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Free irs tax filing online 8. Free irs tax filing online   Business Expenses Table of Contents Introduction Useful Items - You may want to see: Bad DebtsAccrual method. Free irs tax filing online Cash method. Free irs tax filing online Car and Truck ExpensesOffice in the home. Free irs tax filing online Methods for Deducting Car and Truck Expenses Reimbursing Your Employees for Expenses Depreciation Employees' PayFringe benefits. Free irs tax filing online InsuranceHow to figure the deduction. Free irs tax filing online Interest Legal and Professional FeesTax preparation fees. Free irs tax filing online Pension Plans Rent Expense Taxes Travel, Meals, and EntertainmentTransportation. Free irs tax filing online Taxi, commuter bus, and limousine. Free irs tax filing online Baggage and shipping. Free irs tax filing online Car or truck. Free irs tax filing online Meals and lodging. Free irs tax filing online Cleaning. Free irs tax filing online Telephone. Free irs tax filing online Tips. Free irs tax filing online More information. Free irs tax filing online Business Use of Your HomeExceptions to exclusive use. Free irs tax filing online Other Expenses You Can Deduct Expenses You Cannot Deduct Introduction You can deduct the costs of operating your business. Free irs tax filing online These costs are known as business expenses. Free irs tax filing online These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year. Free irs tax filing online To be deductible, a business expense must be both ordinary and necessary. Free irs tax filing online An ordinary expense is one that is common and accepted in your field of business. Free irs tax filing online A necessary expense is one that is helpful and appropriate for your business. Free irs tax filing online An expense does not have to be indispensable to be considered necessary. Free irs tax filing online For more information about the general rules for deducting business expenses, see chapter 1 in Publication 535, Business Expenses. Free irs tax filing online If you have an expense that is partly for business and partly personal, separate the personal part from the business part. Free irs tax filing online The personal part is not deductible. Free irs tax filing online Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 946 How To Depreciate Property See chapter 12 for information about getting publications and forms. Free irs tax filing online Bad Debts If someone owes you money you cannot collect, you have a bad debt. Free irs tax filing online There are two kinds of bad debts, business bad debts and nonbusiness bad debts. Free irs tax filing online A business bad debt is generally one that comes from operating your trade or business. Free irs tax filing online You may be able to deduct business bad debts as an expense on your business tax return. Free irs tax filing online Business bad debt. Free irs tax filing online   A business bad debt is a loss from the worthlessness of a debt that was either of the following. Free irs tax filing online Created or acquired in your business. Free irs tax filing online Closely related to your business when it became partly or totally worthless. Free irs tax filing online A debt is closely related to your business if your primary motive for incurring the debt is a business reason. Free irs tax filing online   Business bad debts are mainly the result of credit sales to customers. Free irs tax filing online They can also be the result of loans to suppliers, clients, employees, or distributors. Free irs tax filing online Goods and services customers have not paid for are shown in your books as either accounts receivable or notes receivable. Free irs tax filing online If you are unable to collect any part of these accounts or notes receivable, the uncollectible part is a business bad debt. Free irs tax filing online    You can take a bad debt deduction for these accounts and notes receivable only if the amount you were owed was included in your gross income either for the year the deduction is claimed or for a prior year. Free irs tax filing online Accrual method. Free irs tax filing online   If you use an accrual method of accounting, you normally report income as you earn it. Free irs tax filing online You can take a bad debt deduction for an uncollectible receivable if you have included the uncollectible amount in income. Free irs tax filing online Cash method. Free irs tax filing online   If you use the cash method of accounting, you normally report income when you receive payment. Free irs tax filing online You cannot take a bad debt deduction for amounts owed to you that you have not received and cannot collect if you never included those amounts in income. Free irs tax filing online More information. Free irs tax filing online   For more information about business bad debts, see chapter 10 in Publication 535. Free irs tax filing online Nonbusiness bad debts. Free irs tax filing online   All other bad debts are nonbusiness bad debts and are deductible as short-term capital losses on Form 8949 and Schedule D (Form 1040). Free irs tax filing online For more information on nonbusiness bad debts, see Publication 550, Investment Income and Expenses. Free irs tax filing online Car and Truck Expenses If you use your car or truck in your business, you may be able to deduct the costs of operating and maintaining your vehicle. Free irs tax filing online You also may be able to deduct other costs of local transportation and traveling away from home overnight on business. Free irs tax filing online You may qualify for a tax credit for qualified plug-in electric vehicles, qualified plug-in electric drive motor vehicles, and alternative motor vehicles you place in service during the year. Free irs tax filing online See Form 8936 and Form 8910 for more information. Free irs tax filing online Local transportation expenses. Free irs tax filing online   Local transportation expenses include the ordinary and necessary costs of all the following. Free irs tax filing online Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Free irs tax filing online Tax home is defined later. Free irs tax filing online Visiting clients or customers. Free irs tax filing online Going to a business meeting away from your regular workplace. Free irs tax filing online Getting from your home to a temporary workplace when you have one or more regular places of work. Free irs tax filing online These temporary workplaces can be either within the area of your tax home or outside that area. Free irs tax filing online Local business transportation does not include expenses you have while traveling away from home overnight. Free irs tax filing online Those expenses are deductible as travel expenses and are discussed later under Travel, Meals, and Entertainment. Free irs tax filing online However, if you use your car while traveling away from home overnight, use the rules in this section to figure your car expense deduction. Free irs tax filing online   Generally, your tax home is your regular place of business, regardless of where you maintain your family home. Free irs tax filing online It includes the entire city or general area in which your business or work is located. Free irs tax filing online Example. Free irs tax filing online You operate a printing business out of rented office space. Free irs tax filing online You use your van to deliver completed jobs to your customers. Free irs tax filing online You can deduct the cost of round-trip transportation between your customers and your print shop. Free irs tax filing online    You cannot deduct the costs of driving your car or truck between your home and your main or regular workplace. Free irs tax filing online These costs are personal commuting expenses. Free irs tax filing online Office in the home. Free irs tax filing online   Your workplace can be your home if you have an office in your home that qualifies as your principal place of business. Free irs tax filing online For more information, see Business Use of Your Home, later. Free irs tax filing online Example. Free irs tax filing online You are a graphics designer. Free irs tax filing online You operate your business out of your home. Free irs tax filing online Your home qualifies as your principal place of business. Free irs tax filing online You occasionally have to drive to your clients to deliver your completed work. Free irs tax filing online You can deduct the cost of the round-trip transportation between your home and your clients. Free irs tax filing online Methods for Deducting Car and Truck Expenses For local transportation or overnight travel by car or truck, you generally can use one of the following methods to figure your expenses. Free irs tax filing online Standard mileage rate. Free irs tax filing online Actual expenses. Free irs tax filing online Standard mileage rate. Free irs tax filing online   You may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. Free irs tax filing online For 2013, the standard mileage rate is 56. Free irs tax filing online 5 cents per mile. Free irs tax filing online    If you choose to use the standard mileage rate for a year, you cannot deduct your actual expenses for that year except for business-related parking fees and tolls. Free irs tax filing online Choosing the standard mileage rate. Free irs tax filing online   If you want to use the standard mileage rate for a car or truck you own, you must choose to use it in the first year the car is available for use in your business. Free irs tax filing online In later years, you can choose to use either the standard mileage rate or actual expenses. Free irs tax filing online   If you use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period (including renewals). Free irs tax filing online Standard mileage rate not allowed. Free irs tax filing online   You cannot use the standard mileage rate if you: Operate five or more cars at the same time, Claimed a depreciation deduction using any method other than straight line, for example, ACRS or MACRS, Claimed a section 179 deduction on the car, Claimed the special depreciation allowance on the car, Claimed actual car expenses for a car you leased, or Are a rural mail carrier who received a qualified reimbursement. Free irs tax filing online Parking fees and tolls. Free irs tax filing online   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. Free irs tax filing online (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. Free irs tax filing online ) Actual expenses. Free irs tax filing online   If you do not choose to use the standard mileage rate, you may be able to deduct your actual car or truck expenses. Free irs tax filing online    If you qualify to use both methods, figure your deduction both ways to see which gives you a larger deduction. Free irs tax filing online   Actual car expenses include the costs of the following items. Free irs tax filing online Depreciation Lease payments Registration Garage rent Licenses Repairs Gas Oil Tires Insurance Parking fees Tolls   If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. Free irs tax filing online You can divide your expenses based on the miles driven for each purpose. Free irs tax filing online Example. Free irs tax filing online You are the sole proprietor of a flower shop. Free irs tax filing online You drove your van 20,000 miles during the year. Free irs tax filing online 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use (including commuting miles). Free irs tax filing online You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. Free irs tax filing online More information. Free irs tax filing online   For more information about the rules for claiming car and truck expenses, see Publication 463. Free irs tax filing online Reimbursing Your Employees for Expenses You generally can deduct the amount you reimburse your employees for car and truck expenses. Free irs tax filing online The reimbursement you deduct and the manner in which you deduct it depend in part on whether you reimburse the expenses under an accountable plan or a nonaccountable plan. Free irs tax filing online For details, see chapter 11 in Publication 535. Free irs tax filing online That chapter explains accountable and nonaccountable plans and tells you whether to report the reimbursement on your employee's Form W-2, Wage and Tax Statement. Free irs tax filing online Depreciation If property you acquire to use in your business is expected to last more than 1 year, you generally cannot deduct the entire cost as a business expense in the year you acquire it. Free irs tax filing online You must spread the cost over more than 1 tax year and deduct part of it each year on Schedule C. Free irs tax filing online This method of deducting the cost of business property is called depreciation. Free irs tax filing online The discussion here is brief. Free irs tax filing online You will find more information about depreciation in Publication 946. Free irs tax filing online What property can be depreciated?   