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Amending A Federal Tax Return

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Amending A Federal Tax Return

Amending a federal tax return Depreciation Table of Contents Introduction Special Depreciation AllowanceQualified Property Election Not To Claim the Allowance Rules for Returns Filed Before June 1, 2002 Passenger Automobiles New York Liberty Zone BenefitsSpecial Liberty Zone Depreciation Allowance Increased Section 179 Deduction Liberty Zone Leasehold Improvement Property If you depreciate business property that you acquired and placed in service after September 10, 2001, new law contains provisions that may affect your depreciation deduction for that property. Amending a federal tax return Publication 946, How To Depreciate Property, contains information on depreciation. Amending a federal tax return However, Publication 946 does not contain the new provisions because it was printed before the law was enacted. Amending a federal tax return The new provisions are in the Supplement to Publication 946, which is reprinted below. Amending a federal tax return Supplement to Publication 946 How To Depreciate Property   Introduction After Publication 946 was printed, the Job Creation and Worker Assistance Act of 2002 was signed into law by the President. Amending a federal tax return The new law made several changes in the tax rules explained in the publication. Amending a federal tax return Some of the changes apply to property placed in service during 2001. Amending a federal tax return This supplemental publication describes those changes and explains what you should do if you are affected by them. Amending a federal tax return The situations and examples in Publication 946 do not reflect any of the changes made by the Job Creation and Worker Assistance Act of 2002. Amending a federal tax return The new law contains the following provisions. Amending a federal tax return 30% depreciation deductions (special depreciation allowance and special New York Liberty Zone (Liberty Zone) depreciation allowance) for the year qualified property is placed in service after September 10, 2001. Amending a federal tax return An increased dollar limit on the section 179 deduction for qualified Liberty Zone property purchased after September 10, 2001. Amending a federal tax return A shorter recovery period for qualified Liberty Zone leasehold improvement property placed in service after September 10, 2001. Amending a federal tax return An increase in the maximum depreciation deduction for 2001 for a qualified passenger automobile placed in service after September 10, 2001. Amending a federal tax return If you believe you qualify for an increased deduction under any of these new rules, you must file the revised 2001 Form 4562 (dated March 2002) for 2001 calendar or fiscal years and 2000 fiscal years ending after September 10, 2001. Amending a federal tax return If you have already filed a tax return, this supplemental publication explains how to claim these benefits and how to elect not to claim the special depreciation allowance or special Liberty Zone depreciation allowance. Amending a federal tax return See Table 2 at the end of the supplement for an overview of the rules that apply if you filed your return before June 1, 2002. Amending a federal tax return Special Depreciation Allowance You can take a special depreciation allowance for qualified property you place in service after September 10, 2001. Amending a federal tax return The allowance is an additional deduction of 30% of the property's depreciable basis. Amending a federal tax return To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. Amending a federal tax return See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. Amending a federal tax return The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. Amending a federal tax return There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. Amending a federal tax return In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. Amending a federal tax return Example 1. Amending a federal tax return On November 1, 2001, you bought and placed in service in your business qualified property that cost $100,000. Amending a federal tax return You did not elect to claim a section 179 deduction. Amending a federal tax return You can deduct 30% of the cost ($30,000) as a special depreciation allowance for 2001. Amending a federal tax return You use the remaining $70,000 of cost to figure your regular depreciation deduction for 2001 and later years. Amending a federal tax return Example 2. Amending a federal tax return The facts are the same as in Example 1, except that you choose to deduct $24,000 of the property's cost as a section 179 deduction. Amending a federal tax return You use the remaining $76,000 of cost to figure your special depreciation allowance of $22,800 ($76,000 × 30%). Amending a federal tax return You use the remaining $53,200 of cost to figure your regular depreciation deduction for 2001 and later years. Amending a federal tax return Qualified Property To qualify for the special depreciation allowance, your property must meet the following requirements. Amending a federal tax return It is new property of one of the following types. Amending a federal tax return