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Efile Irs

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Efile Irs

Efile irs 2. Efile irs   Taxable and Nontaxable Income Table of Contents Compensation for Services Retirement Plan DistributionsIndividual Retirement Arrangements (IRAs) Pensions and Annuities Social Security and Equivalent Railroad Retirement BenefitsAre Any of Your Benefits Taxable? How Much Is Taxable? How To Report Your Benefits Lump-Sum Election Repayments More Than Gross Benefits Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Life Insurance ProceedsInstallments for life. Efile irs Surviving spouse. Efile irs Endowment Contract Proceeds Accelerated Death Benefits Sale of HomeMaximum Amount of Exclusion Ownership and Use Tests Married Persons Business Use or Rental of Home Reporting the Sale Reverse Mortgages Other ItemsWelfare benefits. Efile irs Payments from a state fund for victims of crime. Efile irs Home Affordable Modification Program (HAMP). Efile irs Mortgage assistance payments. Efile irs Payments to reduce cost of winter energy use. Efile irs Nutrition Program for the Elderly. Efile irs Reemployment Trade Adjustment Assistance (RTAA). Efile irs Generally, income is taxable unless it is specifically exempt (not taxed) by law. Efile irs Your taxable income may include compensation for services, interest, dividends, rents, royalties, income from partnerships, estate or trust income, gain from sales or exchanges of property, and business income of all kinds. Efile irs Under special provisions of the law, certain items are partially or fully exempt from tax. Efile irs Provisions that are of special interest to older taxpayers are discussed in this chapter. Efile irs Compensation for Services Generally, you must include in gross income everything you receive in payment for personal services. Efile irs In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. Efile irs You need not receive the compensation in cash for it to be taxable. Efile irs Payments you receive in the form of goods or services generally must be included in gross income at their fair market value. Efile irs Volunteer work. Efile irs   Do not include in your gross income amounts you receive for supportive services or reimbursements for out-of-pocket expenses under any of the following volunteer programs. Efile irs Retired Senior Volunteer Program (RSVP). Efile irs Foster Grandparent Program. Efile irs Senior Companion Program. Efile irs Service Corps of Retired Executives (SCORE). Efile irs Unemployment compensation. Efile irs   You must include in income all unemployment compensation you or your spouse (if married filing jointly) received. Efile irs More information. Efile irs   See Publication 525, Taxable and Nontaxable Income, for more detailed information on specific types of income. Efile irs Retirement Plan Distributions This section summarizes the tax treatment of amounts you receive from traditional individual retirement arrangements (IRA), employee pensions or annuities, and disability pensions or annuities. Efile irs A traditional IRA is any IRA that is not a Roth or SIMPLE IRA. Efile irs A Roth IRA is an individual retirement plan that can be either an account or an annuity and features nondeductible contributions and tax-free distributions. Efile irs A SIMPLE IRA is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. Efile irs More detailed information can be found in Publication 590, Individual Retirement Arrangements (IRAs), and Publication 575, Pension and Annuity Income. Efile irs Individual Retirement Arrangements (IRAs) In general, distributions from a traditional IRA are taxable in the year you receive them. Efile irs Exceptions to the general rule are rollovers, tax-free withdrawals of contributions, and the return of nondeductible contributions. Efile irs These are discussed in Publication 590. Efile irs If you made nondeductible contributions to a traditional IRA, you must file Form 8606, Nondeductible IRAs. Efile irs If you do not file Form 8606 with your return, you may have to pay a $50 penalty. Efile irs Also, when you receive distributions from your traditional IRA, the amounts will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Efile irs Early distributions. Efile irs   Generally, early distributions are amounts distributed from your traditional IRA account or annuity before you are age 59½, or amounts you receive when you cash in retirement bonds before you are age  59½. Efile irs You must include early distributions of taxable amounts in your gross income. Efile irs These taxable amounts are also subject to an additional 10% tax unless the distribution qualifies for an exception. Efile irs For purposes of the additional 10% tax, an IRA is a qualified retirement plan. Efile irs For more information about this tax, see Tax on Early Distributions under Pensions and Annuities, later. Efile irs After age 59½ and before age 70½. Efile irs   After you reach age 59½, you can receive distributions from your traditional IRA without having to pay the 10% additional tax. Efile irs Even though you can receive distributions after you reach age 59½, distributions are not required until you reach  age 70½. Efile irs Required distributions. Efile irs   If you are the owner of a traditional IRA, you generally must receive the entire balance in your IRA or start receiving periodic distributions from your IRA by April 1 of the year following the year in which you reach age 70½. Efile irs See When Must You Withdraw Assets? (Required Minimum Distributions) in Publication 590. Efile irs If distributions from your traditional IRA(s) are less than the required minimum distribution for the year, you may have to pay a 50% excise tax for that year on the amount not distributed as required. Efile irs For purposes of the 50% excise tax, an IRA is a qualified retirement plan. Efile irs For more information about this tax, see Tax on Excess Accumulation under Pensions and Annuities, later. Efile irs See also Excess Accumulations (Insufficient Distributions) in Publication 590. Efile irs Pensions and Annuities Generally, if you did not pay any part of the cost of your employee pension or annuity, and your employer did not withhold part of the cost of the contract from your pay while you worked, the amounts you receive each year are fully taxable. Efile irs However, see Insurance Premiums for Retired Public Safety Officers , later. Efile irs If you paid part of the cost of your pension or annuity plan (see Cost , later), you can exclude part of each annuity payment from income as a recovery of your cost (investment in the contract). Efile irs This tax-free part of the payment is figured when your annuity starts and remains the same each year, even if the amount of the payment changes. Efile irs The rest of each payment is taxable. Efile irs However, see Insurance Premiums for Retired Public Safety Officers , later. Efile irs You figure the tax-free part of the payment using one of the following methods. Efile irs Simplified Method. Efile irs You generally must use this method if your annuity is paid under a qualified plan (a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract). Efile irs You cannot use this method if your annuity is paid under a nonqualified plan. Efile irs General Rule. Efile irs You must use this method if your annuity is paid under a nonqualified plan. Efile irs You generally cannot use this method if your annuity is paid under a qualified plan. Efile irs Contact your employer or plan administrator to find out if your pension or annuity is paid under a qualified or nonqualified plan. Efile irs You determine which method to use when you first begin receiving your annuity, and you continue using it each year that you recover part of your cost. Efile irs Exclusion limit. Efile irs   If your annuity starting date is after 1986, the total amount of annuity income you can exclude over the years as a recovery of the cost cannot exceed your total cost. Efile irs Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. Efile irs This deduction is not subject to the 2%-of-adjusted-gross-income limit on miscellaneous deductions. Efile irs   If you contributed to your pension or annuity and your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. Efile irs If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. Efile irs The total exclusion may be more than your cost. Efile irs Cost. Efile irs   Before you can figure how much, if any, of your pension or annuity benefits are taxable, you must determine your cost in the plan (your investment in the contract). Efile irs Your total cost in the plan includes everything that you paid. Efile irs It also includes amounts your employer contributed that were taxable to you when paid. Efile irs However, see Foreign employment contributions , later. Efile irs   From this total cost, subtract any refunded premiums, rebates, dividends, unrepaid loans, or other tax-free amounts you received by the later of the annuity starting date or the date on which you received your first payment. Efile irs   The annuity starting date is the later of the first day of the first period for which you received a payment from the plan or the date on which the plan's obligations became fixed. Efile irs    The amount of your contributions to the plan may be shown in box 9b of any Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Efile irs , that you receive. Efile irs Foreign employment contributions. Efile irs   If you worked abroad, certain amounts your employer paid into your retirement plan that were not includible in your gross income may be considered part of your cost. Efile irs For details, see Foreign employment contributions in Publication 575. Efile irs Withholding. Efile irs   The payer of your pension, profit-sharing, stock bonus, annuity, or deferred compensation plan will withhold income tax on the taxable part of amounts paid to you. Efile irs However, you can choose not to have tax withheld on the payments you receive, unless they are eligible rollover distributions. Efile irs (These are distributions that are eligible for rollover treatment but are not paid directly to another qualified retirement plan or to a traditional IRA. Efile irs ) See Withholding Tax and Estimated Tax and Rollovers in Publication 575 for more information. Efile irs   For payments other than eligible rollover distributions, you can tell the payer how much to withhold by filing a Form W-4P, Withholding Certificate for Pension or Annuity Payments. Efile irs Simplified Method. Efile irs   Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. Efile irs For an annuity that is payable over the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. Efile irs For any other annuity, this number is the number of monthly annuity payments under the contract. Efile irs Who must use the Simplified Method. Efile irs   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you receive your pension or annuity payments from a qualified plan or annuity, unless you were at least 75 years old and entitled to at least 5 years of guaranteed payments (defined next). Efile irs   In addition, if your annuity starting date is after July 1, 1986, and before November 19, 1996, you could have chosen to use the Simplified Method for payments from a qualified plan, unless you were at least 75 years old and entitled to at least 5 years of guaranteed payments. Efile irs If you chose to use the Simplified Method, you must continue to use it each year that you recover part of your cost. Efile irs Guaranteed payments. Efile irs   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. Efile irs If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. Efile irs Who cannot use the Simplified Method. Efile irs   You cannot use the Simplified Method and must use the General Rule if you receive pension or annuity payments from: A nonqualified plan, such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan, or A qualified plan if you are age 75 or older on your annuity starting date and you are entitled to at least 5 years of guaranteed payments (defined above). Efile irs   In addition, you had to use the General Rule for either circumstance described above if your annuity starting date is after July 1, 1986, and before November 19, 1996. Efile irs If you did not have to use the General Rule, you could have chosen to use it. Efile irs You also had to use the General Rule for payments from a qualified plan if your annuity starting date is before July 2, 1986, and you did not qualify to use the Three-Year Rule. Efile irs   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. Efile irs   Unless your annuity starting date was before 1987, once you have recovered all of your non-taxable investment, all of each remaining payment you receive is fully taxable. Efile irs Once your remaining payments are fully taxable, there is no longer a concern with the General Rule or Simplified Method. Efile irs   Complete information on the General Rule, including the actuarial tables you need, is contained in Publication 939, General Rule for Pensions and Annuities. Efile irs How to use the Simplified Method. Efile irs   Complete the Simplified Method Worksheet in the Form 1040, Form 1040A, or Form 1040NR instructions or in Publication 575 to figure your taxable annuity for 2013. Efile irs Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. Efile irs   To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. Efile irs How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. Efile irs For this purpose, treat an annuity that is payable over the life of an annuitant as payable for that annuitant's life even if the annuity has a fixed-period feature or also provides a temporary annuity payable to the annuitant's child under age 25. Efile irs    You do not need to complete line 3 of the worksheet or make the computation on line 4 if you received annuity payments last year and used last year's worksheet to figure your taxable annuity. Efile irs Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. Efile irs Single-life annuity. Efile irs   If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. Efile irs Enter on line 3 the number shown for your age on your annuity starting date. Efile irs This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Efile irs Multiple-lives annuity. Efile irs   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. Efile irs Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. Efile irs For an annuity payable to you as the primary annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. Efile irs For an annuity that has no primary annuitant and is payable to you and others as survivor annuitants, combine the ages of the oldest and youngest annuitants. Efile irs Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. Efile irs   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. Efile irs Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. Efile irs This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Efile irs Fixed-period annuities. Efile irs   If your annuity does not depend in whole or in part on anyone's life expectancy, the total number of expected monthly payments to enter on line 3 of the worksheet is the number of monthly annuity payments under the contract. Efile irs Line 6. Efile irs   The amount on line 6 should include all amounts that could have been recovered in prior years. Efile irs If you did not recover an amount in a prior year, you may be able to amend your returns for the affected years. Efile irs    Be sure to keep a copy of the completed worksheet; it will help you figure your taxable annuity in later years. Efile irs Example. Efile irs Bill Smith, age 65, began receiving retirement benefits in 2013, under a joint and survivor annuity. Efile irs Bill's annuity starting date is January 1, 2013. Efile irs The benefits are to be paid over the joint lives of Bill and his wife, Kathy, age 65. Efile irs Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. Efile irs Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. Efile irs Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. Efile irs See the illustrated Worksheet 2-A, Simplified Method Worksheet, later. Efile irs You can find a blank version of this worksheet in Publication 575. Efile irs (The references in the illustrated worksheet are to sections in Publication 575). Efile irs His annuity is payable over the lives of more than one annuitant, so Bill uses his and Kathy's combined ages, 130 (65 + 65), and Table 2 at the bottom of the worksheet in completing line 3 of the worksheet and finds the line 3 amount to be 310. Efile irs Bill's tax-free monthly amount is $100 ($31,000 ÷ 310 as shown on line 4 of the worksheet). Efile irs Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. Efile irs The full amount of any annuity payments received after 310 payments are paid must generally be included in gross income. Efile irs If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. Efile irs This deduction is not subject to the 2%-of-adjusted-gross-income limit. Efile irs Worksheet 2-A. Efile irs Simplified Method Worksheet—Illustrated 1. Efile irs Enter the total pension or annuity payments received this year. Efile irs Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. Efile irs $ 14,400 2. Efile irs Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion* See Cost (Investment in the Contract), earlier 2. Efile irs 31,000   Note. Efile irs If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Efile irs Otherwise, go to line 3. Efile irs     3. Efile irs Enter the appropriate number from Table 1 below. Efile irs But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below 3. Efile irs 310 4. Efile irs Divide line 2 by the number on line 3 4. Efile irs 100 5. Efile irs Multiply line 4 by the number of months for which this year's payments were made. Efile irs If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Efile irs Otherwise, go to line 6 5. Efile irs 1,200 6. Efile irs Enter any amount previously recovered tax free in years after 1986. Efile irs This is the amount shown on line 10 of your worksheet for last year 6. Efile irs 0 7. Efile irs Subtract line 6 from line 2 7. Efile irs 31,000 8. Efile irs Enter the smaller of line 5 or line 7 8. Efile irs 1,200 9. Efile irs Taxable amount for year. Efile irs Subtract line 8 from line 1. Efile irs Enter the result, but not less than zero. Efile irs Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Efile irs Note. Efile irs If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. Efile irs If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers, earlier, before entering an amount on your tax return. Efile irs 9. Efile irs $ 13,200 10. Efile irs Was your annuity starting date before 1987? □ Yes. Efile irs STOP. Efile irs Do not complete the rest of this worksheet. Efile irs  ☑ No. Efile irs Add lines 6 and 8. Efile irs This is the amount you have recovered tax free through 2013. Efile irs You will need this number if you need to fill out this worksheet next year. Efile irs 10. Efile irs 1,200 11. Efile irs Balance of cost to be recovered. Efile irs Subtract line 10 from line 2. Efile irs If zero, you will not have to complete this worksheet next year. Efile irs The payments you receive next year will generally be fully taxable 11. Efile irs $ 29,800 * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. Efile irs   Table 1 for Line 3 Above       AND your annuity starting date was—   IF your age on your annuity starting date was . Efile irs . Efile irs . Efile irs   BEFORE November 19, 1996, enter on line 3 . Efile irs . Efile irs . Efile irs AFTER November 18, 1996, enter on line 3 . Efile irs . Efile irs . Efile irs   55 or under 300 360   56-60 260 310   61-65 240 260   66-70 170 210   71 or over 120 160 Table 2 for Line 3 Above   IF the annuitants' combined ages on your annuity starting date were . Efile irs . Efile irs . Efile irs   THEN enter on line 3 . Efile irs . Efile irs . Efile irs         110 or under   410         111-120   360         121-130   310         131-140   260         141 or over   210       Survivors of retirees. Efile irs   Benefits paid to you as a survivor under a joint and survivor annuity must be included in your gross income in