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Filing A Tax Amendment Online

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Filing A Tax Amendment Online

Filing a tax amendment online 2. Filing a tax amendment online   Tax Shelters and Other Reportable Transactions Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Abusive Tax SheltersRules To Curb Abusive Tax Shelters Investor Reporting Penalties Whether To Invest Introduction Investments that yield tax benefits are sometimes called “tax shelters. Filing a tax amendment online ” In some cases, Congress has concluded that the loss of revenue is an acceptable side effect of special tax provisions designed to encourage taxpayers to make certain types of investments. Filing a tax amendment online In many cases, however, losses from tax shelters produce little or no benefit to society, or the tax benefits are exaggerated beyond those intended. Filing a tax amendment online Those cases are called “abusive tax shelters. Filing a tax amendment online ” An investment that is considered a tax shelter is subject to restrictions, including the requirement that it be disclosed, as discussed later. Filing a tax amendment online Topics - This chapter discusses: Abusive Tax Shelters , Rules To Curb Abusive Tax Shelters , Investor Reporting , Penalties , and Whether To Invest . Filing a tax amendment online Useful Items - You may want to see: Publication 538 Accounting Periods and Methods 556 Examination of Returns, Appeal Rights, and Claims for Refund 561 Determining the Value of Donated Property 925 Passive Activity and At-Risk Rules Form (and Instructions) 8275 Disclosure Statement 8275-R Regulation Disclosure Statement 8283 Noncash Charitable Contributions 8886 Reportable Transaction Disclosure Statement See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Filing a tax amendment online Abusive Tax Shelters Abusive tax shelters are marketing schemes involving artificial transactions with little or no economic reality. Filing a tax amendment online They often make use of unrealistic allocations, inflated appraisals, losses in connection with nonrecourse loans, mismatching of income and deductions, financing techniques that do not conform to standard commercial business practices, or mischaracterization of the substance of the transaction. Filing a tax amendment online Despite appearances to the contrary, the taxpayer generally risks little. Filing a tax amendment online Abusive tax shelters commonly involve package deals designed from the start to generate losses, deductions, or credits that will be far more than present or future investment. Filing a tax amendment online Or, they may promise investors from the start that future inflated appraisals will enable them, for example, to reap charitable contribution deductions based on those appraisals. Filing a tax amendment online (But see the appraisal requirements discussed under Rules To Curb Abusive Tax Shelters , later. Filing a tax amendment online ) They are commonly marketed in terms of the ratio of tax deductions allegedly available to each dollar invested. Filing a tax amendment online This ratio (or “write-off”) is frequently said to be several times greater than one-to-one. Filing a tax amendment online Because there are many abusive tax shelters, it is not possible to list all the factors you should consider in determining whether an offering is an abusive tax shelter. Filing a tax amendment online However, you should ask the following questions, which might provide a clue to the abusive nature of the plan. Filing a tax amendment online Do the tax benefits far outweigh the economic benefits? Is this a transaction you would seriously consider, apart from the tax benefits, if you hoped to make a profit? Do shelter assets really exist and, if so, are they insured for less than their purchase price? Is there a nontax justification for the way profits and losses are allocated to partners? Do the facts and supporting documents make economic sense? In that connection, are there sales and resales of the tax shelter property at ever increasing prices? Does the investment plan involve a gimmick, device, or sham to hide the economic reality of the transaction? Does the promoter offer to backdate documents after the close of the year? Are you instructed to backdate checks covering your investment? Is your debt a real debt or are you assured by the promoter that you will never have to pay it? Does this transaction involve laundering United States source income through foreign corporations incorporated in a tax haven and owned by United States shareholders? Rules To Curb Abusive Tax Shelters Congress has enacted a series of income tax laws designed to halt the growth of abusive tax shelters. Filing a tax amendment online These provisions include the following. Filing a tax amendment online Disclosure of reportable transactions. Filing a tax amendment online   You must disclose information for each reportable transaction in which you participate. Filing a tax amendment online See Reportable Transaction Disclosure Statement , later. Filing a tax amendment online   Material advisors with respect to any reportable transaction must disclose information about the transaction on Form 8918, Material Advisor Disclosure Statement. Filing a tax amendment online To determine whether you are a material advisor to a transaction, see the Instructions for Form 8918. Filing a tax amendment online   Material advisors will receive a reportable transaction number for the disclosed reportable transaction. Filing a tax amendment online They must provide this number to all persons to whom they acted as a material advisor. Filing a tax amendment online They must provide the number at the time the transaction is entered into. Filing a tax amendment online If they do not have the number at that time, they must provide it within 60 days from the date the number is mailed to them. Filing a tax amendment online For information on penalties for failure to disclose and failure to maintain lists, see Internal Revenue Code sections 6707, 6707A, and 6708. Filing a tax amendment online Requirement to maintain list. Filing a tax amendment online   Material advisors must maintain a list of persons to whom they provide material aid, assistance, or advice on any reportable transaction. Filing a tax amendment online The list must be available for inspection by the IRS, and the information required to be included on the list generally must be kept for 7 years. Filing a tax amendment online See Regulations section 301. Filing a tax amendment online 6112-1 for more information (including what information is required to be included on the list). Filing a tax amendment online Confidentiality privilege. Filing a tax amendment online   The confidentiality privilege between you and a federally authorized tax practitioner does not apply to written communications made after October 21, 2004, regarding the promotion of your direct or indirect participation in any tax shelter. Filing a tax amendment online Appraisal requirement for donated property. Filing a tax amendment online   If you claim a deduction of more than $5,000 for an item or group of similar items of donated property, you generally must get a qualified appraisal from a qualified appraiser and complete and attach section B of Form 8283 to your return. Filing a tax amendment online If you claim a deduction of more than $500,000 for the donated property, you generally must attach the qualified appraisal to your return. Filing a tax amendment online If you file electronically, see Form 8453, U. Filing a tax amendment online S. Filing a tax amendment online Individual Income Tax Transmittal for an IRS e-file Return, and its instructions. Filing a tax amendment online For more information about appraisals, including exceptions, see Publication 561. Filing a tax amendment online Passive activity loss and credit limits. Filing a tax amendment online   The passive activity loss and credit rules limit the amount of losses and credits that can be claimed from passive activities and limit the amount that can offset nonpassive income, such as certain portfolio income from investments. Filing a tax amendment online For more detailed information about determining and reporting income, losses, and credits from passive activities, see Publication 925. Filing a tax amendment online Interest on penalties. Filing a tax amendment online   If you are assessed an accuracy-related or civil fraud penalty (as discussed under Penalties , later), interest will be imposed on the amount of the penalty from the due date of the return (including any extensions) to the date you pay the penalty. Filing a tax amendment online Accounting method restriction. Filing a tax amendment online   Tax shelters generally cannot use the cash method of accounting. Filing a tax amendment online Uniform capitalization rules. Filing a tax amendment online   The uniform capitalization rules generally apply to producing property or acquiring it for resale. Filing a tax amendment online Under those rules, the direct cost and part of the indirect cost of the property must be capitalized or included in inventory. Filing a tax amendment online For more information, see Publication 538. Filing a tax amendment online Denial of deduction for interest on an underpayment due to a reportable transaction. Filing a tax amendment online   You cannot deduct any interest you paid or accrued on any part of an underpayment of tax due to an understatement arising from a reportable transaction (discussed later) if the relevant facts affecting the tax treatment of the item are not adequately disclosed. Filing a tax amendment online This rule applies to reportable transactions entered into in tax years beginning after October 22, 2004. Filing a tax amendment online Authority for Disallowance of Tax Benefits The IRS has published guidance concluding that the claimed tax benefits of various abusive tax shelters should be disallowed. Filing a tax amendment online The guidance is the conclusion of the IRS on how the law is applied to a particular set of facts. Filing a tax amendment online Guidance is published in the Internal Revenue Bulletin for taxpayers' information and also for use by IRS officials. Filing a tax amendment online So, if your return is examined and an abusive tax shelter is identified and challenged, published guidance dealing with that type of shelter, which disallows certain claimed tax shelter benefits, could serve as the basis for the examining official's challenge of the tax benefits you claimed. Filing a tax amendment online In such a case, the examiner will not compromise even if you or your representative believes you have authority for the positions taken on your tax return. Filing a tax amendment online The courts have generally been unsympathetic to taxpayers involved in abusive tax shelter schemes and have ruled in favor of the IRS in the majority of the cases in which these shelters have been challenged. Filing a tax amendment online Investor Reporting You may be required to file a reportable transaction disclosure statement. Filing a tax amendment online Reportable Transaction Disclosure Statement Use Form 8886 to disclose information for each reportable transaction (discussed later) in which you participated. Filing a tax amendment online Generally, you must attach Form 8886 to your return for each tax year in which you participated in the transaction. Filing a tax amendment online Under certain circumstances, a transaction must be disclosed within 90 days of the transaction being identified as a listed transaction or a transaction of interest (discussed later). Filing a tax amendment online In addition, for the first year Form 8886 is attached to your return, you must send a copy of the form to: Internal Revenue Service OTSA Mail Stop 4915 1973 North Rulon White Blvd. Filing a tax amendment online  Ogden, UT 84404 If you file your return electronically, the copy sent to OTSA must show exactly the same information, word for word, provided with the electronically filed return and it must be provided on the