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Free Filing For 2012 Taxes

Free filing for 2012 taxes Publication 908 - Main Content Table of Contents Bankruptcy Code Tax Compliance RequirementsTax Returns Due for Periods Ending Before the Bankruptcy Filing in Chapter 13 Cases Tax Returns Due After the Bankruptcy Filing Individuals in Chapter 12 or 13 Individuals in Chapter 7 or 11Debtor's Election To End Tax Year – Form 1040 Taxes and the Bankruptcy Estate Bankruptcy Estate – Income, Deductions, and Credits Tax Reporting – Chapter 11 Cases Bankruptcy Estate Tax Return Filing Requirements and Payment of Tax Due Tax Return Example – Form 1041 Partnerships and CorporationsFiling Requirements Partnerships Corporations Receiverships Determination of TaxPrompt Determination Requests Court Jurisdiction Over Tax MattersBankruptcy Court Tax Court Federal Tax ClaimsUnsecured Tax Claims Discharge of Unpaid Tax Debt CancellationExclusions Reduction of Tax Attributes Partnerships Corporations Tax Attribute Reduction Example How To Get Tax HelpTaxpayer Advocacy Panel (TAP). Free filing for 2012 taxes Low Income Taxpayer Clinics (LITCs). Free filing for 2012 taxes Bankruptcy Code Tax Compliance Requirements Tax Returns Due for Periods Ending Before the Bankruptcy Filing in Chapter 13 Cases The Bankruptcy Code requires chapter 13 debtors to file all required tax returns for tax periods ending within 4 years of the debtor's bankruptcy filing. Free filing for 2012 taxes All such federal tax returns must be filed with the IRS before the date first set for the first meeting of creditors. Free filing for 2012 taxes The debtor may request the trustee to hold the meeting open for an additional 120 days to enable the debtor to file the returns (or until the day the returns are due under an automatic IRS extension, if later). Free filing for 2012 taxes After notice and hearing, the bankruptcy court may extend the period for another 30 days. Free filing for 2012 taxes Failure to timely file the returns can prevent confirmation of a chapter 13 plan and result in either dismissal of the chapter 13 case or conversion to a chapter 7 case. Free filing for 2012 taxes Note. Free filing for 2012 taxes Individual debtors should use their home address when filing Form 1040 with the IRS. Free filing for 2012 taxes Returns should not be filed “in care of” the trustee's address. Free filing for 2012 taxes Ordering tax transcripts and copies of returns. Free filing for 2012 taxes   Trustees may require the debtor to submit copies or transcripts of the debtor's returns as proof of filing. Free filing for 2012 taxes The debtor can request free transcripts of the debtor's income tax returns by filing Form 4506-T, Request for Transcript of Tax Return, with the IRS or by placing a request on the IRS's free Automated Delivery Service (ADS), available by calling 1-800-829-1040. Free filing for 2012 taxes If requested through ADS, the transcript will be mailed to the debtor's most current address according to the IRS's records. Free filing for 2012 taxes Transcripts requested using Form 4506-T may be mailed to any address, including to the attention of the trustee in the debtor's bankruptcy case. Free filing for 2012 taxes Transcripts are normally mailed within 10 to 15 days of receipt of the request by the IRS. Free filing for 2012 taxes A transcript contains most of the information on the debtor's filed return, but it is not a copy of the return. Free filing for 2012 taxes To request a copy of the debtor's filed return, file Form 4506, Request for Copy of Tax Return. Free filing for 2012 taxes It may take up to 60 days for the IRS to provide the copies after receipt of the debtor's request, and there is a fee of $57. Free filing for 2012 taxes 00 per tax return for copies of the returns. Free filing for 2012 taxes Tax Returns Due After the Bankruptcy Filing For debtors filing bankruptcy under all chapters (chapters 7, 11, 12, or 13), the Bankruptcy Code provides that if the debtor does not file a tax return that becomes due after the commencement of the bankruptcy case, or obtain an extension for filing the return before the due date, the taxing authority may request that the bankruptcy court either dismiss the case or convert the case to a case under another chapter of the Bankruptcy Code. Free filing for 2012 taxes If the debtor does not file the required return or obtain an extension within 90 days after the request is made, the bankruptcy court must dismiss or convert the case. Free filing for 2012 taxes Tax returns and payment of taxes in chapter 11 cases. Free filing for 2012 taxes   The Bankruptcy Code provides that a chapter 11 debtor's failure to timely file tax returns and pay taxes owed after the date of the “order for relief” (the bankruptcy petition date in voluntary cases) is cause for dismissal of the chapter 11 case, conversion to a chapter 7 case, or appointment of a chapter 11 trustee. Free filing for 2012 taxes Disclosure of debtor's return information to trustee. Free filing for 2012 taxes   In bankruptcy cases filed under chapter 7 or 11 by individuals, the debtor's income tax returns for the year the bankruptcy case begins and for earlier years are, upon written request, open to inspection by or disclosure to the trustee. Free filing for 2012 taxes If the bankruptcy case was not voluntary, disclosure cannot be made before the bankruptcy court has entered an order for relief, unless the court rules that the disclosure is needed for determining whether relief should be ordered. Free filing for 2012 taxes    In bankruptcy cases other than those of individuals filing under chapter 7 or 11, the debtor's income tax returns for the current and prior years are, upon written request, open to inspection by or disclosure to the trustee, but only if the IRS finds that the trustee has a material interest that will be affected by information on the return. Free filing for 2012 taxes Material interest is generally defined as a financial or monetary interest. Free filing for 2012 taxes Material interest is not limited to the trustee's responsibility to file a return on behalf of the bankruptcy estate. Free filing for 2012 taxes   However, the U. Free filing for 2012 taxes S. Free filing for 2012 taxes Trustee (an officer of the Department of Justice, responsible for maintaining and supervising a panel of private trustees for chapter 7 bankruptcy cases) and the standing chapter 13 trustee (the administrator of chapter 13 cases in a specific geographic region) generally do not have a material interest in the debtor’s return or return information. Free filing for 2012 taxes Disclosure of bankruptcy estate's return information to debtor. Free filing for 2012 taxes    The bankruptcy estate's tax return(s) are open, upon written request, to inspection by or disclosure to the individual debtor in a chapter 7 or 11 bankruptcy. Free filing for 2012 taxes Disclosure of the estate's return to the debtor may be necessary to enable the debtor to determine the amount and nature of the tax attributes, if any, that the debtor assumes when the bankruptcy estate terminates. Free filing for 2012 taxes Individuals in Chapter 12 or 13 Only individuals may file a chapter 13 bankruptcy. Free filing for 2012 taxes Chapter 13 relief is not available to corporations or partnerships. Free filing for 2012 taxes The bankruptcy estate is not treated as a separate entity for tax purposes when an individual files a petition under chapter 12 (Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income) or 13 (Adjustment of Debts of an Individual with Regular Income) of the Bankruptcy Code. Free filing for 2012 taxes In these cases the individual continues to file the same federal income tax returns that were filed prior to the bankruptcy petition, Form 1040, U. Free filing for 2012 taxes S. Free filing for 2012 taxes Individual Income Tax Return. Free filing for 2012 taxes On the debtor's individual tax return, Form 1040, report all income received during the entire year and deduct all allowable expenses. Free filing for 2012 taxes Do not include in income the amount from any debt canceled due to the debtor's bankruptcy. Free filing for 2012 taxes To the extent the debtor has any losses, credits, or basis in property that were previously reduced as a result of canceled debt, these reductions must be included on the debtor's return. Free filing for 2012 taxes See Debt Cancellation, later. Free filing for 2012 taxes Interest on trust accounts in chapter 13 cases. Free filing for 2012 taxes   In chapter 13 proceedings, do not include interest earned on amounts held by the trustee in trust accounts as income on the debtor's return. Free filing for 2012 taxes This interest is not available to either the debtor or creditors, it is available only to the trustee for use by the U. Free filing for 2012 taxes S. Free filing for 2012 taxes Trustee system. Free filing for 2012 taxes The interest is also not taxable to the trustee as income. Free filing for 2012 taxes Individuals in Chapter 7 or 11 When an individual debtor files for bankruptcy under chapter 7 or 11 of the Bankruptcy Code, the bankruptcy estate is treated as a new taxable entity, separate from the individual taxpayer. Free filing for 2012 taxes The bankruptcy estate in a chapter 7 case is represented by a trustee. Free filing for 2012 taxes The trustee is appointed to administer the estate and liquidate any nonexempt assets. Free filing for 2012 taxes In chapter 11 cases, the debtor often remains in control of the assets as a “debtor-in-possession” and acts as the bankruptcy trustee. Free filing for 2012 taxes However, the bankruptcy court, for cause, may appoint a trustee if such appointment is in the best interests of the creditors and the estate. Free filing for 2012 taxes During the chapter 7 or 11 bankruptcy, the debtor continues to file an individual tax return on Form 1040. Free filing for 2012 taxes The bankruptcy trustee files a Form 1041 for the bankruptcy estate. Free filing for 2012 taxes However, when a debtor in a chapter 11 bankruptcy case remains a debtor-in-possession, he or she must file both a Form 1040 individual return and a Form 1041 estate return for the bankruptcy estate (if return filing requirements are met). Free filing for 2012 taxes Although a husband and wife may file a joint bankruptcy petition whose bankruptcy estates are jointly administered, the estates are be treated as two separate entities for tax purposes. Free filing for 2012 taxes Two separate bankruptcy estate income tax returns must be filed (if each spouse separately meets the filing requirements). Free filing for 2012 taxes For information about determining the tax due and paying tax for a chapter 7 or 11 bankruptcy estate, see Bankruptcy Estate Tax Return Filing Requirements and Payment of Tax Due, later. Free filing for 2012 taxes Debtor's Election To End Tax Year – Form 1040 Short tax years. Free filing for 2012 taxes   An individual debtor in a chapter 7 or 11 case may elect to close the debtor's tax year for the year in which the bankruptcy petition is filed, as of the day before the date on which the bankruptcy case commences. Free filing for 2012 taxes If the debtor makes this election, the debtor's tax year is divided into 2 short tax years of less than 12 months each. Free filing for 2012 taxes The first tax year ends on the day before the commencement date and the second tax year begins on the commencement date. Free filing for 2012 taxes   If the election is made, the debtor's federal income tax liability for the first short tax year becomes an allowable claim against the bankruptcy estate arising before the bankruptcy filing. Free filing for 2012 taxes Also, the tax liability for the first short tax year is not subject to discharge under the Bankruptcy Code. Free filing for 2012 taxes    If the debtor does not make an election to end the tax year, the commencement of the bankruptcy case does not affect the debtor's tax year. Free filing for 2012 taxes Also, no part of the debtor's income tax liability for the year in which the bankruptcy case commences can be collected from the bankruptcy estate. Free filing for 2012 taxes Note. Free filing for 2012 taxes The debtor cannot make a short tax year election if no assets, other than exempt property, are in the bankruptcy estate. Free filing for 2012 taxes Making the Election - Filing Requirements First short tax year. Free filing for 2012 taxes   The debtor can elect to end the debtor's tax year by filing a return on Form 1040 for the first short tax year. Free filing for 2012 taxes The return must be filed on or before the 15th day of the fourth full month after the end of that first tax year. Free filing for 2012 taxes Second short tax year. Free filing for 2012 taxes   If the debtor elects to end the tax year on the day before filing the bankruptcy case, the debtor must file the return for the first short tax year in the manner discussed above. Free filing for 2012 taxes   If the debtor makes this election, the debtor must also file a separate Form 1040 for the second short tax year by the regular due date. Free filing for 2012 taxes To avoid delays in processing the return, write “Second Short Year Return After Section 1398 Election” at the top of the return. Free filing for 2012 taxes Example. Free filing for 2012 taxes Jane Doe, an individual calendar year taxpayer, filed a bankruptcy petition under chapter 7 or 11 on May 8, 2012. Free filing for 2012 taxes If Jane elected to close her tax year at the commencement of her case, Jane's first short year for 2012 runs from January 1 through May 7, 2012. Free filing for 2012 taxes Jane's second short year runs from May 8, 2012, through December 31, 2012. Free filing for 2012 taxes To have a timely filed election for the first short year, Jane must file Form 1040 (or an extension of time to file) for the period January 1 through May 7 by September 15. Free filing for 2012 taxes To avoid delays in processing the return, write “Section 1398 Election” at the top of the return. Free filing for 2012 taxes The debtor may also make the election by attaching a statement to Form 4868, Automatic Extension of Time to File an U. Free filing for 2012 taxes S. Free filing for 2012 taxes Individual Tax Return. Free filing for 2012 taxes The statement must state that the debtor elects under IRC section 1398(d)(2) to close the debtor's tax year on the day before filing the bankruptcy case. Free filing for 2012 taxes The debtor must file Form 4868 by the due date of the return for the first short tax year. Free filing for 2012 taxes The debtor's spouse may also elect to close his or her tax year, see Election by debtor's spouse, below. Free filing for 2012 taxes Election by debtor's spouse. Free filing for 2012 taxes   If the debtor is married, the debtor's spouse may join in the election to end the tax year. Free filing for 2012 taxes If the debtor and spouse make a joint election, the debtor must file a joint return for the first short tax year. Free filing for 2012 taxes The debtor must elect by the due date for filing the return for the first short tax year. Free filing for 2012 taxes Once the election is made, it cannot be revoked for the first short tax year. Free filing for 2012 taxes However, the election does not prevent the debtor and the spouse from filing separate returns for the second short tax year. Free filing for 2012 taxes Later bankruptcy of spouse. Free filing for 2012 taxes    If the debtor's spouse files for bankruptcy later in the same year, he or she may also choose to end his or her tax year, regardless of whether he or she joined in the election to end the debtor's tax year. Free filing for 2012 taxes   As each spouse has a separate bankruptcy, one or both of them may have 3 short tax years in the same calendar year. Free filing for 2012 taxes If the debtor's spouse joined the debtor's election or if the debtor had not made the election to end the tax year, the debtor can join in the spouse's election. Free filing for 2012 taxes However, if the debtor made an election and the spouse did not join that election, the debtor cannot then join the spouse's later election. Free filing for 2012 taxes The debtor and the spouse are precluded from this election because they have different tax years. Free filing for 2012 taxes This results because the debtor does not have a tax year ending the day before the spouse's filing for bankruptcy, and the debtor cannot file a joint return for a year ending on the day before the spouse's filing of bankruptcy. Free filing for 2012 taxes Example 1. Free filing for 2012 taxes Paul and Mary Harris are calendar-year taxpayers. Free filing for 2012 taxes Paul's voluntary chapter 7 bankruptcy case begins on March 4. Free filing for 2012 taxes If Paul does not make an election, his tax year does not end on March 3. Free filing for 2012 taxes If he makes an election, Paul's first tax year is January 1–March 3, and his second tax year begins on March 4. Free filing for 2012 taxes Mary could join in Paul's election as long as they file a joint return for the tax year January 1–March 3. Free filing for 2012 taxes They must make the election by July 15, the due date for filing the joint return. Free filing for 2012 taxes Example 2. Free filing for 2012 taxes Fred and Ethel Barnes are calendar-year taxpayers. Free filing for 2012 taxes Fred's voluntary chapter 7 bankruptcy case begins on May 6, and Ethel's bankruptcy case begins on November 1 of the same year. Free filing for 2012 taxes Ethel could elect to end her tax year on October 31. Free filing for 2012 taxes If Fred did not elect to end his tax year on May 5, or if he elected to do so but Ethel had not joined in his election, Ethel would have 2 tax years in the same calendar year if she decided to close her tax year. Free filing for 2012 taxes Her first tax year is January 1–October 31, and her second year is November 1–December 31. Free filing for 2012 taxes If Fred did not end his tax year as of May 5, he could join in Ethel's election to close her tax year on October 31, but only if they file a joint return for the tax year January 1–October 31. Free filing for 2012 taxes If Fred elected to end his tax year on May 5, but Ethel did not join in Fred's