the same way the retiree would have included them in gross income. Efile irs   If you receive a survivor annuity because of the death of a retiree who had reported the annuity under the Three-Year Rule, include the total received in your income. Efile irs The retiree's cost has already been recovered tax free. Efile irs   If the retiree was reporting the annuity payments under the General Rule, you must apply the same exclusion percentage the retiree used to your initial payment called for in the contract. Efile irs The resulting tax-free amount will then remain fixed. Efile irs Any increases in the survivor annuity are fully taxable. Efile irs   If the retiree was reporting the annuity payments under the Simplified Method, the part of each payment that is tax free is the same as the tax-free amount figured by the retiree at the annuity starting date. Efile irs See Simplified Method , earlier. Efile irs How to report. Efile irs   If you file Form 1040, report your total annuity on line 16a, and the taxable part on line 16b. Efile irs If your pension or annuity is fully taxable, enter it on line 16b. Efile irs Do not make an entry on line 16a. Efile irs   If you file Form 1040A, report your total annuity on line 12a, and the taxable part on line 12b. Efile irs If your pension or annuity is fully taxable, enter it on line 12b. Efile irs Do not make an entry on line 12a. Efile irs   If you file Form 1040NR, report your total annuity on line 17a, and the taxable part on line 17b. Efile irs If your pension or annuity is fully taxable, enter it on line 17b. Efile irs Do not make an entry on line 17a. Efile irs Example. Efile irs You are a Form 1040 filer and you received monthly payments totaling $1,200 (12 months x $100) during 2013 from a pension plan that was completely financed by your employer. Efile irs You had paid no tax on the payments that your employer made to the plan, and the payments were not used to pay for accident, health, or long-term care insurance premiums (as discussed later under Insurance Premiums for Retired Public Safety Officers ). Efile irs The entire $1,200 is taxable. Efile irs You include $1,200 only on Form 1040, line 16b. Efile irs Joint return. Efile irs   If you file a joint return and you and your spouse each receive one or more pensions or annuities, report the total of the pensions and annuities on line 16a of Form 1040, line 12a of Form 1040A, or line 17a of Form 1040NR. Efile irs Report the total of the taxable parts on line 16b of Form 1040, line 12b of Form 1040A, or line 17b of Form 1040NR. Efile irs Form 1099-R. Efile irs   You should receive a Form 1099-R for your pension or annuity. Efile irs Form 1099-R shows your pension or annuity for the year and any income tax withheld. Efile irs You should receive a Form W-2 if you receive distributions from certain nonqualified plans. Efile irs You must attach Forms 1099-R or Forms W-2 to your 2013 tax return if federal income tax was withheld. Efile irs Generally, you should be sent these forms by January 31, 2014. Efile irs Nonperiodic Distributions If you receive a nonperiodic distribution from your retirement plan, you may be able to exclude all or part of it from your income as a recovery of your cost. Efile irs Nonperiodic distributions include cash withdrawals, distributions of current earnings (dividends) on your investment, and certain loans. Efile irs For information on how to figure the taxable amount of a nonperiodic distribution, see Taxation of Nonperiodic Payments in Publication 575. Efile irs The taxable part of a nonperiodic distribution may be subject to an additional 10% tax. Efile irs See Tax on Early Distributions, later. Efile irs Lump-sum distributions. Efile irs   If you receive a lump-sum distribution from a qualified employee plan or qualified employee annuity and the plan participant was born before January 2, 1936, you may be able to elect optional methods of figuring the tax on the distribution. Efile irs The part from active participation in the plan before 1974 may qualify as capital gain subject to a 20% tax rate. Efile irs The part from participation after 1973 (and any part from participation before 1974 that you do not report as capital gain) is ordinary income. Efile irs You may be able to use the 10-year tax option to figure tax on the ordinary income part. Efile irs Form 1099-R. Efile irs   If you receive a total distribution from a plan, you should receive a Form 1099-R. Efile irs If the distribution qualifies as a lump-sum distribution, box 3 shows the capital gain part of the distribution. Efile irs The amount in box 2a, Taxable amount, minus the amount in box 3, Capital gain, is the ordinary income part. Efile irs More information. Efile irs   For more detailed information on lump-sum distributions, see Publication 575 or Form 4972, Tax on Lump-Sum Distributions. Efile irs Tax on Early Distributions Most distributions you receive from your qualified retirement plan and nonqualified annuity contracts before you reach age 59½ are subject to an additional tax of 10%. Efile irs The tax applies to the taxable part of the distribution. Efile irs For this purpose, a qualified retirement plan is: A qualified employee plan (including a qualified cash or deferred arrangement (CODA) under Internal Revenue Code section 401(k)), A qualified employee annuity plan, A tax-sheltered annuity plan (403(b) plan), or An eligible state or local government section 457 deferred compensation plan (to the extent that any distribution is attributable to amounts the plan received in a direct transfer or rollover from one of the other plans listed here or an IRA). Efile irs  An IRA is also a qualified retirement plan for purposes of this tax. Efile irs General exceptions to tax. Efile irs   The early distribution tax does not apply to any distributions that are: Made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from a qualified retirement plan, the payments must begin after separation from service), Made because you are totally and permanently disabled, or Made on or after the death of the plan participant or contract holder. Efile irs Additional exceptions. Efile irs   There are additional exceptions to the early distribution tax for certain distributions from qualified retirement plans and nonqualified annuity contracts. Efile irs See Publication 575 for details. Efile irs Reporting tax. Efile irs   If you owe only the tax on early distributions and distribution code 1 (early distribution, no known exception) is correctly shown in Form 1099-R, box 7, multiply the taxable part of the early distribution by 10% (. Efile irs 10) and enter the result on Form 1040, line 58, or Form 1040NR, line 56. Efile irs See the instructions for line 58 of Form 1040 or line 56 of Form 1040NR for more information about reporting the early distribution tax. Efile irs Tax on Excess Accumulation To make sure that most of your retirement benefits are paid to you during your lifetime, rather than to your beneficiaries after your death, the payments that you receive from qualified retirement plans must begin no later than your required beginning date. Efile irs Unless the rule for 5% owners applies, this is generally April 1 of the year that follows the later of: The calendar year in which you reach age 70½, or The calendar year in which you retire from employment with the employer maintaining the plan. Efile irs However, your plan may require you to begin to receive payments by April 1 of the year that follows the year in which you reach 70½, even if you have not retired. Efile irs For this purpose, a qualified retirement plan includes: A qualified employee plan, A qualified employee annuity plan, An eligible section 457 deferred compensation plan, or A tax-sheltered annuity plan (403(b) plan) (for benefits accruing after 1986). Efile irs  An IRA is also a qualified retirement plan for purposes of this tax. Efile irs An excess accumulation is the undistributed remainder of the required minimum distribution that was left in your qualified retirement plan. Efile irs 5% owners. Efile irs   If you own (or are considered to own under section 318 of the Internal Revenue Code) more than 5% of the company maintaining your qualified retirement plan, you must begin to receive distributions from the plan by April 1 of the year after the calendar year in which you reach age 70½. Efile irs See Publication 575 for more information. Efile irs Amount of tax. Efile irs   If you do not receive the required minimum distribution, you are subject to an additional tax. Efile irs The tax equals 50% of the difference between the amount that must be distributed and the amount that was distributed during the tax year. Efile irs You can get this excise tax excused if you establish that the shortfall in distributions was due to reasonable error and that you are taking reasonable steps to remedy the shortfall. Efile irs Form 5329. Efile irs   You must file a Form 5329 if you owe a tax because you did not receive a minimum required distribution from your qualified retirement plan. Efile irs Additional information. Efile irs   For more detailed information on the tax on excess accumulation, see Publication 575. Efile irs Insurance Premiums for Retired Public Safety Officers If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. Efile irs The premiums can be for coverage for you, your spouse, or dependent(s). Efile irs The distribution must be made directly from the plan to the insurance provider. Efile irs You can exclude from income the smaller of the amount of the insurance premiums or $3,000. Efile irs You can only make this election for amounts that would otherwise be included in your income. Efile irs The amount excluded from your income cannot be used to claim a medical expense deduction. Efile irs An eligible retirement plan is a governmental plan that is a: Qualified trust, Section 403(a) plan, Section 403(b) annuity, or Section 457(b) plan. Efile irs If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. Efile irs The taxable amount shown in box 2a of any Form 1099-R that you receive does not reflect the exclusion. Efile irs Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Efile irs Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Efile irs Enter “PSO” next to the appropriate line on which you report the taxable amount. Efile irs Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. Efile irs These categories are treated differently for income tax purposes. Efile irs Social security equivalent benefits. Efile irs   The first category is the amount of tier 1 railroad retirement benefits that equals the social security benefit that a railroad employee or beneficiary would have been entitled to receive under the social security system. Efile irs This part of the tier 1 benefit is the social security equivalent benefit (SSEB) and is treated for tax purposes like social security benefits. Efile irs (See Social Security and Equivalent Railroad Retirement Benefits , later. Efile irs ) Non-social security equivalent benefits. Efile irs   The second category contains the rest of the tier 1 benefits, called the non-social security equivalent benefit (NSSEB). Efile irs It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. Efile irs This category of benefits is treated as an amount received from a qualified employee plan. Efile irs This allows for the tax-free (nontaxable) recovery of employee contributions from the tier 2 benefits and the NSSEB part of the tier 1 benefits. Efile irs Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. Efile irs More information. Efile irs   For more information about railroad retirement benefits, see Publication 575. Efile irs Military Retirement Pay Military retirement pay based on age or length of service is taxable and must be included in income as a pension on Form 1040, lines 16a and 16b; on Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b. Efile irs But, certain military and government disability pensions that are based on a percentage of disability from active service in the Armed Forces of any country generally are not taxable. Efile irs For more information, including information about veterans' benefits and insurance, see Publication 525. Efile irs Social Security and Equivalent Railroad Retirement Benefits This discussion explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits. Efile irs Social security benefits include monthly retirement, survivor, and disability benefits. Efile irs They do not include supplemental security income (SSI) payments, which are not taxable. Efile irs Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. Efile irs They commonly are called the social security equivalent benefit (SSEB) portion of tier 1 benefits. Efile irs If you received these benefits during 2013, you should have received a Form SSA-1099 or Form RRB-1099 (Form SSA-1042S or Form RRB-1042S if you are a nonresident alien), showing the amount of the benefits. Efile irs Are Any of Your Benefits Taxable? Note. Efile irs When the term “benefits” is used in this section, it applies to both social security benefits and the SSEB portion of tier 1 railroad retirement benefits. Efile irs  To find out whether any of your benefits may be taxable, compare the base amount for your filing status (explained later) with the total of: One-half of your benefits, plus All your other income, including tax-exempt interest. Efile irs When making this comparison, do not reduce your other income by any exclusions for: Interest from qualified U. Efile irs S. Efile irs savings bonds, Employer-provided adoption benefits, Foreign earned income or foreign housing, or Income earned in American Samoa or Puerto Rico by bona fide residents. Efile irs Figuring total income. Efile irs   To figure the total of one-half of your benefits plus your other income, use Worksheet 2-B. Efile irs If that total amount is more than your base amount, part of your benefits may be taxable. Efile irs If you are married and file a joint return for 2013, you and your spouse must combine your incomes and your benefits to figure whether any of your combined benefits are taxable. Efile irs Even if your spouse did not receive any benefits, you must add your spouse's income to yours to figure whether any of your benefits are taxable. Efile irs If the only income you received during 2013 was your social security or the SSEB portion of tier 1 railroad retirement benefits, your benefits generally are not taxable and you probably do not have to file a return. Efile irs If you have income in addition to your benefits, you may have to file a return even if none of your benefits are taxable. Efile irs Worksheet 2-B. Efile irs A Quick Way To Check if Your Benefits May Be Taxable A. Efile irs Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Efile irs Include  the full amount of any lump-sum benefit payments received in 2013, for 2013 and  earlier years. Efile irs (If you received more than one form, combine the amounts from box 5  and enter the total. Efile irs ) A. Efile irs     Note. Efile irs If the amount on line A is zero or less, stop here; none of your benefits are  taxable this year. Efile irs     B. Efile irs Enter one-half of the amount on line A B. Efile irs   C. Efile irs Enter your taxable pensions, wages, interest, dividends, and other taxable income C. Efile irs   D. Efile irs Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income for: •Interest from qualified U. Efile irs S. Efile irs savings bonds, •Employer-provided adoption benefits, •Foreign earned income or foreign housing, or •Income earned in American Samoa or Puerto Rico by bona fide residents D. Efile irs   E. Efile irs Add lines B, C, and D and enter the total E. Efile irs   F. Efile irs If you are: •Married filing jointly, enter $32,000 •Single, head of household, qualifying widow(er), or married filing separately and you  lived apart from your spouse for all of 2013, enter $25,000 •Married filing separately and you lived with your spouse at any time during 2013,  enter -0- F. Efile irs   G. Efile irs Is the amount on line F less than or equal to the amount on line E? □ No. Efile irs None of your benefits are taxable this year. Efile irs  □ Yes. Efile irs Some of your benefits may be taxable. Efile irs To figure how much of your benefits  are taxable, see Which worksheet to use under How Much Is Taxable. Efile irs     Base Amount Your base amount is: $25,000 if you are single, head of household, or qualifying widow(er) with dependent child, $25,000 if you are married filing separately and lived apart from your spouse for all of 2013, $32,000 if you are married filing jointly, or $0 if you are married filing separately and lived with your spouse at any time during 2013. Efile irs Repayment of Benefits Any repayment of benefits you made during 2013 must be subtracted from the gross benefits you received in 2013. Efile irs It does not matter whether the repayment was for a benefit you received in 2013 or in an earlier year. Efile irs If you repaid more than the gross benefits you received in 2013, see Repayments More Than Gross Benefits , later. Efile irs Your gross benefits are shown in box 3 of Form SSA-1099 or Form RRB-1099. Efile irs Your repayments are shown in box 4. Efile irs The amount in box 5 shows your net benefits for 2013 (box 3 minus box 4). Efile irs Use the amount in box 5 to figure whether any of your benefits are taxable. Efile irs Tax Withholding and Estimated Tax You can choose to have federal income tax withheld from your social security and/or the SSEB portion of your tier 1 railroad retirement benefits. Efile irs If you choose to do this, you must complete a Form W-4V, Voluntary Withholding Request. Efile irs If you do not choose to have income tax withheld, you may have to request additional withholding from other income, or pay estimated tax during the year. Efile irs For details, see Publication 505, Tax Withholding and Estimated Tax, or the instructions for Form 1040-ES, Estimated Tax for Individuals. Efile irs How Much Is Taxable? If part of your benefits is taxable, how much is taxable depends on the total amount of your benefits and other income. Efile irs Generally, the higher that total amount, the greater the taxable part of your benefits. Efile irs Maximum taxable part. Efile irs   The taxable part of your benefits usually cannot be more than 50%. Efile irs However, up to 85% of your benefits can be taxable if either of the following situations applies to you. Efile irs The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly). Efile irs You are married filing separately and lived with your spouse at any time during 2013. Efile irs   If you are a nonresident alien, 85% of your benefits are taxable. Efile irs However, this income is exempt under some tax treaties. Efile irs Which worksheet to use. Efile irs   A worksheet to figure your taxable benefits is in the instructions for your Form 1040 or 1040A. Efile irs However, you will need to use a different worksheet(s) if any of the following situations applies to you. Efile irs You contributed to a traditional individual retirement arrangement (IRA) and you or your spouse were covered by a retirement plan at work. Efile irs In this situation, you must use the special worksheets in Appendix B of Publication 590 to figure both your IRA deduction and your taxable benefits. Efile irs Situation (1) does not apply and you take one or more of the following exclusions. Efile irs Interest from qualified U. Efile irs S. Efile irs savings bonds (Form 8815). Efile irs Employer-provided adoption benefits (Form 8839). Efile irs Foreign earned income or housing (Form 2555 or Form 2555-EZ). Efile irs Income earned in American Samoa (Form 4563) or Puerto Rico by bona fide residents. Efile irs In these situations, you must use Worksheet 1 in Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure your taxable benefits. Efile irs You received a lump-sum payment for an earlier year. Efile irs In this situation, also complete Worksheet 2 or 3 and Worksheet 4 in Publication 915. Efile irs See Lump-Sum Election , later. Efile irs How To Report Your Benefits If part of your benefits are taxable, you must use Form 1040, Form 1040A, or Form 1040NR. Efile irs You cannot use Form 1040EZ. Efile irs Reporting on Form 1040. Efile