official IRS Form 8886 or an exact copy of the form. Filing a tax amendment online If you use a computer-generated or substitute Form 8886, it must be an exact copy of the official IRS form. Filing a tax amendment online If you fail to file Form 8886 as required or fail to include any required information on the form, you may have to pay a penalty. Filing a tax amendment online See Penalty for failure to disclose a reportable transaction , later under Penalties. Filing a tax amendment online The following discussion briefly describes reportable transactions. Filing a tax amendment online For more details, see the Instructions for Form 8886. Filing a tax amendment online Reportable transaction. Filing a tax amendment online   A reportable transaction is any of the following. Filing a tax amendment online A listed transaction. Filing a tax amendment online A confidential transaction. Filing a tax amendment online A transaction with contractual protection. Filing a tax amendment online A loss transaction. Filing a tax amendment online A transaction of interest entered into after November 1, 2006. Filing a tax amendment online Note. Filing a tax amendment online Transactions with a brief asset holding period were removed from the definition of reportable transaction for transactions entered into after August 2, 2007. Filing a tax amendment online Listed transaction. Filing a tax amendment online   A listed transaction is the same as, or substantially similar to, one of the types of transactions the IRS has determined to be a tax-avoidance transaction. Filing a tax amendment online These transactions have been identified in notices, regulations, and other published guidance issued by the IRS. Filing a tax amendment online For a list of existing guidance, see Notice 2009-59 in Internal Revenue Bulletin 2009-31, available at www. Filing a tax amendment online irs. Filing a tax amendment online gov/irb/2009-31_IRB/ar07. Filing a tax amendment online html. Filing a tax amendment online Confidential transaction. Filing a tax amendment online   A confidential transaction is offered to you under conditions of confidentiality and for which you have paid an advisor a minimum fee. Filing a tax amendment online A transaction is offered under conditions of confidentiality if the advisor who is paid the fee places a limit on your disclosure of the tax treatment or tax structure of the transaction and the limit protects the confidentiality of the advisor's tax strategies. Filing a tax amendment online The transaction is treated as confidential even if the conditions of confidentiality are not legally binding on you. Filing a tax amendment online Transaction with contractual protection. Filing a tax amendment online   Generally, a transaction with contractual protection is one in which you or a related party has the right to a full or partial refund of fees if all or part of the intended tax consequences of the transaction are not sustained, or a transaction for which the fees are contingent on your realizing the tax benefits from the transaction. Filing a tax amendment online For information on exceptions, see Revenue Procedure 2007-20 in Internal Revenue Bulletin 2007-7, available at www. Filing a tax amendment online irs. Filing a tax amendment online gov/irb/2007-07_IRB/ar15. Filing a tax amendment online html. Filing a tax amendment online Loss transaction. Filing a tax amendment online   For individuals, a loss transaction is one that results in a deductible loss if the gross amount of the loss is at least $2 million in a single tax year or $4 million in any combination of tax years. Filing a tax amendment online A loss from a foreign currency transaction under Internal Revenue Code section 988 is a loss transaction if the gross amount of the loss is at least $50,000 in a single tax year, whether or not the loss flows through from an S corporation or partnership. Filing a tax amendment online   Certain losses (such as losses from casualties, thefts, and condemnations) are excepted from this category and do not have to be reported on Form 8886. Filing a tax amendment online For information on other exceptions, see Revenue Procedure 2004-66 in Internal Revenue Bulletin 2004-50, as modified and superseded by Revenue Procedure 2013-11, (or future published guidance) available at www. Filing a tax amendment online irs. Filing a tax amendment online gov/irb/2004-50_IRB/ar11. Filing a tax amendment online html. Filing a tax amendment online Transaction of interest. Filing a tax amendment online   A transaction of interest is a transaction entered into after November 1, 2006, that is the same as, or substantially similar to, one of the types of transactions that the IRS has identified by notice, regulation, or other form of published guidance as a transaction of interest. Filing a tax amendment online The IRS has identified the following transactions of interest. Filing a tax amendment online “Toggling” grantor trusts as described in Notice 2007-73, 2007-36 I. Filing a tax amendment online R. Filing a tax amendment online B. Filing a tax amendment online 545, available at www. Filing a tax amendment online irs. Filing a tax amendment online gov/irb/2007-36_IRB/ar20. Filing a tax amendment online html. Filing a tax amendment online Certain transactions involving contributions of a successor member interest in a limited liability company as described in Notice 2007-72, 2007-36 I. Filing a tax amendment online R. Filing a tax amendment online B. Filing a tax amendment online 544, available at www. Filing a tax amendment online irs. Filing a tax amendment online gov/irb/2007-36_IRB/ar19. Filing a tax amendment online html. Filing a tax amendment online Certain transactions involving the sale or other disposition of all interests in a charitable remainder trust and claiming little or no taxable gain as described in Notice 2008-99, 2008-47 I. Filing a tax amendment online R. Filing a tax amendment online B. Filing a tax amendment online 1194, available at www. Filing a tax amendment online irs. Filing a tax amendment online gov/irb/2008-47_IRB/ar11. Filing a tax amendment online html. Filing a tax amendment online Certain transactions involving a U. Filing a tax amendment online S. Filing a tax amendment online taxpayer owning controlled foreign corporations (CFCs) that hold stock of a lower-tier CFC through a domestic partnership to avoid reporting income as described in Notice 2009-7, 2009-3 I. Filing a tax amendment online R. Filing a tax amendment online B. Filing a tax amendment online 312, available at www. Filing a tax amendment online irs. Filing a tax amendment online gov/irb/2009-03_IRB/ar10. Filing a tax amendment online html. Filing a tax amendment online   For updates to this list, go to www. Filing a tax amendment online irs. Filing a tax amendment online gov/Businesses/Corporations/Abusive-Tax-Shelters-and-Transactions. Filing a tax amendment online Penalties Investing in an abusive tax shelter may lead to substantial expenses. Filing a tax amendment online First, the promoter generally charges a substantial fee. Filing a tax amendment online If your return is examined by the IRS and a tax deficiency is determined, you will be faced with payment of more tax, interest on the underpayment, possibly a 20%, 30%, or even 40% accuracy-related penalty, or a 75% civil fraud penalty. Filing a tax amendment online You may also be subject to the penalty for failure to pay tax. Filing a tax amendment online These penalties are explained in the following paragraphs. Filing a tax amendment online Accuracy-related penalties. Filing a tax amendment online   An accuracy-related penalty of 20% can be imposed for underpayments of tax due to: Negligence or disregard of rules or regulations, Substantial understatement of tax, Substantial valuation misstatement (increased to 40% for gross valuation misstatement), Transaction lacking economic substance (increased to 40% for undisclosed transaction lacking economic substance), or Undisclosed foreign financial asset understatement (40% in all cases). Filing a tax amendment online Except for a transaction lacking economic substance, this penalty will not be imposed if you can show you had reasonable cause for any understatement of tax and that you acted in good faith. Filing a tax amendment online Your failure to disclose a reportable transaction is a strong indication that you failed to act in good faith. Filing a tax amendment online   If you are charged an accuracy-related penalty, interest will be imposed on the amount of the penalty from the due date of the return (including extensions) to the date you pay the penalty. Filing a tax amendment online   The 20% penalties do not apply to any underpayment attributable to a reportable transaction understatement subject to an accuracy-related penalty (discussed later). Filing a tax amendment online Negligence or disregard of rules or regulations. Filing a tax amendment online   The penalty for negligence or disregard of rules or regulations is imposed only on the part of the underpayment due to negligence or disregard of rules or regulations. Filing a tax amendment online The penalty will not be charged if you can show you had reasonable cause for understating your tax and that you acted in good faith. Filing a tax amendment online    Negligence includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code. Filing a tax amendment online It also includes any failure to keep adequate books and records. Filing a tax amendment online A return position that has a reasonable basis is not negligence. Filing a tax amendment online   Disregard includes any careless, reckless, or intentional disregard of rules or regulations. Filing a tax amendment online   The penalty for disregard of rules and regulations can be avoided if all the following are true. Filing a tax amendment online You keep adequate books and records. Filing a tax amendment online You have a reasonable basis for your position on the tax issue. Filing a tax amendment online You make an adequate disclosure of your position. Filing a tax amendment online Use Form 8275 to make your disclosure and attach it to your return. Filing a tax amendment online To disclose a position contrary to a regulation, use Form 8275-R. Filing a tax amendment online Use Form 8886 to disclose a reportable transaction (discussed earlier). Filing a tax amendment online Substantial understatement of tax. Filing a tax amendment online   An understatement is considered to be substantial if it is more than the greater of: 10% of the tax required to be shown on the return, or $5,000. Filing a tax amendment online An “understatement” is the amount of tax required to be shown on your return for a tax year minus the amount of tax shown on the return, reduced by any rebates. Filing a tax amendment online The term “rebate” generally means a decrease in the tax shown on your original return as the result of your filing an amended return or claim for refund. Filing a tax amendment online   For items other than tax shelters, you can file Form 8275 or Form 8275-R to disclose items that could cause a substantial understatement of income tax. Filing a tax amendment online In that way, you can avoid the substantial understatement penalty if you have a reasonable basis for your position on the tax issue. Filing a tax amendment online Disclosure of the tax shelter item on a tax return does not reduce the amount of the understatement. Filing a tax amendment online   Also, the understatement penalty will not be imposed if you can show there was reasonable cause for the underpayment caused by the understatement and that you acted in good faith. Filing a tax amendment online An important factor in establishing reasonable cause and good faith will be the extent of your effort to determine your proper tax liability under the law. Filing a tax amendment online Substantial valuation misstatement. Filing a tax amendment online   In general, you are liable for a 20% penalty for a substantial valuation misstatement if all the following are true. Filing a tax amendment online The value or adjusted basis of any property