election, Fred cannot join in Ethel's election to end her tax year on October 31. Free filing for 2012 taxes Fred and Ethel cannot file a joint return for that short tax year because their tax years preceding October 31 were not the same. Free filing for 2012 taxes Example 3. Free filing for 2012 taxes Jack and Karen Thomas are calendar-year taxpayers. Free filing for 2012 taxes Karen's voluntary chapter 7 bankruptcy case began on April 10, and Jack's voluntary chapter 7 bankruptcy case began on October 3 of the same year. Free filing for 2012 taxes Karen elected to close her tax year on April 9 and Jack joins in Karen's election. Free filing for 2012 taxes Under these facts, Jack would have 3 tax years for the same calendar year if he makes the election relating to his own bankruptcy case. Free filing for 2012 taxes The first tax year would be January 1–April 9; the second, April 10–October 2; and the third, October 3–December 31. Free filing for 2012 taxes Karen may join in Jack's election if they file a joint return for the second short tax year (April 10–October 2). Free filing for 2012 taxes If Karen does join in, she would have the same 3 short tax years as Jack. Free filing for 2012 taxes Also, if Karen joins in Jack's election, they may file a joint return for the third tax year (October 3–December 31), but they are not required to do so. Free filing for 2012 taxes Annualizing taxable income. Free filing for 2012 taxes   If the debtor elects to close the tax year, the debtor must annualize taxable income for each short tax year in the same manner a change in annual accounting period is calculated. Free filing for 2012 taxes See Short Tax Year in Publication 538, for information on how to annualize the debtor's income and to figure the tax for the short tax year. Free filing for 2012 taxes Dismissal of bankruptcy case. Free filing for 2012 taxes   If the bankruptcy court later dismisses an individual chapter 7 or 11 case, the bankruptcy estate is no longer treated as a separate taxable entity. Free filing for 2012 taxes It is as if no bankruptcy estate was created for tax purposes. Free filing for 2012 taxes In this situation, the debtor must file amended tax returns on Form 1040X, to replace all full or short year individual returns (Form 1040) and bankruptcy estate returns (Form 1041) filed as a result of the bankruptcy case. Free filing for 2012 taxes Income, deductions, and credits previously reported by the bankruptcy estate must be reported on the debtor's amended returns. Free filing for 2012 taxes Attach a statement to the amended returns explaining why the debtor is filing an amended return. Free filing for 2012 taxes Taxes and the Bankruptcy Estate Property of the bankruptcy estate. Free filing for 2012 taxes   At the commencement of a bankruptcy case a bankruptcy estate is created. Free filing for 2012 taxes Bankruptcy law determines which of the debtor's assets become part of a bankruptcy estate. Free filing for 2012 taxes This estate generally includes all of the debtor's legal and equitable interests in property as of the commencement date. Free filing for 2012 taxes However, there are exceptions and certain property is exempted or excluded from the bankruptcy estate. Free filing for 2012 taxes Note. Free filing for 2012 taxes Exempt property and abandoned property are initially part of the bankruptcy estate, but are subsequently removed from the estate. Free filing for 2012 taxes Excluded property is never included in the estate. Free filing for 2012 taxes Transfer of assets between debtor and bankruptcy estate. Free filing for 2012 taxes   The transfer (other than by sale or exchange) of an asset from the debtor to the bankruptcy estate is not treated as a disposition for income tax purposes. Free filing for 2012 taxes The transfer does not result in gain or loss, acceleration of income or deductions, or recapture of deductions or credits. Free filing for 2012 taxes For example, the transfer of an installment obligation to the estate would not accelerate gain under the rules for reporting installment sales. Free filing for 2012 taxes The estate assumes the same basis, holding period, and character of the transferred assets. Free filing for 2012 taxes Also, the estate generally accounts for the transferred assets in the same manner as debtor. Free filing for 2012 taxes   When the bankruptcy estate is terminated or dissolved, any resulting transfer (other than by sale or exchange) of the estate's assets back to the debtor is also not treated as a disposition for tax purposes. Free filing for 2012 taxes The transfer does not result in gain or loss, acceleration of income or deductions, or recapture of deductions or credits to the estate. Free filing for 2012 taxes Abandoned property. Free filing for 2012 taxes    The abandonment of property by the estate to the debtor is a nontaxable disposition of property. Free filing for 2012 taxes If the debtor received abandoned property from the bankruptcy estate, the debtor assumes the same basis in the property that the bankruptcy estate had. Free filing for 2012 taxes Separate taxable entity. Free filing for 2012 taxes   When an individual files a bankruptcy petition under chapter 7 or 11, the bankruptcy estate is treated as a separate taxable entity from the debtor. Free filing for 2012 taxes The court appointed trustee or the debtor-in-possession is responsible for preparing and filing all of the bankruptcy estate's tax returns, including its income tax return on Form 1041, U. Free filing for 2012 taxes S. Free filing for 2012 taxes Income Tax Return for Estates and Trusts, and paying its taxes. Free filing for 2012 taxes The debtor remains responsible for filing his or her own returns on Form 1040, U. Free filing for 2012 taxes S. Free filing for 2012 taxes Individual Income Tax Return, and paying taxes on income that does not belong to the estate. Free filing for 2012 taxes Employer identification number. Free filing for 2012 taxes   The trustee or debtor-in-possession must obtain an EIN for a bankruptcy estate. Free filing for 2012 taxes The trustee or debtor-in-possession uses this EIN on all tax returns filed for the bankruptcy estate with the IRS, including estimated tax returns. Free filing for 2012 taxes See Employer identification number, under Bankruptcy Estate Tax Return Filing Requirements and Payment of Tax Due, later. Free filing for 2012 taxes    The social security number of the individual debtor cannot be used as the EIN for the bankruptcy estate. Free filing for 2012 taxes Income, deductions, and credits – Form 1040. Free filing for 2012 taxes   In an individual chapter 7 or 11 bankruptcy case, do not include the income, deductions, and credits that belong to the bankruptcy estate on the debtor's individual income tax return (Form 1040). Free filing for 2012 taxes Also, do not include as income on the debtor's return the amount of any debt canceled by reason of the bankruptcy discharge. Free filing for 2012 taxes The bankruptcy estate must reduce certain losses, credits, and the basis in property (to the extent of these items) by the amount of canceled debt. Free filing for 2012 taxes See Debt Cancellation, below. Free filing for 2012 taxes Note. Free filing for 2012 taxes The debtor may not be able to claim certain deductions available to the bankruptcy estate such as administrative expenses. Free filing for 2012 taxes Additionally, the bankruptcy exclusion cannot be used to exclude income from a cancelled debt if the discharge of indebtedness was not within the bankruptcy case, even though the debtor was under the bankruptcy court's protection at the time. Free filing for 2012 taxes However, other exclusions, such as the insolvency exclusion, may apply. Free filing for 2012 taxes Bankruptcy Estate – Income, Deductions, and Credits Bankruptcy Estate Income Income of the estate in individual chapter 7 cases. Free filing for 2012 taxes    The gross income of the bankruptcy estate includes gross income of the debtor to which the estate is entitled under the Bankruptcy Code. Free filing for 2012 taxes Gross income also includes income generated by the bankruptcy estate from property of the estate after the commencement of the case. Free filing for 2012 taxes   Gross income of the bankruptcy estate does not include amounts received or accrued by the debtor before the commencement of the case. Free filing for 2012 taxes Additionally, in chapter 7 cases, gross income of the bankruptcy estate does not include any income that the debtor earns after the date of the bankruptcy petition. Free filing for 2012 taxes Income of the estate in individual chapter 11 cases. Free filing for 2012 taxes    In chapter 11 cases, under IRC section 1398(e)(1), gross income of the bankruptcy estate includes income that the debtor earns for services performed after the bankruptcy petition date. Free filing for 2012 taxes Also, earnings from services performed by an individual debtor after the commencement of the chapter 11 case are property of the bankruptcy estate under section 1115 of the Bankruptcy Code (11 U. Free filing for 2012 taxes S. Free filing for 2012 taxes C. Free filing for 2012 taxes section 1115). Free filing for 2012 taxes Note. Free filing for 2012 taxes A debtor-in-possession may be compensated by the estate for managing or operating a trade or business that the debtor conducted before the commencement of the bankruptcy case. Free filing for 2012 taxes Such payments should be reported by the debtor as miscellaneous income on his or her individual income tax return (Form 1040). Free filing for 2012 taxes Amounts paid by the estate to the debtor-in-possession for managing or operating the trade or business may qualify as administrative expenses of the estate. Free filing for 2012 taxes See Administrative expenses, below. Free filing for 2012 taxes Conversion or dismissal of chapter 11 cases. Free filing for 2012 taxes   If a chapter 11 case is converted to a chapter 13 case, the chapter 13 estate is not a separate taxable entity and earnings from post-conversion services and income from property of the estate realized after the conversion to chapter 13 are taxed to the debtor. Free filing for 2012 taxes If the chapter 11 case is converted to a chapter 7 case, 11 U. Free filing for 2012 taxes S. Free filing for 2012 taxes C. Free filing for 2012 taxes section 1115 does not apply after conversion and: Earnings from post-conversion services will be taxed to the debtor, rather than the estate, and The property of the chapter 11 estate will become property of the chapter 7 estate. Free filing for 2012 taxes Any income on this property will be taxed to the estate even if the income is realized after the conversion to chapter 7. Free filing for 2012 taxes If a chapter 11 case is dismissed, the debtor is treated as if the bankruptcy case had never been filed and as if no bankruptcy estate had been created. Free filing for 2012 taxes Bankruptcy Estate Deductions and Credits A bankruptcy estate deducts expenses incurred in a trade, business, or activity, and uses credits in the same way the debtor would have deducted or credited them had he or she continued operations. Free filing for 2012 taxes Note. Free filing for 2012 taxes Expenses may be disallowed under other provisions of the IRC (such as the disallowance of certain capital expenditures or expenses relating to tax-exempt interest). Free filing for 2012 taxes Administrative expenses. Free filing for 2012 taxes   Allowable expenses include administrative expenses. Free filing for 2012 taxes    Administrative expenses can only be deducted by the estate, never by the debtor. Free filing for 2012 taxes   The bankruptcy estate is allowed deductions for bankruptcy administrative expenses and fees, including accounting fees, attorney fees, and court costs. Free filing for 2012 taxes These expenses are deductible on Form 1040, Schedule A as miscellaneous itemized deductions not subject to the 2% floor on miscellaneous itemized deductions, because they would not have been incurred if property had not been held by the bankruptcy estate. Free filing for 2012 taxes See IRC section 67(e). Free filing for 2012 taxes Administrative expenses of the bankruptcy estate attributable to conducting a trade or business for the production of estate rents or royalties are deductible in arriving at adjusted gross income on Form 1040, Schedules C, E, and F. Free filing for 2012 taxes Note. Free filing for 2012 taxes The bankruptcy estate uses Form 1041 as a transmittal for the tax return prepared using Form 1040 and its schedules. Free filing for 2012 taxes See Transmittal for Form 1040 under Tax Return Filing Requirements and Payment of Tax, later. Free filing for 2012 taxes Administrative expense loss. Free filing for 2012 taxes   If the administrative expenses of the bankruptcy estate are more than its gross income for a tax year, the excess amount may be carried back 3 years and forward 7 years. Free filing for 2012 taxes The amounts can only be carried to a tax year of the estate and never to a debtor's tax year. Free filing for 2012 taxes The excess amount to be carried back or forward is treated like a net operating loss (NOL) and must first be carried back to the earliest year possible. Free filing for 2012 taxes For a discussion of NOLs, see Publication 536. Free filing for 2012 taxes Attribute carryovers. Free filing for 2012 taxes   The bankruptcy estate may use its tax attributes the same way that the debtor would have used them. Free filing for 2012 taxes These items are determined as of the first day of the debtor's tax year in which the bankruptcy case begins. Free filing for 2012 taxes The bankruptcy estate assumes the following tax attributes from the debtor: NOL carryovers, Carryovers of excess charitable contributions, Recovery of tax benefit items, Credit carryovers, Capital loss carryovers, Basis, holding period, and character of assets, Method of accounting, Passive activity loss and credit carryovers, Unused at-risk deductions, and Other tax attributes provided in the regulations. Free filing for 2012 taxes   Certain tax attributes of the bankruptcy estate must be reduced by the amount of income that was previously excluded as a result of cancellation of debt during the bankruptcy proceeding. Free filing for 2012 taxes See Debt Cancellation, later. Free filing for 2012 taxes   When the bankruptcy estate is terminated (for example, when the case ends), the debtor assumes any remaining tax attributes previously taken over by the bankruptcy estate. Free filing for 2012 taxes The debtor also generally assumes any of the tax attributes, listed above, that arose during the administration of the bankruptcy estate. Free filing for 2012 taxes Note. Free filing for 2012 taxes The debtor does not assume the bankruptcy estate's administrative expense losses because they cannot be used by an individual taxpayer filing Form 1040. Free filing for 2012 taxes See Administrative expense loss, above. Free filing for 2012 taxes Passive and at-risk activities. Free filing for 2012 taxes   For bankruptcy cases beginning after November 8, 1992, passive activity carryover losses and credits and unused at-risk deductions are treated as tax attributes passing from the debtor to the bankruptcy estate, which the estate then passes back to the debtor when the bankruptcy estate terminates. Free filing for 2012 taxes Additionally, transfers to the debtor (other than by sale or exchange) of interests in passive or at-risk activities are treated as non-taxable exchanges. Free filing for 2012 taxes These transfers include the return of exempt property and abandonment of estate property to the debtor. Free filing for 2012 taxes Carrybacks from the debtor's activities. Free filing for 2012 taxes   The debtor cannot carry back any NOL or credit carryback from a tax year ending after the bankruptcy case has begun to any tax year ending before the case began. Free filing for 2012 taxes Carrybacks from the bankruptcy estate. Free filing for 2012 taxes   If the bankruptcy estate has an NOL that did not pass to the estate from the debtor under the attribute carryover rules, the estate can carry the loss back not only to its own earlier tax years but also to the debtor's tax years before the year the bankruptcy case began. Free filing for 2012 taxes The estate may also carry back excess credits, such as the general business credit, to the pre-bankruptcy tax years. Free filing for 2012 taxes Tax Reporting – Chapter 11 Cases Allocation of income and credits on information returns and required statement for returns for individual chapter 11 cases. Free filing for 2012 taxes    In chapter 11 cases, when an employer issues a Form W-2 reporting all of the debtor's wages, salary, or other compensation for a calendar year, and a portion of the earnings represent post-petition services includible in the estate's gross income, the Form W-2 amounts must be allocated between the estate and the debtor. Free filing for 2012 taxes The debtor-in-possession or trustee must allocate the income amount reported in box 1 and the income tax withheld reported in box 2 between the debtor and the estate. Free filing for 2012 taxes These allocations must reflect that the debtor's gross earnings from post-petition services and gross income from post-petition property are, generally, includible in the estate's gross income and not the debtor's gross income. Free filing for 2012 taxes The debtor and trustee may use a simple percentage method to allocate income and income tax withheld. Free filing for 2012 taxes The same method must be used to allocate the income and the withheld tax. Free filing for 2012 taxes Example. Free filing for 2012 taxes If 20% of the wages reported on Form W-2 for a calendar year were earned after the commencement of the case and are included in the estate's gross income, 20% of the withheld income tax reported on Form W-2 must also be claimed as a credit on the estate's income tax return. Free filing for 2012 taxes Likewise, 80% of wages must be reported by the debtor and 80% of the income tax withheld must be claimed as a credit on the debtor's income tax return. Free filing for 2012 taxes See IRC section 31(a). Free filing for 2012 taxes   If information returns