You can depreciate property if it meets all the following requirements. Free irs tax filing online It must be property you own. Free irs tax filing online It must be used in business or held to produce income. Free irs tax filing online You never can depreciate inventory (explained in chapter 2) because it is not held for use in your business. Free irs tax filing online It must have a useful life that extends substantially beyond the year it is placed in service. Free irs tax filing online It must have a determinable useful life, which means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Free irs tax filing online You never can depreciate the cost of land because land does not wear out, become obsolete, or get used up. Free irs tax filing online It must not be excepted property. Free irs tax filing online This includes property placed in service and disposed of in the same year. Free irs tax filing online Repairs. Free irs tax filing online    You cannot depreciate repairs and replacements that do not increase the value of your property, make it more useful, or lengthen its useful life. Free irs tax filing online You can deduct these amounts on line 21 of Schedule C or line 2 of Schedule C-EZ. Free irs tax filing online Depreciation method. Free irs tax filing online   The method for depreciating most business and investment property placed in service after 1986 is called the Modified Accelerated Cost Recovery System (MACRS). Free irs tax filing online MACRS is discussed in detail in Publication 946. Free irs tax filing online Section 179 deduction. Free irs tax filing online   You can elect to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. Free irs tax filing online This deduction is known as the “section 179 deduction. Free irs tax filing online ” The maximum amount you can elect to deduct during 2013 is generally $500,000 (higher limits apply to certain property). Free irs tax filing online See IRC 179(e). Free irs tax filing online   This limit is generally reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. Free irs tax filing online The total amount of depreciation (including the section 179 deduction) you can take for a passenger automobile you use in your business and first place in service in 2013 is $3,160 ($11,160 if you take the special depreciation allowance for qualified passenger automobiles placed in service in 2013). Free irs tax filing online Special rules apply to trucks and vans. Free irs tax filing online For more information, see Publication 946. Free irs tax filing online It explains what property qualifies for the deduction, what limits apply to the deduction, and when and how to recapture the deduction. Free irs tax filing online    Your section 179 election for the cost of any sport utility vehicle (SUV) and certain other vehicles is limited to $25,000. Free irs tax filing online For more information, see the Instructions for Form 4562 or Publication 946. Free irs tax filing online Listed property. Free irs tax filing online   You must follow special rules and recordkeeping requirements when depreciating listed property. Free irs tax filing online Listed property is any of the following. Free irs tax filing online Most passenger automobiles. Free irs tax filing online Most other property used for transportation. Free irs tax filing online Any property of a type generally used for entertainment, recreation, or amusement. Free irs tax filing online Certain computers and related peripheral equipment. Free irs tax filing online   For more information about listed property, see Publication 946. Free irs tax filing online Form 4562. Free irs tax filing online   Use Form 4562, Depreciation and Amortization, if you are claiming any of the following. Free irs tax filing online Depreciation on property placed in service during the current tax year. Free irs tax filing online A section 179 deduction. Free irs tax filing online Depreciation on any listed property (regardless of when it was placed in service). Free irs tax filing online    If you have to use Form 4562, you must file Schedule C. Free irs tax filing online You cannot use Schedule C-EZ. Free irs tax filing online   Employees' Pay You can generally deduct on Schedule C the pay you give your employees for the services they perform for your business. Free irs tax filing online The pay may be in cash, property, or services. Free irs tax filing online To be deductible, your employees' pay must be an ordinary and necessary expense and you must pay or incur it in the tax year. Free irs tax filing online In addition, the pay must meet both the following tests. Free irs tax filing online The pay must be reasonable. Free irs tax filing online The pay must be for services performed. Free irs tax filing online Chapter 2 in Publication 535 explains and defines these requirements. Free irs tax filing online You cannot deduct your own salary or any personal withdrawals you make from your business. Free irs tax filing online As a sole proprietor, you are not an employee of the business. Free irs tax filing online If you had employees during the year, you must use Schedule C. Free irs tax filing online You cannot use Schedule C-EZ. Free irs tax filing online Kinds of pay. Free irs tax filing online   Some of the ways you may provide pay to your employees are listed below. Free irs tax filing online For an explanation of each of these items, see chapter 2 in Publication 535. Free irs tax filing online Awards. Free irs tax filing online Bonuses. Free irs tax filing online Education expenses. Free irs tax filing online Fringe benefits (discussed later). Free irs tax filing online Loans or advances you do not expect the employee to repay if they are for personal services actually performed. Free irs tax filing online Property you transfer to an employee as payment for services. Free irs tax filing online Reimbursements for employee business expenses. Free irs tax filing online Sick pay. Free irs tax filing online Vacation pay. Free irs tax filing online Fringe benefits. Free irs tax filing online   A fringe benefit is a form of pay for the performance of services. Free irs tax filing online The following are examples of fringe benefits. Free irs tax filing online Benefits under qualified employee benefit programs. Free irs tax filing online Meals and lodging. Free irs tax filing online The use of a car. Free irs tax filing online Flights on airplanes. Free irs tax filing online Discounts on property or services. Free irs tax filing online Memberships in country clubs or other social clubs. Free irs tax filing online Tickets to entertainment or sporting events. Free irs tax filing online   Employee benefit programs include the following. Free irs tax filing online Accident and health plans. Free irs tax filing online Adoption assistance. Free irs tax filing online Cafeteria plans. Free irs tax filing online Dependent care assistance. Free irs tax filing online Educational assistance. Free irs tax filing online Group-term life insurance coverage. Free irs tax filing online Welfare benefit funds. Free irs tax filing online   You can generally deduct the cost of fringe benefits you provide on your Schedule C in whatever category the cost falls. Free irs tax filing online For example, if you allow an employee to use a car or other property you lease, deduct the cost of the lease as a rent or lease expense. Free irs tax filing online If you own the property, include your deduction for its cost or other basis as a section 179 deduction or a depreciation deduction. Free irs tax filing online    You may be able to exclude all or part of the fringe benefits you provide from your employees' wages. Free irs tax filing online For more information about fringe benefits and the exclusion of benefits, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. Free irs tax filing online Insurance You can generally deduct premiums you pay for the following kinds of insurance related to your business. Free irs tax filing online Fire, theft, flood, or similar insurance. Free irs tax filing online Credit insurance that covers losses from business bad debts. Free irs tax filing online Group hospitalization and medical insurance for employees, including long-term care insurance. Free irs tax filing online Liability insurance. Free irs tax filing online Malpractice insurance that covers your personal liability for professional negligence resulting in injury or damage to patients or clients. Free irs tax filing online Workers' compensation insurance set by state law that covers any claims for bodily injuries or job-related diseases suffered by employees in your business, regardless of fault. Free irs tax filing online Contributions to a state unemployment insurance fund are deductible as taxes if they are considered taxes under state law. Free irs tax filing online Overhead insurance that pays for business overhead expenses you have during long periods of disability caused by your injury or sickness. Free irs tax filing online Car and other vehicle insurance that covers vehicles used in your business for liability, damages, and other losses. Free irs tax filing online If you operate a vehicle partly for personal use, deduct only the part of the insurance premium that applies to the business use of the vehicle. Free irs tax filing online If you use the standard mileage rate to figure your car expenses, you cannot deduct any car insurance premiums. Free irs tax filing online Life insurance covering your employees if you are not directly or indirectly the beneficiary under the contract. Free irs tax filing online Business interruption insurance that pays for lost profits if your business is shut down due to a fire or other cause. Free irs tax filing online Nondeductible premiums. Free irs tax filing online   You cannot deduct premiums on the following kinds of insurance. Free irs tax filing online Self-insurance reserve funds. Free irs tax filing online You cannot deduct amounts credited to a reserve set up for self-insurance. Free irs tax filing online This applies even if you cannot get business insurance coverage for certain business risks. Free irs tax filing online However, your actual losses may be deductible. Free irs tax filing online For more information, see Publication 547, Casualties, Disasters, and Thefts. Free irs tax filing online Loss of earnings. Free irs tax filing online You cannot deduct premiums for a policy that pays for your lost earnings due to sickness or disability. Free irs tax filing online However, see item (8) in the previous list. Free irs tax filing online Certain life insurance and annuities. Free irs tax filing online For contracts issued before June 9, 1997, you cannot deduct the premiums on a life insurance policy covering you, an employee, or any person with a financial interest in your business if you are directly or indirectly a beneficiary of the policy. Free irs tax filing online You are included among possible beneficiaries of the policy if the policy owner is obligated to repay a loan from you using the proceeds of the policy. Free irs tax filing online A person has a financial interest in your business if the person is