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Ez Form

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Ez Form

Ez form 2. Ez form   Filing Status Table of Contents What's New Introduction Useful Items - You may want to see: Marital StatusDivorced persons. Ez form Divorce and remarriage. Ez form Annulled marriages. Ez form Head of household or qualifying widow(er) with dependent child. Ez form Considered married. Ez form Same-sex marriage. Ez form Spouse died during the year. Ez form Married persons living apart. Ez form Single Married Filing JointlyFiling a Joint Return Married Filing SeparatelySpecial Rules Head of HouseholdConsidered Unmarried Keeping Up a Home Qualifying Person Qualifying Widow(er) With Dependent Child What's New Filing status for same-sex married couples. Ez form  If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or married filing separately filing status on your 2013 return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage. Ez form See Same-sex marriage under Marital Status, later. Ez form Introduction This chapter helps you determine which filing status to use. Ez form There are five filing statuses. Ez form Single. Ez form Married Filing Jointly. Ez form Married Filing Separately. Ez form Head of Household. Ez form Qualifying Widow(er) With Dependent Child. Ez form If more than one filing status applies to you, choose the one that will give you the lowest tax. Ez form You must determine your filing status before you can determine whether you must file a tax return (chapter 1), your standard deduction (chapter 20), and your tax (chapter 30). Ez form You also use your filing status to determine whether you are eligible to claim certain deductions and credits. Ez form Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information 519 U. Ez form S. Ez form Tax Guide for Aliens 555 Community Property Marital Status In general, your filing status depends on whether you are considered unmarried or married. Ez form Unmarried persons. Ez form   You are considered unmarried for the whole year if, on the last day of your tax year, you are unmarried or legally separated from your spouse under a divorce or separate maintenance decree. Ez form State law governs whether you are married or legally separated under a divorce or separate maintenance decree. Ez form Divorced persons. Ez form   If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year. Ez form Divorce and remarriage. Ez form   If you obtain a divorce for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intend to and do, in fact, remarry each other in the next tax year, you and your spouse must file as married individuals in both years. Ez form Annulled marriages. Ez form    If you obtain a court decree of annulment, which holds that no valid marriage ever existed, you are considered unmarried even if you filed joint returns for earlier years. Ez form You must file Form 1040X, Amended U. Ez form S. Ez form Individual Income Tax Return, claiming single or head of household status for all tax years that are affected by the annulment and are not closed by the statute of limitations for filing a tax return. Ez form Generally, for a credit or refund, you must file Form 1040X within 3 years (including extensions) after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. Ez form If you filed your original return early (for example, March 1), your return is considered filed on the due date (generally April 15). Ez form However, if you had an extension to file (for example, until October 15) but you filed earlier and we received it on July 1, your return is considered filed on July 1. Ez form Head of household or qualifying widow(er) with dependent child. Ez form   If you are considered unmarried, you may be able to file as a head of household or as a qualifying widow(er) with a dependent child. Ez form See Head of Household and Qualifying Widow(er) With Dependent Child to see if you qualify. Ez form Married persons. Ez form   If you are considered married, you and your spouse can file a joint return or separate returns. Ez form Considered married. Ez form   You are considered married for the whole year if, on the last day of your tax year, you and your spouse meet any one of the following tests. Ez form You are married and living together as a married couple. Ez form You are living together in a common law marriage recognized in the state where you now live or in the state where the common law marriage began. Ez form You are married and living apart, but not legally separated under a decree of divorce or separate maintenance. Ez form You are separated under an interlocutory (not final) decree of divorce. Ez form Same-sex marriage. Ez form   For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Ez form The term “spouse” includes an individual married to a person of the same sex if the couple is lawfully married under state (or foreign) law. Ez form However, individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that is not considered a marriage under state (or foreign) law are not considered married for federal tax purposes. Ez form For more details, see Publication 501. Ez form Spouse died during the year. Ez form   If your spouse died during the year, you are considered married for the whole year for filing status purposes. Ez form   If you did not remarry before the end of the tax year, you can file a joint return for yourself and your deceased spouse. Ez form For the next 2 years, you may be entitled to the special benefits described later under Qualifying Widow(er) With Dependent Child . Ez form   If you remarried before the end of the tax year, you can file a joint return with your new spouse. Ez form Your deceased spouse's filing status is married filing separately for that year. Ez form Married persons living apart. Ez form   If you live apart from your spouse and meet certain tests, you may be able to file as head of household even if you are not divorced or legally separated. Ez form If you qualify to file as head of household instead of married filing separately, your standard deduction will be higher. Ez form Also, your tax may be lower, and you may be able to claim the earned income credit. Ez form See Head of Household , later. Ez form Single Your filing status is single if you are considered unmarried and you do not qualify for another filing status. Ez form To determine your marital status, see Marital Status , earlier. Ez form Widow(er). Ez form   Your filing status may be single if you were widowed before January 1, 2013, and did not remarry before the end of 2013. Ez form You may, however, be able to use another filing status that will give you a lower tax. Ez form See Head of Household and Qualifying Widow(er) With Dependent Child , later, to see if you qualify. Ez form How to file. Ez form   You can file Form 1040. Ez form If you have taxable income of less than $100,000, you may be able to file Form 1040A. Ez form If, in addition, you have no dependents, and are under 65 and not blind, and meet other requirements, you can file Form 1040EZ. Ez form If you file Form 1040A or Form 1040, show your filing status as single by checking the box on line 1. Ez form Use the Single column of the Tax Table or Section A of the Tax Computation Worksheet to figure your tax. Ez form Married Filing Jointly You can choose married filing jointly as your filing status if you are considered married and both you and your spouse agree to file a joint return. Ez form On a joint return, you and your spouse report your combined income and deduct your combined allowable expenses. Ez form You can file a joint return even if one of you had no income or deductions. Ez form If you and your spouse decide to file a joint return, your tax may be lower than your combined tax for the other filing statuses. Ez form Also, your standard deduction (if you do not itemize deductions) may be higher, and you may qualify for tax benefits that do not apply to other filing statuses. Ez form If you and your spouse each have income, you may want to figure your tax both on a joint return and on separate returns (using the filing status of married filing separately). Ez form You can choose the method that gives the two of you the lower combined tax. Ez form How to file. Ez form   If you file as married filing jointly, you can use Form 1040. Ez form If you and your spouse have taxable income of less than $100,000, you may be able to file Form 1040A. Ez form If, in addition, you and your spouse have no dependents, are both under 65 and not blind, and meet other requirements, you can file Form 1040EZ. Ez form If you file Form 1040 or Form 1040A, show this filing status by checking the box on line 2. Ez form Use the Married filing jointly column of the Tax Table or Section B of the Tax Computation Worksheet to figure your tax. Ez form Spouse died. Ez form   If your spouse died during the year, you are considered married for the whole year and can choose married filing jointly as your filing status. Ez form See Spouse died during the year under Marital Status, earlier, for more information. Ez form   If your spouse died in 2014 before filing a 2013 return, you can choose married filing jointly as your filing status on your 2013 return. Ez form Divorced persons. Ez form   If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year and you cannot choose married filing jointly as your filing status. Ez form Filing a Joint Return Both you and your spouse must include all of your income, exemptions, and deductions on your joint return. Ez form Accounting period. Ez form   Both of you must use the same accounting period, but you can use different accounting methods. Ez form See Accounting Periods and Accounting Methods in chapter 1. Ez form Joint responsibility. Ez form   Both of you may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. Ez form This means that if one spouse does not pay the tax due, the other may have to. Ez form Or, if one spouse does not report the correct tax, both spouses may be responsible for any additional taxes assessed by the IRS. Ez form One spouse may be held responsible for all the tax due even if all the income was earned by the other spouse. Ez form You may want to file separately if: You believe your spouse is not reporting all of his or her income, or You do not want to be responsible for any taxes due if your spouse does not have enough tax withheld or does not pay enough estimated tax. Ez form Divorced taxpayer. Ez form   You may be held jointly and individually responsible for any tax, interest, and penalties due on a joint return filed before your divorce. Ez form This responsibility may apply even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns. Ez form Relief from joint responsibility. Ez form   In some cases, one spouse may be relieved of joint responsibility for tax, interest, and penalties on a joint return for items of the other spouse that were incorrectly reported on the joint return. Ez form You can ask for relief no matter how small the liability. Ez form   There are three types of relief available. Ez form Innocent spouse relief. Ez form Separation of liability (available only to joint filers who are divorced, widowed, legally separated, or have not lived together for the 12 months ending on the date the election for this relief is filed). Ez form Equitable relief. Ez form    You must file Form 8857, Request for Innocent Spouse Relief, to request relief from joint responsibility. Ez form Publication 971, Innocent Spouse Relief, explains these kinds of relief and who may qualify for them. Ez form Signing a joint return. Ez form   For a return to be considered a joint return, both spouses generally must sign the return. Ez form Spouse died before signing. Ez form   If your spouse died before signing the return, the executor or administrator must sign the return for your spouse. Ez form If neither you nor anyone else has yet been appointed as executor or administrator, you can sign the return for your spouse and enter “Filing as surviving spouse” in the area where you sign the return. Ez form Spouse away from home. Ez form   If your spouse is away from home, you should prepare the return, sign it, and send it to your spouse to sign so that it can be filed on time. Ez form Injury or disease prevents signing. Ez form   If your spouse cannot sign because of disease or injury and tells you to sign for him or her, you can sign your spouse's name in the proper space on the return followed by the words “By (your name), Husband (or Wife). Ez form ” Be sure to also sign in the space provided for your signature. Ez form Attach a dated statement, signed by you, to the return. Ez form The statement should include the form number of the return you are filing, the tax year, and the reason your spouse cannot sign, and should state that your spouse has agreed to your signing for him or her. Ez form Signing as guardian of spouse. Ez form   If you are the guardian of your spouse who is mentally incompetent, you can sign the return for your spouse as guardian. Ez form Spouse in combat zone. Ez form   You can sign a joint return for your spouse if your spouse cannot sign because he or she is serving in a combat zone (such as the Persian Gulf Area, Serbia, Montenegro, Albania, or Afghanistan), even if you do not have a power of attorney or other statement. Ez form Attach a signed statement to your return explaining that your spouse is serving in a combat zone. Ez form For more information on special tax rules for persons who are serving in a combat zone, or who are in missing status as a result of serving in a combat zone, see Publication 3, Armed Forces' Tax Guide. Ez form Other reasons spouse cannot sign. Ez form    If your spouse cannot sign the joint return for any other reason, you can sign for your spouse only if you are given a valid power of attorney (a legal document giving you permission to act for your spouse). Ez form Attach the power of attorney (or a copy of it) to your tax return. Ez form You can use Form 2848, Power of Attorney and Declaration of Representative. Ez form Nonresident alien or dual-status alien. Ez form   Generally, a married couple cannot file a joint return if either one is a nonresident alien at any time during the tax year. Ez form However, if one spouse was a nonresident alien or dual-status alien who was married to a U. Ez form S. Ez form citizen or resident alien at the end of the year, the spouses can choose to file a joint return. Ez form If you do file a joint return, you and your spouse are both treated as U. Ez form S. Ez form residents for the entire tax year. Ez form See chapter 1 of Publication 519. Ez form Married Filing Separately You can choose married filing separately as your filing status if you are married. Ez form This filing status may benefit you if you want to be responsible only for your own tax or if it results in less tax than filing a joint return. Ez form If you and your spouse do not agree to file a joint return, you must use this filing status unless you qualify for head of household status, discussed later. Ez form You may be able to choose head of household filing status if you are considered unmarried because you live apart from your spouse and meet certain tests (explained later, under Head of Household ). Ez form This can apply to you even if you are not divorced or legally separated. Ez form If you qualify to file as head of household, instead of as married filing separately, your tax may be lower, you may be able to claim the earned income credit and certain other credits, and your standard deduction will be higher. Ez form The head of household filing status allows you to choose the standard deduction even if your spouse chooses to itemize deductions. Ez form See Head of Household , later, for more information. Ez form You will generally pay more combined tax on separate returns than you would on a joint return for the reasons listed under Special Rules, later. Ez form However, unless you are required to file separately, you should figure your tax both ways (on a joint return and on separate returns). Ez form This way you can make sure you are using the filing status that results in the lowest combined tax. Ez form When figuring the combined tax of a married couple, you may want to consider state taxes as well as federal taxes. Ez form How to file. Ez form   If you file a separate return, you generally report only your own income, exemptions, credits, and deductions. Ez form You can claim an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another person. Ez form You can file Form 1040. Ez form If your taxable income is less than $100,000, you may be able to file Form 1040A. Ez form Select this filing status by checking the box on line 3 of either form. Ez form Enter your spouse's full name and SSN or ITIN in the spaces provided. Ez form If your spouse does not have and is not required to have an SSN or ITIN, enter “NRA” in the space for your spouse's SSN. Ez form Use the Married filing separately column of the Tax Table or Section C of the Tax Computation Worksheet to figure your tax. Ez form Special Rules If you choose married filing separately as your filing status, the following special rules apply. Ez form Because of these special rules, you usually pay more tax on a separate return than if you use another filing status you qualify for. Ez form   Your tax rate generally is higher than on a joint return. Ez form Your exemption amount for figuring the alternative minimum tax is half that allowed on a joint return. Ez form You cannot take the credit for child and dependent care expenses in most cases, and the amount you can exclude from income under an employer's dependent care assistance program is limited to $2,500 (instead of $5,000). Ez form If you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. Ez form For more information about these expenses, the credit, and the exclusion, see chapter 32. Ez form You cannot take the earned income credit. Ez form You cannot take the exclusion or credit for adoption expenses in most cases. Ez form You cannot take the education credits (the American opportunity credit and lifetime learning credit), the deduction for student loan interest, or the tuition and fees deduction. Ez form You cannot exclude any interest income from qualified U. Ez form S. Ez form savings bonds you used for higher education expenses. Ez form If you lived with your spouse at any time during the tax year: You cannot claim the credit for the