Property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. Amending a federal tax return See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. Amending a federal tax return Water utility property. Amending a federal tax return See 25-year property on page 22 in Publication 946. Amending a federal tax return Computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. Amending a federal tax return (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. Amending a federal tax return ) Qualified leasehold improvement property (defined later). Amending a federal tax return It meets the following tests (explained later under Tests To Be Met). Amending a federal tax return Acquisition date test. Amending a federal tax return Placed in service date test. Amending a federal tax return Original use test. Amending a federal tax return It is not excepted property (explained later under Excepted Property). Amending a federal tax return Qualified leasehold improvement property. Amending a federal tax return    Generally, this is any improvement to an interior part of a building that is nonresidential real property, provided all of the following requirements are met. Amending a federal tax return The improvement is made under or pursuant to a lease by the lessee (or any sublessee) or the lessor of that part of the building. Amending a federal tax return That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part. Amending a federal tax return The improvement is placed in service more than 3 years after the date the building was first placed in service. Amending a federal tax return   However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following. Amending a federal tax return The enlargement of the building. Amending a federal tax return Any elevator or escalator. Amending a federal tax return Any structural component benefiting a common area. Amending a federal tax return The internal structural framework of the building. Amending a federal tax return   Generally, a binding commitment to enter into a lease is treated as a lease and the parties to the commitment are treated as the lessor and lessee. Amending a federal tax return However, a binding commitment between related persons is not treated as a lease. Amending a federal tax return Related persons. Amending a federal tax return   For this purpose, the following are related persons. Amending a federal tax return Members of an affiliated group. Amending a federal tax return The persons listed in items (1) through (9) under Related persons on page 8 of Publication 946 (except that “80% or more” should be substituted for “more than 10%” each place it appears). Amending a federal tax return An executor and a beneficiary of the same estate. Amending a federal tax return Tests To Be Met To qualify for the special depreciation allowance, the property must meet all of the following tests. Amending a federal tax return Acquisition date test. Amending a federal tax return    Generally, you must have acquired the property either: After September 10, 2001, and before September 11, 2004, but only if no written binding contract for the acquisition was in effect before September 11, 2001, or Pursuant to a written binding contract entered into after September 10, 2001, and before September 11, 2004. Amending a federal tax return   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001, and before September 11, 2004. Amending a federal tax return Placed in service date test. Amending a federal tax return   Generally, the property must be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. Amending a federal tax return   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. Amending a federal tax return Original use test. Amending a federal tax return   The original use of the property must have begun with you after September 10, 2001. Amending a federal tax return “Original use” means the first use to which the property is put, whether or not by you. Amending a federal tax return Additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test. Amending a federal tax return Excepted Property The following property does not qualify for the special depreciation allowance. Amending a federal tax return Property used by any person before September 11, 2001. Amending a federal tax return Property required to be depreciated using ADS. Amending a federal tax return This includes listed property used 50% or less in a qualified business use. Amending a federal tax return Qualified New York Liberty Zone leasehold improvement property (defined next). Amending a federal tax return Qualified New York Liberty Zone leasehold improvement property. Amending a federal tax return   This is any qualified leasehold improvement property (as defined earlier) if all of the following requirements are met. Amending a federal tax return The improvement is to a building located in the New York Liberty Zone (defined later under New York Liberty Zone Benefits). Amending a federal tax return The improvement is placed in service after September 10, 2001, and before January 1, 2007. Amending a federal tax return No written binding contract for the improvement was in effect before September 11, 2001. Amending a federal tax return Election Not To Claim the Allowance You can elect not to claim the special depreciation allowance for