an owner or part owner of the business or has lent money to the business. Free irs tax filing online For contracts issued after June 8, 1997, you generally cannot deduct the premiums on any life insurance policy, endowment contract, or annuity contract if you are directly or indirectly a beneficiary. Free irs tax filing online The disallowance applies without regard to whom the policy covers. Free irs tax filing online Insurance to secure a loan. Free irs tax filing online If you take out a policy on your life or on the life of another person with a financial interest in your business to get or protect a business loan, you cannot deduct the premiums as a business expense. Free irs tax filing online Nor can you deduct the premiums as interest on business loans or as an expense of financing loans. Free irs tax filing online In the event of death, the proceeds of the policy are not taxed as income even if they are used to liquidate the debt. Free irs tax filing online Self-employed health insurance deduction. Free irs tax filing online   You may be able to deduct the amount you paid for medical and dental insurance and qualified long-term care insurance for you and your family. Free irs tax filing online How to figure the deduction. Free irs tax filing online   Generally, you can use the worksheet in the Form 1040 instructions to figure your deduction. Free irs tax filing online However, if any of the following apply, you must use the worksheet in chapter 6 of Publication 535. Free irs tax filing online You have more than one source of income subject to self-employment tax. Free irs tax filing online You file Form 2555 or Form 2555-EZ (relating to foreign earned income). Free irs tax filing online You are using amounts paid for qualified long-term care insurance to figure the deduction. Free irs tax filing online Prepayment. Free irs tax filing online   You cannot deduct expenses in advance, even if you pay them in advance. Free irs tax filing online This rule applies to any expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. Free irs tax filing online Example. Free irs tax filing online In 2013, you signed a 3-year insurance contract. Free irs tax filing online Even though you paid the premiums for 2013, 2014, and 2015 when you signed the contract, you can only deduct the premium for 2013 on your 2013 tax return. Free irs tax filing online You can deduct in 2014 and 2015 the premium allocable to those years. Free irs tax filing online More information. Free irs tax filing online   For more information about deducting insurance, see chapter 6 in Publication 535. Free irs tax filing online Interest You can generally deduct as a business expense all interest you pay or accrue during the tax year on debts related to your business. Free irs tax filing online Interest relates to your business if you use the proceeds of the loan for a business expense. Free irs tax filing online It does not matter what type of property secures the loan. Free irs tax filing online You can deduct interest on a debt only if you meet all of the following requirements. Free irs tax filing online You are legally liable for that debt. Free irs tax filing online Both you and the lender intend that the debt be repaid. Free irs tax filing online You and the lender have a true debtor-creditor relationship. Free irs tax filing online You cannot deduct on Schedule C or C-EZ the interest you paid on personal loans. Free irs tax filing online If a loan is part business and part personal, you must divide the interest between the personal part and the business part. Free irs tax filing online Example. Free irs tax filing online In 2013, you paid $600 interest on a car loan. Free irs tax filing online During 2013, you used the car 60% for business and 40% for personal purposes. Free irs tax filing online You are claiming actual expenses on the car. Free irs tax filing online You can only deduct $360 (60% × $600) for 2013 on Schedule C or C-EZ. Free irs tax filing online The remaining interest of $240 is a nondeductible personal expense. Free irs tax filing online More information. Free irs tax filing online   For more information about deducting interest, see chapter 4 in Publication 535. Free irs tax filing online That chapter explains the following items. Free irs tax filing online Interest you can deduct. Free irs tax filing online Interest you cannot deduct. Free irs tax filing online How to allocate interest between personal and business use. Free irs tax filing online When to deduct interest. Free irs tax filing online The rules for a below-market interest rate loan. Free irs tax filing online (This is generally a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Free irs tax filing online ) Legal and Professional Fees Legal and professional fees, such as fees charged by accountants, that are ordinary and necessary expenses directly related to operating your business are deductible on Schedule C or C-EZ. Free irs tax filing online However, you usually cannot deduct legal fees you pay to acquire business assets. Free irs tax filing online Add them to the basis of the property. Free irs tax filing online If the fees include payments for work of a personal nature (such as making a will), you can take a business deduction only for the part of the fee related to your business. Free irs tax filing online The personal part of legal fees for producing or collecting taxable income, doing or keeping your job, or for tax advice may be deductible on Schedule A (Form 1040) if you itemize deductions. Free irs tax filing online For more information, see Publication 529, Miscellaneous Deductions. Free irs tax filing online Tax preparation fees. Free irs tax filing online   You can deduct on Schedule C or C-EZ the cost of preparing that part of your tax return relating to your business as a sole proprietor or statutory employee. Free irs tax filing online You can deduct the remaining cost on Schedule A (Form 1040) if you itemize your deductions. Free irs tax filing online   You can also deduct on Schedule C or C-EZ the amount you pay or incur in resolving asserted tax deficiencies for your business as a sole proprietor or statutory employee. Free irs tax filing online Pension Plans You can set up and maintain the following small business retirement plans for yourself and your employees. Free irs tax filing online SEP (Simplified Employee Pension) plans. Free irs tax filing online SIMPLE (Savings Incentive Match Plan for Employees) plans. Free irs tax filing online Qualified plans (including Keogh or H. Free irs tax filing online R. Free irs tax filing online 10 plans). Free irs tax filing online SEP, SIMPLE, and qualified plans offer you and your employees a tax favored way to save for retirement. Free irs tax filing online You can deduct contributions you make to the plan for your employees on line 19 of Schedule C. Free irs tax filing online If you are a sole proprietor, you can deduct contributions you make to the plan for yourself on line 28 of Form 1040. Free irs tax filing online You can also deduct trustees' fees if contributions to the plan do not cover them. Free irs tax filing online Earnings on the contributions are generally tax free until you or your employees receive distributions from the plan. Free irs tax filing online You may also be able to claim a tax credit of 50% of the first $1,000 of qualified startup costs if you begin a new qualified defined benefit or defined contribution plan (including a 401(k) plan), SIMPLE plan, or simplified employee pension. Free irs tax filing online Under certain plans, employees can have you contribute limited amounts of their before-tax pay to a plan. Free irs tax filing online These amounts (and earnings on them) are generally tax free until your employees receive distributions from the plan. Free irs tax filing online For more information on retirement plans for small business, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). Free irs tax filing online Publication 590, Individual Retirement Arrangements (IRAs), discusses other tax favored ways to save for retirement. Free irs tax filing online Rent Expense Rent is any amount you pay for the use of property you do not own. Free irs tax filing online In general, you can deduct rent as a business expense only if the rent is for property you use in your business. Free irs tax filing online If you have or will receive equity in or title to the property, you cannot deduct the rent. Free irs tax filing online Unreasonable rent. Free irs tax filing online   You cannot take a rental deduction for unreasonable rents. Free irs tax filing online Ordinarily, the issue of reasonableness arises only if you and the lessor are related. Free irs tax filing online Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. Free irs tax filing online Rent is not unreasonable just because it is figured as a percentage of gross receipts. Free irs tax filing online   Related persons include members of your immediate family, including only brothers and sisters (either whole or half), your spouse, ancestors, and lineal descendants. Free irs tax filing online For a list of the other related persons, see section 267 of the Internal Revenue Code. Free irs tax filing online Rent on your home. Free irs tax filing online   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. Free irs tax filing online You must meet the requirements for business use of your home. Free irs tax filing online For more information, see Business Use of Your Home , later. Free irs tax filing online Rent paid in advance. Free irs tax filing online   Generally, rent paid in your business is deductible in the year paid or accrued. Free irs tax filing online If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. Free irs tax filing online You can deduct the rest of your payment only over the period to which it applies. Free irs tax filing online More information. Free irs tax filing online   For more information about rent, see chapter 3 in Publication 535. Free irs tax filing online Taxes You can deduct on Schedule C or C-EZ various federal, state, local, and foreign taxes directly attributable to your business. Free irs tax filing online Income taxes. Free irs tax filing online   You can deduct on Schedule C or C-EZ a state tax on gross income (as distinguished from net income) directly attributable to your business. Free irs tax filing online You can deduct other state and local income taxes on Schedule A (Form 1040) if you itemize your deductions. Free irs tax filing online Do not deduct federal income tax. Free irs tax filing online Employment taxes. Free irs tax filing online   You can deduct the social security, Medicare, and federal unemployment (FUTA) taxes you paid out of your own funds as an employer. Free irs tax filing online Employment taxes are discussed briefly in chapter 1. Free irs tax filing online You can also deduct payments you made as an employer to a state unemployment compensation fund or to a state disability benefit fund. Free irs tax filing online Deduct these payments as taxes. Free irs tax filing online Self-employment tax. Free irs tax filing online   You can deduct one-half of your self-employment tax on line 27 of Form 1040. Free irs tax filing online Self-employment tax is discussed in chapters 1 and 10. Free irs tax filing online Personal property tax. Free irs tax filing online   You can deduct on Schedule C or C-EZ any tax imposed by a state or local government on personal property used in your business. Free irs tax filing online   You can also deduct registration fees for the right to use property within a state or local area. Free irs tax filing online Example. Free irs tax filing online May and Julius Winter drove their car 7,000 business miles out of a total of 10,000 miles. Free irs tax filing online They had to pay $25 for their annual state license tags and $20 for their city registration sticker. Free irs tax filing online They also paid $235 in city personal property tax on the car, for a total of $280. Free irs tax filing online They are claiming their actual car expenses. Free irs tax filing