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Free Federal And State Tax Filing 2014

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Free Federal And State Tax Filing 2014

Free federal and state tax filing 2014 8. Free federal and state tax filing 2014   Dividends and Other Distributions Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationDividends not reported on Form 1099-DIV. Free federal and state tax filing 2014 Reporting tax withheld. Free federal and state tax filing 2014 Nominees. Free federal and state tax filing 2014 Ordinary DividendsQualified Dividends Dividends Used to Buy More Stock Money Market Funds Capital Gain DistributionsBasis adjustment. Free federal and state tax filing 2014 Nondividend DistributionsLiquidating Distributions Distributions of Stock and Stock Rights Other DistributionsInformation reporting requirement. Free federal and state tax filing 2014 Alternative minimum tax treatment. Free federal and state tax filing 2014 How To Report Dividend IncomeInvestment interest deducted. Free federal and state tax filing 2014 Reminder Foreign-source income. Free federal and state tax filing 2014  If you are a U. Free federal and state tax filing 2014 S. Free federal and state tax filing 2014 citizen with dividend income from sources outside the United States (foreign-source income), you must report that income on your tax return unless it is exempt by U. Free federal and state tax filing 2014 S. Free federal and state tax filing 2014 law. Free federal and state tax filing 2014 This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. Free federal and state tax filing 2014 Introduction This chapter discusses the tax treatment of: Ordinary dividends, Capital gain distributions, Nondividend distributions, and Other distributions you may receive from a corporation or a mutual fund. Free federal and state tax filing 2014 This chapter also explains how to report dividend income on your tax return. Free federal and state tax filing 2014 Dividends are distributions of money, stock, or other property paid to you by a corporation or by a mutual fund. Free federal and state tax filing 2014 You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation. Free federal and state tax filing 2014 However, some amounts you receive that are called dividends are actually interest income. Free federal and state tax filing 2014 (See Dividends that are actually interest under Taxable Interest in chapter 7. Free federal and state tax filing 2014 ) Most distributions are paid in cash (or check). Free federal and state tax filing 2014 However, distributions can consist of more stock, stock rights, other property, or services. Free federal and state tax filing 2014 Useful Items - You may want to see: Publication 514 Foreign Tax Credit for Individuals 550 Investment Income and Expenses Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends General Information This section discusses general rules for dividend income. Free federal and state tax filing 2014 Tax on unearned income of certain children. Free federal and state tax filing 2014   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Free federal and state tax filing 2014 If it is, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Free federal and state tax filing 2014 If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Free federal and state tax filing 2014    Some parents can choose to include the child's interest and dividends on the parent's return if certain requirements are met. Free federal and state tax filing 2014 Use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Free federal and state tax filing 2014   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Free federal and state tax filing 2014 Beneficiary of an estate or trust. Free federal and state tax filing 2014    Dividends and other distributions you receive as a beneficiary of an estate or trust are generally taxable income. Free federal and state tax filing 2014 You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Free federal and state tax filing 2014 , from the fiduciary. Free federal and state tax filing 2014 Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Free federal and state tax filing 2014 Social security number (SSN) or individual taxpayer identification number (ITIN). Free federal and state tax filing 2014    You must give your SSN or ITIN to any person required by federal tax law to make a return, statement, or other document that relates to you. Free federal and state tax filing 2014 This includes payers of dividends. Free federal and state tax filing 2014 If you do not give your SSN or ITIN to the payer of dividends, you may have to pay a penalty. Free federal and state tax filing 2014 For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. Free federal and state tax filing 2014 Backup withholding. Free federal and state tax filing 2014   Your dividend income is generally not subject to regular withholding. Free federal and state tax filing 2014 However, it may be subject to backup withholding to ensure that income tax is collected on the income. Free federal and state tax filing 2014 Under backup withholding, the payer of dividends must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Free federal and state tax filing 2014   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Free federal and state tax filing 2014 For more information, see Backup Withholding in chapter 4. Free federal and state tax filing 2014 Stock certificate in two or more names. Free federal and state tax filing 2014   If two or more persons hold stock as joint tenants, tenants by the entirety, or tenants in common, each person's share of any dividends from the stock is determined by local law. Free federal and state tax filing 2014 Form 1099-DIV. Free federal and state tax filing 2014   Most corporations and mutual funds use Form 1099-DIV, Dividends and Distributions, to show you the distributions you received from them during the year. Free federal and state tax filing 2014 Keep this form with your records. Free federal and state tax filing 2014 You do not have to attach it to your tax return. Free federal and state tax filing 2014 Dividends not reported on Form 1099-DIV. Free federal and state tax filing 2014   Even if you do not receive Form 1099-DIV, you must still report all your taxable dividend income. Free federal and state tax filing 2014 For example, you may receive distributive shares of dividends from partnerships or S corporations. Free federal and state tax filing 2014 These dividends are reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Free federal and state tax filing 2014 , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Free federal and state tax filing 2014 Reporting tax withheld. Free federal and state tax filing 2014   If tax is withheld from your dividend income, the payer must give you a Form 1099-DIV that indicates the amount withheld. Free federal and state tax filing 2014 Nominees. Free federal and state tax filing 2014   If someone receives distributions as a nominee for you, that person should give you a Form 1099-DIV, which will show distributions received on your behalf. Free federal and state tax filing 2014 Form 1099-MISC. Free federal and state tax filing 2014   Certain substitute payments in lieu of dividends or tax-exempt interest received by a broker on your behalf must be reported to you on Form 1099-MISC, Miscellaneous Income, or a similar statement. Free federal and state tax filing 2014 See Reporting Substitute Payments under Short Sales in chapter 4 of Publication 550 for more information about reporting these payments. Free federal and state tax filing 2014 Incorrect amount shown on a Form 1099. Free federal and state tax filing 2014   If you receive a Form 1099 that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Free federal and state tax filing 2014 The new Form 1099 you receive will be marked “Corrected. Free federal and state tax filing 2014 ” Dividends on stock sold. Free federal and state tax filing 2014   If stock is sold, exchanged, or otherwise disposed of after a dividend is declared but before it is paid, the owner of record (usually the payee shown on the dividend check) must include the dividend in income. Free federal and state tax filing 2014 Dividends received in January. Free federal and state tax filing 2014   If a mutual fund (or other regulated investment company) or real estate investment trust (REIT) declares a dividend (including any exempt-interest dividend or capital gain distribution) in October, November, or December, payable to shareholders of record on a date in one of those months but actually pays the dividend during January of the next calendar year, you are considered to have received the dividend on December 31. Free federal and state tax filing 2014 You report the dividend in the year it was declared. Free federal and state tax filing 2014 Ordinary Dividends Ordinary (taxable) dividends are the most common type of distribution from a corporation or a mutual fund. Free federal and state tax filing 2014 They are paid out of earnings and profits and are ordinary income to you. Free federal and state tax filing 2014 This means they are not capital gains. Free federal and state tax filing 2014 You can assume that any dividend you receive on common or preferred stock is an ordinary dividend unless the paying corporation or mutual fund tells you otherwise. Free federal and state tax filing 2014 Ordinary dividends will be shown in box 1a of the Form 1099-DIV you receive. Free federal and state tax filing 2014 Qualified Dividends Qualified dividends are the ordinary dividends subject to the same 0%, 15%, or 20% maximum tax rate that applies to net capital gain. Free federal and state tax filing 2014 They should be shown in box 1b of the Form 1099-DIV you receive. Free federal and state tax filing 2014 The maximum rate of tax on qualified dividends is: 0% on any amount that otherwise would be taxed at a 10% or 15% rate. Free federal and state tax filing 2014 15% on any amount that otherwise would be taxed at rates greater than 15% but less than 39. Free federal and state tax filing 2014 6%. Free federal and state tax filing 2014 20% on any amount that otherwise would be taxed at a 39. Free federal and state tax filing 2014 6% rate. Free federal and state tax filing 2014 To qualify for the maximum rate, all of the following requirements must be met. Free federal and state tax filing 2014 The dividends must have been paid by a U. Free federal and state tax filing 2014 S. Free federal and state tax filing 2014 corporation or a qualified foreign corporation. Free federal and state tax filing 2014 (See Qualified foreign corporation , later. Free federal and state tax filing 2014 ) The dividends are not of the type listed later under Dividends that are not qualified dividends . Free federal and state tax filing 2014 You meet the holding period (discussed next). Free