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Income Tax Forms 20121040 VTax Form 1040xEz FormState Tax Forms Free1040 NrFillable 1040xHrblockfreefilePrint 1040ezFree Tax Calculator 2012I Need To File My State Taxes OnlyFree 1040ezFreefile Com1040nr FreeAmend Income Tax Return1040ez File OnlineForma 1040H&r Block FreeFederal Tax Forms 20091040eztaxformState Taxes OnlineFiling State Taxes Only2011 TaxHow To File 1040 Ez Form Online1040ez 2011 FormFederal Tax AmendmentAmend A ReturnFile Federal Taxes OnlineFree Income Tax ReturnWhere To File 1040xIrs 2012 Tax Form2010 Free Tax FilingHr Block 1040nr1040x FilingIrs Amended FormSenior TaxesIrs Form 1040x 2013 Tax ReturnIrs And Form 1040Easy Tax FormsBack Tax Debt

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Back tax filing Part Three -   Quarterly Filing Information Table of Contents 12. Back tax filing   Filing Form 720Attachments to Form 720. Back tax filing Conditions to allowance. Back tax filing 13. Back tax filing   Payment of TaxesHow To Make Deposits When To Make Deposits Amount of DepositsSafe Harbor Rule 14. Back tax filing   Penalties and Interest 15. Back tax filing   Examination and Appeal Procedures 16. Back tax filing   Rulings Program 17. Back tax filing   How To Get Tax Help 18. Back tax filing   Appendix Prev  Up  Next   Home   More Online Publications
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TEB Newsletters

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TEB State Newsletter - January 2012
This is the inaugural edition of a newsletter specifically designed to meet the needs of state officials responsible for overseeing the issuance of tax-advantaged bonds and ongoing compliance with applicable federal tax rules. This newsletter is a direct result of the State Government Communication land Outreach project of the IRS office of Tax Exempt Bonds.

TEB State Newsletter - April 2013
Semi-annual newsletter to assist in meeting the needs of state officials responsible for overseeing the issuance of tax-advantaged bonds and ongoing compliance with applicable federal tax rules. This newsletter also draws attention to key program developments and new educational resources released since the last issue.

TEB State Newsletter - January 2014
Our January newsletter starts with a message from our new Director of Tax Exempt Bonds, Rebecca Harrigal. This newsletter also provides overviews of our recent phone forums and previews of upcoming phone forums; highlights our new Publication 5091, Voluntary Compliance for Tax-Exempt and Tax-Credit Bonds and the Advisory Committee on Tax Exempt and Government Entities' Annual Report; and an update on the effects of sequestration on tax-advantaged bonds.


 