online Because they used the car 70% for business, they can deduct 70% of the $280, or $196, as a business expense. Free irs tax filing online Real estate taxes. Free irs tax filing online   You can deduct on Schedule C or C-EZ the real estate taxes you pay on your business property. Free irs tax filing online Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. Free irs tax filing online The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. Free irs tax filing online   For more information about real estate taxes, see chapter 5 in Publication 535. Free irs tax filing online That chapter explains special rules for deducting the following items. Free irs tax filing online Taxes for local benefits, such as those for sidewalks, streets, water mains, and sewer lines. Free irs tax filing online Real estate taxes when you buy or sell property during the year. Free irs tax filing online Real estate taxes if you use an accrual method of accounting and choose to accrue real estate tax related to a definite period ratably over that period. Free irs tax filing online Sales tax. Free irs tax filing online   Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. Free irs tax filing online If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. Free irs tax filing online If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. Free irs tax filing online If the property is depreciable, add the sales tax to the basis for depreciation. Free irs tax filing online For information on the basis of property, see Publication 551, Basis of Assets. Free irs tax filing online    Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. Free irs tax filing online Do not include these taxes in gross receipts or sales. Free irs tax filing online Excise taxes. Free irs tax filing online   You can deduct on Schedule C or C-EZ all excise taxes that are ordinary and necessary expenses of carrying on your business. Free irs tax filing online Excise taxes are discussed briefly in chapter 1. Free irs tax filing online Fuel taxes. Free irs tax filing online   Taxes on gasoline, diesel fuel, and other motor fuels you use in your business are usually included as part of the cost of the fuel. Free irs tax filing online Do not deduct these taxes as a separate item. Free irs tax filing online   You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. Free irs tax filing online For more information, see Publication 510, Excise Taxes. Free irs tax filing online Travel, Meals, and Entertainment This section briefly explains the kinds of travel and entertainment expenses you can deduct on Schedule C or C-EZ. Free irs tax filing online Table 8-1. Free irs tax filing online When Are Entertainment Expenses Deductible? (Note. Free irs tax filing online The following is a summary of the rules for deducting entertainment expenses. Free irs tax filing online For more details about these rules, see Publication 463. Free irs tax filing online ) General rule You can deduct ordinary and necessary expenses to entertain a client, customer, or employee if the expenses meet the directly-related test or the associated test. Free irs tax filing online Definitions Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a customer or client. Free irs tax filing online An ordinary expense is one that is common and accepted in your field of business, trade, or profession. Free irs tax filing online A necessary expense is one that is helpful and appropriate, although not necessarily required, for your business. Free irs tax filing online Tests to be met Directly-related test Entertainment took place in a clear business setting, or Main purpose of entertainment was the active conduct of business, and You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit. Free irs tax filing online   Associated test Entertainment is associated with your trade or business, and Entertainment directly precedes or follows a substantial business discussion. Free irs tax filing online Other rules You cannot deduct the cost of your meal as an entertainment expense if you are claiming the meal as a travel expense. Free irs tax filing online You cannot deduct expenses that are lavish or extravagant under the circumstances. Free irs tax filing online You generally can deduct only 50% of your unreimbursed entertainment expenses. Free irs tax filing online Travel expenses. Free irs tax filing online   These are the ordinary and necessary expenses of traveling away from home for your business. Free irs tax filing online You are traveling away from home if both the following conditions are met. Free irs tax filing online Your duties require you to be away from the general area of your tax home (defined later) substantially longer than an ordinary day's work. Free irs tax filing online You need to get sleep or rest to meet the demands of your work while away from home. Free irs tax filing online Generally, your tax home is your regular place of business, regardless of where you maintain your family home. Free irs tax filing online It includes the entire city or general area in which your business is located. Free irs tax filing online See Publication 463 for more information. Free irs tax filing online   The following is a brief discussion of the expenses you can deduct. Free irs tax filing online Transportation. Free irs tax filing online   You can deduct the cost of travel by airplane, train, bus, or car between your home and your business destination. Free irs tax filing online Taxi, commuter bus, and limousine. Free irs tax filing online   You can deduct fares for these and other types of transportation between the airport or station and your hotel, or between the hotel and your work location away from home. Free irs tax filing online Baggage and shipping. Free irs tax filing online   You can deduct the cost of sending baggage and sample or display material between your regular and temporary work locations. Free irs tax filing online Car or truck. Free irs tax filing online   You can deduct the costs of operating and maintaining your vehicle when traveling away from home on business. Free irs tax filing online You can deduct actual expenses or the standard mileage rate (discussed earlier under Car and Truck Expenses), as well as business-related tolls and parking. Free irs tax filing online If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses. Free irs tax filing online Meals and lodging. Free irs tax filing online   You can deduct the cost of meals and lodging if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. Free irs tax filing online In most cases, you can deduct only 50% of your meal expenses. Free irs tax filing online Cleaning. Free irs tax filing online   You can deduct the costs of dry cleaning and laundry while on your business trip. Free irs tax filing online Telephone. Free irs tax filing online   You can deduct the cost of business calls while on your business trip, including business communication by fax machine or other communication devices. Free irs tax filing online Tips. Free irs tax filing online   You can deduct the tips you pay for any expense in this list. Free irs tax filing online More information. Free irs tax filing online   For more information about travel expenses, see Publication 463. Free irs tax filing online Entertainment expenses. Free irs tax filing online   You may be able to deduct business-related entertainment expenses for entertaining a client, customer, or employee. Free irs tax filing online In most cases, you can deduct only 50% of these expenses. Free irs tax filing online   The following are examples of entertainment expenses. Free irs tax filing online Entertaining guests at nightclubs, athletic clubs, theaters, or sporting events. Free irs tax filing online Providing meals, a hotel suite, or a car to business customers or their families. Free irs tax filing online To be deductible, the expenses must meet the rules listed in Table 8-1. Free irs tax filing online For details about these rules, see Publication 463. Free irs tax filing online Reimbursing your employees for expenses. Free irs tax filing online   You generally can deduct the amount you reimburse your employees for travel and entertainment expenses. Free irs tax filing online The reimbursement you deduct and the manner in which you deduct it depend in part on whether you reimburse the expenses under an accountable plan or a nonaccountable plan. Free irs tax filing online For details, see chapter 11 in Publication 535. Free irs tax filing online That chapter explains accountable and nonaccountable plans and tells you whether to report the reimbursement on your employee's Form W-2, Wage and Tax Statement. Free irs tax filing online Business Use of Your Home To deduct expenses related to the part of your home used for business, you must meet specific requirements. Free irs tax filing online Even then, your deduction may be limited. Free irs tax filing online To qualify to claim expenses for business use of your home, you must meet the following tests. Free irs tax filing online Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use , later), Regular, For your business, and The business part of your home must be one of the following: Your principal place of business (defined later), A place where you meet or deal with patients, clients, or customers in the normal course of your business, or A separate structure (not attached to your home) you use in connection with your business. Free irs tax filing online Exclusive use. Free irs tax filing online   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Free irs tax filing online The area used for business can be a room or other separately identifiable space. Free irs tax filing online The space does not need to be marked off by a permanent partition. Free irs tax filing online   You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. Free irs tax filing online Example. Free irs tax filing online You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. Free irs tax filing online Your family also uses the den for recreation. Free irs tax filing online The den is not used exclusively in your profession, so you cannot claim a business deduction for its use. Free irs tax filing online Exceptions to exclusive use. Free irs tax filing online   You do not have to meet the exclusive use test if you use part of your home in either of the following ways. Free irs tax filing online For the storage of inventory or product samples. Free irs tax filing online As a daycare facility. Free irs tax filing online For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). Free irs tax filing online Regular use. Free irs tax filing online   To qualify under the regular use test, you must use a specific area of your home for business on a continuing basis. Free irs tax filing online You do not meet the test if your business use of the area is only occasional or incidental, even if you do not use that area for any other purpose. Free irs tax filing online Principal place of business. Free irs tax filing online   You can have more than one business location, including your home, for a single trade or business. Free irs tax filing online To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that business. Free irs tax filing online To determine your principal place of business, you must consider all the facts and circumstances. Free irs tax filing online   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. Free irs tax filing online You use it exclusively and regularly for administrative or management activities of your business. Free irs tax filing online You have no other fixed location where you conduct substantial administrative or management activities of your business. Free irs tax filing online   Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors. Free irs tax filing online The relative importance of the activities performed at each location. Free irs tax filing online If the relative importance factor does not determine your principal place of business, you can also consider the time spent at each location. Free irs tax filing online   If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Free