qualified property. Amending a federal tax return If you make this election for any property, it applies to all property in the same property class placed in service during the year. Amending a federal tax return To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. Amending a federal tax return When to make election. Amending a federal tax return   Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. Amending a federal tax return   However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). Amending a federal tax return Attach the election statement to the amended return. Amending a federal tax return At the top of the election statement, write “Filed pursuant to section 301. Amending a federal tax return 9100–2. Amending a federal tax return ” Revoking an election. Amending a federal tax return   Once you elect not to deduct the special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. Amending a federal tax return A request to revoke the election is subject to a user fee. Amending a federal tax return Rules for Returns Filed Before June 1, 2002 The following rules apply if you placed qualified property in service after September 10, 2001, and filed your return before June 1, 2002. Amending a federal tax return The rules apply to returns for the following years. Amending a federal tax return 2000 fiscal years that end after September 10, 2001. Amending a federal tax return 2001 calendar and fiscal years. Amending a federal tax return Claiming the allowance. Amending a federal tax return   If you did not claim the allowance on your return and did not make the election not to claim the allowance, you can do either of the following to claim the allowance. Amending a federal tax return File an amended return by the due date (not including extensions) of your return for the year following the year the property was placed in service. Amending a federal tax return Write “Filed Pursuant to Rev. Amending a federal tax return Proc. Amending a federal tax return 2002–33” at the top of the amended return. Amending a federal tax return File Form 3115, Application for Change in Accounting Method, with your return for the year following the year the property was placed in service. Amending a federal tax return Your return must be filed by the due date (including extensions). Amending a federal tax return Write “Automatic Change Filed Under Rev. Amending a federal tax return Proc. Amending a federal tax return 2002–33” on the appropriate line of Form 3115. Amending a federal tax return You must also file a copy (with signature) of the completed Form 3115 with the IRS National Office no later than when you file the original with your return. Amending a federal tax return For more information about filing Form 3115, including the address to send it to, see Revenue Procedure 2002–9, Revenue Procedure 2002–19, and Revenue Procedure 2002–33. Amending a federal tax return Example 1. Amending a federal tax return You are an individual and you use the calendar year. Amending a federal tax return You placed qualified property in service for your business in December 2001. Amending a federal tax return You filed your 2001 income tax return before April 15, 2002. Amending a federal tax return You did not claim the special depreciation allowance for the property and did not make the election not to claim the allowance. Amending a federal tax return You can claim the special allowance by filing an amended 2001 return by April 15, 2003, with “Filed Pursuant to Rev. Amending a federal tax return Proc. Amending a federal tax return 2002–33” at the top of the amended return. Amending a federal tax return You must file an amended return by April 15, 2003, even if you get an extension of time to file your 2002 tax return. Amending a federal tax return Example 2. Amending a federal tax return The facts concerning your 2001 return are the same as in Example 1. Amending a federal tax return In addition, you got an automatic 4-month extension of time (to August 15, 2003) to file your 2002 return. Amending a federal tax return You can claim the special allowance by filing a Form 3115 (with “Filed Pursuant to Rev. Amending a federal tax return Proc. Amending a federal tax return 2002–33” on the appropriate line) with your 2002 return by August 15, 2003. Amending a federal tax return You must also file a copy of this Form 3115 with the IRS National Office no later than when you file your 2002 return. Amending a federal tax return Electing not to claim the allowance. Amending a federal tax return   Generally, you have elected not to claim the special depreciation allowance for a class of property if you: Filed your return timely (including extensions) for the year you placed qualified property in service and indicated on a statement with the return that you are not claiming the allowance, or Filed your return timely and filed an amended return within 6 months of the due date of the original return (not including extensions) and indicated on a statement with the amended return that you are not claiming the allowance. Amending a federal tax return The statement must indicate that you are not deducting the special depreciation allowance and the class of property to which the election applies. Amending a federal tax return The statement can be either attached to or written on