federal and state tax filing 2014 Holding period. Free federal and state tax filing 2014   You must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. Free federal and state tax filing 2014 The ex-dividend date is the first date following the declaration of a dividend on which the buyer of a stock is not entitled to receive the next dividend payment. Free federal and state tax filing 2014 Instead, the seller will get the dividend. Free federal and state tax filing 2014   When counting the number of days you held the stock, include the day you disposed of the stock, but not the day you acquired it. Free federal and state tax filing 2014 See the examples later. Free federal and state tax filing 2014 Exception for preferred stock. Free federal and state tax filing 2014   In the case of preferred stock, you must have held the stock more than 90 days during the 181-day period that begins 90 days before the ex-dividend date if the dividends are due to periods totaling more than 366 days. Free federal and state tax filing 2014 If the preferred dividends are due to periods totaling less than 367 days, the holding period in the previous paragraph applies. Free federal and state tax filing 2014 Example 1. Free federal and state tax filing 2014 You bought 5,000 shares of XYZ Corp. Free federal and state tax filing 2014 common stock on July 9, 2013. Free federal and state tax filing 2014 XYZ Corp. Free federal and state tax filing 2014 paid a cash dividend of 10 cents per share. Free federal and state tax filing 2014 The ex-dividend date was July 16, 2013. Free federal and state tax filing 2014 Your Form 1099-DIV from XYZ Corp. Free federal and state tax filing 2014 shows $500 in box 1a (ordinary dividends) and in box 1b (qualified dividends). Free federal and state tax filing 2014 However, you sold the 5,000 shares on August 12, 2013. Free federal and state tax filing 2014 You held your shares of XYZ Corp. Free federal and state tax filing 2014 for only 34 days of the 121-day period (from July 10, 2013, through August 12, 2013). Free federal and state tax filing 2014 The 121-day period began on May 17, 2013 (60 days before the ex-dividend date), and ended on September 14, 2013. Free federal and state tax filing 2014 You have no qualified dividends from XYZ Corp. Free federal and state tax filing 2014 because you held the XYZ stock for less than 61 days. Free federal and state tax filing 2014 Example 2. Free federal and state tax filing 2014 Assume the same facts as in Example 1 except that you bought the stock on July 15, 2013 (the day before the ex-dividend date), and you sold the stock on September 16, 2013. Free federal and state tax filing 2014 You held the stock for 63 days (from July 16, 2013, through September 16, 2013). Free federal and state tax filing 2014 The $500 of qualified dividends shown in box 1b of your Form 1099-DIV are all qualified dividends because you held the stock for 61 days of the 121-day period (from July 16, 2013, through September 14, 2013). Free federal and state tax filing 2014 Example 3. Free federal and state tax filing 2014 You bought 10,000 shares of ABC Mutual Fund common stock on July 9, 2013. Free federal and state tax filing 2014 ABC Mutual Fund paid a cash dividend of 10 cents a share. Free federal and state tax filing 2014 The ex-dividend date was July 16, 2013. Free federal and state tax filing 2014 The ABC Mutual Fund advises you that the portion of the dividend eligible to be treated as qualified dividends equals 2 cents per share. Free federal and state tax filing 2014 Your Form 1099-DIV from ABC Mutual Fund shows total ordinary dividends of $1,000 and qualified dividends of $200. Free federal and state tax filing 2014 However, you sold the 10,000 shares on August 12, 2013. Free federal and state tax filing 2014 You have no qualified dividends from ABC Mutual Fund because you held the ABC Mutual Fund stock for less than 61 days. Free federal and state tax filing 2014 Holding period reduced where risk of loss is diminished. Free federal and state tax filing 2014   When determining whether you met the minimum holding period discussed earlier, you cannot count any day during which you meet any of the following conditions. Free federal and state tax filing 2014 You had an option to sell, were under a contractual obligation to sell, or had made (and not closed) a short sale of substantially identical stock or securities. Free federal and state tax filing 2014 You were grantor (writer) of an option to buy substantially identical stock or securities. Free federal and state tax filing 2014 Your risk of loss is diminished by holding one or more other positions in substantially similar or related property. Free federal and state tax filing 2014   For information about how to apply condition (3), see Regulations section 1. Free federal and state tax filing 2014 246-5. Free federal and state tax filing 2014 Qualified foreign corporation. Free federal and state tax filing 2014   A foreign corporation is a qualified foreign corporation if it meets any of the following conditions. Free federal and state tax filing 2014 The corporation is incorporated in a U. Free federal and state tax filing 2014 S. Free federal and state tax filing 2014 possession. Free federal and state tax filing 2014 The corporation is eligible for the benefits of a comprehensive income tax treaty with the United States that the Treasury Department determines is satisfactory for this purpose and that includes an exchange of information program. Free federal and state tax filing 2014 For a list of those treaties, see Table 8-1. Free federal and state tax filing 2014 The corporation does not meet (1) or (2) above, but the stock for which the dividend is paid is readily tradable on an established securities market in the United States. Free federal and state tax filing 2014 See Readily tradable stock , later. Free federal and state tax filing 2014 Exception. Free federal and state tax filing 2014   A corporation is not a qualified foreign corporation if it is a passive foreign investment company during its tax year in which the dividends are paid or during its previous tax year. Free federal and state tax filing 2014 Readily tradable stock. Free federal and state tax filing 2014   Any stock (such as common, ordinary, or preferred) or an American depositary receipt in respect of that stock is considered to satisfy requirement (3) under Qualified foreign corporation , if it is listed on a national securities exchange that is registered under section 6 of the Securities Exchange Act of 1934 or on the Nasdaq Stock Market. Free federal and state tax filing 2014 For a list of the exchanges that meet these requirements, see www. Free federal and state tax filing 2014 sec. Free federal and state tax filing 2014 gov/divisions/marketreg/mrexchanges. Free federal and state tax filing 2014 shtml. Free federal and state tax filing 2014 Dividends that are not qualified dividends. Free federal and state tax filing 2014   The following dividends are not qualified dividends. Free federal and state tax filing 2014 They are not qualified dividends even if they are shown in box 1b of Form 1099-DIV. Free federal and state tax filing 2014 Capital gain distributions. Free federal and state tax filing 2014 Dividends paid on deposits with mutual savings banks, cooperative banks, credit unions, U. Free federal and state tax filing 2014 S. Free federal and state tax filing 2014 building and loan associations, U. Free federal and state tax filing 2014 S. Free federal and state tax filing 2014 savings and loan associations, federal savings and loan associations, and similar financial institutions. Free federal and state tax filing 2014 (Report these amounts as interest income. Free federal and state tax filing 2014 ) Dividends from a corporation that is a tax-exempt organization or farmer's cooperative during the corporation's tax year in which the dividends were paid or during the corporation's previous tax year. Free federal and state tax filing 2014 Dividends paid by a corporation on employer securities held on the date of record by an employee stock ownership plan (ESOP) maintained by that corporation. Free federal and state tax filing 2014 Dividends on any share of stock to the extent you are obligated (whether under a short sale or otherwise) to make related payments for positions in substantially similar or related property. Free federal and state tax filing 2014 Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. Free federal and state tax filing 2014 Payments shown in Form 1099-DIV, box 1b, from a foreign corporation to the extent you know or have reason to know the payments are not qualified dividends. Free federal and state tax filing 2014 Table 8-1. Free federal and state tax filing 2014 Income Tax Treaties Income tax treaties the United States has with the following countries satisfy requirement (2) under Qualified foreign corporation. Free federal and state tax filing 2014 Australia Indonesia Romania Austria Ireland Russian Bangladesh Israel Federation Barbados Italy Slovak Belgium Jamaica Republic Bulgaria Japan Slovenia Canada Kazakhstan South Africa China Korea Spain Cyprus Latvia Sri Lanka Czech Lithuania Sweden Republic Luxembourg Switzerland Denmark Malta Thailand Egypt Mexico Trinidad and Estonia Morocco Tobago Finland Netherlands Tunisia France New Zealand Turkey Germany Norway Ukraine Greece Pakistan United Hungary Philippines Kingdom Iceland Poland Venezuela India Portugal     Dividends Used to Buy More Stock The corporation in which you own stock may have a dividend reinvestment plan. Free federal and state tax filing 2014 This plan lets you choose to use your dividends to buy (through an agent) more shares of stock in the corporation instead of receiving the dividends in cash. Free federal and state tax filing 2014 Most mutual funds also permit shareholders to automatically reinvest distributions in more shares in the fund, instead of receiving cash. Free federal and state tax filing 2014 If you use your dividends to buy more stock at a price equal to its fair market value, you still must report the dividends as income. Free federal and state tax filing 2014 If you are a member of a dividend reinvestment plan that lets you buy more stock at a price less than its fair market value, you must report as dividend income the fair market value of the additional stock on the dividend payment date. Free federal and state tax filing 2014 You also must report as dividend income any service charge subtracted from your cash dividends before the dividends are used to buy the additional stock. Free federal and state tax filing 2014 But you may be able to deduct the service charge. Free federal and state tax filing 2014 See chapter 28 for more information about deducting expenses of producing income. Free federal and state tax filing 2014 In some dividend reinvestment plans, you can invest more cash to buy