irs tax filing online However, for other ways to qualify to deduct home office expenses, see Publication 587. Free irs tax filing online Deduction limit. Free irs tax filing online   If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. Free irs tax filing online If your gross income from the business use is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. Free irs tax filing online   Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation (with depreciation taken last), allocable to the business is limited to the gross income from the business use of your home minus the sum of the following. Free irs tax filing online The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). Free irs tax filing online The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. Free irs tax filing online Do not include in (2) above your deduction for one-half of your self-employment tax. Free irs tax filing online   Use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. Free irs tax filing online New simplified method. Free irs tax filing online    The IRS now provides a simplified method to determine your expenses for business use of your home. Free irs tax filing online The simplified method is an alternative to calculating and substantiating actual expenses. Free irs tax filing online In most cases, you will figure your deduction by multiplying $5 by the area of your home used for a qualified business use. Free irs tax filing online The area you use to figure your deduction is limited to 300 square feet. Free irs tax filing online For more information, see the Instructions for Schedule C. Free irs tax filing online More information. Free irs tax filing online   For more information on deducting expenses for the business use of your home, see Publication 587. Free irs tax filing online Other Expenses You Can Deduct You may also be able to deduct the following expenses. Free irs tax filing online See Publication 535 to find out whether you can deduct them. Free irs tax filing online Advertising. Free irs tax filing online Bank fees. Free irs tax filing online Donations to business organizations. Free irs tax filing online Education expenses. Free irs tax filing online Energy efficient commercial buildings deduction expenses. Free irs tax filing online Impairment-related expenses. Free irs tax filing online Interview expense allowances. Free irs tax filing online Licenses and regulatory fees. Free irs tax filing online Moving machinery. Free irs tax filing online Outplacement services. Free irs tax filing online Penalties and fines you pay for late performance or nonperformance of a contract. Free irs tax filing online Repairs that keep your property in a normal efficient operating condition. Free irs tax filing online Repayments of income. Free irs tax filing online Subscriptions to trade or professional publications. Free irs tax filing online Supplies and materials. Free irs tax filing online Utilities. Free irs tax filing online Expenses You Cannot Deduct You usually cannot deduct the following as business expenses. Free irs tax filing online For more information, see Publication 535. Free irs tax filing online Bribes and kickbacks. Free irs tax filing online Charitable contributions. Free irs tax filing online Demolition expenses or losses. Free irs tax filing online Dues to business, social, athletic, luncheon, sporting, airline, and hotel clubs. Free irs tax filing online Lobbying expenses. Free irs tax filing online Penalties and fines you pay to a governmental agency or instrumentality because you broke the law. Free irs tax filing online Personal, living, and family expenses. Free irs tax filing online Political contributions. Free irs tax filing online Repairs that add to the value of your property or significantly increase its life. 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Free irs tax filing online 7. Free irs tax filing online   Interest Income Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationSSN for joint account. Free irs tax filing online Custodian account for your child. Free irs tax filing online Penalty for failure to supply SSN. Free irs tax filing online Reporting backup withholding. Free irs tax filing online Savings account with parent as trustee. Free irs tax filing online Interest not reported on Form 1099-INT. Free irs tax filing online Nominees. Free irs tax filing online Incorrect amount. Free irs tax filing online Information reporting requirement. Free irs tax filing online Taxable InterestInterest subject to penalty for early withdrawal. Free irs tax filing online Money borrowed to invest in certificate of deposit. Free irs tax filing online U. Free irs tax filing online S. Free irs tax filing online Savings Bonds Education Savings Bond Program U. Free irs tax filing online S. Free irs tax filing online Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Original Issue Discount (OID) When To Report Interest IncomeConstructive receipt. Free irs tax filing online How To Report Interest IncomeSchedule B (Form 1040A or 1040). Free irs tax filing online Reporting tax-exempt interest. Free irs tax filing online U. Free irs tax filing online S. Free irs tax filing online savings bond interest previously reported. Free irs tax filing online Reminder Foreign-source income. Free irs tax filing online  If you are a U. Free irs tax filing online S. Free irs tax filing online citizen with interest income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt by U. Free irs tax filing online S. Free irs tax filing online law. Free irs tax filing online This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. Free irs tax filing online Introduction This chapter discusses the following topics. Free irs tax filing online Different types of interest income. Free irs tax filing online What interest is taxable and what interest is nontaxable. Free irs tax filing online When to report interest income. Free irs tax filing online How to report interest income on your tax return. Free irs tax filing online In general, any interest you receive or that is credited to your account and can be withdrawn is taxable income. Free irs tax filing online Exceptions to this rule are discussed later in this chapter. Free irs tax filing online You may be able to deduct expenses you have in earning this income on Schedule A (Form 1040) if you itemize your deductions. Free irs tax filing online See Money borrowed to invest in certificate of deposit , later, and chapter 28. Free irs tax filing online Useful Items - You may want to see: Publication 537 Installment Sales 550 Investment Income and Expenses 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends 8815 Exclusion of Interest From Series EE and I U. Free irs tax filing online S. Free irs tax filing online Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. Free irs tax filing online S. Free irs tax filing online Savings Bonds Issued After 1989 General Information A few items of general interest are covered here. Free irs tax filing online Recordkeeping. Free irs tax filing online You should keep a list showing sources and interest amounts received during the year. Free irs tax filing online Also, keep the forms you receive showing your interest income (Forms 1099-INT, for example) as an important part of your records. Free irs tax filing online Tax on unearned income of certain children. Free irs tax filing online    Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Free irs tax filing online If so, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Free irs tax filing online If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Free irs tax filing online   Some parents can choose to include the child's interest and dividends on the parent's return. Free irs tax filing online If you can, use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Free irs tax filing online   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Free irs tax filing online Beneficiary of an estate or trust. Free irs tax filing online   Interest you receive as a beneficiary of an estate or trust is generally taxable income. Free irs tax filing online You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Free irs tax filing online , from the fiduciary. Free irs tax filing online Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Free irs tax filing online Social security number (SSN). Free irs tax filing online   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. Free irs tax filing online This includes payers of interest. Free irs tax filing online If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. Free irs tax filing online SSN for joint account. Free irs tax filing online   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. Free irs tax filing online (For information on who owns the funds in a joint account, see Joint accounts , later. Free irs tax filing online ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. Free irs tax filing online This is because only one name and SSN can be shown on Form 1099. Free irs tax filing online   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. Free irs tax filing online For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. Free irs tax filing online Custodian account for your child. Free irs tax filing online   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. Free irs tax filing online For example, you must give your child's SSN to the payer of interest on an account owned by your child, even though the interest is paid to you as custodian. Free irs tax filing online Penalty for failure to supply SSN. Free irs tax filing online   If you do not give your SSN to the payer of interest, you may have to pay a penalty. Free irs tax filing online See Failure to supply SSN under Penalties in chapter 1. Free irs tax filing online Backup withholding also may apply. Free irs tax filing online Backup withholding. Free irs tax filing online   Your interest income is generally not subject to regular withholding. Free irs tax filing online However, it may be subject to backup withholding to ensure that income tax is collected on the income. Free irs tax filing online Under backup withholding, the payer of interest must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Free irs tax filing online   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Free irs tax filing online For more information, see Backup Withholding in chapter 4. Free irs tax filing online Reporting backup withholding. Free irs tax filing online   If backup withholding is deducted from your interest income, the payer must give you a Form 1099-INT for the year indicating the amount withheld. Free irs tax filing online The Form 1099-INT will show any backup withholding as “Federal income tax withheld. Free irs tax filing online ” Joint accounts. Free irs tax filing online   If two or more persons hold property (such as a savings account or bond) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest from the property is determined by local law. Free irs tax filing online Income from property given to a child. Free irs tax filing online   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. Free irs tax filing online   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. Free irs tax filing online Savings account with parent as trustee. Free irs tax filing online   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. Free irs tax filing online The savings account legally belongs to the child. Free irs tax filing online The parents are not legally permitted to use any of the funds to support the child. Free irs tax filing online Form 1099-INT. Free irs tax filing online   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. Free irs tax filing online This form shows you the interest you received during the year. Free irs tax filing online Keep this form for your records. Free irs tax filing online You do not have to attach it to your tax return. Free irs tax filing online   Report on your tax return the total interest income you receive for the tax year. Free irs tax filing online Interest not reported on Form 1099-INT. Free irs tax filing