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Fillable 1040ez Form 2012

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Fillable 1040ez Form 2012

Fillable 1040ez form 2012 31. Fillable 1040ez form 2012   Tax on Unearned Income of Certain Children Table of Contents What's New Introduction Useful Items - You may want to see: Which Parent's Return To UseParents Who Do Not File a Joint Return Parent's Election To Report Child's Interest and DividendsEffect of Making the Election Figuring Child's Income Figuring Additional Tax Tax for Certain Children Who Have Unearned IncomeProviding Parental Information (Form 8615, lines A–C) Step 1. Fillable 1040ez form 2012 Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. Fillable 1040ez form 2012 Figuring Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. Fillable 1040ez form 2012 Figuring the Child's Tax (Form 8615, Part III) What's New Net Investment Income Tax. Fillable 1040ez form 2012 . Fillable 1040ez form 2012  For tax years beginning after December 31, 2012, a child whose tax is figured on Form 8615 may be subject to the Net Investment Income Tax (NIIT). Fillable 1040ez form 2012 NIIT is a 3. Fillable 1040ez form 2012 8% tax on the lesser of the net investment income or the excess of the child's modified adjusted gross income (MAGI) over the threshold amount. Fillable 1040ez form 2012 Use Form 8960, Net Investment Income Tax, to figure this tax. Fillable 1040ez form 2012 For more information on NIIT, go to www. Fillable 1040ez form 2012 irs. Fillable 1040ez form 2012 gov and enter “Net Investment Income Tax” in the search box. Fillable 1040ez form 2012 Introduction This chapter discusses the following two rules that may affect the tax on unearned income of certain children. Fillable 1040ez form 2012 If the child's interest and dividend income (including capital gain distributions) total less than $10,000, the child's parent may be able to choose to include that income on the parent's return rather than file a return for the child. Fillable 1040ez form 2012 (See Parent's Election To Report Child's Interest and Dividends , later. Fillable 1040ez form 2012 ) If the child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. Fillable 1040ez form 2012 (See Tax for Certain Children Who Have Unearned Income , later. Fillable 1040ez form 2012 ) For these rules, the term “child” includes a legally adopted child and a stepchild. Fillable 1040ez form 2012 These rules apply whether or not the child is a dependent. Fillable 1040ez form 2012 Useful Items - You may want to see: Publication 929 Tax Rules for Children and Dependents Form (and Instructions) 8615 Tax for Certain Children Who Have Unearned Income 8814 Parents' Election To Report Child's Interest and Dividends Which Parent's Return To Use If a child's parents are married to each other and file a joint return, use the joint return to figure the tax on the child's unearned income. Fillable 1040ez form 2012 The tax rate and other return information from that return are used to figure the child's tax as explained later under Tax for Certain Children Who Have Unearned Income . Fillable 1040ez form 2012 Parents Who Do Not File a Joint Return For parents who do not file a joint return, the following discussions explain which parent's tax return must be used to figure the tax. Fillable 1040ez form 2012 Only the parent whose tax return is used can make the election described under Parent's Election To Report Child's Interest and Dividends . Fillable 1040ez form 2012 Parents are married. Fillable 1040ez form 2012   If the child's parents file separate returns, use the return of the parent with the greater taxable income. Fillable 1040ez form 2012 Parents not living together. Fillable 1040ez form 2012   If the child's parents are married to each other but not living together, and the parent with whom the child lives (the custodial parent) is considered unmarried, use the return of the custodial parent. Fillable 1040ez form 2012 If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. Fillable 1040ez form 2012   For an explanation of when a married person living apart from his or her spouse is considered unmarried, see Head of Household in chapter 2. Fillable 1040ez form 2012 Parents are divorced. Fillable 1040ez form 2012   If the child's parents are divorced or legally separated, and the parent who had custody of the child for the greater part of the year (the custodial parent) has not remarried, use the return of the custodial parent. Fillable 1040ez form 2012 Custodial parent remarried. Fillable 1040ez form 2012   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. Fillable 1040ez form 2012 Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. Fillable 1040ez form 2012 Do not use the return of the noncustodial parent. Fillable 1040ez form 2012   If the custodial parent and the stepparent are married, but file separate returns, use the return of the one with the greater taxable income. Fillable 1040ez form 2012 If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. Fillable 1040ez form 2012 Parents never married. Fillable 1040ez form 2012   If a child's parents have never been married to each other, but lived together all year, use the return of the parent with the greater taxable income. Fillable 1040ez form 2012 If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. Fillable 1040ez form 2012 Widowed parent remarried. Fillable 1040ez form 2012   If a widow or widower remarries, the new spouse is treated as the child's other parent. Fillable 1040ez form 2012 The rules explained earlier under Custodial parent remarried apply. Fillable 1040ez form 2012 Parent's Election To Report Child's Interest and Dividends You may be able to elect to include your child's interest and dividend income (including capital gain distributions) on your tax return. Fillable 1040ez form 2012 If you do, your child will not have to file a return. Fillable 1040ez form 2012 You can make this election only if all the following conditions are met. Fillable 1040ez form 2012 Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. Fillable 1040ez form 2012 Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). Fillable 1040ez form 2012 The child's gross income was less than $10,000. Fillable 1040ez form 2012 The child is required to file a return unless you make this election. Fillable 1040ez form 2012 The child does not file a joint return for the year. Fillable 1040ez form 2012 No estimated tax payment was made for the year, and no overpayment from the previous year (or from any amended return) was applied to this year under your child's name and social security number. Fillable 1040ez form 2012 No federal income tax was taken out of your child's income under the backup withholding rules. Fillable 1040ez form 2012 You are the parent whose return must be used when applying the special tax rules for children. Fillable 1040ez form 2012 (See Which Parent's Return To Use , earlier. Fillable 1040ez form 2012 ) These conditions are also shown in Figure 31-A. Fillable 1040ez form 2012 Certain January 1 birthdays. Fillable 1040ez form 2012   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. Fillable 1040ez form 2012 You cannot make this election for such a child unless the child was a full-time student. Fillable 1040ez form 2012   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. Fillable 1040ez form 2012 You cannot make this election for such a child. Fillable 1040ez form 2012 Full-time student. Fillable 1040ez form 2012   A full-time student is a child who during some part of each of any 5 calendar months of the year was enrolled as a full-time