claimed on the return is 150% or more of the correct amount. Filing a tax amendment online You underpaid your tax by more than $5,000 because of the misstatement. Filing a tax amendment online You cannot establish that you had reasonable cause for the underpayment and that you acted in good faith. Filing a tax amendment online   You may be assessed a penalty of 40% for a gross valuation misstatement. Filing a tax amendment online If you misstate the value or the adjusted basis of property by 200% or more of the amount determined to be correct, you will be assessed a penalty of 40%, instead of 20%, of the amount you underpaid because of the gross valuation misstatement. Filing a tax amendment online The penalty rate is also 40% if the property's correct value or adjusted basis is zero. Filing a tax amendment online Transaction lacking economic substance. Filing a tax amendment online   The economic substance doctrine only applies to an individual that entered into a transaction in connection with a trade or business or an activity engaged in for the production of income. Filing a tax amendment online For transactions entered into after March 30, 2010, a transaction has economic substance for you as an individual taxpayer only if: The transaction changes your economic position in a meaningful way (apart from federal income tax effects), or You have a substantial purpose (apart from federal income tax effects) for entering into the transaction. Filing a tax amendment online   For purposes of determining whether economic substance exists, a transaction's profit potential will only be taken into account if the present value of the reasonably expected pre-tax profit from the transaction is substantial compared to the present value of the expected net tax benefits that would be allowed if the transaction were respected. Filing a tax amendment online   If any part of your underpayment is due to any disallowance of claimed tax benefits by reason of a transaction lacking economic substance or failing to meet the requirements of any similar rule of law, that part of your underpayment will be subject to the 20% accuracy-related penalty even if you had a reasonable cause and acted in good faith concerning that part. Filing a tax amendment online   Additionally, the penalty increases to 40% if you do not adequately disclose on your return or in a statement attached to your return the relevant facts affecting the tax treatment of a transaction that lacks economic substance. Filing a tax amendment online Relevant facts include any facts affecting the tax treatment of the transaction. Filing a tax amendment online    Any excessive amount of an erroneous claim for an income tax refund or credit (other than a refund or credit related to the earned income credit) that results from a transaction found to be lacking economic substance will not be treated as having a reasonable basis and could be subject to a 20% penalty. Filing a tax amendment online Undisclosed foreign financial asset understatement. Filing a tax amendment online   For tax years beginning after March 18, 2010, you may be liable for a 40% penalty for an understatement of your tax liability due to an undisclosed foreign financial asset. Filing a tax amendment online An undisclosed foreign financial asset is any asset for which an information return, required to be provided under Internal Revenue Code section 6038, 6038B, 6038D, 6046A, or 6048 for any taxable year, is not provided. Filing a tax amendment online The penalty applies to any part of an underpayment related to the following undisclosed foreign financial assets. Filing a tax amendment online Any foreign business you control, reportable on Form 5471, Information Return of U. Filing a tax amendment online S. Filing a tax amendment online Persons With Respect To Certain Foreign Corporations, or Form 8865, Return of U. Filing a tax amendment online S. Filing a tax amendment online Persons With Respect to Certain Foreign Partnerships. Filing a tax amendment online Certain transfers of property to a foreign corporation or partnership, reportable on Form 926, Return by a U. Filing a tax amendment online S. Filing a tax amendment online Transferor of Property to a Foreign Corporation, or certain distributions to a foreign person, reportable on Form 8865. Filing a tax amendment online Your ownership interest in certain foreign financial assets, temporarily reportable on Form 8275 or 8275-R. Filing a tax amendment online    Instead of, or in addition to, Form 8275 or 8275-R, you may have to file Form 8938, Statement of Specified Foreign Financial Assets, with your tax return. Filing a tax amendment online See the Instructions for Form 8938 for details. Filing a tax amendment online    Your acquisition, disposition, or substantial change in ownership interest in a foreign partnership, reportable on Form 8865. Filing a tax amendment online Creation or transfer of money or property to certain foreign trusts, reportable on Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. Filing a tax amendment online Penalty for incorrect appraisals. Filing a tax amendment online   The person who prepares an appraisal of the value of property may have to pay a penalty if: He or she knows, or reasonably should have known, that the appraisal would be used in connection with a return or claim for refund; and The claimed value of the property on a return or claim for refund based on that appraisal results in a substantial valuation misstatement or a gross valuation misstatement as discussed earlier. Filing a tax amendment online For details on the penalty amount and exceptions, see Publication 561. Filing a tax amendment online Penalty for failure to disclose a reportable transaction. Filing a tax amendment online   If you fail to include any required information regarding a reportable transaction (discussed earlier) on a return or statement, you may have to pay a penalty of 75% of the decrease in tax shown on your return as a result of such transaction (or that would have resulted if the transaction were respected for federal tax purposes). Filing a tax amendment online For an individual, the minimum penalty is $5,000 and the maximum is $10,000 (or $100,000 for a listed transaction). Filing a tax amendment online This penalty is in addition to any other penalty that may be imposed. Filing a tax amendment online   The IRS may rescind or abate the penalty for failing to disclose a reportable transaction under certain limited circumstances but cannot rescind the penalty for failing to disclose a listed transaction. Filing a tax amendment online For information on rescission, see Revenue Procedure 2007-21 in Internal Revenue Bulletin 2007-9 available at www. Filing a tax amendment online irs. Filing a tax amendment online gov/irb/2007-09_IRB/ar12. Filing a tax amendment online html. Filing a tax amendment online Accuracy-related penalty for a reportable transaction understatement. Filing a tax amendment online   If you have a reportable transaction understatement, you may have to pay a penalty equal to 20% of the amount of that understatement. Filing a tax amendment online This applies to any item due to a listed transaction or other reportable transaction with a significant purpose of avoiding or evading federal income tax. Filing a tax amendment online The penalty is 30% rather than 20% for the part of any reportable transaction understatement if the transaction was not properly disclosed. Filing a tax amendment online You may not have to pay the 20% penalty if you meet the strengthened reasonable cause and good faith exception. Filing a tax amendment online The reasonable cause and good faith exception does not apply to any part of a reportable transaction understatement attributable to one or more transactions that lack economic substance. Filing a tax amendment online   This penalty does not apply to the part of an understatement on which the fraud penalty, gross valuation misstatement penalty, or penalty for nondisclosure of noneconomic substance transactions is imposed. Filing a tax amendment online Civil fraud penalty. Filing a tax amendment online   If any underpayment of tax on your return is due to fraud, a penalty of 75% of the underpayment will be added to your tax. Filing a tax amendment online Joint return. Filing a tax amendment online   The fraud penalty on a joint return applies to a spouse only if some part of the underpayment is due to the fraud of that spouse. Filing a tax amendment online Failure to pay tax. Filing a tax amendment online   If a deficiency is assessed and is not paid within 10 days of the demand for payment, an investor can be penalized with up to a 25% addition to tax if the failure to pay continues. Filing a tax amendment online Whether To Invest In light of the adverse tax consequences and the substantial amount of penalties and interest that will result if the claimed tax benefits are disallowed, you should consider tax shelter investments carefully and seek competent legal and financial advice. Filing a tax amendment online Prev  Up  Next   Home   More Online Publications
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Prevent and Report Identity Theft

Learn how to prevent and report identity theft.


Tips for Preventing Identity Theft

Identity thieves steal your personal information to commit fraud. They can damage your credit status and cost you time and money restoring your good name. To reduce your risk of becoming a victim, follow the tips below:

  • Don't carry your Social Security card in your wallet or write it on your checks. Only give out your SSN when absolutely necessary.
  • Protect your PIN. Never write a PIN on a credit/debit card or on a slip of paper kept in your wallet.
  • Watch out for "shoulder surfers". Use your free hand to shield the keypad when using pay phones and ATMs.
  • Collect mail promptly. Ask the post office to put your mail on hold when you are away from home for more than a day or two.
  • Pay attention to your billing cycles. If bills or financial statements are late, contact the sender.
  • Keep your receipts. Ask for carbons and incorrect charge slips as well. Promptly compare receipts with account statements. Watch for unauthorized transactions.
  • Tear up or shred unwanted receipts, credit offers, account statements, expired cards, etc., to prevent dumpster divers getting your personal information.
  • Store personal information in a safe place at home and at work. Don't leave it lying around.
  • Don't respond to unsolicited requests for personal information in the mail, over the phone or online.
  • Install firewalls and virus-detection software on your home computer.
  • Check your credit report once a year. Check it more frequently if you suspect someone has gotten access to your account information.

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How to Report Identity Theft

Your wallet contains some of your most important personal items, from hard-earned money to credit cards and driver’s license. For an identity thief, your wallet offers a treasure trove of personal information. If you suspect or become a victim of identity theft, follow these steps:

  • Report it to your financial institution. Call the phone number on your account statement or on the back of your credit or debit card.
  • Report the fraud to your local police immediately. Keep a copy of the police report, which will make it easier to prove your case to creditors and retailers.
  • Contact the credit-reporting bureaus and ask them to flag your account with a fraud alert, which asks merchants not to grant new credit without your approval.

If your identity has been stolen, you can use an ID Theft affidavit to report the theft to most of the parties involved. All three credit bureaus and many major creditors have agreed to accept the affidavit. You can download the ID theft affidavit or request a copy by calling toll-free 1-877-ID-THEFT (438-4338). You can also file a complaint with the Federal Trade Commission.

Use this helpful infographic (PDF) to help you remember the steps to take if your wallet or identity have been stolen.