irs   Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 20a and the taxable part on line 20b. Efile irs If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 20a. Efile irs Reporting on Form 1040A. Efile irs   Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 14a and the taxable part on line 14b. Efile irs If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 14a. Efile irs Reporting on Form 1040NR. Efile irs   Report 85% of the total amount of your benefits (box 5 of your Form SSA-1042S or Form RRB-1042S) in the appropriate column of Form 1040NR, Schedule NEC, line 8. Efile irs Benefits not taxable. Efile irs   If you are filing Form 1040EZ, do not report any benefits on your tax return. Efile irs If you are filing Form 1040 or Form 1040A, report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on Form 1040, line 20a, or Form 1040A, line 14a. Efile irs Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Efile irs If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Efile irs Lump-Sum Election You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2013 in your 2013 income, even if the payment includes benefits for an earlier year. Efile irs This type of lump-sum benefit payment should not be confused with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. Efile irs No part of the lump-sum death benefit is subject to tax. Efile irs For more information about the lump-sum death benefit, visit the Social Security Administration website at www. Efile irs SSA. Efile irs gov, and use keyword: death benefit. Efile irs Generally, you use your 2013 income to figure the taxable part of the total benefits received in 2013. Efile irs However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. Efile irs You can elect this method if it lowers your taxable benefits. Efile irs See Publication 915 for more information. Efile irs Repayments More Than Gross Benefits In some situations, your Form SSA-1099 or Form RRB-1099 will show that the total benefits you repaid (box 4) are more than the gross benefits (box 3) you received. Efile irs If this occurred, your net benefits in box 5 will be a negative figure (a figure in parentheses) and none of your benefits will be taxable. Efile irs If you receive more than one form, a negative figure in box 5 of one form is used to offset a positive figure in box 5 of another form for that same year. Efile irs If you have any questions about this negative figure, contact your local Social Security Administration office or your local U. Efile irs S. Efile irs Railroad Retirement Board field office. Efile irs Joint return. Efile irs   If you and your spouse file a joint return, and your Form SSA-1099 or RRB-1099 has a negative figure in box 5 but your spouse's does not, subtract the box 5 amount on your form from the box 5 amount on your spouse's form. Efile irs You do this to get your net benefits when figuring if your combined benefits are taxable. Efile irs Repayment of benefits received in an earlier year. Efile irs   If the total amount shown in box 5 of all of your Forms SSA-1099 and RRB-1099 is a negative figure, you can take an itemized deduction for the part of this negative figure that represents benefits you included in gross income in an earlier year. Efile irs   If this deduction is $3,000 or less, it is subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions. Efile irs Claim it on Schedule A (Form 1040), line 23. Efile irs   If this deduction is more than $3,000, you have to follow some special instructions. Efile irs See Publication 915 for those instructions. Efile irs Sickness and Injury Benefits Generally, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. Efile irs If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income. Efile irs However, certain payments may not be taxable to you. Efile irs Some of these payments are discussed later in this section. Efile irs Also, see Military and Government Disability Pensions and Other Sickness and Injury Benefits in Publication 525. Efile irs Cost paid by you. Efile irs   If you pay the entire cost of an accident or health plan, do not include any amounts you receive from the plan for personal injury or sickness as income on your tax return. Efile irs If your plan reimbursed you for medical expenses you deducted in an earlier year, you may have to include some, or all, of the reimbursement in your income. Efile irs Disability Pensions If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. Efile irs You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A or on line 8 of Form 1040NR until you reach minimum retirement age. Efile irs Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Efile irs If you were 65 or older by the end of 2013 or you were retired on permanent and total disability and received taxable disability income, you may be able to claim the credit for the elderly or the disabled. Efile irs See Credit for the Elderly or the Disabled, later. Efile irs For more information on this credit, see Publication 524, Credit for the Elderly or the Disabled. Efile irs Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Efile irs Report the payments on lines 16a and 16b of Form 1040, on lines 12a and 12b of Form 1040A, or on lines 17a and 17b of Form 1040NR. Efile irs For more information on pensions and annuities, see Publication 575. Efile irs Retirement and profit-sharing plans. Efile irs   If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat the payments as a disability pension. Efile irs The payments must be reported as a pension or annuity. Efile irs Accrued leave payment. Efile irs   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. Efile irs The payment is not a disability payment. Efile irs Include it in your income in the tax year you receive it. Efile irs Long-Term Care Insurance Contracts In most cases, long-term care insurance contracts generally are treated as accident and health insurance contracts. Efile irs Amounts you receive from them (other than policyholder dividends or premium refunds) generally are excludable from income as amounts received for personal injury or sickness. Efile irs However, the amount you can exclude may be limited. Efile irs Long-term care insurance contracts are discussed in more detail in Publication 525. Efile irs Workers' Compensation Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. Efile irs The exemption also applies to your survivors. Efile irs The exemption, however, does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired because of an occupational sickness or injury. Efile irs If part of your workers' compensation reduces your social security or equivalent railroad retirement benefits, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. Efile irs For a discussion of the taxability of these benefits, see Social Security and Equivalent Railroad Retirement Benefits, earlier. Efile irs Return to work. Efile irs   If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages. Efile irs Other Sickness and Injury Benefits In addition to disability pensions and annuities, you may receive other payments for sickness or injury. Efile irs Federal Employees' Compensation Act (FECA). Efile irs   Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of death, are not taxable. Efile irs However, you are taxed on amounts you receive under this Act as continuation of pay for up to 45 days while a claim is being decided. Efile irs Report this income on Form 1040, line 7; Form 1040A, line 7; on Form 1040EZ, line 1; or Form 1040NR, line 8. Efile irs Also, pay for sick leave while a claim is being processed is taxable and must be included in your income as wages. Efile irs    If part of the payments you receive under FECA reduces your social security or equivalent railroad retirement benefits, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. Efile irs For a discussion of the taxability of these benefits, see Social Security and Equivalent Railroad Retirement Benefits, earlier. Efile irs Other compensation. Efile irs   Many other amounts you receive as compensation for sickness or injury are not taxable. Efile irs These include the following amounts. Efile irs Benefits you receive under an accident or health insurance policy on which either you paid the premiums or your employer paid the premiums but you had to include them in your income. Efile irs Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy. Efile irs Compensation you receive for permanent loss or loss of use of a part or function of your body, for your permanent disfigurement, or for such loss or disfigurement suffered by your spouse or dependent(s). Efile irs This compensation must be based only on the injury and not on the period of your absence from work. Efile irs These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits. Efile irs Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. Efile irs This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. Efile irs Proceeds not received in installments. Efile irs   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. Efile irs If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. Efile irs Proceeds received in installments. Efile irs   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. Efile irs   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. Efile irs Include anything over this excluded part in your income as interest. Efile irs Installments for life. Efile irs   If, as the beneficiary under an insurance contract, you are entitled to receive the proceeds in installments for the rest of your life without a refund or period-certain guarantee, you figure the excluded part of each installment by dividing the amount held by the insurance company by your life expectancy. Efile irs If there is a refund or period-certain guarantee, the amount held by the insurance company for this purpose is reduced by the actuarial value of the guarantee. Efile irs Surviving spouse. Efile irs   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude, in any year, up to $1,000 of the interest included in the installments. Efile irs If you remarry, you can continue to take the exclusion. Efile irs Surrender of policy for cash. Efile irs   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Efile irs In general, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. Efile irs You should receive a Form 1099-R showing the total proceeds and the taxable part. Efile irs Report these amounts on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or Form 1040NR, lines 17a and 17b. Efile irs Endowment Contract Proceeds An endowment contract is a policy that pays over to you a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. Efile irs Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. Efile irs To determine your cost, subtract from the total premiums (or other consideration) paid for the contract any amount that you previously received under the contract and excluded from your income. Efile irs Include in your income the part of the lump-sum payment that is more than your cost. Efile irs Endowment proceeds that you choose to receive in installments instead of a lump-sum payment at the maturity of the policy are taxed as an annuity. Efile irs The tax treatment of an annuity is explained in Publication 575. Efile irs For this treatment to apply, you must choose to receive the proceeds in installments before receiving any part of the lump sum. Efile irs This election must be made within 60 days after the lump-sum payment first becomes payable to you. Efile irs Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are generally excluded from income if the insured is terminally or chronically ill. Efile irs However, see Exception , later. Efile irs For a chronically ill individual, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. Efile irs Accelerated death benefits paid on a per diem or other periodic basis without regard to the costs are excludable up to a limit. Efile irs In addition, if any portion of a death benefit under a life insurance contract on the life of a terminally or chronically ill individual is sold or assigned to a viatical settlement provider, the amount received also is excluded from income. Efile irs Generally, a viatical settlement provider is one who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill. Efile irs To report taxable accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. Efile irs Terminally or chronically ill defined. Efile irs   A terminally ill person is one who has been certified by a physician as having an illness or physical condition that reasonably can be expected to result in death within 24 months from the date of the certification. Efile irs A chronically ill person is one who is not terminally ill but has been certified (within the previous 12 months) by a licensed health care practitioner as meeting either of the following conditions. Efile irs The person is unable to perform (without substantial help) at least two activities of daily living (eating, toileting, transferring, bathing, dressing, and continence) for a period of 90 days or more because of a loss of functional capacity. Efile irs The person requires substantial supervision to protect himself or herself from threats to health and safety due to severe cognitive impairment. Efile irs Exception. Efile irs   The exclusion does not apply to any amount paid to a person other than the insured if that other person has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the other person, or Has a financial interest in the business of the other person. Efile irs Sale of Home You may be able to exclude from income any gain up to $250,000 ($500,000 on a joint return in most cases) on the sale of your main home. Efile irs Generally, if you can exclude all of the gain, you do not need to report the sale on your tax return. Efile irs You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. Efile irs Main home. Efile irs   Usually, your main home is the home you live in most of the time and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Efile irs Repaying the first-time homebuyer credit because you sold your home. Efile irs   If you claimed a first-time homebuyer credit for your main home and you sell it, you may have to repay the credit. Efile irs For a home purchased in 2008 and used as your main home until sold in 2013, you must file Form 5405 and repay the balance of the unpaid credit on your 2013 tax return. Efile irs   For a home purchased after 2008, you generally must repay the entire credit if the home was sold (or otherwise ceased to be your main home) within 36 months of the purchase date. Efile irs If you purchased your home in 2009 and used it as your main home until sold in 2013, you do not have to repay the credit or file Form 5405. Efile irs If you purchased your home in 2010 and used it as your main home until sold in 2013, you may have to file Form 5405 and repay the entire credit on your 2013 tax return. Efile irs   See the Instructions for Form 5405 for more information about repaying the credit and exceptions to repayment that may apply to you. Efile irs Maximum Amount of Exclusion You can generally exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. Efile irs You meet the ownership test. Efile irs You meet the use test. Efile irs During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. Efile irs You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . Efile irs Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. Efile irs This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). Efile irs Exception to ownership and use tests. Efile irs   If you owned and lived in the property as your main home for less than 2 years, you still can claim an exclusion in some cases. Efile irs Generally, you must have sold the home due to a change in place of employment, health, or unforeseen circumstances. Efile irs The maximum amount you can exclude will be reduced. Efile irs See Publication 523, Selling Your Home, for more information. Efile irs Exception to use test for individuals with a disability. Efile irs   There is an exception to the use test if, during the 5-year period before the sale of your home: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year. Efile irs Under this exception, you are considered to live in your home during any time that you own the home and live in a facility (including a nursing home) that is licensed by a state or political subdivision to care for persons in your condition. Efile irs   If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. Efile irs Exception to ownership test for property acquired in a like-kind exchange. Efile irs   You must have owned your main home for at least 5 years to qualify for the exclusion if you acquired your main home in a like-kind exchange. Efile irs This special 5-year ownership rule continues to apply to a home you acquired in a like-kind exchange and gave to another person. Efile irs A like-kind exchange is an exchange of property held for productive use in a trade or business or for investment. Efile irs See Publication 523 for more information. Efile irs Period of nonqualified use. Efile irs   Generally, the gain from the sale or exchange of your main home will not qualify for the exclusion to the extent that the gain is allocated to periods of nonqualified use. Efile irs Nonqualified use is any period after December 31, 2008, during which the property is not used as the main home. Efile irs See Publication 523 for more information. Efile irs Married Persons In the special situations discussed below, if you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use test, you can exclude up to $250,000 of gain. Efile irs However, see Special rules for joint returns , next. Efile irs Special rules for joint returns. Efile irs   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. Efile irs You are married and file a joint return for the year. Efile irs Either you or your spouse meets the ownership test. Efile irs Both you and your spouse meet the use test. Efile irs During the 2-year period ending on the date of the sale, neither you nor your spouse exclude gain from the sale of another home. Efile irs Sale of home by surviving spouse. Efile irs   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. Efile irs   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home in 2013. Efile irs The sale or exchange took place no more than 2 years after the date of death of your spouse. Efile irs You have not remarried. Efile irs You and your spouse met the use test at the time of your spouse's death. Efile irs You or your spouse met the ownership test at the time of your spouse's death. Efile irs Neither you nor your spouse excluded gain from the sale of another home during the last 2 years. Efile irs Home transferred from spouse. Efile irs   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. Efile irs Use of home after divorce. Efile irs   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. Efile irs Business Use or Rental of Home You may be able to exclude gain from the sale of a home that you have used for business or to produce rental income. Efile irs However, you must meet the ownership and use tests. Efile irs See Publication 523 for more information. Efile irs Depreciation after May 6, 1997. Efile irs   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. Efile irs See Publication 523 for more information. Efile irs Reporting the Sale Do not report the 2013 sale of your main home on your tax return unless: You have a gain and you do not qualify to exclude all of it, You have a gain and you choose not to exclude it, or You received Form 1099-S. Efile irs If you have a gain that you cannot or choose not to exclude, if you received a Form 1099-S, or if you have a deductible loss, report the sale on your tax return. Efile irs Report the sale on Part I or Part II of Form 8949 as a short-term or long-term transaction, depending on how long you owned the home. Efile irs If you used your home for business or to produce rental income, you may have to use Form 4797, Sales of Business Property, to report the sale of the business or rental part. Efile irs See Publication 523 for more information. Efile irs Reverse Mortgages A revers
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Understanding Your CP210/CP220 Notice