shares of stock at a price less than fair market value. Free federal and state tax filing 2014 If you choose to do this, you must report as dividend income the difference between the cash you invest and the fair market value of the stock you buy. Free federal and state tax filing 2014 When figuring this amount, use the fair market value of the stock on the dividend payment date. Free federal and state tax filing 2014 Money Market Funds Report amounts you receive from money market funds as dividend income. Free federal and state tax filing 2014 Money market funds are a type of mutual fund and should not be confused with bank money market accounts that pay interest. Free federal and state tax filing 2014 Capital Gain Distributions Capital gain distributions (also called capital gain dividends) are paid to you or credited to your account by mutual funds (or other regulated investment companies) and real estate investment trusts (REITs). Free federal and state tax filing 2014 They will be shown in box 2a of the Form 1099-DIV you receive from the mutual fund or REIT. Free federal and state tax filing 2014 Report capital gain distributions as long-term capital gains, regardless of how long you owned your shares in the mutual fund or REIT. Free federal and state tax filing 2014 Undistributed capital gains of mutual funds and REITs. Free federal and state tax filing 2014    Some mutual funds and REITs keep their long-term capital gains and pay tax on them. Free federal and state tax filing 2014 You must treat your share of these gains as distributions, even though you did not actually receive them. Free federal and state tax filing 2014 However, they are not included on Form 1099-DIV. Free federal and state tax filing 2014 Instead, they are reported to you in box 1a of Form 2439. Free federal and state tax filing 2014   Report undistributed capital gains (box 1a of Form 2439) as long-term capital gains on Schedule D (Form 1040), column (h), line 11. Free federal and state tax filing 2014   The tax paid on these gains by the mutual fund or REIT is shown in box 2 of Form 2439. Free federal and state tax filing 2014 You take credit for this tax by including it on Form 1040, line 71, and checking box a on that line. Free federal and state tax filing 2014 Attach Copy B of Form 2439 to your return, and keep Copy C for your records. Free federal and state tax filing 2014 Basis adjustment. Free federal and state tax filing 2014   Increase your basis in your mutual fund, or your interest in a REIT, by the difference between the gain you report and the credit you claim for the tax paid. Free federal and state tax filing 2014 Additional information. Free federal and state tax filing 2014   For more information on the treatment of distributions from mutual funds, see Publication 550. Free federal and state tax filing 2014 Nondividend Distributions A nondividend distribution is a distribution that is not paid out of the earnings and profits of a corporation or a mutual fund. Free federal and state tax filing 2014 You should receive a Form 1099-DIV or other statement showing the nondividend distribution. Free federal and state tax filing 2014 On Form 1099-DIV, a nondividend distribution will be shown in box 3. Free federal and state tax filing 2014 If you do not receive such a statement, you report the distribution as an ordinary dividend. Free federal and state tax filing 2014 Basis adjustment. Free federal and state tax filing 2014   A nondividend distribution reduces the basis of your stock. Free federal and state tax filing 2014 It is not taxed until your basis in the stock is fully recovered. Free federal and state tax filing 2014 This nontaxable portion is also called a return of capital; it is a return of your investment in the stock of the company. Free federal and state tax filing 2014 If you buy stock in a corporation in different lots at different times, and you cannot definitely identify the shares subject to the nondividend distribution, reduce the basis of your earliest purchases first. Free federal and state tax filing 2014   When the basis of your stock has been reduced to zero, report any additional nondividend distribution you receive as a capital gain. Free federal and state tax filing 2014 Whether you report it as a long-term or short-term capital gain depends on how long you have held the stock. Free federal and state tax filing 2014 See Holding Period in chapter 14. Free federal and state tax filing 2014 Example. Free federal and state tax filing 2014 You bought stock in 2000 for $100. Free federal and state tax filing 2014 In 2003, you received a nondividend distribution of $80. Free federal and state tax filing 2014 You did not include this amount in your income, but you reduced the basis of your stock to $20. Free federal and state tax filing 2014 You received a nondividend distribution of $30 in 2013. Free federal and state tax filing 2014 The first $20 of this amount reduced your basis to zero. Free federal and state tax filing 2014 You report the other $10 as a long-term capital gain for 2013. Free federal and state tax filing 2014 You must report as a long-term capital gain any nondividend distribution you receive on this stock in later years. Free federal and state tax filing 2014 Liquidating Distributions Liquidating distributions, sometimes called liquidating dividends, are distributions you receive during a partial or complete liquidation of a corporation. Free federal and state tax filing 2014 These distributions are, at least in part, one form of a return of capital. Free federal and state tax filing 2014 They may be paid in one or more installments. Free federal and state tax filing 2014 You will receive Form 1099-DIV from the corporation showing you the amount of the liquidating distribution in box 8 or 9. Free federal and state tax filing 2014 For more information on liquidating distributions, see chapter 1 of Publication 550. Free federal and state tax filing 2014 Distributions of Stock and Stock Rights Distributions by a corporation of its own stock are commonly known as stock dividends. Free federal and state tax filing 2014 Stock rights (also known as “stock options”) are distributions by a corporation of rights to acquire the corporation's stock. Free federal and state tax filing 2014 Generally, stock dividends and stock rights are not taxable to you, and you do not report them on your return. Free federal and state tax filing 2014 Taxable stock dividends and stock rights. Free federal and state tax filing 2014   Distributions of stock dividends and stock rights are taxable to you if any of the following apply. Free federal and state tax filing 2014 You or any other shareholder have the choice to receive cash or other property instead of stock or stock rights. Free federal and state tax filing 2014 The distribution gives cash or other property to some shareholders and an increase in the percentage interest in the corporation's assets or earnings and profits to other shareholders. Free federal and state tax filing 2014 The distribution is in convertible preferred stock and has the same result as in (2). Free federal and state tax filing 2014 The distribution gives preferred stock to some common stock shareholders and common stock to other common stock shareholders. Free federal and state tax filing 2014 The distribution is on preferred stock. Free federal and state tax filing 2014 (The distribution, however, is not taxable if it is an increase in the conversion ratio of convertible preferred stock made solely to take into account a stock dividend, stock split, or similar event that would otherwise result in reducing the conversion right. Free federal and state tax filing 2014 )   The term “stock” includes rights to acquire stock, and the term “shareholder” includes a holder of rights or of convertible securities. Free federal and state tax filing 2014 If you receive taxable stock dividends or stock rights, include their fair market value at the time of distribution in your income. Free federal and state tax filing 2014 Preferred stock redeemable at a premium. Free federal and state tax filing 2014   If you hold preferred stock having a redemption price higher than its issue price, the difference (the redemption premium) generally is taxable as a constructive distribution of additional stock on the preferred stock. Free federal and state tax filing 2014 For more information, see chapter 1 of Publication 550. Free federal and state tax filing 2014 Basis. Free federal and state tax filing 2014   Your basis in stock or stock rights received in a taxable distribution is their fair market value when distributed. Free federal and state tax filing 2014 If you receive stock or stock rights that are not taxable to you, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550 for information on how to figure their basis. Free federal and state tax filing 2014 Fractional shares. Free federal and state tax filing 2014    You may not own enough stock in a corporation to receive a full share of stock if the corporation declares a stock dividend. Free federal and state tax filing 2014 However, with the approval of the shareholders, the corporation may set up a plan in which fractional shares are not issued but instead are sold, and the cash proceeds are given to the shareholders. Free federal and state tax filing 2014 Any cash you receive for fractional shares under such a plan is treated as an amount realized on the sale of the fractional shares. Free federal and state tax filing 2014 Report this transaction on Form 8949, Sales and Other Dispositions of Capital Assets. Free federal and state tax filing 2014 Enter your gain or loss, the difference between the cash you receive and the basis of the fractional shares sold, in column (h) of Schedule D (Form 1040) in Part I or Part II, whichever is appropriate. Free federal and state tax filing 2014    Report these transactions on Form 8949 with the correct box checked. Free federal and state tax filing 2014   For more information on Form 8949 and Schedule D (Form 1040), see chapter 4 of Publication 550. Free federal and state tax filing 2014 Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Free federal and state tax filing 2014 Example. Free federal and state tax filing 2014 You own one share of common stock that you bought on January 3, 2004, for $100. Free federal and state tax filing 2014 The corporation declared a common stock dividend of 5% on June 29, 2013. Free federal and state tax filing 2014 The fair market value of the stock at the time the stock dividend was declared was $200. Free federal and state tax filing 2014 You were paid $10 for the fractional-share stock dividend under a plan described in the discussion above. Free federal and state tax filing 2014 You figure your gain or loss as follows: Fair market value of old stock $200. Free federal and state tax filing 2014 00 Fair market value of stock dividend (cash