Page Last Reviewed or Updated: 09-Jan-2014

The Back Tax Filing

Back tax filing 1. Back tax filing   Rental Income and Expenses (If No Personal Use of Dwelling) Table of Contents Rental IncomeWhen To Report Types of Income Rental ExpensesWhen To Deduct Types of Expenses This chapter discusses the various types of rental income and expenses for a residential rental activity with no personal use of the dwelling. Back tax filing Generally, each year you will report all income and deduct all out-of-pocket expenses in full. Back tax filing The deduction to recover the cost of your rental property—depreciation—is taken over a prescribed number of years, and is discussed in chapter 2, Depreciation of Rental Property. Back tax filing If your rental income is from property you also use personally or rent to someone at less than a fair rental price, first read the information in chapter 5 , Personal Use of Dwelling Unit (Including Vacation Home). Back tax filing Rental Income In most cases, you must include in your gross income all amounts you receive as rent. Back tax filing Rental income is any payment you receive for the use or occupation of property. Back tax filing In addition to amounts you receive as normal rental payments, there are other amounts that may be rental income. Back tax filing When To Report When you report rental income on your tax return generally depends on whether you are a cash basis taxpayer or use an accrual method. Back tax filing Most individual taxpayers use the cash method. Back tax filing Cash method. Back tax filing   You are a cash basis taxpayer if you report income on your return in the year you actually or constructively receive it, regardless of when it was earned. Back tax filing You constructively receive income when it is made available to you, for example, by being credited to your bank account. Back tax filing Accrual method. Back tax filing    If you are an accrual basis taxpayer, you generally report income when you earn it, rather than when you receive it. Back tax filing You generally deduct your expenses when you incur them, rather than when you pay them. Back tax filing More information. Back tax filing   See Publication 538, Accounting Periods and Methods, for more information about when you constructively receive income and accrual methods of accounting. Back tax filing Types of Income The following are common types of rental income. Back tax filing Advance rent. Back tax filing   Advance rent is any amount you receive before the period that it covers. Back tax filing Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. Back tax filing Example. Back tax filing On March 18, 2013, you signed a 10-year lease to rent your property. Back tax filing During 2013, you received $9,600 for the first year's rent and $9,600 as rent for the last year of the lease. Back tax filing You must include $19,200 in your rental income in the first year. Back tax filing Canceling a lease. Back tax filing   If your tenant pays you to cancel a lease, the amount you receive is rent. Back tax filing Include the payment in your income in the year you receive it regardless of your method of accounting. Back tax filing Expenses paid by tenant. Back tax filing   If your tenant pays any of your expenses, those payments are rental income. Back tax filing Because you must include this amount in income, you can also deduct the expenses if they are deductible rental expenses. Back tax filing For more information, see Rental Expenses , later. Back tax filing Example 1. Back tax filing Your tenant pays the water and sewage bill for your rental property and deducts the amount from the normal rent payment. Back tax filing Under the terms of the lease, your tenant does not have to pay this bill. Back tax filing Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income. Back tax filing You can deduct the utility payment made by your tenant as a rental expense. Back tax filing Example 2. Back tax filing While you are out of town, the furnace in your rental property stops working. Back tax filing Your tenant pays for the necessary repairs and deducts the repair bill from the rent payment. Back tax filing Include the repair bill paid by the tenant and any amount received as a rent payment in your rental income. Back tax filing You can deduct the repair payment made by your tenant as a rental expense. Back tax filing Property or services. Back tax filing   If you receive property or services as rent, instead of money, include the fair market value of the property or services in your rental income. Back tax filing   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. Back tax filing Example. Back tax filing Your tenant is a house painter. Back tax filing He offers to paint your rental property instead of paying 2 months rent. Back tax filing You accept his offer. Back tax filing Include in your rental income the amount the tenant would have paid for 2 months rent. Back tax filing You can deduct that same amount as a rental expense for painting your property. Back tax filing Security deposits. Back tax filing   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. Back tax filing But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. Back tax filing    If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Back tax filing Include it in your income when you receive it. Back tax filing Other Sources of Rental Income Lease with option to buy. Back tax filing   If the rental agreement gives your tenant the right to buy your rental property, the payments you receive under the agreement are generally rental income. Back tax filing If your tenant exercises the right to buy the property, the payments you receive for the period after the date of sale are considered part of the selling price. Back tax filing Part interest. Back tax filing   If you own a part interest in rental property, you must report your part of the rental income from the property. Back tax filing Rental of property also used as your home. Back tax filing   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. Back tax filing However, you can deduct on Schedule A (Form 1040), Itemized Deductions, the interest, taxes, and casualty and theft losses that are allowed for nonrental property. Back tax filing See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Back tax filing Rental Expenses In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. Back tax filing Personal use of rental property. Back tax filing   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. Back tax filing Also, your rental expense deductions may be limited. Back tax filing See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Back tax filing Part interest. Back tax filing   If you own a part interest in rental property, you can deduct expenses you paid according to your percentage of ownership. Back tax filing Example. Back tax filing Roger owns a one-half undivided interest in a rental house. Back tax filing Last year he paid $968 for necessary repairs on the property. Back tax filing