student at a school, or took a full-time on-farm training course given by a school or a state, county, or local government agency. Fillable 1040ez form 2012 A school includes a technical, trade, or mechanical school. Fillable 1040ez form 2012 It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Fillable 1040ez form 2012 How to make the election. Fillable 1040ez form 2012   Make the election by attaching Form 8814 to your Form 1040. Fillable 1040ez form 2012 (If you make this election, you cannot file Form 1040A or Form 1040EZ. Fillable 1040ez form 2012 ) Attach a separate Form 8814 for each child for whom you make the election. Fillable 1040ez form 2012 You can make the election for one or more children and not for others. Fillable 1040ez form 2012 Effect of Making the Election The federal income tax on your child's income may be more if you make the Form 8814 election. Fillable 1040ez form 2012 Rate may be higher. Fillable 1040ez form 2012   If your child received qualified dividends or capital gain distributions, you may pay up to $100 more tax if you make this election instead of filing a separate tax return for the child. Fillable 1040ez form 2012 This is because the tax rate on the child's income between $1,000 and $2,000 is 10% if you make this election. Fillable 1040ez form 2012 However, if you file a separate return for the child, the tax rate may be as low as 0% (zero percent) because of the preferential tax rates for qualified dividends and capital gain distributions. Fillable 1040ez form 2012 Deductions you cannot take. Fillable 1040ez form 2012   By making the Form 8814 election, you cannot take any of the following deductions that the child would be entitled to on his or her return. Fillable 1040ez form 2012 The additional standard deduction if the child is blind. Fillable 1040ez form 2012 The deduction for a penalty on an early withdrawal of your child's savings. Fillable 1040ez form 2012 Itemized deductions (such as your child's investment expenses or charitable contributions). Fillable 1040ez form 2012 Reduced deductions or credits. Fillable 1040ez form 2012   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return including the following. Fillable 1040ez form 2012 Deduction for contributions to a traditional individual retirement arrangement (IRA). Fillable 1040ez form 2012 Deduction for student loan interest. Fillable 1040ez form 2012 Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. Fillable 1040ez form 2012 Credit for child and dependent care expenses. Fillable 1040ez form 2012 Child tax credit. Fillable 1040ez form 2012 Education tax credits. Fillable 1040ez form 2012 Earned income credit. Fillable 1040ez form 2012 Penalty for underpayment of estimated tax. Fillable 1040ez form 2012   If you make this election for 2013 and did not have enough tax withheld or pay enough estimated tax to cover the tax you owe, you may be subject to a penalty. Fillable 1040ez form 2012 If you plan to make this election for 2014, you may need to increase your federal income tax withholding or your estimated tax payments to avoid the penalty. Fillable 1040ez form 2012 See chapter 4 for more information. Fillable 1040ez form 2012 Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. Fillable 1040ez form 2012 Only the amount over $2,000 is added to your income. Fillable 1040ez form 2012 The amount over $2,000 is shown on Form 8814, line 6. Fillable 1040ez form 2012 Unless the child's income includes qualified dividends or capital gain distributions (discussed next), the same amount is shown on Form 8814, line 12. Fillable 1040ez form 2012 Include the amount from Form 8814, line 12, on Form 1040, line 21. Fillable 1040ez form 2012 Enter “Form 8814” on the dotted line next to line 21. Fillable 1040ez form 2012 If you file more than one Form 8814, include the total amounts from line 12 of all your Forms 8814 on Form 1040, line 21. Fillable 1040ez form 2012 Capital gain distributions and qualified dividends. Fillable 1040ez form 2012   If your child's dividend income included any capital gain distributions, see Capital gain distributions under Figuring Child's Income in Publication 929, Part 2. Fillable 1040ez form 2012 If your child's dividend income included any qualified dividends, see Qualified dividends under Figuring Child's Income in Publication 929, Part 2. Fillable 1040ez form 2012 Figuring Additional Tax Use Form 8814, Part II, to figure the tax on the $2,000 of your child's interest and dividends that you do not include in your income. Fillable 1040ez form 2012 This tax is added to the tax figured on your income. Fillable 1040ez form 2012 This additional tax is the smaller of: 10% × (your child's gross income − $1,000), or $100. Fillable 1040ez form 2012 Include the amount from line 15 of all your Forms 8814 in the total on Form 1040, line 44. Fillable 1040ez form 2012 Check box a on Form 1040, line 44. Fillable 1040ez form 2012 Figure 31-A. Fillable 1040ez form 2012 Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. Fillable 1040ez form 2012 Figure 31–A. Fillable 1040ez form 2012 Can You Include Your Child's Income On Your Tax Return? Tax for Certain Children Who Have Unearned Income If a child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. Fillable 1040ez form 2012 If the parent does not or cannot choose to include the child's income on the parent's return, use Form 8615 to figure the child's tax. Fillable 1040ez form 2012 Attach the completed form to the child's Form 1040 or Form 1040A. Fillable 1040ez form 2012 When Form 8615 must be filed. Fillable 1040ez form 2012   Form 8615 must be filed for a child if all of the following statements are true. Fillable 1040ez form 2012 The child's investment income was more than $2,000. Fillable 1040ez form 2012 The child is required to file a return for 2013. Fillable 1040ez form 2012 The child either: Was under age 18 at the end of the year, Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or Was over age 18 and under age 24 at the end of the year, was a full-time student, and did not have earned income that was more than half of his or her support. Fillable 1040ez form 2012 At least one of the child's parents was alive at the end of 2013. Fillable 1040ez form 2012 The child does not file a joint return for 2013. Fillable 1040ez form 2012 These conditions are also shown in  Figure 31-B. Fillable 1040ez form 2012 Earned income. Fillable 1040ez form 2012   Earned income includes salaries, wages, tips, and other payments received for personal services performed. Fillable 1040ez form 2012 It does not include unearned income as defined later in this chapter. Fillable 1040ez form 2012 Support. Fillable 1040ez form 2012   Your child's support includes all amounts spent to provide the child with food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. Fillable 1040ez form 2012 To figure your child's support, count support provided by you, your child, and others. Fillable 1040ez form 2012 However, a scholarship received by your child is not considered support if your child is a full-time student. Fillable 1040ez form 2012 See chapter 3 for details about support. Fillable 1040ez form 2012 Certain January 1 birthdays. Fillable 1040ez form 2012   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. Fillable 1040ez form 2012 Figure 31-B. Fillable 1040ez form 2012 Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. Fillable 1040ez form 2012 Figure 31-B. Fillable 1040ez form 2012 Do You Have To Use Form 8615 To Figure Your Child's Tax?    