paint removal, Lead-Based Paint Removal Learning disabilities, Special Education Legal fees, Legal Fees Lessons, dancing and swimming, Dancing Lessons Lifetime care Advance payments for, Lifetime Care—Advance Payments Lodging, Lodging, Trips (see also Trips) Long-term care, Long-Term Care Chronically ill individuals, Chronically ill individual. 2012 tax software download Maintenance and personal care services, Maintenance and personal care services. 2012 tax software download Qualified insurance contracts, Qualified Long-Term Care Insurance Contracts Qualified services, Qualified Long-Term Care Services M Maintenance and personal care services, Maintenance and personal care services. 2012 tax software download Maternity clothes, Maternity Clothes Meals, Meals, Weight-Loss Program (see also Weight-loss programs) Medical conferences, Medical Conferences Medical equipment or property Adjusted basis (Worksheet D), Worksheet D. 2012 tax software download Adjusted Basis of Medical Equipment or Property Sold Medical expense records, What Tax Form Do You Use? Medical information plans, Medical Information Plan Medical savings accounts (MSAs), Medical Savings Account (MSA) Medicare Medicare A, deductible expense, Medicare A Medicare B, deductible expense, Medicare B Medicare D, deductible expense, Medicare D Medicines, Medicines Imported, Imported medicines and drugs. 2012 tax software download , Medicines and Drugs From Other Countries Nonprescription drugs and medicines, Nonprescription Drugs and Medicines Missing children, photographs of in IRS publications, Reminders Multiple support agreement, Support claimed under a multiple support agreement. 2012 tax software download N Nondeductible expenses, What Expenses Are Not Includible?, Weight-Loss Program Nonprescription drugs and medicines, Nonprescription Drugs and Medicines Nursing homes, Nursing Home Nursing services, Nursing Services, Baby Sitting, Childcare, and Nursing Services for a Normal, Healthy Baby Chronically ill individuals, Chronically ill individual. 2012 tax software download Nutritional supplements Natural medicines, Nutritional Supplements O Operations, Operations Cosmetic surgery, Cosmetic Surgery Eye surgery, Eye Surgery Illegal operations and treatments, Illegal Operations and Treatments Optometrist, Optometrist Optometrist services, Eyeglasses Organ donors, Transplants Osteopath, Osteopath Oxygen, Oxygen P Paint removal, for lead-based, Lead-Based Paint Removal Parking fees and tolls, Car expenses. 2012 tax software download Personal injury damages, Damages for Personal Injuries Personal use items, Personal Use Items Photographs of missing children in IRS publications, Reminders Physical examination, Physical Examination Physical therapy, Therapy Plastic surgery, Cosmetic Surgery Pregnancy test kit, Pregnancy Test Kit Premiums (see Health insurance) Prepaid insurance premiums, Prepaid Insurance Premiums Prosthesis, Artificial Limb Psychiatric care, Psychiatric Care Psychoanalysis, Psychoanalysis Psychologists, Psychologist Publications (see Tax help) R Radial keratotomy, Eye Surgery Recordkeeping, What Tax Form Do You Use? Rehabilitation facilities, Nursing Home Reimbursements, How Do You Treat Reimbursements?, What If You Are Reimbursed for Medical Expenses You Did Not Deduct? Excess includible in income More than one policy (Worksheet C), More than one policy. 2012 tax software download One policy (Worksheet B), Worksheet B. 2012 tax software download Excess Reimbursement Includible in Income When You Have Only One Policy Excess may be taxable (Figure 1), What If Your Insurance Reimbursement Is More Than Your Medical Expenses? Health Reimbursement Arrangement (HRA), Health reimbursement arrangement (HRA). 2012 tax software download Insurance, Insurance Reimbursement, What If Your Insurance Reimbursement Is More Than Your Medical Expenses? Medical expenses not deducted, What If You Receive Insurance Reimbursement in a Later Year? More than one policy, More than one policy. 2012 tax software download Received in later year, What If You Are Reimbursed for Medical Expenses You Did Not Deduct? Rental property Improvements to, Improvements to property rented by a person with a disability. 