Roger can deduct $484 (50% × $968) as a rental expense. Back tax filing He is entitled to reimbursement for the remaining half from the co-owner. Back tax filing When To Deduct You generally deduct your rental expenses in the year you pay them. Back tax filing If you use the accrual method, see Publication 538 for more information. Back tax filing Types of Expenses Listed below are the most common rental expenses. Back tax filing Advertising. Back tax filing Auto and travel expenses. Back tax filing Cleaning and maintenance. Back tax filing Commissions. Back tax filing Depreciation. Back tax filing Insurance. Back tax filing Interest (other). Back tax filing Legal and other professional fees. Back tax filing Local transportation expenses. Back tax filing Management fees. Back tax filing Mortgage interest paid to banks, etc. Back tax filing Points. Back tax filing Rental payments. Back tax filing Repairs. Back tax filing Taxes. Back tax filing Utilities. Back tax filing Some of these expenses, as well as other less common ones, are discussed below. Back tax filing Depreciation. Back tax filing   Depreciation is a capital expense. Back tax filing It is the mechanism for recovering your cost in an income producing property and must be taken over the expected life of the property. Back tax filing   You can begin to depreciate rental property when it is ready and available for rent. Back tax filing See Placed in Service under When Does Depreciation Begin and End in chapter 2. Back tax filing Insurance premiums paid in advance. Back tax filing   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. Back tax filing You cannot deduct the total premium in the year you pay it. Back tax filing See chapter 6 of Publication 535 for information on deductible premiums. Back tax filing Interest expense. Back tax filing   You can deduct mortgage interest you pay on your rental property. Back tax filing When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Back tax filing Chapter 4 of Publication 535 explains mortgage interest in detail. Back tax filing Expenses paid to obtain a mortgage. Back tax filing   Certain expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. Back tax filing These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property. Back tax filing Form 1098, Mortgage Interest Statement. Back tax filing   If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098 or similar statement showing the interest you paid for the year. Back tax filing If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on, the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. Back tax filing Attach a statement to your return showing the name and address of the other person. Back tax filing On the dotted line next to line 13, enter “See attached. Back tax filing ” Legal and other professional fees. Back tax filing   You can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. Back tax filing For example, on your 2013 Schedule E you can deduct fees paid in 2013 to prepare Part I of your 2012 Schedule E. Back tax filing You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. Back tax filing Local benefit taxes. Back tax filing   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. Back tax filing These charges are nondepreciable capital expenditures and must be added to the basis of your property. Back tax filing However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. Back tax filing Local transportation expenses. Back tax filing   You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. Back tax filing However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. Back tax filing See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Back tax filing   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. Back tax filing For 2013, the standard mileage rate for business use is 56. Back tax filing 5 cents per mile. Back tax filing For more information, see chapter 4 of Publication 463. Back tax filing    To deduct car expenses under either method, you must keep records that follow the rules in chapter 5 of Publication 463. Back tax filing In addition, you must complete Form 4562, Part V, and attach it to your tax return. Back tax filing Pre-rental expenses. Back tax filing   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. Back tax filing Rental of equipment. Back tax filing   You can deduct the rent you pay for equipment that you use for rental purposes. Back tax filing However, in some cases, lease contracts are actually purchase contracts. Back tax filing If so, you cannot deduct these payments. Back tax filing You can recover the cost of purchased equipment through depreciation. Back tax filing Rental of property. Back tax filing   You can deduct the rent you pay for property that you use for rental purposes. Back tax filing If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. Back tax filing Travel expenses. Back tax filing   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. Back tax filing You must properly allocate your expenses between rental and nonrental activities. Back tax filing You cannot deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. Back tax filing The cost of improvements is recovered by taking depreciation. Back tax filing For information on travel expenses, see chapter 1 of Publication 463. Back tax filing    To deduct travel expenses, you must keep records that follow the rules in chapter 5 of Publication 463. Back tax filing Uncollected rent. Back tax filing   If you are a cash basis taxpayer, do not deduct uncollected rent. Back tax filing Because you have not included it in your income, it is not deductible. Back tax filing   If you use an accrual method, report income when you earn it. Back tax filing If you are unable to collect the rent, you may be able to deduct it as a business bad debt. Back tax filing See chapter 10 of Publication 535 for more information about business bad debts. Back tax filing Vacant rental property. Back tax filing   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. Back tax filing However, you cannot deduct any loss of rental income for the period the property is vacant. Back tax filing Vacant while listed for sale. Back tax filing   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. Back tax filing If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. Back tax filing Points The term “points” is often used to describe some of the charges paid, or treated as paid, by a borrower to take out a loan or a mortgage. Back tax filing These charges are also called loan origination fees, maximum loan charges, or premium charges. Back tax filing Any of these charges (points) that are solely for the use of money are interest. Back tax filing Because points are prepaid interest, you generally cannot deduct the full amount in the year paid, but must deduct the interest over the term of the loan. Back tax filing The method used to figure the amount of points you can deduct each year follows the original issue discount (OID) rules. Back tax filing In this