IF a child was born on. Fillable 1040ez form 2012 . Fillable 1040ez form 2012 . Fillable 1040ez form 2012 THEN, at the end of 2013, the child is considered to be. Fillable 1040ez form 2012 . Fillable 1040ez form 2012 . Fillable 1040ez form 2012 January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. Fillable 1040ez form 2012 The child meets condition 3 only if the child did not have earned income that was more than half of the child's support. Fillable 1040ez form 2012  **This child meets condition 3 only if the child was a full-time student who did not have earned income that was more than half of the child's support. Fillable 1040ez form 2012  ***Do not use Form 8615 for this child. Fillable 1040ez form 2012 Providing Parental Information (Form 8615, lines A–C) On Form 8615, lines A and B, enter the parent's name and social security number. Fillable 1040ez form 2012 (If the parents filed a joint return, enter the name and social security number listed first on the joint return. Fillable 1040ez form 2012 ) On line C, check the box for the parent's filing status. Fillable 1040ez form 2012 See Which Parent's Return To Use at the beginning of this chapter for information on which parent's return information must be used on Form 8615. Fillable 1040ez form 2012 Parent with different tax year. Fillable 1040ez form 2012   If the parent and the child do not have the same tax year, complete Form 8615 using the information on the parent's return for the tax year that ends in the child's tax year. Fillable 1040ez form 2012 Parent's return information not known timely. Fillable 1040ez form 2012   If the information needed from the parent's return is not known by the time the child's return is due (usually April 15), you can file the return using estimates. Fillable 1040ez form 2012   You can use any reasonable estimate. Fillable 1040ez form 2012 This includes using information from last year's return. Fillable 1040ez form 2012 If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. Fillable 1040ez form 2012    When you get the correct information, file an amended return on Form 1040X, Amended U. Fillable 1040ez form 2012 S. Fillable 1040ez form 2012 Individual Income Tax Return. Fillable 1040ez form 2012   Instead of using estimates, you can get an automatic 6-month extension of time to file if, by the date your return is due, you file Form 4868, Application for Automatic Extension of Time To File U. Fillable 1040ez form 2012 S. Fillable 1040ez form 2012 Individual Income Tax Return. Fillable 1040ez form 2012 Extensions are discussed in chapter 1. Fillable 1040ez form 2012 Step 1. Fillable 1040ez form 2012 Figuring the Child's Net Unearned Income (Form 8615, Part I) The first step in figuring a child's tax using Form 8615 is to figure the child's net unearned income. Fillable 1040ez form 2012 To do that, use Form 8615, Part I. Fillable 1040ez form 2012 Line 1 (unearned income). Fillable 1040ez form 2012   If the child had no earned income, enter on this line the adjusted gross income shown on the child's return. Fillable 1040ez form 2012 Adjusted gross income is shown on Form 1040, line 38, or Form 1040A, line 22. Fillable 1040ez form 2012 Form 1040EZ cannot be used if Form 8615 must be filed. Fillable 1040ez form 2012   If the child had earned income, figure the amount to enter on Form 8615, line 1, by using the worksheet in the instructions for the form. Fillable 1040ez form 2012   However, if the child has: excluded any foreign earned income, deducted either a loss from self-employment, or deducted a net operating loss from another year, then use the Alternate Worksheet for Form 8615, Line 1, in Publication 929 to figure the amount to enter on Form 8615, line 1. Fillable 1040ez form 2012 Unearned income defined. Fillable 1040ez form 2012   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually done. Fillable 1040ez form 2012 It includes taxable interest, dividends (including capital gain distributions), capital gains, unemployment compensation, the taxable part of social security and pension payments, and certain distributions from trusts. Fillable 1040ez form 2012 Unearned income includes amounts produced by assets the child obtained with earned income (such as interest on a savings account into which the child deposited wages). Fillable 1040ez form 2012 Nontaxable income. Fillable 1040ez form 2012   For this purpose, unearned income includes only amounts the child must include in total income. Fillable 1040ez form 2012 Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. Fillable 1040ez form 2012 Income from property received as a gift. Fillable 1040ez form 2012   A child's unearned income includes all income produced by property belonging to the child. Fillable 1040ez form 2012 This is true even if the property was transferred to the child, regardless of when the property was transferred or purchased or who transferred it. Fillable 1040ez form 2012   A child's unearned income includes income produced by property given as a gift to the child. Fillable 1040ez form 2012 This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. Fillable 1040ez form 2012 Example. Fillable 1040ez form 2012 Amanda Black, age 13, received the following income. Fillable 1040ez form 2012 Dividends — $800 Wages — $2,100 Taxable interest — $1,200 Tax-exempt interest — $100 Net capital gains — $100 The dividends were qualified dividends on stock given to her by her grandparents. Fillable 1040ez form 2012 Amanda's unearned income is $2,100. Fillable 1040ez form 2012 This is the total of the dividends ($800), taxable interest ($1,200), and net capital gains ($100). Fillable 1040ez form 2012 Her wages are earned (not unearned) income because they are received for work actually done. Fillable 1040ez form 2012 Her tax-exempt interest is not included because it is nontaxable. Fillable 1040ez form 2012 Trust income. Fillable 1040ez form 2012   If a child is the beneficiary of a trust, distributions of taxable interest, dividends, capital gains, and other unearned income from the trust are unearned income to the child. Fillable 1040ez form 2012   However, for purposes of completing Form 8615, a taxable distribution from a qualified disability trust is considered earned income, not unearned income. Fillable 1040ez form 2012 Line 2 (deductions). Fillable 1040ez form 2012   If the child does not itemize deductions on Schedule A (Form 1040), enter $2,000 on line 2. Fillable 1040ez form 2012   If the child does itemize deductions, enter on line 2 the larger of: $1,000 plus the portion of the child's itemized deductions on Schedule A (Form 1040), line 29, that are directly connected with the production of unearned income entered on line 1, or $2,000. Fillable 1040ez form 2012 Directly connected. Fillable 1040ez form 2012   Itemized deductions are directly connected with the production of unearned income if they are for expenses paid to produce or collect taxable income or to manage, conserve, or maintain property held for producing income. Fillable 1040ez form 2012 These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. Fillable 1040ez form 2012   These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). Fillable 1040ez form 2012 Only the amount greater than 2% of the child's adjusted gross income can be deducted. Fillable 1040ez form 2012 See chapter 28 for more information. Fillable 1040ez form 2012 Example 1. Fillable 1040ez form 2012 Roger, age 12, has unearned income of $8,000, no other income, no adjustments to income, and itemized deductions of $300 (net of the 2% limit) that are directly connected with his unearned income. Fillable 1040ez form 2012 His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. Fillable 1040ez form 2012 Roger enters $2,000 on line 2 because that