Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Ez Tax Form Online

E Filing Income TaxWhere Can I File State Taxes Free OnlineFree 2012 Tax Forms1040x Online FreeForm 1040 EzFederal Income Tax AmendmentAmended Tax2010 1040 Tax FormFree Tax ComAmend My Taxes OnlineFile 2008 Taxes Online Free H&r BlockIncome Tax For Unemployed1040 Ez Tax Table2012 940 Tax FormIrs1040xClues Fill 1040x FormHow To Fill Out 1040ez FormWww.irs.gov/form 1040x1040ez ComDownload State Tax Forms1040ez Forms Printable2012 1040ez FormFree Online Tax Software 2010Irs Forms 2011Taxes 20112010 Federal Income Tax FormsCompleted 1040x ExampleFile Amended Tax ReturnFederal Tax Forms 2010File Amended Tax Return OnlineFree 1040 Ez Filing1040ez Instruction BookH&r Block Free Filing2009 FreetaxusaTax Exemptions For StudentsTaxes OnlineHow To Amend A Tax Return 2012Free 1040 Tax ReturnIrs Form 1040 Ez InstructionsE File 2012 Taxes Free

Ez Tax Form Online

Ez tax form online 10. Ez tax form online   Business Bad Debts Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Definition of Business Bad DebtAccrual method. Ez tax form online Cash method. Ez tax form online Debt acquired from a decedent. Ez tax form online Liquidation. Ez tax form online Types of Business Bad Debts When a Debt Becomes Worthless How To Claim a Business Bad DebtSpecific Charge-Off Method Nonaccrual-Experience Method Recovery of a Bad DebtNet operating loss (NOL) carryover. Ez tax form online Introduction You have a bad debt if you cannot collect money owed to you. Ez tax form online A bad debt is either a business bad debt or a nonbusiness bad debt. Ez tax form online This chapter discusses only business bad debts. Ez tax form online Generally, a business bad debt is one that comes from operating your trade or business. Ez tax form online You can deduct business bad debts on Schedule C (Form 1040) or your applicable business income tax return. Ez tax form online All other bad debts are nonbusiness bad debts and are deductible only as short-term capital losses. Ez tax form online For more information on nonbusiness bad debts, see Publication 550. Ez tax form online Topics - This chapter discusses: Definition of business bad debt When a debt becomes worthless How to claim a business bad debt Recovery of a bad debt Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 556 Examination of Returns, Appeal Rights, and Claims for Refund Form (and Instructions) Schedule C (Form 1040) Profit or Loss From Business 1040X Amended U. Ez tax form online S. Ez tax form online Individual Income Tax Return 1045 Application for Tentative Refund 1139 Corporation Application for Tentative Refund 3115 Application for Change in Accounting Method See chapter 12 for information about getting publications and forms. Ez tax form online Definition of Business Bad Debt A business bad debt is a loss from the worthlessness of a debt that was either: Created or acquired in your trade or business, or Closely related to your trade or business when it became partly or totally worthless. Ez tax form online A debt is closely related to your trade or business if your primary motive for incurring the debt is business related. Ez tax form online Bad debts of a corporation (other than an S corporation) are always business bad debts. Ez tax form online Credit sales. Ez tax form online   Business bad debts are mainly the result of credit sales to customers. Ez tax form online Goods that have been sold, but not yet paid for, and services that have been performed, but not yet paid for, are recorded in your books as either accounts receivable or notes receivable. Ez tax form online After a reasonable period of time, if you have tried to collect the amount due, but are unable to do so, the uncollectible part becomes a business bad debt. Ez tax form online   Accounts or notes receivable valued at fair market value (FMV) when received are deductible only at that value, even though the FMV may be less than the face value. Ez tax form online If you purchased an account receivable for less than its face value, and the receivable subsequently becomes worthless, the most you are allowed to deduct is the amount you paid to acquire it. Ez tax form online    You can claim a business bad debt deduction only if the amount owed to you was previously included in gross income. Ez tax form online This applies to amounts owed to you from all sources of taxable income, including sales, services, rents, and interest. Ez tax form online Accrual method. Ez tax form online   If you use the accrual method of accounting, you generally report income as you earn it. Ez tax form online You can only claim a bad debt deduction for an uncollectible receivable if you have previously included the uncollectible amount in income. Ez tax form online   If you qualify, you can use the nonaccrual-experience method of accounting discussed later. Ez tax form online Under this method, you do not have to accrue income that, based on your experience, you do not expect to collect. Ez tax form online Cash method. Ez tax form online   If you use the cash method of accounting, you generally report income when you receive payment. Ez tax form online You cannot claim a bad debt deduction for amounts owed to you because you never included those amounts in income. Ez tax form online For example, a cash basis architect cannot claim a bad debt deduction if a client fails to pay the bill because the architect's fee was never included in income. Ez tax form online Debts from a former business. Ez tax form online   If you sell your business but retain its receivables, these debts are business debts because they arose out of your trade or business. Ez tax form online If any of these receivables subsequently become worthless, the loss is still a business bad debt. Ez tax form online Debt acquired from a decedent. Ez tax form online   The character of a loss from debts of a business acquired from a decedent is determined in the same way as debts acquired on the purchase of a business. Ez tax form online The executor of the decedent's estate treats any loss from the debts as a business bad debt if the debts were closely related to the decedent's trade or business when they became worthless. Ez tax form online Otherwise, a loss from these debts becomes a nonbusiness bad debt for the decedent's estate. Ez tax form online Liquidation. Ez tax form online   If you liquidate your business and some of the accounts receivable that you retain become worthless, they become business bad debts. Ez tax form online Types of Business Bad Debts Business bad debts may result from the following. Ez tax form online Loans to clients and suppliers. Ez tax form online   If you loan money to a client, supplier, employee, or distributor for a business reason and you are unable to collect the loan