are issued to the debtor for gross income, gross proceeds, or other reportable payments that should have been reported to the bankruptcy estate, the debtor-in-possession or trustee must allocate the improperly reported income in a reasonable manner between the debtor and the estate. Free filing for 2012 taxes In general, the allocation must ensure that any income and income tax withheld attributable to the post-petition period is reported on the estate's return, and any income and income tax withheld attributable to the pre-petition period is reported on the debtor's return. Free filing for 2012 taxes    IRS Notice 2006-83 requires the debtor to attach a statement to his or her individual income tax return (Form 1040) stating that the return is filed subject to a chapter 11 bankruptcy case. Free filing for 2012 taxes The statement must also: Show the allocations of income and income tax withheld, Describe the method used to allocate income and income tax withheld, and List the filing date of the bankruptcy case, the bankruptcy court in which the case is pending, the bankruptcy court case number, and the bankruptcy estate's EIN. Free filing for 2012 taxes Note. Free filing for 2012 taxes The debtor-in-possession or trustee must attach a similar statement to the bankruptcy estate's income tax return (Form 1041). Free filing for 2012 taxes   The model Notice 2006-83 Statement, shown above, may be used by debtors, debtors-in-possession, and trustees to satisfy the reporting requirement. Free filing for 2012 taxes Self-employment taxes in individual chapter 11 cases. Free filing for 2012 taxes   IRC section 1401 imposes a tax upon the self-employment income, that is, the net earnings from self-employment of an individual. Free filing for 2012 taxes Net earnings from self-employment are equal to the gross income derived by an individual from any trade or business carried on by such individual, less deductions attributable to the business. Free filing for 2012 taxes   Neither section 1115 of the Bankruptcy Code nor IRC section 1398 addresses the application of self-employment tax to the post-petition earnings of the individual debtor. Free filing for 2012 taxes Therefore, if the debtor continues to derive gross income from the performance of services as a self-employed individual after the commencement of the bankruptcy case, the debtor must continue to report the debtor's self-employment income on Schedule SE (Form 1040) of the debtor's income tax return. Free filing for 2012 taxes This schedule includes self-employment income earned post-petition and the attributable deductions. Free filing for 2012 taxes The debtor must pay any self-employment tax imposed by IRC section 1401. Free filing for 2012 taxes Employment taxes and employer's obligation to file Form W-2 in individual chapter 11 cases. Free filing for 2012 taxes   In chapter 11 cases, post-petition wages earned by a debtor are generally treated as gross income of the estate. Free filing for 2012 taxes However, section 1115 of the Bankruptcy Code (11 U. Free filing for 2012 taxes S. Free filing for 2012 taxes C. Free filing for 2012 taxes section 1115) does not affect the determination of what are deemed wages for Federal Insurance Contributions Act (FICA) tax, Federal Unemployment Tax Act (FUTA) tax, or Federal Income Tax Withholding purposes. Free filing for 2012 taxes See Notice 2006-83. Free filing for 2012 taxes   The reporting and withholding obligations of a debtor's employer also do not change. Free filing for 2012 taxes An employer should continue to report the wages and tax withholding on a Form W-2 issued under the debtor's name and social security number. Free filing for 2012 taxes Notice to persons required to file information returns (other than Form W-2, Wage and Tax Statement) in individual chapter 11 cases. Free filing for 2012 taxes   Within a reasonable time after the commencement of a chapter 11 bankruptcy case, the trustee or debtor-in-possession should provide notification of the bankruptcy estate's EIN to all persons (or entities) that are required to file information returns for the bankruptcy estate's gross income, gross proceeds, or other types of reportable payments. Free filing for 2012 taxes See IRC section 6109(a)(2). Free filing for 2012 taxes As these payments are the property of the estate under section 1115 of the Bankruptcy Code, the payors should report the gross income, gross proceeds, or other reportable payments on the appropriate information return using the estate's name and EIN as required under the IRC and regulations (see IRC sections 6041 through 6049). Free filing for 2012 taxes   The trustee or debtor-in-possession should not, however, provide the EIN to a person (or entity) filing Form W-2 reporting the debtor's wages or other compensation, as section 1115 of the Bankruptcy Code does not affect the determination of what constitutes wages for purposes of federal income tax withholding or FICA. Free filing for 2012 taxes See Notice 2006-83. Free filing for 2012 taxes An employer should continue to report all wage income and tax withholding, both pre-petition and post-petition, on a Form W-2 to the debtor under the debtor's social security number. Free filing for 2012 taxes   The debtor in a chapter 11 case is not required to file a new Form W-4 with an employer solely because the debtor filed a chapter 11 case and the post-petition wages are includible in the estate's income and not the debtor's income. Free filing for 2012 taxes However, a new Form W-4 may be necessary if the debtor is no longer entitled to claim the same number of allowances previously claimed because certain deductions or credits now belong to the estate. Free filing for 2012 taxes See Employment Tax Regulations section 31. Free filing for 2012 taxes 3402(f)(2)-1. Free filing for 2012 taxes Additionally, the debtor may wish to file a new Form W-4 to increase the income tax withheld from post-petition wages allocated to the estate to avoid having to make estimated tax payments for the estate. Free filing for 2012 taxes See IRC section 6654(a). Free filing for 2012 taxes Notice required in converted and dismissed cases. Free filing for 2012 taxes   When a chapter 11 bankruptcy case is closed, dismissed, or converted to a chapter 12 or 13 case, the bankruptcy estate ends as a separate taxable entity. Free filing for 2012 taxes The debtor should, within a reasonable time, send notice of such event to the persons (or entities) previously notified of the bankruptcy case. Free filing for 2012 taxes This helps to ensure that gross income, proceeds, and other reportable payments realized after the event are reported to the debtor under the correct TIN rather than to the estate. Free filing for 2012 taxes   When a chapter 11 case is converted to a chapter 7 case, the bankruptcy estate will continue to exist as a separate taxable entity. Free filing for 2012 taxes Gross income (other than post-conversion income from the debtor's services), gross proceeds, or other reportable payments should continue to be reported to the estate if they are property of the chapter 7 estate. Free filing for 2012 taxes However, income from services performed by the debtor after conversion of the case to chapter 7 is not property of the chapter 7 estate. Free filing for 2012 taxes After the conversion, the debtor should notify payors required to report the debtor's nonemployee compensation that compensation earned after the conversion should be reported using the debtor's name and TIN, not the estate's name and EIN. Free filing for 2012 taxes Employment taxes. Free filing for 2012 taxes   The trustee or debtor-in-possession must withhold income and social security taxes and file employment tax returns for any wages paid by the trustee or debtor, including wage claims paid as administrative expenses. Free filing for 2012 taxes See Publication 15, Circular E, Employer's Tax Guide, for details on employer tax responsibilities. Free filing for 2012 taxes   The trustee also has the duty to prepare and file Forms W-2 for wage claims paid by the trustee, regardless of whether the claims accrued before or during bankruptcy. Free filing for 2012 taxes For a further discussion of employment taxes, see Employment Taxes, later. Free filing for 2012 taxes Notice 2006-83 Statement Pending Bankruptcy Case The taxpayer, , filed a bankruptcy petition under chapter 11 of the Bankruptcy Code in the bankruptcy court for the District of . Free filing for 2012 taxes The bankruptcy court case number is . Free filing for 2012 taxes Gross income, and withheld federal income tax, reported on Form W-2, Forms 1099, Schedule K-1, and other information returns received under the taxpayer's name and social security number (or other taxpayer identification number) are allocated between the taxpayer's TIN and the bankruptcy estate's EIN as follows, using [describe allocation method]:. Free filing for 2012 taxes   Year Taxpayer   Estate 1. Free filing for 2012 taxes Form W-2, Payor: $   $     Withheld income tax shown on Form W-2 $   $   2. Free filing for 2012 taxes Form 1099-INT Payor: $   $     Withheld income tax (if any) shown on Form 1099-INT $   $   3. Free filing for 2012 taxes Form 1099-DIV Payor: $   $     Withheld income tax (if any) shown on Form 1099-DIV $   $   4. Free filing for 2012 taxes Form 1099-MISC Payor: $   $     Withheld income tax (if any) shown on Form 1099-MISC $   $   Bankruptcy Estate Tax Return Filing Requirements and Payment of Tax Due Filing Requirements Filing threshold. Free filing for 2012 taxes   If the bankruptcy estate has gross income that meets or exceeds the minimum amount required for filing, the trustee or debtor-in-possession must file an income tax return on Form 1041. Free filing for 2012 taxes This amount is equal to the sum of the personal exemption amount plus the basic standard deduction for a married individual filing separately. Free filing for 2012 taxes   For 2012, the threshold filing amount for a bankruptcy estate is $9,750 (the sum of the $3,800 personal exemption plus the $5,950 standard deduction for married individuals filing separately). Free filing for 2012 taxes   These amounts are generally adjusted annually. Free filing for 2012 taxes See the present year Form 1041 Instructions at www. Free filing for 2012 taxes irs. Free filing for 2012 taxes gov/form1041 for the current dollar amounts. Free filing for 2012 taxes Accounting period. Free filing for 2012 taxes   A bankruptcy estate may have a fiscal year. Free filing for 2012 taxes However, this period cannot be longer than 12 months. Free filing for 2012 taxes Change of accounting period. Free filing for 2012 taxes   The bankruptcy estate may change its accounting period (tax year) once without IRS approval. Free filing for 2012 taxes This rule allows the bankruptcy trustee to close the estate's tax year early, before the expected termination of the bankruptcy estate. Free filing for 2012 taxes The trustee can then file a return for the first short tax year to get a quick determination of the estate's tax liability. Free filing for 2012 taxes Employer identification number. Free filing for 2012 taxes   The trustee or debtor-in-possession must obtain an EIN for a bankruptcy estate. Free filing for 2012 taxes The trustee or debtor-in-possession uses this EIN on all tax returns filed for the bankruptcy estate with the IRS, including estimated tax returns. Free filing for 2012 taxes    The social security number of the individual debtor cannot be used as the EIN for the bankruptcy estate. Free filing for 2012 taxes   Obtain an EIN for a bankruptcy estate by applying: Online by clicking on the EIN link at www. Free filing for 2012 taxes irs. Free filing for 2012 taxes gov/businesses/small. Free filing for 2012 taxes The EIN is issued immediately once the application information is validated. Free filing for 2012 taxes By telephone at 1-800-829-4933 from 7:00 a. Free filing for 2012 taxes m. Free filing for 2012 taxes to 7:00 p. Free filing for 2012 taxes m. Free filing for 2012 taxes in the trustee's or debtor-in-possession's local time zone. Free filing for 2012 taxes Assistance provided to callers from Alaska and Hawaii will be based on the hours of operation in the Pacific time zone, or By mailing or faxing Form SS-4, Application for Employer Identification Number. Free filing for 2012 taxes   If the trustee or debtor-in-possession has not received the bankruptcy estate's EIN by the time the return is due, write “Applied for” and the date you applied in the space for the EIN. Free filing for 2012 taxes For more details, see Pub. Free filing for 2012 taxes 583, Starting a Business and Keeping Records. Free filing for 2012 taxes   Trustees representing ten or more bankruptcy estates (other than estates that will be filing employment or excise tax returns) may request a series or block of EINs. Free filing for 2012 taxes Figuring tax due. Free filing for 2012 taxes   The bankruptcy estate figures its taxable income the same way an individual figures taxable income. Free filing for 2012 taxes However, the estate uses the tax rates for a married individual filing separately to calculate the tax on its taxable income. Free filing for 2012 taxes The estate is entitled to one personal exemption and may either itemize deductions or take the basic standard deduction for a married individual filing a separate return. Free filing for 2012 taxes The estate cannot take the higher standard deduction allowed for married persons filing separately who are 65 or older or blind. Free filing for 2012 taxes Tax rate schedule. Free filing for 2012 taxes The tax on income for bankruptcy estates is calculated using the tax rate schedule for Married Individuals Filing Separately not the Estates and Trusts tax rate schedule. Free filing for 2012 taxes When to file. Free filing for 2012 taxes   Calendar year bankruptcy estates must file Form 1041 by April 15th. Free filing for 2012 taxes Fiscal year bankruptcy estates must file on or before the 15th day of the 4th month following the close of its tax year. Free filing for 2012 taxes For example, an estate that has a tax year that ends on June 30th must file Form 1041 by October 15th of the tax year. Free filing for 2012 taxes If the due date falls on a Saturday, Sunday, or legal holiday, file on the next business day. Free filing for 2012 taxes Note. Free filing for 2012 taxes The bankruptcy estate is allowed an automatic 6-month extension of time to file the bankruptcy estate tax return upon filing the required application, Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns. Free filing for 2012 taxes Transmittal for Form 1040. Free filing for 2012 taxes   Form 1041 is used as a transmittal for Form 1040. Free filing for 2012 taxes If a return is required, the trustee or debtor-in-possession must complete the identification area at the top of Form 1041 and indicate the chapter under which the bankruptcy estate filed, either chapter 7 or chapter 11. Free filing for 2012 taxes   Prepare the bankruptcy estate's return by completing Form 1040. Free filing for 2012 taxes In the top margin of Form 1040, write “Attachment to Form 1041 —DO NOT DETACH. Free filing for 2012 taxes ” Then, attach Form 1040 to the Form 1041 transmittal. Free filing for 2012 taxes Enter the tax and payment amounts on lines 23 through 29 of Form 1041, then sign and date the return. Free filing for 2012 taxes An example of a bankruptcy estate's tax return is prepared below. Free filing for 2012 taxes Note. Free filing for 2012 taxes The filing of the bankruptcy estate's tax return does not relieve a debtor from the requirement to file his or her individual tax return on Form 1040. Free filing for 2012 taxes Payment of Tax Due Payment methods. Free filing for 2012 taxes   Payment of tax due may be made by check or money order or by credit or debit card. Free filing for 2012 taxes For information on how to make payments electronically by credit or debit card, go to irs. Free filing for 2012 taxes gov/e-pay. Free filing for 2012 taxes      Payments may also be made electronically using the Electronic Federal Tax Payment System (EFTPS), a free tax payment system that allows you to make payments online or by phone. Free filing for 2012 taxes To enroll in EFTPS, go to eftps. Free filing for 2012 taxes gov or call 1-800-555-4477. Free filing for 2012 taxes For more information see Publication 966, Electronic Federal Tax Payment System: A Guide to Getting Started. Free filing for 2012 taxes Payment voucher – Form 1041-V. Free filing for 2012 taxes   Form 1041-V accompanies payments made by check or money order for Form 1041. Free filing for 2012 taxes The voucher includes information about the bankruptcy estate, including the name of the bankruptcy estate, trustee, EIN, and amount due. Free filing for 2012 taxes Using Form 1041-V assists the IRS in processing the payment more accurately and efficiently. Free filing for 2012 taxes We recommend the use of Form 1041-V; however, there is no penalty if the voucher is not used. Free filing for 2012 taxes Estimated tax – Form 1041-ES. Free filing for 2012 taxes   In most cases, the trustee or debtor-in-possession must pay any required estimated tax due for the bankruptcy estate. Free filing for 2012 taxes See the Form 1041-ES Instructions for information on the minimum threshold amount required for filing Form 1041-ES, paying the estimated tax, and exceptions to filing. Free filing for 2012 taxes Employment Taxes The trustee or debtor-in-possession must withhold income and social security taxes and file employment tax returns for any wages paid by the trustee or debtor, including wage claims paid as administrative expenses. Free filing for 2012 taxes Until these employment taxes are deposited as required by the IRC, they should be set aside in a separate bank account to ensure that funds are available to satisfy the liability. Free filing for 2012 taxes If the employment taxes are not paid as required, the trustee may be held personally liable for payment of the taxes. Free filing for 2012 taxes   See Publication 15, (Circular E), Employer's Tax Guide, for details on employer tax responsibilities. Free filing for 2012 taxes Also see IRS Notice 931, Deposit Requirements for