elderly or the disabled, and You must include in income a greater percentage (up to 85%) of any social security or equivalent railroad retirement benefits you received. Ez form The following credits and deductions are reduced at income levels half those for a joint return: The child tax credit, The retirement savings contributions credit, The deduction for personal exemptions, and Itemized deductions. Ez form Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return). Ez form If your spouse itemizes deductions, you cannot claim the standard deduction. Ez form If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return. Ez form Adjusted gross income (AGI) limits. Ez form   If your AGI on a separate return is lower than it would have been on a joint return, you may be able to deduct a larger amount for certain deductions that are limited by AGI, such as medical expenses. Ez form Individual retirement arrangements (IRAs). Ez form   You may not be able to deduct all or part of your contributions to a traditional IRA if you or your spouse were covered by an employee retirement plan at work during the year. Ez form Your deduction is reduced or eliminated if your income is more than a certain amount. Ez form This amount is much lower for married individuals who file separately and lived together at any time during the year. Ez form For more information, see How Much Can You Deduct in chapter 17. Ez form Rental activity losses. Ez form   If you actively participated in a passive rental real estate activity that produced a loss, you generally can deduct the loss from your nonpassive income, up to $25,000. Ez form This is called a special allowance. Ez form However, married persons filing separate returns who lived together at any time during the year cannot claim this special allowance. Ez form Married persons filing separate returns who lived apart at all times during the year are each allowed a $12,500 maximum special allowance for losses from passive real estate activities. Ez form See Limits on Rental Losses in chapter 9. Ez form Community property states. Ez form   If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin and file separately, your income may be considered separate income or community income for income tax purposes. Ez form See Publication 555. Ez form Joint Return After Separate Returns You can change your filing status from a separate return to a joint return by filing an amended return using Form 1040X. Ez form You generally can change to a joint return any time within 3 years from the due date of the separate return or returns. Ez form This does not include any extensions. Ez form A separate return includes a return filed by you or your spouse claiming married filing separately, single, or head of household filing status. Ez form Separate Returns After Joint Return Once you file a joint return, you cannot choose to file separate returns for that year after the due date of the return. Ez form Exception. Ez form   A personal representative for a decedent can change from a joint return elected by the surviving spouse to a separate return for the decedent. Ez form The personal representative has 1 year from the due date of the return (including extensions) to make the change. Ez form See Publication 559, Survivors, Executors, and Administrators, for more information on filing a return for a decedent. Ez form Head of Household You may be able to file as head of household if you meet all the following requirements. Ez form You are unmarried or “considered unmarried” on the last day of the year. Ez form See Marital Status , earlier, and Considered Unmarried , later. Ez form You paid more than half the cost of keeping up a home for the year. Ez form A qualifying person lived with you in the home for more than half the year (except for temporary absences, such as school). Ez form However, if the qualifying person is your dependent parent, he or she does not have to live with you. Ez form See Special rule for parent , later, under Qualifying Person. Ez form If you qualify to file as head of household, your tax rate usually will be lower than the rates for single or married filing separately. Ez form You will also receive a higher standard deduction than if you file as single or married filing separately. Ez form Kidnapped child. Ez form   A child may qualify you to file as head of household even if the child has been kidnapped. Ez form For more information, see Publication 501. Ez form How to file. Ez form   If you file as head of household, you can use Form 1040. Ez form If your taxable income is less than $100,000, you may be able to file Form 1040A. Ez form Indicate your choice of this filing status by checking the box on line 4 of either form. Ez form Use the Head of a household column of the Tax Table or Section D of the Tax Computation Worksheet to figure your tax. Ez form Considered Unmarried To qualify for head of household status, you must be either unmarried or considered unmarried on the last day of the year. Ez form You are considered unmarried on the last day of the tax year if you meet all the following tests. Ez form You file a separate return (defined earlier under Joint Return After Separate Returns ). Ez form You paid more than half the cost of keeping up your home for the tax year. Ez form Your spouse did not live in your home during the last 6 months of the tax year. Ez form Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. Ez form See Temporary absences , under Qualifying Person, later. Ez form Your home was the main home of your child, stepchild, or foster child for more than half the year. Ez form (See Home of qualifying person , under Qualifying Person, later, for rules applying to a child's birth, death, or temporary absence during the year. Ez form ) You must be able to claim an exemption for the child. Ez form However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child using the rules described in Children of divorced or separated parents (or parents who live apart) under Qualifying Child in chapter 3, or in Support Test for Children of Divorced or Separated Parents (or Parents Who Live Apart) under Qualifying Relative in chapter 3. Ez form The general rules for claiming an exemption for a dependent are explained under Exemptions for Dependents in chapter 3. Ez form If you were considered married for part of the year and lived in a community property state (listed earlier under Married Filing Separately), special rules may apply in determining your income and expenses. Ez form See Publication 555 for more information. Ez form Nonresident alien spouse. Ez form   You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you do not choose to treat your nonresident spouse as a resident alien. Ez form However, your spouse is not a qualifying person for head of household purposes. Ez form You must have another qualifying person and meet the other tests to be eligible to file as a head of household. Ez form Choice to treat spouse as resident. Ez form   You are considered married if you choose to treat your spouse as a resident alien. Ez form See Publication 519. Ez form Keeping Up a Home To qualify for head of household status, you must pay more than half of the cost of keeping up a home for the year. Ez form You can determine whether you paid more than half of the cost of keeping up a home by using Worksheet 2–1. Ez form Worksheet 2-1. Ez form Cost of Keeping Up a Home   Amount You Paid Total Cost Property taxes $ $ Mortgage interest expense     Rent     Utility charges     Repairs/maintenance     Property insurance     Food consumed on the premises     Other household expenses     Totals $ $ Minus total amount you paid   () Amount others paid   $ If the total amount you paid is more than the amount others paid, you meet the requirement of paying more than half the cost of keeping up the home. Ez form Costs you include. Ez form   Include in the cost of keeping up a home expenses such as rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home. Ez form   If you used payments you received under Temporary Assistance for Needy Families (TANF) or other public assistance programs to pay part of the cost of keeping up your home, you cannot count them as money you paid. Ez form However, you must include them in the total cost of keeping up your home to figure if you paid over half the cost. Ez form Costs you do not include. Ez form   Do not include the costs of clothing, education, medical treatment, vacations, life insurance, or transportation. Ez form Also, do not include the rental value of a home you own or the value of your services or those of a member of your household. Ez form Qualifying Person See Table 2-1 to see who is a qualifying person. Ez form Any person not described in Table 2-1 is not a qualifying person. Ez form Table 2-1. Ez form Who Is a Qualifying Person Qualifying You To File as Head of Household?1 Caution. Ez form See the text of this chapter for the other requirements you must meet to claim head of household filing status. Ez form IF the person is your . Ez form . Ez form . Ez form   AND . Ez form . Ez form . Ez form   THEN that person is . Ez form . Ez form . Ez form qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests)2   he or she is single   a qualifying person, whether or not you can claim an exemption for the person. Ez form   he or she is married and you can claim an exemption for him or her   a qualifying person. Ez form   he or she is married and you cannot claim an exemption for him or her   not a qualifying person. Ez form 3 qualifying relative4 who is your father or mother   you can claim an exemption for him or her5   a qualifying person. Ez form 6   you cannot claim an exemption for him or her   not a qualifying person. Ez form qualifying relative4 other than your father or mother (such as a grandparent, brother, or sister who meets certain tests)   he or she lived with you more than half the year, and he or she is related to you in one of the ways listed under Relatives who do not have to live with you in chapter 3 and you can claim an exemption for him or her5   a qualifying person. Ez form   he or she did not live with you more than half the year   not a qualifying person. Ez form   he or she is not related to you in one of the ways listed under Relatives who do not have to live with you in chapter 3 and is your qualifying relative only because he or she lived with you all year as a member of your household   not a qualifying person. Ez form   you cannot claim an exemption for him or her   not a qualifying person. Ez form 1A person cannot qualify more than one taxpayer to use the head of household filing status for the year. Ez form 2The term “qualifying child” is defined in chapter 3. Ez form Note. Ez form If you are a noncustodial parent, the term “qualifying child” for head of household filing status does not include a child who is your qualifying child for exemption purposes only because of the rules described under Children of divorced or separated parents (or parents who live apart) under Qualifying Child in chapter 3. Ez form If you are the custodial parent and those rules apply, the child generally is your qualifying child for head of household filing status even though the child is not a qualifying child for whom you can claim an exemption. Ez form 3This person is a qualifying person if the only reason you cannot claim the exemption is that you can be claimed as a dependent on someone else's return. Ez form 4The term “ qualifying relative ” is defined in chapter 3. Ez form 5If you can claim an exemption for a person only because of a multiple support agreement, that person is not a qualifying person. Ez form See Multiple Support Agreement in chapter 3. Ez form 6See Special rule for parent . Ez form Example 1—child. Ez form Your unmarried son lived with you all year and was 18 years old at the end of the year. Ez form He did not provide more than half of his own support and does not meet the tests to be a qualifying child of anyone else. Ez form As a result, he is your qualifying child (see Qualifying Child in chapter 3) and, because he is single, your qualifying person for you to claim head of household filing status. Ez form Example 2—child who is not qualifying person. Ez form The facts are the same as in Example 1 except your son was 25 years old at the end of the year and his gross income was $5,000. Ez form Because he does not meet the age test (explained under Qualifying Child in chapter 3), your son is not your qualifying child. Ez form Because he does not meet the gross income test (explained later under Qualifying Relative in chapter 3), he is not your qualifying relative. Ez form As a result, he is not your qualifying person for head of household purposes. Ez form Example 3—girlfriend. Ez form Your girlfriend lived with you all year. Ez form Even though she may be your qualifying relative if the gross income and support tests (explained in chapter 3) are met, she is not your qualifying person for head of household purposes because she is not related to you in one of the ways listed under Relatives who do not have to live with you in chapter 3. Ez form See Table 2-1. Ez form Example 4—girlfriend's child. Ez form The facts are the same as in Example 3 except your girlfriend's 10-year-old son also lived with you all year. Ez form He is not your qualifying child and, because he is your girlfriend's qualifying child, he is not your qualifying relative (see Not a Qualifying Child Test in chapter 3). Ez form As a result, he is not your qualifying person for head of household purposes. Ez form Home of qualifying person. Ez form   Generally, the qualifying person must live with you for more than half of the year. Ez form Special rule for parent. Ez form   If your qualifying person is your father or mother, you may be eligible to file as head of household even if your father or mother does not live with you. Ez form However, you must be able to claim an exemption for your father or mother. Ez form Also, you must pay more than half the cost of keeping up a home that was the main home for the entire year for your father or mother. Ez form   You are keeping up a main home for your father or mother if you pay more than half the cost of keeping your parent in a rest home or home for the elderly. Ez form Death or birth. Ez form   You may be eligible to file as head of household even if the individual who qualifies you for this filing status is born or dies during the year. Ez form If the individual is your qualifying child, the child must have lived with you for more than half the part of the year he or she was alive. Ez form If the individual is anyone else, see Publication 501. Ez form Temporary absences. Ez form   You and your qualifying person are considered to live together even if one or both of you are temporarily absent from your home due to special circumstances such as illness, education, business, vacation, or military service. Ez form It must be reasonable to assume the absent person will return to the home after the temporary absence. Ez form You must continue to keep up the home during the absence. Ez form Qualifying Widow(er) With Dependent Child If your spouse died in 2013, you can use married filing jointly as your filing status for 2013 if you otherwise qualify to use that status. Ez form The year of death is the last year for which you can file jointly with your deceased spouse. Ez form See Married Filing Jointly , earlier. Ez form You may be eligible to use qualifying widow(er) with dependent child as your filing status for 2 years following the year your spouse died. Ez form For example, if your spouse died in 2012, and you have not remarried, you may be able to use this filing status for 2013 and 2014. Ez form This filing status entitles you to use joint return tax rates and the highest standard deduction amount (if you do not itemize deductions). Ez form It does not entitle you to file a joint return. Ez form How to file. Ez form   If you file as qualifying widow(er) with dependent child, you can use Form 1040. Ez form If you also have taxable income of less than $100,000 and meet certain other conditions, you may be able to file Form 1040A. Ez form Check the box on line 5 of either form. Ez form Use the Married filing jointly column of the Tax Table or Section B of the Tax Computation Worksheet to figure your tax. Ez form Eligibility rules. Ez form   You are eligible to file your 2013 return as a qualifying widow(er) with dependent child if you meet all of the following tests. Ez form You were entitled to file a joint return with your spouse for the year your spouse died. Ez form It does not matter whether you actually filed a joint return. Ez form Your spouse died in 2011 or 2012 and you did not remarry before the end of 2013. Ez form You have a child or stepchild for whom you can claim an exemption. Ez form This does not include a foster child. Ez form This child lived in your home all year, except for temporary absences. Ez form See Temporary absences , earlier, under Head of Household. Ez form There are also exceptions, described later, for a child who was born or died during the year and for a kidnapped child. Ez form You paid more than half the cost of keeping up a home for the year. Ez form See Keeping Up a Home , earlier, under Head of Household. Ez form Example. Ez form John's wife died in 2011. Ez form John has not remarried. Ez form During 2012 and 2013, he continued to keep up a home for himself and his child, who lives with him and for whom he can claim an exemption. Ez form For 2011 he was entitled to file a joint return for himself and his deceased wife. Ez form For 2012 and 2013, he can file as qualifying widower with a dependent child. Ez form After 2013 he can file as head of household if he qualifies. Ez form Death or birth. Ez form    You may be eligible to file as a qualifying widow(er) with dependent child if the child who qualifies you for this filing status is born or dies during the year. Ez form You must have provided more than half of the cost of keeping up a home that was the child's main home during the entire part of the year he or she was alive. Ez form Kidnapped child. Ez form   A child may qualify you for qualifying widow(er) with dependent child, even if the child has been kidnapped. Ez form See Publication 501. Ez form    As mentioned earlier, this filing status is available for only 2 years following the year your spouse died. Ez form Prev  Up  Next   Home   More Online Publications