after attempting to do so, you have a business bad debt. Ez tax form online Debts owed by political parties. Ez tax form online   If a political party (or other organization that accepts contributions or spends money to influence elections) owes you money and the debt becomes worthless, you can claim a bad debt deduction only if all of the following requirements are met. Ez tax form online You use the accrual method of accounting. Ez tax form online The debt arose from the sale of goods or services in the ordinary course of your trade or business. Ez tax form online More than 30% of your receivables accrued in the year of the sale were from sales to political parties. Ez tax form online You made substantial and continuing efforts to collect on the debt. Ez tax form online Loan or capital contribution. Ez tax form online   You cannot claim a bad debt deduction for a loan you made to a corporation if, based on the facts and circumstances, the loan is actually a contribution to capital. Ez tax form online Debts of an insolvent partner. Ez tax form online   If your business partnership breaks up and one of your former partners becomes insolvent, you may have to pay more than your pro rata share of the partnership's debts. Ez tax form online If you pay any part of the insolvent partner's share of the debts, you can claim a bad debt deduction for the amount you paid that is attributable to the insolvent partner's share. Ez tax form online Business loan guarantee. Ez tax form online   If you guarantee a debt that subsequently becomes worthless, the debt can qualify as a business bad debt if all the following requirements are met. Ez tax form online You made the guarantee in the course of your trade or business. Ez tax form online You have a legal duty to pay the debt. Ez tax form online You made the guarantee before the debt became worthless. Ez tax form online You meet this requirement if you reasonably expected you would not have to pay the debt without full reimbursement from the borrower. Ez tax form online You received reasonable consideration for making the guarantee. Ez tax form online You meet this requirement if you made the guarantee in accord with normal business practice or for a good faith business purpose. Ez tax form online Example. Ez tax form online Jane Zayne owns the Zayne Dress Company. Ez tax form online She guaranteed payment of a $20,000 note for Elegant Fashions, a dress outlet. Ez tax form online Elegant Fashions is one of Zayne's largest clients. Ez tax form online Elegant Fashions later defaulted on the loan. Ez tax form online As a result, Ms. Ez tax form online Zayne paid the remaining balance of the loan in full to the bank. Ez tax form online She can claim a business bad debt deduction only for the amount she paid, since her guarantee was made in the course of her trade or business for a good faith business purpose. Ez tax form online She was motivated by the desire to retain one of her better clients and keep a sales outlet. Ez tax form online Deductible in the year paid. Ez tax form online   If you make a payment on a loan you guaranteed, you can deduct it in the year paid, unless you have rights against the borrower. Ez tax form online Rights against a borrower. Ez tax form online   When you make payment on a loan you guaranteed, you may have the right to take the place of the lender. Ez tax form online The debt is then owed to you. Ez tax form online If you have this right, or some other right to demand payment from the borrower, you cannot claim a bad debt deduction until these rights become partly or totally worthless. Ez tax form online Joint debtor. Ez tax form online   If two or more debtors jointly owe you money, your inability to collect from one does not enable you to deduct a proportionate amount as a bad debt. Ez tax form online Sale of mortgaged property. Ez tax form online   If mortgaged or pledged property is sold for less than the debt, the unpaid, uncollectible balance of the debt is a bad debt. Ez tax form online When a Debt Becomes Worthless A debt becomes worthless when there is no longer any chance the amount owed will be paid. Ez tax form online This may occur when the debt is due or prior to that date. Ez tax form online To demonstrate worthlessness, you must only show that you have taken reasonable steps to collect the debt but were unable to do so. Ez tax form online It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. Ez tax form online Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. Ez tax form online Property received for debt. Ez tax form online   If you receive property in partial settlement of a debt, reduce the debt by the property's FMV, which becomes the property's basis. Ez tax form online You can deduct the remaining debt as a bad debt if and when it becomes worthless. Ez tax form online   If you later sell the property for more than its basis, any gain on the sale is due to the appreciation of the property. Ez tax form online It is not a recovery of a bad debt. Ez tax form online For information on the sale of an asset, see Publication 544. Ez tax form online How To Claim a Business Bad Debt There are two methods to claim a business bad debt. Ez tax form online The specific charge-off method. Ez tax form online The nonaccrual-experience method. Ez tax form online Generally, you must use the specific charge-off method. Ez tax form online However, you may use the nonaccrual-experience method if you meet the requirements discussed later under Nonaccrual-Experience Method . Ez tax form online Specific Charge-Off Method If you use the specific charge-off method, you can deduct specific business bad debts that become either partly or totally worthless during the tax year. Ez tax form online However, with respect to partly worthless bad debts, your deduction is limited to the amount you charged off on your books during the year. Ez tax form online Partly worthless debts. Ez tax form online   You can deduct specific bad debts that become partly uncollectible during the tax year. Ez tax form online Your tax deduction is limited to the amount you charge off on your books during the year. Ez tax form online You do not have to charge off and deduct your partly worthless debts annually. Ez tax form online You can delay the charge off until a later year. Ez tax form online However, you cannot deduct any part of a debt after the year it becomes totally worthless. Ez tax form online Significantly modified debt. Ez tax form online   An exception to the charge-off rule exists for debt which has been significantly modified and on which the holder recognized gain. Ez tax form online For more information, see Regulations section 1. Ez tax form online 166-3(a)(3). Ez tax form online Deduction disallowed. Ez tax form online   Generally, you can claim a