received) +10. Free federal and state tax filing 2014 00 Fair market value of old stock and stock dividend $210. Free federal and state tax filing 2014 00 Basis (cost) of old stock after the stock dividend (($200 ÷ $210) × $100) $95. Free federal and state tax filing 2014 24 Basis (cost) of stock dividend (($10 ÷ $210) × $100) + 4. Free federal and state tax filing 2014 76 Total $100. Free federal and state tax filing 2014 00 Cash received $10. Free federal and state tax filing 2014 00 Basis (cost) of stock dividend − 4. Free federal and state tax filing 2014 76 Gain $5. Free federal and state tax filing 2014 24 Because you had held the share of stock for more than 1 year at the time the stock dividend was declared, your gain on the stock dividend is a long-term capital gain. Free federal and state tax filing 2014 Scrip dividends. Free federal and state tax filing 2014   A corporation that declares a stock dividend may issue you a scrip certificate that entitles you to a fractional share. Free federal and state tax filing 2014 The certificate is generally nontaxable when you receive it. Free federal and state tax filing 2014 If you choose to have the corporation sell the certificate for you and give you the proceeds, your gain or loss is the difference between the proceeds and the portion of your basis in the corporation's stock allocated to the certificate. Free federal and state tax filing 2014   However, if you receive a scrip certificate that you can choose to redeem for cash instead of stock, the certificate is taxable when you receive it. Free federal and state tax filing 2014 You must include its fair market value in income on the date you receive it. Free federal and state tax filing 2014 Other Distributions You may receive any of the following distributions during the year. Free federal and state tax filing 2014 Exempt-interest dividends. Free federal and state tax filing 2014   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. Free federal and state tax filing 2014 Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Free federal and state tax filing 2014 Information reporting requirement. Free federal and state tax filing 2014   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file a return. Free federal and state tax filing 2014 This is an information reporting requirement and does not change the exempt-interest dividends to taxable income. Free federal and state tax filing 2014 Alternative minimum tax treatment. Free federal and state tax filing 2014   Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Free federal and state tax filing 2014 See Alternative Minimum Tax (AMT) in chapter 30 for more information. Free federal and state tax filing 2014 Dividends on insurance policies. Free federal and state tax filing 2014    Insurance policy dividends the insurer keeps and uses to pay your premiums are not taxable. Free federal and state tax filing 2014 However, you must report as taxable interest income the interest that is paid or credited on dividends left with the insurance company. Free federal and state tax filing 2014    If dividends on an insurance contract (other than a modified endowment contract) are distributed to you, they are a partial return of the premiums you paid. Free federal and state tax filing 2014 Do not include them in your gross income until they are more than the total of all net premiums you paid for the contract. Free federal and state tax filing 2014 Report any taxable distributions on insurance policies on Form 1040, line 21. Free federal and state tax filing 2014 Dividends on veterans' insurance. Free federal and state tax filing 2014   Dividends you receive on veterans' insurance policies are not taxable. Free federal and state tax filing 2014 In addition, interest on dividends left with the Department of Veterans Affairs is not taxable. Free federal and state tax filing 2014 Patronage dividends. Free federal and state tax filing 2014   Generally, patronage dividends you receive in money from a cooperative organization are included in your income. Free federal and state tax filing 2014   Do not include in your income patronage dividends you receive on: Property bought for your personal use, or Capital assets or depreciable property bought for use in your business. Free federal and state tax filing 2014 But you must reduce the basis (cost) of the items bought. Free federal and state tax filing 2014 If the dividend is more than the adjusted basis of the assets, you must report the excess as income. Free federal and state tax filing 2014   These rules are the same whether the cooperative paying the dividend is a taxable or tax-exempt cooperative. Free federal and state tax filing 2014 Alaska Permanent Fund dividends. Free federal and state tax filing 2014    Do not report these amounts as dividends. Free federal and state tax filing 2014 Instead, report these amounts on Form 1040, line 21; Form 1040A, line 13; or Form 1040EZ, line 3. Free federal and state tax filing 2014 How To Report Dividend Income Generally, you can use either Form 1040 or Form 1040A to report your dividend income. Free federal and state tax filing 2014 Report the total of your ordinary dividends on line 9a of Form 1040 or Form 1040A. Free federal and state tax filing 2014 Report qualified dividends on line 9b of Form 1040 or Form 1040A. Free federal and state tax filing 2014 If you receive capital gain distributions, you may be able to use Form 1040A or you may have to use Form 1040. Free federal and state tax filing 2014 See Exceptions to filing Form 8949 and Schedule D (Form 1040) in chapter 16. Free federal and state tax filing 2014 If you receive nondividend distributions required to be reported as capital gains, you must use Form 1040. Free federal and state tax filing 2014 You cannot use Form 1040EZ if you receive any dividend income. Free federal and state tax filing 2014 Form 1099-DIV. Free federal and state tax filing 2014   If you owned stock on which you received $10 or more in dividends and other distributions, you should receive a Form 1099-DIV. Free federal and state tax filing 2014 Even if you do not receive Form 1099-DIV, you must report all your dividend income. Free federal and state tax filing 2014   See Form 1099-DIV for more information on how to report dividend income. Free federal and state tax filing 2014 Form 1040A or 1040. Free federal and state tax filing 2014    You must complete Schedule B (Form 1040A or 1040), Part II, and attach it to your Form 1040A or 1040, if: Your ordinary dividends (Form 1099-DIV, box 1a) are more than $1,500, or You received, as a nominee, dividends that actually belong to someone else. Free federal and state tax filing 2014 If your ordinary dividends are more than $1,500, you must also complete Schedule B (Form 1040A or 1040), Part III. Free federal and state tax filing 2014   List on Schedule B (Form 1040A or 1040), Part II, line 5, each payer's name and the ordinary dividends you received. Free federal and state tax filing 2014 If your securities are held by a brokerage firm (in “street name”), list the name of the brokerage firm shown on Form 1099-DIV as the payer. Free federal and state tax filing 2014 If your stock is held by a nominee who is the owner of record, and the nominee credited or paid you dividends on the stock, show the name of the nominee and the dividends you received or for which you were credited. Free federal and state tax filing 2014   Enter on line 6 the total of the amounts listed on line 5. Free federal and state tax filing 2014 Also enter this total on line 9a of Form 1040A or 1040. Free federal and state tax filing 2014 Qualified dividends. Free federal and state tax filing 2014   Report qualified dividends (Form 1099-DIV, box 1b) on line 9b of Form 1040 or Form 1040A. Free federal and state tax filing 2014 The amount in box 1b is already included in box 1a. Free federal and state tax filing 2014 Do not add the amount in box 1b to, or substract it from, the amount in box 1a. Free federal and state tax filing 2014   Do not include any of the following on line 9b. Free federal and state tax filing 2014 Qualified dividends you received as a nominee. Free federal and state tax filing 2014 See Nominees under How to Report Dividend Income in chapter 1 of Publication 550. Free federal and state tax filing 2014 Dividends on stock for which you did not meet the holding period. Free federal and state tax filing 2014 See Holding period , earlier under Qualified Dividends. Free federal and state tax filing 2014 Dividends on any share of stock to the extent you are obligated (whether under a short sale or otherwise) to make related payments for positions in substantially similar or related property. Free federal and state tax filing 2014 Payments in lieu of dividends, but only if you know or have reason to know the payments are not qualified dividends. Free federal and state tax filing 2014 Payments shown in Form 1099-DIV, box 1b, from a foreign corporation to the extent you know or have reason to know the payments are not qualified dividends. Free federal and state tax filing 2014   If you have qualified dividends, you must figure your tax by completing the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040 or 1040A instructions or the Schedule D Tax Worksheet in the Schedule D (Form 1040) instructions, whichever applies. Free federal and state tax filing 2014 Enter qualified dividends on line 2 of the worksheet. Free federal and state tax filing 2014 Investment interest deducted. Free federal and state tax filing 2014   If you claim a deduction for investment interest, you may have to reduce the amount of your qualified dividends that are eligible for the 0%, 15%, or 20% tax rate. Free federal and state tax filing 2014 Reduce it by the qualified dividends you choose to include in investment income when figuring the limit on your investment interest deduction. Free federal and state tax filing 2014 This is done on the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet. Free federal and state tax filing 2014 For more information about the limit on investment interest, see Investment expenses in chapter 23. Free federal and state tax filing 2014 Expenses related to dividend income. Free federal and state tax filing 2014   You may be able to deduct expenses related to dividend income if you itemize your deductions on Schedule A (Form 1040). Free federal and state tax filing 2014 See chapter 28 for general information about deducting expenses of producing income. Free federal and state tax filing 2014 More information. Free federal and state tax filing 2014    For more information about how to report dividend income, see chapter 1 of Publication 550 or the instructions for the form you must file. Free federal and state tax filing 2014 Prev  Up  Next   Home   More Online Publications
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IRS Urges Taxpayers to Avoid Becoming Victims of Tax Scams