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Whistleblower - Informant Award

The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay the tax that they owe. If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.

 


Fiscal 2014 Sequester Notice from Whistleblower Office dated October 1, 2013:  Impact on whistleblower payments.

Fiscal 2013 Sequester Notice from Whistleblower Office dated March 1, 2013: Impact on whistleblower payments.

Treasury proposed regulations to implement 26 USC 7623, as amended, on December 18, 2012. The public comment period has officially closed and the comments received are under evaluation. The IRS often receives comments on proposed regulations after the official comment period has closed and may consider late submissions in preparing final regulations. 

 


The Whistleblower Office has developed new rules that became effective August 1, 2012. We are providing the three Interim Guidance memoranda below. 


Deputy Commissioner for Services and Enforcement Memorandum dated June 20, 2012

 


Who can get an award?

The IRS may pay awards to people who provide specific and credible information to the IRS if the information results in the collection of taxes, penalties, interest or other amounts from the noncompliant taxpayer.

The IRS is looking for solid information, not an “educated guess” or unsupported speculation. We are also looking for a significant Federal tax issue - this is not a program for resolving personal problems or disputes about a business relationship.

What are the rules for getting an award?

The law provides for two types of awards. If the taxes, penalties, interest and other amounts in dispute exceed $2 million, and a few other qualifications are met, the IRS will pay 15 percent to 30 percent of the amount collected. If the case deals with an individual, his or her annual gross income must be more than $200,000. If the whistleblower disagrees with the outcome of the claim, he or she can appeal to the Tax Court. These rules are found at Internal Revenue Code IRC Section 7623(b) - Whistleblower Rules.

The IRS also has an award program for other whistleblowers - generally those who do not meet the dollar thresholds of $2 million in dispute or cases involving individual taxpayers with gross income of less that $200,000. The awards through this program are less, with a maximum award of 15 percent up to $10 million. In addition, the awards are discretionary and the informant cannot dispute the outcome of the claim in Tax Court. The rules for these cases are found at Internal Revenue Code IRC Section 7623(a) - Informant Claims Program, and some of the rules are different from those that apply to cases involving more than $2 million.

If you decide to submit information and seek an award for doing so, use IRS Form 211. The same form is used for both award programs.

More Information

What Happens to a Claim for an Informant Award (Whistleblower)
Procedures used and the criteria followed to identify and process informant cases

Whistleblower Law
A brief synopsis of what the new whistleblower law entails. This is the most significant change to the Services’ approach to informant awards in 140 years

How Do You File a Whistleblower Award Claim
Step by step procedures to follow to file an informant claim for award

Confidentiality and Disclosure for Whistleblowers
The rules governing confidentiality of informant information

IRC Section 7623(b) - Whistleblower Rules
The requirements of the new rules enacted in IRC Section 7623(b), the Whistleblower Program

IRC Section 7623(a) - Informant Claims Program
The requirement of the rules governing claims that do not meet the requirements of the provisions in the whistleblower program under IRC Section 7623(b). These claims are part of the Informant Claims Program

IRS Form 211
Application for Award for Original Information

News Release IR-2007-201
Procedure Unveiled for Reporting Violations of the Tax Law, Making Reward Claims

Notice 2008-4 Guidance to the public on how to file claims
Claims Submitted to the IRS Whistleblower Office under Section 7623

History of the Whistleblower/Informant Program
Historical information on the evolution of the concept of paying for leads from its inception up to the current law followed today

Realignment of Informant Claims Examination Unit into Whistleblower Office
The Informant Claims Examination Unit in Ogden, Utah has been realigned with the Whistleblower Office. Their new name is Whistleblower Office - Ogden.