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The Filing A Tax Amendment Online

Filing a tax amendment online 1. Filing a tax amendment online   Travel Table of Contents Traveling Away From HomeTax Home Tax Home Different From Family Home Temporary Assignment or Job What Travel Expenses Are Deductible?Employee. Filing a tax amendment online Business associate. Filing a tax amendment online Bona fide business purpose. Filing a tax amendment online Meals Travel in the United States Travel Outside the United States Luxury Water Travel Conventions If you temporarily travel away from your tax home, you can use this chapter to determine if you have deductible travel expenses. Filing a tax amendment online This chapter discusses: Traveling away from home, Temporary assignment or job, and What travel expenses are deductible. Filing a tax amendment online It also discusses the standard meal allowance, rules for travel inside and outside the United States, luxury water travel, and deductible convention expenses. Filing a tax amendment online Travel expenses defined. Filing a tax amendment online   For tax purposes, travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. Filing a tax amendment online   An ordinary expense is one that is common and accepted in your trade or business. Filing a tax amendment online A necessary expense is one that is helpful and appropriate for your business. Filing a tax amendment online An expense does not have to be required to be considered necessary. Filing a tax amendment online   You will find examples of deductible travel expenses in Table 1-1 , later. Filing a tax amendment online Traveling Away From Home You are traveling away from home if: Your duties require you to be away from the general area of your tax home (defined later) substantially longer than an ordinary day's work, and You need to sleep or rest to meet the demands of your work while away from home. Filing a tax amendment online This rest requirement is not satisfied by merely napping in your car. Filing a tax amendment online You do not have to be away from your tax home for a whole day or from dusk to dawn as long as your relief from duty is long enough to get necessary sleep or rest. Filing a tax amendment online Example 1. Filing a tax amendment online You are a railroad conductor. Filing a tax amendment online You leave your home terminal on a regularly scheduled round-trip run between two cities and return home 16 hours later. Filing a tax amendment online During the run, you have 6 hours off at your turnaround point where you eat two meals and rent a hotel room to get necessary sleep before starting the return trip. Filing a tax amendment online You are considered to be away from home. Filing a tax amendment online Example 2. Filing a tax amendment online You are a truck driver. Filing a tax amendment online You leave your terminal and return to it later the same day. Filing a tax amendment online You get an hour off at your turnaround point to eat. Filing a tax amendment online Because you are not off to get necessary sleep and the brief time off is not an adequate rest period, you are not traveling away from home. Filing a tax amendment online Members of the Armed Forces. Filing a tax amendment online   If you are a member of the U. Filing a tax amendment online S. Filing a tax amendment online Armed Forces on a permanent duty assignment overseas, you are not traveling away from home. Filing a tax amendment online You cannot deduct your expenses for meals and lodging. Filing a tax amendment online You cannot deduct these expenses even if you have to maintain a home in the United States for your family members who are not allowed to accompany you overseas. Filing a tax amendment online If you are transferred from one permanent duty station to another, you may have deductible moving expenses, which are explained in Publication 521, Moving Expenses. Filing a tax amendment online   A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a tax home (explained next) aboard the ship for travel expense purposes. Filing a tax amendment online Tax Home To determine whether you are traveling away from home, you must first determine the location of your tax home. Filing a tax amendment online Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home. Filing a tax amendment online It includes the entire city or general area in which your business or work is located. Filing a tax amendment online If you have more than one regular place of business, your tax home is your main place of business. Filing a tax amendment online See Main place of business or work , later. Filing a tax amendment online If you do not have a regular or a main place of business because of the nature of your work, then your tax home may be the place where you regularly live. Filing a tax amendment online See No main place of business or work , later. Filing a tax amendment online If you do not have a regular or main place of business or post of duty and there is no place where you regularly live, you are considered an itinerant (a transient) and your tax home is wherever you work. Filing a tax amendment online As an itinerant, you cannot claim a travel expense deduction because you are never considered to be traveling away from home. Filing a tax amendment online Main place of business or work. Filing a tax amendment online   If you have more than one place of work, consider the following when determining which one is your main place of business or work. Filing a tax amendment online The total time you ordinarily spend in each place. Filing a tax amendment online The level of your business activity in each place. Filing a tax amendment online Whether your income from each place is significant or insignificant. Filing a tax amendment online Example. Filing a tax amendment online You live in Cincinnati where you have a seasonal job for 8 months each year and earn $40,000. Filing a tax amendment online You work the other 4 months in Miami, also at a seasonal job, and earn $15,000. Filing a tax amendment online Cincinnati is your main place of work because you spend most of your time there and earn most of your income there. Filing a tax amendment online No main place of business or work. Filing a tax amendment online   You may have a tax home even if you do not have a regular or main place of work. Filing a tax amendment online Your tax home may be the home where you regularly live. Filing a tax amendment online Factors used to determine tax home. Filing a tax amendment online   If you do not have a regular or main place of business or work, use the following three factors to determine where your tax home is. Filing a tax amendment online You perform part of your business in the area of your main home and use that home for lodging while doing business in the area. Filing a tax amendment online You have living expenses at your main home that you duplicate because your business requires you to be away from that home. Filing a tax amendment online You have not abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging. Filing a tax amendment online   If you satisfy all three factors, your tax home is the home where you regularly live. Filing a tax amendment online If you satisfy only two factors, you may have a tax home depending on all the facts and circumstances. Filing a tax amendment online If you satisfy only one factor, you are an itinerant; your tax home is wherever you work and you cannot deduct travel expenses. Filing a tax amendment online Example 1. Filing a tax amendment online You are single and live in Boston in an apartment you rent. Filing a tax amendment online You have worked for your employer in Boston for a number of years. Filing a tax amendment online Your employer enrolls you in a 12-month executive training program. Filing a tax amendment online You do not expect to return to work in Boston after you complete your training. Filing a tax amendment online During your training, you do not do any work in Boston. Filing a tax amendment online Instead, you receive classroom and on-the-job training throughout the United States. Filing a tax amendment online You keep your apartment in Boston and return to it frequently. Filing a tax amendment online You use your apartment to conduct your personal business. Filing a tax amendment online You also keep up your community contacts in Boston. Filing a tax amendment online When you complete your training, you are transferred to Los Angeles. Filing a tax amendment online You do not satisfy factor (1) because you did not work in Boston. Filing a tax amendment online You satisfy factor (2) because you had duplicate living expenses. Filing a tax amendment online You also satisfy factor (3) because you did not abandon your apartment in Boston as your main home, you kept your community contacts, and you frequently returned to live in your apartment. Filing a tax amendment online Therefore, you have a tax home in Boston. Filing a tax amendment online Example 2. Filing a tax amendment online You are an outside salesperson with a sales territory covering several states. Filing a tax amendment online Your employer's main office is in Newark, but you do not conduct any business there. Filing a tax amendment online Your work assignments are temporary, and you have no way of knowing where your future assignments will be located. Filing a tax amendment online You have a room in your married sister's house in Dayton. Filing a tax amendment online You stay there for one or two weekends a year, but you do no work in the area. Filing a tax amendment online You do not pay your sister for the use of the room. Filing a tax amendment online You do not satisfy any of the three factors listed earlier. Filing a tax amendment online You are an itinerant and have no tax home. Filing a tax amendment online Tax Home Different From Family Home If you (and your family) do not live at your tax home (defined earlier), you cannot deduct the cost of traveling between your tax home and your family home. Filing a tax amendment online You also cannot deduct the cost of meals and lodging while at your tax home. Filing a tax amendment online See Example 1 , later. Filing a tax amendment online If you are working temporarily in the same city where you and your family live, you may be considered as traveling away from home. Filing a tax amendment online See Example 2 , later. Filing a tax amendment online Example 1. Filing a tax amendment online You are a truck driver and you and your family live in Tucson. Filing a tax amendment online You are employed by a trucking firm that has its terminal in Phoenix. Filing a tax amendment online At the end of your long runs, you return to your home terminal in Phoenix and spend one night there before returning home. Filing a tax amendment online You cannot deduct any expenses you have for meals and lodging in Phoenix or the cost of traveling from Phoenix to Tucson. Filing a tax amendment online This is because Phoenix is your tax home. Filing a tax amendment online Example 2. Filing a tax amendment online Your family home is in Pittsburgh, where you work 12 weeks a year. Filing a tax amendment online The rest of the year you work for the same employer in Baltimore. Filing a tax amendment online In Baltimore, you eat in restaurants and sleep in a rooming house. Filing a tax amendment online Your salary is the same whether you are in Pittsburgh or Baltimore. Filing a tax amendment online Because you spend most of your working time and earn most of your salary in Baltimore, that city is your tax home. Filing a tax amendment online You cannot deduct any expenses you have for meals and lodging there. Filing a tax amendment online However, when you return to work in Pittsburgh, you are away from your tax home even though you stay at your family home. Filing a tax amendment online You can deduct the cost of your round trip between Baltimore and Pittsburgh. Filing a tax amendment online You can also deduct your part of your family's living expenses for meals and lodging while you are living and working in Pittsburgh. Filing a tax amendment online Temporary Assignment or Job You may regularly work at your tax home and also work at another location. Filing a tax amendment online It may not be practical to return to your tax home from this other location at the end of each work day. Filing a tax amendment online Temporary assignment vs. Filing a tax amendment online indefinite assignment. Filing a tax amendment online   If your assignment or job away from your main place of work is temporary, your tax home does not change. Filing a tax amendment online You are considered to be away from home for the whole period you are away from your main place of work. Filing a tax amendment online You can deduct your travel expenses if they otherwise qualify for deduction. Filing a tax amendment online Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less. Filing a tax amendment online    However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home and you cannot deduct your travel expenses while there. Filing a tax amendment online An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than 1 year, whether or not it actually lasts for more than 1 year. Filing a tax amendment online   If your assignment is indefinite, you must include in your income any amounts you receive from your employer for living expenses, even if they are called travel allowances and you account to your employer for them. Filing a tax amendment online You may be able to deduct the cost of relocating to your new tax home as a moving expense. Filing a tax amendment online See Publication 521 for more information. Filing a tax amendment online Exception for federal crime