IR-2011-73, July 11, 2011

IRS YouTube Videos:
Tax Refund Scams :
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WASHINGTON — The Internal Revenue Service today encouraged taxpayers to guard against being misled by unscrupulous individuals trying to persuade them to file false claims for tax credits or rebates.

The IRS has noted an increase in tax-return-related scams, frequently involving unsuspecting taxpayers who normally do not have a filing requirement in the first place. These taxpayers are led to believe they should file a return with the IRS for tax credits, refunds or rebates for which they are not really entitled. Many of these recent scams have been targeted in the South and Midwest.

Most paid tax return preparers provide honest and professional service, but there are some who engage in fraud and other illegal activities.   Unscrupulous promoters deceive people into paying for advice on how to file false claims. Some promoters may charge unreasonable amounts for preparing legitimate returns that could have been prepared for free by the IRS or IRS sponsored Volunteer Income Tax Assistance partners. In other situations, identity theft is involved.

Taxpayers should be wary of any of the following:

  • Fictitious claims for refunds or rebates based on excess or withheld Social Security benefits.
  • Claims that Treasury Form 1080 can be used to transfer funds from the Social Security Administration to the IRS enabling a payout from the IRS.
  • Unfamiliar for-profit tax services teaming up with local churches.
  • Home-made flyers and brochures implying credits or refunds are available without proof of eligibility.
  • Offers of free money with no documentation required.
  • Promises of refunds for “Low Income – No Documents Tax Returns.”
  • Claims for the expired Economic Recovery Credit Program or Recovery Rebate Credit. 
  • Advice on claiming the Earned Income Tax Credit based on exaggerated reports of self-employment income.

In some cases non-existent Social Security refunds or rebates have been the bait used by the con artists.  In other situations, taxpayers deserve the tax credits they are promised but the preparer uses fictitious or inflated information on the return which results in a fraudulent return.

Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file with little or no documentation, have been appearing in community churches around the country. Promoters are targeting church congregations, exploiting their good intentions and credibility. These schemes also often spread by word of mouth among unsuspecting and well-intentioned people telling their friends and relatives. 
Promoters of these scams often prey upon low income individuals and the elderly. 

They build false hopes and charge people good money for bad advice.  In the end, the victims discover their claims are rejected or the refund barely exceeds what they paid the promoter.  Meanwhile, their money and the promoters are long gone.

Unsuspecting individuals are most likely to get caught up in scams and the IRS is warning all taxpayers, and those that help others prepare returns, to remain vigilant. If it sounds too good to be true, it probably is.

Anyone with questions about a tax credit or program should visit www.IRS.gov, call the IRS toll-free number at 800-829-1040 or visit a local IRS Taxpayer Assistance Center.

For questions about rebates, credit and benefits from other federal agencies contact the relevant agency directly for accurate information. 

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Page Last Reviewed or Updated: 19-Mar-2014