case, points are equivalent to OID, which is the difference between: The amount borrowed (redemption price at maturity, or principal) and The proceeds (issue price). Back tax filing The first step is to determine whether your total OID (which you may have on bonds or other investments in addition to the mortgage loan), including the OID resulting from the points, is insignificant or de minimis. Back tax filing If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct. Back tax filing De minimis OID. Back tax filing   The OID is de minimis if it is less than one-fourth of 1% (. Back tax filing 0025) of the stated redemption price at maturity (principal amount of the loan) multiplied by the number of full years from the date of original issue to maturity (term of the loan). Back tax filing   If the OID is de minimis, you can choose one of the following ways to figure the amount of points you can deduct each year. Back tax filing On a constant-yield basis over the term of the loan. Back tax filing On a straight line basis over the term of the loan. Back tax filing In proportion to stated interest payments. Back tax filing In its entirety at maturity of the loan. Back tax filing You make this choice by deducting the OID (points) in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued. Back tax filing Example. Back tax filing Carol Madison took out a $100,000 mortgage loan on January 1, 2013, to buy a house she will use as a rental during 2013. Back tax filing The loan is to be repaid over 30 years. Back tax filing During 2013, Carol paid $10,000 of mortgage interest (stated interest) to the lender. Back tax filing When the loan was made, she paid $1,500 in points to the lender. Back tax filing The points reduced the principal amount of the loan from $100,000 to $98,500, resulting in $1,500 of OID. Back tax filing Carol determines that the points (OID) she paid are de minimis based on the following computation. Back tax filing Redemption price at maturity (principal amount of the loan) $100,000 Multiplied by: The term of the  loan in complete years ×30 Multiplied by ×. Back tax filing 0025 De minimis amount $7,500 The points (OID) she paid ($1,500) are less than the de minimis amount ($7,500). Back tax filing Therefore, Carol has de minimis OID and she can choose one of the four ways discussed earlier to figure the amount she can deduct each year. Back tax filing Under the straight line method, she can deduct $50 each year for 30 years. Back tax filing Constant-yield method. Back tax filing   If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. Back tax filing   You figure your deduction for the first year in the following manner. Back tax filing Determine the issue price of the loan. Back tax filing If you paid points on the loan, the issue price generally is the difference between the principal and the points. Back tax filing Multiply the result in (1) by the yield to maturity (defined later). Back tax filing Subtract any qualified stated interest payments (defined later) from the result in (2). Back tax filing This is the OID you can deduct in the first year. Back tax filing Yield to maturity (YTM). Back tax filing   This rate is generally shown in the literature you receive from your lender. Back tax filing If you do not have this information, consult your lender or tax advisor. Back tax filing In general, the YTM is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan. Back tax filing Qualified stated interest (QSI). Back tax filing   In general, this is the stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a fixed rate. Back tax filing Example—Year 1. Back tax filing The facts are the same as in the previous example. Back tax filing The yield to maturity on Carol's loan is 10. Back tax filing 2467%, compounded annually. Back tax filing She figured the amount of points (OID) she could deduct in 2013 as follows. Back tax filing Principal amount of the loan $100,000 Minus: Points (OID) –1,500 Issue price of the loan $98,500 Multiplied by: YTM × . Back tax filing 102467 Total 10,093 Minus: QSI –10,000 Points (OID) deductible in 2013 $93 To figure your deduction in any subsequent year, you start with the adjusted issue price. Back tax filing To get the adjusted issue price, add to the issue price figured in Year 1 any OID previously deducted. Back tax filing Then follow steps (2) and (3), earlier. Back tax filing Example—Year 2. Back tax filing Carol figured the deduction for 2014 as follows. Back tax filing Issue price $98,500 Plus: Points (OID) deducted  in 2013 +93 Adjusted issue price $98,593 Multiplied by: YTM × . Back tax filing 102467 Total 10,103 Minus: QSI –10,000 Points (OID) deductible in 2014 $103 Loan or mortgage ends. Back tax filing    If your loan or mortgage ends, you may be able to deduct any remaining points (OID) in the tax year in which the loan or mortgage ends. Back tax filing A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event. Back tax filing However, if the refinancing is with the same lender, the remaining points (OID) generally are not deductible in the year in which the refinancing occurs, but may be deductible over the term of the new mortgage or loan. Back tax filing Points when loan refinance is more than the previous outstanding balance. Back tax filing   When you refinance a rental property for more than the previous outstanding balance, the portion of the points allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Back tax filing For example, if an individual refinanced a loan with a balance of $100,000, the amount of the new loan was $120,000, and the taxpayer used $20,000 to purchase a car, points allocable to the $20,000 would be treated as nondeductible personal interest. Back tax filing Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. Back tax filing Improvements. Back tax filing   You must capitalize any expense you pay to improve your rental property. Back tax filing An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. Back tax filing Betterments. Back tax filing   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. Back tax filing Restoration. Back tax filing   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. Back tax filing Adaptation. Back tax filing   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. Back tax filing Separate the costs of repairs and improvements, and keep accurate records. Back tax filing You will need to know the cost of improvements when you sell or depreciate your property. Back tax filing The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. Back tax filing Table 1-1. Back tax filing Examples of Improvements Additions Bedroom Bathroom Deck Garage Porch Patio  Lawn & Grounds Landscaping Driveway Walkway Fence Retaining wall Sprinkler system Swimming pool Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system   Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances Kitchen modernization Flooring Wall-to-wall carpeting  Insulation Attic Walls, floor Pipes, duct work Prev  Up  Next   Home   More Online Publications