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

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

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

3. E-File for FREE

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

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

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

Free Federal And State Tax Filing 2012

E-file Prior Year Tax Return1040v2014 1040 Ez FormFree State Filing Only2012 1040ez FormHow To Fill Out 1040x Line By LineOnline Amended Tax ReturnFiling State Tax ReturnsTax Act 2012 OnlineTax Forms For 2011How Do You Amend A Tax ReturnFile 2011 Tax Returns1040ez Filing TableFree FileH And R Block 1040ezNeed To File 2011 Tax Return H And R BlockTax Act Online 2011How To File State Taxes Online For FreeWhen Is The Last Day To File Taxes 20122008 Tax Forms 1040Tax 1040ezH&r Block At Home Deluxe State 2012 Download2009 Form 1040 EzFree Taxes For 2012Irs Forms 1040 EzIrs Form 1040ez 2011Amending 2011 Tax ReturnCan I Still File My 2012 TaxesFree Turbotax For MilitaryHow To File An AmendmentTaxact 2013 FreeForm 1040aForm 4868How Can I File My 2012 Taxes For FreeH&r Block 1040ez Free 2013Free Form 1040ez Online1040 Ez FormFree Tax Filing Online2012 State Tax FormCan I Efile A 1040x

Free Federal And State Tax Filing 2012

Free federal and state tax filing 2012 12. Free federal and state tax filing 2012   Other Income Table of Contents Introduction Useful Items - You may want to see: Bartering Canceled DebtsInterest included in canceled debt. Free federal and state tax filing 2012 Exceptions Host or Hostess Life Insurance ProceedsSurviving spouse. Free federal and state tax filing 2012 Endowment Contract Proceeds Accelerated Death Benefits Public Safety Officer Killed in the Line of Duty Partnership Income S Corporation Income RecoveriesItemized Deduction Recoveries Rents from Personal Property RepaymentsMethod 1. Free federal and state tax filing 2012 Method 2. Free federal and state tax filing 2012 RoyaltiesDepletion. Free federal and state tax filing 2012 Coal and iron ore. Free federal and state tax filing 2012 Sale of property interest. Free federal and state tax filing 2012 Part of future production sold. Free federal and state tax filing 2012 Unemployment BenefitsTypes of unemployment compensation. Free federal and state tax filing 2012 Governmental program. Free federal and state tax filing 2012 Repayment of unemployment compensation. Free federal and state tax filing 2012 Tax withholding. Free federal and state tax filing 2012 Repayment of benefits. Free federal and state tax filing 2012 Welfare and Other Public Assistance Benefits Other IncomeEmotional distress. Free federal and state tax filing 2012 Deduction for costs involved in unlawful discrimination suits. Free federal and state tax filing 2012 Energy conservation measure. Free federal and state tax filing 2012 Dwelling unit. Free federal and state tax filing 2012 Current income required to be distributed. Free federal and state tax filing 2012 Current income not required to be distributed. Free federal and state tax filing 2012 How to report. Free federal and state tax filing 2012 Losses. Free federal and state tax filing 2012 Grantor trust. Free federal and state tax filing 2012 Nonemployee compensation. Free federal and state tax filing 2012 Corporate director. Free federal and state tax filing 2012 Personal representatives. Free federal and state tax filing 2012 Manager of trade or business for bankruptcy estate. Free federal and state tax filing 2012 Notary public. Free federal and state tax filing 2012 Election precinct official. Free federal and state tax filing 2012 Difficulty-of-care payments. Free federal and state tax filing 2012 Maintaining space in home. Free federal and state tax filing 2012 Reporting taxable payments. Free federal and state tax filing 2012 Lotteries and raffles. Free federal and state tax filing 2012 Form W-2G. Free federal and state tax filing 2012 Reporting winnings and recordkeeping. Free federal and state tax filing 2012 Inherited pension or IRA. Free federal and state tax filing 2012 Employee awards or bonuses. Free federal and state tax filing 2012 Pulitzer, Nobel, and similar prizes. Free federal and state tax filing 2012 Payment for services. Free federal and state tax filing 2012 VA payments. Free federal and state tax filing 2012 Prizes. Free federal and state tax filing 2012 Strike and lockout benefits. Free federal and state tax filing 2012 Introduction You must include on your return all items of income you receive in the form of money, property, and services unless the tax law states that you do not include them. Free federal and state tax filing 2012 Some items, however, are only partly excluded from income. Free federal and state tax filing 2012 This chapter discusses many kinds of income and explains whether they are taxable or nontaxable. Free federal and state tax filing 2012 Income that is taxable must be reported on your tax return and is subject to tax. Free federal and state tax filing 2012 Income that is nontaxable may have to be shown on your tax return but is not taxable. Free federal and state tax filing 2012 This chapter begins with discussions of the following income items. Free federal and state tax filing 2012 Bartering. Free federal and state tax filing 2012 Canceled debts. Free federal and state tax filing 2012 Sales parties at which you are the host or hostess. Free federal and state tax filing 2012 Life insurance proceeds. Free federal and state tax filing 2012 Partnership income. Free federal and state tax filing 2012 S Corporation income. Free federal and state tax filing 2012 Recoveries (including state income tax refunds). Free federal and state tax filing 2012 Rents from personal property. Free federal and state tax filing 2012 Repayments. Free federal and state tax filing 2012 Royalties. Free federal and state tax filing 2012 Unemployment benefits. Free federal and state tax filing 2012 Welfare and other public assistance benefits. Free federal and state tax filing 2012 These discussions are followed by brief discussions of other income items. Free federal and state tax filing 2012 Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 544 Sales and Other Dispositions of Assets 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Bartering Bartering is an exchange of property or services. Free federal and state tax filing 2012 You must include in your income, at the time received, the fair market value of property or services you receive in bartering. Free federal and state tax filing 2012 If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise. Free federal and state tax filing 2012 Generally, you report this income on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Free federal and state tax filing 2012 However, if the barter involves an exchange of something other than services, such as in Example 3 below, you may have to use another form or schedule instead. Free federal and state tax filing 2012 Example 1. Free federal and state tax filing 2012 You are a self-employed attorney who performs legal services for a client, a small corporation. Free federal and state tax filing 2012 The corporation gives you shares of its stock as payment for your services. Free federal and state tax filing 2012 You must include the fair market value of the shares in your income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) in the year you receive them. Free federal and state tax filing 2012 Example 2. Free federal and state tax filing 2012 You are self-employed and a member of a barter club. Free federal and state tax filing 2012 The club uses “credit units” as a means of exchange. Free federal and state tax filing 2012 It adds credit units to your account for goods or services you provide to members, which you can use to purchase goods or services offered by other members of the barter club. Free federal and state tax filing 2012 The club subtracts credit units from your account when you receive goods or services from other members. Free federal and state tax filing 2012 You must include in your income the value of the credit units that are added to your account, even though you may not actually receive goods or services from other members until a later tax year. Free federal and state tax filing 2012 Example 3. Free federal and state tax filing 2012 You own a small apartment building. Free federal and state tax filing 2012 In return for 6 months rent-free use of an apartment, an artist gives you a work of art she created. Free federal and state tax filing 2012 You must report as rental income on Schedule E (Form 1040), Supplemental Income and Loss, the fair market value of the artwork, and the artist must report as income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) the fair rental value of the apartment. Free federal and state tax filing 2012 Form 1099-B from barter exchange. Free federal and state tax filing 2012   If you exchanged property or services through a barter exchange, Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a similar statement from the barter exchange should be sent to you by February 18, 2014. Free federal and state tax filing 2012 It should show the value of cash, property, services, credits, or scrip you received from exchanges during 2013. Free federal and state tax filing 2012 The IRS also will receive a copy of Form 1099-B. Free federal and state tax filing 2012 Canceled Debts In most cases, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income. Free federal and state tax filing 2012 You have no income from the canceled debt if it is intended as a gift to you. Free federal and state tax filing 2012 A debt includes any indebtedness for which you are liable or which attaches to property you hold. Free federal and state tax filing 2012 If the debt is a nonbusiness debt, report the canceled amount on Form 1040, line 21. Free federal and state tax filing 2012 If it is a business debt, report the amount on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) (or on Schedule F (Form 1040), Profit or Loss From Farming, if the debt is farm debt and you are a farmer). Free federal and state tax filing 2012 Form 1099-C. Free federal and state tax filing 2012   If a Federal Government agency, financial institution, or credit union cancels or forgives a debt you owe of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. Free federal and state tax filing 2012 The amount of the canceled debt is shown in box 2. Free federal and state tax filing 2012 Interest included in canceled debt. Free federal and state tax filing 2012   If any interest is forgiven and included in the amount of canceled debt in box 2, the amount of interest also will be shown in box 3. Free federal and state tax filing 2012 Whether or not you must include the interest portion of the canceled debt in your income depends on whether the interest would be deductible when you paid it. Free federal and state tax filing 2012 See Deductible debt under Exceptions, later. Free federal and state tax filing 2012   If the interest would not be deductible (such as interest on a personal loan), include in your income the amount from Form 1099-C, box 2. Free federal and state tax filing 2012 If the interest would be deductible (such as on a business loan), include in your income the net amount of the canceled debt (the amount shown in box 2 less the interest amount shown in box 3). Free federal and state tax filing 2012 Discounted mortgage loan. Free federal and state tax filing 2012   If your financial institution offers a discount for the early payment of your mortgage loan, the amount of the discount is canceled debt. Free federal and state tax filing 2012 You must include the canceled amount in your income. Free federal and state tax filing 2012 Mortgage relief upon sale or other disposition. Free federal and state tax filing 2012   If you are personally liable for a mortgage (recourse debt), and you are relieved of the mortgage when you dispose of the property, you may realize gain or loss up to the fair market value of the property. Free federal and state tax filing 2012 To the extent the mortgage discharge exceeds the fair market value of the property, it is income from discharge of indebtedness unless it qualifies for exclusion under Excluded debt , later. Free federal and state tax filing 2012 Report any income from discharge of indebtedness on nonbusiness debt that does not qualify for exclusion as other income on Form 1040, line 21. Free federal and state tax filing 2012    You may be able to exclude part of the mortgage relief on your principal residence. Free federal and state tax filing 2012 See Excluded debt, later. Free federal and state tax filing 2012   If you are not personally liable for a mortgage (nonrecourse debt), and you are relieved of the mortgage when you dispose of the property (such as through foreclosure), that relief is included in the amount you realize. Free federal and state tax filing 2012 You may have a taxable gain if the amount you realize exceeds your adjusted basis in the property. Free federal and state tax filing 2012 Report any gain on nonbusiness property as a capital gain. Free federal and state tax filing 2012   See Publication 4681 for more information. Free federal and state tax filing 2012 Stockholder debt. Free federal and state tax filing 2012   If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution that is generally dividend income to you. Free federal and state tax filing 2012 For more information, see Publication 542, Corporations. Free federal and state tax filing 2012   If you are a stockholder in a corporation and you cancel a debt owed to you by the corporation, you generally do not realize income. Free federal and state tax filing 2012 This is because the canceled debt is considered as a contribution to the capital of the corporation equal to the amount of debt principal that you canceled. Free federal and state tax filing 2012 Repayment of canceled debt. Free federal and state tax filing 2012   If you included a canceled amount in your income and later pay the debt, you may be able to file a claim for refund for the year the amount was included in income. Free federal and state tax filing 2012 You can file a claim on Form 1040X if the statute of limitations for filing a claim is still open. Free federal and state tax filing 2012 The statute of limitations generally does not end until 3 years after the due date of your original