The Free Federal And State Tax Filing 2014

Free federal and state tax filing 2014 7. Free federal and state tax filing 2014   Costs You Can Deduct or Capitalize Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Carrying Charges Research and Experimental CostsProduct. Free federal and state tax filing 2014 Costs not included. Free federal and state tax filing 2014 Intangible Drilling Costs Exploration CostsPartnerships and S corporations. Free federal and state tax filing 2014 Development Costs Circulation Costs Business Start-Up and Organizational Costs Reforestation Costs Retired Asset Removal Costs Barrier Removal CostsOther barrier removals. Free federal and state tax filing 2014 Film and Television Production Costs What's New Film and television productions costs. Free federal and state tax filing 2014  The election to expense film and television production costs does not apply to productions that begin after December 31, 2013. Free federal and state tax filing 2014 See Film and Television Production Costs , later. Free federal and state tax filing 2014 Introduction This chapter discusses costs you can elect to deduct or capitalize. Free federal and state tax filing 2014 You generally deduct a cost as a current business expense by subtracting it from your income in either the year you incur it or the year you pay it. Free federal and state tax filing 2014 If you capitalize a cost, you may be able to recover it over a period of years through periodic deductions for amortization, depletion, or depreciation. Free federal and state tax filing 2014 When you capitalize a cost, you add it to the basis of property to which it relates. Free federal and state tax filing 2014 A partnership, corporation, estate, or trust makes the election to deduct or capitalize the costs discussed in this chapter except for exploration costs for mineral deposits. Free federal and state tax filing 2014 Each individual partner, shareholder, or beneficiary elects whether to deduct or capitalize exploration costs. Free federal and state tax filing 2014 You may be subject to the alternative minimum tax (AMT) if you deduct research and experimental, intangible drilling, exploration, development, circulation, or business organizational costs. Free federal and state tax filing 2014 For more information on the alternative minimum tax, see the instructions for the following forms. Free federal and state tax filing 2014 Form 6251, Alternative Minimum Tax—Individuals. Free federal and state tax filing 2014 Form 4626, Alternative Minimum Tax—Corporations. Free federal and state tax filing 2014 Topics - This chapter discusses: Carrying charges Research and experimental costs Intangible drilling costs Exploration costs Development costs Circulation costs Qualified disaster expenses Business start-up and organizational costs Reforestation costs Retired asset removal costs Barrier removal costs Film and television production costs Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 3468 Investment Credit 8826 Disabled Access Credit See chapter 12 for information about getting publications and forms. Free federal and state tax filing 2014 Carrying Charges Carrying charges include the taxes and interest you pay to carry or develop real property or to carry, transport, or install personal property. Free federal and state tax filing 2014 Certain carrying charges must be capitalized under the uniform capitalization rules. Free federal and state tax filing 2014 (For information on capitalization of interest, see chapter 4 . Free federal and state tax filing 2014 ) You can elect to capitalize carrying charges not subject to the uniform capitalization rules, but only if they are otherwise deductible. Free federal and state tax filing 2014 You can elect to capitalize carrying charges separately for each project you have and for each type of carrying charge. Free federal and state tax filing 2014 For unimproved and unproductive real property, your election is good for only 1 year. Free federal and state tax filing 2014 You must decide whether to capitalize carrying charges each year the property remains unimproved and unproductive. Free federal and state tax filing 2014 For other real property, your election to capitalize carrying charges remains in effect until construction or development is completed. Free federal and state tax filing 2014 For personal property, your election is effective until the date you install or first use it, whichever is later. Free federal and state tax filing 2014 How to make the election. Free federal and state tax filing 2014   To make the election to capitalize a carrying charge, attach a statement to your original tax return for the year the election is to be effective indicating which charges you are electing to capitalize. Free federal and state tax filing 2014 However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Free federal and state tax filing 2014 Attach the statement to the amended return and write “Filed pursuant to section 301. Free federal and state tax filing 2014 9100-2” on the statement. Free federal and state tax filing 2014 File the amended return at the same address you filed the original return. Free federal and state tax filing 2014 Research and Experimental Costs The costs of research and experimentation are generally capital expenses. Free federal and state tax filing 2014 However, you can elect to deduct these costs as a current business expense. Free federal and state tax filing 2014 Your election to deduct these costs is binding for the year it is made and for all later years unless you get IRS approval to make a change. Free federal and state tax filing 2014 If you meet certain requirements, you may elect to defer and amortize research and experimental costs. Free federal and state tax filing 2014 For information on electing to defer and amortize these costs, see Research and Experimental Costs in chapter 8. Free federal and state tax filing 2014 Research and experimental costs defined. Free federal and state tax filing 2014   Research and experimental costs are reasonable costs you incur in your trade or business for activities intended to provide information that would eliminate uncertainty about the development or improvement of a product. Free federal and state tax filing 2014 Uncertainty exists if the information available to you does not establish how to develop or improve a product or the appropriate design of a product. Free federal and state tax filing 2014 Whether costs qualify as research and experimental costs depends on the nature of the activity to which the costs relate rather than on the nature of the product or improvement being developed or the level of technological advancement. Free federal and state tax filing 2014      The costs of obtaining a patent, including attorneys' fees paid or incurred in making and perfecting a patent application, are research and experimental costs. Free federal and state tax filing 2014 However, costs paid or incurred to obtain another's patent are not research and experimental costs. Free federal and state tax filing 2014 Product. Free federal and state tax filing 2014   The term “product” includes any of the following items. Free federal and state tax filing 2014 Formula. Free federal and state tax filing 2014 Invention. Free federal and state tax filing 2014 Patent. Free federal and state tax filing 2014 Pilot model. Free federal and state tax filing 2014 Process. Free federal and state tax filing 2014 Technique. Free federal and state tax filing 2014 Property similar to the items listed above. Free federal and state tax filing 2014 It also includes products used by you in your trade or business or held for sale, lease, or license. Free federal and state tax filing 2014 Costs not included. Free federal and state tax filing 2014   Research and experimental costs do not include expenses for any of the following activities. Free federal and state tax filing 2014 Advertising or promotions. Free federal and state tax filing 2014 Consumer surveys. Free federal and state tax filing 2014 Efficiency surveys. Free federal and state tax filing 2014 Management studies. Free federal and state tax filing 2014 Quality control testing. Free federal and state tax filing 2014 Research in connection with literary, historical, or similar projects. Free federal and state tax filing 2014 The acquisition of another's patent, model, production, or process. Free federal and state tax filing 2014 When and how to elect. Free federal and state tax filing 2014   You make the election to deduct research and experimental costs by deducting them on your tax return for the year in which you first pay or incur research and experimental costs. Free federal and state tax filing 2014 If you do not make the election to deduct research and experimental costs in the first year in which you pay or incur the costs, you can deduct the costs in a later year only with approval from the IRS. Free federal and state tax filing 2014 Deducting or Amortizing Research and Experimentation Costs IF you . Free federal and state tax filing 2014 . Free federal and state tax filing 2014 . Free federal and state tax filing 2014 THEN . Free federal and state tax filing 2014 . Free federal and state tax filing 2014 . Free federal and state tax filing 2014 Elect to deduct research and experimental costs as a current business expense Deduct all research and experimental costs in the first year you pay or incur the costs and all later years. Free federal and state tax filing 2014 Do not deduct research and experimental costs as a current business expense If you meet the requirements, amortize them over at least 60 months, starting with the month you first receive an economic benefit from the research. Free federal and state tax filing 2014 See Research and Experimental Costs in chapter 8. Free federal and state tax filing 2014 Research credit. Free federal and state tax filing 2014   If you pay or incur qualified research expenses, you may be able to take the research credit. Free federal and state tax filing 2014 For more information see Form 6765, Credit for Increasing Research Activities and its instructions. Free federal and state tax filing 2014 Intangible Drilling Costs The costs of developing oil, gas, or geothermal wells are ordinarily capital expenditures. Free federal and state tax filing 2014 You can usually recover them through depreciation or depletion. Free federal and state tax filing 2014 However, you can elect to deduct intangible drilling costs (IDCs) as a current business expense. Free federal and state tax filing 2014 These are certain drilling and development costs for wells in the United States in which you hold an operating or working interest. Free federal and state tax filing 2014 You can deduct only costs for drilling or preparing a well for the production of oil, gas, or geothermal steam or hot water. Free federal and state tax filing 2014 You can elect to deduct only the costs of items with no salvage value. Free federal and state tax filing 2014 These include wages, fuel, repairs, hauling, and supplies related to drilling wells and preparing them for production. Free federal and state tax filing 2014 Your cost for any drilling or development work done by contractors under any form of contract is also an IDC. Free federal and state tax filing 2014 However, see Amounts paid to contractor that must be capitalized , later. Free federal and state tax filing 2014 You can also elect to deduct the cost of drilling exploratory bore holes to determine the location and delineation of offshore hydrocarbon deposits if the shaft is capable of conducting hydrocarbons to the surface on completion. Free federal and state tax filing 2014 It does not matter whether there is any intent to produce hydrocarbons. Free federal and state tax filing 2014 If you do not elect to deduct your IDCs as a current business expense, you can elect to deduct them over the 60-month period beginning with the month they were paid or incurred. Free federal and state tax filing 2014 Amounts paid to contractor that must be capitalized. Free federal and state tax filing 2014   Amounts paid to a contractor must be capitalized if they are either: Amounts properly allocable to the cost of depreciable property, or Amounts paid only out of production or proceeds from production if these amounts are depletable income to the recipient. Free federal and state tax filing 2014 How to make the election. Free federal and state tax filing 2014   You elect to deduct IDCs as a current business expense by taking the deduction on your income tax return for the first tax year you have eligible costs. Free federal and state tax filing 2014 No formal statement is required. Free federal and state tax filing 2014 If you file Schedule C (Form 1040), enter these costs under “Other expenses. Free federal and state tax filing 2014 ”   For oil and gas wells, your election is binding for the year it is made and for all later years. Free federal and state tax filing 2014 For geothermal wells, your election can be revoked by the filing of an amended return on which you do not take the deduction. Free federal and state tax filing 2014 You can file the amended return for the year up to the normal time of expiration for filing a claim for credit or refund, generally, within 3 years after the date you filed the original return or within 2 years after the date you paid the tax, whichever is later. Free federal and state tax filing 2014 Energy credit for costs of geothermal wells. Free federal and state tax filing 2014   If you