2012 tax software download Reporting Health coverage tax credit, How To Take the Credit Impairment-related work expenses, Where to report. 2012 tax software download Medical and dental expenses, What If You Are Reimbursed for Medical Expenses You Did Not Deduct? Medical deduction (see Form 1040, Schedule A) Self-employed persons, health insurance costs, Health Insurance Costs for Self-Employed Persons S Sale of medical equipment or property, Sale of Medical Equipment or Property Adjusted basis (Worksheet D), Worksheet D. 2012 tax software download Adjusted Basis of Medical Equipment or Property Sold Schedules (see Form 1040) Seeing-eye dogs, Guide Dog or Other Service Animal Self-employed persons Health coverage tax credit, How To Take the Credit Health insurance costs, Health Insurance Costs for Self-Employed Persons Senior housing, Nursing Home Separate returns Community property states, Community property states. 2012 tax software download Medical and dental expenses, Separate returns. 2012 tax software download Separated taxpayers Health coverage tax credit, Legally separated. 2012 tax software download Medical expenses of child, Child of divorced or separated parents. 2012 tax software download Service animals, Guide Dog or Other Service Animal Sick leave Used to pay health insurance premiums, Unused Sick Leave Used To Pay Premiums Special education, Special Education Spouse's medical expenses, Spouse Deceased spouse, What if you pay medical expenses of a deceased spouse or dependent? Sterilization, Sterilization Stop-smoking programs, Stop-Smoking Programs Surgery (see Operations) Swimming lessons, Dancing Lessons T Tables and figures Medical equipment or property Adjusted basis (Worksheet D), Worksheet D. 2012 tax software download Adjusted Basis of Medical Equipment or Property Sold Reimbursements, excess includible in income More than one policy (Worksheet C), More than one policy. 2012 tax software download One policy (Worksheet B), Worksheet B. 2012 tax software download Excess Reimbursement Includible in Income When You Have Only One Policy Reimbursements, excess may be taxable (Figure 1), What If Your Insurance Reimbursement Is More Than Your Medical Expenses? Tax help, How To Get Tax Help Teeth Artificial, Artificial Teeth Dental treatment, Dental Treatment Whitening, Teeth Whitening Telephone, Telephone Television, Television Therapy, Therapy Transplants, Transplants Travel and transportation expenses, Transportation Car expenses, Car expenses. 2012 tax software download Includible expenses, You can include:, Transportation expenses you cannot include. 2012 tax software download Parking fees and tolls, Car expenses. 2012 tax software download Trips, Trips TTY/TDD information, How To Get Tax Help Tuition, Tuition V Vasectomy, Vasectomy Veterinary fees, Veterinary Fees Vision correction surgery, Eye Surgery Visually impaired persons Guide dog or other animal for, Guide Dog or Other Service Animal Vitamins or minerals, Nutritional Supplements Voluntary Employee's Beneficiary Association (VEBA) Qualified health insurance, Voluntary Employee's Beneficiary Association (VEBA) W Weight-loss programs, Weight-Loss Program, Weight-Loss Program What's new COBRA continuous coverage, What's New Health coverage tax credit, What's New Standard medical mileage rate, What's New Wheelchairs, Wheelchair Wigs, Wig Work expenses Disabled dependent care, Disabled Dependent Care Expenses Impairment-related, Impairment-Related Work Expenses Workers' compensation, Workers' compensation. 2012 tax software download Worksheets Capital expenses (Worksheet A), Capital expense worksheet. 2012 tax software download Medical equipment or property Adjusted basis (Worksheet D), Worksheet D. 2012 tax software download Adjusted Basis of Medical Equipment or Property Sold Reimbursements, excess includible in income More than one policy (Worksheet C), More than one policy. 2012 tax software download One policy (Worksheet B), Worksheet B. 2012 tax software download Excess Reimbursement Includible in Income When You Have Only One Policy X X-rays, X-ray Prev  Up     Home   More Online Publications