investigations or prosecutions. Filing a tax amendment online   If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule. Filing a tax amendment online This means you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year provided you meet the other requirements for deductibility. Filing a tax amendment online   For you to qualify, the Attorney General (or his or her designee) must certify that you are traveling: For the federal government, In a temporary duty status, and To investigate, prosecute, or provide support services for the investigation or prosecution of a federal crime. Filing a tax amendment online Determining temporary or indefinite. Filing a tax amendment online   You must determine whether your assignment is temporary or indefinite when you start work. Filing a tax amendment online If you expect an assignment or job to last for 1 year or less, it is temporary unless there are facts and circumstances that indicate otherwise. Filing a tax amendment online An assignment or job that is initially temporary may become indefinite due to changed circumstances. Filing a tax amendment online A series of assignments to the same location, all for short periods but that together cover a long period, may be considered an indefinite assignment. Filing a tax amendment online   The following examples illustrate whether an assignment or job is temporary or indefinite. Filing a tax amendment online Example 1. Filing a tax amendment online You are a construction worker. Filing a tax amendment online You live and regularly work in Los Angeles. Filing a tax amendment online You are a member of a trade union in Los Angeles that helps you get work in the Los Angeles area. Filing a tax amendment online Your tax home is Los Angeles. Filing a tax amendment online Because of a shortage of work, you took a job on a construction project in Fresno. Filing a tax amendment online Your job was scheduled to end in 8 months. Filing a tax amendment online The job actually lasted 10 months. Filing a tax amendment online You realistically expected the job in Fresno to last 8 months. Filing a tax amendment online The job actually did last less than 1 year. Filing a tax amendment online The job is temporary and your tax home is still in Los Angeles. Filing a tax amendment online Example 2. Filing a tax amendment online The facts are the same as in Example 1, except that you realistically expected the work in Fresno to last 18 months. Filing a tax amendment online The job actually was completed in 10 months. Filing a tax amendment online Your job in Fresno is indefinite because you realistically expected the work to last longer than 1 year, even though it actually lasted less than 1 year. Filing a tax amendment online You cannot deduct any travel expenses you had in Fresno because Fresno became your tax home. Filing a tax amendment online Example 3. Filing a tax amendment online The facts are the same as in Example 1, except that you realistically expected the work in Fresno to last 9 months. Filing a tax amendment online After 8 months, however, you were asked to remain for 7 more months (for a total actual stay of 15 months). Filing a tax amendment online Initially, you realistically expected the job in Fresno to last for only 9 months. Filing a tax amendment online However, due to changed circumstances occurring after 8 months, it was no longer realistic for you to expect that the job in Fresno would last for 1 year or less. Filing a tax amendment online You can only deduct your travel expenses for the first 8 months. Filing a tax amendment online You cannot deduct any travel expenses you had after that time because Fresno became your tax home when the job became indefinite. Filing a tax amendment online Going home on days off. Filing a tax amendment online   If you go back to your tax home from a temporary assignment on your days off, you are not considered away from home while you are in your hometown. Filing a tax amendment online You cannot deduct the cost of your meals and lodging there. Filing a tax amendment online However, you can deduct your travel expenses, including meals and lodging, while traveling between your temporary place of work and your tax home. Filing a tax amendment online You can claim these expenses up to the amount it would have cost you to stay at your temporary place of work. Filing a tax amendment online   If you keep your hotel room during your visit home, you can deduct the cost of your hotel room. Filing a tax amendment online In addition, you can deduct your expenses of returning home up to the amount you would have spent for meals had you stayed at your temporary place of work. Filing a tax amendment online Probationary work period. Filing a tax amendment online   If you take a job that requires you to move, with the understanding that you will keep the job if your work is satisfactory during a probationary period, the job is indefinite. Filing a tax amendment online You cannot deduct any of your expenses for meals and lodging during the probationary period. Filing a tax amendment online What Travel Expenses Are Deductible? Once you have determined that you are traveling away from your tax home, you can determine what travel expenses are deductible. Filing a tax amendment online You can deduct ordinary and necessary expenses you have when you travel away from home on business. Filing a tax amendment online The type of expense you can deduct depends on the facts and your circumstances. Filing a tax amendment online Table 1-1 summarizes travel expenses you may be able to deduct. Filing a tax amendment online You may have other deductible travel expenses that are not covered there, depending on the facts and your circumstances. Filing a tax amendment online When you travel away from home on business, you should keep records of all the expenses you have and any advances you receive from your employer. Filing a tax amendment online You can use a log, diary, notebook, or any other written record to keep track of your expenses. Filing a tax amendment online The types of expenses you need to record, along with supporting documentation, are described in Table 5-1 (see chapter 5). Filing a tax amendment online Separating costs. Filing a tax amendment online   If you have one expense that includes the costs of meals, entertainment, and other services (such as lodging or transportation), you must allocate that expense between the cost of meals and entertainment and the cost of other services. Filing a tax amendment online You must have a reasonable basis for making this allocation. Filing a tax amendment online For example, you must allocate your expenses if a hotel includes one or more meals in its room charge. Filing a tax amendment online Travel expenses for another individual. Filing a tax amendment online    If a spouse, dependent, or other individual goes with you (or your employee) on a business trip or to a business convention, you generally cannot deduct his or her travel expenses. Filing a tax amendment online Employee. Filing a tax amendment online   You can deduct the travel expenses of someone who goes with you if that person: Is your employee, Has a bona fide business purpose for the travel, and Would otherwise be allowed to deduct the travel expenses. Filing a tax amendment online Business associate. Filing a tax amendment online   If a business associate travels with you and meets the conditions in (2) and (3), earlier, you can deduct the travel expenses you have for that person. Filing a tax amendment online A business associate is someone with whom you could reasonably expect to actively conduct business. Filing a tax amendment online A business associate can be a current or prospective (likely to become) customer, client, supplier, employee, agent, partner, or professional advisor. Filing a tax amendment online Bona fide business purpose. Filing a tax amendment online   A bona fide business purpose exists if you can prove a real business purpose for the individual's presence. Filing a tax amendment online Incidental services, such as typing notes or assisting in entertaining customers, are not enough to make the expenses deductible. Filing a tax amendment online Table 1-1. Filing a tax amendment online Travel Expenses You Can Deduct   This chart summarizes expenses you can deduct when you travel away from home for business purposes. Filing a tax amendment online IF you have expenses for. Filing a tax amendment online . Filing a tax amendment online . Filing a tax amendment online THEN you can deduct the cost of. Filing a tax amendment online . Filing a tax amendment online . Filing a tax amendment online transportation travel by airplane, train, bus, or car between your home and your business destination. Filing a tax amendment online If you were provided with a free ticket or you are riding free as a result of a frequent traveler or similar program, your cost is zero. Filing a tax amendment online If you travel by ship, see Luxury Water Travel and Cruise Ships (under Conventions) for additional rules and limits. Filing a tax amendment online taxi, commuter bus, and airport limousine fares for these and other types of transportation that take you between: The airport or station and your hotel, and The hotel and the work location of your customers or clients, your business meeting place, or your temporary work location. Filing a tax amendment online baggage and shipping sending baggage and sample or display material between your regular and temporary work locations. Filing a tax amendment online car operating and maintaining your car when traveling away from home on business. Filing a tax amendment online You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking. Filing a tax amendment online If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses. Filing a tax amendment online lodging and meals your lodging and meals if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. Filing a tax amendment online Meals include amounts spent for food, beverages, taxes, and related tips. Filing a tax amendment online See Meals for additional rules and limits. Filing a tax amendment online cleaning dry cleaning and laundry. Filing a tax amendment online telephone business calls while on your business trip. Filing a tax amendment online This includes business communication by fax machine or other communication devices. Filing a tax amendment online tips tips you pay for any expenses in this chart. Filing a tax amendment online other other similar ordinary and necessary expenses related to your business travel. Filing a tax amendment online These expenses might include transportation to or from a business meal, public stenographer's fees, computer rental fees, and operating and maintaining a house trailer. Filing a tax amendment online Example. Filing a tax amendment online Jerry drives to Chicago on business and takes his wife, Linda, with him. Filing a tax amendment online Linda is not Jerry's employee. Filing a tax amendment online Linda occasionally types notes, performs similar services, and accompanies Jerry to luncheons and dinners. Filing a tax amendment online The performance of these services does not establish that her presence on the trip is necessary to the conduct of Jerry's business. Filing a tax amendment online Her expenses are not deductible. Filing a tax amendment online Jerry pays $199 a day for a double room. Filing a tax amendment online A single room costs $149 a day. Filing a tax amendment online He can deduct the total cost of driving his car to and from Chicago, but only $149 a day for his hotel room. Filing a tax amendment online If he uses public transportation, he can deduct only his fare. Filing a tax amendment online Meals You can deduct the cost of meals in either of the following situations. Filing a tax amendment online It is necessary for you to stop for substantial sleep or rest to properly perform your duties while traveling away from home on business. Filing a tax amendment online The meal is business-related entertainment. Filing a tax amendment online Business-related entertainment is discussed in chapter 2 . Filing a tax amendment online The following discussion deals only with meals that are not business-related entertainment. Filing a tax amendment online Lavish or extravagant. Filing a tax amendment online   You cannot deduct expenses for meals that are lavish or extravagant. Filing a tax amendment online An expense is not considered lavish or extravagant if it is reasonable based on the facts and circumstances. Filing a tax amendment online Expenses will not be disallowed merely because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. Filing a tax amendment online 50% limit on meals. Filing a tax amendment online   You can figure your meals expense using either of the following methods. Filing a tax amendment online Actual cost. Filing a tax amendment online The standard meal allowance. Filing a tax amendment online Both of these methods are explained below. Filing a tax amendment online But, regardless of the method you use, you generally can deduct only 50% of the unreimbursed cost of your meals. Filing a tax amendment online   If you are reimbursed for the cost of your meals, how you apply the 50% limit depends on whether your employer's reimbursement plan was accountable or nonaccountable. Filing a tax amendment online If you are not reimbursed, the 50% limit applies whether the unreimbursed meal expense is for business travel or business entertainment. Filing a tax amendment online Chapter 2 discusses the 50% Limit in more detail, and chapter 6 discusses accountable and nonaccountable plans. Filing a tax amendment online Actual Cost You can use the actual cost of your meals to