the return. Amending a federal tax return You can, for example, write “not deducting 30%” on Form 4562. Amending a federal tax return Deemed election. Amending a federal tax return   If you have not followed either of the procedures described above to elect not to claim the allowance, you may still be treated as making the election. Amending a federal tax return You will be treated as making the election if you meet both of the following conditions. Amending a federal tax return You filed your return for the year you placed the property in service and claimed depreciation, but not the special allowance, for any class of property. Amending a federal tax return You do not file an amended return or a Form 3115 within the time prescribed for claiming the special allowance. Amending a federal tax return See Claiming the allowance, earlier. Amending a federal tax return Passenger Automobiles The limit on your depreciation deduction (including any section 179 deduction) for any passenger automobile that is qualified property (defined earlier) placed in service after September 10, 2001, and for which you claim the special depreciation allowance is increased. Amending a federal tax return Generally, the limit is increased from $3,060 to $7,660. Amending a federal tax return However, if the automobile is a qualified electric car, the limit is increased from $9,280 to $23,080 ($22,980 if placed in service in 2002). Amending a federal tax return Table 1 shows the maximum deduction amounts for 2001. Amending a federal tax return Table 1. Amending a federal tax return Maximum Deduction for 2001 Qualified Vehicle Placed in Service Before Sept. Amending a federal tax return 11 Placed in Service After Sept. Amending a federal tax return 10 Passenger automobile $3,060 $7,660 Electric car 9,280 23,080 1 1$22,980 if you place an electric car in service in 2002. Amending a federal tax return Election not to claim the allowance. Amending a federal tax return   The increased maximum depreciation deduction does not apply if you elected not to claim the special depreciation allowance as explained earlier under Election Not To Claim the Allowance and Rules for Returns Filed Before June 1, 2002. Amending a federal tax return New York Liberty Zone Benefits Several benefits are available for property you place in service in the New York Liberty Zone (Liberty Zone). Amending a federal tax return They include a special depreciation allowance for the year you place the property in service, an increased section 179 deduction, and the classification of certain leasehold improvement property as 5-year property. Amending a federal tax return Area defined. Amending a federal tax return   The New York Liberty Zone is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway) in the Borough of Manhattan in the City of New York, New York. Amending a federal tax return Special Liberty Zone Depreciation Allowance You can take a special depreciation allowance for qualified Liberty Zone property you place in service after September 10, 2001. Amending a federal tax return The allowance is an additional deduction of 30% of the property's depreciable basis. Amending a federal tax return To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. Amending a federal tax return See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. Amending a federal tax return The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. Amending a federal tax return There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. Amending a federal tax return In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. Amending a federal tax return You cannot claim the special Liberty Zone depreciation allowance for property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. Amending a federal tax return Qualified property is eligible for only one special depreciation allowance. Amending a federal tax return Example 1. Amending a federal tax return On November 1, 2001, you bought and placed in service in your business, which is in the Liberty Zone, qualified Liberty Zone property that cost $200,000. Amending a federal tax return You did not elect to claim a section 179 deduction. Amending a federal tax return You can deduct 30% of the cost ($60,000) as a special Liberty Zone depreciation allowance for 2001. Amending a federal tax return You use the remaining $140,000 of cost to figure your regular depreciation deduction for 2001 and later years. Amending a federal tax return Example 2. Amending a federal tax return The facts are the same as in Example 1, except that you choose to deduct $59,000 of the property's cost as a section 179 deduction. Amending a federal tax return (See Increased Section 179 Deduction, later, for information concerning how this section 179 deduction amount is figured). Amending a federal tax return You use the remaining $141,000 of cost to figure your special Liberty Zone depreciation allowance of $42,300 ($141,000 × 30%). Amending a federal tax return You use the remaining $98,700 of cost to figure your regular depreciation deduction for 2001 and later years. Amending a federal tax return Qualified Liberty Zone Property For a 2001 calendar or fiscal year and a 2000 fiscal year that ends after September 10, 2001, property qualifies for the special Liberty Zone depreciation allowance if it