We made change(s) for the tax year specified on the notice.


What you need to do

  • Read your notice carefully - it explains the changes we made to your tax account.
  • If you agree, make your payment (if you have a balance) by your due date. Go to the payments page to find out more about your payment options.
  • If you disagree, contact us at the toll-free number on the top right corner of your notice.
  • Correct the copy of your tax return that you kept for your records.

You may want to


Answers to Common Questions

Q. The notice says "Based on the information you provided, we changed your 200X Form XXXX to correct your...", but I don't remember sending any change to IRS. How can I find out what IRS received to initiate this change?

A. Please contact us at the number listed on the top right corner of your notice for specific information about your tax return. 

Q. What do I say when I call the IRS?

A. Mention that you received a CP210 or CP 220 notice and you need to review your account with a customer service representative. Be sure to have a copy of your notice and your tax return before you call. 

Q. What should I do if I disagree with the changes you made?

A. If you disagree, contact us at the toll-free number listed on the top right corner of your notice. 

Q. What happens if I can't pay the full amount I owe?

A. See if you may be able to set up a payment plan through our Online Payment Agreement Application

Q. Am I charged interest on the money I owe?

A. If you don't full pay the amount you owe by the date on your notice, interest will accrue on the unpaid balance after that date. 

Q. Will I receive a penalty if I can't pay the full amount?

A. Yes, you'll receive a late payment penalty if you did not pay the tax in full. You can contact us at the number listed on your notice if you’re unable to pay the full amount shown in your specific notice because of circumstances beyond your control. Contact us by the due date of your payment and, depending on your situation, we may be able to remove the penalty. 

Q. What if I'm due a refund and haven't received it within 2-3 weeks?

A. If you don't owe other taxes or debts we're required to collect, such as child support, and 3 weeks have lapsed, call us at the toll-free number listed on the top right corner of your notice. 

Q. Will I receive information about the interest that I need to report on my next tax return?

A. If you were paid $10 or more in interest, you'll receive a Form 1099-INT from IRS by January 31st of next year. Please note, even if the interest amount paid to you is less than $10, you must report this amount on your tax return. 

Q. What if I need to make another correction to my account?

A. You'll need to file an amended return. 

Q. What if I have tried to get answers and after contacting IRS several times have not been successful?

A. Call Taxpayer Advocate at 1-877-777-4778 or for TTY/TDD 1-800-829-4059. 

Q. What if I think I’m a victim of identity theft?

A. Please contact us at the number listed on the top right corner of your notice. Refer to the IRS Identity Theft resource page for more information.


Tips for next year

  • Consider filing your taxes electronically in the future if you did not file this return electronically. Filing online can help you avoid mistakes. Learn more about e-file.

 

 