online   Even if you do not receive Form 1099-INT, you must still report all of your interest income. Free irs tax filing online For example, you may receive distributive shares of interest from partnerships or S corporations. Free irs tax filing online This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deduction, Credits, etc. Free irs tax filing online , or Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Free irs tax filing online Nominees. Free irs tax filing online   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. Free irs tax filing online   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on nominee distributions under How To Report Interest Income in chapter 1 of Publication 550, or Schedule B (Form 1040A or 1040) instructions. Free irs tax filing online Incorrect amount. Free irs tax filing online   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Free irs tax filing online The new Form 1099-INT you receive will be marked “Corrected. Free irs tax filing online ” Form 1099-OID. Free irs tax filing online   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. Free irs tax filing online For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. Free irs tax filing online Exempt-interest dividends. Free irs tax filing online   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. Free irs tax filing online (However, see Information reporting requirement , next. Free irs tax filing online ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Free irs tax filing online You do not reduce your basis for distributions that are exempt-interest dividends. Free irs tax filing online Information reporting requirement. Free irs tax filing online   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. Free irs tax filing online This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. Free irs tax filing online Note. Free irs tax filing online Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Free irs tax filing online See Alternative Minimum Tax (AMT) in chapter 30 for more information. Free irs tax filing online Chapter 1 of Publication 550 contains a discussion on private activity bonds under State or Local Government Obligations. Free irs tax filing online Interest on VA dividends. Free irs tax filing online   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. Free irs tax filing online This includes interest paid on dividends on converted United States Government Life Insurance and on National Service Life Insurance policies. Free irs tax filing online Individual retirement arrangements (IRAs). Free irs tax filing online   Interest on a Roth IRA generally is not taxable. Free irs tax filing online Interest on a traditional IRA is tax deferred. Free irs tax filing online You generally do not include it in your income until you make withdrawals from the IRA. Free irs tax filing online See chapter 17. Free irs tax filing online Taxable Interest Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. Free irs tax filing online The following are some sources of taxable interest. Free irs tax filing online Dividends that are actually interest. Free irs tax filing online   Certain distributions commonly called dividends are actually interest. Free irs tax filing online You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. Free irs tax filing online  The “dividends” will be shown as interest income on Form 1099-INT. Free irs tax filing online Money market funds. Free irs tax filing online   Money market funds pay dividends and are offered by nonbank financial institutions, such as mutual funds and stock brokerage houses. Free irs tax filing online Generally, amounts you receive from money market funds should be reported as dividends, not as interest. Free irs tax filing online Certificates of deposit and other deferred interest accounts. Free irs tax filing online   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. Free irs tax filing online You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. Free irs tax filing online The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. Free irs tax filing online If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. Free irs tax filing online Interest subject to penalty for early withdrawal. Free irs tax filing online   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. Free irs tax filing online You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. Free irs tax filing online See Penalty on early withdrawal of savings in chapter 1 of Publication 550 for more information on how to report the interest and deduct the penalty. Free irs tax filing online Money borrowed to invest in certificate of deposit. Free irs tax filing online   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. Free irs tax filing online You must report the total interest you earn on the certificate in your income. Free irs tax filing online If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. Free irs tax filing online See Interest Expenses in chapter 3 of Publication 550. Free irs tax filing online Example. Free irs tax filing online You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. Free irs tax filing online The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. Free irs tax filing online The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. Free irs tax filing online The bank also gives you a statement showing that you paid $310 interest for 2013. Free irs tax filing online You must include the $575 in your income. Free irs tax filing online If you itemize your deductions on Schedule A (Form 1040), you can deduct $310, subject to the net investment income limit. Free irs tax filing online Gift for opening account. Free irs tax filing online   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. Free irs tax filing online   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. Free irs tax filing online For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. Free irs tax filing online The value is determined by the cost to the financial institution. Free irs tax filing online Example. Free irs tax filing online You open a savings account at your local bank and deposit $800. Free irs tax filing online The account earns $20 interest. Free irs tax filing online You also receive a $15 calculator. Free irs tax filing online If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. Free irs tax filing online You must report $35 interest income on your tax return. Free irs tax filing online Interest on insurance dividends. Free irs tax filing online   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. Free irs tax filing online However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. Free irs tax filing online Prepaid insurance premiums. Free irs tax filing online   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. Free irs tax filing online U. Free irs tax filing online S. Free irs tax filing online obligations. Free irs tax filing online   Interest on U. Free irs tax filing online S. Free irs tax filing online obligations, such as U. Free irs tax filing online S. Free irs tax filing online Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. Free irs tax filing online Interest on tax refunds. Free irs tax filing online   Interest you receive on tax refunds is taxable income. Free irs tax filing online Interest on condemnation award. Free irs tax filing online   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. Free irs tax filing online Installment sale payments. Free irs tax filing online   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. Free irs tax filing online That interest is taxable when you receive it. Free irs tax filing online If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. Free irs tax filing online See Unstated Interest and Original Issue Discount in Publication 537, Installment Sales. Free irs tax filing online Interest on annuity contract. Free irs tax filing online   Accumulated interest on an annuity contract you sell before its maturity date is taxable. Free irs tax filing online Usurious interest. Free irs tax filing online   Usurious interest is interest charged at an illegal rate. Free irs tax filing online This is taxable as interest unless state law automatically changes it to a payment on the principal. Free irs tax filing online Interest income on frozen deposits. Free irs tax filing online   Exclude from your gross income interest on frozen deposits. Free irs tax filing online A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state where the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. Free irs tax filing online   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). Free irs tax filing online If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income in chapter 1 of Publication 550, for information about reporting this interest income exclusion on your tax return. Free irs tax filing online   The interest you exclude is treated as credited to your account in the following year. Free irs tax filing online You must include it in income in the year you can withdraw it. Free irs tax filing online Example. Free irs tax filing online $100 of interest was credited on your frozen deposit during the year. Free irs tax filing online You withdrew $80 but could not withdraw any more as of the end of the year. Free irs tax filing online You must include $80 in your income and exclude $20 from your income for the year. Free irs tax filing online You must include the $20 in your income for the year you can withdraw it. Free irs tax filing online Bonds traded flat. Free irs tax filing online   If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. Free irs tax filing online The defaulted or unpaid interest is not income and is not taxable as interest if paid later. Free irs tax filing online When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. Free irs tax filing online Interest that accrues after the date of purchase, however, is taxable interest income for the year it is received or accrued. Free irs tax filing online See Bonds Sold Between Interest Dates , later, for more information. Free irs tax filing online Below-market loans. Free irs tax filing online   In general, a below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Free irs tax filing online See Below-Market Loans in chapter 1 of Publication 550 for more information. Free irs tax filing online U. Free irs tax filing online S. Free irs tax filing online Savings Bonds This section provides tax information on U. Free irs tax filing online S. Free irs tax filing online savings bonds. Free irs tax filing online It explains how to report the interest income on these bonds and how to treat transfers of these bonds. Free irs tax filing online For other information on U. Free irs tax filing online S. Free irs tax filing online savings bonds, write to:  For series EE and I paper savings bonds: Bureau of the Public Debt Division of Customer Assistance P. Free irs tax filing online O. Free irs tax filing online Box 7012 Parkersburg, WV 26106-7012  For series EE and I electronic bonds: Bureau of the Public Debt Division of Customer Assistance P. Free irs tax filing online O. Free irs tax filing online Box 7015 Parkersburg, WV 26106–7015  For series HH/H: Bureau of the Public Debt Division of Customer Assistance P. Free irs tax filing online O. Free irs tax filing online Box 2186 Parkersburg, WV 26106-2186 Or, on the Internet, visit: www. Free irs tax filing online treasurydirect. Free irs tax filing online gov/indiv/indiv. Free irs tax filing online htm. Free irs tax filing online Accrual method taxpayers. Free irs tax filing online   If you use an accrual method of accounting, you must report interest on U. Free irs tax filing online S. Free irs tax filing online savings bonds each year as it accrues. Free irs tax filing online You cannot postpone reporting interest until you receive it or until the bonds mature. Free irs tax filing online Accrual methods of accounting are explained in chapter 1 under Accounting Methods . Free irs tax filing online Cash method taxpayers. Free irs tax filing online   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. Free