return. Free federal and state tax filing 2012 Exceptions There are several exceptions to the inclusion of canceled debt in income. Free federal and state tax filing 2012 These are explained next. Free federal and state tax filing 2012 Student loans. Free federal and state tax filing 2012   Certain student loans contain a provision that all or part of the debt incurred to attend the qualified educational institution will be canceled if you work for a certain period of time in certain professions for any of a broad class of employers. Free federal and state tax filing 2012   You do not have income if your student loan is canceled after you agreed to this provision and then performed the services required. Free federal and state tax filing 2012 To qualify, the loan must have been made by: The Federal Government, a state or local government, or an instrumentality, agency, or subdivision thereof, A tax-exempt public benefit corporation that has assumed control of a state, county, or municipal hospital, and whose employees are considered public employees under state law, or An educational institution: Under an agreement with an entity described in (1) or (2) that provided the funds to the institution to make the loan, or As part of a program of the institution designed to encourage its students to serve in occupations with unmet needs or in areas with unmet needs and under which the services provided by the students (or former students) are for or under the direction of a governmental unit or a tax-exempt organization described in section 501(c)(3). Free federal and state tax filing 2012   A loan to refinance a qualified student loan also will qualify if it was made by an educational institution or a qualified tax-exempt organization under its program designed as described in (3)(b) above. Free federal and state tax filing 2012 Education loan repayment assistance. Free federal and state tax filing 2012   Education loan repayments made to you by the National Health Service Corps Loan Repayment Program (NHSC Loan Repayment Program), a state education loan repayment program eligible for funds under the Public Health Service Act, or any other state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health services in underserved or health professional shortage areas are not taxable. Free federal and state tax filing 2012    The provision relating to the “other state loan repayment or loan forgiveness program” was added to this exclusion for amounts received in tax years beginning after December 31, 2008. Free federal and state tax filing 2012 If you included these amounts in income in 2010, 2011, or 2012, you should file an amended tax return to exclude this income. Free federal and state tax filing 2012 See Form 1040X and its instructions for details on filing. Free federal and state tax filing 2012 Deductible debt. Free federal and state tax filing 2012   You do not have income from the cancellation of a debt if your payment of the debt would be deductible. Free federal and state tax filing 2012 This exception applies only if you use the cash method of accounting. Free federal and state tax filing 2012 For more information, see chapter 5 of Publication 334, Tax Guide for Small Business. Free federal and state tax filing 2012 Price reduced after purchase. Free federal and state tax filing 2012   In most cases, if the seller reduces the amount of debt you owe for property you purchased, you do not have income from the reduction. Free federal and state tax filing 2012 The reduction of the debt is treated as a purchase price adjustment and reduces your basis in the property. Free federal and state tax filing 2012 Excluded debt. Free federal and state tax filing 2012   Do not include a canceled debt in your gross income in the following situations. Free federal and state tax filing 2012 The debt is canceled in a bankruptcy case under title 11 of the U. Free federal and state tax filing 2012 S. Free federal and state tax filing 2012 Code. Free federal and state tax filing 2012 See Publication 908, Bankruptcy Tax Guide. Free federal and state tax filing 2012 The debt is canceled when you are insolvent. Free federal and state tax filing 2012 However, you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent. Free federal and state tax filing 2012 See Publication 908. Free federal and state tax filing 2012 The debt is qualified farm debt and is canceled by a qualified person. Free federal and state tax filing 2012 See chapter 3 of Publication 225, Farmer's Tax Guide. Free federal and state tax filing 2012 The debt is qualified real property business debt. Free federal and state tax filing 2012 See chapter 5 of Publication 334. Free federal and state tax filing 2012 The cancellation is intended as a gift. Free federal and state tax filing 2012 The debt is qualified principal residence indebtedness. Free federal and state tax filing 2012 See Publication 525 for additional information. Free federal and state tax filing 2012 Host or Hostess If you host a party or event at which sales are made, any gift or gratuity you receive for giving the event is a payment for helping a direct seller make sales. Free federal and state tax filing 2012 You must report this item as income at its fair market value. Free federal and state tax filing 2012 Your out-of-pocket party expenses are subject to the 50% limit for meal and entertainment expenses. Free federal and state tax filing 2012 These expenses are deductible as miscellaneous itemized deductions subject to the 2%-of-AGI limit on Schedule A (Form 1040), but only up to the amount of income you receive for giving the party. Free federal and state tax filing 2012 For more information about the 50% limit for meal and entertainment expenses, see chapter 26. Free federal and state tax filing 2012 Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. Free federal and state tax filing 2012 This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. Free federal and state tax filing 2012 However, interest income received as a result of life insurance proceeds may be taxable. Free federal and state tax filing 2012 Proceeds not received in installments. Free federal and state tax filing 2012   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. Free federal and state tax filing 2012 If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. Free federal and state tax filing 2012 Proceeds received in installments. Free federal and state tax filing 2012   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. Free federal and state tax filing 2012   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. Free federal and state tax filing 2012 Include anything over this excluded part in your income as interest. Free federal and state tax filing 2012 Surviving spouse. Free federal and state tax filing 2012   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude up to $1,000 a year of the interest included in the installments. Free federal and state tax filing 2012 If you remarry, you can continue to take the exclusion. Free federal and state tax filing 2012 Surrender of policy for cash. Free federal and state tax filing 2012   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Free federal and state tax filing 2012 In most cases, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. Free federal and state tax filing 2012    You should receive a Form 1099-R showing the total proceeds and the taxable part. Free federal and state tax filing 2012 Report these amounts on lines 16a and 16b of Form 1040 or lines 12a and 12b of Form 1040A. Free federal and state tax filing 2012 More information. Free federal and state tax filing 2012   For more information, see Life Insurance Proceeds in Publication 525. Free federal and state tax filing 2012 Endowment Contract Proceeds An endowment contract is a policy under which you are paid a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. Free federal and state tax filing 2012 Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. Free federal and state tax filing 2012 To determine your cost, subtract any amount that you previously received under the contract and excluded from your income from the total premiums (or other consideration) paid for the contract. Free federal and state tax filing 2012 Include the part of the lump sum payment that is more than your cost in your income. Free federal and state tax filing 2012 Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are excluded from income if the insured is terminally or chronically ill. Free federal and state tax filing 2012 Viatical settlement. Free federal and state tax filing 2012   This is the sale or assignment of any part of the death benefit under a life insurance contract to a viatical settlement provider. Free federal and state tax filing 2012 A viatical settlement provider is a person who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill and who meets the requirements of section 101(g)(2)(B) of the Internal Revenue Code. Free federal and state tax filing 2012 Exclusion for terminal illness. Free federal and state tax filing 2012    Accelerated death benefits are fully excludable if the insured is a terminally ill individual. Free federal and state tax filing 2012 This is a person who has been certified by a physician as having an illness or physical condition that can reasonably be expected to result in death within 24 months from the date of the certification. Free federal and state tax filing 2012 Exclusion for chronic illness. Free federal and state tax filing 2012    If the insured is a chronically ill individual who is not terminally ill, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. Free federal and state tax filing 2012 Accelerated death benefits paid on a per diem or other periodic basis are excludable up to a limit. Free federal and state tax filing 2012 This limit applies to the total of the accelerated death benefits and any periodic payments received from long-term care insurance contracts. Free federal and state tax filing 2012 For information on the limit and the definitions of chronically ill individual, qualified long-term care services, and long-term care insurance contracts, see Long-Term Care Insurance Contracts under Sickness and Injury Benefits in Publication 525. Free federal and state tax filing 2012 Exception. Free federal and state tax filing 2012   The exclusion does not apply to any amount paid to a person (other than the insured) who has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the person, or Has a financial interest in the person's business. Free federal and state tax filing 2012 Form 8853. Free federal and state tax filing 2012   To claim an exclusion for accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. Free federal and state tax filing 2012 You do not have to file Form 8853 to exclude accelerated death benefits paid on the basis of actual expenses incurred. Free federal and state tax filing 2012 Public Safety Officer Killed in the Line of Duty If you are a survivor of a public safety officer who was killed in the line of duty, you may be able to exclude from income certain amounts you receive. Free federal and state tax filing 2012 For this purpose, the term public safety officer includes law enforcement officers, firefighters, chaplains, and rescue squad and ambulance crew members. Free federal and state tax filing 2012 For more information, see Publication 559, Survivors, Executors, and Administrators. Free federal and state tax filing 2012 Partnership Income A partnership generally is not a taxable entity. Free federal and state tax filing 2012 The income, gains, losses, deductions, and credits of a partnership are passed through to the partners based on each partner's distributive share of these items. Free federal and state tax filing 2012 Schedule K-1 (Form 1065). Free federal and state tax filing 2012    Although a partnership generally pays no tax, it must file an information return on Form 1065, U. Free federal and state tax filing 2012 S. Free federal and state tax filing 2012 Return of Partnership Income, and send Schedule K-1 (Form 1065) to each partner. Free federal and state tax filing 2012 In addition, the partnership will send each partner a copy of the Partner's Instructions for Schedule K-1 (Form 1065) to help each partner report his or her share of the partnership's income, deductions, credits, and tax preference items. Free federal and state tax filing 2012 Keep Schedule K-1 (Form 1065) for your records. Free federal and state tax filing 2012 Do not attach it to your Form 1040, unless you are specifically required to do so. Free federal and state tax filing 2012 For more information on partnerships, see Publication 541, Partnerships. Free federal and state tax filing 2012 Qualified joint venture. Free federal and state tax filing 2012   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Free federal and state tax filing 2012 To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Free federal and state tax filing 2012 For further information on how to make the election and which schedule(s) to file, see the instructions for your individual tax return. Free federal and state tax filing 2012 S Corporation Income In most cases, an S corporation does not pay tax on its income. Free federal and state tax filing 2012 Instead, the income, losses, deductions, and credits of the corporation are passed through to the shareholders based on each shareholder's pro rata share. Free federal and state tax filing 2012 Schedule K-1 (Form 1120S). Free federal and state tax filing 2012   An S corporation must file a return on Form 1120S, U. Free federal and state tax filing 2012 S. Free federal and state tax filing 2012 Income Tax Return for an S Corporation, and send Schedule K-1 (Form 1120S) to each shareholder. Free federal and state tax filing 2012 In addition, the S corporation will send each shareholder a copy of the Shareholder's Instructions for Schedule K-1 (Form 1120S) to help each shareholder report his or her share of the S corporation's income, losses, credits, and deductions. Free federal and state tax filing 2012 Keep Schedule K-1 (Form 1120S) for your records. Free federal and state tax filing 2012 Do not attach it to your Form 1040, unless you are specifically required to do so. Free federal and state tax filing 2012 For more information on S corporations and their shareholders, see the Instructions for Form 1120S. Free federal and state tax filing 2012 Recoveries A recovery is a return of an amount