is more than the total of $1,000 plus his directly connected itemized deductions of $300. Fillable 1040ez form 2012 Example 2. Fillable 1040ez form 2012 Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. Fillable 1040ez form 2012 She has no other income. Fillable 1040ez form 2012 She has itemized deductions of $1,050 (net of the 2% limit) that are directly connected with the production of her unearned income. Fillable 1040ez form 2012 Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). Fillable 1040ez form 2012 The amount on line 2 is $2,050. Fillable 1040ez form 2012 This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. Fillable 1040ez form 2012 Line 3. Fillable 1040ez form 2012   Subtract line 2 from line 1 and enter the result on this line. Fillable 1040ez form 2012 If zero or less, do not complete the rest of the form. Fillable 1040ez form 2012 However, you must still attach Form 8615 to the child's tax return. Fillable 1040ez form 2012 Figure the tax on the child's taxable income in the normal manner. Fillable 1040ez form 2012 Line 4 (child's taxable income). Fillable 1040ez form 2012   Enter on line 4 the child's taxable income from Form 1040, line 43, or Form 1040A, line 27. Fillable 1040ez form 2012   However, if the child files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, see the Form 8615 instructions or Pub. Fillable 1040ez form 2012 929. Fillable 1040ez form 2012 Line 5 (net unearned income). Fillable 1040ez form 2012   A child's net unearned income cannot be more than his or her taxable income. Fillable 1040ez form 2012 Enter on Form 8615, line 5, the smaller of line 3 or line 4. Fillable 1040ez form 2012 This is the child's net unearned income. Fillable 1040ez form 2012   If zero or less, do not complete the rest of the form. Fillable 1040ez form 2012 However, you must still attach Form 8615 to the child's tax return. Fillable 1040ez form 2012 Figure the tax on the child's taxable income in the normal manner. Fillable 1040ez form 2012 Step 2. Fillable 1040ez form 2012 Figuring Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) The next step in completing Form 8615 is to figure a tentative tax on the child's net unearned income at the parent's tax rate. Fillable 1040ez form 2012 The tentative tax at the parent's tax rate is the difference between the tax on the parent's taxable income figured with the child's net unearned income (plus the net unearned income of any other child whose Form 8615 includes the tax return information of that parent) and the tax figured without it. Fillable 1040ez form 2012 When figuring the tentative tax at the parent's tax rate on Form 8615, do not refigure any of the exclusions, deductions, or credits on the parent's return because of the child's net unearned income. Fillable 1040ez form 2012 For example, do not refigure the medical expense deduction. Fillable 1040ez form 2012 Figure the tentative tax on Form 8615, lines 6 through 13. Fillable 1040ez form 2012 Note. Fillable 1040ez form 2012 If the child or parent has any capital gains or losses, get Publication 929 for help in completing Form 8615, Part II. Fillable 1040ez form 2012 Line 6 (parent's taxable income). Fillable 1040ez form 2012   Enter on line 6 the parent's taxable income from Form 1040, line 43, Form 1040A, line 27, or Form 1040EZ, line 6. Fillable 1040ez form 2012   If the Foreign Earned Income Tax Worksheet (in the Form 1040 instructions) was used to figure the parent's tax, enter the amount from line 3 of that worksheet instead of the parent's taxable income. Fillable 1040ez form 2012 Line 7 (net unearned income of other children). Fillable 1040ez form 2012   If the tax return information of the parent is also used on any other child's Form 8615, enter on line 7 the total of the amounts from line 5 of all the other children's Forms 8615. Fillable 1040ez form 2012 Do not include the amount from line 5 of the Form 8615 being completed. Fillable 1040ez form 2012 Example. Fillable 1040ez form 2012 Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. Fillable 1040ez form 2012 The children's net unearned income amounts on line 5 of their Forms 8615 are: Sharon — $800 Jerry — $600 Mike — $1,000 Line 7 of Sharon's Form 8615 will show $1,600, the total of the amounts on line 5 of Jerry's and Mike's Forms 8615. Fillable 1040ez form 2012 Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). Fillable 1040ez form 2012 Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). Fillable 1040ez form 2012 Other children's information not available. Fillable 1040ez form 2012   If the net unearned income of the other children is not available when the return is due, either file the return using estimates or get an extension of time to file. Fillable 1040ez form 2012 See Parent's return information not known timely , earlier. Fillable 1040ez form 2012 Line 11 (tentative tax). Fillable 1040ez form 2012   Subtract line 10 from line 9 and enter the result on this line. Fillable 1040ez form 2012 This is the tentative tax. Fillable 1040ez form 2012   If line 7 is blank, skip lines 12a and 12b and enter the amount from line 11 on line 13. Fillable 1040ez form 2012 Also skip the discussion for lines 12a and 12b that follows. Fillable 1040ez form 2012 Lines 12a and 12b (dividing the tentative tax). Fillable 1040ez form 2012   If an amount is entered on line 7, divide the tentative tax shown on line 11 among the children according to each child's share of the total net unearned income. Fillable 1040ez form 2012 This is done on lines 12a, 12b, and 13. Fillable 1040ez form 2012 Add the amount on line 7 to the amount on line 5 and enter the total on line 12a. Fillable 1040ez form 2012 Divide the amount on line 5 by the amount on line 12a and enter the result, as a decimal, on line 12b. Fillable 1040ez form 2012 Example. Fillable 1040ez form 2012 In the earlier example under Line 7 (net unearned income of other children), Sharon's Form 8615 shows $1,600 on line 7. Fillable 1040ez form 2012 The amount entered on line 12a is $2,400, the total of the amounts on lines 5 and 7 ($800 + $1,600). Fillable 1040ez form 2012 The decimal on line 12b is  . Fillable 1040ez form 2012 333, figured as follows and rounded to three places. Fillable 1040ez form 2012   $800 = . Fillable 1040ez form 2012 333     $2,400   Step 3. Fillable 1040ez form 2012 Figuring the Child's Tax (Form 8615, Part III) The final step in figuring a child's tax using Form 8615 is to determine the larger of: The total of: The child's share of the tentative tax based on the parent's tax rate, plus The tax on the child's taxable income in excess of net unearned income, figured at the child's tax rate, or The tax on the child's taxable income, figured at the child's tax rate. Fillable 1040ez form 2012 This is the child's tax. Fillable 1040ez form 2012 It is figured on Form 8615, lines 14 through 18. Fillable 1040ez form 2012 Alternative minimum tax. Fillable 1040ez form 2012   A child may be subject to alternative minimum tax (AMT) if he or she has certain items given preferential treatment under the tax law. Fillable 1040ez form 2012 See Alternative Minimum Tax (AMT) in chapter 30. Fillable 1040ez form 2012    For more information on who is liable for AMT and how to figure it, see Form 6251, Alternative Minimum Tax—Individuals. Fillable 1040ez form 2012 For information on special limits that apply to a child who files Form 6251, see Certain Children Under Age 24 in the Instructions for Form 6251. Fillable 1040ez form 2012 Prev  Up  Next   Home   More Online Publications
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Withholding Compliance Questions & Answers