Page Last Reviewed or Updated: 27-Jan-2014

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Efile Irs

Efile irs Publication 559 - Main Content Table of Contents Personal RepresentativeDuties Fees Received by Personal Representatives Final Income Tax Return for Decedent—Form 1040Name, Address, and Signature When and Where To File Filing Requirements Income To Include Exemptions and Deductions Credits, Other Taxes, and Payments Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Filing Reminders Other Tax InformationTax Benefits for Survivors Income in Respect of a Decedent Deductions in Respect of a Decedent Estate Tax Deduction Gifts, Insurance, and Inheritances Other Items of Income Income Tax Return of an Estate— Form 1041Filing Requirements Income To Include Exemption and Deductions Credits, Tax, and Payments Name, Address, and Signature When and Where To File Distributions to BeneficiariesIncome That Must Be Distributed Currently Other Amounts Distributed Discharge of a Legal Obligation Character of Distributions How and When To Report Bequest Termination of Estate Estate and Gift TaxesApplicable Credit Amount Gift Tax Estate Tax Generation-Skipping Transfer Tax Comprehensive ExampleFinal Return for Decedent—Form 1040 Income Tax Return of an Estate—Form 1041 How To Get Tax HelpLow Income Taxpayer Clinics Personal Representative A personal representative of an estate is an executor, administrator, or anyone who is in charge of the decedent's property. Efile irs Generally, an executor (or executrix) is named in a decedent's will to administer the estate and distribute properties as the decedent has directed. Efile irs An administrator (or administratrix) is usually appointed by the court if no will exists, if no executor was named in the will, or if the named executor cannot or will not serve. Efile irs In general, an executor and an administrator perform the same duties and have the same responsibilities. Efile irs For estate tax purposes, if there is no executor or administrator appointed, qualified, and acting within the United States, the term “executor” includes anyone in actual or constructive possession of any property of the decedent. Efile irs It includes, among others, the decedent's agents and representatives; safe-deposit companies, warehouse companies, and other custodians of property in this country; brokers holding securities of the decedent as collateral; and the debtors of the decedent who are in this country. Efile irs Duties The primary duties of a personal representative are to collect all the decedent's assets, pay his or her creditors, and distribute the remaining assets to the heirs or other beneficiaries. Efile irs The personal representative also must perform the following duties. Efile irs Apply for an employer identification number (EIN) for the estate. Efile irs File all tax returns, including income, estate and gift tax returns, when due. Efile irs Pay the tax determined up to the date of discharge from duties. Efile irs Other duties of the personal representative in federal tax matters are discussed in other sections of this publication. Efile irs If any beneficiary is a nonresident alien, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for information on the personal representative's duties as a withholding agent. Efile irs Penalty. Efile irs   There is a penalty for failure to file a tax return when due unless the failure is due to reasonable cause. Efile irs Reliance on an agent (attorney, accountant, etc. Efile irs ) is not reasonable cause for late filing. Efile irs It is the personal representative's duty to file the returns for the decedent and the estate when due. Efile irs Identification number. Efile irs   The first action you should take if you are the personal representative for the decedent is to apply for an EIN for the estate. Efile irs You should apply for this number as soon as possible because you need to enter it on returns, statements, and other documents you file concerning the estate. Efile irs You also must give the number to payers of interest and dividends and other payers who must file a return concerning the estate. Efile irs   You can get an EIN by applying online at www. Efile irs irs. Efile irs gov (click on "Apply for an EIN Online" under the Tools heading). Efile irs Generally, if you apply online, you will receive your EIN immediately upon completing the application. Efile irs You can also apply using Form SS-4, Application for Employer Identification Number. Efile irs Generally, if you apply by mail, it takes about 4 weeks to get your EIN. Efile irs See the form instructions for other ways to apply. Efile irs   Payers of interest and dividends report amounts on Forms 1099 using the identification number of the person to whom the account is payable. Efile irs After a decedent's death, Forms 1099 must reflect the identification number of the estate or beneficiary to whom the amounts are payable. Efile irs As the personal representative handling the estate, you must furnish this identification number to the payer. Efile irs For example, if interest is payable to the estate, the estate's EIN must be provided to the payer and used to report the interest on Form 1099-INT, Interest Income. Efile irs If the interest is payable to a surviving joint owner, the survivor's identification number, such as an SSN or ITIN, must be provided to the payer and used to report the interest. Efile irs   If the estate or a survivor may receive interest or dividends after you inform the payer of the decedent's death, the payer should give you (or the survivor) a Form W-9, Request for Taxpayer Identification Number and Certification (or a similar substitute form). Efile irs Complete this form to inform the payer of the estate's (or if completed by the survivor, the survivor's) identification number and return it to the payer. Efile irs    Do not use the deceased individual's identifying number to file an individual income tax return after the decedent's final tax return. Efile irs Also do not use it to make estimated tax payments for a tax year after the year of death. Efile irs Penalty. Efile irs   If you do not include the EIN or the taxpayer identification number of another person where it is required on a return, statement, or other document, you are liable for a penalty for each failure, unless you can show reasonable cause. Efile irs You also are liable for a penalty if you do not give the taxpayer identification number of another person when required on a return, statement, or other document. Efile irs Notice of fiduciary relationship. Efile irs   The term fiduciary means any person acting for another person. Efile irs It applies to persons who have positions of trust on behalf of others. Efile irs A personal representative for a decedent's estate is a fiduciary. Efile irs Form 56. Efile irs   If you are appointed to act in a fiduciary capacity for another, you must file a written notice with the IRS stating this. Efile irs Form 56, Notice Concerning Fiduciary Relationship, is used for this purpose. Efile irs See the Instructions for Form 56 for filing requirements and other information. Efile irs   File Form 56 as soon as all the necessary information (including the EIN) is available. Efile irs It notifies the IRS that you, as the fiduciary, are assuming the powers, rights, duties, and privileges of the decedent. Efile irs The notice remains in effect until you notify the IRS (by filing another Form 56) that your fiduciary relationship with the estate has terminated. Efile irs Termination of fiduciary relationship. Efile irs   Form 56 should also be filed to notify the IRS if your fiduciary relationship is terminated or when a successor fiduciary is appointed if the estate has not been terminated. Efile irs See Form 56 and its instructions for more information. Efile irs   At the time of termination of the fiduciary relationship, you may want to file Form 4810, Request for Prompt Assessment Under Internal Revenue Code Section 6501(d), and Form 5495, Request for Discharge From Personal Liability Under Internal Revenue Code Section 2204 or 6905, to wind up your duties as fiduciary. Efile irs See below for a discussion of these forms. Efile irs Request for prompt assessment (charge) of tax. Efile irs   The IRS ordinarily has 3 years from the date an income tax return is filed, or its due date, whichever is later, to charge any additional tax due. Efile irs However, as a personal representative, you may request a prompt assessment of tax after the return has been filed. Efile irs This reduces the time for making the assessment to 18 months from the date the written request for prompt assessment was received. Efile irs This request can be made for any tax return (except the estate tax return) of the decedent or the decedent's estate. Efile irs This may permit a quicker settlement of the tax liability of the estate and an earlier final distribution of the assets to the beneficiaries. Efile irs Form 4810. Efile irs   Form 4810 can be used for making this request. Efile irs It must be filed separately from any other document. Efile irs   As the personal representative for the decedent's estate, you are responsible for any additional taxes that may be due. Efile irs You can request prompt assessment of any of the decedent's taxes (other than federal estate taxes) for any years for which the statutory period for assessment is open. Efile irs This applies even though the returns were filed before the decedent's death. Efile irs Failure to report income. Efile irs   If you or the decedent failed to report substantial amounts of gross income (more than 25% of the gross income reported on the return) or filed a false or fraudulent return, your request for prompt assessment will not shorten the period during which the IRS may assess the additional tax. Efile irs However, such a request may relieve you of personal liability for the tax if you did not have knowledge of the unpaid tax. Efile irs Request for discharge from personal liability for tax. Efile irs   An executor can make a request for discharge from personal liability for a decedent's income, gift, and estate taxes. Efile irs The request must be made after the returns for those taxes are filed. Efile irs To make the request, file Form 5495. Efile irs For this purpose, an executor is an executor or administrator that is appointed, qualified, and acting within the United States. Efile irs   Within 9 months after receipt of the request, the IRS will notify the executor of the amount of taxes due. Efile irs If this amount is paid, the executor will be discharged from personal liability for any future deficiencies. Efile irs If the IRS has not notified the executor, he or she will be discharged from personal liability at the end of the 9-month period. Efile irs    Even if the executor is discharged from personal liability, the IRS will still be able to assess tax deficiencies against the executor to the extent he or she still has any of the decedent's property. Efile irs Insolvent estate. Efile irs   Generally, if a decedent's estate is insufficient to pay all the decedent's debts, the debts due to the United States must be paid first. Efile irs Both the decedent's federal income tax liabilities at the time of death and the estate's income tax liability are debts due to the United States. Efile irs The personal representative of an insolvent estate is personally responsible for any tax liability of the decedent or of the estate if he or she had notice of such tax obligations or failed to exercise due care in determining if such obligations existed before distribution of the estate's assets and before being discharged from duties. Efile irs The extent of such personal responsibility is the amount of any other payments made before paying the debts due to the United States, except where such other debt paid has priority over the debts due to the United States. Efile irs Income tax liabilities need not be formally assessed for the personal representative to be liable if he or she was aware or should have been aware of their existence. Efile irs Fees Received by Personal Representatives All personal representatives must include fees paid to them from an estate in their gross income. Efile irs If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on your Form 1040, line 21. Efile irs If you are in the trade or business of being an executor, report fees received from the estate as self-employment income on Schedule C or Schedule C-EZ of your Form 1040. Efile irs If the estate operates a trade or business and you, as executor, actively participate in the trade or business while fulfilling your duties, any fees you receive related to the operation of the trade or business must be reported as self-employment income on Schedule C (or Schedule C-EZ) of your Form 1040. Efile irs Final Income Tax Return for Decedent—Form 1040 The personal representative (defined earlier) must file the final income tax return (Form 1040) of the decedent for the year of death and any returns not filed for preceding years. Efile irs A surviving spouse, under certain circumstances, may have to file the returns for the decedent. Efile irs See Joint Return, later. Efile irs Return for preceding year. Efile irs   If an individual died after the close of the tax year, but before the return for that year was filed, the return for the year just closed will not be the final return. Efile irs The return for that year will be a regular return and the personal representative must file it. Efile irs Example. Efile irs Samantha Smith died on March 21, 2013, before filing her 2012 tax return. Efile irs Her personal representative must file her 2012 return by April 15, 2013. Efile irs Her final tax return covering the period from January 1, 2013, to March 20, 2013, is due April 15, 2014. Efile irs Name, Address, and Signature Write the word “DECEASED,” the decedent's name, and the date of death across the top of the tax return. Efile irs If filing a joint return, write the name and address of the decedent and the surviving spouse in the name and address fields. Efile irs If a joint return is not being filed, write the decedent's name in the name field and the personal representative's name and address in the address field. Efile irs Third party designee. Efile irs   You can check the “Yes” box in the Third Party Designee area on page 2 of the return to authorize the IRS to discuss the return with a friend, family member, or any other person you choose. Efile irs This allows the IRS to call the person you identified as the designee to answer any questions that may arise during the processing of the return. Efile irs It also allows the designee to perform certain actions. Efile irs See the Instructions for Form 1040 for details. Efile irs Signature. Efile irs   If a personal representative has been appointed, that person must sign the return. Efile irs If it is a joint return, the surviving spouse must also sign it. Efile irs If no personal representative has been appointed, the surviving spouse (on a joint return) signs the return and writes in the signature area “Filing as surviving spouse. Efile irs ” If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative. Efile irs ” Paid preparer. Efile irs   If you pay someone to prepare, assist in preparing, or review the tax return, that person must sign the return and fill in the other blanks in the Paid Preparer Use Only area of the return. Efile irs See the Form 1040 instructions for details. Efile irs When and Where To File The final income tax return is due at the same time the decedent's return would have been due had death not occurred. Efile irs A final return for a decedent who was a calendar year taxpayer is generally due on April 15 following the year of death, regardless of when during that year death occurred. Efile irs However, when the due date falls on a Saturday, Sunday, or legal holiday, the return is filed timely if filed by the next business day. Efile irs The tax return must be prepared for the year of death regardless of when during the year death occurred. Efile irs Generally, you must file the final income tax return of the decedent with the Internal Revenue Service Center for the place where you live. Efile irs A tax return for a decedent can be electronically filed. Efile irs A personal representative may also obtain an income tax filing extension on behalf of a decedent. Efile irs Filing Requirements The gross income, age, and filing status of a decedent generally determine whether a return must be filed. Efile irs Gross income is all income received by an individual from any source in the form of money, goods, property, and services that is not tax-exempt. Efile irs It includes gross receipts from self-employment, but if the business involves manufacturing, merchandising, or mining, subtract any cost of goods sold. Efile irs In general, filing status depends on whether the decedent was considered single or married at the time of death. Efile irs See the income tax return instructions or Publication 501, Exemptions, Standard Deduction, and Filing Information. Efile irs Refund A return must be filed to obtain a refund if tax was withheld from salaries, wages, pensions, or annuities, or if estimated tax was paid, even if a return is not otherwise required