Employment Taxes, for details on the deposit rules, including the requirement that federal employment tax deposits be made by electronic funds transfer. Free filing for 2012 taxes The trustee also has a duty to prepare and file Forms W-2, Wage and Tax Statement, for wage claims paid by the trustee, regardless of whether the claims accrued before or during bankruptcy. Free filing for 2012 taxes If the debtor fails to prepare and file Forms W-2 for wages paid before bankruptcy, the trustee should instruct the employees to file a Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Free filing for 2012 taxes , with their individual income tax returns. Free filing for 2012 taxes Tax Return Example – Form 1041 This publication is not revised annually. Free filing for 2012 taxes Future changes to the forms and their instructions may not be reflected in this example. Free filing for 2012 taxes Note. Free filing for 2012 taxes The following return was prepared for tax year 2011. Free filing for 2012 taxes In 2011, the threshold filing amount for a bankruptcy estate was $9,500 (the sum of the $3,700 personal exemption plus the $5,800 standard deduction for married individuals filing separately). Free filing for 2012 taxes Facts and circumstances. Free filing for 2012 taxes   On December 15, 2010, Thomas Smith filed a bankruptcy petition under chapter 7. Free filing for 2012 taxes Joan Black was appointed trustee to administer the bankruptcy estate and to distribute the assets. Free filing for 2012 taxes   The estate received the following assets from Mr. Free filing for 2012 taxes Smith: A $100,000 certificate of deposit, Commercial rental real estate with a fair market value (FMV) of $280,000, and His personal residence with an FMV of $200,000. Free filing for 2012 taxes   Also, the estate received a $251,500 capital loss carryover. Free filing for 2012 taxes   Mr. Free filing for 2012 taxes Smith's bankruptcy case was closed on December 31, 2011. Free filing for 2012 taxes During 2011, Mr. Free filing for 2012 taxes Smith was relieved of $70,000 of debt by the bankruptcy court. Free filing for 2012 taxes The estate chose a calendar year as its tax year. Free filing for 2012 taxes Joan, the trustee, reviews the estate's transactions and reports the taxable events on the estate's final return. Free filing for 2012 taxes Schedule B (Form 1040). Free filing for 2012 taxes    The certificate of deposit earned $5,500 of interest during 2011. Free filing for 2012 taxes Joan reports this interest on Schedule B. Free filing for 2012 taxes She completes this schedule and enters the result on Form 1040. Free filing for 2012 taxes Form 4562. Free filing for 2012 taxes   Joan enters the depreciation allowed on Form 4562. Free filing for 2012 taxes She completes the form and enters the result on Schedule E. Free filing for 2012 taxes Schedule E (Form 1040). Free filing for 2012 taxes   The commercial real estate was rented through the date of sale. Free filing for 2012 taxes Joan reports the income and expenses on Schedule E. Free filing for 2012 taxes She enters the net income on Form 1040. Free filing for 2012 taxes Form 4797. Free filing for 2012 taxes   The commercial real estate was sold on July 1, 2011, for $280,000. Free filing for 2012 taxes The property was purchased in 2001 at a cost of $250,000. Free filing for 2012 taxes The total depreciation allowable as of the date of sale was $120,000. Free filing for 2012 taxes Additionally, $25,000 of selling expenses were incurred. Free filing for 2012 taxes Joan reports the gain or loss from the sale on Form 4797. Free filing for 2012 taxes She completes the form and enters the gain on Schedule D (Form 1040). Free filing for 2012 taxes   Mr. Free filing for 2012 taxes Smith's former residence was sold on September 30, 2011. Free filing for 2012 taxes The sale price was $200,000, the selling expenses were $20,000, and his adjusted basis was $130,000. Free filing for 2012 taxes This sale is excluded from gross income under IRC section 121. Free filing for 2012 taxes Note. Free filing for 2012 taxes Gains from the sale of personal residences are excluded from gross income up to $250,000 under IRC section 121 ($500,000 for married couples filing a joint return). Free filing for 2012 taxes Bankruptcy estates succeed to this exclusion at the commencement of the case. Free filing for 2012 taxes See Regulation section 1. Free filing for 2012 taxes 1398-3. Free filing for 2012 taxes Schedule D (Form 1040). Free filing for 2012 taxes   Joan completes Schedule D, taking into account the $250,000 capital loss carryover from 2010 ($251,500 transferred to the estate minus $1,500 used on the estate's 2010 return). Free filing for 2012 taxes She enters the results on Form 1040. Free filing for 2012 taxes Form 1040, page 1. Free filing for 2012 taxes   Joan completes page 1 of the Form 1040 and enters the adjusted gross income on the first line of Form 1040, page 2. Free filing for 2012 taxes Schedule A (Form 1040). Free filing for 2012 taxes   During 2011, the estate paid mortgage interest and real property tax on Mr. Free filing for 2012 taxes Smith's former residence. Free filing for 2012 taxes It also paid income tax to the state. Free filing for 2012 taxes Joan enters the mortgage interest, real estate tax, and income tax on Schedule A. Free filing for 2012 taxes Also, she reports the bankruptcy estate's administrative expenses as a miscellaneous deduction not subject to the 2% floor on miscellaneous itemized deductions. Free filing for 2012 taxes She completes the Schedule A and enters the result on page 2 of Form 1040. Free filing for 2012 taxes Form 1040, page 2. Free filing for 2012 taxes   Joan determines the estate's taxable income and figures its tax using the tax rate schedule for married filing separately. Free filing for 2012 taxes She then enters the estate's estimated tax payments and figures the amount the estate still owes. Free filing for 2012 taxes Form 982. Free filing for 2012 taxes   Joan completes the Schedule D Tax Worksheet to figure the capital loss carryover. Free filing for 2012 taxes Because $70,000 of debt was canceled, Joan must reduce the tax attributes of the estate by the amount of the canceled debt. Free filing for 2012 taxes See Debt Cancellation, later. Free filing for 2012 taxes After the bankruptcy case ends, Mr. Free filing for 2012 taxes Smith will assume the estate's tax attributes. Free filing for 2012 taxes Mr. Free filing for 2012 taxes Smith will assume a capital loss carryover of $53,500 ($123,500 carryover minus the $70,000 attribute reduction) for use in preparation of his individual tax return (Form 1040). Free filing for 2012 taxes Note. Free filing for 2012 taxes If the bankruptcy estate had continued, the capital loss carryover would be available to the bankruptcy estate for the 2012 tax year. Free filing for 2012 taxes Form 1041. Free filing for 2012 taxes   Joan enters the total tax, estimated tax payments, and tax due from Form 1040 on Form 1041. Free filing for 2012 taxes She completes the identification area at the top of Form 1041, then signs and dates the return as the trustee on behalf of the bankruptcy estate. Free filing for 2012 taxes This image is too large to be displayed in the current screen. Free filing for 2012 taxes Please click the link to view the image. Free filing for 2012 taxes Sample Form 1040 - page 1 This image is too large to be displayed in the current screen. Free filing for 2012 taxes Please click the link to view the image. Free filing for 2012 taxes Sample Form 1040 - page 2 This image is too large to be displayed in the current screen. Free filing for 2012 taxes Please click the link to view the image. Free filing for 2012 taxes Sample Schedule A This image is too large to be displayed in the current screen. Free filing for 2012 taxes Please click the link to view the image. Free filing for 2012 taxes Sample Schedule B This image is too large to be displayed in the current screen. Free filing for 2012 taxes Please click the link to view the image. Free filing for 2012 taxes Sample Schedule D This image is too large to be displayed in the current screen. Free filing for 2012 taxes Please click the link to view the image. Free filing for 2012 taxes Sample Schedule E This image is too large to be displayed in the current screen. Free filing for 2012 taxes Please click the link to view the image. Free filing for 2012 taxes Sample Form 4797 - page 1 This image is too large to be displayed in the current screen. Free filing for 2012 taxes Please click the link to view the image. Free filing for 2012 taxes Sample Form 2119 This image is too large to be displayed in the current screen. Free filing for 2012 taxes Please click the link to view the image. Free filing for 2012 taxes Sample Form 4797 - page 2 This image is too large to be displayed in the current screen. Free filing for 2012 taxes Please click the link to view the image. Free filing for 2012 taxes Sample Form 4562 This image is too large to be displayed in the current screen. Free filing for 2012 taxes Please click the link to view the image. Free filing for 2012 taxes Sample Capital Loss Carryover Worksheet This image is too large to be displayed in the current screen. Free filing for 2012 taxes Please click the link to view the image. Free filing for 2012 taxes Sample Form 982 Capital Loss Carryover Worksheet—Lines 6 and 14 Use this worksheet to figure your capital loss carryovers from 2010 to 2011 if your 2010 Schedule D, line 21, is a loss and (a) that loss is a smaller loss than the loss on your 2010 Schedule D, line 16, or (b) the amount on your 2010 Form 1040, line 41 (or your 2010 Form 1040NR, line 38, if applicable) is less than zero. Free filing for 2012 taxes Otherwise, you do not have any carryovers. Free filing for 2012 taxes 1. Free filing for 2012 taxes Enter the amount from your 2010 Form 1040, line 41, or Form 1040NR, line 38. Free filing for 2012 taxes If a loss, enclose the amount in parentheses 1. Free filing for 2012 taxes 19,880   2. Free filing for 2012 taxes Enter the loss from your 2010 Schedule D, line 21, as a positive amount 2. Free filing for 2012 taxes 1,500   3. Free filing for 2012 taxes Combine lines 1 and 2. Free filing for 2012 taxes If zero or less, enter -0- 3. Free filing for 2012 taxes 21,380   4. Free filing for 2012 taxes Enter the smaller of line 2 or line 3 4. Free filing for 2012 taxes 1,500     If line 7 of your 2010 Schedule D is a loss, go to line 5; otherwise, enter -0- on line 5 and go to line 9. Free filing for 2012 taxes       5. Free filing for 2012 taxes Enter the loss from your 2010 Schedule D, line 7, as a positive amount 5. Free filing for 2012 taxes 0   6. Free filing for 2012 taxes Enter any gain from your 2010 Schedule D, line 15. Free filing for 2012 taxes If a loss, enter -0- 6. Free filing for 2012 taxes         7. Free filing for 2012 taxes Add lines 4 and 6 7. Free filing for 2012 taxes 1,500   8. Free filing for 2012 taxes Short-term capital loss carryover for 2011. Free filing for 2012 taxes Subtract line 7 from line 5. Free filing for 2012 taxes If zero or less, enter -0-. Free filing for 2012 taxes If more than zero, also enter this amount on Schedule D, line 6 8. Free filing for 2012 taxes 0     If line 15 of your 2010 Schedule D is a loss, go to line 9; otherwise, skip lines 9 through 13. Free filing for 2012 taxes       9. Free filing for 2012 taxes Enter the loss from your 2010 Schedule D, line 15, as a positive amount 9. Free filing for 2012 taxes 251,500   10. Free filing for 2012 taxes Enter any gain from your 2010 Schedule D, line 7. Free filing for 2012 taxes If a loss, enter -0- 10. Free filing for 2012 taxes 0       11. Free filing for 2012 taxes Subtract line 5 from line 4. Free filing for 2012 taxes If zero or less, enter -0- 11. Free filing for 2012 taxes 1,500       12. Free filing for 2012 taxes Add lines 10 and 11 12. Free filing for 2012 taxes 1,500   13. Free filing for 2012 taxes Long-term capital loss carryover for 2011. Free filing for 2012 taxes Subtract line 12 from line 9. Free filing for 2012 taxes If zero or less, enter -0-. Free filing for 2012 taxes If more than zero, also enter this amount on Schedule D, line 14 13. Free filing for 2012 taxes 250,000                       Partnerships and Corporations Filing Requirements A separate taxable estate is not created when a partnership or corporation files a bankruptcy petition and their tax return filing requirements do not change. Free filing for 2012 taxes The debtor-in-possession, court appointed trustee, assignee, or receiver must file the entity's income tax returns on Form 1065, Form 1120 or, Form 1120S. Free filing for 2012 taxes In cases where a trustee or receiver is not appointed, the debtor-in-possession continues business operations and remains in possession of the business' property during the bankruptcy proceeding. Free filing for 2012 taxes The debtor-in-possession, rather than the general partner of a partnership or corporate officer of a corporation, assumes the fiduciary responsibility to file the business' tax returns. Free filing for 2012 taxes Partnerships The filing requirements for a partnership in a bankruptcy proceeding do not change. Free filing for 2012 taxes However, the responsibility to file the required returns becomes that of the court appointed trustee, receiver, or debtor-in-possession. Free filing for 2012 taxes A partnership's debt that is canceled as a result of the bankruptcy proceeding is not included in the partnership's income. Free filing for 2012 taxes However, It may or may not be included in the individual partners' income. Free filing for 2012 taxes See Partnerships, below under Debt Cancellation. Free filing for 2012 taxes Corporations The filing requirements for a corporation in a bankruptcy proceeding also do not change. Free filing for 2012 taxes A bankruptcy trustee, receiver, or debtor-in-possession, having possession of or holding title to substantially all of the property or business operations of the debtor corporation, must file the debtor's corporate income tax return for the tax year. Free filing for 2012 taxes The following discussion only highlights bankruptcy tax rules applying to corporations. Free filing for 2012 taxes The complex details of corporate bankruptcy reorganizations are beyond the scope of this publication. Free filing for 2012 taxes Therefore, you may wish to seek the help of a professional tax advisor. Free filing for 2012 taxes See Corporations under Debt Cancellation for information about a corporation's debt canceled in a bankruptcy proceeding. Free filing for 2012 taxes Tax-Free Reorganizations The tax-free reorganization provisions of the Internal Revenue Code allow a corporation to transfer all or part of its assets to another corporation in a bankruptcy under title 11 of the United States Code or in a similar case. Free filing for 2012 taxes However, under the reorganization plan, the stock or securities of the corporation to which the assets are transferred must be distributed in a transaction that qualifies under IRC section 354, 355, or 356. Free filing for 2012 taxes A “similar case” includes a receivership, foreclosure, or other similar proceeding in a federal or state court. Free filing for 2012 taxes In these cases, any party to the reorganization must be under the jurisdiction of the court and the transfer of assets under the plan of reorganization must be approved by the court. Free filing for 2012 taxes In a receivership, foreclosure, or similar proceeding before a federal or state agency involving certain financial institutions, the agency is treated as a court. Free filing for 2012 taxes Generally, IRC section 354 provides that no gain or loss is recognized if a corporation's stock is exchanged solely for stock or securities in a corporation that is a party to the reorganization under a qualifying reorganization plan. Free filing for 2012 taxes In this case, shareholders in the bankrupt corporation would recognize no gain or loss if they exchange their stock solely for stock or securities of the corporation acquiring the bankrupt corporation's assets. Free filing for 2012 taxes IRC section 355 generally provides that no gain or loss is recognized by a shareholder if a corporation distributes solely stock or securities of another corporation that the distributing corporation controls immediately before the distribution. Free filing for 2012 taxes IRC section 356 allows tax-free exchanges in situations that would qualify under IRC section 354 or 355, except that other property or money, in addition to the permitted stock or securities, is received by the shareholder. Free filing for 2012 taxes In this situation, gain is recognized by the shareholder, but only to the extent of the money and the FMV of the other property received. Free filing for 2012 taxes No loss is recognized in this situation. Free filing for 2012 taxes Exemption from tax return filing A trustee, receiver, or assignee of a corporation in bankruptcy, receivership, or in the process of dissolving, may apply to the IRS for relief from filing federal income tax returns for the corporation. Free filing for 2012 taxes To qualify, the corporation must have ceased business operations and have no assets nor income for the tax year. Free filing for 2012 taxes The exemption request must be submitted to the local IRS Insolvency Office handling the case. Free filing for 2012 taxes The request to the IRS must include the name, address, and EIN of the corporation and a statement of the facts (with any supporting documents) showing why the debtor needs relief from the filing requirements. Free filing for 2012 taxes The request must also include the following statement: “I hereby request relief from filing federal income tax returns for tax years ending _____ for the above-named corporation and declare under penalties of perjury that to the best of my knowledge and belief the information contained herein is correct. Free filing for 2012 taxes ” The statement must be signed by the trustee, receiver or assignee. Free filing for 2012 taxes The statement must also include notice of appointment to act on behalf of the corporation (this is not required for bankruptcy trustees or debtors-in-possession). Free