meets the following requirements. Amending a federal tax return It is one of the following types of property. Amending a federal tax return Used property depreciated under MACRS with a recovery period of 20 years or less. Amending a federal tax return See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. Amending a federal tax return Used water utility property. Amending a federal tax return See 25-year property on page 22 in Publication 946. Amending a federal tax return Used computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. Amending a federal tax return (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. Amending a federal tax return ) Certain nonresidential real property and residential rental property (defined later). Amending a federal tax return It meets the following tests (explained later under Tests to be met). Amending a federal tax return Acquisition date test. Amending a federal tax return Placed in service date test. Amending a federal tax return Substantial use test. Amending a federal tax return Original use test. Amending a federal tax return It is not excepted property (explained later under Excepted property). Amending a federal tax return Nonresidential real property and residential rental property. Amending a federal tax return   This property is qualifying property only to the extent it rehabilitates real property damaged, or replaces real property destroyed or condemned, as a result of the terrorist attack of September 11, 2001. Amending a federal tax return Property is treated as replacing destroyed or condemned property if, as part of an integrated plan, such property replaces real property included in a continuous area that includes real property destroyed or condemned. Amending a federal tax return   For these purposes, real property is considered destroyed (or condemned) only if an entire building or structure was destroyed (or condemned) as a result of the terrorist attack. Amending a federal tax return Otherwise, the property is considered damaged real property. Amending a federal tax return For example, if certain structural components of a building (such as walls, floors, or plumbing fixtures) are damaged or destroyed as a result of the terrorist attack, but the building is not destroyed (or condemned), then only costs related to replacing the damaged or destroyed structural components qualify for the special Liberty Zone depreciation allowance. Amending a federal tax return Tests to be met. Amending a federal tax return   To qualify for the special Liberty Zone depreciation allowance, your property must meet all of the following tests. Amending a federal tax return Acquisition date test. Amending a federal tax return   You must have acquired the property by purchase after September 10, 2001, and there must not have been a binding written contract for the acquisition in effect before September 11, 2001. Amending a federal tax return   For information on the acquisition of property by purchase, see Property Acquired by Purchase on page 15 of Publication 946. Amending a federal tax return   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001. Amending a federal tax return Placed in service date test. Amending a federal tax return   Generally, the property must be placed in service for use in your trade or business or for the production of income before January 1, 2007 (January 1, 2010, in the case of qualifying nonresidential real property and residential rental property). Amending a federal tax return   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. Amending a federal tax return Substantial use test. Amending a federal tax return   Substantially all use of the property must be in the Liberty Zone and in the active conduct of your trade or business in the Liberty Zone. Amending a federal tax return Original use test. Amending a federal tax return   The original use of the property in the Liberty Zone must have begun with you after September 10, 2001. Amending a federal tax return   Used property can be qualified Liberty Zone property if it has not previously been used within the Liberty Zone. Amending a federal tax return Also, additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test if the original use of the property in the Liberty Zone began with you. Amending a federal tax return Excepted property. Amending a federal tax return   The following property does not qualify for the special Liberty Zone depreciation allowance. Amending a federal tax return Property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. Amending a federal tax return Property required to be depreciated using ADS. Amending a federal tax return This includes listed property used 50% or less in a qualified business use. Amending a federal tax return Qualified New York Liberty Zone leasehold improvement property (defined earlier in Excepted Property under Special Depreciation Allowance). Amending a federal tax return Example. Amending a federal tax return In December 2001, you bought and placed in service in your business in the Liberty Zone the following property. Amending a federal tax return New office furniture with a MACRS recovery period of 7 years. Amending a federal tax return A used computer with a MACRS recovery period of 5 years. Amending a federal tax return The computer had not previously