partial bad debt deduction only in the year you make the charge-off on your books. Ez tax form online If, under audit, the IRS does not allow your deduction and the debt becomes partly worthless in a later tax year, you can deduct the amount you charged off in that year plus the disallowed amount charged off in the earlier year. Ez tax form online The charge-off in the earlier year, unless reversed on your books, fulfills the charge-off requirement for the later year. Ez tax form online Totally worthless debts. Ez tax form online   If a debt becomes totally worthless in the current tax year, you can deduct the entire amount, less any amount deducted in an earlier tax year when the debt was only partly worthless. Ez tax form online   You do not have to make an actual charge-off on your books to claim a bad debt deduction for a totally worthless debt. Ez tax form online However, you may want to do so. Ez tax form online If you do not and the IRS later rules the debt is only partly worthless, you will not be allowed a deduction for the debt in that tax year because a deduction of a partly worthless bad debt is limited to the amount actually charged off. Ez tax form online See Partly worthless debts, earlier. Ez tax form online Filing a claim for refund. Ez tax form online   If you did not deduct a bad debt on your original return for the year it became worthless, you can file a claim for a credit or refund. Ez tax form online If the bad debt was totally worthless, you must file the claim by the later of the following dates. Ez tax form online 7 years from the date your original return was due (not including extensions). Ez tax form online 2 years from the date you paid the tax. Ez tax form online   If the claim is for a partly worthless bad debt, you must file the claim by the later of the following dates. Ez tax form online 3 years from the date you filed your original return. Ez tax form online 2 years from the date you paid the tax. Ez tax form online You may have longer to file the claim if you were unable to manage your financial affairs due to a physical or mental impairment. Ez tax form online Such an impairment requires proof of existence. Ez tax form online   For details and more information about filing a claim, see Publication 556. Ez tax form online Use one of the following forms to file a claim. Ez tax form online For more information, see the instructions for the applicable form. Ez tax form online Table 10-1. Ez tax form online Forms Used To File a Claim IF you filed as a. Ez tax form online . Ez tax form online . Ez tax form online THEN file. Ez tax form online . Ez tax form online . Ez tax form online Sole proprietor or farmer Form 1040X Corporation Form 1120X S corporation Form 1120S and check box H(4) Partnership Form 1065X if filing on paper or  Form 1065 and check box G(5) if filing electronically Nonaccrual-Experience Method If you use an accrual method of accounting and qualify under the rules explained in this section, you can use the nonaccrual-experience method for bad debts. Ez tax form online Under this method, you do not accrue service related income you expect to be uncollectible. Ez tax form online Because the expected uncollectible amounts are not included in income, these amounts are not later deducted from income. Ez tax form online Generally, you can use the nonaccrual-experience method for accounts receivable for services you performed only if: The services are provided in the fields of accounting, actuarial science, architecture, consulting, engineering, health, law, or the performing arts, or You meet the $5 million gross receipts test for all prior years. Ez tax form online Service related income. Ez tax form online   You can use the nonaccrual-experience method only for amounts earned by performing services. Ez tax form online You cannot use this method for amounts owed to you from activities such as lending money, selling goods, or acquiring receivables or other rights to receive payment. Ez tax form online Gross receipts test. Ez tax form online   To find out if you meet the $5 million gross receipts test for all prior years, you must figure the average annual gross receipts for each prior year. Ez tax form online If your average annual gross receipts for any year exceeds $5 million, you cannot use the non-accural experience method. Ez tax form online   The average annual gross receipts for any year is the average of gross receipts from the year in question and the 2 previous years. Ez tax form online For example, if you were figuring the average annual gross receipts for 2013, you would average your gross receipts for 2011, 2012, and 2013. Ez tax form online Interest or penalty charged. Ez tax form online   Generally, you cannot use the nonaccrual-experience method for amounts due on which you charge interest or a late payment penalty. Ez tax form online However, do not treat a discount offered for early payment as the charging of interest or a penalty if both the following apply. Ez tax form online You otherwise accrue the full amount due as gross income at the time you provide the services. Ez tax form online You treat the discount allowed for early payment as an adjustment to gross income in the year of payment. Ez tax form online Change in accounting method. Ez tax form online   Generally, you must obtain consent to change to a nonaccrual-experience method (other than one of the safe harbor methods) or to change from one method to another. Ez tax form online See Form 3115 and the Instructions for Form 3115 for more information. Ez tax form online Recovery of a Bad Debt If you claim a deduction for a bad debt on your income tax return and later recover (collect) all or part of it, you may have to include all or part of the recovery in gross income. Ez tax form online The amount you include is limited to the amount you actually deducted. Ez tax form online However, you can exclude the amount deducted that did not reduce your tax. Ez tax form online Report the recovery as “Other income” on the appropriate business form or schedule. Ez tax form online See Recoveries in Publication 525 for more information. Ez tax form online Net operating loss (NOL) carryover. Ez tax form online   If a bad debt deduction increases an NOL carryover that has not expired before the beginning of the tax year in which the recovery takes place, you treat the deduction as having reduced your tax. Ez tax form online A bad debt deduction that contributes to a NOL helps lower taxes in the year to which you carry the NOL. Ez tax form online For more information about NOLs, see Publication 536. Ez tax form online Also, see the Instructions for Form 1045, and the Instructions for Form 1139. Ez tax form online Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Understanding Your CP297C Notice