to be filed. Efile irs Also, the decedent may be entitled to other credits that result in a refund. Efile irs These advance payments of tax and credits are discussed later under Credits, Other Taxes, and Payments. Efile irs Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer. Efile irs   Form 1310 does not have to be filed if you are claiming a refund and you are: A surviving spouse filing an original or amended joint return with the decedent, or A court-appointed or certified personal representative filing the decedent’s original return and a copy of the court certificate showing your appointment is attached to the return. Efile irs   If the personal representative is filing a claim for refund on Form 1040X, Amended U. Efile irs S. Efile irs Individual Income Tax Return, or Form 843, Claim for Refund and Request for Abatement, and the court certificate has already been filed with the IRS, attach Form 1310 and write “Certificate Previously Filed” at the bottom of the form. Efile irs Example. Efile irs Edward Green died before filing his tax return. Efile irs You were appointed the personal representative for Edward's estate, and you file his Form 1040 showing a refund due. Efile irs You do not need Form 1310 to claim the refund if you attach a copy of the court certificate showing you were appointed the personal representative. Efile irs    If you are a surviving spouse and you receive a tax refund check in both your name and your deceased spouse's name, you can have the check reissued in your name alone. Efile irs Return the joint-name check marked “VOID” to your local IRS office or the service center where you mailed your return, along with a written request for reissuance of the refund check. Efile irs A new check will be issued in your name and mailed to you. Efile irs Death certificate. Efile irs   When filing the decedent's final income tax return, do not attach the death certificate or other proof of death to the final return. Efile irs Instead, keep it for your records and provide it if requested. Efile irs Nonresident Alien If the decedent was a nonresident alien who would have had to file Form 1040NR, U. Efile irs S. Efile irs Nonresident Alien Income Tax Return, you must file that form for the decedent's final tax year. Efile irs See the Instructions for Form 1040NR for the filing requirements, due date, and where to file. Efile irs Joint Return Generally, the personal representative and the surviving spouse can file a joint return for the decedent and the surviving spouse. Efile irs However, the surviving spouse alone can file the joint return if no personal representative has been appointed before the due date for filing the final joint return for the year of death. Efile irs This also applies to the return for the preceding year if the decedent died after the close of the preceding tax year and before filing the return for that year. Efile irs The income of the decedent that was includible on his or her return for the year up to the date of death (see Income To Include, later) and the income of the surviving spouse for the entire year must be included in the final joint return. Efile irs A final joint return with the decedent cannot be filed if the surviving spouse remarried before the end of the year of the decedent's death. Efile irs The filing status of the decedent in this instance is married filing a separate return. Efile irs For information about tax benefits to which a surviving spouse may be entitled, see Tax Benefits for Survivors, later, under Other Tax Information. Efile irs Personal representative may revoke joint return election. Efile irs   A court-appointed personal representative may revoke an election to file a joint return previously made by the surviving spouse alone. Efile irs This is done by filing a separate return for the decedent within one year from the due date of the return (including any extensions). Efile irs The joint return made by the surviving spouse will then be regarded as the separate return of that spouse by excluding the decedent's items and refiguring the tax liability. Efile irs Relief from joint liability. Efile irs   In some cases, one spouse may be relieved of joint liability for tax, interest, and penalties on a joint return for items of the other spouse that were incorrectly reported on the joint return. Efile irs If the decedent qualified for this relief while alive, the personal representative can pursue an existing request, or file a request, for relief from joint liability. Efile irs For information on requesting this relief, see Publication 971, Innocent Spouse Relief. Efile irs Income To Include The decedent's income includible on the final return is generally determined as if the person were still alive except that the taxable period is usually shorter because it ends on the date of death. Efile irs The method of accounting regularly used by the decedent before death also determines the income includible on the final return. Efile irs This section explains how some types of income are reported on the final return. Efile irs For more information about accounting methods, see Publication 538, Accounting Periods and Methods. Efile irs Cash Method If the decedent accounted for income under the cash method, only those items actually or constructively received before death are included on the final return. Efile irs Constructive receipt of income. Efile irs   Interest from coupons on the decedent's bonds is constructively received by the decedent if the coupons matured in the decedent's final tax year, but had not been cashed. Efile irs Include the interest income on the final return. Efile irs   Generally, a dividend is considered constructively received if it was available for use by the decedent without restriction. Efile irs If the corporation customarily mailed its dividend checks, the dividend was includible when received. Efile irs If the individual died between the time the dividend was declared and the time it was received in the mail, the decedent did not constructively receive it before death. Efile irs Do not include the dividend in the final return. Efile irs Accrual Method Generally, under an accrual method of accounting, income is reported when earned. Efile irs If the decedent used an accrual method, only the income items normally accrued before death are included on the final return. Efile irs Interest and Dividend Income (Forms 1099) Form(s) 1099 reporting interest and dividends earned by the decedent before death should be received and the amounts included on the decedent's final return. Efile irs A separate Form 1099 should show the interest and dividends earned after the date of the decedent's death and paid to the estate or other recipient that must include those amounts on its return. Efile irs You can request corrected Forms 1099 if these forms do not properly reflect the right recipient or amounts. Efile irs For example, a Form 1099-INT, reporting interest payable to the decedent, may include income that should be reported on the final income tax return of the decedent, as well as income that the estate or other recipient should report, either as income earned after death or as income in respect of the decedent (discussed later). Efile irs For income earned after death, you should ask the payer for a Form 1099 that properly identifies the recipient (by name and identification number) and the proper amount. Efile irs If that is not possible, or if the form includes an amount that represents income in respect of the decedent, report the interest as shown next under How to report. Efile irs See U. Efile irs S. Efile irs savings bonds acquired from decedent under Income in Respect of a Decedent, later, for information on savings bond interest that may have to be reported on the final return. Efile irs How to report. Efile irs   If you are preparing the decedent's final return and you have received a Form 1099-INT for the decedent that includes amounts belonging to the decedent and to another recipient (the decedent's estate or another beneficiary), report the total interest shown on Form 1099-INT on Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends. Efile irs Next, enter a subtotal of the interest shown on Forms 1099, and the interest reportable from other sources for which you did not receive Forms 1099. Efile irs Then, show any interest (including any interest you receive as a nominee) belonging to another recipient separately and subtract it from the subtotal. Efile irs Identify the amount of this adjustment as “Nominee Distribution” or other appropriate designation. Efile irs   Report dividend income for which you received a Form 1099-DIV, Dividends and Distributions, on the appropriate schedule using the same procedure. Efile irs    Note. Efile irs If the decedent received amounts as a nominee, you must give the actual owner a Form 1099, unless the owner is the decedent's spouse. Efile irs See General Instructions for Certain Information Returns (Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G) for more information on filing Forms 1099. Efile irs Partnership Income The death of a partner closes the partnership's tax year for that partner. Efile irs Generally, it does not close the partnership's tax year for the remaining partners. Efile irs The decedent's distributive share of partnership items must be figured as if the partnership's tax year ended on the date the partner died. Efile irs To avoid an interim closing of the partnership books, the partners can agree to estimate the decedent's distributive share by prorating the amounts the partner would have included for the entire partnership tax year. Efile irs On the decedent's final return, include the decedent's distributive share of partnership items for the following periods. Efile irs The partnership's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). Efile irs The period, if any, from the end of the partnership's tax year in (1) to the decedent's date of death. Efile irs Example. Efile irs Mary Smith was a partner in XYZ partnership and reported her income on a tax year ending December 31. Efile irs The partnership uses a tax year ending June 30. Efile irs Mary died August 31, 2013, and her estate established its tax year through August 31. Efile irs The distributive share of partnership items based on the decedent's partnership interest is reported as follows. Efile irs Final Return for the Decedent—January 1 through August 31, 2013, includes XYZ partnership items from (a) the partnership tax year ending June 30, 2013, and (b) the partnership tax year beginning July 1, 2013, and ending August 31, 2013 (the date of death). Efile irs Income Tax Return of the Estate—September 1, 2013, through August 31, 2014, includes XYZ partnership items for the period September 1, 2013, through June 30, 2014. Efile irs S Corporation Income If the decedent was a shareholder in an S corporation, include on the final return the decedent's share of the S corporation's items of income, loss, deduction, and credit for the following periods. Efile irs The corporation's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). Efile irs The period, if any, from the end of the corporation's tax year in (1) to the decedent's date of death. Efile irs Self-Employment Income Include self-employment income actually or constructively received or accrued, depending on the decedent's accounting method. Efile irs For self-employment tax purposes only, the decedent's self-employment income will include the decedent's distributive share of a partnership's income or loss through the end of the month in which death occurred. Efile irs For this purpose, the partnership's income or loss is considered to be earned ratably over the partnership's tax year. Efile irs Community Income If the decedent was married and domiciled in a community property state, half of the income received and half of the expenses paid during the decedent's tax year by either the decedent or spouse may be considered to be the income and expenses of the other. Efile irs For more information, see Publication 555, Community Property. Efile irs HSA, Archer MSA, or Medicare Advantage MSA The treatment of an HSA (health savings account), an Archer MSA (medical savings account), or a Medicare Advantage MSA at the death of the account holder, depends on who acquires the interest in the account. Efile irs If the decedent's estate acquires the interest, the fair market value (FMV) of the assets in the account on the date of death is included in income on the decedent's final return. Efile irs The estate tax deduction, discussed later, does not apply to this amount. Efile irs If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. Efile irs For other information on HSAs, Archer MSAs, or Medicare Advantage MSAs, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. Efile irs Coverdell Education Savings Account (ESA) Generally, the balance in a Coverdell ESA must be distributed within 30 days after the individual for whom the account was established reaches age 30, or dies, whichever is earlier. Efile irs The treatment of the Coverdell ESA at the death of an individual under age 30 depends on who acquires the interest in the account. Efile irs If the decedent's estate acquires the interest, the earnings on the account must be included on the final income tax return of the decedent. Efile irs The estate tax deduction, discussed later, does not apply to this amount. Efile irs If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. Efile irs The age 30 limitation does not apply if the individual for whom the account was established or the beneficiary that acquires the account is an individual with special needs. Efile irs This includes an individual who, because of a physical, mental, or emotional condition (including a learning disability), requires additional time to complete his or her education. Efile irs For more information on Coverdell ESAs, see Publication 970, Tax Benefits for Education. Efile irs Accelerated Death Benefits Accelerated death benefits are amounts received under a life insurance contract before the death of the insured individual. Efile irs These benefits also include amounts received on the sale or assignment of the contract to a viatical settlement provider. Efile irs Generally, if the decedent received accelerated death benefits on the life of a terminally or chronically ill individual, whether on his or her own life or on the life of another person, those benefits are not included in the decedent's income. Efile irs For more information, see the discussion under Gifts, Insurance, and Inheritances under Other Tax Information, later. Efile irs Exemptions and Deductions Generally, the rules for exemptions and deductions allowed to an individual also apply to the decedent's final income tax return. Efile irs Show on the final return deductible items the decedent paid (or accrued, if the decedent reported deductions on an accrual method) before death. Efile irs This section contains a detailed discussion of medical expenses because the tax treatment of the decedent's medical expenses can be different. Efile irs See Medical Expenses, later. Efile irs Exemptions You can claim the decedent's personal exemption on the final income tax return. Efile irs If the decedent was another person's dependent (for example, a parent's), you cannot claim the personal exemption on the decedent's final return. Efile irs Standard Deduction If you do not itemize deductions on the final return, the full amount of the appropriate standard deduction is allowed regardless of the date of death. Efile irs For information on the appropriate standard deduction, see the Form 1040 income tax return instructions or Publication 501. Efile irs Medical Expenses Medical expenses paid before death by the decedent are deductible, subject to limits, on the final income tax return if deductions are itemized. Efile irs This includes expenses for the decedent, as well as for the decedent's spouse and dependents. Efile irs Beginning in 2013, medical expenses exceeding 10% of adjusted gross income (AGI) may be deducted, unless the decedent or their spouse is age 65 or older. Efile irs In that case medical expenses exceeding 7. Efile irs 5% of AGI may be deducted. Efile irs Qualified medical expenses are not deductible if paid with a tax-free distribution from an HSA or an Archer MSA. Efile irs Election for decedent's expenses. Efile irs   Medical expenses not paid before death are liabilities of the estate and are shown on the federal estate tax return (Form 706). Efile irs However, if medical expenses for the decedent are paid out of the estate during the 1-year period beginning with the day after death, you can elect to treat all or part of the expenses as paid by the decedent at the time they were incurred. Efile irs   If you make the election, you can claim all or part of the expenses on the decedent's income tax return (if deductions are itemized) rather than on the federal estate tax return (Form 706). Efile irs You can deduct expenses incurred in the year of death on the final income tax return. Efile irs You should file an amended return (Form 1040X) for medical expenses incurred in an earlier year, unless the statutory period for filing a claim for that year has expired. Efile irs   The amount you can