Information and Whistleblower Awards

  • IRM 25.2.1, Receiving Information — This chapter provides procedures and guidance for all Service personnel to follow when receiving information dealing with whistleblowers’ claims for award.
  • IRM 25.2.2, Whistleblower Awards — This chapter provides procedures and guidance for all Service personnel to follow when dealing with payment of whistleblowers’ claims for award.

Whistleblower Office At-a-Glance
 

Annual Reports

Reporting other information to the IRS

If you have information about tax noncompliance but are not interested in an award, or you have other information you believe may be of interest to the IRS:

  • For information on how to Report Suspected Tax Fraud Activity, if you have information about an individual or company you suspect is not complying with the tax law, and you do not want to seek an award . You can remain anonymous
Page Last Reviewed or Updated: 30-Sep-2013

The Ez Form

Ez form Publication 542 - Main Content Table of Contents Businesses Taxed as CorporationsPersonal services. Ez form Employee-owners. Ez form Other rules. Ez form Other rules. Ez form Property Exchanged for StockNonqualified preferred stock. Ez form Liabilities. Ez form Election to reduce basis. Ez form Capital Contributions Filing and Paying Income TaxesIncome Tax Return Penalties Estimated Tax U. Ez form S. Ez form Real Property Interest Accounting MethodsSection 481(a) adjustment. Ez form Accounting Periods Recordkeeping Income, Deductions, and Special ProvisionsCosts of Going Into Business Related Persons Income From Qualifying Shipping Activities Election to Expense Qualified Refinery Property Deduction to Comply With EPA Sulfur Regulations Energy-Efficient Commercial Building Property Deduction Corporate Preference Items Dividends-Received Deduction Extraordinary Dividends Below-Market Loans Charitable Contributions Capital Losses Net Operating Losses At-Risk Limits Passive Activity Limits Figuring TaxTax Rate Schedule Alternative Minimum Tax (AMT) Credits Recapture Taxes Accumulated Earnings Tax Distributions to ShareholdersMoney or Property Distributions Distributions of Stock or Stock Rights Constructive Distributions Reporting Dividends and Other Distributions How To Get Tax Help Businesses Taxed as Corporations The rules you must use to determine whether a business is taxed as a corporation changed for businesses formed after 1996. Ez form Business formed before 1997. Ez form   A business formed before 1997 and taxed as a corporation under the old rules will generally continue to be taxed as a corporation. Ez form Business formed after 1996. Ez form   The following businesses formed after 1996 are taxed as corporations. Ez form A business formed under a federal or state law that refers to it as a corporation, body corporate, or body politic. Ez form A business formed under a state law that refers to it as a joint-stock company or joint-stock association. Ez form An insurance company. Ez form Certain banks. Ez form A business wholly owned by a state or local government. Ez form A business specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). Ez form Certain foreign businesses. Ez form Any other business that elects to be taxed as a corporation. Ez form For example, a limited liability company (LLC) can elect to be treated as an association taxable as a corporation by filing Form 8832, Entity Classification Election. Ez form For more information about LLCs, see Publication 3402, Taxation of Limited Liability Companies. Ez form S corporations. Ez form   Some corporations may meet the qualifications for electing to be S corporations. Ez form For information on S corporations, see the instructions for Form 1120S, U. Ez form S. Ez form Income Tax Return for an S Corporation. Ez form Personal service corporations. Ez form   A corporation is a personal service corporation if it meets all of the following requirements. Ez form Its principal activity during the “testing period” is performing personal services (defined later). Ez form Generally, the testing period for any tax year is the prior tax year. Ez form If the corporation has just been formed, the testing period begins on the first day of its tax year and ends on the earlier of: The last day of its tax year, or The last day of the calendar year in which its tax year begins. Ez form Its employee-owners substantially perform the services in (1), above. Ez form This requirement is met if more than 20% of the corporation's compensation cost for its activities of performing personal services during the testing period is for personal services performed by employee-owners. Ez form Its employee-owners own more than 10% of the fair market value of its outstanding stock on the last day of the testing period. Ez form Personal services. Ez form   Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health (including veterinary services), law, and the performing arts. Ez form Employee-owners. Ez form   A person is an employee-owner of a personal service corporation if both of the following apply. Ez form He or she is an employee of the corporation or performs personal services for, or on behalf of, the corporation (even if he or she is an independent contractor for other purposes) on any day of the testing period. Ez form He or she owns any stock in the corporation at any time during the testing period. Ez form Other rules. Ez form   For other rules that apply to personal service corporations see Accounting Periods, later. Ez form Closely held corporations. Ez form   A corporation is closely held if all of the following apply. Ez form It is not a personal service corporation. Ez form At any time during the last half of the tax year, more than 50% of the value of its outstanding stock is, directly or indirectly, owned by or for five or fewer individuals. Ez form “Individual” includes certain trusts and private foundations. Ez form Other rules. Ez form   For the at-risk rules that apply to closely held corporations, seeAt-Risk Limits, later. Ez form Property Exchanged for Stock If you transfer property (or money and property) to a corporation in exchange for stock in that corporation (other than nonqualified preferred stock, described later), and immediately afterward you are in control of the corporation, the exchange is usually not taxable. Ez form This rule applies both to individuals and to groups who transfer property to a corporation. Ez form It also applies whether the corporation is being formed or is already operating. Ez form It does not apply in the following situations. Ez form The corporation is an investment company. Ez form You transfer the property in a bankruptcy or similar proceeding in exchange for stock used to pay creditors. Ez form The stock is received in exchange for the corporation's debt (other than a security) or for interest on the corporation's debt (including a security) that accrued while you held the debt. Ez form Both the corporation and any person involved in a nontaxable exchange of property for stock must attach to their income tax returns a complete statement of all facts pertinent to the exchange. Ez form For more information, see section 1. Ez form 351-3 of the Regulations. Ez form Control of a corporation. Ez form   To be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock. Ez form Example 1. Ez form You and Bill Jones buy property for $100,000. Ez form You both organize a corporation when the property has a fair market value of $300,000. Ez form You transfer the property to the corporation for all its authorized capital stock, which has a par value of $300,000. Ez form No gain is recognized by you, Bill, or the corporation. Ez form Example 2. Ez form You and Bill transfer the property with a basis of $100,000 to a corporation in exchange for stock with a fair market value of $300,000. Ez form This represents only 75% of each class of stock of the corporation. Ez form The other 25% was already issued to someone else. Ez form You and Bill recognize a taxable gain of $200,000 on the transaction. Ez form Services rendered. Ez form   The term property does not include services rendered or to be rendered to the issuing corporation. Ez form The value of stock received for services is income to the recipient. Ez form Example. Ez form You transfer property worth $35,000 and render services valued at $3,000 to a corporation in exchange for stock valued at $38,000. Ez form Right after the exchange, you own 85% of the outstanding stock. Ez form No gain is recognized on the exchange of property. Ez form However, you recognize ordinary income of $3,000 as payment for services you rendered to the corporation. Ez form Property of relatively small value. Ez form   The term property does not include property of a relatively small value when it is compared to the value of stock and securities already owned or to be received for services by the transferor if the main purpose of the transfer is to qualify for the nonrecognition of gain or loss by other transferors. Ez form   Property transferred will not be considered to be of relatively small value if its fair market value is at least 10% of the fair market value of the stock and securities already owned or to be received for services by the transferor. Ez form Stock received in disproportion to property transferred. Ez form   If a group of transferors exchange property for corporate stock, each transferor does not have to receive stock in proportion to his or her interest in the property transferred. Ez form If a disproportionate transfer takes place, it will be treated for tax purposes in accordance with its true nature. Ez form It may be treated as if the stock were first received in proportion and then some of it used to make gifts, pay compensation for services, or satisfy the transferor's obligations. Ez form Money or other property received. Ez form   If, in an otherwise nontaxable exchange of property for corporate stock, you also receive money or property other than stock, you may have to recognize gain. Ez form You must recognize gain only up to the amount of money plus the fair market value of the other property you receive. Ez form The rules for figuring the recognized gain in this situation generally follow those for a partially nontaxable exchange discussed in Publication 544 under Like-Kind Exchanges. Ez form If the property you give up includes depreciable property, the recognized gain may have to be reported as ordinary income from depreciation. Ez form See chapter 3 of Publication 544. Ez form No loss is recognized. Ez form Nonqualified preferred stock. Ez form   Nonqualified preferred stock is treated as property other than stock. Ez form Generally, it is preferred stock with any of the following features. Ez form The holder has the right to require the issuer or a related person to redeem or buy the stock. Ez form The issuer or a related person is required to redeem or buy the stock. Ez form The issuer or a related person has the right to redeem or buy the stock and, on the issue date, it is more likely than not that the right will be exercised. Ez form The dividend rate on the stock varies with reference to interest rates, commodity prices, or similar indices. Ez form For a detailed definition of nonqualified preferred stock, see section 351(g)(2) of the Internal Revenue Code. Ez form Liabilities. Ez form   If the corporation assumes your liabilities, the exchange generally is not treated as if you received money or other property. Ez form There are two exceptions to this treatment. Ez form If the liabilities the corporation assumes are more than your adjusted basis in the property you transfer, gain is recognized up to the difference. Ez form However, if the liabilities assumed give rise to a deduction when paid, such as a trade account payable or interest, no gain is recognized. Ez form If there is no good business reason for the corporation to assume your liabilities, or if your main purpose in the exchange is to avoid federal income tax, the assumption is treated as if you received money in the amount of the liabilities. Ez form For more information on the assumption of liabilities, see section 357(d) of the Internal Revenue Code. Ez form Example. Ez form You transfer property to a corporation for stock. Ez form Immediately after the transfer, you control the corporation. Ez form You also receive $10,000 in the exchange. Ez form Your adjusted basis in the transferred property is $20,000. Ez form The stock you receive has a fair market value (FMV) of $16,000. Ez form The corporation also assumes a $5,000 mortgage on the property for which you are personally liable. Ez form Gain is realized as follows. Ez form FMV of stock received $16,000 Cash received 10,000 Liability assumed by corporation 5,000 Total received $31,000 Minus: Adjusted basis of property transferred 20,000 Realized gain $11,000   The liability assumed is not treated as money or other property. Ez form The recognized gain is limited to $10,000, the cash received. Ez form Loss on exchange. Ez form   If you have a loss from an exchange and own, directly or indirectly, more than 50% of the corporation's stock, you cannot deduct the loss. Ez form For more information, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Ez form Basis of stock or other property received. Ez form   The basis of the stock you receive is generally the adjusted basis of the property you transfer. Ez form Increase this amount by any amount treated as a dividend, plus any gain recognized on the exchange. Ez form Decrease this amount by any cash you received, the fair market value of any other