We levied you for unpaid taxes. You have the right to a Collection Due
Process hearing.


What you need to do

  • Read your notice carefully — it explains our actions.
  • Pay what you owe.
  • Make a payment plan if you can’t pay the full amount you owe.

You may want to...


Answers to Common Questions

What should I do if I disagree with the notice?
Request a Collection Due Process hearing.

Why should I request a Collection Due Process hearing?
You can appeal the levy and other disagreements you have at a Collection Due Process hearing.

How can I request a Collection Due Process hearing?
Complete and send us a Form 12153, Request for a Collection Due Process or Equivalent Hearing.

Why didn't you tell me about my rights before you levied me?
Federal contractors do not have the right to a pre-levy hearing. We've already sent you several notices about the amount you owe.

What happens if I can't pay what I owe?
You can request a payment plan if you can't pay the full amount you owe.

How can I make a payment plan?
Call us at the toll free number on the top right corner of your notice to talk about payment plans or learn more about them here.


Tips for next year

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


Understanding your notice

Reading your notice
Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

Notice CP297C, Page 1

Notice CP297C, Page 2

Notice CP297C, Page 3

Notice CP297C, Page 4

Notice CP297C, Page 5

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 

Page Last Reviewed or Updated: 27-Jan-2014

The Ez Tax Form Online

Ez tax form online 2. Ez tax form online   Possession Source Income Table of Contents Types of IncomeCompensation for Labor or Personal Services Investment Income Sales or Other Dispositions of Property Scholarships, Fellowships, Grants, Prizes, and Awards Effectively Connected Income In order to determine where to file your return and which form(s) you need to complete, you must determine the source of each item of income you received during the tax year. Ez tax form online Income you received from sources within, or that was effectively connected with the conduct of a trade or business within, the relevant possession must be identified separately from U. Ez tax form online S. Ez tax form online or foreign source income. Ez tax form online This chapter discusses the rules for determining if the source of your income is from: American Samoa, The Commonwealth of the Northern Mariana Islands (CNMI), The Commonwealth of Puerto Rico (Puerto Rico), Guam, or The U. Ez tax form online S. Ez tax form online Virgin Islands (USVI). Ez tax form online Generally, the same rules that apply for determining U. Ez tax form online S. Ez tax form online source income also apply for determining possession source income. Ez tax form online However, there are some important exceptions to these rules. Ez tax form online Both the general rules and the exceptions are discussed in this chapter. Ez tax form online U. Ez tax form online S. Ez tax form online income rule. Ez tax form online   This rule states that income is not possession source income if, under the rules of Internal Revenue Code sections 861–865, it is treated as income: From sources within the United States, or Effectively connected with the conduct of a trade or business within the United States. Ez tax form online Table 2-1 shows the general rules for determining whether income is from sources within the United States. Ez tax form online Table 2-1. Ez tax form online General Rules for Determining U. Ez tax form online S. Ez tax form online Source of Income Item of Income Factor Determining Source Salaries, wages, and other compensation for labor or personal services Where labor or services performed Pensions Contributions: Where services were performed that earned the pension Investment earnings: Where pension trust is located Interest Residence of payer Dividends Where corporation created or organized Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. Ez tax form online Where property is used Sale of business inventory—purchased Where sold Sale of business inventory—produced Allocation if produced and sold in different locations Sale of real property Location of property Sale of personal property Seller's tax home (but see Special Rules for Gains From Dispositions of Certain Property , later, for exceptions) Sale of natural resources Allocation based on fair market value of product at export terminal. Ez tax form online For more information, see Regulations section 1. Ez tax form online 863-1(b). Ez tax form online Types of Income This section looks at the most common types of income received by individuals, and the rules for determining the source of the income. Ez tax form online Generally, the same rules shown in Table 2-1 are used to determine if you have possession source income. Ez tax form online Compensation for Labor or Personal Services Income from labor or personal services includes wages, salaries, commissions, fees, per diem allowances, employee allowances and bonuses, and fringe benefits. Ez tax form online It also includes income earned by sole proprietors and general partners from providing personal services in the course of their trade or business. Ez tax form online Services performed wholly within a relevant possession. Ez tax form online   Generally, all pay you receive for services performed in a relevant possession is considered to be from sources within that possession. Ez tax form online However, there is an exception for income earned as a member of the U. Ez tax form online S. Ez tax form online Armed Forces or a civilian spouse. Ez tax form online U. Ez tax form online S. Ez