filing for 2012 taxes The IRS will act on your request within 90 days. Free filing for 2012 taxes Disclosure of return information to trustee. Free filing for 2012 taxes   Upon written request, current and earlier returns of the debtor are open to inspection by or disclosure to the trustee or receiver. Free filing for 2012 taxes However, in bankruptcy cases other than those of individuals filing under chapter 7 or 11, such as a corporate bankruptcy, the IRS must find that the trustee has a material interest that will be affected by information on the return. Free filing for 2012 taxes Material interest is generally defined as a financial or monetary interest. Free filing for 2012 taxes Material interest is not limited to the trustee's responsibility to file a return on behalf of the bankruptcy estate. Free filing for 2012 taxes Receiverships Court-established receiverships sometimes arise in connection with bankruptcies. Free filing for 2012 taxes Certain court-established receiverships should be treated as qualified settlement funds ("QSFs") for purposes of IRC section 468B and the underlying Treasury Regulations. Free filing for 2012 taxes QSFs are required to file an annual income tax return, Form 1120-SF, U. Free filing for 2012 taxes S. Free filing for 2012 taxes Income Tax Return for Settlement Funds. Free filing for 2012 taxes More information about QSFs may be found in Treasury Regulation sections 1. Free filing for 2012 taxes 468B-1 through -5. Free filing for 2012 taxes Determination of Tax The determination of the proper amount of tax due for a tax year begins with the bankruptcy estate's filing of Form 1041, and the individual debtor's filing of Form 1040, or for bankrupt entities filing Forms 1065, 1120, or 1120S. Free filing for 2012 taxes After a return is filed, the IRS will either accept the return as filed or select the return for examination. Free filing for 2012 taxes Under examination the IRS may redetermine the tax liability shown on the return. Free filing for 2012 taxes If the bankruptcy estate or debtor disagrees with the redetermined tax due, the tax as redetermined by the IRS may be contested in the bankruptcy court, or Tax Court, as applicable. Free filing for 2012 taxes See Court Jurisdiction over Tax Matters, later. Free filing for 2012 taxes Prompt Determination Requests Pursuant to Rev. Free filing for 2012 taxes Proc. Free filing for 2012 taxes 2006-24, 2006-22 I. Free filing for 2012 taxes R. Free filing for 2012 taxes B. Free filing for 2012 taxes 943, www. Free filing for 2012 taxes irs. Free filing for 2012 taxes gov/irb/2006-22_IRB/ar12, as modified by Announcement 2011-77, www. Free filing for 2012 taxes irs. Free filing for 2012 taxes gov/irb/2011-51_IRB/ar13, the bankruptcy trustee may request a determination of any unpaid tax liability incurred by the bankruptcy estate during the administration of the case, by filing a tax return and a request for such determination with the IRS. Free filing for 2012 taxes Unless the return is fraudulent or contains a material misrepresentation, the estate, trustee, debtor, and any successor to the debtor are discharged from liability upon payment of the tax: As determined by the IRS, As determined by the bankruptcy court, after completion of the IRS examination, or As shown on the return, if the IRS does not: Notify the trustee within 60 days after the request for determination that the return has been selected for examination, or Complete the examination and notify the trustee of any tax due within 180 days after the request (or any additional time permitted by the bankruptcy court). Free filing for 2012 taxes Making the request for determination. Free filing for 2012 taxes   As detailed in Rev. Free filing for 2012 taxes Proc. Free filing for 2012 taxes 2006-24, as modified by Announcement 2011-77, to request a prompt determination of any unpaid tax liability of the estate, the trustee must file a signed written request, in duplicate, with the Internal Revenue Service, Centralized Insolvency Operation, P. Free filing for 2012 taxes O. Free filing for 2012 taxes Box 7346, Philadelphia, PA 19101–7346 (marked “Request for Prompt Determination”). Free filing for 2012 taxes   The request must be submitted in duplicate and must be executed under penalties of perjury. Free filing for 2012 taxes In addition, the trustee must submit along with the request an exact copy of the return(s) filed by the trustee with the IRS for each completed tax period. Free filing for 2012 taxes The request must contain the following information: A statement indicating that it is a Request for Prompt Determination of Tax Liability, specifying the type of return and tax period for each return being filed. Free filing for 2012 taxes The name and location of the office where the return was filed. Free filing for 2012 taxes The name of the debtor. Free filing for 2012 taxes Debtor's social security number, TIN, or EIN. Free filing for 2012 taxes Type of bankruptcy estate. Free filing for 2012 taxes Bankruptcy case number. Free filing for 2012 taxes Court where the bankruptcy case is pending. Free filing for 2012 taxes   The copy of the return(s) submitted with the request must be an exact copy of a valid return. Free filing for 2012 taxes A request for prompt determination will be considered incomplete and returned to the trustee if it is filed with a copy of a document that does not qualify as a valid return. Free filing for 2012 taxes    To qualify as valid, a return must meet certain criteria, including a signature under penalties of perjury. Free filing for 2012 taxes A document filed by the trustee with the jurat stricken, deleted, or modified will not qualify as a valid return. Free filing for 2012 taxes Examination of return. Free filing for 2012 taxes   The IRS will notify the trustee within 60 days from receipt of the request whether the return filed by the trustee has been selected for examination or has been accepted as filed. Free filing for 2012 taxes If the return is selected for examination, it will be examined as soon as possible. Free filing for 2012 taxes The IRS will notify the trustee of any tax due within 180 days from receipt of the application or within any additional time permitted by the bankruptcy court. Free filing for 2012 taxes   If a prompt determination request is incomplete, all the documents received by the IRS will be returned to the trustee by the assigned Field Insolvency Office with an explanation identifying the missing item(s) and instructions to re-file the request once corrected. Free filing for 2012 taxes   Once corrected, the request must be filed with the IRS at the Field Insolvency Office address specified in the correspondence accompanying the returned incomplete request. Free filing for 2012 taxes   In the case of an incomplete request submitted with a copy of an invalid return document, the trustee must file a valid original return with the appropriate IRS office and submit a copy of that return with the corrected request when the request is re-filed. Free filing for 2012 taxes Note. Free filing for 2012 taxes An incomplete request includes those submitted with a copy of a return form, the original of which does not qualify as a valid return. Free filing for 2012 taxes   The 60-day period to notify the trustee whether the return is accepted as filed or has been selected for examination does not begin to run until a complete request package is recei
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The Free Filing For 2012 Taxes

Free filing for 2012 taxes Publication 525 - Main Content Table of Contents Employee CompensationBabysitting. Free filing for 2012 taxes Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Business and Investment IncomeRents From Personal Property Royalties Partnership Income S Corporation Income Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Miscellaneous IncomeBartering Canceled Debts Host or Hostess Life Insurance Proceeds Recoveries Survivor Benefits Unemployment Benefits Welfare and Other Public Assistance Benefits Other Income RepaymentsMethod 1. Free filing for 2012 taxes Method 2. Free filing for 2012 taxes How To Get Tax HelpLow Income Taxpayer Clinics Employee Compensation In most cases, you must include in gross income everything you receive in payment for personal services. Free filing for 2012 taxes In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. Free filing for 2012 taxes You should receive a Form W-2 from your employer or former employer showing the pay you received for your services. Free filing for 2012 taxes Include all your pay on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ, even if you do not receive Form W-2, or you receive a Form W-2 that does not include all pay that should be included on the Form W-2. Free filing for 2012 taxes If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. Free filing for 2012 taxes These wages must be included on line 7 of Form 1040. Free filing for 2012 taxes See Form 8919 for more information. Free filing for 2012 taxes Childcare providers. Free filing for 2012 taxes   If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. Free filing for 2012 taxes If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Free filing for 2012 taxes You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. Free filing for 2012 taxes Babysitting. Free filing for 2012 taxes   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. Free filing for 2012 taxes Bankruptcy. Free filing for 2012 taxes   If you filed for bankruptcy under Chapter 11 of the Bankruptcy Code, you must allocate your wages and withheld income tax. Free filing for 2012 taxes Your W-2 will show your total wages and withheld income tax for the year. Free filing for 2012 taxes On your tax return, you report the wages and withheld income tax for the period before you filed for bankruptcy. Free filing for 2012 taxes Your bankruptcy estate reports the wages and withheld income tax for the period after you filed for bankruptcy. Free filing for 2012 taxes If you receive other information returns (such as Form 1099-DIV, Dividends and Distributions, or 1099-INT, Interest Income) that report gross income to you, rather than to the bankruptcy estate, you must allocate that income. Free filing for 2012 taxes   The only exception is for purposes of figuring your self-employment tax, if you are self-employed. Free filing for 2012 taxes For that purpose, you must take into account all your self-employment income for the year from services performed both before and after the beginning of the case. Free filing for 2012 taxes   You must file a statement with your income tax return stating you filed a Chapter 11 bankruptcy case. Free filing for 2012 taxes The statement must show the allocation and describe the method used to make the allocation. Free filing for 2012 taxes For a sample of this statement and other information, see Notice 2006-83, 2006-40 I. Free filing for 2012 taxes R. Free filing for 2012 taxes B. Free filing for 2012 taxes 596, available at www. Free filing for 2012 taxes irs. Free filing for 2012 taxes gov/irb/2006-40_IRB/ar12. Free filing for 2012 taxes html. Free filing for 2012 taxes Miscellaneous Compensation This section discusses many types of employee compensation. Free filing for 2012 taxes The subjects are arranged in alphabetical order. Free filing for 2012 taxes Advance commissions and other earnings. Free filing for 2012 taxes   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. Free filing for 2012 taxes    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. Free filing for 2012 taxes If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), Itemized Deductions, or you may be able to take a credit for that year. Free filing for 2012 taxes See Repayments , later. Free filing for 2012 taxes Allowances and reimbursements. Free filing for 2012 taxes    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Free filing for 2012 taxes If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. Free filing for 2012 taxes Back pay awards. Free filing for 2012 taxes   Include in income amounts you are awarded in a settlement or judgment for back pay. Free filing for 2012 taxes These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. Free filing for 2012 taxes They should be reported to you by your employer on Form W-2. Free filing for 2012 taxes Bonuses and awards. Free filing for 2012 taxes    Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. Free filing for 2012 taxes These include prizes such as vacation trips for meeting sales goals. Free filing for 2012 taxes If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. Free filing for 2012 taxes However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. Free filing for 2012 taxes Employee achievement award. Free filing for 2012 taxes   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. Free filing for 2012 taxes However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. Free filing for 2012 taxes Your employer can tell you whether your award is a qualified plan award. Free filing for 2012 taxes Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. Free filing for 2012 taxes   However, the exclusion does not apply to the following awards. Free filing for 2012 taxes A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. Free filing for 2012 taxes A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. Free filing for 2012 taxes Example. Free filing for 2012 taxes Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. Free filing for 2012 taxes Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. Free filing for 2012 taxes However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 − $1,600) in his income. Free filing for 2012 taxes Differential wage payments. Free filing for 2012 taxes   This is any payment made by an employer to an individual for any period during which the individual is, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages the individual would have received from the employer for that period. Free filing for 2012 taxes These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. Free filing for 2012 taxes The payments are reported as wages on Form W-2. Free filing for 2012 taxes Government cost-of-living allowances. Free filing for 2012 taxes   Most payments received by U. Free filing for 2012 taxes S. Free filing for 2012 taxes Government civilian employees for working abroad are taxable. Free filing for 2012 taxes However, certain cost-of-living allowances are tax free. Free filing for 2012 taxes Publication 516, U. Free filing for 2012 taxes S. Free filing for 2012 taxes Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. Free filing for 2012 taxes Nonqualified deferred compensation plans. Free filing for 2012 taxes   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. Free filing for 2012 taxes This amount is shown on Form W-2, box 12, using code Y. Free filing for 2012 taxes This amount is not included in your income. Free filing for 2012 taxes   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. Free filing for 2012 taxes This amount is included in your wages shown on Form W-2, box 1. Free filing for 2012 taxes It is also shown on Form W-2, box 12, using code Z. Free filing for 2012 taxes Nonqualified deferred compensation plans of nonqualified entities. Free filing for 2012 taxes   In most cases, any compensation deferred under a nonqualified deferred compensation plan of a nonqualified entity is included in gross income when there is no substantial risk of forfeiture of the rights to such compensation. Free filing for 2012 taxes For this purpose, a nonqualified entity is: A foreign corporation unless substantially all of its income is: Effectively connected with the conduct of a trade or business in the United States, or Subject to a comprehensive foreign income tax. Free filing for 2012 taxes A partnership unless substantially all of its income is allocated to persons other than: Foreign persons for whom the income is not subject to a comprehensive foreign income tax, and Tax-exempt organizations. Free filing for 2012 taxes Note received for services. Free filing for 2012 taxes   If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. Free filing for 2012 taxes When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. Free filing for 2012 taxes Do not include that part again in your income. Free filing for 2012 taxes Include the rest of the payment in your income in the year of payment. Free filing for 2012 taxes   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. Free filing for 2012 taxes Severance pay. Free filing for 2012 taxes   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. Free filing for 2012 taxes Accrued leave payment. Free filing for 2012 taxes   If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. Free filing for 2012 taxes   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. Free filing for 2012 taxes You can reduce gross wages by the amount you repaid in the same tax year in which you received it. Free filing for 2012 taxes Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on your return and the wages on your Forms W-2. Free filing for 2012 taxes Outplacement services. Free filing for 2012 taxes   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. Free filing for 2012 taxes    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). Free filing for 2012 taxes Sick pay. Free filing for 2012 taxes   Pay you receive from your employer while you are sick or injured is part of your salary or wages. Free filing for 2012 taxes In addition, you must include in your income sick pay benefits received from any of the following payers. Free filing for 2012 taxes A welfare fund. Free filing for 2012 taxes A state sickness or disability fund. Free filing for 2012 taxes An association of employers or employees. Free filing for 2012 taxes An insurance company, if your employer paid for the plan. Free filing for 2012 taxes However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. Free filing for 2012 taxes For more information, see Other Sickness and Injury Benefits under Sickness and Injury Benefits, later. Free filing for 2012 taxes Social security and Medicare taxes paid by employer. Free filing for 2012 taxes   