you deducted or took a credit for in an earlier year. Free federal and state tax filing 2012 The most common recoveries are refunds, reimbursements, and rebates of deductions itemized on Schedule A (Form 1040). Free federal and state tax filing 2012 You also may have recoveries of non-itemized deductions (such as payments on previously deducted bad debts) and recoveries of items for which you previously claimed a tax credit. Free federal and state tax filing 2012 Tax benefit rule. Free federal and state tax filing 2012   You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. Free federal and state tax filing 2012 For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year. Free federal and state tax filing 2012 For more information, see Publication 525. Free federal and state tax filing 2012 Federal income tax refund. Free federal and state tax filing 2012   Refunds of federal income taxes are not included in your income because they are never allowed as a deduction from income. Free federal and state tax filing 2012 State tax refund. Free federal and state tax filing 2012   If you received a state or local income tax refund (or credit or offset) in 2013, you generally must include it in income if you deducted the tax in an earlier year. Free federal and state tax filing 2012 The payer should send Form 1099-G, Certain Government Payments, to you by January 31, 2014. Free federal and state tax filing 2012 The IRS also will receive a copy of the Form 1099-G. Free federal and state tax filing 2012 If you file Form 1040, use the State and Local Income Tax Refund Worksheet in the 2013 Form 1040 instructions for line 10 to figure the amount (if any) to include in your income. Free federal and state tax filing 2012 See Publication 525 for when you must use another worksheet. Free federal and state tax filing 2012   If you could choose to deduct for a tax year either: State and local income taxes, or State and local general sales taxes, then the maximum refund that you may have to include in income is limited to the excess of the tax you chose to deduct for that year over the tax you did not choose to deduct for that year. Free federal and state tax filing 2012 For examples, see Publication 525. Free federal and state tax filing 2012 Mortgage interest refund. Free federal and state tax filing 2012    If you received a refund or credit in 2013 of mortgage interest paid in an earlier year, the amount should be shown in box 3 of your Form 1098, Mortgage Interest Statement. Free federal and state tax filing 2012 Do not subtract the refund amount from the interest you paid in 2013. Free federal and state tax filing 2012 You may have to include it in your income under the rules explained in the following discussions. Free federal and state tax filing 2012 Interest on recovery. Free federal and state tax filing 2012   Interest on any of the amounts you recover must be reported as interest income in the year received. Free federal and state tax filing 2012 For example, report any interest you received on state or local income tax refunds on Form 1040, line 8a. Free federal and state tax filing 2012 Recovery and expense in same year. Free federal and state tax filing 2012   If the refund or other recovery and the expense occur in the same year, the recovery reduces the deduction or credit and is not reported as income. Free federal and state tax filing 2012 Recovery for 2 or more years. Free federal and state tax filing 2012   If you receive a refund or other recovery that is for amounts you paid in 2 or more separate years, you must allocate, on a pro rata basis, the recovered amount between the years in which you paid it. Free federal and state tax filing 2012 This allocation is necessary to determine the amount of recovery from any earlier years and to determine the amount, if any, of your allowable deduction for this item for the current year. Free federal and state tax filing 2012 For information on how to compute the allocation, see Recoveries in Publication 525. Free federal and state tax filing 2012 Itemized Deduction Recoveries If you recover any amount that you deducted in an earlier year on Schedule A (Form 1040), you generally must include the full amount of the recovery in your income in the year you receive it. Free federal and state tax filing 2012 Where to report. Free federal and state tax filing 2012   Enter your state or local income tax refund on Form 1040, line 10, and the total of all other recoveries as other income on Form 1040, line 21. Free federal and state tax filing 2012 You cannot use Form 1040A or Form 1040EZ. Free federal and state tax filing 2012 Standard deduction limit. Free federal and state tax filing 2012   You generally are allowed to claim the standard deduction if you do not itemize your deductions. Free federal and state tax filing 2012 Only your itemized deductions that are more than your standard deduction are subject to the recovery rule (unless you are required to itemize your deductions). Free federal and state tax filing 2012 If your total deductions on the earlier year return were not more than your income for that year, include in your income this year the lesser of: Your recoveries, or The amount by which your itemized deductions exceeded the standard deduction. Free federal and state tax filing 2012 Example. Free federal and state tax filing 2012 For 2012, you filed a joint return. Free federal and state tax filing 2012 Your taxable income was $60,000 and you were not entitled to any tax credits. Free federal and state tax filing 2012 Your standard deduction was $11,900, and you had itemized deductions of $14,000. Free federal and state tax filing 2012 In 2013, you received the following recoveries for amounts deducted on your 2012 return: Medical expenses $200 State and local income tax refund 400 Refund of mortgage interest 325 Total recoveries $925 None of the recoveries were more than the deductions taken for 2012. Free federal and state tax filing 2012 The difference between the state and local income tax you deducted and your local general sales tax was more than $400. Free federal and state tax filing 2012 Your total recoveries are less than the amount by which your itemized deductions exceeded the standard deduction ($14,000 − 11,900 = $2,100), so you must include your total recoveries in your income for 2013. Free federal and state tax filing 2012 Report the state and local income tax refund of $400 on Form 1040, line 10, and the balance of your recoveries, $525, on Form 1040, line 21. Free federal and state tax filing 2012 Standard deduction for earlier years. Free federal and state tax filing 2012   To determine if amounts recovered in 2013 must be included in your income, you must know the standard deduction for your filing status for the year the deduction was claimed. Free federal and state tax filing 2012 Look in the instructions for your tax return from prior years to locate the standard deduction for the filing status for that prior year. Free federal and state tax filing 2012 Example. Free federal and state tax filing 2012 You filed a joint return on Form 1040 for 2012 with taxable income of $45,000. Free federal and state tax filing 2012 Your itemized deductions were $12,350. Free federal and state tax filing 2012 The standard deduction that you could have claimed was $11,900. Free federal and state tax filing 2012 In 2013, you recovered $2,100 of your 2012 itemized deductions. Free federal and state tax filing 2012 None of the recoveries were more than the actual deductions for 2012. Free federal and state tax filing 2012 Include $450 of the recoveries in your 2013 income. Free federal and state tax filing 2012 This is the smaller of your recoveries ($2,100) or the amount by which your itemized deductions were more than the standard deduction ($12,350 − $11,900 = $450). Free federal and state tax filing 2012 Recovery limited to deduction. Free federal and state tax filing 2012   You do not include in your income any amount of your recovery that is more than the amount you deducted in the earlier year. Free federal and state tax filing 2012 The amount you include in your income is limited to the smaller of: The amount deducted on Schedule A (Form 1040), or The amount recovered. Free federal and state tax filing 2012 Example. Free federal and state tax filing 2012 During 2012 you paid $1,700 for medical expenses. Free federal and state tax filing 2012 From this amount you subtracted $1,500, which was 7. Free federal and state tax filing 2012 5% of your adjusted gross income. Free federal and state tax filing 2012 Your actual medical expense deduction was $200. Free federal and state tax filing 2012 In 2013, you received a $500 reimbursement from your medical insurance for your 2012 expenses. Free federal and state tax filing 2012 The only amount of the $500 reimbursement that must be included in your income for 2013 is $200—the amount actually deducted. Free federal and state tax filing 2012 Other recoveries. Free federal and state tax filing 2012   See Recoveries in Publication 525 if: You have recoveries of items other than itemized deductions, or You received a recovery for an item for which you claimed a tax credit (other than investment credit or foreign tax credit) in a prior year. Free federal and state tax filing 2012 Rents from Personal Property If you rent out personal property, such as equipment or vehicles, how you report your income and expenses is in most cases determined by: Whether or not the rental activity is a business, and Whether or not the rental activity is conducted for profit. Free federal and state tax filing 2012 In most cases, if your primary purpose is income or profit and you are involved in the rental activity with continuity and regularity, your rental activity is a business. Free federal and state tax filing 2012 See Publication 535, Business Expenses, for details on deducting expenses for both business and not-for-profit activities. Free federal and state tax filing 2012 Reporting business income and expenses. Free federal and state tax filing 2012    If you are in the business of renting personal property, report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Free federal and state tax filing 2012 The form instructions have information on how to complete them. Free federal and state tax filing 2012 Reporting nonbusiness income. Free federal and state tax filing 2012   If you are not in the business of renting personal property, report your rental income on Form 1040, line 21. Free federal and state tax filing 2012 List the type and amount of the income on the dotted line next to line 21. Free federal and state tax filing 2012 Reporting nonbusiness expenses. Free federal and state tax filing 2012   If you rent personal property for profit, include your rental expenses in the total amount you enter on Form 1040, line 36. Free federal and state tax filing 2012 Also enter the amount and “PPR” on the dotted line next to line 36. Free federal and state tax filing 2012   If you do not rent personal property for profit, your deductions are limited and you cannot report a loss to offset other income. Free federal and state tax filing 2012 See Activity not for profit , under Other Income, later. Free federal and state tax filing 2012 Repayments If you had to repay an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income for the year in which you repaid it. Free federal and state tax filing 2012 Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. Free federal and state tax filing 2012 Generally, you can claim a deduction or credit only if the repayment qualifies as an expense or loss incurred in your trade or business or in a for-profit transaction. Free federal and state tax filing 2012 Type of deduction. Free federal and state tax filing 2012   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. Free federal and state tax filing 2012 You generally deduct the repayment on the same form or schedule on which you previously reported it as income. Free federal and state tax filing 2012 For example, if you reported it as self-employment income, deduct it as a business expense on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). Free federal and state tax filing 2012 If you reported it as a capital gain, deduct it as a capital loss as explained in the Instructions for Schedule D (Form 1040). Free federal and state tax filing 2012 If you reported it as wages, unemployment compensation, or other nonbusiness income, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040). Free federal and state tax filing 2012 Repaid social security benefits. Free federal and state tax filing 2012   If you repaid social security benefits or equivalent railroad retirement benefits, see Repayment of benefits in chapter 11. Free federal and state tax filing 2012 Repayment of $3,000 or less. Free federal and state tax filing 2012   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Free federal and state tax filing 2012 If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 23. Free federal and state tax filing 2012 Repayment over $3,000. Free federal and state tax filing 2012   If the amount you repaid was more than $3,000, you can deduct the repayment (as explained under Type of deduction , earlier). Free federal and state tax filing 2012 However, you can choose instead to take a tax credit for the year of repayment if you included the income under a claim of right. Free federal and state tax filing 2012 This means that at the time you included the income, it appeared that you had an unrestricted right to it. Free federal and state tax filing 2012 If you qualify for this choice, figure your tax under both methods and compare the results. Free federal and state tax filing 2012 Use the method (deduction or credit) that results in less tax. Free federal and state tax filing 2012 When determining whether the amount you repaid was more or less than $3,000, consider the total amount being repaid on the return. Free federal and state tax filing 2012 Each instance of repayment is not considered separately. Free federal and state tax filing 2012 Method 1. Free federal and state tax filing 2012   Figure your tax for 2013 claiming a deduction for the repaid amount. Free federal and state tax filing 2012 If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 28. Free federal and state tax filing 2012 Method 2. Free federal and state tax filing 2012   Figure your tax for 2013 claiming a credit for the repaid amount. Free federal