tax form online Armed Forces. Ez tax form online   If you are a bona fide resident of a relevant possession, your military service pay will be sourced in that possession even if you perform the services in the United States or another possession. Ez tax form online However, if you are not a bona fide resident of a possession, your military service pay will be income from the  United States even if you perform services in a possession. Ez tax form online Civilian spouse of active duty member of the U. Ez tax form online S. Ez tax form online Armed Forces. Ez tax form online   If you are a bona fide resident of a U. Ez tax form online S. Ez tax form online possession and choose to keep that possession as your tax residence under MSRRA when relocating with your servicemember spouse under military orders, the source of income for your labor or personal services is considered to be that possession. Ez tax form online Likewise, if your tax residence is in one of the 50 states or the District of Columbia before relocating and you choose to keep it as your tax residence, the source of income for services performed in any of the U. Ez tax form online S. Ez tax form online possessions is considered to be the United States and, specifically, your state of residence or the District of Columbia. Ez tax form online Services performed partly inside and partly outside a relevant possession. Ez tax form online   If you are an employee and receive compensation for labor or personal services performed both inside and outside the relevant possession, special rules apply in determining the source of the compensation. Ez tax form online Compensation (other than certain fringe benefits) is sourced on a time basis. Ez tax form online Certain fringe benefits (such as housing and education) are sourced on a geographical basis. Ez tax form online   Or, you may be permitted to use an alternative basis to determine the source of compensation. Ez tax form online See Alternative basis , later. Ez tax form online   If you are self-employed, determine the source of your income for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. Ez tax form online In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. Ez tax form online Time basis. Ez tax form online   Use a time basis to figure your compensation for labor or personal services from the relevant possession (other than the fringe benefits discussed later). Ez tax form online Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed  services in the relevant  possession during the year     Total number of days you  performed services during the year           You can use a unit of time less than a day in the above fraction, if appropriate. Ez tax form online The time period for which the income is made does not have to be a year. Ez tax form online Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. Ez tax form online Example. Ez tax form online In 2013, you worked in your employer's office in the United States for 60 days and in the Puerto Rico office for 180 days, earning a total of $80,000 for the year. Ez tax form online Your Puerto Rico source income is $60,000, figured as follows. Ez tax form online       180 days 240 days × $80,000 = $60,000                 Multi-year compensation. Ez tax form online   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. Ez tax form online Multi-year compensation is compensation that is included in your income in 1 tax year but is attributable to a period that includes 2 or more tax years. Ez tax form online You determine the period to which the income is attributable based on the facts and circumstances of your case. Ez tax form online For more information on multi-year compensation, see Treasury Decision (T. Ez tax form online D. Ez tax form online ) 9212 and Regulations section 1. Ez tax form online 861-4, 2005-35 I. Ez tax form online R. Ez tax form online B. Ez tax form online 429, available at www. Ez tax form online irs. Ez tax form online gov/irb/2005-35_IRB/ar14. Ez tax form online html. Ez tax form online Certain fringe benefits sourced on a geographical basis. Ez tax form online   If you received any of the following fringe benefits as compensation for labor or services performed as an employee partly inside and partly outside a relevant possession, you must source that income on a geographical basis. Ez tax form online Housing. Ez tax form online Education. Ez tax form online Local transportation. Ez tax form online Tax reimbursement. Ez tax form online Hazardous or hardship duty pay. Ez tax form online Moving expense reimbursement. Ez tax form online For information on determining the source of the fringe benefits listed above, see Regulations section 1. Ez tax form online 861-4. Ez tax form online Alternative basis. Ez tax form online   You can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your income than the time or geographical basis. Ez tax form online If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your income. Ez tax form online De minimis exception. Ez tax form online   There is an exception to the rule for determining the source of income earned in a possession. Ez tax form online Generally, you will not have income from a possession if during a tax year you: Are a U. Ez tax form online S. Ez tax form online citizen or resident, Are not a bona fide resident of that possession, Are not employed by or under contract with an individual, partnership, or corporation that is engaged in a trade or business in that possession, Temporarily perform services in that possession for 90 days or less, and Earned $3,000 or less from such services. Ez tax form online This exception began with income earned during your 