property you received, and any loss recognized on the exchange. Ez form Also decrease this amount by the amount of any liability the corporation or another party to the exchange assumed from you, unless payment of the liability gives rise to a deduction when paid. Ez form    Further decreases may be required when the corporation or another party to the exchange assumes from you a liability that gives rise to a deduction when paid, if the basis of the stock would otherwise be higher than its fair market value on the date of the exchange. Ez form This rule does not apply if the entity assuming the liability acquired either substantially all of the assets or the trade or business with which the liability is associated. Ez form The basis of any other property you receive is its fair market value on the date of the trade. Ez form Basis of property transferred. Ez form   A corporation that receives property from you in exchange for its stock generally has the same basis you had in the property, increased by any gain you recognized on the exchange. Ez form However, the increase for the gain recognized may be limited. Ez form For more information, see section 362 of the Internal Revenue Code. Ez form Election to reduce basis. Ez form   In a section 351 transaction, if the adjusted basis of the property transferred exceeds the property's fair market value, the transferor and transferee may make an irrevocable election to treat the basis of the stock received by the transferor as having a basis equal to the fair market value of the property transferred. Ez form The transferor and transferee make this election by attaching a statement to their tax returns filed by the due date (including extensions) for the tax year in which the transaction occurred. Ez form However, if the transferor makes the election by including the certification provided in Notice 2005-70, 2005-41, I. Ez form R. Ez form B. Ez form 694, on or with its tax return filed by the due date (including extensions), then no election need be made by the transferee. Ez form    For more information on making this election, see section 362(e)(2)(C) of the Internal Revenue Code, and Notice 2005-70. Ez form Capital Contributions This section explains the tax treatment of contributions from shareholders and nonshareholders. Ez form Paid-in capital. Ez form   Contributions to the capital of a corporation, whether or not by shareholders, are paid-in capital. Ez form These contributions are not taxable to the corporation. Ez form Basis. Ez form   The corporation's basis of property contributed to capital by a shareholder is the same as the basis the shareholder had in the property, increased by any gain the shareholder recognized on the exchange. Ez form However, the increase for the gain recognized may be limited. Ez form For more information, see Basis of property transferred, above, and section 362 of the Internal Revenue Code. Ez form   The basis of property contributed to capital by a person other than a shareholder is zero. Ez form   If a corporation receives a cash contribution from a person other than a shareholder, the corporation must reduce the basis of any property acquired with the contribution during the 12-month period beginning on the day it received the contribution by the amount of the contribution. Ez form If the amount contributed is more than the cost of the property acquired, then reduce, but not below zero, the basis of the other properties held by the corporation on the last day of the 12-month period in the following order. Ez form Depreciable property. Ez form Amortizable property. Ez form Property subject to cost depletion but not to percentage depletion. Ez form All other remaining properties. Ez form   Reduce the basis of property in each category to zero before going on to the next category. Ez form   There may be more than one piece of property in each category. Ez form Base the reduction of the basis of each property on the following ratio:   Basis of each piece of property   Bases of all properties (within that category) If the corporation wishes to make this adjustment in some other way, it must get IRS approval. Ez form The corporation files a request for approval with its income tax return for the tax year in which it receives the contribution. Ez form Filing and Paying Income Taxes The federal income tax is a pay-as-you-go tax. Ez form A corporation generally must make estimated tax payments as it earns or receives income during its tax year. Ez form After the end of the year, the corporation must file an income tax return. Ez form This section will help you determine when and how to pay and file corporate income taxes. Ez form For certain corporations affected by Presidentially declared disasters such as hurricanes, the due dates for filing returns, paying taxes, and performing other time-sensitive acts may be extended. Ez form The IRS may also forgive the interest and penalties on any underpaid tax for the length of any extension. Ez form For more information, visit www. Ez form irs. Ez form gov/newsroom/article/0,,id=108362. Ez form 00. Ez form Income Tax Return This section will help you determine when and how to report a corporation's income tax. Ez form Who must file. Ez form   Unless exempt under section 501 of the Internal Revenue Code, all domestic corporations in existence for any part of a tax year (including corporations in bankruptcy) must file an income tax return whether or not they have taxable income. Ez form Which form to file. Ez form   A corporation generally must file Form 1120, U. Ez form S. Ez form Corporation Income Tax Return, to report its income, gains, losses, deductions, credits, and to figure its income tax liability. Ez form Certain organizations and entities must file special returns. Ez form For more information, see Special Returns for Certain Organizations, in the Instructions for Form 1120. Ez form Electronic filing. Ez form   Corporations can generally electronically file (e-file) Form 1120 and certain related forms, schedules, and attachments. Ez form Certain corporations with total assets of $10 million or more, that file at least 250 returns a year must e-file Form 1120. Ez form However, in certain instances, these corporations can request a waiver. Ez form For more information regarding electronic filing, visit www. Ez form irs. Ez form gov/efile. Ez form When to file. Ez form   Generally, a corporation must file its income tax return by the 15th day of the 3rd month after the end of its tax year. Ez form A new corporation filing a short-period return must generally file by the 15th day of the 3rd month after the short period ends. Ez form A corporation that has dissolved must generally file by the 15th day of the 3rd month after the date it dissolved. Ez form Example 1. Ez form A corporation's tax year ends December 31. Ez form It must file its income tax return by March 15th. Ez form Example 2. Ez form A corporation's tax year ends June 30. Ez form It must file its income tax return by September 15th. Ez form   If the due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day. Ez form Extension of time to file. Ez form   File Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information and Other Returns, to request an extension of time to file a corporation income tax return. Ez form The IRS will grant the extension if you complete the form properly, file it, and pay any tax due by the original due date for the return. Ez form   Form 7004 does not extend the time for paying the tax due on the return. Ez form Interest, and possibly penalties, will be charged on any part of the final tax due not shown as a balance due on Form 7004. Ez form The interest is figured from the original due date of the return to the date of payment. Ez form   For more information, see the instructions for Form 7004. Ez form How to pay your taxes. Ez form   A corporation must pay its tax due in full no later than the 15th day of the 3rd month after the end of its tax year. Ez form Electronic Federal Tax Payment System (EFTPS). Ez form   Corporations generally must use EFTPS to make deposits of all tax liabilities (including social security, Medicare, withheld income, excise, and corporate income taxes). Ez form For more information on EFTPS and enrollment, visit www. Ez form eftps. Ez form gov or call 1-800-555-4477. Ez form Also see Publication 966, The Secure Way to Pay Your Federal Taxes. Ez form Note. Ez form Forms 8109 and 8109-B, Federal Tax Deposit Coupon, can no longer be used to make federal tax deposits. Ez form Penalties Generally, if the corporation receives a notice about interest and penalties after it files its return, send the IRS an explanation and we will determine if the corporation meets reasonable-cause criteria. Ez form Do not attach an explanation when the corporation's return is filed. Ez form See the instructions for your income tax return. Ez form Late filing of return. Ez form    A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. Ez form If the corporation is charged a penalty for late payment of tax (discussed next) for the same period of time, the penalty for late filing is reduced by the amount of the penalty for late payment. Ez form The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $100. Ez form The penalty will not be imposed if the corporation can show the failure to file on time was due to a reasonable cause. Ez form Late payment of tax. Ez form    A corporation that does not pay the tax when due may be penalized ½ of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. Ez form The penalty will not be imposed if the corporation can show that the failure to pay on time was due to a reasonable cause. Ez form Trust fund recovery penalty. Ez form   If income, social security, and Medicare taxes that a corporation must withhold from employee wages are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. Ez form The penalty is the full amount of the unpaid trust fund tax. Ez form This penalty may apply to you if these unpaid taxes cannot be immediately collected from the business. Ez form   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying these taxes, and who acted willfully in not doing so. Ez form   A responsible person can be an officer or employee of a corporation, an accountant, or a volunteer director/trustee. Ez form A responsible person also may include one who signs checks for the corporation or otherwise has authority to cause the spending of business funds. Ez form   Willfully means voluntarily, consciously, and intentionally. Ez form A responsible person acts willfully if the person knows the required actions are not taking place. Ez form   For more information on withholding and paying these taxes, see Publication 15 (Circular E), Employer's Tax Guide, and Publication 51, (Circular A), Agricultural Employer's Tax Guide. Ez form Other penalties. Ez form   Other penalties can be imposed for negligence, substantial understatement of tax, reportable transaction understatements, and fraud. Ez form See sections 6662, 6662A, and 6663 of the Internal Revenue Code. Ez form Estimated Tax Generally, a corporation must make installment payments if it expects its estimated tax for the year to be $500 or more. Ez form If the corporation does not pay the installments when they are due, it could be subject to an underpayment penalty. Ez form This section will explain how to avoid this penalty. Ez form When to pay estimated tax. Ez form   Installment payments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year. Ez form Example 1. Ez form Your corporation's tax year ends December 31. Ez form Installment payments are due on April 15, June 15, September 15, and December 15. Ez form Example 2. Ez form Your corporation's tax year ends June 30. Ez form Installment payments are due on October 15, December 15, March 15, and June 15. Ez form   If any due date falls on a Saturday, Sunday, or legal holiday, the installment is due on the next business day. Ez form How to figure each required installment. Ez form   Use Form 1120-W, Estimated Tax for Corporations, as a worksheet to figure each required installment of estimated tax. Ez form You will generally use one of the following two methods to figure each required installment. Ez form You should use the method that yields the smallest installment payments. Ez form Note. Ez form In these discussions, “return” generally refers to the corporation's original return. Ez form However, an amended return is considered the original return if it is filed by the due date (including extensions) of the original return. Ez form Method 1. Ez form   Each required installment is 25% of the income tax the corporation will show on its return for the current year. Ez form Method 2. Ez form   Each required installment is 25% of the income tax shown on the corporation's return for the previous year. Ez form   To use Method 2: The corporation must have filed a return for the previous year, The return must have been for a full 12 months, and The return must have shown a positive tax liability (not zero). Ez form Also, if the corporation is a large corporation, it can use Method 2 to figure the first installment only. Ez form   See the Instructions for Form 1120-W, for the definition of a large corporation and other special rules for large corporations. Ez form Other methods. Ez form   If a corporation's income is expected to vary during the year because, for example, its business is seasonal, it may be able to lower the amount of one or more required installments by using one or both of the following methods. Ez form The annualized income installment