and state tax filing 2012 Follow these steps. Free federal and state tax filing 2012 Figure your tax for 2013 without deducting the repaid amount. Free federal and state tax filing 2012 Refigure your tax from the earlier year without including in income the amount you repaid in 2013. Free federal and state tax filing 2012 Subtract the tax in (2) from the tax shown on your return for the earlier year. Free federal and state tax filing 2012 This is the credit. Free federal and state tax filing 2012 Subtract the answer in (3) from the tax for 2013 figured without the deduction (Step 1). Free federal and state tax filing 2012   If method 1 results in less tax, deduct the amount repaid. Free federal and state tax filing 2012 If method 2 results in less tax, claim the credit figured in (3) above on Form 1040, line 71, by adding the amount of the credit to any other credits on this line, and entering “I. Free federal and state tax filing 2012 R. Free federal and state tax filing 2012 C. Free federal and state tax filing 2012 1341” in the column to the right of line 71. Free federal and state tax filing 2012   An example of this computation can be found in Publication 525. Free federal and state tax filing 2012 Repaid wages subject to social security and Medicare taxes. Free federal and state tax filing 2012   If you had to repay an amount that you included in your wages or compensation in an earlier year on which social security, Medicare, or tier 1 RRTA taxes were paid, ask your employer to refund the excess amount to you. Free federal and state tax filing 2012 If the employer refuses to refund the taxes, ask for a statement indicating the amount of the overcollection to support your claim. Free federal and state tax filing 2012 File a claim for refund using Form 843, Claim for Refund and Request for Abatement. Free federal and state tax filing 2012 Repaid wages subject to Additional Medicare Tax. Free federal and state tax filing 2012   Employers cannot make an adjustment or file a claim for refund for Additional Medicare Tax withholding when there is a repayment of wages received by an employee in a prior year because the employee determines liability for Additional Medicare Tax on the employee's income tax return for the prior year. Free federal and state tax filing 2012 If you had to repay an amount that you included in your wages or compensation in an earlier year, and on which Additional Medicare Tax was paid, you may be able to recover the Additional Medicare Tax paid on the amount. Free federal and state tax filing 2012 To recover Additional Medicare Tax on the repaid wages or compensation, you must file Form 1040X, Amended U. Free federal and state tax filing 2012 S. Free federal and state tax filing 2012 Individual Income Tax Return, for the prior year in which the wages or compensation were originally received. Free federal and state tax filing 2012 See the Instructions for Form 1040X. Free federal and state tax filing 2012 Royalties Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income. Free federal and state tax filing 2012 In most cases you report royalties in Part I of Schedule E (Form 1040). Free federal and state tax filing 2012 However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc. Free federal and state tax filing 2012 , report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Free federal and state tax filing 2012 Copyrights and patents. Free federal and state tax filing 2012   Royalties from copyrights on literary, musical, or artistic works, and similar property, or from patents on inventions, are amounts paid to you for the right to use your work over a specified period of time. Free federal and state tax filing 2012 Royalties generally are based on the number of units sold, such as the number of books, tickets to a performance, or machines sold. Free federal and state tax filing 2012 Oil, gas, and minerals. Free federal and state tax filing 2012   Royalty income from oil, gas, and mineral properties is the amount you receive when natural resources are extracted from your property. Free federal and state tax filing 2012 The royalties are based on units, such as barrels, tons, etc. Free federal and state tax filing 2012 , and are paid to you by a person or company who leases the property from you. Free federal and state tax filing 2012 Depletion. Free federal and state tax filing 2012   If you are the owner of an economic interest in mineral deposits or oil and gas wells, you can recover your investment through the depletion allowance. Free federal and state tax filing 2012 For information on this subject, see chapter 9 of Publication 535. Free federal and state tax filing 2012 Coal and iron ore. Free federal and state tax filing 2012   Under certain circumstances, you can treat amounts you receive from the disposal of coal and iron ore as payments from the sale of a capital asset, rather than as royalty income. Free federal and state tax filing 2012 For information about gain or loss from the sale of coal and iron ore, see Publication 544. Free federal and state tax filing 2012 Sale of property interest. Free federal and state tax filing 2012   If you sell your complete interest in oil, gas, or mineral rights, the amount you receive is considered payment for the sale of property used in a trade or business under section 1231, not royalty income. Free federal and state tax filing 2012 Under certain circumstances, the sale is subject to capital gain or loss treatment as explained in the Instructions for Schedule D (Form 1040). Free federal and state tax filing 2012 For more information on selling section 1231 property, see chapter 3 of Publication 544. Free federal and state tax filing 2012   If you retain a royalty, an overriding royalty, or a net profit interest in a mineral property for the life of the property, you have made a lease or a sublease, and any cash you receive for the assignment of other interests in the property is ordinary income subject to a depletion allowance. Free federal and state tax filing 2012 Part of future production sold. Free federal and state tax filing 2012   If you own mineral property but sell part of the future production, in most cases you treat the money you receive from the buyer at the time of the sale as a loan from the buyer. Free federal and state tax filing 2012 Do not include it in your income or take depletion based on it. Free federal and state tax filing 2012   When production begins, you include all the proceeds in your income, deduct all the production expenses, and deduct depletion from that amount to arrive at your taxable income from the property. Free federal and state tax filing 2012 Unemployment Benefits The tax treatment of unemployment benefits you receive depends on the type of program paying the benefits. Free federal and state tax filing 2012 Unemployment compensation. Free federal and state tax filing 2012   You must include in income all unemployment compensation you receive. Free federal and state tax filing 2012 You should receive a Form 1099-G showing in box 1 the total unemployment compensation paid to you. Free federal and state tax filing 2012 In most cases, you enter unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Free federal and state tax filing 2012 Types of unemployment compensation. Free federal and state tax filing 2012   Unemployment compensation generally includes any amount received under an unemployment compensation law of the United States or of a state. Free federal and state tax filing 2012 It includes the following benefits. Free federal and state tax filing 2012 Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund. Free federal and state tax filing 2012 State unemployment insurance benefits. Free federal and state tax filing 2012 Railroad unemployment compensation benefits. Free federal and state tax filing 2012 Disability payments from a government program paid as a substitute for unemployment compensation. Free federal and state tax filing 2012 (Amounts received as workers' compensation for injuries or illness are not unemployment compensation. Free federal and state tax filing 2012 See chapter 5 for more information. Free federal and state tax filing 2012 ) Trade readjustment allowances under the Trade Act of 1974. Free federal and state tax filing 2012 Unemployment assistance under the Disaster Relief and Emergency Assistance Act. Free federal and state tax filing 2012 Unemployment assistance under the Airline Deregulation Act of 1974 Program. Free federal and state tax filing 2012 Governmental program. Free federal and state tax filing 2012   If you contribute to a governmental unemployment compensation program and your contributions are not deductible, amounts you receive under the program are not included as unemployment compensation until you recover your contributions. Free federal and state tax filing 2012 If you deducted all of your contributions to the program, the entire amount you receive under the program is included in your income. Free federal and state tax filing 2012 Repayment of unemployment compensation. Free federal and state tax filing 2012   If you repaid in 2013 unemployment compensation you received in 2013, subtract the amount you repaid from the total amount you received and enter the difference on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Free federal and state tax filing 2012 On the dotted line next to your entry enter “Repaid” and the amount you repaid. Free federal and state tax filing 2012 If you repaid unemployment compensation in 2013 that you included in income in an earlier year, you can deduct the amount repaid on Schedule A (Form 1040), line 23, if you itemize deductions. Free federal and state tax filing 2012 If the amount is more than $3,000, see Repayments , earlier. Free federal and state tax filing 2012 Tax withholding. Free federal and state tax filing 2012   You can choose to have federal income tax withheld from your unemployment compensation. Free federal and state tax filing 2012 To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. Free federal and state tax filing 2012 Tax will be withheld at 10% of your payment. Free federal and state tax filing 2012    If you do not choose to have tax withheld from your unemployment compensation, you may be liable for estimated tax. Free federal and state tax filing 2012 If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. Free federal and state tax filing 2012 For more information on estimated tax, see chapter 4. Free federal and state tax filing 2012 Supplemental unemployment benefits. Free federal and state tax filing 2012   Benefits received from an employer-financed fund (to which the employees did not contribute) are not unemployment compensation. Free federal and state tax filing 2012 They are taxable as wages and are subject to withholding for income tax. Free federal and state tax filing 2012 They may be subject to social security and Medicare taxes. Free federal and state tax filing 2012 For more information, see Supplemental Unemployment Benefits in section 5 of Publication 15-A, Employer's Supplemental Tax Guide. Free federal and state tax filing 2012 Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Free federal and state tax filing 2012 Repayment of benefits. Free federal and state tax filing 2012   You may have to repay some of your supplemental unemployment benefits to qualify for trade readjustment allowances under the Trade Act of 1974. Free federal and state tax filing 2012 If you repay supplemental unemployment benefits in the same year you receive them, reduce the total benefits by the amount you repay. Free federal and state tax filing 2012 If you repay the benefits in a later year, you must include the full amount of the benefits received in your income for the year you received them. Free federal and state tax filing 2012   Deduct the repayment in the later year as an adjustment to gross income on Form 1040. Free federal and state tax filing 2012 (You cannot use Form 1040A or Form 1040EZ. Free federal and state tax filing 2012 ) Include the repayment on Form 1040, line 36, and enter “Sub-Pay TRA” and the amount on the dotted line next to line 36. Free federal and state tax filing 2012 If the amount you repay in a later year is more than $3,000, you may be able to take a credit against your tax for the later year instead of deducting the amount repaid. Free federal and state tax filing 2012 For more information on this, see Repayments , earlier. Free federal and state tax filing 2012 Private unemployment fund. Free federal and state tax filing 2012   Unemployment benefit payments from a private (nonunion) fund to which you voluntarily contribute are taxable only if the amounts you receive are more than your total payments into the fund. Free federal and state tax filing 2012 Report the taxable amount on Form 1040, line 21. Free federal and state tax filing 2012 Payments by a union. Free federal and state tax filing 2012   Benefits paid to you as an unemployed member of a union from regular union dues are included in your income on Form 1040, line 21. Free federal and state tax filing 2012 However, if you contribute to a special union fund and your payments to the fund are not deductible, the unemployment benefits you receive from the fund are includible in your income only to the extent they are more than your contributions. Free federal and state tax filing 2012 Guaranteed annual wage. Free federal and state tax filing 2012   Payments you receive from your employer during periods of unemployment, under a union agreement that guarantees you full pay during the year, are taxable as wages. Free federal and state tax filing 2012 Include them on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Free federal and state tax filing 2012 State employees. Free federal and state tax filing 2012   Payments similar to a state's unemployment compensation may be made by the state to its employees who are not covered by the state's unemployment compensation law. Free federal and state tax filing 2012 Although the payments are fully taxable, do not report them as unemployment compensation. Free federal and state tax filing 2012 Report these payments on Form 1040, line 21. Free federal and state tax filing 2012 Welfare and Other Public Assistance Benefits Do not include in your income governmental benefit payments from a public welfare fund based upon need, such as payments to blind individuals under a state public assistance law. Free federal and state tax