2008 tax year. Ez tax form online Pensions. Ez tax form online   Generally, pension income has two components: contributions to the pension plan and the earnings accrued from investing those contributions. Ez tax form online The contribution portion is sourced according to where services were performed that earned the pension. Ez tax form online The investment earnings portion is sourced according to the location of the pension trust. Ez tax form online Example. Ez tax form online You are a U. Ez tax form online S. Ez tax form online citizen who worked in Puerto Rico for a U. Ez tax form online S. Ez tax form online company. Ez tax form online All services were performed in Puerto Rico. Ez tax form online Upon retirement you remained in Puerto Rico and began receiving your pension from the U. Ez tax form online S. Ez tax form online pension trust of your employer. Ez tax form online Distributions from the U. Ez tax form online S. Ez tax form online pension trust must be allocated between (1) contributions, which are Puerto Rico source income, and (2) investment earnings, which are U. Ez tax form online S. Ez tax form online source income. Ez tax form online Investment Income This category includes such income as interest, dividends, rents, and royalties. Ez tax form online Interest income. Ez tax form online   The source of interest income is generally determined by the residence of the payer. Ez tax form online Interest paid by corporations created or organized in a relevant possession (possession corporation) or by individuals who are bona fide residents of a relevant possession is considered income from sources within that possession. Ez tax form online   However, there is an exception to this rule if you are a bona fide resident of a relevant possession, receive interest from a corporation created or organized in that possession, and are a shareholder of that corporation who owns, directly or indirectly, at least 10% of the total voting stock of the corporation. Ez tax form online See Regulations section 1. Ez tax form online 937-2(i) for more information. Ez tax form online Dividends. Ez tax form online   Generally, dividends paid by a corporation created or organized in a relevant possession will be considered income from sources within that possession. Ez tax form online There are additional rules for bona fide residents of a relevant possession who receive dividend income from possession corporations, and who own, directly or indirectly, at least 10% of the voting stock of the corporation. Ez tax form online For more information, see Regulations section 1. Ez tax form online 937-2(g). Ez tax form online Rental income. Ez tax form online   Rents from property located in a relevant possession are treated as income from sources within that possession. Ez tax form online Royalties. Ez tax form online   Royalties from natural resources located in a relevant possession are considered income from sources within that possession. Ez tax form online   Also considered possession source income are royalties received for the use of, or for the privilege of using, in a relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property. Ez tax form online Sales or Other Dispositions of Property The source rules for sales or other dispositions of property are varied. Ez tax form online The most common situations are discussed below. Ez tax form online Real property. Ez tax form online   Real property includes land and buildings, and generally anything built on, growing on, or attached to land. Ez tax form online The location of the property generally determines the source of income from the sale. Ez tax form online For example, if you are a bona fide resident of Guam and sell your home that is located in Guam, the gain on the sale is sourced in Guam. Ez tax form online If, however, the home you sold was located in the United States, the gain is U. Ez tax form online S. Ez tax form online source income. Ez tax form online Personal property. Ez tax form online   The term “personal property” refers to property (such as machinery, equipment, or furniture) that is not real property. Ez tax form online Generally, gain (or loss) from the sale or other disposition is sourced according to the seller's tax home. Ez tax form online If personal property is sold by a bona fide resident of a relevant possession, the gain (or loss) from the sale is treated as sourced within that possession. Ez tax form online   This rule does not apply to the sale of inventory, intangible property, depreciable personal property, or property sold through a foreign office or fixed place of business. Ez tax form online The rules applying to sales of inventory are discussed below. Ez tax form online For information on sales of the other types of property mentioned, see Internal Revenue Code section 865. Ez tax form online Inventory. Ez tax form online   Your inventory is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. Ez tax form online The source of income from the sale of inventory depends on whether the inventory was purchased or produced. Ez tax form online Purchased. Ez tax form online   Income from the sale of inventory that you purchased is sourced where you sell the property. Ez tax form online Generally, this is where title to the property passes to the buyer. Ez tax form online Produced. Ez tax form online   Income from the sale of inventory that you produced in a relevant possession and sold outside that possession (or vice versa) is sourced based on an allocation. Ez tax form online For information on making the allocation, see Regulations section 1. Ez tax form online 863-3(f). Ez tax form online Special Rules for Gains From