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. Free filing for 2012 taxes The payment is also treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. Free filing for 2012 taxes However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. Free filing for 2012 taxes Stock appreciation rights. Free filing for 2012 taxes   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. Free filing for 2012 taxes When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. Free filing for 2012 taxes You include the cash payment in income in the year you use the right. Free filing for 2012 taxes Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. Free filing for 2012 taxes Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. Free filing for 2012 taxes See Valuation of Fringe Benefits , later in this discussion, for information on how to determine the amount to include in income. Free filing for 2012 taxes Recipient of fringe benefit. Free filing for 2012 taxes   You are the recipient of a fringe benefit if you perform the services for which the fringe benefit is provided. Free filing for 2012 taxes You are considered to be the recipient even if it is given to another person, such as a member of your family. Free filing for 2012 taxes An example is a car your employer gives to your spouse for services you perform. Free filing for 2012 taxes The car is considered to have been provided to you and not to your spouse. Free filing for 2012 taxes   You do not have to be an employee of the provider to be a recipient of a fringe benefit. Free filing for 2012 taxes If you are a partner, director, or independent contractor, you also can be the recipient of a fringe benefit. Free filing for 2012 taxes Provider of benefit. Free filing for 2012 taxes   Your employer or another person for whom you perform services is the provider of a fringe benefit regardless of whether that person actually provides the fringe benefit to you. Free filing for 2012 taxes The provider can be a client or customer of an independent contractor. Free filing for 2012 taxes Accounting period. Free filing for 2012 taxes   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. Free filing for 2012 taxes Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. Free filing for 2012 taxes The general rule: benefits are reported for a full calendar year (January 1–December 31). Free filing for 2012 taxes The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. Free filing for 2012 taxes For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. Free filing for 2012 taxes Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. Free filing for 2012 taxes   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). Free filing for 2012 taxes Form W-2. Free filing for 2012 taxes   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. Free filing for 2012 taxes Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). Free filing for 2012 taxes However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). Free filing for 2012 taxes Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. Free filing for 2012 taxes Benefits you receive from the plan may be taxable, as explained, later, under Sickness and Injury Benefits . Free filing for 2012 taxes For information on the items covered in this section, other than Long-term care coverage , see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. Free filing for 2012 taxes Long-term care coverage. Free filing for 2012 taxes   Contributions by your employer to provide coverage for long-term care services generally are not included in your income. Free filing for 2012 taxes However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. Free filing for 2012 taxes This amount will be reported as wages in box 1 of your Form W-2. Free filing for 2012 taxes Archer MSA contributions. Free filing for 2012 taxes    Contributions by your employer to your Archer MSA generally are not included in your income. Free filing for 2012 taxes Their total will be reported in box 12 of Form W-2, with code R. Free filing for 2012 taxes You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. Free filing for 2012 taxes File the form with your return. Free filing for 2012 taxes Health flexible spending arrangement (health FSA). Free filing for 2012 taxes   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. Free filing for 2012 taxes   Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. Free filing for 2012 taxes The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. Free filing for 2012 taxes For more information, see Notice 2012-40, 2012-26 I. Free filing for 2012 taxes R. Free filing for 2012 taxes B. Free filing for 2012 taxes 1046, available at www. Free filing for 2012 taxes irs. Free filing for 2012 taxes gov/irb/2012-26 IRB/ar09. Free filing for 2012 taxes html. Free filing for 2012 taxes Health reimbursement arrangement (HRA). Free filing for 2012 taxes   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. Free filing for 2012 taxes Health savings accounts (HSA). Free filing for 2012 taxes   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. Free filing for 2012 taxes Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. Free filing for 2012 taxes Contributions made by your employer are not included in your income. Free filing for 2012 taxes Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. Free filing for 2012 taxes Distributions not used for qualified medical expenses are included in your income. Free filing for 2012 taxes See Publication 969 for the requirements of an HSA. Free filing for 2012 taxes   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. Free filing for 2012 taxes The contributions are treated as a distribution of money and are not included in the partner's gross income. Free filing for 2012 taxes Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. Free filing for 2012 taxes In both situations, the partner can deduct the contribution made to the partner's HSA. Free filing for 2012 taxes   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. Free filing for 2012 taxes The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. Free filing for 2012 taxes Qualified HSA funding distribution. Free filing for 2012 taxes   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. Free filing for 2012 taxes See Publication 590, Individual Retirement Arrangements (IRAs), for the requirements for these qualified HSA funding distributions. Free filing for 2012 taxes Failure to maintain eligibility. Free filing for 2012 taxes   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. Free filing for 2012 taxes If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. Free filing for 2012 taxes This income is also subject to an additional 10% tax. Free filing for 2012 taxes Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. Free filing for 2012 taxes See Instructions for Form 8839, Qualified Adoption Expenses, for more information. Free filing for 2012 taxes Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. Free filing for 2012 taxes They also are included as social security and Medicare wages in boxes 3 and 5. Free filing for 2012 taxes However, they are not included as wages in box 1. Free filing for 2012 taxes To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. Free filing for 2012 taxes File the form with your return. Free filing for 2012 taxes Athletic Facilities If your employer provides you with the free or low-cost use of an employer-operated gym or other athletic club on your employer's premises, the value is not included in your compensation. Free filing for 2012 taxes The gym must be used primarily by employees, their spouses, and their dependent children. Free filing for 2012 taxes If your employer pays for a fitness program provided to you at an off-site resort hotel or athletic club, the value of the program is included in your compensation. Free filing for 2012 taxes De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. Free filing for 2012 taxes In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. Free filing for 2012 taxes Also see Employee Discounts , later. Free filing for 2012 taxes Holiday gifts. Free filing for 2012 taxes   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. Free filing for 2012 taxes However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. Free filing for 2012 taxes Dependent Care Benefits If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Free filing for 2012 taxes Dependent care benefits include: Amounts your employer pays directly to either you or your care provider for the care of your qualifying person while you work, and The fair market value of care in a daycare facility provided or sponsored by your employer. Free filing for 2012 taxes The amount you can exclude is limited to the lesser of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). Free filing for 2012 taxes Your employer must show the total amount of dependent care benefits provided to you during the year under a qualified plan in box 10 of your Form W-2. Free filing for 2012 taxes Your employer also will include any dependent care benefits over $5,000 in your wages shown in box 1 of your Form W-2. Free filing for 2012 taxes To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. Free filing for 2012 taxes See the Instructions for Form 2441 for more information. Free filing for 2012 taxes Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. Free filing for 2012 taxes For more information, see Publication 970. Free filing for 2012 taxes Employee Discounts If your employer sells you property or services at a discount, you may be able to exclude the amount of the discount from your income. Free filing for 2012 taxes The exclusion applies to discounts on property or services offered to customers in the ordinary course of the line of business in which you work. Free filing for 2012 taxes However, it does not apply to discounts on real property or property commonly held for investment (such as stocks or bonds). Free filing for 2012 taxes The exclusion is limited to the price charged nonemployee customers multiplied by the following percentage. Free filing for 2012 taxes For a discount on property, your employer's gross profit percentage (gross profit divided by gross sales) on all property sold during the employer's previous tax year. Free filing for 2012 taxes (Ask your employer for this percentage. Free filing for 2012 taxes ) For a discount on services, 20%. Free filing for 2012 taxes Financial Counseling Fees Financial counseling fees paid for you by your employer are included in your income and must be reported as part of wages. Free filing for 2012 taxes If the fees are for tax or investment counseling, they can be deducted on Schedule A (Form 1040) as a miscellaneous deduction (subject to the 2%-of-AGI limit). Free filing for 2012 taxes Qualified retirement planning services paid for you by your employer may be excluded from your income. Free filing for 2012 taxes For more information, see Retirement Planning Services , later. Free filing for 2012 taxes Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. Free filing for 2012 taxes However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. Free filing for 2012 taxes For exceptions to this rule, see Entire cost excluded , and Entire cost taxed , later. Free filing for 2012 taxes If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. Free filing for 2012 taxes Also, it is shown separately in box 12 with code C. Free filing for 2012 taxes Group-term life insurance. Free filing for 2012 taxes   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. Free filing for 2012 taxes Permanent benefits. Free filing for 2012 taxes   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. Free filing for 2012 taxes Your employer should be able to tell you the amount to include in your income. Free filing for 2012 taxes Accidental death benefits. Free filing for 2012 taxes   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. Free filing for 2012 taxes Former employer. Free filing for 2012 taxes   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. Free filing for 2012 taxes Also, it is shown separately in box 12 with code C. Free filing for 2012 taxes Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. Free filing for 2012 taxes You must pay these taxes with your income tax return. Free filing for 2012 taxes Include them on line 60, Form 1040, and follow the instructions forline 60. Free filing for 2012 taxes For more information, see the Instructions for Form 1040. Free filing for 2012 taxes Two or more employers. Free filing for 2012 taxes   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. Free filing for 2012 taxes If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. Free filing for 2012 taxes You must figure how much to include in your income. Free filing for 2012 taxes Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. Free filing for 2012 taxes Figuring the taxable cost. Free filing for 2012 taxes    Use the following worksheet to figure the amount to include in your income. Free filing for 2012 taxes   If you pay any part of the cost of the insurance, your entire payment reduces, dollar for dollar, the amount you otherwise would include in your income. Free filing for 2012 taxes However, you cannot reduce the amount to include in your income by: Payments for coverage in a different tax year, Payments for coverage through a cafeteria plan, unless the payments are after-tax contributions, or Payments for coverage not taxed to you because of the exceptions discussed later under Entire cost excluded . Free filing for 2012 taxes Worksheet 1. Free filing for 2012 taxes Figuring the Cost of Group-Term Life Insurance To Include in Income 1. Free filing for 2012 taxes Enter the total amount of your insurance coverage from your employer(s) 1. Free filing for 2012 taxes   2. Free filing for 2012 taxes Limit on exclusion for employer-provided group-term life insurance coverage 2. Free filing for 2012 taxes 50,000 3. Free filing for 2012 taxes Subtract line 2 from line 1 3. Free filing for 2012 taxes   4. Free filing for 2012 taxes Divide line 3 by $1,000. Free filing for 2012 taxes Figure to the nearest tenth 4. Free filing for 2012 taxes   5. Free filing for 2012 taxes Go to Table 1. Free filing for 2012 taxes Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. Free filing for 2012 taxes   6. Free filing for 2012 taxes Multiply line 4 by line 5 6. Free filing for 2012 taxes     7. Free filing for 2012 taxes Enter the number of full months of coverage at this cost 7. Free filing for 2012 taxes   8. Free filing for 2012 taxes Multiply line 6 by line 7 8. Free filing for 2012 taxes   9. Free filing for 2012 taxes Enter the premiums you paid per month 9. Free filing for 2012 taxes       10. Free filing for 2012 taxes Enter the number of months you paid the  premiums 10. Free filing for 2012 taxes       11. Free filing for 2012 taxes Multiply line 9 by line 10. Free filing for 2012 taxes 11. Free filing for 2012 taxes   12. Free filing for 2012 taxes Subtract line 11 from line 8. Free filing for 2012 taxes Include this amount in your income as wages 12. Free filing for 2012 taxes   Table 1. Free filing for 2012 taxes Cost of $1,000 of Group-Term Life Insurance for One Month   Age Cost     Under 25 $ . Free filing for 2012 taxes 05     25 through 29 . Free filing for 2012 taxes 06     30 through 34 . Free filing for 2012 taxes 08     35 through 39 . Free filing for 2012 taxes 09     40 through 44 . Free filing for 2012 taxes 10     45 through 49 . Free filing for 2012 taxes 15     50 through 54 . Free filing for 2012 taxes 23     55 through 59 . Free filing for 2012 taxes 43     60 through 64 . Free filing for 2012 taxes 66     65 through 69 1. Free filing for 2012 taxes 27     70 and older 2. Free filing for 2012 taxes 06   Example. Free filing for 2012 taxes You are 51 years old and work for employers A and B. Free filing for 2012 taxes Both employers provide group-term life insurance coverage for you for the entire year. Free filing for 2012 taxes Your coverage is $35,000 with employer A and $45,000 with employer B. Free filing for 2012 taxes You pay premiums of $4. Free filing for 2012 taxes 15 a month under the employer B group plan. Free filing for 2012 taxes You figure the amount to include in your income as follows. Free filing for 2012 taxes   Worksheet 1. Free filing for 2012 taxes Figuring the Cost of Group-Term Life Insurance To Include in Income—Illustrated 1. Free filing for 2012 taxes Enter the total amount of your insurance coverage from your employer(s) 1. Free filing for 2012 taxes 80,000 2. Free filing for 2012 taxes Limit on exclusion for employer-provided group-term life insurance coverage 2. Free filing for 2012 taxes 50,000 3. Free filing for 2012 taxes Subtract line 2 from line 1 3. Free filing for 2012 taxes 30,000 4. Free filing for 2012 taxes Divide line 3 by $1,000. Free filing for 2012 taxes Figure to the nearest tenth 4. Free filing for 2012 taxes 30. Free filing for 2012 taxes 0 5. Free filing for 2012 taxes Go to Table 1. Free filing for 2012 taxes Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. Free filing for 2012 taxes . Free filing for 2012 taxes 23 6. Free filing for 2012 taxes Multiply line 4 by line 5 6. Free filing for 2012 taxes 6. Free filing for 2012 taxes 90 7. Free filing for 2012 taxes Enter the number of full months of coverage at this cost. Free filing for 2012 taxes 7. Free filing for 2012 taxes 12 8. Free filing for 2012 taxes Multiply line 6 by line 7 8. Free filing for 2012 taxes 82. Free filing for 2012 taxes 80 9. Free filing for 2012 taxes Enter the premiums you paid per month 9. Free filing for 2012 taxes 4. Free filing for 2012 taxes 15     10. Free filing for 2012 taxes Enter the number of months you paid the premiums 10. Free filing for 2012 taxes 12     11. Free filing for 2012 taxes Multiply line 9 by line 10. Free filing for 2012 taxes 11. Free filing for 2012 taxes 49. Free filing for 2012 taxes 80 12. Free filing for 2012 taxes Subtract line 11 from line 8. Free filing for 2012 taxes Include this amount in your income as wages 12. Free filing for 2012 taxes 33. Free filing for 2012 taxes 00 The total amount to include in income for the cost of excess group-term life insurance is $33. Free