Q1: In the past, as an employer, I was required to submit all Forms W-4 that claimed complete exemption from withholding (when $200 or more in weekly wages were regularly expected) or claimed more than 10 allowances. What Forms W-4 do I now have to submit to the IRS?

A1: Employers are no longer required to routinely submit Forms W-4 to the IRS.  However, in certain circumstances, the IRS may direct you to submit copies of Forms W-4 for certain employees in order to ensure that the employees have adequate withholding. You are now required to submit the Forms W-4 to IRS only if directed to do so in a written notice or pursuant to specified criteria set forth in future published guidance.

 


Q2: If an employer no longer has to submit Forms W-4 claiming complete exemption from withholding or claiming more than 10 allowances, how does the IRS determine adequate withholding?

A2: The IRS is making more effective use of information contained in its records along with information reported on Form W-2 wage statements to ensure that employees have enough federal income tax withheld. 
 


Q3: If the IRS determines that an employee does not have enough federal income tax withheld, what will an employer be asked to do?

A3: If the IRS determines that an employee does not have enough withholding, we will notify you to increase the amount of withholding tax by issuing a “lock-in” letter that specifies the maximum number of withholding allowances permitted for the employee. You will also receive a copy for the employee that identifies the maximum number of withholding exemptions permitted and the process by which the employee can provide additional information to the IRS for purposes of determining the appropriate number of withholding exemptions. If the employee still works for you, you must furnish the employee copy to the employee. If the employee no longer works for you, NO ACTION IS REQUIRED AT THIS TIME. However if the employee should return to work within twelve (12) months, you should begin withholding income tax from the employee’s wages based on the withholding rate stated in this letter.The employee will be given a period of time before the lock-in rate is effective to submit for approval to the IRS a new Form W-4 and a statement supporting the claims made on the Form W-4 that would decrease federal income tax withholding. The employee must send the Form W-4 and statement directly to the IRS office designated on the lock-in letter. You must withhold tax in accordance with the lock-in letter as of the date specified in the lock-in letter, unless otherwise notified by the IRS. You will be required to take this action no sooner than 45 calendar days after the date of the lock-in letter. Once a lock-in rate is effective, an employer can not decrease withholding unless approved by the IRS.

 


Q4: As an employer, after I lock in withholding on an employee based on a lock-in letter from the IRS, what do I do if I receive a revised Form W-4 from the employee?

A4: After the receipt of a lock-in letter, you must disregard any Form W-4 that decreases the amount of withholding. The employee must submit for approval to the IRS any new Form W-4 and a statement supporting the claims made on the Form W-4 that would decrease federal income tax withholding. The employee should send the Form W-4 and statement directly to the address on the lock-in letter. The IRS will notify you to withhold at a specific rate if the employee’s request is approved. However, if, at any time, the employee furnishes a Form W-4 that claims a number of withholding allowances less than the maximum number specified in the lock-in letter, the employer must increase withholding by withholding tax based on that Form W-4.

 


Q5: As an employer who has received a modification letter (letter 2808C) from the WHC program, do I wait for another 60 days to change the marital status and/or number of allowances per the modification letter?

A5: No, the modifications to the marital status and/or number of allowances become effective immediately upon receipt of the letter 2808C.

 


Q6: I have been directed to lock in an employee’s withholding. What happens if I do not lock in the employee’s withholding as directed?

A6: Those employers who do not follow the IRS lock-in instructions will be liable for paying the additional amount of tax that should have been withheld. 

 


Q7: Our employees can submit or change their Forms W-4 on line. How can I prevent them from changing their Forms W-4 after they have been locked-in by the IRS?

A7: You will need to block employees who have been locked-in from using an on line Form W-4 system to decrease their withholding.

 


Q8:  What should I do if an employee submits a valid Form W-4 that appears to be claiming an incorrect withholding amount?

A8: You should withhold federal income tax based on the allowances claimed on the Form W-4.  But, you should advise the employee that the IRS may review withholding to ensure it is adequate, and that the IRS may direct you, as the employer, to withhold income tax for the employee at a certain rate if the review indicates the employee’s withholding is inadequate. Once this occurs the employee will not be allowed to decrease their withholding unless approved by the IRS.

 


Q9: What do I do if an employee hands me a substitute Form W-4 developed by the employee?

A9:  Employers may refuse to accept a substitute form developed by an employee and the employee submitting such a form will be treated as failing to furnish a Form W-4.  In such case, you should inform the employee that you will not accept this form and offer the employee an opportunity to complete an official Form W-4 or a substitute Form W-4 developed by you. Until the employee furnishes a new Form W-4, the employer must withhold from the employee as from a single person claiming no allowances; if, however, a prior Form W-4 is in effect for the employee, the employer must continue to withhold based on the prior Form W-4.  As an employer, a substitute withholding exemption certificate developed by you can be used in lieu of the official Form W-4, if you provide all the tables, instructions, and worksheets contained in the Form W-4 in effect at that time to the employee.  

 


Q10: What do I do if an employee hands me an official IRS Form W-4 that is clearly altered?

A10: Any alteration of a Form W-4 (e.g. crossed out penalties of perjury statement above the signature) will cause the Form W-4 to be invalid. If an employer receives an invalid Form W-4, the employee will be treated as failing to furnish a Form W-4; the employer must inform the employee that the Form W-4 is invalid, and must request another Form W-4 from the employee. Until the employee furnishes a new Form W-4, the employer must withhold from the employee as from a single person claiming no allowances. If, however, a prior Form W-4 is in effect for the employee, the employer must continue to withhold based on the prior Form W-4.

 


Q11: I heard my employer no longer has to routinely submit Forms W-4 to the IRS.  How will this affect me as an employee?

A11: There is no change in the requirement that employees have adequate income tax withholding. The withholding calculator found on www.irs.gov is available to help employees determine the proper amount of federal income tax withholding. Another useful resource, Publication 505, “Tax Withholding and Estimated Taxes" is available on the IRS Web site or can be obtained by calling 1-800-TAX-FORM (829-3676).  Individuals who do not have sufficient income tax withholding are subject to penalties. The IRS will be making more effective use of information contained in its records along with information reported on Form W-2 wage statements to ensure that employees have enough federal income tax withheld. 

 


Q12: As an employee, what happens if the IRS determines that I do not have adequate withholding?

A12: The IRS may direct your employer to withhold federal income tax at an increased rate to ensure you have adequate withholding by issuing a lock-in letter. At that point, your employer must disregard any Form W-4 that decreases the amount of withholding. You will receive a copy of the lock-in letter. You will be given a period of time before the lock-in rate is put in effect to submit for approval to the IRS a new Form W-4 and a statement supporting the claims made on the Form W-4 that would decrease your federal income tax withholding. You should send the Form W-4 and statement directly to the address on the lock-in letter. Once a lock-in letter is issued, you will not be allowed to decrease your withholding unless approved by the IRS.

 


Q13: What if I don’t want to submit a Form W-4 to my employer?

A13: Your employer is required to withhold income tax from your wages as if you are single with zero allowances if you do not submit a Form W-4.

 

 


Q14: How can you be released from the Withholding Compliance Program?

A14: You must continue to file returns and pay your taxes due. If you timely meet all your filing and payment obligations for three consecutive years, you can request that we release you from the Withholding Compliance Program.