filing 2012 Payments from a state fund for the victims of crime should not be included in the victims' incomes if they are in the nature of welfare payments. Free federal and state tax filing 2012 Do not deduct medical expenses that are reimbursed by such a fund. Free federal and state tax filing 2012 You must include in your income any welfare payments that are compensation for services or that are obtained fraudulently. Free federal and state tax filing 2012 Reemployment Trade Adjustment Assistance (RTAA) payments. Free federal and state tax filing 2012   RTAA payments received from a state must be included in your income. Free federal and state tax filing 2012 The state must send you Form 1099-G to advise you of the amount you should include in income. Free federal and state tax filing 2012 The amount should be reported on Form 1040, line 21. Free federal and state tax filing 2012 Persons with disabilities. Free federal and state tax filing 2012   If you have a disability, you must include in income compensation you receive for services you perform unless the compensation is otherwise excluded. Free federal and state tax filing 2012 However, you do not include in income the value of goods, services, and cash that you receive, not in return for your services, but for your training and rehabilitation because you have a disability. Free federal and state tax filing 2012 Excludable amounts include payments for transportation and attendant care, such as interpreter services for the deaf, reader services for the blind, and services to help individuals with an intellectual disability do their work. Free federal and state tax filing 2012 Disaster relief grants. Free federal and state tax filing 2012    Do not include post-disaster grants received under the Robert T. Free federal and state tax filing 2012 Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, child care, or funeral expenses. Free federal and state tax filing 2012 Do not deduct casualty losses or medical expenses that are specifically reimbursed by these disaster relief grants. Free federal and state tax filing 2012 If you have deducted a casualty loss for the loss of your personal residence and you later receive a disaster relief grant for the loss of the same residence, you may have to include part or all of the grant in your taxable income. Free federal and state tax filing 2012 See Recoveries , earlier. Free federal and state tax filing 2012 Unemployment assistance payments under the Act are taxable unemployment compensation. Free federal and state tax filing 2012 See Unemployment compensation under Unemployment Benefits, earlier. Free federal and state tax filing 2012 Disaster relief payments. Free federal and state tax filing 2012   You can exclude from income any amount you receive that is a qualified disaster relief payment. Free federal and state tax filing 2012 A qualified disaster relief payment is an amount paid to you: To reimburse or pay reasonable and necessary personal, family, living, or funeral expenses that result from a qualified disaster; To reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of your home or repair or replacement of its contents to the extent it is due to a qualified disaster; By a person engaged in the furnishing or sale of transportation as a common carrier because of the death or personal physical injuries incurred as a result of a qualified disaster; or By a federal, state, or local government, or agency, or instrumentality in connection with a qualified disaster in order to promote the general welfare. Free federal and state tax filing 2012 You can exclude this amount only to the extent any expense it pays for is not paid for by insurance or otherwise. Free federal and state tax filing 2012 The exclusion does not apply if you were a participant or conspirator in a terrorist action or a representative of one. Free federal and state tax filing 2012   A qualified disaster is: A disaster which results from a terrorist or military action; A federally declared disaster; or A disaster which results from an accident involving a common carrier, or from any other event, which is determined to be catastrophic by the Secretary of the Treasury or his or her delegate. Free federal and state tax filing 2012   For amounts paid under item (4), a disaster is qualified if it is determined by an applicable federal, state, or local authority to warrant assistance from the federal, state, or local government, agency, or instrumentality. Free federal and state tax filing 2012 Disaster mitigation payments. Free federal and state tax filing 2012   You also can exclude from income any amount you receive that is a qualified disaster mitigation payment. Free federal and state tax filing 2012 Qualified disaster mitigation payments are also most commonly paid to you in the period immediately following damage to property as a result of a natural disaster. Free federal and state tax filing 2012 However, disaster mitigation payments are used to mitigate (reduce the severity of) potential damage from future natural disasters. Free federal and state tax filing 2012 They are paid to you through state and local governments based on the provisions of the Robert T. Free federal and state tax filing 2012 Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act. Free federal and state tax filing 2012   You cannot increase the basis or adjusted basis of your property for improvements made with nontaxable disaster mitigation payments. Free federal and state tax filing 2012 Home Affordable Modification Program (HAMP). Free federal and state tax filing 2012   If you benefit from Pay-for-Performance Success Payments under HAMP, the payments are not taxable. Free federal and state tax filing 2012 Mortgage assistance payments under section 235 of the National Housing Act. Free federal and state tax filing 2012   Payments made under section 235 of the National Housing Act for mortgage assistance are not included in the homeowner's income. Free federal and state tax filing 2012 Interest paid for the homeowner under the mortgage assistance program cannot be deducted. Free federal and state tax filing 2012 Medicare. Free federal and state tax filing 2012   Medicare benefits received under title XVIII of the Social Security Act are not includible in the gross income of the individuals for whom they are paid. Free federal and state tax filing 2012 This includes basic (part A (Hospital Insurance Benefits for the Aged)) and supplementary (part B (Supplementary Medical Insurance Benefits for the Aged)). Free federal and state tax filing 2012 Old-age, survivors, and disability insurance benefits (OASDI). Free federal and state tax filing 2012   Generally, OASDI payments under section 202 of title II of the Social Security Act are not includible in the gross income of the individuals to whom they are paid. Free federal and state tax filing 2012 This applies to old-age insurance benefits, and insurance benefits for wives, husbands, children, widows, widowers, mothers and fathers, and parents, as well as the lump-sum death payment. Free federal and state tax filing 2012 Nutrition Program for the Elderly. Free federal and state tax filing 2012    Food benefits you receive under the Nutrition Program for the Elderly are not taxable. Free federal and state tax filing 2012 If you prepare and serve free meals for the program, include in your income as wages the cash pay you receive, even if you are also eligible for food benefits. Free federal and state tax filing 2012 Payments to reduce cost of winter energy. Free federal and state tax filing 2012   Payments made by a state to qualified people to reduce their cost of winter energy use are not taxable. Free federal and state tax filing 2012 Other Income The following brief discussions are arranged in alphabetical order. Free federal and state tax filing 2012 Other income items briefly discussed below are referenced to publications which provide more topical information. Free federal and state tax filing 2012 Activity not for profit. Free federal and state tax filing 2012   You must include on your return income from an activity from which you do not expect to make a profit. Free federal and state tax filing 2012 An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. Free federal and state tax filing 2012 Enter this income on Form 1040, line 21. Free federal and state tax filing 2012 Deductions for expenses related to the activity are limited. Free federal and state tax filing 2012 They cannot total more than the income you report and can be taken only if you itemize deductions on Schedule A (Form 1040). Free federal and state tax filing 2012 See Not-for-Profit Activities in chapter 1 of Publication 535 for information on whether an activity is considered carried on for a profit. Free federal and state tax filing 2012 Alaska Permanent Fund dividend. Free federal and state tax filing 2012   If you received a payment from Alaska's mineral income fund (Alaska Permanent Fund dividend), report it as income on line 21 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Free federal and state tax filing 2012 The state of Alaska sends each recipient a document that shows the amount of the payment with the check. Free federal and state tax filing 2012 The amount also is reported to IRS. Free federal and state tax filing 2012 Alimony. Free federal and state tax filing 2012   Include in your income on Form 1040, line 11, any alimony payments you receive. Free federal and state tax filing 2012 Amounts you receive for child support are not income to you. Free federal and state tax filing 2012 Alimony and child support payments are discussed in chapter 18. Free federal and state tax filing 2012 Bribes. Free federal and state tax filing 2012   If you receive a bribe, include it in your income. Free federal and state tax filing 2012 Campaign contributions. Free federal and state tax filing 2012   These contributions are not income to a candidate unless they are diverted to his or her personal use. Free federal and state tax filing 2012 To be exempt from tax, the contributions must be spent for campaign purposes or kept in a fund for use in future campaigns. Free federal and state tax filing 2012 However, interest earned on bank deposits, dividends received on contributed securities, and net gains realized on sales of contributed securities are taxable and must be reported on Form 1120-POL, U. Free federal and state tax filing 2012 S. Free federal and state tax filing 2012 Income Tax Return for Certain Political Organizations. Free federal and state tax filing 2012 Excess campaign funds transferred to an office account must be included in the officeholder's income on Form 1040, line 21, in the year transferred. Free federal and state tax filing 2012 Car pools. Free federal and state tax filing 2012   Do not include in your income amounts you receive from the passengers for driving a car in a car pool to and from work. Free federal and state tax filing 2012 These amounts are considered reimbursement for your expenses. Free federal and state tax filing 2012 However, this rule does not apply if you have developed car pool arrangements into a profit-making business of transporting workers for hire. Free federal and state tax filing 2012 Cash rebates. Free federal and state tax filing 2012   A cash rebate you receive from a dealer or manufacturer of an item you buy is not income, but you must reduce your basis by the amount of the rebate. Free federal and state tax filing 2012 Example. Free federal and state tax filing 2012 You buy a new car for $24,000 cash and receive a $2,000 rebate check from the manufacturer. Free federal and state tax filing 2012 The $2,000 is not income to you. Free federal and state tax filing 2012 Your basis in the car is $22,000. Free federal and state tax filing 2012 This is the basis on which you figure gain or loss if you sell the car and depreciation if you use it for business. Free federal and state tax filing 2012 Casualty insurance and other reimbursements. Free federal and state tax filing 2012   You generally should not report these reimbursements on your return unless you are figuring gain or loss from the casualty or theft. Free federal and state tax filing 2012 See chapter 25 for more information. Free federal and state tax filing 2012 Child support payments. Free federal and state tax filing 2012   You should not report these payments on your return. Free federal and state tax filing 2012 See chapter 18 for more information. Free federal and state tax filing 2012 Court awards and damages. Free federal and state tax filing 2012   To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. Free federal and state tax filing 2012 The character of the income as ordinary income or capital gain depends on the nature of the underlying claim. Free federal and state tax filing 2012 Include the following as ordinary income. Free federal and state tax filing 2012 Interest on any award. Free federal and state tax filing 2012 Compensation for lost wages or lost profits in most cases. Free federal and state tax filing 2012 Punitive damages, in most cases. Free federal and state tax filing 2012 It does not matter if they relate to a physical injury or physical sickness. Free federal and state tax filing 2012 Amounts received in settlement of pension rights (if you did not contribute to the plan). Free federal and state tax filing 2012 Damages for: Patent or copyright infringement, Breach of contract, or Interference with business operations. Free federal and state tax filing 2012 Back pay and damages for emotional distress received to satisfy a claim under title VII of the Civil Rights Act of 1964. Free federal and state tax filing 2012 Attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income. Free federal and state tax filing 2012   Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments). Free federal and state tax filing 2012 Emotional distress. Free federal and state tax filing 2012   Emotional distress itself is not a physical injury or physical sickness, but damages you receive for emotional distress due to a physical injury or sickness are treated as received for the physical injury or sickness. Free federal and state tax filing 2012 Do not include them in your income. Free federal and state tax filing 2012   If the emotional distress is due to a personal injury that is not due to a physical injury or sickness (for example, employment discrimination or injury to reputation), you must