filing for 2012 taxes Neither employer provided over $50,000 insurance coverage, so the wages shown on your Forms W-2 do not include any part of that $33. Free filing for 2012 taxes You must add it to the wages shown on your Forms W-2 and include the total on your return. Free filing for 2012 taxes Entire cost excluded. Free filing for 2012 taxes   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. Free filing for 2012 taxes You are permanently and totally disabled and have ended your employment. Free filing for 2012 taxes Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. Free filing for 2012 taxes A charitable organization to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. Free filing for 2012 taxes (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. Free filing for 2012 taxes ) The plan existed on January 1, 1984, and: You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. Free filing for 2012 taxes Entire cost taxed. Free filing for 2012 taxes   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply. Free filing for 2012 taxes The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. Free filing for 2012 taxes You are a key employee and your employer's plan discriminates in favor of key employees. Free filing for 2012 taxes Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. Free filing for 2012 taxes The meals are: Furnished on the business premises of your employer, and Furnished for the convenience of your employer. Free filing for 2012 taxes The lodging is: Furnished on the business premises of your employer, Furnished for the convenience of your employer, and A condition of your employment. Free filing for 2012 taxes (You must accept it in order to be able to properly perform your duties. Free filing for 2012 taxes ) You also do not include in your income the value of meals or meal money that qualifies as a de minimis fringe benefit. Free filing for 2012 taxes See De Minimis (Minimal) Benefits , earlier. Free filing for 2012 taxes Faculty lodging. Free filing for 2012 taxes   If you are an employee of an educational institution or an academic health center and you are provided with lodging that does not meet the three conditions given earlier, you still may not have to include the value of the lodging in income. Free filing for 2012 taxes However, the lodging must be qualified campus lodging, and you must pay an adequate rent. Free filing for 2012 taxes Academic health center. Free filing for 2012 taxes   This is an organization that meets the following conditions. Free filing for 2012 taxes Its principal purpose or function is to provide medical or hospital care or medical education or research. Free filing for 2012 taxes It receives payments for graduate medical education under the Social Security Act. Free filing for 2012 taxes One of its principal purposes or functions is to provide and teach basic and clinical medical science and research using its own faculty. Free filing for 2012 taxes Qualified campus lodging. Free filing for 2012 taxes   Qualified campus lodging is lodging furnished to you, your spouse, or one of your dependents by, or on behalf of, the institution or center for use as a home. Free filing for 2012 taxes The lodging must be located on or near a campus of the educational institution or academic health center. Free filing for 2012 taxes Adequate rent. Free filing for 2012 taxes   The amount of rent you pay for the year for qualified campus lodging is considered adequate if it is at least equal to the lesser of: 5% of the appraised value of the lodging, or The average of rentals paid by individuals (other than employees or students) for comparable lodging held for rent by the educational institution. Free filing for 2012 taxes If the amount you pay is less than the lesser of these amounts, you must include the difference in your income. Free filing for 2012 taxes   The lodging must be appraised by an independent appraiser and the appraisal must be reviewed on an annual basis. Free filing for 2012 taxes Example. Free filing for 2012 taxes Carl Johnson, a sociology professor for State University, rents a home from the university that is qualified campus lodging. Free filing for 2012 taxes The house is appraised at $200,000. Free filing for 2012 taxes The average rent paid for comparable university lodging by persons other than employees or students is $14,000 a year. Free filing for 2012 taxes Carl pays an annual rent of $11,000. Free filing for 2012 taxes Carl does not include in his income any rental value because the rent he pays equals at least 5% of the appraised value of the house (5% × $200,000 = $10,000). Free filing for 2012 taxes If Carl paid annual rent of only $8,000, he would have to include $2,000 in his income ($10,000 − $8,000). Free filing for 2012 taxes Moving Expense Reimbursements In most cases, if your employer pays for your moving expenses (either directly or indirectly) and the expenses would have been deductible if you paid them yourself, the value is not included in your income. Free filing for 2012 taxes See Publication 521 for more information. Free filing for 2012 taxes No-Additional-Cost Services The value of services you receive from your employer for free, at cost, or for a reduced price is not included in your income if your employer: Offers the same service for sale to customers in the ordinary course of the line of business in which you work, and Does not have a substantial additional cost (including any sales income given up) to provide you with the service (regardless of what you paid for the service). Free filing for 2012 taxes In most cases, no-additional-cost services are excess capacity services, such as airline, bus, or train tickets, hotel rooms, and telephone services. Free filing for 2012 taxes Example. Free filing for 2012 taxes You are employed as a flight attendant for a company that owns both an airline and a hotel chain. Free filing for 2012 taxes Your employer allows you to take personal flights (if there is an unoccupied seat) and stay in any one of their hotels (if there is an unoccupied room) at no cost to you. Free filing for 2012 taxes The value of the personal flight is not included in your income. Free filing for 2012 taxes However, the value of the hotel room is included in your income because you do not work in the hotel business. Free filing for 2012 taxes Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. Free filing for 2012 taxes Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. Free filing for 2012 taxes You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. Free filing for 2012 taxes Also, see Financial Counseling Fees , earlier. Free filing for 2012 taxes Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. Free filing for 2012 taxes A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. Free filing for 2012 taxes Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. Free filing for 2012 taxes However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. Free filing for 2012 taxes Exclusion limit. Free filing for 2012 taxes   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. Free filing for 2012 taxes   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. Free filing for 2012 taxes   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. Free filing for 2012 taxes   If the benefits have a value that is more than these limits, the excess must be included in your income. Free filing for 2012 taxes You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. Free filing for 2012 taxes Commuter highway vehicle. Free filing for 2012 taxes   This is a highway vehicle that seats at least six adults (not including the driver). Free filing for 2012 taxes At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). Free filing for 2012 taxes Transit pass. Free filing for 2012 taxes   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. Free filing for 2012 taxes Qualified parking. Free filing for 2012 taxes   This is parking provided to an employee at or near the employer's place of business. Free filing for 2012 taxes It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. Free filing for 2012 taxes It does not include parking at or near the employee's home. Free filing for 2012 taxes Qualified bicycle commuting. Free filing for 2012 taxes   This is reimbursement based on the number of qualified bicycle commuting months for the year. Free filing for 2012 taxes A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. Free filing for 2012 taxes The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. Free filing for 2012 taxes Tuition Reduction You can exclude a qualified tuition reduction from your income. Free filing for 2012 taxes This is the amount of a reduction in tuition: For education (below graduate level) furnished by an educational institution to an employee, former employee who retired or became disabled, or his or her spouse and dependent children. Free filing for 2012 taxes For education furnished to a graduate student at an educational institution if the graduate student is engaged in teaching or research activities for that institution. Free filing for 2012 taxes Representing payment for teaching, research, or other services if you receive the amount under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance program. Free filing for 2012 taxes For more information, see Publication 970. Free filing for 2012 taxes Working Condition Benefits If your employer provides you with a product or service and the cost of it would have been allowable as a business or depreciation deduction if you paid for it yourself, the cost is not included in your income. Free filing for 2012 taxes Example. Free filing for 2012 taxes You work as an engineer and your employer provides you with a subscription to an engineering trade magazine. Free filing for 2012 taxes The cost of the subscription is not included in your income because the cost would have been allowable to you as a business deduction if you had paid for the subscription yourself. Free filing for 2012 taxes Valuation of Fringe Benefits If a fringe benefit is included in your income, the amount included is generally its value determined under the general valuation rule or under the special valuation rules. Free filing for 2012 taxes For an exception, see Group-Term Life Insurance , earlier. Free filing for 2012 taxes General valuation rule. Free filing for 2012 taxes   You must include in your income the amount by which the fair market value of the fringe benefit is more than the sum of: The amount, if any, you paid for the benefit, plus The amount, if any, specifically excluded from your income by law. Free filing for 2012 taxes If you pay fair market value for a fringe benefit, no amount is included in your income. Free filing for 2012 taxes Fair market value. Free filing for 2012 taxes   The fair market value of a fringe benefit is determined by all the facts and circumstances. Free filing for 2012 taxes It is the amount you would have to pay a third party to buy or lease the benefit. Free filing for 2012 taxes This is determined without regard to: Your perceived value of the benefit, or The amount your employer paid for the benefit. Free filing for 2012 taxes Employer-provided vehicles. Free filing for 2012 taxes   If your employer provides a car (or other highway motor vehicle) to you, your personal use of the car is usually a taxable noncash fringe benefit. Free filing for 2012 taxes   Under the general valuation rules, the value of an employer-provided vehicle is the amount you would have to pay a third party to lease the same or a similar vehicle on the same or comparable terms in the same geographic area where you use the vehicle. Free filing for 2012 taxes An example of a comparable lease term is the amount of time the vehicle is available for your use, such as a 1-year period. Free filing for 2012 taxes The value cannot be determined by multiplying a cents-per-mile rate times the number of miles driven unless you prove the vehicle could have been leased on a cents-per-mile basis. Free filing for 2012 taxes Flights on employer-provided aircraft. Free filing for 2012 taxes   Under the general valuation rules, if your flight on an employer-provided piloted aircraft is primarily personal and you control the use of the aircraft for the flight, the value is the amount it would cost to charter the flight from a third party. Free filing for 2012 taxes   If there is more than one employee on the flight, the cost to charter the aircraft must be divided among those employees. Free filing for 2012 taxes The division must be based on all the facts, including which employee or employees control the use of the aircraft. Free filing for 2012 taxes Special valuation rules. Free filing for 2012 taxes   You generally can use a special valuation rule for a fringe benefit only if your employer uses the rule. Free filing for 2012 taxes If your employer uses a special valuation rule, you cannot use a different special rule to value that benefit. Free filing for 2012 taxes You always can use the general valuation rule discussed earlier, based on facts and circumstances, even if your employer uses a special rule. Free filing for 2012 taxes   If you and your employer use a special valuation rule, you must include in your income the amount your employer determines under the special rule minus the sum of: Any amount you repaid your employer, plus Any amount specifically excluded from income by law. Free filing for 2012 taxes The special valuation rules are the following. Free filing for 2012 taxes The automobile lease rule. Free filing for 2012 taxes The vehicle cents-per-mile rule. Free filing for 2012 taxes The commuting rule. Free filing for 2012 taxes The unsafe conditions commuting rule. Free filing for 2012 taxes The employer-operated eating-facility rule. Free filing for 2012 taxes   For more information on these rules, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. Free filing for 2012 taxes    For information on the non-commercial flight and commercial flight valuation rules, see sections 1. Free filing for 2012 taxes 61-21(g) and 1. Free filing for 2012 taxes 61-21(h) of the regulations. Free filing for 2012 taxes Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. Free filing for 2012 taxes (Your employer can tell you whether your retirement plan is qualified. Free filing for 2012 taxes ) However, the cost of life insurance coverage included in the plan may have to be included. Free filing for 2012 taxes See Group-Term Life Insurance , earlier, under Fringe Benefits. Free filing for 2012 taxes If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. Free filing for 2012 taxes However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. Free filing for 2012 taxes For information on distributions from retirement plans, see Publication 575 (or Publication 721, Tax Guide to U. Free filing for 2012 taxes S. Free filing for 2012 taxes Civil Service Retirement Benefits, if you are a federal employee or retiree). Free filing for 2012 taxes Elective Deferrals If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. Free filing for 2012 taxes The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. Free filing for 2012 taxes An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. Free filing for 2012 taxes However, it is included in wages subject to social security and Medicare taxes. Free filing for 2012 taxes Elective deferrals include elective contributions to the following retirement plans. Free filing for 2012 taxes Cash or deferred arrangements (section 401(k) plans). Free filing for 2012 taxes The Thrift Savings Plan for federal employees. Free filing for 2012 taxes Salary reduction simplified employee pension plans (SARSEP). Free filing for 2012 taxes Savings incentive match plans for employees (SIMPLE plans). Free filing for 2012 taxes Tax-sheltered annuity plans (403(b) plans). Free filing for 2012 taxes Section 501(c)(18)(D) plans. Free filing for 2012 taxes (But see Reporting by employer , later. Free filing for 2012 taxes ) Section 457 plans. Free filing for 2012 taxes Qualified automatic contribution arrangements. Free filing for 2012 taxes   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. Free filing for 2012 taxes You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. Free filing for 2012 taxes The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. Free filing for 2012 taxes   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. Free filing for 2012 taxes Overall limit on deferrals. Free filing for 2012 taxes   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3), earlier. Free filing for 2012 taxes The specific plan limits for the plans listed in (4) through (7), earlier, are discussed later. Free filing for 2012 taxes Amounts deferred under specific plan limits are part of the overall limit on deferrals. Free filing for 2012 taxes   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. Free filing for 2012 taxes However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. Free filing for 2012 taxes Catch-up contributions. Free filing for 2012 taxes   You may be allowed catch-up contributions (additional elective deferrals) if you are age 50 or older by the end of your tax year. Free filing for 2012 taxes For more information about catch-up contributions to 403(b) plans, see chapter 6 of Publication 571, Tax Sheltered Annuity Plans. Free filing for 2012 taxes   For more information about additional elective deferrals to: SEPs (SARSEPs), see Salary Reduction Simplified Employee Pension in chapter 2 of Publication 560, Retirement Plans for Small Business. Free filing for 2012 taxes SIMPLE plans, see How Much Can Be Contributed on Your Behalf? in chapter 3 of Publication 590. Free filing for 2012 taxes Section 457 plans, see Limit for deferrals under section 457 plans , later. Free filing for 2012 taxes Limit for deferrals under SIMPLE plans. Free filing for 2012 taxes   If you are a participant in a SIMPLE plan, you generally should not have deferred more than $12,000 in 2013. Free filing for 2012 taxes Amounts you defer under a SIMPLE plan count toward the overall limit ($17,500 for 2013) and may affect the amount you can defer under other elective deferral plans. Free filing for 2012 taxes Limit for tax-sheltered