Page Last Reviewed or Updated: 20-Mar-2014

The Fillable 1040ez Form 2012

Fillable 1040ez form 2012 5. Fillable 1040ez form 2012   Soil and Water Conservation Expenses Table of Contents Introduction Topics - This chapter discusses: Business of Farming Plan Certification Conservation ExpensesWater well. Fillable 1040ez form 2012 Assessment by Conservation DistrictAssessment for Depreciable Property 25% Limit on DeductionNet operating loss. Fillable 1040ez form 2012 When to Deduct or Capitalize Sale of a Farm Introduction If you are in the business of farming, you can choose to deduct certain expenses for: Soil or water conservation, Prevention of erosion of land used in farming, or Endangered species recovery. Fillable 1040ez form 2012 Otherwise, these are capital expenses that must be added to the basis of the land. Fillable 1040ez form 2012 (See chapter 6 for information on determining basis. Fillable 1040ez form 2012 ) Conservation expenses for land in a foreign country do not qualify for this special treatment. Fillable 1040ez form 2012 The deduction for conservation expenses cannot be more than 25% of your gross income from farming. Fillable 1040ez form 2012 See 25% Limit on Deduction , later. Fillable 1040ez form 2012 Although some expenses are not deductible as soil and water conservation expenses, they may be deductible as ordinary and necessary farm expenses. Fillable 1040ez form 2012 These include interest and taxes, the cost of periodically clearing brush from productive land, the regular removal of sediment from a drainage ditch, and expenses paid or incurred primarily to produce an agricultural crop that may also conserve soil. Fillable 1040ez form 2012 You must include in income most government payments for approved conservation practices. Fillable 1040ez form 2012 However, you can exclude some payments you receive under certain cost-sharing conservation programs. Fillable 1040ez form 2012 For more information, see Agricultural Program Payments in chapter 3. Fillable 1040ez form 2012 To get the full deduction to which you are entitled, you should maintain your records to clearly distinguish between your ordinary and necessary farm business expenses and your soil and water conservation expenses. Fillable 1040ez form 2012 Topics - This chapter discusses: Business of farming Plan certification Conservation expenses Assessment by conservation district 25% limit on deduction When to deduct or capitalize Sale of a farm Business of Farming For purposes of soil and water conservation expenses, you are in the business of farming if you cultivate, operate, or manage a farm for profit, either as an owner or a tenant. Fillable 1040ez form 2012 You are not in the business of farming if you cultivate or operate a farm for recreation or pleasure, rather than for profit. Fillable 1040ez form 2012 You are not farming if you are engaged only in forestry or the growing of timber. Fillable 1040ez form 2012 Farm defined. Fillable 1040ez form 2012   A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. Fillable 1040ez form 2012 It also includes plantations, ranches, ranges, and orchards. Fillable 1040ez form 2012 A fish farm is an area where fish and other marine animals are grown or raised and artificially fed, protected, etc. Fillable 1040ez form 2012 It does not include an area where they are merely caught or harvested. Fillable 1040ez form 2012 A plant nursery is a farm for purposes of deducting soil and water conservation expenses. Fillable 1040ez form 2012 Farm rental. Fillable 1040ez form 2012   If you own a farm and receive farm rental payments based on farm production, either in cash or crop shares, you are in the business of farming. Fillable 1040ez form 2012 If you get cash rental for a farm you own that is not used in farm production, you cannot deduct soil and water conservation expenses for that farm. Fillable 1040ez form 2012   If you receive a fixed rental payment that is not based on farm production, you are in the business of farming only if you materially participate in operating or managing the farm. Fillable 1040ez form 2012 Example. Fillable 1040ez form 2012 You own a farm in Iowa and live in California. Fillable 1040ez form 2012 You rent the farm for $175 in cash per acre and do not materially participate in producing or managing production of the crops grown on the farm. Fillable 1040ez form 2012 You cannot deduct your soil conservation expenses for this farm. Fillable 1040ez form 2012 You must capitalize the expenses and add them to the basis of the land. Fillable 1040ez form 2012     For more information, see Material participation for landlords under Landlord Participation in Farming in chapter 12. Fillable 1040ez form 2012 Plan Certification You can deduct soil and water conservation expenses only if they are consistent with a plan approved by the Natural Resources Conservation Service (NRCS) of the Department of Agriculture. Fillable 1040ez form 2012 If no such plan exists, the expenses must be consistent with a soil conservation plan of a comparable state agency. Fillable 1040ez form 2012 Keep a copy of the plan with your books and records to support your deductions. Fillable 1040ez form 2012 Conservation plan. Fillable 1040ez form 2012   A conservation plan includes the farming conservation practices approved for the area where your farmland is located. Fillable 1040ez form 2012 There are three types of approved plans. Fillable 1040ez form 2012 NRCS individual site plans. Fillable 1040ez form 2012 These plans are issued individually to farmers who request assistance from NRCS to develop a conservation plan designed specifically for their farmland. Fillable 1040ez form 2012 NRCS county plans. Fillable 1040ez form 2012 These plans include a listing of farm conservation practices approved for the county where the farmland is located. Fillable 1040ez form 2012 You can deduct expenses for conservation practices not included on the NRCS county plans only if the practice is a part of an individual site plan. Fillable 1040ez form 2012 Comparable state agency plans. Fillable 1040ez form 2012 These plans are approved by state agencies and can be approved individual site plans or county plans. Fillable 1040ez form 2012   A list of NRCS conservation programs is available at www. Fillable 1040ez form 2012 nrcs. Fillable 1040ez form 2012 usda. Fillable 1040ez form 2012 gov/programs. Fillable 1040ez form 2012 Individual site plans can be obtained from NRCS offices and the comparable state agencies. Fillable 1040ez form 2012 Conservation Expenses You can deduct conservation expenses only for land you or your tenant are using, or have used in the past, for farming. Fillable 1040ez form 2012 These expenses include, but are not limited to, the following. Fillable 1040ez form 2012 The treatment or movement of earth, such as: Leveling, Conditioning, Grading, Terracing, Contour furrowing, and Restoration of soil fertility. Fillable 1040ez form 2012 The construction, control, and protection of: Diversion channels, Drainage ditches, Irrigation ditches, Earthen dams, and Watercourses, outlets, and ponds. Fillable 1040ez form 2012 The eradication of brush. Fillable 1040ez form 2012 The planting of windbreaks. Fillable 1040ez form 2012 You cannot deduct expenses to drain or fill wetlands, or to prepare land for center pivot irrigation systems, as soil and water conservation expenses. Fillable 1040ez form 2012 These expenses are added to the basis of the land. Fillable 1040ez form 2012 If you choose to deduct soil and water conservation expenses, you cannot exclude from gross income any cost-sharing payments you receive for those expenses. Fillable 1040ez form 2012 See chapter 3 for information about payments eligible for the cost-sharing exclusion. Fillable 1040ez form 2012 New farm or farmland. Fillable 1040ez form 2012   If you acquire a new farm or new farmland from someone who was using it in farming immediately before you acquired the land, soil and water conservation expenses you incur on it will be treated as made on land used in farming at the time the expenses were paid or incurred. Fillable 1040ez form 2012 You can deduct soil and water conservation expenses for this land if your use of it is substantially a continuation of its use in farming. Fillable 1040ez form 2012 The new farming activity does not have to be the same as the old farming activity. Fillable 1040ez form 2012 For example, if you buy land that was used for grazing cattle and then prepare it for use as an apple orchard, you can deduct