include the damages in your income, except for any damages you receive for medical care due to that emotional distress. Free federal and state tax filing 2012 Emotional distress includes physical symptoms that result from emotional distress, such as headaches, insomnia, and stomach disorders. Free federal and state tax filing 2012 Deduction for costs involved in unlawful discrimination suits. Free federal and state tax filing 2012   You may be able to deduct attorney fees and court costs paid to recover a judgment or settlement for a claim of unlawful discrimination under various provisions of federal, state, and local law listed in Internal Revenue Code section 62(e), a claim against the United States government, or a claim under section 1862(b)(3)(A) of the Social Security Act. Free federal and state tax filing 2012 For more information, see Publication 525. Free federal and state tax filing 2012 Credit card insurance. Free federal and state tax filing 2012   In most cases, if you receive benefits under a credit card disability or unemployment insurance plan, the benefits are taxable to you. Free federal and state tax filing 2012 These plans make the minimum monthly payment on your credit card account if you cannot make the payment due to injury, illness, disability, or unemployment. Free federal and state tax filing 2012 Report on Form 1040, line 21, the amount of benefits you received during the year that is more than the amount of the premiums you paid during the year. Free federal and state tax filing 2012 Down payment assistance. Free federal and state tax filing 2012   If you purchase a home and receive assistance from a nonprofit corporation to make the down payment, that assistance is not included in your income. Free federal and state tax filing 2012 If the corporation qualifies as a tax-exempt charitable organization, the assistance is treated as a gift and is included in your basis of the house. Free federal and state tax filing 2012 If the corporation does not qualify, the assistance is treated as a rebate or reduction of the purchase price and is not included in your basis. Free federal and state tax filing 2012 Employment agency fees. Free federal and state tax filing 2012   If you get a job through an employment agency, and the fee is paid by your employer, the fee is not includible in your income if you are not liable for it. Free federal and state tax filing 2012 However, if you pay it and your employer reimburses you for it, it is includible in your income. Free federal and state tax filing 2012 Energy conservation subsidies. Free federal and state tax filing 2012   You can exclude from gross income any subsidy provided, either directly or indirectly, by public utilities for the purchase or installation of an energy conservation measure for a dwelling unit. Free federal and state tax filing 2012 Energy conservation measure. Free federal and state tax filing 2012   This includes installations or modifications that are primarily designed to reduce consumption of electricity or natural gas, or improve the management of energy demand. Free federal and state tax filing 2012 Dwelling unit. Free federal and state tax filing 2012   This includes a house, apartment, condominium, mobile home, boat, or similar property. Free federal and state tax filing 2012 If a building or structure contains both dwelling and other units, any subsidy must be properly allocated. Free federal and state tax filing 2012 Estate and trust income. Free federal and state tax filing 2012    An estate or trust, unlike a partnership, may have to pay federal income tax. Free federal and state tax filing 2012 If you are a beneficiary of an estate or trust, you may be taxed on your share of its income distributed or required to be distributed to you. Free federal and state tax filing 2012 However, there is never a double tax. Free federal and state tax filing 2012 Estates and trusts file their returns on Form 1041, U. Free federal and state tax filing 2012 S. Free federal and state tax filing 2012 Income Tax Return for Estates and Trusts, and your share of the income is reported to you on Schedule K-1 (Form 1041). Free federal and state tax filing 2012 Current income required to be distributed. Free federal and state tax filing 2012   If you are the beneficiary of an estate or trust that must distribute all of its current income, you must report your share of the distributable net income, whether or not you actually received it. Free federal and state tax filing 2012 Current income not required to be distributed. Free federal and state tax filing 2012    If you are the beneficiary of an estate or trust and the fiduciary has the choice of whether to distribute all or part of the current income, you must report: All income that is required to be distributed to you, whether or not it is actually distributed, plus All other amounts actually paid or credited to you, up to the amount of your share of distributable net income. Free federal and state tax filing 2012 How to report. Free federal and state tax filing 2012   Treat each item of income the same way that the estate or trust would treat it. Free federal and state tax filing 2012 For example, if a trust's dividend income is distributed to you, you report the distribution as dividend income on your return. Free federal and state tax filing 2012 The same rule applies to distributions of tax-exempt interest and capital gains. Free federal and state tax filing 2012   The fiduciary of the estate or trust must tell you the type of items making up your share of the estate or trust income and any credits you are allowed on your individual income tax return. Free federal and state tax filing 2012 Losses. Free federal and state tax filing 2012   Losses of estates and trusts generally are not deductible by the beneficiaries. Free federal and state tax filing 2012 Grantor trust. Free federal and state tax filing 2012   Income earned by a grantor trust is taxable to the grantor, not the beneficiary, if the grantor keeps certain control over the trust. Free federal and state tax filing 2012 (The grantor is the one who transferred property to the trust. Free federal and state tax filing 2012 ) This rule applies if the property (or income from the property) put into the trust will or may revert (be returned) to the grantor or the grantor's spouse. Free federal and state tax filing 2012   Generally, a trust is a grantor trust if the grantor has a reversionary interest valued (at the date of transfer) at more than 5% of the value of the transferred property. Free federal and state tax filing 2012 Expenses paid by another. Free federal and state tax filing 2012   If your personal expenses are paid for by another person, such as a corporation, the payment may be taxable to you depending upon your relationship with that person and the nature of the payment. Free federal and state tax filing 2012 But if the payment makes up for a loss caused by that person, and only restores you to the position you were in before the loss, the payment is not includible in your income. Free federal and state tax filing 2012 Fees for services. Free federal and state tax filing 2012   Include all fees for your services in your income. Free federal and state tax filing 2012 Examples of these fees are amounts you receive for services you perform as: A corporate director, An executor, administrator, or personal representative of an estate, A manager of a trade or business you operated before declaring Chapter 11 bankruptcy, A notary public, or An election precinct official. Free federal and state tax filing 2012 Nonemployee compensation. Free federal and state tax filing 2012   If you are not an employee and the fees for your services from the same payer total $600 or more for the year, you may receive a Form 1099-MISC. Free federal and state tax filing 2012 You may need to report your fees as self-employment income. Free federal and state tax filing 2012 See Self-Employed Persons , in chapter 1, for a discussion of when you are considered self-employed. Free federal and state tax filing 2012 Corporate director. Free federal and state tax filing 2012   Corporate director fees are self-employment income. Free federal and state tax filing 2012 Report these payments on Schedule C or Schedule C-EZ (Form 1040). Free federal and state tax filing 2012 Personal representatives. Free federal and state tax filing 2012   All personal representatives must include in their gross income fees paid to them from an estate. Free federal and state tax filing 2012 If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on Form 1040, line 21. Free federal and state tax filing 2012 If you are in the trade or business of being an executor, report these fees as self-employment income on Schedule C or Schedule C-EZ (Form 1040). Free federal and state tax filing 2012 The fee is not includible in income if it is waived. Free federal and state tax filing 2012 Manager of trade or business for bankruptcy estate. Free federal and state tax filing 2012   Include in your income all payments received from your bankruptcy estate for managing or operating a trade or business that you operated before you filed for bankruptcy. Free federal and state tax filing 2012 Report this income on Form 1040, line 21. Free federal and state tax filing 2012 Notary public. Free federal and state tax filing 2012    Report payments for these services on Schedule C or Schedule C-EZ (Form 1040). Free federal and state tax filing 2012 These payments are not subject to self-employment tax. Free federal and state tax filing 2012 See the separate instructions for Schedule SE (Form 1040) for details. Free federal and state tax filing 2012 Election precinct official. Free federal and state tax filing 2012    You should receive a Form W-2 showing payments for services performed as an election official or election worker. Free federal and state tax filing 2012 Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Free federal and state tax filing 2012 Foster care providers. Free federal and state tax filing 2012   Payments you receive from a state, political subdivision, or a qualified foster care placement agency for providing care to qualified foster individuals in your home generally are not included in your income. Free federal and state tax filing 2012 However, you must include in your income payments received for the care of more than 5 individuals age 19 or older and certain difficulty-of-care payments. Free federal and state tax filing 2012   A qualified foster individual is a person who: Is living in a foster family home, and Was placed there by: An agency of a state or one of its political subdivisions, or A qualified foster care placement agency. Free federal and state tax filing 2012 Difficulty-of-care payments. Free federal and state tax filing 2012   These are additional payments that are designated by the payer as compensation for providing the additional care that is required for physically, mentally, or emotionally handicapped qualified foster individuals. Free federal and state tax filing 2012 A state must determine that the additional compensation is needed, and the care for which the payments are made must be provided in your home. Free federal and state tax filing 2012   You must include in your income difficulty-of-care payments received for more than: 10 qualified foster individuals under age 19, or 5 qualified foster individuals age 19 or older. Free federal and state tax filing 2012 Maintaining space in home. Free federal and state tax filing 2012   If you are paid to maintain space in your home for emergency foster care, you must include the payment in your income. Free federal and state tax filing 2012 Reporting taxable payments. Free federal and state tax filing 2012    If you receive payments that you must include in your income, you are in business as a foster care provider and you are self-employed. Free federal and state tax filing 2012 Report the payments on Schedule C or Schedule C-EZ (Form 1040). Free federal and state tax filing 2012 See Publication 587, Business Use of Your Home, to help you determine the amount you can deduct for the use of your home. Free federal and state tax filing 2012 Found property. Free federal and state tax filing 2012   If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession. Free federal and state tax filing 2012 Free tour. Free federal and state tax filing 2012   If you received a free tour from a travel agency for organizing a group of tourists, you must include its value in your income. Free federal and state tax filing 2012 Report the fair market value of the tour on Form 1040, line 21, if you are not in the trade or business of organizing tours. Free federal and state tax filing 2012 You cannot deduct your expenses in serving as the voluntary leader of the group at the group's request. Free federal and state tax filing 2012 If you organize tours as a trade or business, report the tour's value on Schedule C or Schedule C-EZ (Form 1040). Free federal and state tax filing 2012 Gambling winnings. Free federal and state tax filing 2012   You must include your gambling winnings in income on Form 1040, line 21. Free federal and state tax filing 2012 If you itemize your deductions on Schedule A (Form 1040), you can deduct gambling losses you had during the year, but only up to the amount of your winnings. Free federal and state tax filing 2012 Lotteries and raffles. Free federal and state tax filing 2012   Winnings from lotteries and raffles are gambling winnings. Free federal and state tax filing 2012 In addition to cash winnings, you must include in your income the fair market value of bonds, cars, houses, and other noncash prizes. Free federal and state tax filing 2012    If you win a state lottery prize payable in installments, see Publication 525 for more information. Free federal and state tax filing 2012 Form W-2G. Free federal and state tax filing 2012   You may have received a Form W-2G, Certain Gambling Winnings, showing the amount of your gambling winnings and any tax taken out of them. Free federal and state tax filing 2012 Include the amount from box 1 on Form 1040, line 21. Free federal and state tax filing 2012 Include the amount shown in box 4 on Form 1040, line 62, as federal income tax withheld. Free federal and state tax filing 2012 Reporting winnings and recordkeeping. Free federal and state tax filing 2012   For more information on reporting gam
Print - Click this link to Print this page