annuities. Free filing for 2012 taxes   If you are a participant in a tax-sheltered annuity plan (403(b) plan), the limit on elective deferrals for 2013 generally is $17,500. Free filing for 2012 taxes However, if you have at least 15 years of service with a public school system, a hospital, a home health service agency, a health and welfare service agency, a church, or a convention or association of churches (or associated organization), the limit on elective deferrals is increased by the least of the following amounts. Free filing for 2012 taxes $3,000, $15,000, reduced by the sum of: The additional pre-tax elective deferrals made in earlier years because of this rule, plus The aggregate amount of designated Roth contributions permitted for prior tax years because of this rule, or $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years. Free filing for 2012 taxes   If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013. Free filing for 2012 taxes   For more information, see Publication 571. Free filing for 2012 taxes Limit for deferral under section 501(c)(18) plans. Free filing for 2012 taxes   If you are a participant in a section 501(c)(18) plan (a trust created before June 25, 1959, funded only by employee contributions), you should have deferred no more than the lesser of $7,000 or 25% of your compensation. Free filing for 2012 taxes Amounts you defer under a section 501(c)(18) plan count toward the overall limit ($17,500 in 2013) and may affect the amount you can defer under other elective deferral plans. Free filing for 2012 taxes Limit for deferrals under section 457 plans. Free filing for 2012 taxes   If you are a participant in a section 457 plan (a deferred compensation plan for employees of state or local governments or tax-exempt organizations), you should have deferred no more than the lesser of your includible compensation or $17,500 in 2013. Free filing for 2012 taxes However, if you are within 3 years of normal retirement age, you may be allowed an increased limit if the plan allows it. Free filing for 2012 taxes See Increased limit , later. Free filing for 2012 taxes Includible compensation. Free filing for 2012 taxes   This is the pay you received for the year from the employer who maintained the section 457 plan. Free filing for 2012 taxes In most cases, it includes all the following payments. Free filing for 2012 taxes Wages and salaries. Free filing for 2012 taxes Fees for professional services. Free filing for 2012 taxes The value of any employer-provided qualified transportation fringe benefit (defined under Transportation , earlier) that is not included in your income. Free filing for 2012 taxes Other amounts received (cash or noncash) for personal services you performed, including, but not limited to, the following items. Free filing for 2012 taxes Commissions and tips. Free filing for 2012 taxes Fringe benefits. Free filing for 2012 taxes Bonuses. Free filing for 2012 taxes Employer contributions (elective deferrals) to: The section 457 plan. Free filing for 2012 taxes Qualified cash or deferred arrangements (section 401(k) plans) that are not included in your income. Free filing for 2012 taxes A salary reduction simplified employee pension (SARSEP). Free filing for 2012 taxes A tax-sheltered annuity (section 403(b) plan). Free filing for 2012 taxes A savings incentive match plan for employees (SIMPLE plan). Free filing for 2012 taxes A section 125 cafeteria plan. Free filing for 2012 taxes   Instead of using the amounts listed earlier to determine your includible compensation, your employer can use any of the following amounts. Free filing for 2012 taxes Your wages as defined for income tax withholding purposes. Free filing for 2012 taxes Your wages as reported in box 1 of Form W-2. Free filing for 2012 taxes Your wages that are subject to social security withholding (including elective deferrals). Free filing for 2012 taxes Increased limit. Free filing for 2012 taxes   During any, or all, of the last 3 years ending before you reach normal retirement age under the plan, your plan may provide that your limit is the lesser of: Twice the annual limit ($35,000 for 2013), or The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions). Free filing for 2012 taxes Catch-up contributions. Free filing for 2012 taxes   You generally can have additional elective deferrals made to your governmental section 457 plan if: You reached age 50 by the end of the year, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions. Free filing for 2012 taxes If you qualify, your limit can be the lesser of your includible compensation or $17,500, plus $5,500. Free filing for 2012 taxes However, if you are within 3 years of retirement age and your plan provides the increased limit, discussed earlier, that limit may be higher. Free filing for 2012 taxes Designated Roth contributions. Free filing for 2012 taxes   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. Free filing for 2012 taxes Designated Roth contributions are treated as elective deferrals, except that they are included in income. Free filing for 2012 taxes Your retirement plan must maintain separate accounts and recordkeeping for the designated Roth contributions. Free filing for 2012 taxes   Qualified distributions from a Roth plan are not included in income. Free filing for 2012 taxes In most cases, a distribution made before the end of the 5-tax-year period beginning with the first tax year for which you made a designated Roth contribution to the plan is not a qualified distribution. Free filing for 2012 taxes Reporting by employer. Free filing for 2012 taxes   Your employer generally should not include elective deferrals in your wages in box 1 of Form W-2. Free filing for 2012 taxes Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12. Free filing for 2012 taxes Section 501(c)(18)(D) contributions. Free filing for 2012 taxes   Wages shown in box 1 of your Form W-2 should not have been reduced for contributions you made to a section 501(c)(18)(D) retirement plan. Free filing for 2012 taxes The amount you contributed should be identified with code “H” in box 12. Free filing for 2012 taxes You may deduct the amount deferred subject to the limits that apply. Free filing for 2012 taxes Include your deduction in the total on Form 1040, line 36. Free filing for 2012 taxes Enter the amount and “501(c)(18)(D)” on the dotted line next to line 36. Free filing for 2012 taxes Designated Roth contributions. Free filing for 2012 taxes    These contributions are elective deferrals but are included in your wages in box 1 of Form W-2. Free filing for 2012 taxes Designated Roth contributions to a section 401(k) plan are reported using code AA in box 12, or, for section 403(b) plans, code BB in box 12. Free filing for 2012 taxes Excess deferrals. Free filing for 2012 taxes   If your deferrals exceed the limit, you must notify your plan by the date required by the plan. Free filing for 2012 taxes If the plan permits, the excess amount will be distributed to you. Free filing for 2012 taxes If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. Free filing for 2012 taxes You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. Free filing for 2012 taxes The plan then must pay you the amount of the excess, along with any income earned on that amount, by April 15 of the following year. Free filing for 2012 taxes   You must include the excess deferral in your income for the year of the deferral unless you have an excess deferral of a designated Roth contribution. Free filing for 2012 taxes File Form 1040 to add the excess deferral amount to your wages on line 7. Free filing for 2012 taxes Do not use Form 1040A or Form 1040EZ to report excess deferral amounts. Free filing for 2012 taxes Excess not distributed. Free filing for 2012 taxes   If you do not take out the excess amount, you cannot include it in the cost of the contract even though you included it in your income. Free filing for 2012 taxes Therefore, you are taxed twice on the excess deferral left in the plan—once when you contribute it, and again when you receive it as a distribution. Free filing for 2012 taxes Excess distributed to you. Free filing for 2012 taxes   If you take out the excess after the year of the deferral and you receive the corrective distribution by April 15 of the following year, do not include it in income again in the year you receive it. Free filing for 2012 taxes If you receive it later, you must include it in income in both the year of the deferral and the year you receive it. Free filing for 2012 taxes Any income on the excess deferral taken out is taxable in the tax year in which you take it out. Free filing for 2012 taxes If you take out part of the excess deferral and the income on it, allocate the distribution proportionately between the excess deferral and the income. Free filing for 2012 taxes    You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. Free filing for 2012 taxes Use the following rules to report a corrective distribution shown on Form 1099-R for 2013. Free filing for 2012 taxes If the distribution was for a 2013 excess deferral, your Form 1099-R should have the code “8” in box 7. Free filing for 2012 taxes Add the excess deferral amount to your wages on your 2013 tax return. Free filing for 2012 taxes If the distribution was for a 2013 excess deferral to a designated Roth account, your Form 1099-R should have code “B” in box 7. Free filing for 2012 taxes Do not add this amount to your wages on your 2013 return. Free filing for 2012 taxes If the distribution was for a 2012 excess deferral, your Form 1099-R should have the code “P” in box 7. Free filing for 2012 taxes If you did not add the excess deferral amount to your wages on your 2012 tax return, you must file an amended return on Form 1040X, Amended U. Free filing for 2012 taxes S. Free filing for 2012 taxes Individual Income Tax Return. Free filing for 2012 taxes If you did not receive the distribution by April 15, 2013, you also must add it to your wages on your 2013 tax return. Free filing for 2012 taxes If the distribution was for the income earned on an excess deferral, your Form 1099-R should have the code “8” in box 7. Free filing for 2012 taxes Add the income amount to your wages on your 2013 income tax return, regardless of when the excess deferral was made. Free filing for 2012 taxes Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. Free filing for 2012 taxes Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution. Free filing for 2012 taxes ”    Even though a corrective distribution of excess deferrals is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. Free filing for 2012 taxes It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Free filing for 2012 taxes Excess Contributions If you are a highly compensated employee, the total of your elective deferrals and other contributions made for you for any year under a section 401(k) plan or SARSEP can be, as a percentage of pay, no more than 125% of the average deferral percentage (ADP) of all eligible non-highly compensated employees. Free filing for 2012 taxes If the total contributed to the plan is more than the amount allowed under the ADP test, the excess contributions must be either distributed to you or recharacterized as after-tax employee contributions by treating them as distributed to you and then contributed by you to the plan. Free filing for 2012 taxes You must include the excess contributions in your income as wages on Form 1040, line 7. Free filing for 2012 taxes You cannot use Form 1040A or Form 1040EZ to report excess contribution amounts. Free filing for 2012 taxes If you receive a corrective distribution of excess contributions (and allocable income), it is included in your income in the year of the distribution. Free filing for 2012 taxes The allocable income is the amount of gain or loss through the end of the plan year for which the contribution was made that is allocable to the excess contributions. Free filing for 2012 taxes You should receive a Form 1099-R for the year the excess contributions are distributed to you. Free filing for 2012 taxes Add the distribution to your wages for that year. Free filing for 2012 taxes Even though a corrective distribution of excess contributions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. Free filing for 2012 taxes It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Free filing for 2012 taxes Excess Annual Additions The amount contributed in 2013 to a defined contribution plan is generally limited to the lesser of 100% of your compensation or $51,000. Free filing for 2012 taxes Under certain circumstances, contributions that exceed these limits (excess annual additions) may be corrected by a distribution of your elective deferrals or a return of your after-tax contributions and earnings from these contributions. Free filing for 2012 taxes A corrective payment of excess annual additions consisting of elective deferrals or earnings from your after-tax contributions is fully taxable in the year paid. Free filing for 2012 taxes A corrective payment consisting of your after-tax contributions is not taxable. Free filing for 2012 taxes If you received a corrective payment of excess annual additions, you should receive a separate Form 1099-R for the year of the payment with the code “E” in box 7. Free filing for 2012 taxes Report the total payment shown in box 1 of Form 1099-R on line 16a of Form 1040 or line 12a of Form 1040A. Free filing for 2012 taxes Report the taxable amount shown in box 2a of Form 1099-R on line 16b of Form 1040 or line 12b of Form 1040A. Free filing for 2012 taxes Even though a corrective distribution of excess annual additions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. Free filing for 2012 taxes It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Free filing for 2012 taxes Stock Options If you receive an option to buy or sell stock or other property as payment for your services, you may have income when you receive the option (the grant), when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option or property acquired through exercise of the option. Free filing for 2012 taxes The timing, type, and amount of income inclusion depend on whether you receive a nonstatutory stock option or a statutory stock option. Free filing for 2012 taxes Your employer can tell you which kind of option you hold. Free filing for 2012 taxes Nonstatutory Stock Options Grant of option. Free filing for 2012 taxes   If you are granted a nonstatutory stock option, you may have income when you receive the option. Free filing for 2012 taxes The amount of income to include and the time to include it depend on whether the fair market value of the option can be readily determined. Free filing for 2012 taxes The fair market value of an option can be readily determined if it is actively traded on an established market. Free filing for 2012 taxes    The fair market value of an option that is not traded on an established market can be readily determined only if all of the following conditions exist. Free filing for 2012 taxes You can transfer the option. Free filing for 2012 taxes You can exercise the option immediately in full. Free filing for 2012 taxes The option or the property subject to the option is not subject to any condition or restriction (other than a condition to secure payment of the purchase price) that has a significant effect on the fair market value of the option. Free filing for 2012 taxes The fair market value of the option privilege can be readily determined. Free filing for 2012 taxes The option privilege for an option to buy is the opportunity to benefit during the option's exercise period from any increase in the value of property subject to the option without risking any capital. Free filing for 2012 taxes For example, if during the exercise period the fair market value of stock subject to an option is greater than the option's exercise price, a profit may be realized by exercising the option and immediately selling the stock at its higher value. Free filing for 2012 taxes The option privilege for an option to sell is the opportunity to benefit during the exercise period from a decrease in the value of the property subject to the option. Free filing for 2012 taxes If you or a member of your family is an officer, director, or more-than-10% owner of an expatriated corporation, you may owe an excise tax on the value of nonstatutory options and other stock-based compensation from that corporation. Free filing for 2012 taxes For more information on the excise tax, see Internal Revenue Code section 4985. Free filing for 2012 taxes Option with readily determinable value. Free filing for 2012 taxes   If you receive a nonstatutory stock option that has a readily determinable fair market value at the time it is granted to you, the option is treated like other property received as compensation. Free filing for 2012 taxes See Restricted Property , later, for rules on how much income to include and when to include it. Free filing for 2012 taxes However, the rule described in that discussion for choosing to include the value of property in your income for the year of the transfer does not apply to a nonstatutory option. Free filing for 2012 taxes Option without readily determinable value. Free filing for 2012 taxes   If the fair market value of the option is not readily determinable at the time it is granted to you (even if it is determined later), you do not have income until you exercise or transfer the option. Free filing for 2012 taxes    Exercise or transfer of option. Free filing for 2012 taxes   When you exercise a nonstatutory stock option, the amount to include in your income depends on whether the option had a readily determinable value. Free filing for 2012 taxes Option with readily determinable value. Free filing for 2012 taxes   When you exercise a nonstatutory stock option that had a readily determinable value at the time the option was granted, you do not have to include any amount in income. Free filing for 2012 taxes Option without readily determinable value. Free filing for 2012 taxes   When you exercise a nonstatutory stock option that did not have a readily determinable value at the time the option was granted, the restricted prope