your conservation expenses. Fillable 1040ez form 2012 Land not used for farming. Fillable 1040ez form 2012   If your conservation expenses benefit both land that does not qualify as land used for farming and land that does qualify, you must allocate the expenses between the two types of land. Fillable 1040ez form 2012 For example, if the expenses benefit 200 acres of your land, but only 120 acres of this land are used for farming, then you can deduct 60% (120 ÷ 200) of the expenses. Fillable 1040ez form 2012 You can use another method to allocate these expenses if you can clearly show that your method is more reasonable. Fillable 1040ez form 2012 Depreciable conservation assets. Fillable 1040ez form 2012   You generally cannot deduct your expenses for depreciable conservation assets. Fillable 1040ez form 2012 However, you can deduct certain amounts you pay or incur for an assessment for depreciable property that a soil and water conservation or drainage district levies against your farm. Fillable 1040ez form 2012 See Assessment for Depreciable Property , later. Fillable 1040ez form 2012   You must capitalize expenses to buy, build, install, or improve depreciable structures or facilities. Fillable 1040ez form 2012 These expenses include those for materials, supplies, wages, fuel, hauling, and moving dirt when making structures such as tanks, reservoirs, pipes, culverts, canals, dams, wells, or pumps composed of masonry, concrete, tile, metal, or wood. Fillable 1040ez form 2012 You recover your capital investment through annual allowances for depreciation. Fillable 1040ez form 2012   You can deduct soil and water conservation expenses for nondepreciable earthen items. Fillable 1040ez form 2012 Nondepreciable earthen items include certain dams, ponds, and terraces described under Property Having a Determinable Useful Life in chapter 7. Fillable 1040ez form 2012 Water well. Fillable 1040ez form 2012   You cannot deduct the cost of drilling a water well for irrigation and other agricultural purposes as a soil and water conservation expense. Fillable 1040ez form 2012 It is a capital expense. Fillable 1040ez form 2012 You recover your cost through depreciation. Fillable 1040ez form 2012 You also must capitalize your cost for drilling a test hole. Fillable 1040ez form 2012 If the test hole produces no water and you continue drilling, the cost of the test hole is added to the cost of the producing well. Fillable 1040ez form 2012 You can recover the total cost through depreciation deductions. Fillable 1040ez form 2012   If a test hole, dry hole, or dried-up well (resulting from prolonged lack of rain, for instance) is abandoned, you can deduct your unrecovered cost in the year of abandonment. Fillable 1040ez form 2012 Abandonment means that all economic benefits from the well are terminated. Fillable 1040ez form 2012 For example, filling or sealing a well excavation or casing so that all economic benefits from the well are terminated constitutes an abandonment. Fillable 1040ez form 2012 Endangered species recovery expenses. Fillable 1040ez form 2012   If you are in the business of farming and meet other specific requirements, you can choose to deduct the conservation expenses discussed earlier as endangered species recovery expenses. Fillable 1040ez form 2012 Otherwise, these are capital expenses that must be added to the basis of the land. Fillable 1040ez form 2012   The expenses must be paid or incurred for the purpose of achieving site-specific management actions recommended in a recovery plan approved under section 4(f) of the Endangered Species Act of 1973. Fillable 1040ez form 2012 See Internal Revenue Code section 175 for more information. Fillable 1040ez form 2012 Assessment by Conservation District In some localities, a soil or water conservation or drainage district incurs expenses for soil or water conservation and levies an assessment against the farmers who benefit from the expenses. Fillable 1040ez form 2012 You can deduct as a conservation expense amounts you pay or incur for the part of an assessment that: Covers expenses you could deduct if you had paid them directly, or Covers expenses for depreciable property used in the district's business. Fillable 1040ez form 2012 Assessment for Depreciable Property You generally can deduct as a conservation expense amounts you pay or incur for the part of a conservation or drainage district assessment that covers expenses for depreciable property. Fillable 1040ez form 2012 This includes items such as pumps, locks, concrete structures (including dams and weir gates), draglines, and similar equipment. Fillable 1040ez form 2012 The depreciable property must be used in the district's soil and water conservation activities. Fillable 1040ez form 2012 However, the following limits apply to these assessments. Fillable 1040ez form 2012 The total assessment limit. Fillable 1040ez form 2012 The yearly assessment limit. Fillable 1040ez form 2012 After you apply these limits, the amount you can deduct is added to your other conservation expenses for the year. Fillable 1040ez form 2012 The total for these expenses is then subject to the 25% of gross income from farming limit on the deduction, discussed later. Fillable 1040ez form 2012 See Table 5-1 for a brief summary of these limits. Fillable 1040ez form 2012 Table 5-1. Fillable 1040ez form 2012 Limits on Deducting an Assessment by a Conservation District for Depreciable Property Total Limit on Deduction for Assessment for Depreciable Property Yearly Limit on Deduction for Assessment for Depreciable Property Yearly Limit for All Conservation Expenses 10% of: $500 + 10% of: 25% of: Total assessment against all members of the district for the property. Fillable 1040ez form 2012 Your deductible share of the cost to the district for the property. Fillable 1040ez form 2012 Your gross income from farming. Fillable 1040ez form 2012 No one taxpayer can deduct more than 10% of the total assessment. Fillable 1040ez form 2012 Any amount over 10% is a capital expense and is added to the basis of your land. Fillable 1040ez form 2012 If an assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. Fillable 1040ez form 2012 If the amount you pay or incur for any year is more than the limit, you can deduct for that year only 10% of your deductible share of the cost. Fillable 1040ez form 2012 You can deduct the remainder in equal amounts over the next 9 tax years. Fillable 1040ez form 2012 Limit for all conservation expenses, including assessments for depreciable property. Fillable 1040ez form 2012 Amounts greater than 25% can be carried to the following year and added to that year's expenses. Fillable 1040ez form 2012 The total is then subject to the 25% of gross income from farming limit in that year. Fillable 1040ez form 2012 To ensure your deduction is within the deduction limits, keep records to show the following. Fillable 1040ez form 2012 The total assessment against all members of the district for the depreciable property. Fillable 1040ez form 2012 Your deductible share of the cost to the district for the depreciable property. Fillable 1040ez form 2012 Your gross income from farming. Fillable 1040ez form 2012 Total assessment limit. Fillable 1040ez form 2012   You cannot deduct more than 10% of the total amount assessed to all members of the conservation or drainage district for the depreciable property. Fillable 1040ez form 2012 This applies whether you pay the assessment in one payment or in installments. Fillable 1040ez form 2012 If your assessment is more than 10% of the total amount assessed, both the following rules apply. Fillable 1040ez form 2012 The amount over 10% is a capital expense and is added to the basis of your land. Fillable 1040ez form 2012 If the assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. Fillable 1040ez form 2012 Yearly assessment limit. Fillable 1040ez form 2012   The maximum amount you can deduct in any one year is the total of 10% of your deductible share of the cost as explained earlier, plus $500. Fillable 1040ez form 2012 If the amount you pay or incur is equal to or less than the maximum amount, you can deduct it in the year it is paid or incurred. Fillable 1040ez form 2012 If the amount you pay or incur is more, you can deduct in that year only 10% of your deductible share of the cost. Fillable 1040ez form 2012 You can deduct the remainder in equal amounts over the next 9 tax years. Fillable 1040ez form 2012 Your total conservation expense deduction for each year is also subject to the 