method. Ez form The adjusted seasonal installment method. Ez form Use Schedule A of Form 1120-W to determine if using one or both of these methods will lower the amount of any required installments. Ez form Refiguring required installments. Ez form   If after the corporation figures and deposits its estimated tax it finds that its tax liability for the year will be more or less than originally estimated, it may have to refigure its required installments to see if an underpayment penalty may apply. Ez form An immediate catchup payment should be made to reduce any penalty resulting from the underpayment of any earlier installments. Ez form Underpayment penalty. Ez form   If the corporation does not pay a required installment of estimated tax by its due date, it may be subject to a penalty. Ez form The penalty is figured separately for each installment due date. Ez form The corporation may owe a penalty for an earlier due date, even if it paid enough tax later to make up the underpayment. Ez form This is true even if the corporation is due a refund when its return is filed. Ez form Form 2220. Ez form   Use Form 2220, Underpayment of Estimated Tax by Corporations, to determine if a corporation is subject to the penalty for underpayment of estimated tax and to figure the amount of the penalty. Ez form   If the corporation is charged a penalty, the amount of the penalty depends on the following three factors. Ez form The amount of the underpayment. Ez form The period during which the underpayment was due and unpaid. Ez form The interest rate for underpayments published quarterly by the IRS in the Internal Revenue Bulletin. Ez form   A corporation generally does not have to file Form 2220 with its income tax return because the IRS will figure any penalty and bill the corporation. Ez form However, even if the corporation does not owe a penalty, complete and attach the form to the corporation's tax return if any of the following apply. Ez form The annualized income installment method was used to figure any required installment. Ez form The adjusted seasonal installment method was used to figure any required installment. Ez form The corporation is a large corporation figuring its first required installment based on the prior year's tax. Ez form How to pay estimated tax. Ez form   A corporation is generally required to use EFTPS to pay its taxes. Ez form See Electronic Federal Tax Payment System (EFTPS), earlier. Ez form Also see the Instructions for Form 1120-W. Ez form Quick refund of overpayments. Ez form   A corporation that has overpaid its estimated tax for the tax year may be able to apply for a quick refund. Ez form Use Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, to apply for a quick refund of an overpayment of estimated tax. Ez form A corporation can apply for a quick refund if the overpayment is: At least 10% of its expected tax liability, and At least $500. Ez form Use Form 4466 to figure the corporation's expected tax liability and the overpayment of estimated tax. Ez form File Form 4466 before the 16th day of the 3rd month after the end of the tax year, but before the corporation files its income tax return. Ez form Do not file Form 4466 before the end of the corporation's tax year. Ez form An extension of time to file the corporation's income tax return will not extend the time for filing Form 4466. Ez form The IRS will act on the form within 45 days from the date you file it. Ez form U. Ez form S. Ez form Real Property Interest If a domestic corporation acquires a U. Ez form S. Ez form real property interest from a foreign person or firm, the corporation may have to withhold tax on the amount it pays for the property. Ez form The amount paid includes cash, the fair market value of other property, and any assumed liability. Ez form If a domestic corporation distributes a U. Ez form S. Ez form real property interest to a foreign person or firm, it may have to withhold tax on the fair market value of the property. Ez form A corporation that fails to withhold may be liable for the tax, and any penalties and interest that apply. Ez form For more information, see section 1445 of the Internal Revenue Code; Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities; Form 8288, U. Ez form S. Ez form Withholding Tax Return for Dispositions by Foreign Persons of U. Ez form S. Ez form Real Property Interests; and Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U. Ez form S. Ez form Real Property Interests. Ez form Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. Ez form Taxable income should be determined using the method of accounting regularly used in keeping the corporation's books and records. Ez form In all cases, the method used must clearly show taxable income. Ez form Generally, permissible methods include: Cash, Accrual, or Any other method authorized by the Internal Revenue Code. Ez form Accrual method. Ez form   Generally, a corporation (other than a qualified personal service corporation) must use the accrual method of accounting if its average annual gross receipts exceed $5 million. Ez form A corporation engaged in farming operations also must use the accrual method. Ez form   If inventories are required, the accrual method generally must be used for sales and purchases of merchandise. Ez form However, qualifying taxpayers and eligible businesses of qualifying small business taxpayers are excepted from using the accrual method for eligible trades or businesses and may account for inventoriable items as materials and supplies that are not incidental. Ez form   Under the accrual method, an amount is includable in income when: All the events have occurred that fix the right to receive the income, which is the earliest of the date: The required performance takes place, Payment is due, or Payment is received; and The amount can be determined with reasonable accuracy. Ez form   Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year when: All events that determine the liability have occurred, The amount of the liability can be figured with reasonable accuracy, and Economic performance takes place with respect to the expense. Ez form   There are exceptions to the economic performance rule for certain items, including recurring expenses. Ez form See section 461(h) of the Internal Revenue Code and the related regulations for the rules for determining when economic performance takes place. Ez form Nonaccrual experience method. Ez form   Accrual method corporations are not required to maintain accruals for certain amounts from the performance of services that, on the basis of their experience, will not be collected, if: The services are in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting; or The corporation's average annual gross receipts for the 3 prior tax years does not exceed $5 million. Ez form   This provision does not apply if interest is required to be paid on the amount or if there is any penalty for failure to pay the amount timely. Ez form Percentage of completion method. Ez form   Long-term contracts (except for certain real property construction contracts) must generally be accounted for using the percentage of completion method described in section 460 of the Internal Revenue Code. Ez form Mark-to-market accounting method. Ez form   Generally, dealers in securities must use the mark-to-market accounting method described in section 475 of the Internal Revenue Code. Ez form Under this method any security held by a dealer as inventory must be included in inventory at its FMV. Ez form Any security not held as inventory at the close of the tax year is treated as sold at its FMV on the last business day of the tax year. Ez form Any gain or loss must be taken into account in determining gross income. Ez form The gain or loss taken into account is treated as ordinary gain or loss. Ez form   Dealers in commodities and traders in securities and commodities can elect to use the mark-to-market accounting method. Ez form Change in accounting method. Ez form   A corporation can change its method of accounting used to report taxable income (for income as a whole or for the treatment of any material item). Ez form The corporation must file Form 3115, Application for Change in Accounting Method. Ez form For more information, see Form 3115 and Publication 538. Ez form Section 481(a) adjustment. Ez form   The corporation may have to make an adjustment under section 481(a) of the Internal Revenue Code to prevent amounts of income or expense from being duplicated or omitted. Ez form The section 481(a) adjustment period is generally 1 year for a net negative adjustment and 4 years for a net positive adjustment. Ez form However, a corporation can elect to use a 1-year adjustment period if the net section 481(a) adjustment for the change is less than $25,000. Ez form The corporation must complete the appropriate lines of Form 3115 to make the election. Ez form See the Instructions for Form 3115. Ez form Accounting Periods A corporation must figure its taxable income on the basis of a tax year. Ez form A tax year is the annual accounting period a corporation uses to keep its records and report its income and expenses. Ez form Generally, corporations can use either a calendar year or a fiscal year as its tax year. Ez form Unless special rules apply, a corporation generally adopts a tax year by filing its first federal income tax return using that tax year. Ez form For more information, see Publication 538. Ez form Personal service corporation. Ez form   A personal service corporation must use a calendar year as its tax year unless: It elects to use a 52–53 week tax year that ends with reference to the calendar year; It can establish a business purpose for a different tax year and obtains approval of the IRS. Ez form See Form 1128, Application To Adopt, Change, or Retain a Tax Year, and Publication 538; or It elects under section 444 of the Internal Revenue Code to have a tax year other than a calendar year. Ez form Use Form 8716, Election to Have a Tax Year Other Than a Required Tax Year, to make the election. Ez form   If a personal service corporation makes a section 444 election, its deduction for certain amounts paid to employee-owners may be limited. Ez form See Schedule H (Form 1120), Section 280H Limitations for a Personal Service Corporation (PSC), to figure the maximum deduction. Ez form Change of tax year. Ez form   Generally, a corporation must get the consent of the IRS before changing its tax year by filing Form 1128. Ez form However, under certain conditions, a corporation can change its tax year without getting the consent. Ez form For more information, see Form 1128 and Publication 538. Ez form Recordkeeping A corporation should keep its records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. Ez form Usually records that support items of income, deductions, or credits on the return must be kept for 3 years from the date the return is due or filed, whichever is later. Ez form Keep records that verify the corporation's basis in property for as long as they are needed to figure the basis of the original or replacement property. Ez form The corporation should keep copies of all filed returns. Ez form They help in preparing future and amended returns and in the calculation of earnings and profits. Ez form Income, Deductions, and Special Provisions Rules on income and deductions that apply to individuals also apply, for the most part, to corporations. Ez form However, the following special provisions apply only to corporations. Ez form Costs of Going Into Business When you go into business, treat all costs you incur to get your business started as capital expenses. Ez form However, a corporation can elect to deduct a limited amount of start-up or organizational costs. Ez form Any costs not deducted can be amortized. Ez form Start-up costs are costs for creating an active trade or business or investigating the creation or acquisition of an active trade or business. Ez form Organizational costs are the direct costs of creating the corporation. Ez form For more information on deducting or amortizing start-up and organizational costs, see the instructions for your income tax return. Ez form Also see, Publication 535, chapter 7, Costs You Can Deduct or Capitalize, and chapter 8, Amortization. Ez form Related Persons A corporation that uses an accrual method of accounting cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until the corporation makes the payment and the corresponding amount is includible in the related person's gross income. Ez form Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. Ez form If a deduction is denied, the rule will continue to apply even if the corporation's relationship with the person ends before the expense or interest is includible in the gross income of that person. Ez form These rules also deny the deduction of losses on the sale or exchange of property between related persons. Ez form Related persons. Ez form   For purposes of this rule, the following persons are related to a corporation. Ez form Another corporation, that is a member of the same controlled group (as defined in section 267(f) of the Internal Revenue Code). Ez form An individual who owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. Ez form A trust fiduciary, when the trust or the grantor of the trust owns, directly or indirectly, more than 50% in value of the outstanding stock of the corporation. Ez form An S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. Ez form A partnership, if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profits interest in the partnership. Ez