figure the amount of your expense before reimbursement and application of the 50% deduction limit. Filing a tax amendment online If you use this method, you must keep records of your actual cost. Filing a tax amendment online Standard Meal Allowance Generally, you can use the “standard meal allowance” method as an alternative to the actual cost method. Filing a tax amendment online It allows you to use a set amount for your daily meals and incidental expenses (M&IE), instead of keeping records of your actual costs. Filing a tax amendment online The set amount varies depending on where and when you travel. Filing a tax amendment online In this publication, “standard meal allowance” refers to the federal rate for M&IE, discussed later under Amount of standard meal allowance . Filing a tax amendment online If you use the standard meal allowance, you still must keep records to prove the time, place, and business purpose of your travel. Filing a tax amendment online See the recordkeeping rules for travel in chapter 5 . Filing a tax amendment online Incidental expenses. Filing a tax amendment online   The term “incidental expenses” means fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. Filing a tax amendment online   Incidental expenses do not include expenses for laundry, cleaning and pressing of clothing, lodging taxes, costs of telegrams or telephone calls, transportation between places of lodging or business and places where meals are taken, or the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings. Filing a tax amendment online Incidental-expenses-only method. Filing a tax amendment online   You can use an optional method (instead of actual cost) for deducting incidental expenses only. Filing a tax amendment online The amount of the deduction is $5 a day. Filing a tax amendment online You can use this method only if you did not pay or incur any meal expenses. Filing a tax amendment online You cannot use this method on any day that you use the standard meal allowance. Filing a tax amendment online This method is subject to the proration rules for partial days. Filing a tax amendment online See Travel for days you depart and return , later in this chapter. Filing a tax amendment online Note. Filing a tax amendment online The incidental-expenses-only method is not subject to the 50% limit discussed below. Filing a tax amendment online Federal employees should refer to the Federal Travel Regulations at www. Filing a tax amendment online gsa. Filing a tax amendment online gov. Filing a tax amendment online Find the “Most Requested Links” on the upper left and click on “Regulations: FAR, FMR, FTR” for Federal Travel Regulation (FTR) for changes affecting claims for reimbursement. Filing a tax amendment online 50% limit may apply. Filing a tax amendment online   If you use the standard meal allowance method for meal expenses and you are not reimbursed or you are reimbursed under a nonaccountable plan, you can generally deduct only 50% of the standard meal allowance. Filing a tax amendment online If you are reimbursed under an accountable plan and you are deducting amounts that are more than your reimbursements, you can deduct only 50% of the excess amount. Filing a tax amendment online The 50% limit is discussed in more detail in chapter 2, and accountable and nonaccountable plans are discussed in chapter 6. Filing a tax amendment online There is no optional standard lodging amount similar to the standard meal allowance. Filing a tax amendment online Your allowable lodging expense deduction is your actual cost. Filing a tax amendment online Who can use the standard meal allowance. Filing a tax amendment online   You can use the standard meal allowance whether you are an employee or self-employed, and whether or not you are reimbursed for your traveling expenses. Filing a tax amendment online Use of the standard meal allowance for other travel. Filing a tax amendment online   You can use the standard meal allowance to figure your meal expenses when you travel in connection with investment and other income-producing property. Filing a tax amendment online You can also use it to figure your meal expenses when you travel for qualifying educational purposes. Filing a tax amendment online You cannot use the standard meal allowance to figure the cost of your meals when you travel for medical or charitable purposes. Filing a tax amendment online Amount of standard meal allowance. Filing a tax amendment online   The standard meal allowance is the federal M&IE rate. Filing a tax amendment online For travel in 2013, the rate for most small localities in the United States is $46 a day. Filing a tax amendment online    Most major cities and many other localities in the United States are designated as high-cost areas, qualifying for higher standard meal allowances. Filing a tax amendment online    You can find this information (organized by state) on the Internet at www. Filing a tax amendment online gsa. Filing a tax amendment online gov/perdiem. Filing a tax amendment online Enter a zip code or select a city and state for the per diem rates for the current fiscal year. Filing a tax amendment online Per diem rates for prior fiscal years are available by using the drop down menu under “Search by State. Filing a tax amendment online ”   Per diem rates are listed by the Federal government's fiscal year which runs from October 1 to September 30. Filing a tax amendment online You can choose to use the rates from the 2013 fiscal year per diem tables or the rates from the 2014 fiscal year tables, but you must consistently use the same tables for all travel you are reporting on your income tax return for the year. Filing a tax amendment online   If you travel to more than one location in one day, use the rate in effect for the area where you stop for sleep or rest. Filing a tax amendment online If you work in the transportation industry, however, see Special rate for transportation workers , later. Filing a tax amendment online Standard meal allowance for areas outside the continental United States. Filing a tax amendment online   The standard meal allowance rates above do not apply to travel in Alaska, Hawaii, or any other location outside the continental United States. Filing a tax amendment online The Department of Defense establishes per diem rates for Alaska, Hawaii, Puerto Rico, American Samoa, Guam, Midway, the Northern Mariana Islands, the U. Filing a tax amendment online S. Filing a tax amendment online Virgin Islands, Wake Island, and other non-foreign areas outside the continental United States. Filing a tax amendment online The Department of State establishes per diem rates for all other foreign areas. Filing a tax amendment online    You can access per diem rates for non-foreign areas outside the continental United States at: www. Filing a tax amendment online defensetravel. Filing a tax amendment online dod. Filing a tax amendment online mil/site/perdiemCalc. Filing a tax amendment online cfm. Filing a tax amendment online You can access all other foreign per diem rates at: www. Filing a tax amendment online state. Filing a tax amendment online gov/travel/. Filing a tax amendment online Click on “Travel Per Diem Allowances for Foreign Areas,” under “Foreign Per Diem Rates” to obtain the latest foreign per diem rates. Filing a tax amendment online Special rate for transportation workers. Filing a tax amendment online   You can use a special standard meal allowance if you work in the transportation industry. Filing a tax amendment online You are in the transportation industry if your work: Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates. Filing a tax amendment online If this applies to you, you can claim a standard meal allowance of $59 a day ($65 for travel outside the continental United States). Filing a tax amendment online   Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest. Filing a tax amendment online If you choose to use the special rate for any trip, you must use the special rate (and not use the regular standard meal allowance rates) for all trips you take that year. Filing a tax amendment online Travel for days you depart and return. Filing a tax amendment online   For both the day you depart for and the day you return from a business trip, you must prorate the standard meal allowance (figure a reduced amount for each day). Filing a tax amendment online You can do so by one of two methods. Filing a tax amendment online Method 1: You can claim 3/4 of the standard meal allowance. Filing a tax amendment online Method 2: You can prorate using any method that you consistently apply and that is in accordance with reasonable business practice. Filing a tax amendment online Example. Filing a tax amendment online Jen is employed in New Orleans as a convention planner. Filing a tax amendment online In March, her employer sent her on a 3-day trip to Washington, DC, to attend a planning seminar. Filing a tax amendment online She left her home in New Orleans at 10 a. Filing a tax amendment online m. Filing a tax amendment online on Wednesday and arrived in Washington, DC, at 5:30 p. Filing a tax amendment online m. Filing a tax amendment online After spending two nights there, she flew back to New Orleans on Friday and arrived back home at 8:00 p. Filing a tax amendment online m. Filing a tax amendment online Jen's employer gave her a flat amount to cover her expenses and included it with her wages. Filing a tax amendment online Under Method 1, Jen can claim 2½ days of the standard meal allowance for Washington, DC: 3/4 of the daily rate for Wednesday and Friday (the days she departed and returned), and the full daily rate for Thursday. Filing a tax amendment online Under Method 2, Jen could also use any method that she applies consistently and that is in accordance with reasonable business practice. Filing a tax amendment online For example, she could claim 3 days of the standard meal allowance even though a federal employee would have to use Method 1 and be limited to only 2½ days. Filing a tax amendment online Travel in the United States The following discussion applies to travel in the United States. Filing a tax amendment online For this purpose, the United States includes the 50 states and the District of Columbia. Filing a tax amendment online The treatment of your travel expenses depends on how much of your trip was business related and on how much of your trip occurred within the United States. Filing a tax amendment online See Part of Trip Outside the United States , later. Filing a tax amendment online Trip Primarily for Business You can deduct all of your travel expenses if your trip was entirely business related. Filing a tax amendment online If your trip was primarily for business and, while at your business destination, you extended your stay for a vacation, made a personal side trip, or had other personal activities, you can deduct only your business-related travel expenses. Filing a tax amendment online These expenses include the travel costs of getting to and from your business destination and any business-related expenses at your business destination. Filing a tax amendment online Example. Filing a tax amendment online You work in Atlanta and take a business trip to New Orleans in May. Filing a tax amendment online Your business travel totals 850 miles round trip. Filing a tax amendment online On your way, you stop in Mobile to visit your parents. Filing a tax amendment online You spend $2,120 for the 9 days you are away from home for travel, meals, lodging, and other travel expenses. Filing a tax amendment online If you had not stopped in Mobile, you would have been gone only 6 days, and your total cost would have been $1,820. Filing a tax amendment online You can deduct $1,820 for your trip, including the cost of round-trip transportation to and from New Orleans. Filing a tax amendment online The deduction for your meals is subject to the 50% limit on meals mentioned earlier. Filing a tax amendment online Trip Primarily for Personal Reasons If your trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a nondeductible personal expense. Filing a tax amendment online However, you can deduct any expenses you have while at your destination that are directly related to your business. Filing a tax amendment online A trip to a resort or on a cruise ship may be a vacation even if the promoter advertises that it is primarily for business. Filing a tax amendment online The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip. Filing a tax amendment online Part of Trip Outside the United States If part of your trip is outside the United States, use the rules described later in this chapter under Travel Outside the United States for that part of the trip. Filing a tax amendment online For the part of your trip that is inside the United States, use the rules for travel in the United States. Filing a tax amendment online Travel outside the United States does not include travel from one point in the United States to another point in the United States. Filing a tax amendment online The following discussion can help you determine whether your trip was entirely within the United States. Filing a tax amendment online Public transportation. Filing a tax amendment online   If you travel by public transportation, any place in the United States where that vehicle makes a scheduled stop is a point in the United States. Filing a tax amendment online Once the vehicle leaves the last scheduled stop in the United States on its way to a point outside the United States, you apply the rules under Travel Outside the United States . Filing a tax amendment online Example. Filing a tax amendment online You fly from New York to Puerto Rico with