been used within the Liberty Zone. Amending a federal tax return Because the office furniture is new property, it qualifies for the special depreciation allowance, but not the special Liberty Zone depreciation allowance. Amending a federal tax return Because the computer is used property that had not previously been used in the Liberty Zone, it qualifies for the special Liberty Zone depreciation allowance, but not the special depreciation allowance. Amending a federal tax return Election Not To Claim the Liberty Zone Allowance You can elect not to claim the special Liberty Zone depreciation allowance for qualified property. Amending a federal tax return If you make this election for any property, it applies to all property in the same property class placed in service during the year. Amending a federal tax return To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. Amending a federal tax return When to make the election. Amending a federal tax return   Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. Amending a federal tax return   However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). Amending a federal tax return Attach the election statement to the amended return. Amending a federal tax return At the top of the election statement, write “Filed pursuant to section 301. Amending a federal tax return 9100–2. Amending a federal tax return ” Revoking an election. Amending a federal tax return   Once you elect not to deduct the special Liberty Zone depreciation allowance for a class of property, you cannot revoke the election without IRS consent. Amending a federal tax return A request to revoke the election is subject to a user fee. Amending a federal tax return Returns filed before June 1, 2002. Amending a federal tax return   The rules that apply to the special depreciation allowance discussed earlier in Rules for Returns Filed Before June 1, 2002 under Special Depreciation Allowance also apply to the special Liberty Zone depreciation allowance. Amending a federal tax return Increased Section 179 Deduction Under section 179 of the Internal Revenue Code, you can choose to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. Amending a federal tax return For tax years beginning in 2000, that limit was $20,000. Amending a federal tax return For tax years beginning in 2001 and 2002, that limit is generally $24,000. Amending a federal tax return If the cost of qualifying section 179 property placed in service in a year is over $200,000, you must reduce the dollar limit (but not below zero) by the amount of the cost over $200,000. Amending a federal tax return Increased Dollar Limit The dollar limit on the section 179 deduction is increased for certain property placed in service in the Liberty Zone. Amending a federal tax return The increase is the smaller of the following amounts. Amending a federal tax return $35,000. Amending a federal tax return The cost of section 179 property that is qualified Liberty Zone property placed in service during the year. Amending a federal tax return If you use the revised 2001 Form 4562 (dated March 2002) for a tax year beginning in 2000, you must reduce the section 179 dollar limit to $20,000 before adding the additional amount for qualified property. Amending a federal tax return Qualified property. Amending a federal tax return   To qualify for the increased section 179 deduction, your property must be section 179 property that is either: Qualified Liberty Zone property, or Property that would be qualified Liberty Zone property except that it is eligible for the special depreciation allowance. Amending a federal tax return Qualified Liberty Zone property is explained earlier in Qualified Liberty Zone Property under Special Liberty Zone Depreciation Allowance. Amending a federal tax return Property eligible for the special depreciation allowance is explained earlier in Qualified Property under Special Depreciation Allowance. Amending a federal tax return For information on the requirements that must be met for property to qualify for the section 179 deduction, see What Property Qualifies? on page 14 of Publication 946. Amending a federal tax return Example 1. Amending a federal tax return In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $25,000. Amending a federal tax return Because this cost is less than $35,000, the dollar limit on the section 179 deduction is increased by $25,000 to $49,000 ($24,000 + $25,000). Amending a federal tax return Example 2. Amending a federal tax return In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $75,000. Amending a federal tax return Because $35,000 is less than the cost of the property you place in service, the dollar limit on the section 179 deduction you can claim is increased by $35,000 to $59,000 ($24,000 + $35,000). Amending a federal tax return Reduced Dollar Limit Generally, you must reduce the dollar limit for a year by the cost of qualifying section 179 property placed in service in the year that is more than $200,000. Amending a federal tax return However, if the cost of your Liberty Zone property exceeds $200,000, you take into account only 50% (instead of 100%) of the cost of qualified property placed in service in a year. Amending a federal tax return Example. Amending a federal tax return In 2002, you place in service in