form Any employee-owner, if the corporation is a personal service corporation (see Personal service corporation, earlier), regardless of the amount of stock owned by the employee-owner. Ez form Ownership of stock. Ez form   To determine whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following apply. Ez form Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, is treated as being owned proportionately by or for its shareholders, partners, or beneficiaries. Ez form An individual is treated as owning the stock owned, directly or indirectly, by or for the individual's family. Ez form Family includes only brothers and sisters (including half brothers and half sisters), a spouse, ancestors, and lineal descendants. Ez form Any individual owning (other than by applying (2), above) stock in a corporation, is treated as also owning the stock owned directly or indirectly by that individual's partner. Ez form To apply (1), (2), or (3), above, stock constructively owned by a person under (1) is treated as actually owned by that person. Ez form But stock constructively owned by an individual under (2) or (3) is not treated as actually owned by the individual for applying either (2) or (3) to make another person the constructive owner of that stock. Ez form Reallocation of income and deductions. Ez form   Where it is necessary to clearly show income or prevent tax evasion, the IRS can reallocate gross income, deductions, credits, or allowances between two or more organizations, trades, or businesses owned or controlled directly, or indirectly, by the same interests. Ez form Complete liquidations. Ez form   The disallowance of losses from the sale or exchange of property between related persons does not apply to liquidating distributions. Ez form More information. Ez form   For more information about the related person rules, see Publication 544. Ez form Income From Qualifying Shipping Activities A corporation may make an election to be taxed on its notional shipping income at the highest corporate tax rate. Ez form If a corporation makes this election it may exclude income from qualifying shipping activities from gross income. Ez form Also if the election is made, the corporation generally may not claim any loss, deduction, or credit with respect to qualifying shipping activities. Ez form A corporation making this election may also elect to defer gain on the disposition of a qualifying vessel. Ez form A corporation uses Form 8902, Alternative Tax on Qualifying Shipping Activities, to make the election and figure the alternative tax. Ez form For more information regarding the election, see Form 8902. Ez form Election to Expense Qualified Refinery Property A corporation can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct 50% of the cost of qualified refinery property (defined in section 179C(c) of the Internal Revenue Code), placed in service before January 1, 2014. Ez form The deduction is allowed for the year in which the property is placed in service. Ez form A subchapter T cooperative can make an irrevocable election on its return by the due date (including extensions) to allocate this deduction to its owners based on their ownership interest. Ez form For more information, see section 179C of the Internal Revenue Code and the related Regulations. Ez form Deduction to Comply With EPA Sulfur Regulations A small business refiner can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct up to 75% of qualified costs paid or incurred to comply with the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency (EPA). Ez form A subchapter T cooperative can make an irrevocable election on its return filed by the due date (including extensions) to allocate the deduction to its owners based on their ownership interest. Ez form For more information, see sections 45H and 179B of the Internal Revenue Code and the related Regulations. Ez form Energy-Efficient Commercial Building Property Deduction A corporation can claim a deduction for costs associated with energy-efficient commercial building property, placed in service before January 1, 2014. Ez form In order to qualify for the deduction: The costs must be associated with depreciable or amortizable property in a Standard 90. Ez form 1-2001 domestic building; The property must be either a part of the interior lighting system, the heating, cooling, ventilation and hot water system, or the building envelope (defined in section 179D(c)(1)(C) of the Internal Revenue Code); and The property must be installed as part of a plan to reduce the total annual energy and power costs of the building by 50% or more. Ez form The deduction is limited to $1. Ez form 80 per square foot of the building less the total amount of deductions taken for this property in prior tax years. Ez form Other rules and limitations apply. Ez form The corporation must reduce the basis of any property by any deduction taken. Ez form The deduction is subject to recapture if the corporation fails to fully implement an energy savings plan. Ez form For more information, see section 179D of the Internal Revenue Code. Ez form Also see Notice 2006-52, 2006-26 I. Ez form R. Ez form B. Ez form 1175, clarified and amplified by Notice 2008-40, 2008-14 I. Ez form R. Ez form B. Ez form 725, and any successor. Ez form Corporate Preference Items A corporation must make special adjustments to certain items before it takes them into account in determining its taxable income. Ez form These items are known as corporate preference items and they include the following. Ez form Gain on the disposition of section 1250 property. Ez form For more information, see section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. Ez form Percentage depletion for iron ore and coal (including lignite). Ez form For more information, see Mines and Geothermal Deposits under Mineral Property in chapter 9 of Publication 535. Ez form Amortization of pollution control facilities. Ez form For more information, see Pollution Control Facilities in chapter 8 of Publication 535 and section 291(a)(5) of the Internal Revenue Code. Ez form Mineral exploration and development costs. Ez form For more information, see Exploration Costs and Development Costs in chapter 7 of Publication 535. Ez form For more information on corporate preference items, see section 291 of the Internal Revenue Code. Ez form Dividends-Received Deduction A corporation can deduct a percentage of certain dividends received during its tax year. Ez form This section discusses the general rules that apply. Ez form The deduction is figured on Form 1120, Schedule C, or the applicable schedule of your income tax return. Ez form For more information, see the Instructions for Form 1120, or the instructions for your applicable income tax return. Ez form Dividends from domestic corporations. Ez form   A corporation can deduct, within certain limits, 70% of the dividends received if the corporation receiving the dividend owns less than 20% of the corporation distributing the dividend. Ez form If the corporation owns 20% or more of the distributing corporation's stock, it can, subject to certain limits, deduct 80% of the dividends received. Ez form Ownership. Ez form   Determine ownership, for these rules, by the amount of voting power and value of the paying corporation's stock (other than certain preferred stock) the receiving corporation owns. Ez form Small business investment companies. Ez form   Small business investment companies can deduct 100% of the dividends received from taxable domestic corporations. Ez form Dividends from regulated investment companies. Ez form   Regulated investment company dividends received are subject to certain limits. Ez form Capital gain dividends received from a regulated investment company do not qualify for the deduction. Ez form For more information, see section 854 of the Internal Revenue Code. Ez form No deduction allowed for certain dividends. Ez form   Corporations cannot take a deduction for dividends received from the following entities. Ez form A real estate investment trust (REIT). Ez form A corporation exempt from tax under section 501 or 521 of the Internal Revenue Code either for the tax year of the distribution or the preceding tax year. Ez form A corporation whose stock was held less than 46 days during the 91-day period beginning 45 days before the stock became ex-dividend with respect to the dividend. Ez form Ex-dividend means the holder has no rights to the dividend. Ez form A corporation whose preferred stock was held less than 91 days during the 181-day period beginning 90 days before the stock became ex-dividend with respect to the dividend if the dividends received are for a period or periods totaling more than 366 days. Ez form Any corporation, if your corporation is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. Ez form Dividends on deposits. Ez form   Dividends on deposits or withdrawable accounts in domestic building and loan associations, mutual savings banks, cooperative banks, and similar organizations are interest, not dividends. Ez form They do not qualify for this deduction. Ez form Limit on deduction for dividends. Ez form   The total deduction for dividends received or accrued is generally limited (in the following order) to: 80% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from 20%-owned corporations, then 70% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from less-than-20%-owned corporations (reducing taxable income by the total dividends received from 20%-owned corporations). Ez form Figuring the limit. Ez form   In figuring the limit, determine taxable income without the following items. Ez form The net operating loss deduction. Ez form The domestic production activities deduction. Ez form The deduction for dividends received. Ez form Any adjustment due to the nontaxable part of an extraordinary dividend (see Extraordinary Dividends, below). Ez form Any capital loss carryback to the tax year. Ez form Effect of net operating loss. Ez form   If a corporation has a net operating loss (NOL) for a tax year, the limit of 80% (or 70%) of taxable income does not apply. Ez form To determine whether a corporation has an NOL, figure the dividends-received deduction without the 80% (or 70%) of taxable income limit. Ez form Example 1. Ez form A corporation loses $25,000 from operations. Ez form It receives $100,000 in dividends from a 20%-owned corporation. Ez form Its taxable income is $75,000 ($100,000 – $25,000) before the deduction for dividends received. Ez form If it claims the full dividends-received deduction of $80,000 ($100,000 × 80%) and combines it with an operations loss of $25,000, it will have an NOL of ($5,000). Ez form Therefore, the 80% of taxable income limit does not apply. Ez form The corporation can deduct the full $80,000. Ez form Example 2. Ez form Assume the same facts as in Example 1, except that the corporation only loses $15,000 from operations. Ez form Its taxable income is $85,000 before the deduction for dividends received. Ez form After claiming the dividends-received deduction of $80,000 ($100,000 × 80%), its taxable income is $5,000. Ez form Because the corporation will not have an NOL after applying a full dividends-received deduction, its allowable dividends-received deduction is limited to 80% of its taxable income, or $68,000 ($85,000 × 80%). Ez form Extraordinary Dividends If a corporation receives an extraordinary dividend on stock held 2 years or less before the dividend announcement date, it generally must reduce its basis in the stock by the nontaxed part of the dividend. Ez form The nontaxed part is any dividends-received deduction allowable for the dividends. Ez form Extraordinary dividend. Ez form   An extraordinary dividend is any dividend on stock that equals or exceeds a certain percentage of the corporation's adjusted basis in the stock. Ez form The percentages are: 5% for stock preferred as to dividends, or 10% for other stock. Ez form Treat all dividends received that have ex-dividend dates within an 85-consecutive-day period as one dividend. Ez form Treat all dividends received that have ex-dividend dates within a 365-consecutive-day period as extraordinary dividends if the total of the dividends exceeds 20% of the corporation's adjusted basis in the stock. Ez form Disqualified preferred stock. Ez form   Any dividend on disqualified preferred stock is treated as an extraordinary dividend regardless of the period of time the corporation held the stock. Ez form   Disqualified preferred stock is any stock preferred as to dividends if any of the following apply. Ez form The stock when issued has a dividend rate that declines (or can reasonably be expected to decline) in the future. Ez form The issue price of the stock exceeds its liquidation rights or stated redemption price. Ez form The stock is otherwise structured to avoid the rules for extraordinary dividends and to enable corporate shareholders to reduce tax through a combination of dividends-received deductions and loss on the disposition of the stock. Ez form   These rules apply to stock issued after July 10, 1989, unless it was issued under a written binding contract in effect on that date, and thereafter, before the issuance of the stock. Ez form More information. Ez form   For more information on extraordinary dividends, see section 1059 of the Internal Revenue Code. Ez form Below-Market Loans If a corporation receives a below-market loan and uses the proceeds for its trade or business, it may be able to deduct the forgone interest. Ez form A below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Ez form A