a scheduled stop in Miami. Filing a tax amendment online You return to New York nonstop. Filing a tax amendment online The flight from New York to Miami is in the United States, so only the flight from Miami to Puerto Rico is outside the United States. Filing a tax amendment online Because there are no scheduled stops between Puerto Rico and New York, all of the return trip is outside the United States. Filing a tax amendment online Private car. Filing a tax amendment online   Travel by private car in the United States is travel between points in the United States, even though you are on your way to a destination outside the United States. Filing a tax amendment online Example. Filing a tax amendment online You travel by car from Denver to Mexico City and return. Filing a tax amendment online Your travel from Denver to the border and from the border back to Denver is travel in the United States, and the rules in this section apply. Filing a tax amendment online The rules under Travel Outside the United States apply to your trip from the border to Mexico City and back to the border. Filing a tax amendment online Travel Outside the United States If any part of your business travel is outside the United States, some of your deductions for the cost of getting to and from your destination may be limited. Filing a tax amendment online For this purpose, the United States includes the 50 states and the District of Columbia. Filing a tax amendment online How much of your travel expenses you can deduct depends in part upon how much of your trip outside the United States was business related. Filing a tax amendment online Travel Entirely for Business or Considered Entirely for Business You can deduct all your travel expenses of getting to and from your business destination if your trip is entirely for business or considered entirely for business. Filing a tax amendment online Travel entirely for business. Filing a tax amendment online   If you travel outside the United States and you spend the entire time on business activities, you can deduct all of your travel expenses. Filing a tax amendment online Travel considered entirely for business. Filing a tax amendment online   Even if you did not spend your entire time on business activities, your trip is considered entirely for business if you meet at least one of the following four exceptions. Filing a tax amendment online Exception 1 - No substantial control. Filing a tax amendment online   Your trip is considered entirely for business if you did not have substantial control over arranging the trip. Filing a tax amendment online The fact that you control the timing of your trip does not, by itself, mean that you have substantial control over arranging your trip. Filing a tax amendment online   You do not have substantial control over your trip if you: Are an employee who was reimbursed or paid a travel expense allowance, and Are not related to your employer, or Are not a managing executive. Filing a tax amendment online    “Related to your employer” is defined later in chapter 6 under Per Diem and Car Allowances . Filing a tax amendment online   A “managing executive” is an employee who has the authority and responsibility, without being subject to the veto of another, to decide on the need for the business travel. Filing a tax amendment online   A self-employed person generally has substantial control over arranging business trips. Filing a tax amendment online Exception 2 - Outside United States no more than a week. Filing a tax amendment online   Your trip is considered entirely for business if you were outside the United States for a week or less, combining business and nonbusiness activities. Filing a tax amendment online One week means 7 consecutive days. Filing a tax amendment online In counting the days, do not count the day you leave the United States, but do count the day you return to the United States. Filing a tax amendment online Example. Filing a tax amendment online You traveled to Brussels primarily for business. Filing a tax amendment online You left Denver on Tuesday and flew to New York. Filing a tax amendment online On Wednesday, you flew from New York to Brussels, arriving the next morning. Filing a tax amendment online On Thursday and Friday, you had business discussions, and from Saturday until Tuesday, you were sightseeing. Filing a tax amendment online You flew back to New York, arriving Wednesday afternoon. Filing a tax amendment online On Thursday, you flew back to Denver. Filing a tax amendment online Although you were away from your home in Denver for more than a week, you were not outside the United States for more than a week. Filing a tax amendment online This is because the day you depart does not count as a day outside the United States. Filing a tax amendment online You can deduct your cost of the round-trip flight between Denver and Brussels. Filing a tax amendment online You can also deduct the cost of your stay in Brussels for Thursday and Friday while you conducted business. Filing a tax amendment online However, you cannot deduct the cost of your stay in Brussels from Saturday through Tuesday because those days were spent on nonbusiness activities. Filing a tax amendment online Exception 3 - Less than 25% of time on personal activities. Filing a tax amendment online   Your trip is considered entirely for business if: You were outside the United States for more than a week, and You spent less than 25% of the total time you were outside the United States on nonbusiness activities. Filing a tax amendment online For this purpose, count both the day your trip began and the day it ended. Filing a tax amendment online Example. Filing a tax amendment online You flew from Seattle to Tokyo, where you spent 14 days on business and 5 days on personal matters. Filing a tax amendment online You then flew back to Seattle. Filing a tax amendment online You spent 1 day flying in each direction. Filing a tax amendment online Because only 5/21 (less than 25%) of your total time abroad was for nonbusiness activities, you can deduct as travel expenses what it would have cost you to make the trip if you had not engaged in any nonbusiness activity. Filing a tax amendment online The amount you can deduct is the cost of the round-trip plane fare and 16 days of meals (subject to the 50% limit), lodging, and other related expenses. Filing a tax amendment online Exception 4 - Vacation not a major consideration. Filing a tax amendment online   Your trip is considered entirely for business if you can establish that a personal vacation was not a major consideration, even if you have substantial control over arranging the trip. Filing a tax amendment online Travel Primarily for Business If you travel outside the United States primarily for business but spend some of your time on other activities, you generally cannot deduct all of your travel expenses. Filing a tax amendment online You can only deduct the business portion of your cost of getting to and from your destination. Filing a tax amendment online You must allocate the costs between your business and other activities to determine your deductible amount. Filing a tax amendment online See Travel allocation rules , later. Filing a tax amendment online You do not have to allocate your travel expenses if you meet one of the four exceptions listed earlier under Travel considered entirely for business . Filing a tax amendment online In those cases, you can deduct the total cost of getting to and from your destination. Filing a tax amendment online Travel allocation rules. Filing a tax amendment online   If your trip outside the United States was primarily for business, you must allocate your travel time on a day-to-day basis between business days and nonbusiness days. Filing a tax amendment online The days you depart from and return to the United States are both counted as days outside the United States. Filing a tax amendment online   To figure the deductible amount of your round-trip travel expenses, use the following fraction. Filing a tax amendment online The numerator (top number) is the total number of business days outside the United States. Filing a tax amendment online The denominator (bottom number) is the total number of business and nonbusiness days of travel. Filing a tax amendment online Counting business days. Filing a tax amendment online   Your business days include transportation days, days your presence was required, days you spent on business, and certain weekends and holidays. Filing a tax amendment online Transportation day. Filing a tax amendment online   Count as a business day any day you spend traveling to or from a business destination. Filing a tax amendment online However, if because of a nonbusiness activity you do not travel by a direct route, your business days are the days it would take you to travel a reasonably direct route to your business destination. Filing a tax amendment online Extra days for side trips or nonbusiness activities cannot be counted as business days. Filing a tax amendment online Presence required. Filing a tax amendment online   Count as a business day any day your presence is required at a particular place for a specific business purpose. Filing a tax amendment online Count it as a business day even if you spend most of the day on nonbusiness activities. Filing a tax amendment online Day spent on business. Filing a tax amendment online   If your principal activity during working hours is the pursuit of your trade or business, count the day as a business day. Filing a tax amendment online Also, count as a business day any day you are prevented from working because of circumstances beyond your control. Filing a tax amendment online Certain weekends and holidays. Filing a tax amendment online   Count weekends, holidays, and other necessary standby days as business days if they fall between business days. Filing a tax amendment online But if they follow your business meetings or activity and you remain at your business destination for nonbusiness or personal reasons, do not count them as business days. Filing a tax amendment online Example 1. Filing a tax amendment online Your tax home is New York City. Filing a tax amendment online You travel to Quebec, where you have a business appointment on Friday. Filing a tax amendment online You have another appointment on the following Monday. Filing a tax amendment online Because your presence was required on both Friday and Monday, they are business days. Filing a tax amendment online Because the weekend is between business days, Saturday and Sunday are counted as business days. Filing a tax amendment online This is true even though you use the weekend for sightseeing, visiting friends, or other nonbusiness activity. Filing a tax amendment online Example 2. Filing a tax amendment online If, in Example 1, you had no business in Quebec after Friday, but stayed until Monday before starting home, Saturday and Sunday would be nonbusiness days. Filing a tax amendment online Nonbusiness activity on the way to or from your business destination. Filing a tax amendment online   If you stopped for a vacation or other nonbusiness activity either on the way from the United States to your business destination, or on the way back to the United States from your business destination, you must allocate part of your travel expenses to the nonbusiness activity. Filing a tax amendment online   The part you must allocate is the amount it would have cost you to travel between the point where travel outside the United States begins and your nonbusiness destination and a return to the point where travel outside the United States ends. Filing a tax amendment online   You determine the nonbusiness portion of that expense by multiplying it by a fraction. Filing a tax amendment online The numerator (top number) of the fraction is the number of nonbusiness days during your travel outside the United States and the denominator (bottom number) is the total number of days you spend outside the United States. Filing a tax amendment online Example. Filing a tax amendment online You live in New York. Filing a tax amendment online On May 4 you flew to Paris to attend a business conference that began on May 5. Filing a tax amendment online The conference ended at noon on May 14. Filing a tax amendment online That evening you flew to Dublin where you visited with friends until the afternoon of May 21, when you flew directly home to New York. Filing a tax amendment online The primary purpose for the trip was to attend the conference. Filing a tax amendment online If you had not stopped in Dublin, you would have arrived home the evening of May 14. Filing a tax amendment online You do not meet any of the exceptions that would allow you to consider your travel entirely for business. Filing a tax amendment online May 4 through May 14 (11 days) are business days and May 15 through May 21 (7 days) are nonbusiness days. Filing a tax amendment online You can deduct the cost of your meals (subject to the 50% limit), lodging, and other business-related travel expenses while in Paris. Filing a tax amendment online You cannot deduct your expenses while in Dublin. Filing a tax amendment online You also cannot deduct 7/18 of what it would have cost you to travel round-trip between New York and Dublin. Filing a tax amendment online You paid $750 to fly from New York to Paris, $400 to fly from Paris to Dublin, and $700 to fly from Dublin back to New York. Filing a tax amendment online Round-trip airfare from New York to Dublin would have been $1,250. Filing a tax amendment online You figure the deductible part of your air travel expenses by subtracting 7/18 of the round-trip fare and other expenses you would