Dispositions of Certain Property There are special rules for gains from dispositions of certain investment property (for example, stocks, bonds, debt instruments, diamonds, and gold) owned by a U. Ez tax form online S. Ez tax form online citizen or resident alien prior to becoming a bona fide resident of a possession. Ez tax form online You are subject to these special rules if you meet both of the following conditions. Ez tax form online For the tax year for which the source of the gain must be determined, you are a bona fide resident of the relevant possession. Ez tax form online For any of the 10 years preceding that year, you were a citizen or resident alien of the United States (other than a bona fide resident of the relevant possession). Ez tax form online If you meet these conditions, gains from the disposition of this property will not be treated as income from sources within the relevant possession for purposes of the Internal Revenue Code. Ez tax form online Accordingly, bona fide residents of American Samoa and Puerto Rico, for example, may not exclude the gain on their U. Ez tax form online S. Ez tax form online tax return. Ez tax form online (See chapter 3 for additional filing information. Ez tax form online ) With respect to the CNMI, Guam, and the USVI, the gain from the disposition of this property will not meet the requirements for certain tax rules that may allow bona fide residents of those possessions to reduce or obtain a rebate of taxes on income from sources within the relevant possessions. Ez tax form online These rules apply to dispositions after April 11, 2005. Ez tax form online For details, see Regulations section 1. Ez tax form online 937-2(f)(1) and Examples 1 and 2 of section 1. Ez tax form online 937-2(k). Ez tax form online Example 1. Ez tax form online In 2007, Cheryl Jones, a U. Ez tax form online S. Ez tax form online citizen, lived in the United States and paid $1,000 for 100 shares of stock in the Rose Corporation, a U. Ez tax form online S. Ez tax form online corporation listed on the New York Stock Exchange. Ez tax form online On March 1, 2010, she moved to Puerto Rico and changed her tax home to Puerto Rico on the same date. Ez tax form online Cheryl satisfied the presence test in 2010 and, under the year-of-move exception, she was considered a bona fide resident of Puerto Rico for the rest of 2010. Ez tax form online On March 1, 2010, the closing value of Cheryl's stock in the Rose Corporation was $2,000. Ez tax form online On January 5, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold all her Rose Corporation stock for $7,000. Ez tax form online Under the earlier rules, none of Cheryl's $6,000 gain will be treated as income from sources within Puerto Rico. Ez tax form online The source rules discussed in the preceding paragraphs supplement, and may apply in conjunction with, an existing special rule. Ez tax form online This existing special rule applies if you are a U. Ez tax form online S. Ez tax form online citizen or resident alien who becomes a bona fide resident of American Samoa, the CNMI, or Guam, and who has gain from the disposition of certain U. Ez tax form online S. Ez tax form online assets during the 10-year period beginning when you became a bona fide resident. Ez tax form online The gain is U. Ez tax form online S. Ez tax form online source income that generally is subject to U. Ez tax form online S. Ez tax form online tax if the property is either (1) located in the United States; (2) stock issued by a U. Ez tax form online S. Ez tax form online corporation or a debt obligation of a U. Ez tax form online S. Ez tax form online person or of the United States, a state (or political subdivision), or the District of Columbia; or (3) property that has a basis in whole or in part by reference to property described in (1) or (2). Ez tax form online See chapter 3 for filing information. Ez tax form online Special election. Ez tax form online   For dispositions after April 11, 2005, you can choose to treat the part of gain (or loss) attributable to the time you held the property while a bona fide resident of the relevant possession (the possession holding period) as gain (or loss) from sources within that possession. Ez tax form online Make the election by reporting the gain attributable to the possession holding period on your income tax return for the year of disposition. Ez tax form online This election overrides both of the special rules discussed earlier. Ez tax form online   There are two methods for figuring the gain for the possession holding period, one for marketable securities and another for other types of investment property. Ez tax form online Marketable securities. Ez tax form online   Marketable securities are those actively traded on an established financial market, such as stock in a publicly held corporation. Ez tax form online Under the special election, allocate the gain (or loss) by figuring the appreciation separately for your possession and U. Ez tax form online S. Ez tax form online holding periods. Ez tax form online   Your possession holding period begins on the first day you do not have a tax home outside the relevant possession. Ez tax form online The gain (or loss) attributable to the possession holding period is the difference in fair market value of the security at the close of the market on the first and last days of this holding period. Ez tax form online This is your gain (or loss) that is treated as being from sources within the relevant possession. Ez tax form online If you were a bona fide resident of the relevant possession for more than one continuous period, combine the gains (or losses) from each possession