your business, which is in the Liberty Zone, qualified property costing $460,000. Amending a federal tax return Your increased dollar limit is $59,000 ($35,000 + $24,000). Amending a federal tax return Because 50% of the cost of the property you place in service ($230,000) is $30,000 more than $200,000, you must reduce your $59,000 dollar limit to $29,000 ($59,000 - $30,000). Amending a federal tax return Recapture Rules Rules similar to those explained on page 20 of Publication 946 under When Must You Recapture the Deduction? apply with respect to any qualified property you stop using in the Liberty Zone. Amending a federal tax return Returns Filed Before June 1, 2002 If you filed a return before June 1, 2002, and did not deduct the increased section 179 amount for qualified property placed in service after September 10, 2001, you can deduct the increased amount by filing an amended return by the due date (not including extensions) of the return for the year after the year the property was placed in service. Amending a federal tax return This rule applies to returns for the following years. Amending a federal tax return 2000 fiscal years that end after September 10, 2001. Amending a federal tax return 2001 calendar and fiscal years. Amending a federal tax return On the amended return, write “Filed Pursuant to Rev. Amending a federal tax return Proc. Amending a federal tax return 2002–33. Amending a federal tax return ” Liberty Zone Leasehold Improvement Property Qualified Liberty Zone leasehold improvement property (described earlier in Qualified Property under Special Depreciation Allowance) is 5-year property. Amending a federal tax return This means that it is depreciated over a recovery period of 5 years. Amending a federal tax return For information about recovery periods, see Which Recovery Period Applies? on page 23 of Publication 946. Amending a federal tax return The straight-line method must be used with respect to qualified Liberty Zone leasehold improvement property. Amending a federal tax return Under ADS, the recovery period for qualified Liberty Zone leasehold improvement property is 9 years. Amending a federal tax return Returns Filed Before June 1, 2002 If you filed either of the following returns before June 1, 2002, and did not depreciate qualified Liberty Zone leasehold improvement property placed in service during the tax year as 5-year property using the straight line method, you should file an amended return before you file your return for the year after the year the property was placed in service. Amending a federal tax return Your 2000 fiscal year return (for a 2000 fiscal year that ends after September 10, 2001). Amending a federal tax return Your 2001 calendar or fiscal year return. Amending a federal tax return On the amended return, write “Filed Pursuant to Rev. Amending a federal tax return Proc. Amending a federal tax return 2002–33. Amending a federal tax return ” Table 2. Amending a federal tax return Rules for Returns Filed Before June 1, 2002 Note:This chart highlights the rules for returns affected by the Job Creation and Worker Assistance Act of 2002 that were filed before June 1, 2002, without accounting for any of the new benefits under the law. Amending a federal tax return See the text for definitions and examples. Amending a federal tax return Do not rely on this chart alone. Amending a federal tax return IF you want to. Amending a federal tax return . Amending a federal tax return . Amending a federal tax return THEN you. Amending a federal tax return . Amending a federal tax return . Amending a federal tax return BY. Amending a federal tax return . Amending a federal tax return . Amending a federal tax return claim the special depreciation allowance or special Liberty Zone depreciation allowance • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service, or • must file Form 3115, Application for Change in Accounting Method, with your return for the year after the year the property was placed in service • the due date (including extensions) of your return for the year after the year the property was placed in service, and • must file a copy of your completed Form 3115 with the IRS National Office • the date you file the original Form 3115 with your return for the year after the year the property was placed in service. Amending a federal tax return elect not to claim the special depreciation allowance or the special Liberty Zone depreciation allowance 1 • must have filed your return timely for the year the property was placed in service, and   • must file an amended return stating you are not claiming the allowance • the date that is 6 months after the due date of the original return (not including extensions). Amending a federal tax return deduct the increased section 179 amount • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service. Amending a federal tax return use a 5-year recovery period for depreciating qualified Liberty Zone leasehold improvement property • should file an amended return • the date you file your return for the year after the year the property was placed in service. Amending a federal tax return 1See also Deemed election under Rules for Returns Filed Before June 1, 2002, earlier. 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Understanding Your CP2000 Notice