Contact My Local Office in Maine

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

 City Street Address  Days/Hours of Service  Telephone* 
Augusta  68 Sewall St.
Augusta, ME  04330 

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

Services Provided

(207) 622-1508 
Bangor  202 Harlow St.
Bangor, ME  04401 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

Services Provided

(207) 942-8573 
Lewiston  217 Main St.
Lewiston, ME 04240 

Monday-Friday - 8:30 a.m.- 4:30 p.m. 
(Closed for lunch 1:30 p.m. - 2:30 p.m.)

 

Services Provided

(207) 782-6795 
Presque Isle  36 North St.
Presque Isle, ME  04769 

Monday - Friday - 8:30 a.m. - 4:30 p.m. 
(Closed for lunch 1:00 p.m. - 2:00 p.m.)

 

** This office will be closed 5/14-5/16 and 5/19-5/21**

 

Services Provided

(207) 764-0947 
South Portland  220 Maine Mall Rd.
So. Portland, ME  04106 

Monday-Friday - 8:30 a.m. - 4:30 p.m.
(Closed for lunch 1:00 p.m. - 2:00 p.m.)
 

Services Provided

(207) 879-4683 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

For information on where to file your tax return please see Where to File Addresses.

The Taxpayer Advocate Service: Call (207)622-8528 in Augusta or 1-877-777-4778 elsewhere, or see Publication 1546, The Taxpayer Advocate Service of the IRS. For further information, see Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
220 Maine Mall Rd., 2nd Floor
So. Portland, ME 04106

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The Free Federal And State Tax Filing 2012