have had in traveling directly between New York and Dublin ($1,250 × 7/18 = $486) from your total expenses in traveling from New York to Paris to Dublin and back to New York ($750 + $400 + $700 = $1,850). Filing a tax amendment online Your deductible air travel expense is $1,364 ($1,850 − $486). Filing a tax amendment online Nonbusiness activity at, near, or beyond business destination. Filing a tax amendment online   If you had a vacation or other nonbusiness activity at, near, or beyond your business destination, you must allocate part of your travel expenses to the nonbusiness activity. Filing a tax amendment online   The part you must allocate is the amount it would have cost you to travel between the point where travel outside the United States begins and your business destination and a return to the point where travel outside the United States ends. Filing a tax amendment online   You determine the nonbusiness portion of that expense by multiplying it by a fraction. Filing a tax amendment online The numerator (top number) of the fraction is the number of nonbusiness days during your travel outside the United States and the denominator (bottom number) is the total number of days you spend outside the United States. Filing a tax amendment online   None of your travel expenses for nonbusiness activities at, near, or beyond your business destination are deductible. Filing a tax amendment online Example. Filing a tax amendment online Assume that the dates are the same as in the previous example but that instead of going to Dublin for your vacation, you fly to Venice, Italy, for a vacation. Filing a tax amendment online You cannot deduct any part of the cost of your trip from Paris to Venice and return to Paris. Filing a tax amendment online In addition, you cannot deduct 7/18 of the airfare and other expenses from New York to Paris and back to New York. Filing a tax amendment online You can deduct 11/18 of the round-trip plane fare and other travel expenses from New York to Paris, plus your meals (subject to the 50% limit), lodging, and any other business expenses you had in Paris. Filing a tax amendment online (Assume these expenses total $4,939. Filing a tax amendment online ) If the round-trip plane fare and other travel-related expenses (such as food during the trip) are $1,750, you can deduct travel costs of $1,069 (11/18 × $1,750), plus the full $4,939 for the expenses you had in Paris. Filing a tax amendment online Other methods. Filing a tax amendment online   You can use another method of counting business days if you establish that it more clearly reflects the time spent on other than business activities outside the United States. Filing a tax amendment online Travel Primarily for Personal Reasons If you travel outside the United States primarily for vacation or for investment purposes, the entire cost of the trip is a nondeductible personal expense. Filing a tax amendment online However, if you spend some time attending brief professional seminars or a continuing education program, you can deduct your registration fees and other expenses you have that are directly related to your business. Filing a tax amendment online Example. Filing a tax amendment online The university from which you graduated has a continuing education program for members of its alumni association. Filing a tax amendment online This program consists of trips to various foreign countries where academic exercises and conferences are set up to acquaint individuals in most occupations with selected facilities in several regions of the world. Filing a tax amendment online However, none of the conferences are directed toward specific occupations or professions. Filing a tax amendment online It is up to each participant to seek out specialists and organizational settings appropriate to his or her occupational interests. Filing a tax amendment online Three-hour sessions are held each day over a 5-day period at each of the selected overseas facilities where participants can meet with individual practitioners. Filing a tax amendment online These sessions are composed of a variety of activities including workshops, mini-lectures, role playing, skill development, and exercises. Filing a tax amendment online Professional conference directors schedule and conduct the sessions. Filing a tax amendment online Participants can choose those sessions they wish to attend. Filing a tax amendment online You can participate in this program since you are a member of the alumni association. Filing a tax amendment online You and your family take one of the trips. Filing a tax amendment online You spend about 2 hours at each of the planned sessions. Filing a tax amendment online The rest of the time you go touring and sightseeing with your family. Filing a tax amendment online The trip lasts less than 1 week. Filing a tax amendment online Your travel expenses for the trip are not deductible since the trip was primarily a vacation. Filing a tax amendment online However, registration fees and any other incidental expenses you have for the five planned sessions you attended that are directly related and beneficial to your business are deductible business expenses. Filing a tax amendment online These expenses should be specifically stated in your records to ensure proper allocation of your deductible business expenses. Filing a tax amendment online Luxury Water Travel If you travel by ocean liner, cruise ship, or other form of luxury water transportation for business purposes, there is a daily limit on the amount you can deduct. Filing a tax amendment online The limit is twice the highest federal per diem rate allowable at the time of your travel. Filing a tax amendment online (Generally, the federal per diem is the amount paid to federal government employees for daily living expenses when they travel away from home, but in the United States, for business purposes. Filing a tax amendment online ) Daily limit on luxury water travel. Filing a tax amendment online   The highest federal per diem rate allowed and the daily limit for luxury water travel in 2013 is shown in the following table. Filing a tax amendment online   2013 Dates Highest Federal Per Diem Daily Limit on Luxury Water Travel   Jan. Filing a tax amendment online 1 – Mar. Filing a tax amendment online 31 $367 $734   Apr. Filing a tax amendment online 1 – June 30 312 624   July 1 – Aug. Filing a tax amendment online 31 310 620   Sept. Filing a tax amendment online 1 – Sept. Filing a tax amendment online 30 366 732   Oct. Filing a tax amendment online 1 – Dec. Filing a tax amendment online 31 374 748 Example. Filing a tax amendment online Caroline, a travel agent, traveled by ocean liner from New York to London, England, on business in May. Filing a tax amendment online Her expense for the 6-day cruise was $5,200. Filing a tax amendment online Caroline's deduction for the cruise cannot exceed $3,744 (6 days × $624 daily limit). Filing a tax amendment online Meals and entertainment. Filing a tax amendment online   If your expenses for luxury water travel include separately stated amounts for meals or entertainment, those amounts are subject to the 50% limit on meals and entertainment before you apply the daily limit. Filing a tax amendment online For a discussion of the 50% Limit , see chapter 2. Filing a tax amendment online Example. Filing a tax amendment online In the previous example, Caroline's luxury water travel had a total cost of $5,200. Filing a tax amendment online Of that amount, $3,700 was separately stated as meals and entertainment. Filing a tax amendment online Caroline, who is self-employed, is not reimbursed for any of her travel expenses. Filing a tax amendment online Caroline figures her deductible travel expenses as follows. Filing a tax amendment online Meals and entertainment $3,700   50% limit × . Filing a tax amendment online 50   Allowable meals &     entertainment $1,850   Other travel expenses + 1,800   Allowable cost before the daily limit $3,650 Daily limit for May 2013 $624   Times number of days × 6   Maximum luxury water travel     deduction $3,744 Amount of allowable deduction $3,650 Caroline's deduction for her cruise is limited to $3,650, even though the limit on luxury water travel is slightly higher. Filing a tax amendment online Not separately stated. Filing a tax amendment online   If your meal or entertainment charges are not separately stated or are not clearly identifiable, you do not have to allocate any portion of the total charge to meals or entertainment. Filing a tax amendment online Exceptions The daily limit on luxury water travel (discussed earlier) does not apply to expenses you have to attend a convention, seminar, or meeting on board a cruise ship. Filing a tax amendment online See Cruise Ships under Conventions. Filing a tax amendment online Conventions You can deduct your travel expenses when you attend a convention if you can show that your attendance benefits your trade or business. Filing a tax amendment online You cannot deduct the travel expenses for your family. Filing a tax amendment online If the convention is for investment, political, social, or other purposes unrelated to your trade or business, you cannot deduct the expenses. Filing a tax amendment online Your appointment or election as a delegate does not, in itself, determine whether you can deduct travel expenses. Filing a tax amendment online You can deduct your travel expenses only if your attendance is connected to your own trade or business. Filing a tax amendment online Convention agenda. Filing a tax amendment online   The convention agenda or program generally shows the purpose of the convention. Filing a tax amendment online You can show your attendance at the convention benefits your trade or business by comparing the agenda with the official duties and responsibilities of your position. Filing a tax amendment online The agenda does not have to deal specifically with your official duties and responsibilities; it will be enough if the agenda is so related to your position that it shows your attendance was for business purposes. Filing a tax amendment online Conventions Held Outside the North American Area You cannot deduct expenses for attending a convention, seminar, or similar meeting held outside the North American area unless: The meeting is directly related to your trade or business, and It is reasonable to hold the meeting outside the North American area. Filing a tax amendment online See Reasonableness test , later. Filing a tax amendment online If the meeting meets these requirements, you also must satisfy the rules for deducting expenses for business trips in general, discussed earlier under Travel Outside the United States . Filing a tax amendment online North American area. Filing a tax amendment online   The North American area includes the following locations. Filing a tax amendment online American Samoa Johnston Island Antigua and Barbuda Kingman Reef Aruba Marshall Islands Bahamas Mexico Baker Island Micronesia Barbados Midway Islands Bermuda Netherlands Antilles Canada Northern Mariana Costa Rica Islands Dominica Palau Dominican Republic Palmyra Atoll Grenada Panama Guam Puerto Rico Guyana Trinidad and Tobago Honduras USA Howland Island U. Filing a tax amendment online S. Filing a tax amendment online Virgin Islands Jamaica Wake Island Jarvis Island   The North American area also includes U. Filing a tax amendment online S. Filing a tax amendment online islands, cays, and reefs that are possessions of the United States and not part of the fifty states or the District of Columbia. Filing a tax amendment online Reasonableness test. Filing a tax amendment online   The following factors are taken into account to determine if it was reasonable to hold the meeting outside the North American area. Filing a tax amendment online The purpose of the meeting and the activities taking place at the meeting. Filing a tax amendment online The purposes and activities of the sponsoring organizations or groups. Filing a tax amendment online The homes of the active members of the sponsoring organizations and the places at which other meetings of the sponsoring organizations or groups have been or will be held. Filing a tax amendment online Other relevant factors you may present. Filing a tax amendment online Cruise Ships You can deduct up to $2,000 per year of your expenses of attending conventions, seminars, or similar meetings held on cruise ships. Filing a tax amendment online All ships that sail are considered cruise ships. Filing a tax amendment online You can deduct these expenses only if all of the following requirements are met. Filing a tax amendment online The convention, seminar, or meeting is directly related to your trade or business. Filing a tax amendment online The cruise ship is a vessel registered in the United States. Filing a tax amendment online All of the cruise ship's ports of call are in the United States or in possessions of the United States. Filing a tax amendment online You attach to your return a written statement signed by you that includes information about: The total days of the trip (not including the days of transportation to and from the cruise ship port), The number of hours each day that you devoted to scheduled business activities, and A program of the scheduled business activities of the meeting. Filing a tax amendment online You attach to your return a written statement signed by an officer of the organization or group sponsoring the meeting that includes: A schedule of the business activities of each day of the meeting, and The number of hours you attended the scheduled business activities. Filing a tax amendment online Prev  Up  Next   Home   More Online Publications