capitalize the drilling and development costs of geothermal wells that you place in service during the tax year, you may be able to claim a business energy credit. Free federal and state tax filing 2014 See the Instructions for Form 3468 for more information. Free federal and state tax filing 2014 Nonproductive well. Free federal and state tax filing 2014   If you capitalize your IDCs, you have another option if the well is nonproductive. Free federal and state tax filing 2014 You can deduct the IDCs of the nonproductive well as an ordinary loss. Free federal and state tax filing 2014 You must indicate and clearly state your election on your tax return for the year the well is completed. Free federal and state tax filing 2014 Once made, the election for oil and gas wells is binding for all later years. Free federal and state tax filing 2014 You can revoke your election for a geothermal well by filing an amended return that does not claim the loss. Free federal and state tax filing 2014 Costs incurred outside the United States. Free federal and state tax filing 2014   You cannot deduct as a current business expense all the IDCs paid or incurred for an oil, gas, or geothermal well located outside the United States. Free federal and state tax filing 2014 However, you can elect to include the costs in the adjusted basis of the well to figure depletion or depreciation. Free federal and state tax filing 2014 If you do not make this election, you can deduct the costs over the 10-year period beginning with the tax year in which you paid or incurred them. Free federal and state tax filing 2014 These rules do not apply to a nonproductive well. Free federal and state tax filing 2014 Exploration Costs The costs of determining the existence, location, extent, or quality of any mineral deposit are ordinarily capital expenditures if the costs lead to the development of a mine. Free federal and state tax filing 2014 You recover these costs through depletion as the mineral is removed from the ground. Free federal and state tax filing 2014 However, you can elect to deduct domestic exploration costs paid or incurred before the beginning of the development stage of the mine (except those for oil and gas wells). Free federal and state tax filing 2014 How to make the election. Free federal and state tax filing 2014   You elect to deduct exploration costs by taking the deduction on your income tax return, or on an amended income tax return, for the first tax year for which you wish to deduct the costs paid or incurred during the tax year. Free federal and state tax filing 2014 Your return must adequately describe and identify each property or mine, and clearly state how much is being deducted for each one. Free federal and state tax filing 2014 The election applies to the tax year you make this election and all later tax years. Free federal and state tax filing 2014 Partnerships and S corporations. Free federal and state tax filing 2014   Each partner, not the partnership, elects whether to capitalize or to deduct that partner's share of exploration costs. Free federal and state tax filing 2014 Each shareholder, not the S corporation, elects whether to capitalize or to deduct that shareholder's share of exploration costs. Free federal and state tax filing 2014 Reduced corporate deductions for exploration costs. Free federal and state tax filing 2014   A corporation (other than an S corporation) can deduct only 70% of its domestic exploration costs. Free federal and state tax filing 2014 It must capitalize the remaining 30% of costs and amortize them over the 60-month period starting with the month the exploration costs are paid or incurred. Free federal and state tax filing 2014 A corporation may also elect to capitalize and amortize mining exploration costs over a 10-year period. Free federal and state tax filing 2014 For more information on this method of amortization, see Internal Revenue Code section 59(e). Free federal and state tax filing 2014   The 30% the corporation capitalizes cannot be added to its basis in the property to figure cost depletion. Free federal and state tax filing 2014 However, the amount amortized is treated as additional depreciation and is subject to recapture as ordinary income on a disposition of the property. Free federal and state tax filing 2014 See Section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. Free federal and state tax filing 2014   These rules also apply to the deduction of development costs by corporations. Free federal and state tax filing 2014 See Development Costs , later. Free federal and state tax filing 2014 Recapture of exploration expenses. Free federal and state tax filing 2014   When your mine reaches the producing stage, you must recapture any exploration costs you elected to deduct. Free federal and state tax filing 2014 Use either of the following methods. Free federal and state tax filing 2014 Method 1—Include the deducted costs in gross income for the tax year the mine reaches the producing stage. Free federal and state tax filing 2014 Your election must be clearly indicated on the return. Free federal and state tax filing 2014 Increase your adjusted basis in the mine by the amount included in income. Free federal and state tax filing 2014 Generally, you must elect this recapture method by the due date (including extensions) of your return. Free federal and state tax filing 2014 However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Free federal and state tax filing 2014 Make the election on your amended return and write “Filed pursuant to section 301. Free federal and state tax filing 2014 9100-2” on the form where you are including the income. Free federal and state tax filing 2014 File the amended return at the same address you filed the original return. Free federal and state tax filing 2014 Method 2—Do not claim any depletion deduction for the tax year the mine reaches the producing stage and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. Free federal and state tax filing 2014   You also must recapture deducted exploration costs if you receive a bonus or royalty from mine property before it reaches the producing stage. Free federal and state tax filing 2014 Do not claim any depletion deduction for the tax year you receive the bonus or royalty and any later tax years until the depletion you would have deducted equals the exploration costs you deducted. Free federal and state tax filing 2014   Generally, if you dispose of the mine before you have fully recaptured the exploration costs you deducted, recapture the balance by treating all or part of your gain as ordinary income. Free federal and state tax filing 2014 Under these circumstances, you generally treat as ordinary income all of your gain if it is less than your adjusted exploration costs with respect to the mine. Free federal and state tax filing 2014 If your gain is more than your adjusted exploration costs, treat as ordinary income only a part of your gain, up to the amount of your adjusted exploration costs. Free federal and state tax filing 2014 Foreign exploration costs. Free federal and state tax filing 2014   If you pay or incur exploration costs for a mine or other natural deposit located outside the United States, you cannot deduct all the costs in the current year. Free federal and state tax filing 2014 You can elect to include the costs (other than for an oil, gas, or geothermal well) in the adjusted basis of the mineral property to figure cost depletion. Free federal and state tax filing 2014 (Cost depletion is discussed in chapter 9 . Free federal and state tax filing 2014 ) If you do not make this election, you must deduct the costs over the 10-year period beginning with the tax year in which you pay or incur them. Free federal and state tax filing 2014 These rules also apply to foreign development costs. Free federal and state tax filing 2014 Development Costs You can deduct costs paid or incurred during the tax year for developing a mine or any other natural deposit (other than an oil or gas well) located in the United States. Free federal and state tax filing 2014 These costs must be paid or incurred after the discovery of ores or minerals in commercially marketable quantities. Free federal and state tax filing 2014 Development costs also include depreciation on improvements used in the development of ores or minerals and costs incurred for you by a contractor. Free federal and state tax filing 2014 Development costs do not include the costs for the acquisition or improvement of depreciable property. Free federal and state tax filing 2014 Instead of deducting development costs in the year paid or incurred, you can elect to treat the cost as deferred expenses and deduct them ratably as the units of produced ores or minerals benefited by the expenses are sold. Free federal and state tax filing 2014 This election applies each tax year to expenses paid or incurred in that year. Free federal and state tax filing 2014 Once made, the election is binding for the year and cannot be revoked for any reason. Free federal and state tax filing 2014 How to make the election. Free federal and state tax filing 2014   The election to deduct development costs ratably as the ores or minerals are sold must be made for each mine or other natural deposit by a clear indication on your return or by a statement filed with the IRS office where you file your return. Free federal and state tax filing 2014 Generally, you must make the election by the due date of the return (including extensions). Free federal and state tax filing 2014 However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Free federal and state tax filing 2014 Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Free federal and state tax filing 2014 9100-2. Free federal and state tax filing 2014 ” File the amended return at the same address you filed the original return. Free federal and state tax filing 2014 Foreign development costs. Free federal and state tax filing 2014   The rules discussed earlier for foreign exploration costs apply to foreign development costs. Free federal and state tax filing 2014 Reduced corporate deductions for development costs. Free federal and state tax filing 2014   The rules discussed earlier for reduced corporate deductions for exploration costs also apply to corporate deductions for development costs. Free federal and state tax filing 2014 Circulation Costs A publisher can deduct as a current business expense the costs of establishing, maintaining, or increasing the circulation of a newspaper, magazine, or other periodical. Free federal and state tax filing 2014 For example, a publisher can deduct the cost of hiring extra employees for a limited time to get new subscriptions through telephone calls. Free federal and state tax filing 2014 Circulation costs are deductible even if they normally would be capitalized. Free federal and state tax filing 2014 This rule does not apply to the following costs that must be capitalized. Free federal and state tax filing 2014 The purchase of land or depreciable property. Free federal and state tax filing 2014 The acquisition of circulation through the purchase of any part of the business of another publisher of a newspaper, magazine, or other periodical, including the purchase of another publisher's list of subscribers. Free federal and state tax filing 2014 Other treatment of circulation costs. Free federal and state tax filing 2014   If you do not want to deduct circulation costs as a current business expense, you can elect one of the following ways to recover these costs. Free federal and state tax filing 2014 Capitalize all circulation costs that are properly chargeable to a capital account (see chapter 1 ). Free federal and state tax filing 2014 Amortize circulation costs over the 3-year period beginning with the tax year they were paid or incurred. Free federal and state tax filing 2014 How to make the election. Free federal and state tax filing 2014   You elect to capitalize circulation costs by attaching a statement to your return for the first tax year the election applies. Free federal and state tax filing 2014 Your election is binding for the year it is made and for all later years, unless you get IRS approval to revoke it. Free federal and state tax filing 2014 Business Start-Up and Organizational Costs Business start-up and organizational costs are generally capital expenditures. Free federal and state tax filing 2014 However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. Free federal and state tax filing 2014 The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Free federal and state tax filing 2014 Any remaining costs must be amortized. Free federal and state tax filing 2014 For information about amortizing start-up and organizational costs, see chapter 8 . Free federal and state tax filing 2014 Start-up costs include any amounts paid or incurred in connection with creating an active trade or business or investigating the creation or acquisition of an active trade or business. Free federal and state tax filing 2014 Organizational costs include the costs of creating a corporation. Free federal and state tax filing 2014 For more information on start-up and organizational costs, see chapter 8 . Free federal and state tax filing 2014 How to make the election. Free federal and state tax filing 2014   You elect to deduct the start-up or organizational costs by claiming the deduction on your income tax return (filed by the due date including extensions) for the tax year in which the active trade or business begins. Free federal