Free federal and state tax filing 2012 3. Free federal and state tax filing 2012   Rent Expense Table of Contents Introduction Topics - This chapter discusses: RentConditional sales contract. Free federal and state tax filing 2012 Leveraged leases. Free federal and state tax filing 2012 Leveraged leases of limited-use property. Free federal and state tax filing 2012 Taxes on Leased Property Cost of Getting a Lease Improvements by Lessee Capitalizing Rent Expenses Introduction This chapter discusses the tax treatment of rent or lease payments you make for property you use in your business but do not own. Free federal and state tax filing 2012 It also discusses how to treat other kinds of payments you make that are related to your use of this property. Free federal and state tax filing 2012 These include payments you make for taxes on the property. Free federal and state tax filing 2012 Topics - This chapter discusses: The definition of rent Taxes on leased property The cost of getting a lease Improvements by the lessee Capitalizing rent expenses Rent Rent is any amount you pay for the use of property you do not own. Free federal and state tax filing 2012 In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. Free federal and state tax filing 2012 If you have or will receive equity in or title to the property, the rent is not deductible. Free federal and state tax filing 2012 Unreasonable rent. Free federal and state tax filing 2012   You cannot take a rental deduction for unreasonable rent. Free federal and state tax filing 2012 Ordinarily, the issue of reasonableness arises only if you and the lessor are related. Free federal and state tax filing 2012 Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. Free federal and state tax filing 2012 Rent is not unreasonable just because it is figured as a percentage of gross sales. Free federal and state tax filing 2012 For examples of related persons, see Related persons in chapter 2, Publication 544. Free federal and state tax filing 2012 Rent on your home. Free federal and state tax filing 2012   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. Free federal and state tax filing 2012 You must meet the requirements for business use of your home. Free federal and state tax filing 2012 For more information, see Business use of your home in chapter 1. Free federal and state tax filing 2012 Rent paid in advance. Free federal and state tax filing 2012   Generally, rent paid in your trade or business is deductible in the year paid or accrued. Free federal and state tax filing 2012 If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. Free federal and state tax filing 2012 You can deduct the rest of your payment only over the period to which it applies. Free federal and state tax filing 2012 Example 1. Free federal and state tax filing 2012 You are a calendar year taxpayer and you leased a building for 5 years beginning July 1. Free federal and state tax filing 2012 Your rent is $12,000 per year. Free federal and state tax filing 2012 You paid the first year's rent ($12,000) on June 30. Free federal and state tax filing 2012 You can deduct only $6,000 (6/12 × $12,000) for the rent that applies to the first year. Free federal and state tax filing 2012 Example 2. Free federal and state tax filing 2012 You are a calendar year taxpayer. Free federal and state tax filing 2012 Last January you leased property for 3 years for $6,000 a year. Free federal and state tax filing 2012 You paid the full $18,000 (3 × $6,000) during the first year of the lease. Free federal and state tax filing 2012 Each year you can deduct only $6,000, the part of the lease that applies to that year. Free federal and state tax filing 2012 Canceling a lease. Free federal and state tax filing 2012   You generally can deduct as rent an amount you pay to cancel a business lease. Free federal and state tax filing 2012 Lease or purchase. Free federal and state tax filing 2012   There may be instances in which you must determine whether your payments are for rent or for the purchase of the property. Free federal and state tax filing 2012 You must first determine whether your agreement is a lease or a conditional sales contract. Free federal and state tax filing 2012 Payments made under a conditional sales contract are not deductible as rent expense. Free federal and state tax filing 2012 Conditional sales contract. Free federal and state tax filing 2012   Whether an agreement is a conditional sales contract depends on the intent of the parties. Free federal and state tax filing 2012 Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. Free federal and state tax filing 2012 No single test, or special combination of tests, always applies. Free federal and state tax filing 2012 However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. Free federal and state tax filing 2012 The agreement applies part of each payment toward an equity interest you will receive. Free federal and state tax filing 2012 You get title to the property after you make a stated amount of required payments. Free federal and state tax filing 2012 The amount you must pay to use the property for a short time is a large part of the amount you would pay to get title to the property. Free federal and state tax filing 2012 You pay much more than the current fair rental value of the property. Free federal and state tax filing 2012 You have an option to buy the property at a nominal price compared to the value of the property when you may exercise the option. Free federal and state tax filing 2012 Determine this value when you make the agreement. Free federal and state tax filing 2012 You have an option to buy the property at a nominal price compared to the total amount you have to pay under the agreement. Free federal and state tax filing 2012 The agreement designates part of the payments as interest, or that part is easy to recognize as interest. Free federal and state tax filing 2012 Leveraged leases. Free federal and state tax filing 2012   Leveraged lease transactions may not be considered leases. Free federal and state tax filing 2012 Leveraged leases generally involve three parties: a lessor, a lessee, and a lender to the lessor. Free federal and state tax filing 2012 Usually the lease term covers a large part of the useful life of the leased property, and the lessee's payments to the lessor are enough to cover the lessor's payments to the lender. Free federal and state tax filing 2012   If you plan to take part in what appears to be a leveraged lease, you may want to get an advance ruling. Free federal and state tax filing 2012 Revenue Procedure 2001-28 on page 1156 of Internal Revenue Bulletin 2001-19 contains the guidelines the IRS will use to determine if a leveraged lease is a lease for federal income tax purposes. Free federal and state tax filing 2012 Revenue Procedure 2001-29 on page 1160 of the same Internal Revenue Bulletin provides the information required to be furnished in a request for an advance ruling on a leveraged lease transaction. Free federal and state tax filing 2012 Internal Revenue Bulletin 2001-19 is available at www. Free federal and state tax filing 2012 irs. Free federal and state tax filing 2012 gov/pub/irs-irbs/irb01-19. Free federal and state tax filing 2012 pdf. Free federal and state tax filing 2012   In general, Revenue Procedure 2001-28 provides that, for advance ruling purposes only, the IRS will consider the lessor in a leveraged lease transaction to be the owner of the property and the transaction to be a valid lease if all the factors in the revenue procedure are met, including the following. Free federal and state tax filing 2012 The lessor must maintain a minimum unconditional “at risk” equity investment in the property (at least 20% of the cost of the property) during the entire lease term. Free federal and state tax filing 2012 The lessee may not have a contractual right to buy the property from the lessor at less than fair market value when the right is exercised. Free federal and state tax filing 2012 The lessee may not invest in the property, except as provided by Revenue Procedure 2001-28. Free federal and state tax filing 2012 The lessee may not lend any money to the lessor to buy the property or guarantee the loan used by the lessor to buy the property. Free federal and state tax filing 2012 The lessor must show that it expects to receive a profit apart from the tax deductions, allowances, credits, and other tax attributes. Free federal and state tax filing 2012   The IRS may charge you a user fee for issuing a tax ruling. Free federal and state tax filing 2012 For more information, see Revenue Procedure 2014-1 available at  www. Free federal and state tax filing 2012 irs. Free federal and state tax filing 2012 gov/irb/2014-1_IRB/ar05. Free federal and state tax filing 2012 html. Free federal and state tax filing 2012 Leveraged leases of limited-use property. Free federal and state tax filing 2012   The IRS will not issue advance rulings on leveraged leases of so-called limited-use property. Free federal and state tax filing 2012 Limited-use property is property not expected to be either useful to or usable by a lessor at the end of the lease term except for continued leasing or transfer to a lessee. Free federal and state tax filing 2012 See Revenue Procedure 2001-28 for examples of limited-use property and property that is not limited-use property. Free federal and state tax filing 2012 Leases over $250,000. Free federal and state tax filing 2012   Special rules are provided for certain leases of tangible property. Free federal and state tax filing 2012 The rules apply if the lease calls for total payments of more than $250,000 and any of the following apply. Free federal and state tax filing 2012 Rents increase during the lease. Free federal and state tax filing 2012 Rents decrease during the lease. Free federal and state tax filing 2012 Rents are deferred (rent is payable after the end of the calendar year following the calendar year in which the use occurs and the rent is allocated). Free federal and state tax filing 2012 Rents are prepaid (rent is payable before the end of the calendar year preceding the calendar year in which the use occurs and the rent is allocated). Free federal and state tax filing 2012 These rules do not apply if your lease specifies equal amounts of rent for each month in the lease term and all rent payments are due in the calendar year to which the rent relates (or in the preceding or following calendar year). Free federal and state tax filing 2012   Generally, if the special rules apply, you must use an accrual method of accounting (and time value of money principles) for your rental expenses, regardless of your overall method of accounting. Free federal and state tax filing 2012 In addition, in certain cases in which the IRS has determined that a lease was designed to achieve tax avoidance, you must take rent and stated or imputed interest into account under a constant rental accrual method in which the rent is treated as accruing ratably over the entire lease term. Free federal and state tax filing 2012 For details, see section 467 of the Internal Revenue Code. Free federal and state tax filing 2012 Taxes on Leased Property If you lease business property, you can deduct as additional rent any taxes you have to pay to or for the lessor. Free federal and state tax filing 2012 When you can deduct these taxes as additional rent depends on your accounting method. Free federal and state tax filing 2012 Cash method. Free federal and state tax filing 2012   If you use the cash method of accounting, you can deduct the taxes as additional rent only for the tax year in which you pay them. Free federal and state tax filing 2012 Accrual method. Free federal and state tax filing 2012   If you use an accrual method of accounting, you can deduct taxes as additional rent for the tax year in which you can determine all the following. Free federal and state tax filing 2012 That you have a liability for taxes on the leased property. Free federal and state tax filing 2012 How much the liability is. Free federal and state tax filing 2012 That economic performance occurred. Free federal and state tax filing 2012   The liability and amount of taxes are determined by state or local law and the lease agreement. Free federal and state tax filing 2012 Economic performance occurs as you use the property. Free federal and state tax filing 2012 Example 1. Free federal and state tax filing 2012 Oak Corporation is a calendar year taxpayer that uses an accrual method of accounting. Free federal and state tax filing 2012 Oak leases land for use in its business. Free federal and state tax filing 2012 Under state law, owners of real property become liable (incur a lien on the property) for real estate taxes for the year on January 1 of that year. Free federal and state tax filing 2012 However, they do not have to pay these taxes until July 1 of the next year (18 months later) when tax bills are issued. Free federal and state tax filing 2012 Under the terms of the lease, Oak becomes liable for the real estate taxes in the later year when the tax bills are issued. Free federal and state tax filing 2012 If the lease ends before the tax bill for a year is issued, Oak is not liable for the taxes for that year. Free federal and state tax filing 2012 Oak cannot deduct the real estate taxes as rent until the tax bill is issued. Free federal and state tax filing 2012 This is when Oak's liability under the lease becomes fixed. Free federal and state tax filing 2012 Example 2. Free federal and state tax filing 2012 The facts are the same as in Example 1 except that, according to the terms of the lease, Oak becomes liable for the real estate taxes when the owner of the property becomes liable for them. Free federal and state tax filing 2012 As a result, Oak will deduct the real estate taxes as rent on its tax return for the earlier year. Free federal and state tax filing 2012 This is the year in which Oak's liability under the lease becomes fixed. Free federal and state tax filing 2012 Cost of Getting a Lease You may either enter into a new lease with the lessor of the property or get an existing lease from another lessee. Free federal and state tax filing 2012 Very often when you get an existing lease from another lessee, you must pay the previous lessee money to get the lease, besides having to pay the rent on the lease. Free federal and state tax filing 2012 If you get an existing lease on property or equipment for your business, you generally must amortize any amount you pay to get that lease over the remaining term of the lease. Free federal and state tax filing 2012 For example, if you pay $10,000 to get a lease and there are 10 years remaining on the lease with no option to renew, you can deduct $1,000 each year. Free federal and state tax filing 2012 The cost of getting an existing lease of tangible property is not subject to the amortization rules for section 197 intangibles discussed in chapter 8. Free federal and state tax filing 2012 Option to renew. Free federal and state tax filing 2012   The term of the lease for amortization includes all renewal options plus any other period for which you and the lessor reasonably expect the lease to be renewed. Free federal and state tax filing 2012 However, this applies only if less than 75% of the cost of getting the lease is for the term remaining on the purchase date (not including any period for which you may choose to renew, extend, or continue the lease). Free federal and state tax filing 2012 Allocate the lease cost to the original term and any option term based on the facts and circumstances. Free federal and state tax filing 2012 In some cases, it may be appropriate to make the allocation using a present value computation. Free federal and state tax filing 2012 For more information, see Regulations section 1. Free federal and state tax filing 2012 178-1(b)(5). Free federal and state tax filing 2012 Example 1. Free federal and state tax filing 2012 You paid $10,000 to get a lease with 20 years remaining on it and two options to renew for 5 years each. Free federal and state tax filing 2012 Of this cost, you paid $7,000 for the original lease and $3,000 for the renewal options. Free federal and state tax filing 2012 Because $7,000 is less than 75% of the total $10,000 cost of the lease (or $7,500), you must amortize the $10,000 over 30 years. Free federal and state tax filing 2012 That is the remaining life of your present lease plus the periods for renewal. Free federal and state tax filing 2012 Example 2. Free federal and state tax filing 2012 The facts are the same as in Example 1, except that you paid $8,000 for the original lease and $2,000 for the renewal options. Free federal and state tax filing 2012 You can amortize the entire $10,000 over the 20-year remaining life of the original lease. Free federal and state tax filing 2012 The $8,000 cost of getting the original lease was not less than 75% of the total cost of the lease (or $7,500). Free federal and state tax filing 2012 Cost of a modification agreement. Free federal and state tax filing 2012   You may have to pay an additional “rent” amount over part of the lease period to change certain provisions in your lease. Free federal and state tax filing 2012 You must capitalize these payments and amortize them over the remaining period of the lease. Free federal and state tax filing 2012 You cannot deduct the payments as additional rent, even if they are described as rent in the agreement. Free federal and state tax filing 2012 Example. Free federal and state tax filing 2012 You are a calendar year taxpayer and sign a 20-year lease to rent part of a building starting on January 1. Free federal and state tax filing 2012 However, before you occupy it, you decide that you really need less space. Free federal and state tax filing 2012 The lessor agrees to reduce your rent from $7,000 to $6,000 per year and to release the excess space from the original lease. Free federal and state tax filing 2012 In exchange, you agree to pay an additional rent amount of $3,000, payable in 60 monthly installments of $50 each. Free federal and state tax filing 2012   You must capitalize the $3,000 and amortize it over the 20-year term of the lease. Free federal and state tax filing 2012 Your amortization deduction each year will be $150 ($3,000 ÷ 20). Free federal and state tax filing 2012 You cannot deduct the $600 (12 × $50) that you will pay during each of the first 5 years as rent. Free federal and state tax filing 2012 Commissions, bonuses, and fees. Free federal and state tax filing 2012   Commissions, bonuses, fees, and other amounts you pay to get a lease on property you use in your business are capital costs. Free federal and state tax filing 2012 You must amortize these costs over the term of the lease. Free federal and state tax filing 2012 Loss on merchandise and fixtures. Free federal and state tax filing 2012   If you sell at a loss merchandise and fixtures that you bought solely to get a lease, the loss is a cost of getting the lease. Free federal and state tax filing 2012 You must capitalize the loss and amortize it over the remaining term of the lease. Free federal and state tax filing 2012 Improvements by Lessee If you add buildings or make other permanent improvements to leased property, depreciate the cost of the improvements using the modified accelerated cost recovery system (MACRS). Free federal and state tax filing 2012 Depreciate the property over its appropriate recovery period. Free federal and state tax filing 2012 You cannot amortize the cost over the remaining term of the lease. Free federal and state tax filing 2012 If you do not keep the improvements when you end the lease, figure your gain or loss based on your adjusted basis in the improvements at that time. Free federal and state tax filing 2012 For more information, see the discussion of MACRS in Publication 946, How To Depreciate Property. Free federal and state tax filing 2012 Assignment of a lease. Free federal and state tax filing 2012   If a long-term lessee who makes permanent improvements to land later assigns all lease rights to you for money and you pay the rent required by the lease, the amount you pay for the assignment is a capital investment. Free federal and state tax filing 2012 If the rental value of the leased land increased since the lease began, part of your capital investment is for that increase in the rental value. Free federal and state tax filing 2012 The rest is for your investment in the permanent improvements. Free federal and state tax filing 2012   The part that is for the increased rental value of the land is a cost of getting a lease, and you amortize it over the remaining term of the lease. Free federal and state tax filing 2012 You can depreciate the part that is for your investment in the improvements over the recovery period of the property as discussed earlier, without regard to the lease term. Free federal and state tax filing 2012 Capitalizing Rent Expenses Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Free federal and state tax filing 2012 Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Free federal and state tax filing 2012 You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Free federal and state tax filing 2012 Indirect costs include amounts incurred for renting or leasing equipment, facilities, or land. Free federal and state tax filing 2012 Uniform capitalization rules. Free federal and state tax filing 2012   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Free federal and state tax filing 2012 Produce real property or tangible personal property. Free federal and state tax filing 2012 For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Free federal and state tax filing 2012 Acquire property for resale. Free federal and state tax filing 2012 However, these rules do not apply to the following property. Free federal and state tax filing 2012 Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. Free federal and state tax filing 2012 Property you produce if you meet either of the following conditions. Free federal and state tax filing 2012 Your indirect costs of producing the property are $200,000 or less. Free federal and state tax filing 2012 You use the cash method of accounting and do not account for inventories. Free federal and state tax filing 2012 Example 1. Free federal and state tax filing 2012 You rent construction equipment to build a storage facility. Free federal and state tax filing 2012 If you are subject to the uniform capitalization rules, you must capitalize as part of the cost of the building the rent you paid for the equipment. Free federal and state tax filing 2012 You recover your cost by claiming a deduction for depreciation on the building. Free federal and state tax filing 2012 Example 2. Free federal and state tax filing 2012 You rent space in a facility to conduct your business of manufacturing tools. Free federal and state tax filing 2012 If you are subject to the uniform capitalization rules, you must include the rent you paid to occupy the facility in the cost of the tools you produce. Free federal and state tax filing 2012 More information. Free federal and state tax filing 2012   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. Free federal and state tax filing 2012 Prev  Up  Next   Home   More Online Publications