irs tax filing online S. Free irs tax filing online savings bonds when you receive it. Free irs tax filing online The cash method of accounting is explained in chapter 1 under Accounting Methods. Free irs tax filing online But see Reporting options for cash method taxpayers , later. Free irs tax filing online Series HH bonds. Free irs tax filing online    These bonds were issued at face value. Free irs tax filing online Interest is paid twice a year by direct deposit to your bank account. Free irs tax filing online If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. Free irs tax filing online   Series HH bonds were first offered in 1980 and last offered in August 2004. Free irs tax filing online Before 1980, series H bonds were issued. Free irs tax filing online Series H bonds are treated the same as series HH bonds. Free irs tax filing online If you are a cash method taxpayer, you must report the interest when you receive it. Free irs tax filing online   Series H bonds have a maturity period of 30 years. Free irs tax filing online Series HH bonds mature in 20 years. Free irs tax filing online The last series H bonds matured in 2009. Free irs tax filing online Series EE and series I bonds. Free irs tax filing online   Interest on these bonds is payable when you redeem the bonds. Free irs tax filing online The difference between the purchase price and the redemption value is taxable interest. Free irs tax filing online Series EE bonds. Free irs tax filing online   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. Free irs tax filing online   Before July 1980, series E bonds were issued. Free irs tax filing online The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. Free irs tax filing online Paper series EE and series E bonds are issued at a discount. Free irs tax filing online The face value is payable to you at maturity. Free irs tax filing online Electronic series EE bonds are issued at their face value. Free irs tax filing online The face value plus accrued interest is payable to you at maturity. Free irs tax filing online As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. Free irs tax filing online   Owners of paper series EE bonds can convert them to electronic bonds. Free irs tax filing online These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). Free irs tax filing online Series I bonds. Free irs tax filing online   Series I bonds were first offered in 1998. Free irs tax filing online These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. Free irs tax filing online The face value plus all accrued interest is payable to you at maturity. Free irs tax filing online Reporting options for cash method taxpayers. Free irs tax filing online   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. Free irs tax filing online Method 1. Free irs tax filing online Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year they mature. Free irs tax filing online (However, see Savings bonds traded , later. Free irs tax filing online )  Note. Free irs tax filing online Series EE bonds issued in 1983 matured in 2013. Free irs tax filing online If you have used method 1, you generally must report the interest on these bonds on your 2013 return. Free irs tax filing online The last series E bonds were issued in 1980 and matured in 2010. Free irs tax filing online If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. Free irs tax filing online Method 2. Free irs tax filing online Choose to report the increase in redemption value as interest each year. Free irs tax filing online You must use the same method for all series EE, series E, and series I bonds you own. Free irs tax filing online If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. Free irs tax filing online    If you plan to cash your bonds in the same year you will pay for higher education expenses, you may want to use method 1 because you may be able to exclude the interest from your income. Free irs tax filing online To learn how, see Education Savings Bond Program, later. Free irs tax filing online Change from method 1. Free irs tax filing online   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. Free irs tax filing online In the year of change you must report all interest accrued to date and not previously reported for all your bonds. Free irs tax filing online   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. Free irs tax filing online Change from method 2. Free irs tax filing online   To change from method 2 to method 1, you must request permission from the IRS. Free irs tax filing online Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. Free irs tax filing online You have typed or printed the following number at the top: “131. Free irs tax filing online ” It includes your name and social security number under “131. Free irs tax filing online ” It includes the year of change (both the beginning and ending dates). Free irs tax filing online It identifies the savings bonds for which you are requesting this change. Free irs tax filing online It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. Free irs tax filing online   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). Free irs tax filing online   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. Free irs tax filing online On the statement, type or print “Filed pursuant to section 301. Free irs tax filing online 9100-2. Free irs tax filing online ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). Free irs tax filing online    By the date you file the original statement with your return, you must also send a signed copy to the address below. Free irs tax filing online   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. Free irs tax filing online O. Free irs tax filing online Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. Free irs tax filing online   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW  Washington, DC 20224   Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115, Application for Change in Accounting Method. Free irs tax filing online In that case, follow the form instructions for an automatic change. Free irs tax filing online No user fee is required. Free irs tax filing online Co-owners. Free irs tax filing online   If a U. Free irs tax filing online S. Free irs tax filing online savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. Free irs tax filing online One co-owner's funds used. Free irs tax filing online    If you used your funds to buy the bond, you must pay the tax on the interest. Free irs tax filing online This is true even if you let the other co-owner redeem the bond and keep all the proceeds. Free irs tax filing online Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. Free irs tax filing online The co-owner who redeemed the bond is a “nominee. Free irs tax filing online ” See Nominee distributions under How To Report Interest Income in chapter 1 of Publication 550 for more information about how a person who is a nominee reports interest income belonging to another person. Free irs tax filing online Both co-owners' funds used. Free irs tax filing online   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. Free irs tax filing online Community property. Free irs tax filing online   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. Free irs tax filing online If you file separate returns, each of you generally must report one-half of the bond interest. Free irs tax filing online For more information about community property, see Publication 555. Free irs tax filing online Table 7-1. Free irs tax filing online   These rules are also shown in Table 7-1. Free irs tax filing online Ownership transferred. Free irs tax filing online   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. Free irs tax filing online But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. Free irs tax filing online   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. Free irs tax filing online Purchased jointly. Free irs tax filing online   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. Free irs tax filing online The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. Free irs tax filing online This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. Free irs tax filing online   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. Free irs tax filing online But the new co-owner will report only his or her share of the interest earned after the transfer. Free irs tax filing online   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. Free irs tax filing online    Table 7-1. Free irs tax filing online Who Pays the Tax on U. Free irs tax filing online S. Free irs tax filing online Savings Bond Interest IF . Free irs tax filing online . Free irs tax filing online . Free irs tax filing online THEN the interest must be reported by . Free irs tax filing online . Free irs tax filing online . Free irs tax filing online you buy a bond in your name and the name of another person as co-owners, using only your own funds you. Free irs tax filing online you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. Free irs tax filing online you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. Free irs tax filing online you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. Free irs tax filing online If you file separate returns, both you and your spouse generally report one-half of the interest. Free irs tax filing online Example 1. Free irs tax filing online You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. Free irs tax filing online The bond was issued to you and your spouse as co-owners. Free irs tax filing online You both postpone reporting interest on the bond. Free irs tax filing online You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Free irs tax filing online At that time neither you nor your spouse has to report the interest earned to the date of reissue. Free irs tax filing online Example 2. Free irs tax filing online You bought a $1,000 series EE savings bond entirely with your own funds. Free irs tax filing online The bond was issued to you and your spouse as co-owners. Free irs tax filing online You both postpone reporting interest on the bond. Free irs tax filing online You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Free irs tax filing online You must report half the interest earned to the date of reissue. Free irs tax filing online Transfer to a trust. Free irs tax filing online   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. Free irs tax filing online However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. Free irs tax filing online You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. Free irs tax filing online   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. Free irs tax filing online See Savings bonds traded , later. Free irs tax filing online Decedents. Free irs tax filing online   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. Free irs tax filing online This is explained in chapter 1 of Publication 550. Free irs tax filing online Savings bonds traded. Free irs tax filing online   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. Free irs tax filing online (You cannot trade series I bonds for series HH bonds. Free irs tax filing online After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. Free irs tax filing online ) Any cash you received is income up to the amount of the interest earned on the bonds traded. Free irs tax filing online When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. Free irs tax filing online Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. Free irs tax filing online Example. Free irs tax filing online You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. Free irs tax filing online You reported the $223 as taxable income on your tax return. Free irs tax filing online At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. Free irs tax filing online You hold the series HH bonds until maturity, when you receive $2,500. Free irs tax filing online You must report $300 as interest income in the year of maturity. Free irs tax filing online This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). Free