and state tax filing 2014 However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Free federal and state tax filing 2014 Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Free federal and state tax filing 2014 9100-2. Free federal and state tax filing 2014 ” File the amended return at the same address you filed the original return. Free federal and state tax filing 2014 The election applies when computing taxable income for the current tax year and all subsequent years. Free federal and state tax filing 2014 Reforestation Costs Reforestation costs are generally capital expenditures. Free federal and state tax filing 2014 However, you can elect to deduct up to $10,000 ($5,000 if married filing separately; $0 for a trust) of qualifying reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. Free federal and state tax filing 2014 The remaining costs can be amortized over an 84-month period. Free federal and state tax filing 2014 For information about amortizing reforestation costs, see chapter 8 . Free federal and state tax filing 2014 Qualifying reforestation costs are the direct costs of planting or seeding for forestation or reforestation. Free federal and state tax filing 2014 Qualified timber property is property that contains trees in significant commercial quantities. Free federal and state tax filing 2014 See chapter 8 for more information on qualifying reforestation costs and qualified timber property. Free federal and state tax filing 2014 If you elect to deduct qualified reforestation costs, create and maintain separate timber accounts for each qualified timber property and include all reforestation costs and the dates each was applied. Free federal and state tax filing 2014 Do not include this qualified timber property in any account (for example, depletion block) for which depletion is allowed. Free federal and state tax filing 2014 How to make the election. Free federal and state tax filing 2014   You elect to deduct qualifying reforestation costs by claiming the deduction on your timely filed income tax return (including extensions) for the tax year the expenses were paid or incurred. Free federal and state tax filing 2014 If Form T (Timber), Forest Activities Schedule, is required, complete Part IV of Form T. Free federal and state tax filing 2014 If Form T is not required, attach a statement containing the following information for each qualified timber property for which an election is being made. Free federal and state tax filing 2014 The unique stand identification numbers. Free federal and state tax filing 2014 The total number of acres reforested during the tax year. Free federal and state tax filing 2014 The nature of the reforestation treatments. Free federal and state tax filing 2014 The total amounts of qualified reforestation expenditures eligible to be amortized or deducted. Free federal and state tax filing 2014   If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Free federal and state tax filing 2014 Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Free federal and state tax filing 2014 9100-2. Free federal and state tax filing 2014 ” File the amended return at the same address you filed the original return. Free federal and state tax filing 2014 The election applies when computing taxable income for the current tax year and all subsequent years. Free federal and state tax filing 2014   For additional information on reforestation costs, see chapter 8 . Free federal and state tax filing 2014 Recapture. Free federal and state tax filing 2014   This deduction may have to be recaptured as ordinary income under section 1245 when you sell or otherwise dispose of the property that would have received an addition to basis if you had not elected to deduct the expenditure. Free federal and state tax filing 2014 For more information on recapturing the deduction, see Depreciation Recapture in Publication 544. Free federal and state tax filing 2014 Retired Asset Removal Costs If you retire and remove a depreciable asset in connection with the installation or production of a replacement asset, you can deduct the costs of removing the retired asset. Free federal and state tax filing 2014 However, if you replace a component (part) of a depreciable asset, capitalize the removal costs if the replacement is an improvement and deduct the costs if the replacement is a repair. Free federal and state tax filing 2014 Barrier Removal Costs The cost of an improvement to a business asset is normally a capital expense. Free federal and state tax filing 2014 However, you can elect to deduct the costs of making a facility or public transportation vehicle more accessible to and usable by those who are disabled or elderly. Free federal and state tax filing 2014 You must own or lease the facility or vehicle for use in connection with your trade or business. Free federal and state tax filing 2014 A facility is all or any part of buildings, structures, equipment, roads, walks, parking lots, or similar real or personal property. Free federal and state tax filing 2014 A public transportation vehicle is a vehicle, such as a bus or railroad car, that provides transportation service to the public (including service for your customers, even if you are not in the business of providing transportation services). Free federal and state tax filing 2014 You cannot deduct any costs that you paid or incurred to completely renovate or build a facility or public transportation vehicle or to replace depreciable property in the normal course of business. Free federal and state tax filing 2014 Deduction limit. Free federal and state tax filing 2014   The most you can deduct as a cost of removing barriers to the disabled and the elderly for any tax year is $15,000. Free federal and state tax filing 2014 However, you can add any costs over this limit to the basis of the property and depreciate these excess costs. Free federal and state tax filing 2014 Partners and partnerships. Free federal and state tax filing 2014   The $15,000 limit applies to a partnership and also to each partner in the partnership. Free federal and state tax filing 2014 A partner can allocate the $15,000 limit in any manner among the partner's individually incurred costs and the partner's distributive share of partnership costs. Free federal and state tax filing 2014 If the partner cannot deduct the entire share of partnership costs, the partnership can add any costs not deducted to the basis of the improved property. Free federal and state tax filing 2014   A partnership must be able to show that any amount added to basis was not deducted by the partner and that it was over a partner's $15,000 limit (as determined by the partner). Free federal and state tax filing 2014 If the partnership cannot show this, it is presumed that the partner was able to deduct the distributive share of the partnership's costs in full. Free federal and state tax filing 2014 Example. Free federal and state tax filing 2014 Emilio Azul's distributive share of ABC partnership's deductible expenses for the removal of architectural barriers was $14,000. Free federal and state tax filing 2014 Emilio had $12,000 of similar expenses in his sole proprietorship. Free federal and state tax filing 2014 He elected to deduct $7,000 of them. Free federal and state tax filing 2014 Emilio allocated the remaining $8,000 of the $15,000 limit to his share of ABC's expenses. Free federal and state tax filing 2014 Emilio can add the excess $5,000 of his own expenses to the basis of the property used in his business. Free federal and state tax filing 2014 Also, if ABC can show that Emilio could not deduct $6,000 ($14,000 – $8,000) of his share of the partnership's expenses because of how Emilio applied the limit, ABC can add $6,000 to the basis of its property. Free federal and state tax filing 2014 Qualification standards. Free federal and state tax filing 2014   You can deduct your costs as a current expense only if the barrier removal meets the guidelines and requirements issued by the Architectural and Transportation Barriers Compliance Board under the Americans with Disabilities Act (ADA) of 1990. Free federal and state tax filing 2014 You can view the Americans with Disabilities Act at www. Free federal and state tax filing 2014 ada. Free federal and state tax filing 2014 gov/pubs/ada. Free federal and state tax filing 2014 htm. Free federal and state tax filing 2014   The following is a list of some architectural barrier removal costs that can be deducted. Free federal and state tax filing 2014 Ground and floor surfaces. Free federal and state tax filing 2014 Walks. Free federal and state tax filing 2014 Parking lots. Free federal and state tax filing 2014 Ramps. Free federal and state tax filing 2014 Entrances. Free federal and state tax filing 2014 Doors and doorways. Free federal and state tax filing 2014 Stairs. Free federal and state tax filing 2014 Floors. Free federal and state tax filing 2014 Toilet rooms. Free federal and state tax filing 2014 Water fountains. Free federal and state tax filing 2014 Public telephones. Free federal and state tax filing 2014 Elevators. Free federal and state tax filing 2014 Controls. Free federal and state tax filing 2014 Signage. Free federal and state tax filing 2014 Alarms. Free federal and state tax filing 2014 Protruding objects. Free federal and state tax filing 2014 Symbols of accessibility. Free federal and state tax filing 2014 You can find the ADA guidelines and requirements for architectural barrier removal at www. Free federal and state tax filing 2014 usdoj. Free federal and state tax filing 2014 gov/crt/ada/reg3a. Free federal and state tax filing 2014 html. Free federal and state tax filing 2014   The costs for removal of transportation barriers from rail facilities, buses, and rapid and light rail vehicles are deductible. Free federal and state tax filing 2014 You can find the guidelines and requirements for transportation barrier removal at www. Free federal and state tax filing 2014 fta. Free federal and state tax filing 2014 dot. Free federal and state tax filing 2014 gov. Free federal and state tax filing 2014   Also, you can access the ADA website at www. Free federal and state tax filing 2014 ada. Free federal and state tax filing 2014 gov for additional information. Free federal and state tax filing 2014 Other barrier removals. Free federal and state tax filing 2014   To be deductible, expenses of removing any barrier not covered by the above standards must meet all three of the following tests. Free federal and state tax filing 2014 The removed barrier must be a substantial barrier to access or use of a facility or public transportation vehicle by persons who have a disability or are elderly. Free federal and state tax filing 2014 The removed barrier must have been a barrier for at least one major group of persons who have a disability or are elderly (such as people who are blind, deaf, or wheelchair users). Free federal and state tax filing 2014 The barrier must be removed without creating any new barrier that significantly impairs access to or use of the facility or vehicle by a major group of persons who have a disability or are elderly. Free federal and state tax filing 2014 How to make the election. Free federal and state tax filing 2014   If you elect to deduct your costs for removing barriers to the disabled or the elderly, claim the deduction on your income tax return (partnership return for partnerships) for the tax year the expenses were paid or incurred. Free federal and state tax filing 2014 Identify the deduction as a separate item. Free federal and state tax filing 2014 The election applies to all the qualifying costs you have during the year, up to the $15,000 limit. Free federal and state tax filing 2014 If you make this election, you must maintain adequate records to support your deduction. Free federal and state tax filing 2014   For your election to be valid, you generally must file your return by its due date, including extensions. Free federal and state tax filing 2014 However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Free federal and state tax filing 2014 Clearly indicate the election on your amended return and write “Filed pursuant to section 301. Free federal and state tax filing 2014 9100-2. Free federal and state tax filing 2014 ” File the amended return at the same address you filed the original return. Free federal and state tax filing 2014 Your election is irrevocable after the due date, including extensions, of your return. Free federal and state tax filing 2014 Disabled access credit. Free federal and state tax filing 2014   If you make your business accessible to persons with disabilities and your business is an eligible small business, you may be able to claim the disabled access credit. Free federal and state tax filing 2014 If you choose to claim the credit, you must reduce the amount you deduct or capitalize by the amount of the credit. Free federal and state tax filing 2014   For more information, see Form 8826, Disabled Access Credit. Free federal and state tax filing 2014 Film and Television Production Costs Film and television production costs are generally capital expenses. Free federal and state tax filing 2014 However, you can elect to deduct costs paid or incurred for certain productions commencing before January 1, 2014. Free federal and state tax filing 2014 For more information, see section 181 of the Internal Revenue Code and the related Treasury Regulations. Free federal and state tax filing 2014 Prev  Up  Next   Home   More Online Publications