The income and/or payment information we have on file doesn’t match the information you reported on your tax return. This could affect your tax return; it may cause an increase or decrease in your tax, or may not change it at all.


What you need to do

  • Read your notice carefully—it explains the information we received and how it affects your tax return.
  • Complete the notice response form whether or not you agree or disagree with the notice, the response form explains what actions to take. (Your specific notice may not have a response form. In that case, the notice will have instructions on what to do).
  • Contact the business or person reporting the information, if it is wrong. Ask them to correct it, and then provide the corrected information to us.

You may want to…


Answers to Common Questions

Why did I receive the notice?

We received information from a third party that doesn’t match the information you reported on your tax return.

Is the notice a bill?

No. It informs you about the information we’ve received and how it affects your tax.

What do I need to do?

Complete the notice response form. (Follow the notice instructions if your notice doesn’t have a response form.)

What do I do if the information is wrong or if I disagree?

The notice response form has instructions on what to do if the new information is wrong. You also may want to contact whoever reported the information and ask them to correct it.

The information is wrong because someone else is using my name and social security number. What can I do?

Call us and let us know. You also can use this link to go to our Identity theft information webpage to find out more about what you can do.

I reported the information but I reported it incorrectly. Can I call you to correct my return?

We can accept your information over the phone for incorrectly reported information as long as the mistake didn't increase or decrease your tax.

Do I need to amend my return?

If the information displayed in the CP2000 notice is correct, you don't need to amend your return unless you have additional income, credits or expenses to report. If you agree with our notice, follow the instructions to sign the response page and return it to us in the envelope provided.

If you have additional income, credits or expenses to report, you may want to complete and submit a Form 1040-X, Amended U.S. Individual Income Tax Return. You can receive help at an IRS Taxpayer Assistance Center.

I want to check a copy of my original return. I don’t have one. How can I get one?

You can get a transcript of your return on our ”Order a Transcript” webpage at irs.gov. You also can get one by completing and sending us a Form 4506-T, Request for Transcript of Tax Return.

I don’t want a transcript of my return. I want a copy. How can I get one?

Did an accountant or some other person prepare your return? You could ask them for a copy.

I can’t get a copy of my return from a tax preparer. How else can I get a copy of it?

You can get a copy of your return by completing and sending us a Form 4506, Request for Copy of Tax Return. We charge a fee for tax return requests.

How can I find an IRS Taxpayer Assistance Center?

We have centers located throughout the country. Our website has directions on how to find the center nearest to you.

Why did it take you so long to contact me about this matter?

Our computer systems match the information you report on your tax return with information reported by employers, banks, businesses, and others. This matching takes several months to complete.

The notice says my taxes will increase. Will I be charged interest on the money I owe?

Yes, interest accrues on your unpaid balance until you pay it in full.

What happens if I can’t pay the full amount I owe?

You can make a payment plan with us when you can’t pay the full amount you owe.

How can I make a payment plan?

Call us at the toll free number on the top right corner of your notice to talk about payment plans or learn more about them at this web page.


Tips for next year

You can avoid future problems by:

  • keeping accurate and full records
  • waiting until you get all of your income statements before filing your tax return
  • checking the records you get from your employer, mortgage company, bank, or other sources of income (W-2s, 1098s, 1099s, etc.) to make sure they're correct
  • including all your income on your tax return
  • following the instructions on how to report income, expenses and deductions
  • filing an amended tax return for any information you receive after you’ve filed your return

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

Page Last Reviewed or Updated: 28-Feb-2014

The Amending A Federal Tax Return

Amending a federal tax return 9. Amending a federal tax return   Obligations Not in Registered Form Tax is imposed on any person who issues a registration-required obligation not in registered form. Amending a federal tax return The tax is: 1% of the principal of the obligation, multiplied by The number of calendar years (or portions of calendar years) during the period starting on the date the obligation was issued and ending on the date it matures. Amending a federal tax return A registration-required obligation is any obligation other than one that meets any of the following conditions. Amending a federal tax return It is issued by a natural person. Amending a federal tax return It is not of a type offered to the public. Amending a federal tax return It has a maturity (at issue) of not more than 1 year. Amending a federal tax return It can only be issued to a foreign person. Amending a federal tax return For item (4), if the obligation is not in registered form, the interest on the obligation must be payable only outside the United States and its possessions. Amending a federal tax return Also, the obligation must state on its face that any U. Amending a federal tax return S. Amending a federal tax return person who holds it shall be subject to limits under the U. Amending a federal tax return S. Amending a federal tax return income tax laws. Amending a federal tax return Prev  Up  Next   Home   More Online Publications