25% of gross income from farming limit on the deduction, discussed later. Fillable 1040ez form 2012 Example 1. Fillable 1040ez form 2012 This year, the soil conservation district levies and you pay an assessment of $2,400 against your farm. Fillable 1040ez form 2012 Of the assessment, $1,500 is for digging drainage ditches. Fillable 1040ez form 2012 You can deduct this part as a soil or conservation expense as if you had paid it directly. Fillable 1040ez form 2012 The remaining $900 is for depreciable equipment to be used in the district's irrigation activities. Fillable 1040ez form 2012 The total amount assessed by the district against all its members for the depreciable equipment is $7,000. Fillable 1040ez form 2012 The total amount you can deduct for the depreciable equipment is limited to 10% of the total amount assessed by the district against all its members for depreciable equipment, or $700. Fillable 1040ez form 2012 The $200 excess ($900 − $700) is a capital expense you must add to the basis of your farm. Fillable 1040ez form 2012 To figure the maximum amount you can deduct for the depreciable equipment this year, multiply your deductible share of the total assessment ($700) by 10%. Fillable 1040ez form 2012 Add $500 to the result for a total of $570. Fillable 1040ez form 2012 Your deductible share, $700, is greater than the maximum amount deductible in one year, so you can deduct only $70 of the amount you paid or incurred for depreciable property this year (10% of $700). Fillable 1040ez form 2012 You can deduct the balance at the rate of $70 a year over the next 9 years. Fillable 1040ez form 2012 You add $70 to the $1,500 portion of the assessment for drainage ditches. Fillable 1040ez form 2012 You can deduct $1,570 of the $2,400 assessment as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed later. Fillable 1040ez form 2012 Example 2. Fillable 1040ez form 2012 Assume the same facts in Example 1 except that $1,850 of the $2,400 assessment is for digging drainage ditches and $550 is for depreciable equipment. Fillable 1040ez form 2012 The total amount assessed by the district against all its members for depreciable equipment is $5,500. Fillable 1040ez form 2012 The total amount you can deduct for the depreciable equipment is limited to 10% of this amount, or $550. Fillable 1040ez form 2012 The maximum amount you can deduct this year for the depreciable equipment is $555 (10% of your deductible share of the total assessment, $55, plus $500). Fillable 1040ez form 2012 Since your deductible share is less than the maximum amount deductible in one year, you can deduct the entire $550 this year. Fillable 1040ez form 2012 You can deduct the entire assessment, $2,400, as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed below. Fillable 1040ez form 2012 Sale or other disposal of land during 9-year period. Fillable 1040ez form 2012   If you dispose of the land during the 9-year period for deducting conservation expenses subject to the yearly limit, any amounts you have not yet deducted because of this limit are added to the basis of the property. Fillable 1040ez form 2012 Death of farmer during 9-year period. Fillable 1040ez form 2012   If a farmer dies during the 9-year period, any remaining amounts not yet deducted are deducted in the year of death. Fillable 1040ez form 2012 25% Limit on Deduction The total deduction for conservation expenses in any tax year is limited to 25% of your gross income from farming for the year. Fillable 1040ez form 2012 Gross income from farming. Fillable 1040ez form 2012   Gross income from farming is the income you derive in the business of farming from the production of crops, fish, fruits, other agricultural products, or livestock. Fillable 1040ez form 2012 Gains from sales of draft, breeding, or dairy livestock are included. Fillable 1040ez form 2012 Gains from sales of assets such as farm machinery, or from the disposition of land, are not included. Fillable 1040ez form 2012 Carryover of deduction. Fillable 1040ez form 2012   If your deductible conservation expenses in any year are more than 25% of your gross income from farming for that year, you can carry the unused deduction over to later years. Fillable 1040ez form 2012 However, the deduction in any later year is limited to 25% of the gross income from farming for that year as well. Fillable 1040ez form 2012 Example. Fillable 1040ez form 2012 In 2012, you have gross income of $32,000 from two farms. Fillable 1040ez form 2012 During the year, you incurred $10,000 of deductible soil and water conservation expenses for one of the farms. Fillable 1040ez form 2012 However, your deduction is limited to 25% of $32,000, or $8,000. Fillable 1040ez form 2012 The $2,000 excess ($10,000 − $8,000) is carried over to 2013 and added to deductible soil and water conservation expenses made in that year. Fillable 1040ez form 2012 The total of the 2012 carryover plus 2013 expenses is deductible in 2013, subject to the limit of 25% of your gross income from farming in 2013. Fillable 1040ez form 2012 Any expenses over the limit in that year are carried to 2014 and later years. Fillable 1040ez form 2012 Net operating loss. Fillable 1040ez form 2012   The deduction for soil and water conservation expenses, after applying the 25% limit, is included when figuring a net operating loss (NOL) for the year. Fillable 1040ez form 2012 If the NOL is carried to another year, the soil and water conservation deduction included in the NOL is not subject to the 25% limit in the year to which it is carried. Fillable 1040ez form 2012 When to Deduct or Capitalize If you choose to deduct soil and water conservation expenses, you must deduct the total allowable amount on your tax return for the first year you pay or incur these expenses. Fillable 1040ez form 2012 If you do not choose to deduct the expenses, you must capitalize them. Fillable 1040ez form 2012 Change of method. Fillable 1040ez form 2012   If you want to change your method for the treatment of soil and water conservation expenses, or you want to treat the expenses for a particular project or a single farm in a different manner, you must get the approval of the IRS. Fillable 1040ez form 2012 To get this approval, submit a written request by the due date of your return for the first tax year you want the new method to apply. Fillable 1040ez form 2012 You or your authorized representative must sign the request. Fillable 1040ez form 2012   The request must include the following information. Fillable 1040ez form 2012 Your name and address. Fillable 1040ez form 2012 The first tax year the method or change of method is to apply. Fillable 1040ez form 2012 Whether the method or change of method applies to all your soil and water conservation expenses or only to those for a particular project or farm. Fillable 1040ez form 2012 If the method or change of method does not apply to all your expenses, identify the project or farm to which the expenses apply. Fillable 1040ez form 2012 The total expenses you paid or incurred in the first tax year the method or change of method is to apply. Fillable 1040ez form 2012 A statement that you will account separately in your books for the expenses to which this method or change of method relates. Fillable 1040ez form 2012 Send your request to the following  address. Fillable 1040ez form 2012  Department of the Treasury Internal Revenue Service Center Cincinnati, OH 45999  For more information, see Change in  Accounting Method in chapter 2. Fillable 1040ez form 2012 Sale of a Farm If you sell your farm, you cannot adjust the basis of the land at the time of the sale for any unused carryover of soil and water conservation expenses (except for deductions of assessments for depreciable property, discussed earlier). Fillable 1040ez form 2012 However, if you acquire another farm and return to the business of farming, you can start taking deductions again for the unused carryovers. Fillable 1040ez form 2012 Gain on sale of farmland. Fillable 1040ez form 2012   If you held the land 5 years or less before you sold it, gain on the sale of the land is treated as ordinary income up to the amount you previously deducted for soil and water conservation expenses. Fillable 1040ez form 2012 If you held the land less than 10 but more than 5 years, the gain is treated as ordinary income up to a specified percentage of the previous deductions. Fillable 1040ez form 2012 See Section 1252 property under Other Gains in chapter 9. 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