deduct on the income tax return is the amount above 10% of adjusted gross income (or 7. Efile irs 5% of adjusted gross income if the decedent or the decedent's spouse was born before January 2, 1949). Efile irs Amounts not deductible because of this percentage cannot be claimed on the federal estate tax return. Efile irs Making the election. Efile irs   You make the election by attaching a statement, in duplicate, to the decedent's income tax return or amended return. Efile irs The statement must state that you have not claimed the amount as an estate tax deduction, and that the estate waives the right to claim the amount as a deduction. Efile irs This election applies only to expenses incurred for the decedent, not to expenses incurred to provide medical care for dependents. Efile irs Example. Efile irs Richard Brown used the cash method of accounting and filed his income tax return on a calendar year basis. Efile irs Richard died on June 1, 2013, at the age of 78, after incurring $800 in medical expenses. Efile irs Of that amount, $500 was incurred in 2012 and $300 was incurred in 2013. Efile irs Richard itemized his deductions when he filed his 2012 income tax return. Efile irs The personal representative of the estate paid the entire $800 liability in August 2013. Efile irs The personal representative may file an amended return (Form 1040X) for 2012 claiming the $500 medical expense as a deduction, subject to the 7. Efile irs 5% limit. Efile irs The $300 of expenses incurred in 2013 can be deducted on the final income tax return if deductions are itemized, subject to the 7. Efile irs 5% limit. Efile irs The personal representative must file a statement in duplicate with each return stating that these amounts have not been claimed on the federal estate tax return (Form 706), and waiving the right to claim such a deduction on Form 706 in the future. Efile irs Medical expenses not paid by estate. Efile irs   If you paid medical expenses for your deceased spouse or dependent, claim the expenses on your tax return for the year in which you paid them, whether they are paid before or after the decedent's death. Efile irs If the decedent was a child of divorced or separated parents, the medical expenses can usually be claimed by both the custodial and noncustodial parent to the extent paid by that parent during the year. Efile irs Insurance reimbursements. Efile irs   Insurance reimbursements of previously deducted medical expenses due a decedent at the time of death and later received by the decedent's estate are includible in the income tax return of the estate (Form 1041) for the year the reimbursements are received. Efile irs The reimbursements are also includible in the decedent's gross estate. Efile irs No deduction for funeral expenses can be taken on the final Form 1040 of a decedent. Efile irs These expenses may be deductible for estate tax purposes on Form 706. Efile irs Deduction for Losses A decedent's net operating loss deduction from a prior year and any capital losses (including capital loss carryovers) can be deducted only on the decedent's final income tax return. Efile irs A net operating loss on the decedent's final income tax return can be carried back to prior years. Efile irs (See Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. Efile irs ) You cannot deduct any unused net operating loss or capital loss on the estate's income tax return. Efile irs At-risk loss limits. Efile irs   Special at-risk rules apply to most activities that are engaged in as a trade or business or for the production of income. Efile irs   These rules limit the deductible loss to the amount which the individual was considered at-risk in the activity. Efile irs An individual generally will be considered at-risk to the extent of the money and the adjusted basis of property that he or she contributed to the activity and certain amounts the individual borrowed for use in the activity. Efile irs An individual will be considered at-risk for amounts borrowed only if he or she was personally liable for the repayment or if the amounts borrowed were secured by property other than that used in the activity. Efile irs The individual is not considered at-risk for borrowed amounts if the lender has an interest in the activity or if the lender is related to a person who has an interest in the activity. Efile irs For more information, see Publication 925, Passive Activity and At-Risk Rules. Efile irs Passive activity rules. Efile irs   A passive activity is any trade or business activity in which the taxpayer does not materially participate. Efile irs To determine material participation, see Publication 925. Efile irs Rental activities are passive activities regardless of the taxpayer's participation, unless the taxpayer meets certain eligibility requirements. Efile irs   Individuals, estates, and trusts can offset passive activity losses only against passive activity income. Efile irs Passive activity losses or credits not allowed in one tax year can be carried forward to the next year. Efile irs   If a passive activity interest is transferred because a taxpayer dies, the accumulated unused passive activity losses are allowed as a deduction against the decedent's income in the year of death. Efile irs Losses are allowed only to the extent they are greater than the excess of the transferee's (recipient of the interest transferred) basis in the property over the decedent's adjusted basis in the property immediately before death. Efile irs The part of the accumulated losses equal to the excess is not allowed as a deduction for any tax year. Efile irs   Use Form 8582, Passive Activity Loss Limitations, to summarize losses and income from passive activities and to figure the amounts allowed. Efile irs For more information, see Publication 925. Efile irs Credits, Other Taxes, and Payments Discussed below are some of the tax credits, types of taxes that may be owed, income tax withheld, and estimated tax payments reported on the final return of a decedent. Efile irs Credits On the final income tax return, you can claim any tax credits that applied to the decedent before death. Efile irs Some of these credits are discussed next. Efile irs Earned income credit. Efile irs   If the decedent was an eligible individual, you can claim the earned income credit on the decedent's final return even though the return covers less than 12 months. Efile irs If the allowable credit is more than the tax liability for the year, the excess is refunded. Efile irs   For more information, see Publication 596, Earned Income Credit (EIC). Efile irs Credit for the elderly or the disabled. Efile irs   This credit is allowable on a decedent's final income tax return if the decedent met both of the following requirements in the year of death. Efile irs The decedent: Was a “qualified individual,” and Had income (adjusted gross income (AGI) and nontaxable social security and pensions) less than certain limits. Efile irs   For details on qualifying for or figuring the credit, see Publication 524, Credit for the Elderly or the Disabled. Efile irs Child tax credit. Efile irs   If the decedent had a qualifying child, you may be able to claim the child tax credit on the decedent's final return even though the return covers less than 12 months. Efile irs You may be able to claim the additional child tax credit and get a refund if the credit is more than the decedent's liability. Efile irs For more information, see the Instructions for Form 1040. Efile irs Adoption credit. Efile irs   Depending upon when the adoption was finalized, this credit may be taken on a decedent's final income tax return if the decedent: Adopted an eligible child and paid qualified adoption expenses, or Has a carryforward of an adoption credit from a prior year. Efile irs   Also, if the decedent is survived by a spouse who meets the filing status of qualifying widow(er), unused adoption credit may be carried forward and used following the death of the decedent. Efile irs See Form 8839, Qualified Adoption Expenses, and its instructions for more details. Efile irs General business tax credit. Efile irs   The general business credit available to a taxpayer is limited. Efile irs Any credit arising in a tax year beginning before 1998 that has not been used up can be carried forward for up to 15 years. Efile irs Any unused credit arising in a tax year beginning after 1997 has a 1-year carryback and a 20-year carryforward period. Efile irs   After the carryforward period, a deduction may be allowed for any unused business credit. Efile irs If the taxpayer dies before the end of the carryforward period, the deduction generally is allowed in the year of death. Efile irs   For more information on the general business credit, see Publication 334, Tax Guide for Small Business. Efile irs Other Taxes Taxes other than income tax that may be owed on the final return of a decedent include self-employment tax and alternative minimum tax, which are reported on Form 1040. Efile irs Self-employment tax. Efile irs   Self-employment tax may be owed on the final return if either of the following applied to the decedent in the year of death: Net earnings from self-employment (excluding income described in (2)) were $400 or more; or Wages from services performed as a church employee were $108. Efile irs 28 or more. Efile irs Alternative minimum tax (AMT). Efile irs   The tax laws give special treatment to certain types of income and allow special deductions and credits for certain types of expenses. Efile irs The alternative minimum tax (AMT) was enacted so taxpayers who benefit from these laws still pay at least a minimum amount of tax. Efile irs In general, the AMT is the excess of the tentative minimum tax over the regular tax shown on the return. Efile irs Form 6251. Efile irs    Use Form 6251, Alternative Minimum Tax—Individuals, to determine if this tax applies to the decedent. Efile irs See the form instructions for information on when you must attach Form 6251 to Form 1040. Efile irs Form 8801. Efile irs   If the decedent paid AMT in a previous year or had a credit carryforward, the decedent may be eligible for a minimum tax credit. Efile irs See Form 8801, Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts. Efile irs Payments of Tax The income tax withheld from the decedent's salary, wages, pensions, or annuities, and the amount paid as estimated tax are credits (advance payments of tax) that must be claimed on the final return. Efile irs Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Income tax liability may be forgiven for a decedent who dies due to service in a combat zone, due to military or terrorist actions, as a result of a terrorist attack, or while serving in the line of duty as an astronaut. Efile irs Combat Zone If a member of the Armed Forces of the United States dies while in active service in a combat zone or from wounds, disease, or injury incurred in a combat zone, the decedent's income tax liability is abated (forgiven) for the entire year in which death occurred and for any prior tax year ending on or after the first day the person served in a combat zone in active service. Efile irs For this purpose, a qualified hazardous duty area is treated as a combat zone. Efile irs If the tax (including interest, additions to the tax, and additional amounts) for these years has been assessed, the assessment will be forgiven. Efile irs If the tax has been collected (regardless of the date of collection), that tax will be credited or refunded. Efile irs Any of the decedent's income tax for tax years before those mentioned above that remains unpaid as of the actual (or presumptive) date of death will not be assessed. Efile irs If any unpaid tax (including interest, additions to the tax, and additional amounts) has been assessed, this assessment will be forgiven. Efile irs Also, if any tax was collected after the date of death, that amount will be credited or refunded. Efile irs The date of death of a member of the Armed Forces reported as missing in action or as a prisoner of war is the date his or her name is removed from missing status for military pay purposes. Efile irs This is true even if death actually occurred earlier. Efile irs For other tax information for members of the Armed Forces, see Publication 3, Armed Forces' Tax Guide. Efile irs Military or Terrorist Actions The decedent's income tax liability is forgiven if, at death, he or she was a military or civilian employee of the United States who died because of wounds or injury incurred: While a U. Efile irs S. Efile irs employee, and In a military or terrorist action. Efile irs The forgiveness applies to the tax year in which death occurred and for any earlier tax year, beginning with the year before the year in which the wounds or injury occurred. Efile irs Example. Efile irs The income tax liability of a civilian employee of the United States who died in 2013 because of wounds incurred while a U. Efile irs S. Efile irs employee in a terrorist attack that occurred in 2008 will be forgiven for 2013 and for all prior tax years in the period 2007 through 2012. Efile irs Refunds are allowed for the tax years for which the period for filing a claim for refund has not ended, as discussed later. Efile irs Military or terrorist action defined. Efile irs   A military or terrorist action means the following. Efile irs Any terrorist activity that most of the evidence indicates was directed against the United States or any of its allies. Efile irs Any military action involving the U. Efile irs S. Efile irs Armed Forces and resulting from violence or aggression against the United States or any of its allies, or the threat of such violence or aggression. Efile irs   Terrorist activity includes criminal offenses intended to coerce, intimidate, or retaliate against the government or civilian population. Efile irs Military action does not include training exercises. Efile irs Any multinational force in which the United States is participating is treated as an ally of the United States. Efile irs Determining if a terrorist activity or military action has occurred. Efile irs   You may rely on published guidance from the IRS to determine if a particular event is considered a terrorist activity or military action. Efile irs Specified Terrorist Victim The Victims of Terrorism Tax Relief Act of 2001 (the Act) provides tax relief for those injured or killed as a result of terrorist attacks, certain survivors of those killed as a result of terrorist attacks, and others who were affected by terrorist attacks. Efile irs Under the Act, the federal income tax liability of those killed in the following attacks (specified terrorist victim) is forgiven for certain tax years. Efile irs The April 19, 1995, terrorist attack on the Alfred P. Efile irs Murrah Federal Building (Oklahoma City). Efile irs The September 11, 2001, terrorist attacks. Efile irs The terrorist attacks involving anthrax occurring after September 10, 2001, and before January 1, 2002. Efile irs The Act also exempts from federal income tax the following types of income. Efile irs Qualified disaster relief payments made after September 10, 2001, to cover personal, family, living, or funeral expenses incurred because of a terrorist attack. Efile irs Certain disability payments received in tax years ending after September 10, 2001, for injuries sustained in a terrorist attack. Efile irs Certain death benefits paid by an employer to the survivor of an employee because the employee died as a result of a terrorist attack. Efile irs Payments from the September 11th Victim Compensation Fund 2001. Efile irs The Act also reduces the estate tax of individuals who die as a result of a terrorist attack. Efile irs See Publication 3920, Tax Relief for Victims of Terrorist Attacks, for more information. Efile irs Astronauts Legislation extended the tax relief available under the Victims of Terrorism Tax Relief Act of 2001 (the Act) to astronauts who died in the line of duty after December 31, 2002. Efile irs The decedent's income tax liability is forgiven for the tax year in which death occurs, and for the tax year prior to death. Efile irs For information on death benefit payments and the reduction of federal estate taxes, see Publication 3920. Efile irs However, the discussions in that publication under Death Benefits and Estate Tax Reduction should be modified for astronauts (for example, by using the date of death of the astronaut instead of September 11, 2001). Efile irs For more information on the Act, see Publication 3920. Efile irs Claim for Credit or Refund If any of these tax-forgiveness situations applies to a prior year tax, any tax paid for which the period for filing a claim has not ended will be credited or refunded. Efile irs If any tax is still due, it will be canceled. Efile irs The normal period for filing a claim for credit or refund is 3 years after the return was filed or 2 years after the tax was paid, whichever is later. Efile irs If death occurred in a combat zone or from wounds, disease, or injury incurred in a combat zone, the period for filing the claim is extended by: The amount of time served in the combat zone (including any period in which the individual was in missing status), plus The period of continuous qualified hospitalization for injury from