below-market loan generally is treated as an arm's-length transaction in which the borrower is considered as having received both the following: A loan in exchange for a note that requires payment of interest at the applicable federal rate, and An additional payment in an amount equal to the forgone interest. Ez form Treat the additional payment as a gift, dividend, contribution to capital, payment of compensation, or other payment, depending on the substance of the transaction. Ez form Foregone interest. Ez form   For any period, forgone interest is equal to: The interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. Ez form See Below-market loans, in chapter 4 of Publication 535 for more information. Ez form Charitable Contributions A corporation can claim a limited deduction for charitable contributions made in cash or other property. Ez form The contribution is deductible if made to, or for the use of, a qualified organization. Ez form For more information on qualified organizations, see Publication 526, Charitable Contributions. Ez form Also see, Exempt Organizations Select Check (EO Select Check) at www. Ez form irs. Ez form gov/charities, the on-line search tool for finding information on organizations eligible to receive tax-deductible contributions. Ez form Note. Ez form You cannot take a deduction if any of the net earnings of an organization receiving contributions benefit any private shareholder or individual. Ez form Cash method corporation. Ez form   A corporation using the cash method of accounting deducts contributions in the tax year paid. Ez form Accrual method corporation. Ez form   A corporation using an accrual method of accounting can choose to deduct unpaid contributions for the tax year the board of directors authorizes them if it pays them by the 15th day of the 3rd month after the close of that tax year. Ez form Make the choice by reporting the contribution on the corporation's return for the tax year. Ez form A declaration stating that the board of directors adopted the resolution during the tax year must accompany the return. Ez form The declaration must include the date the resolution was adopted. Ez form Limitations on deduction. Ez form   A corporation cannot deduct charitable contributions that exceed 10% of its taxable income for the tax year. Ez form Figure taxable income for this purpose without the following. Ez form The deduction for charitable contributions. Ez form The dividends-received deduction. Ez form The deduction allowed under section 249 of the Internal Revenue Code. Ez form The domestic production activities deduction. Ez form Any net operating loss carryback to the tax year. Ez form Any capital loss carryback to the tax year. Ez form Farmers and ranchers. Ez form    Corporations that are farmers and ranchers should see section 170(b)(2) of the Internal Revenue Code for special rules that may affect the deduction limit. Ez form Carryover of excess contributions. Ez form   You can carry over, within certain limits, to each of the subsequent 5 years any charitable contributions made during the current year that exceed the 10% limit. Ez form You lose any excess not used within that period. Ez form For example, if a corporation has a carryover of excess contributions paid in 2010 and it does not use all the excess on its return for 2011, it can carry any excess over to 2012, 2013, 2014, and 2015, if applicable. Ez form Any excess not used in 2015 is lost. Ez form Do not deduct a carryover of excess contributions in the carryover year until after you deduct contributions made in that year (subject to the 10% limit). Ez form You cannot deduct a carryover of excess contributions to the extent it increases a net operating loss carryover. Ez form Cash contributions. Ez form   A corporation must maintain a record of any contribution of cash, check, or other monetary contribution, regardless of the amount. Ez form The record can be a bank record, receipt, letter, or other written communication from the donee indicating the name of the organization, the date of the contribution, and the amount of the contribution. Ez form Keep the record of the contribution with the other corporate records. Ez form Do not attach the records to the corporation's return. Ez form For more information on cash contributions, see Publication 526. Ez form Gifts of $250 or more. Ez form   Generally, no deduction is allowed for any contribution of $250 or more unless the corporation gets a written acknowledgement from the donee organization. Ez form The acknowledgement should show the amount of cash contributed, a description of the property contributed, and either gives a description and a good faith estimate of the value of any goods or services provided in return for the contribution or states that no goods or services were provided in return for the contribution. Ez form The acknowledgement should be received by the due date (including extensions) of the return, or, if earlier, the date the return was filed. Ez form Keep the acknowledgement with other corporate records. Ez form Do not attach the acknowledgement to the return. Ez form Contributions of property other than cash. Ez form   If a corporation (other than a closely-held or a personal service corporation) claims a deduction of more than $500 for contributions of property other than cash, a schedule describing the property and the method used to determine its fair market value must be attached to the corporation's return. Ez form In addition the corporation should keep a record of: The approximate date and manner of acquisition of the donated property and The cost or other basis of the donated property held by the donor for less than 12 months prior to contribution. Ez form   Closely held and personal service corporations must complete and attach Form 8283, Noncash Charitable Contributions, to their returns if they claim a deduction of more than $500 for non-cash contributions. Ez form For all other corporations, if the deduction claimed for donated property exceeds $5,000, complete Form 8283 and attach it to the corporation's return. Ez form   A corporation must obtain a qualified appraisal for all deductions of property claimed in excess of $5,000. Ez form A qualified appraisal is not required for the donation of cash, publicly traded securities, inventory, and any qualified vehicles sold by a donee organization without any significant intervening use or material improvement. Ez form The appraisal should be maintained with other corporate records and only attached to the corporation's return when the deduction claimed exceeds $500,000; $20,000 for donated art work. Ez form   See Form 8283 for more information. Ez form Qualified conservation contributions. Ez form   If a corporation makes a qualified conservation contribution, the corporation must provide information regarding the legal interest being donated, the fair market value of the underlying property before and after the donation, and a description of the conservation purpose for which the property will be used. Ez form For more information, see section 170(h) of the Internal Revenue Code. Ez form Contributions of used vehicles. Ez form   A corporation is allowed a deduction for the contribution of used motor vehicles, boats, and airplanes. Ez form The deduction is limited, and other special rules apply. Ez form For more information, see Publication 526. Ez form Reduction for contributions of certain property. Ez form   For a charitable contribution of property, the corporation must reduce the contribution by the sum of: The ordinary income and short-term capital gain that would have resulted if the property were sold at its FMV and For certain contributions, the long-term capital gain that would have resulted if the property were sold at its FMV. Ez form   The reduction for the long-term capital gain applies to: Contributions of tangible personal property for use by an exempt organization for a purpose or function unrelated to the basis for its exemption; Contributions of any property to or for the use of certain private foundations except for stock for which market quotations are readily available; and Contributions of any patent, certain copyrights, trademark, trade name, trade secret, know-how, software (that is a section 197 intangible), or similar property, or applications or registrations of such property. Ez form Larger deduction. Ez form   A corporation (other than an S corporation) may be able to claim a deduction equal to the lesser of (a) the basis of the donated inventory or property plus one-half of the inventory or property's appreciation (gain if the donated inventory or property was sold at fair market value on the date of the donation), or (b) two times basis of the donated inventory or property. Ez form This deduction may be allowed for certain contributions of: Certain inventory and other property made to a donee organization and used solely for the care of the ill, the needy, and infants. Ez form Scientific property constructed by the corporation (other than an S corporation, personal holding company, or personal service corporation) and donated no later than 2 years after substantial completion of the construction. Ez form The property must be donated to a qualified organization and its original use must be by the donee for research, experimentation, or research training within the United States in the area of physical or biological science. Ez form Computer technology and equipment acquired or constructed and donated no later than 3 years after either acquisition or substantial completion of construction to an educational organization for educational purposes within the United States. Ez form Contributions to organizations conducting lobbying activities. Ez form   Contributions made to an organization that conducts lobbying activities are not deductible if: The lobbying activities relate to matters of direct financial interest to the donor's trade or business and The principal purpose of the contribution was to avoid federal income tax by obtaining a deduction for activities that would have been nondeductible under the lobbying expense rules if conducted directly by the donor. Ez form More information. Ez form   For more information on charitable contributions, including substantiation and recordkeeping requirements, see section 170 of the Internal Revenue Code, the related regulations, and Publication 526. Ez form Capital Losses A corporation can deduct capital losses only up to the amount of its capital gains. Ez form In other words, if a corporation has an excess capital loss, it cannot deduct the loss in the current tax year. Ez form Instead, it carries the loss to other tax years and deducts it from any net capital gains that occur in those years. Ez form A capital loss is carried to other years in the following order. Ez form 3 years prior to the loss year. Ez form 2 years prior to the loss year. Ez form 1 year prior to the loss year. Ez form Any loss remaining is carried forward for 5 years. Ez form When you carry a net capital loss to another tax year, treat it as a short-term loss. Ez form It does not retain its original identity as long term or short term. Ez form Example. Ez form A calendar year corporation has a net short-term capital gain of $3,000 and a net long-term capital loss of $9,000. Ez form The short-term gain offsets some of the long-term loss, leaving a net capital loss of $6,000. Ez form The corporation treats this $6,000 as a short-term loss when carried back or forward. Ez form The corporation carries the $6,000 short-term loss back 3 years. Ez form In year 1, the corporation had a net short-term capital gain of $8,000 and a net long-term capital gain of $5,000. Ez form It subtracts the $6,000 short-term loss first from the net short-term gain. Ez form This results in a net capital gain for year 1 of $7,000. Ez form This consists of a net short-term capital gain of $2,000 ($8,000 − $6,000) and a net long-term capital gain of $5,000. Ez form S corporation status. Ez form   A corporation may not carry a capital loss from, or to, a year for which it is an S corporation. Ez form Rules for carryover and carryback. Ez form   When carrying a capital loss from one year to another, the following rules apply. Ez form When figuring the current year's net capital loss, you cannot combine it with a capital loss carried from another year. Ez form In other words, you can carry capital losses only to years that would otherwise have a total net capital gain. Ez form If you carry capital losses from 2 or more years to the same year, deduct the loss from the earliest year first. Ez form You cannot use a capital loss carried from another year to produce or increase a net operating loss in the year to which you carry it back. Ez form Refunds. Ez form   When you carry back a capital loss to an earlier tax year, refigure your tax for that year. Ez form If your corrected tax is less than the tax you originally owed, use either Form 1139, Corporate Application for Tentative Refund, or Form 1120X, Amended U. Ez form S. Ez form Corporation Income Tax Return, to apply for a refund. Ez form Form 1139. Ez form    A corporation can get a refund faster by using Form 1139. Ez form It cannot file Form 1139 before filing the return for the corporation's capital loss year, but it must file Form 1139 no later than 1 year after the year it sustains the capital loss. Ez form Form 1120X. Ez form   If the corporation does not file Form 1139, it must file Form 1120X to apply for a refund. Ez form The corporation must file the Form 1120X within 3 years of the due date, includin