holding period. Ez tax form online Example 2. Ez tax form online Assume the same facts as in Example 1, except that Cheryl makes the special election to allocate the gain between her U. Ez tax form online S. Ez tax form online and possession holding periods. Ez tax form online Cheryl's possession holding period began March 1, 2010, the date her tax home changed to Puerto Rico. Ez tax form online Therefore, the portion of gain attributable to her possession holding period is $5,000 ($7,000 sale price – $2,000 closing value on first day of the possession holding period). Ez tax form online By reporting $5,000 of her $6,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. Ez tax form online Other personal property. Ez tax form online   For personal property other than marketable securities, use a time-based allocation. Ez tax form online Figure the gain (or loss) attributable to the possession holding period by multiplying your total gain (or loss) by the following fraction. Ez tax form online      Number of days in the  possession holding period     Total number of days  in your holding period         The result is your gain (or loss) that is treated as being from sources within the relevant possession. Ez tax form online Example 3. Ez tax form online In addition to the stock in Rose Corporation, Cheryl acquired a 5% interest in the Alder Partnership on January 1, 2009. Ez tax form online On March 1, 2010, when she established bona fide residency in Puerto Rico, her partnership interest was not considered a marketable security. Ez tax form online On September 16, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold her interest in Alder Partnership for a $100,000 gain. Ez tax form online She had owned the interest for a total of 1,720 days. Ez tax form online Cheryl's possession holding period (from March 1, 2010, through September 16, 2013) is 1,296 days. Ez tax form online The portion of her gain attributable to Puerto Rico is $75,349 ($100,000 x (1,296 Puerto Rico days ÷ 1,720 total days)). Ez tax form online By reporting $75,349 of her $100,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. Ez tax form online Scholarships, Fellowships, Grants, Prizes, and Awards The source of these types of income is generally the residence of the payer, regardless of who actually disburses the funds. Ez tax form online Therefore, in order to be possession source income, the payer must be a resident of the relevant possession, such as an individual who is a bona fide resident or a corporation created or organized in that possession. Ez tax form online These rules do not apply to amounts paid as salary or other compensation for services. Ez tax form online See Compensation for Labor or Personal Services, earlier in this chapter, for the source rules that apply. Ez tax form online Effectively Connected Income In limited circumstances, some kinds of income from sources outside the relevant possession must be treated as effectively connected with a trade or business in that possession. Ez tax form online These circumstances are listed below. Ez tax form online You have an office or other fixed place of business in the relevant possession to which the income can be attributed. Ez tax form online That office or place of business is a material factor in producing the income. Ez tax form online The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. Ez tax form online An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. Ez tax form online The three kinds of income from sources outside the relevant possession to which these rules apply are the following. Ez tax form online Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the relevant possession or from any interest in such property. Ez tax form online Included are rents or royalties for the use of, or for the privilege of using, outside the relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the relevant possession. Ez tax form online Dividends or interest from the active conduct of a banking, financing, or similar business in the relevant possession. Ez tax form online Income, gain, or loss from the sale or exchange outside the relevant possession, through the office or other fixed place of business in the relevant possession, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. Ez tax form online Item (3) will not apply if you sold the property for use, consumption, or disposition outside the relevant possession and an office or other fixed place of business in a foreign country was a material factor in the sale. Ez tax form online Example. Ez tax form online Marcy Jackson is a bona fide resident of American Samoa. Ez tax form online Her business, which she conducts from an office in American Samoa, is developing and selling specialized computer software. Ez tax form online A software purchaser will frequently pay Marcy an additional amount to install the software on the purchaser's operating system and to ensure that the software is functioning properly. Ez tax form online Marcy installs the software at the purchaser's place of business, which may be in American Samoa, in the United States, or in another country. Ez tax form online The income from selling the software is effectively connected with the conduct of Marcy's business in American Samoa, even though the product's destination may be outside the possession. Ez tax form online However, the compensation she receives for installing the software (personal services) outside of American Samoa is not effectively connected with the conduct of her business in the possession—the income is sourced where she performs the services. Ez tax form online Prev  Up  Next   Home   More Online Publications