service in the combat zone, if any, plus The next 180 days. Efile irs Qualified hospitalization means any hospitalization outside the United States and any hospitalization in the United States of not more than 5 years. Efile irs This extended period for filing the claim also applies to a member of the Armed Forces who was deployed outside the United States in a designated contingency operation. Efile irs Filing a claim. Efile irs   Use the following procedures to file a claim. Efile irs If a U. Efile irs S. Efile irs individual income tax return (Form 1040, 1040A, or 1040EZ) has not been filed, you should make a claim for refund of any withheld income tax or estimated tax payments by filing Form 1040. Efile irs Form W-2, Wage and Tax Statement, must accompany all returns. Efile irs If a U. Efile irs S. Efile irs individual income tax return has been filed, you should make a claim for refund by filing Form 1040X. Efile irs You must file a separate Form 1040X for each year in question. Efile irs   You must file these returns and claims at the following address for regular mail (U. Efile irs S. Efile irs Postal Service). Efile irs    Internal Revenue Service 333 W. Efile irs Pershing, P5–6503 Kansas City, MO 64108   Identify all returns and claims for refund by writing “Iraq—KIA,” “Enduring Freedom—KIA,” “Kosovo Operation—KIA,” “Desert Storm—KIA,” or “Former Yugoslavia—KIA” in bold letters on the top of page 1 of the return or claim. Efile irs On the applicable return, write the same phrase on the line for total tax. Efile irs If the individual was killed in a terrorist or military action, put “KITA” on the front of the return and on the line for total tax. Efile irs   Include an attachment showing the computation of the decedent's tax liability and a computation of the amount to be forgiven. Efile irs On joint returns, make an allocation of the tax as described below under Joint returns. Efile irs If you cannot make a proper allocation, attach a statement of all income and deductions allocable to each spouse and the IRS will make the proper allocation. Efile irs   You must attach Form 1310 to all returns and claims for refund. Efile irs However, for exceptions to filing Form 1310, see Form 1310. Efile irs Statement of Person Claiming Refund Due a Deceased Taxpayer, under Refund, earlier. Efile irs   You must also attach proof of death that includes a statement that the individual was a U. Efile irs S. Efile irs employee on the date of injury and on the date of death and died as the result of a military or terrorist action. Efile irs For military and civilian employees of the Department of Defense, attach DD Form 1300, Report of Casualty. Efile irs For other U. Efile irs S. Efile irs civilian employees killed in the United States, attach a death certificate and a certification (letter) from the federal employer. Efile irs For other U. Efile irs S. Efile irs civilian employees killed overseas, attach a certification from the Department of State. Efile irs   If you do not have enough tax information to file a timely claim for refund, you can suspend the period for filing a claim by filing Form 1040X. Efile irs Attach Form 1310, any required documentation currently available, and a statement that you will file an amended claim as soon as you have the required tax information. Efile irs Joint returns. Efile irs   If a joint return was filed, only the decedent's part of the income tax liability is eligible for forgiveness. Efile irs Determine the decedent's tax liability as follows. Efile irs Figure the income tax for which the decedent would have been liable if a separate return had been filed. Efile irs Figure the income tax for which the spouse would have been liable if a separate return had been filed. Efile irs Multiply the joint tax liability by a fraction. Efile irs The numerator of the fraction is the amount in (1), above. Efile irs The denominator of the fraction is the total of (1) and (2). Efile irs   The resulting amount from (3) above is the decedent's tax liability eligible for forgiveness. Efile irs Filing Reminders To minimize the time needed to process the decedent's final return and issue any refund, be sure to follow these procedures. Efile irs Write “DECEASED,” the decedent's name, and the date of death across the top of the tax return. Efile irs If a personal representative has been appointed, the personal representative must sign the return. Efile irs If it is a joint return, the surviving spouse must also sign it. Efile irs If you are the decedent's spouse filing a joint return with the decedent and no personal representative has been appointed, write “Filing as surviving spouse” in the area where you sign the return. Efile irs If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative. Efile irs ” To claim a refund for the decedent, do the following. Efile irs If you are the decedent's spouse filing a joint return with the decedent, file only the tax return to claim the refund. Efile irs If you are the personal representative and the return is not a joint return filed with the decedent's surviving spouse, file the return and attach a copy of the certificate that shows your appointment by the court. Efile irs (A power of attorney or a copy of the decedent's will is not acceptable evidence of your appointment as the personal representative. Efile irs ) If you are filing an amended return, attach Form 1310 and a copy of the certificate of appointment (or, if you have already sent the certificate of appointment to IRS, write “Certificate Previously Filed” at the bottom of Form 1310). Efile irs If you are not filing a joint return as the surviving spouse and a personal representative has not been appointed, file the return and attach Form 1310. Efile irs Other Tax Information Discussed below is information about the effect of an individual's death on the income tax liability of the survivors (including widows and widowers), the beneficiaries, and the estate. Efile irs Tax Benefits for Survivors Survivors can qualify for certain benefits when filing their own income tax returns. Efile irs Joint return by surviving spouse. Efile irs   A surviving spouse can file a joint return for the year of death and may qualify for special tax rates for the following 2 years, as explained under Qualifying widows and widowers, later. Efile irs Decedent as your dependent. Efile irs   If the decedent qualified as your dependent for a part of the year before death, you can claim the exemption for the dependent on your tax return, regardless of when death occurred during the year. Efile irs   If the decedent was your qualifying child, you may be able to claim the child tax credit or the earned income credit. Efile irs To determine if you qualify for the child tax credit, see the instructions for Form 1040, line 51; Form 1040A, line 33; or Form 1040NR, line 48. Efile irs To determine if you qualify for the earned income credit, see the instructions for Form 1040, lines 64a and 64b or Form 1040A, lines 38a and 38b. Efile irs Qualifying widows and widowers. Efile irs   If your spouse died within the 2 tax years preceding the year for which your return is being filed, you may be eligible to claim the filing status of qualifying widow(er) with dependent child and qualify to use the married-filing-jointly tax rates. Efile irs Requirements. Efile irs   Generally, you qualify for this special benefit if you meet all of the following requirements. Efile irs You were entitled to file a joint return with your spouse for the year of death—whether or not you actually filed jointly. Efile irs You did not remarry before the end of the current tax year. Efile irs You have a child, stepchild, or foster child who qualifies as your dependent for the tax year. Efile irs You provide more than half the cost of maintaining your home, which is the principal residence of that child for the entire year except for temporary absences. Efile irs Example. Efile irs William Burns' wife died in 2010. Efile irs William has not remarried and continued throughout 2011 and 2012 to maintain a home for himself and his dependent child. Efile irs For 2010, he was entitled to file a joint return for himself and his deceased wife. Efile irs For 2011 and 2012, he qualifies to file as a qualifying widower with dependent child. Efile irs For later years, he may qualify to file as a head of household. Efile irs Figuring your tax. Efile irs   Check the box on line 5 (Form 1040 or 1040A) under Filing Status on your tax return. Efile irs Use the Tax Rate Schedule or the column in the Tax Table for Married filing jointly, which gives you the split-income benefits. Efile irs   The last year you can file jointly with, or claim an exemption for, your deceased spouse is the year of death. Efile irs Joint return filing rules. Efile irs   If you are the surviving spouse and a personal representative is handling the estate for the decedent, you should coordinate filing your return for the year of death with this personal representative. Efile irs See Joint Return under Final Income Tax Return for Decedent—Form 1040, earlier. Efile irs Income in Respect of a Decedent All income the decedent would have received had death not occurred that was not properly includible on the final return, discussed earlier, is income in respect of a decedent. Efile irs If the decedent is a specified terrorist victim (see Specified Terrorist Victim, earlier), income received after the date of death and before the end of the decedent's tax year (determined without regard to death) is excluded from the recipient's gross income. Efile irs This exclusion does not apply to certain income. Efile irs For more information, see Publication 3920. Efile irs How To Report Income in respect of a decedent must be included in the income of one of the following. Efile irs The decedent's estate, if the estate receives it. Efile irs The beneficiary, if the right to income is passed directly to the beneficiary and the beneficiary receives it. Efile irs Any person to whom the estate properly distributes the right to receive it. Efile irs If you have to include income in respect of a decedent in your gross income and an estate tax return (Form 706) was filed for the decedent, you may be able to claim a deduction for the estate tax paid on that income. Efile irs See Estate Tax Deduction, later. Efile irs Example 1. Efile irs Frank Johnson owned and operated an apple orchard. Efile irs He used the cash method of accounting. Efile irs He sold and delivered 1,000 bushels of apples to a canning factory for $2,000, but did not receive payment before his death. Efile irs The proceeds from the sale are income in respect of a decedent. Efile irs When the estate was settled, payment had not been made and the estate transferred the right to the payment to his widow. Efile irs When Frank's widow collects the $2,000, she must include that amount in her return. Efile irs It is not reported on the final return of the decedent or on the return of the estate. Efile irs Example 2. Efile irs Assume the same facts as in Example 1, except that Frank used the accrual method of accounting. Efile irs The amount accrued from the sale of the apples would be included on his final return. Efile irs Neither the estate nor the widow would realize income in respect of a decedent when the money is later paid. Efile irs Example 3. Efile irs On February 1, George High, a cash method taxpayer, sold his tractor for $3,000, payable March 1 of the same year. Efile irs His adjusted basis in the tractor was $2,000. Efile irs George died on February 15, before receiving payment. Efile irs The gain to be reported as income in respect of a decedent is the $1,000 difference between the decedent's basis in the property and the sale proceeds. Efile irs In other words, the income in respect of a decedent is the gain the decedent would have realized had he lived. Efile irs Example 4. Efile irs Cathy O'Neil was entitled to a large salary payment at the date of her death. Efile irs The amount was to be paid in five annual installments. Efile irs The estate, after collecting two installments, distributed the right to the remaining installments to you, the beneficiary. Efile irs The payments are income in respect of a decedent. Efile irs None of the payments were includible on Cathy's final return. Efile irs The estate must include in its income the two installments it received, and you must include in your income each of the three installments as you receive them. Efile irs Example 5. Efile irs You inherited the right to receive renewal commissions on life insurance sold by your father before his death. Efile irs You inherited the right from your mother, who acquired it by bequest from your father. Efile irs Your mother died before she received all the commissions she had the right to receive, so you received the rest. Efile irs The commissions are income in respect of a decedent. Efile irs None of these commissions were includible in your father's final return. Efile irs The commissions received by your mother were included in her income. Efile irs The commissions you received are not includible in your mother's income, even on her final return. Efile irs You must include them in your income. Efile irs Character of income. Efile irs   The character of the income you receive in respect of a decedent remains the same as it would have been to the decedent if he or she were alive. Efile irs If the income would have been a capital gain to the decedent, it will be a capital gain to you. Efile irs Transfer of right to income. Efile irs   If you transfer your right to income in respect of a decedent, you must include in your income the greater of: The amount you receive for the right, or The fair market value of the right you transfer. Efile irs   If you make a gift of such a right, you must include in your income the fair market value of the right at the time of the gift. Efile irs   If the right to income from an installment obligation is transferred, the amount you must include in income is reduced by the basis of the obligation. Efile irs See Installment obligations, later. Efile irs Transfer defined. Efile irs   A transfer for this purpose includes a sale, exchange, or other disposition, the satisfaction of an installment obligation at other than face value, or the cancellation of an installment obligation. Efile irs Installment obligations. Efile irs   If the decedent sold property using the installment method and you are collecting payments on an installment obligation acquired from the decedent, use the same gross profit percentage the decedent used to figure the part of each payment that represents profit. Efile irs Include in your income the same profit the decedent would have included had death not occurred. Efile irs For more information, see Publication 537, Installment Sales. Efile irs   If you dispose of an installment obligation acquired from a decedent (other than by transfer to the obligor), the rules explained in Publication 537 for figuring gain or loss on the disposition apply to you. Efile irs Transfer to obligor. Efile irs   A transfer of a right to income, discussed earlier, has occurred if the decedent (seller) sold property using the installment method and the installment obligation was transferred to the obligor (buyer or person legally obligated to pay the installments). Efile irs A transfer also occurs if the obligation was canceled either at death or by the estate or person receiving the obligation from the decedent. Efile irs An obligation that becomes unenforceable is treated as having been canceled. Efile irs   If such a transfer occurs, the amount included in the income of the transferor (the estate or beneficiary) is the greater of the amount received or the fair market value of the installment obligation at the time of transfer, reduced by the basis of the obligation. Efile irs The basis of the obligation is the decedent's basis, adjusted for all installment payments received after the decedent's death and before the transfer. Efile irs   If the decedent and obligor were related persons, the fair market value of the obligation cannot be less than its face value. Efile irs Specific Types of Income in Respect of a Decedent This section explains and provides examples of some specific types of income in respect of a decedent. Efile irs Wages. Efile irs   The entire amount of wages or other employee compensation earned by the decedent but unpaid at the time of death is income in respect of a decedent. Efile irs The income is not reduced by any amounts withheld by the employer. Efile irs If the income is $600 or more, the employer should report it in box 3 of Form 1099-MISC, Miscellaneous Income, and give the recipient a copy of the form or a similar statement. Efile irs   Wages paid as income in respect of a decedent are not subject to federal income tax withholding. Efile irs However, if paid during the calendar year of death, they are subject to withholding for social security and Medicare taxes. Efile irs These taxes should be included on the decedent's Form W-2 along with the taxes withheld before death. Efile irs These wages are not included in box 1 of Form W-2. Efile irs   Wages paid as income in respect of a decedent after the year of death generally are not subject to withholding for any federal taxe