irs tax filing online (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. Free irs tax filing online ) Choice to report interest in year of trade. Free irs tax filing online   You could have chosen to treat all of the previously unreported accrued interest on the series EE or series E bonds traded for series HH bonds as income in the year of the trade. Free irs tax filing online If you made this choice, it is treated as a change from method 1. Free irs tax filing online See Change from method 1 under Series EE and series I bonds, earlier. Free irs tax filing online Form 1099-INT for U. Free irs tax filing online S. Free irs tax filing online savings bonds interest. Free irs tax filing online   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. Free irs tax filing online Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. Free irs tax filing online However, your Form 1099-INT may show more interest than you have to include on your income tax return. Free irs tax filing online For example, this may happen if any of the following are true. Free irs tax filing online You chose to report the increase in the redemption value of the bond each year. Free irs tax filing online The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. Free irs tax filing online You received the bond from a decedent. Free irs tax filing online The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. Free irs tax filing online Ownership of the bond was transferred. Free irs tax filing online The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. Free irs tax filing online You were named as a co-owner, and the other co-owner contributed funds to buy the bond. Free irs tax filing online The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. Free irs tax filing online (See Co-owners , earlier in this chapter, for more information about the reporting requirements. Free irs tax filing online ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. Free irs tax filing online The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. Free irs tax filing online (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Free irs tax filing online , for the year of distribution. Free irs tax filing online )   For more information on including the correct amount of interest on your return, see How To Report Interest Income , later. Free irs tax filing online Publication 550 includes examples showing how to report these amounts. Free irs tax filing online    Interest on U. Free irs tax filing online S. Free irs tax filing online savings bonds is exempt from state and local taxes. Free irs tax filing online The Form 1099-INT you receive will indicate the amount that is for U. Free irs tax filing online S. Free irs tax filing online savings bond interest in box 3. Free irs tax filing online Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. Free irs tax filing online S. Free irs tax filing online savings bonds during the year if you pay qualified higher educational expenses during the same year. Free irs tax filing online This exclusion is known as the Education Savings Bond Program. Free irs tax filing online You do not qualify for this exclusion if your filing status is married filing separately. Free irs tax filing online Form 8815. Free irs tax filing online   Use Form 8815 to figure your exclusion. Free irs tax filing online Attach the form to your Form 1040 or Form 1040A. Free irs tax filing online Qualified U. Free irs tax filing online S. Free irs tax filing online savings bonds. Free irs tax filing online   A qualified U. Free irs tax filing online S. Free irs tax filing online savings bond is a series EE bond issued after 1989 or a series I bond. Free irs tax filing online The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). Free irs tax filing online You must be at least 24 years old before the bond's issue date. Free irs tax filing online For example, a bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child. Free irs tax filing online    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. Free irs tax filing online Beneficiary. Free irs tax filing online   You can designate any individual (including a child) as a beneficiary of the bond. Free irs tax filing online Verification by IRS. Free irs tax filing online   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of the Treasury. Free irs tax filing online Qualified expenses. Free irs tax filing online   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. Free irs tax filing online   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. Free irs tax filing online   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. Free irs tax filing online Eligible educational institutions. Free irs tax filing online   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the U. Free irs tax filing online S. Free irs tax filing online Department of Education. Free irs tax filing online Reduction for certain benefits. Free irs tax filing online   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. Free irs tax filing online Tax-free part of scholarships and fellowships (see Scholarships and fellowships in chapter 12). Free irs tax filing online Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. Free irs tax filing online Expenses used to figure the tax-free portion of distributions from a qualified tuition program. Free irs tax filing online Any tax-free payments (other than gifts or inheritances) received for educational expenses, such as Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. Free irs tax filing online Any expense used in figuring the American Opportunity and lifetime learning credits. Free irs tax filing online Amount excludable. Free irs tax filing online   If the total proceeds (interest and principal) from the qualified U. Free irs tax filing online S. Free irs tax filing online savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. Free irs tax filing online If the proceeds are more than the expenses, you may be able to exclude only part of the interest. Free irs tax filing online   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. Free irs tax filing online The numerator of the fraction is the qualified higher educational expenses you paid during the year. Free irs tax filing online The denominator of the fraction is the total proceeds you received during the year. Free irs tax filing online Example. Free irs tax filing online In February 2013, Mark and Joan, a married couple, cashed a qualified series EE U. Free irs tax filing online S. Free irs tax filing online savings bond they bought in April 1997. Free irs tax filing online They received proceeds of $8,372 representing principal of $5,000 and interest of $3,372. Free irs tax filing online In 2013, they paid $4,000 of their daughter's college tuition. Free irs tax filing online They are not claiming an education credit for that amount, and their daughter does not have any tax-free educational assistance. Free irs tax filing online They can exclude $1,611 ($3,372 × ($4,000 ÷ $8,372)) of interest in 2013. Free irs tax filing online They must pay tax on the remaining $1,761 ($3,372 − $1,611) interest. Free irs tax filing online Modified adjusted gross income limit. Free irs tax filing online   The interest exclusion is limited if your modified adjusted gross income (modified AGI) is: $74,700 to $89,700 for taxpayers filing single or head of household, and $112,050 to $142,050 for married taxpayers filing jointly or for a qualifying widow(er) with dependent child. Free irs tax filing online You do not qualify for the interest exclusion if your modified AGI is equal to or more than the upper limit for your filing status. Free irs tax filing online   Modified AGI, for purposes of this exclusion, is adjusted gross income (Form 1040, line 37, or Form 1040A, line 21) figured before the interest exclusion, and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion and deduction, Exclusion of income for bona fide residents of American Samoa, Exclusion for income from Puerto Rico, Exclusion for adoption benefits received under an employer's adoption assistance program, Deduction for tuition and fees, Deduction for student loan interest, and Deduction for domestic production activities. Free irs tax filing online   Use the Line 9 Worksheet in the Form 8815 instructions to figure your modified AGI. Free irs tax filing online If you claim any of the exclusion or deduction items listed above (except items 6, 7, and 8), add the amount of the exclusion or deduction (except items 6, 7, and 8) to the amount on line 5 of the worksheet, and enter the total on Form 8815, line 9, as your modified AGI. Free irs tax filing online   If you have investment interest expense incurred to earn royalties and other investment income, see Education Savings Bond Program in chapter 1 of Publication 550. Free irs tax filing online Recordkeeping. Free irs tax filing online If you claim the interest exclusion, you must keep a written record of the qualified U. Free irs tax filing online S. Free irs tax filing online savings bonds you redeem. Free irs tax filing online Your record must include the serial number, issue date, face value, and total redemption proceeds (principal and interest) of each bond. Free irs tax filing online You can use Form 8818 to record this information. Free irs tax filing online You should also keep bills, receipts, canceled checks, or other documentation that shows you paid qualified higher educational expenses during the year. Free irs tax filing online U. Free irs tax filing online S. Free irs tax filing online Treasury Bills, Notes, and Bonds Treasury bills, notes, and bonds are direct debts (obligations) of the U. Free irs tax filing online S. Free irs tax filing online Government. Free irs tax filing online Taxation of interest. Free irs tax filing online   Interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. Free irs tax filing online You should receive Form 1099-INT showing the interest (in box 3) paid to you for the year. Free irs tax filing online   Payments of principal and interest generally will be credited to your designated checking or savings account by direct deposit through the TreasuryDirect® system. Free irs tax filing online Treasury bills. Free irs tax filing online   These bills generally have a 4-week, 13-week, 26-week, or 52-week maturity period. Free irs tax filing online They are generally issued at a discount in the amount of $100 and multiples of $100. Free irs tax filing online The difference between the discounted price you pay for the bills and the face value you receive at maturity is interest income. Free irs tax filing online Generally, you report this interest income when the bill is paid at maturity. Free irs tax filing online If you paid a premium for a bill (more than the face value), you generally report the premium as a section 171 deduction when the bill is paid at maturity. Free irs tax filing online Treasury notes and bonds. Free irs tax filing online   Treasury notes have maturity periods of more than 1 year, ranging up to 10 years. Free irs tax filing online Maturity periods for Treasury bonds are longer than 10 years. Free irs tax filing online Both generally are issued in denominations of $100 to $1 million and generally pay interest every 6 months. Free irs tax filing online Generally, you report this interest for the year paid. Free irs tax filing online For more information, see U. Free irs tax filing online S. Free irs tax filing online Treasury Bills, Notes, and Bonds in chapter 1 of Publication 550. Free irs tax filing online For other information on Treasury notes or bonds, write to:  Bureau of the Public Debt P. Free irs tax filing online O. Free irs tax filing online Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. Free irs tax filing online treasurydirect. Free irs tax filing online gov/indiv/indiv. Free irs tax filing online htm. Free irs tax filing online For information on series EE, series I, and series HH savings bonds, see U. Free irs tax filing online S. Free irs tax filing online Savings Bonds , earlier. Free irs tax filing online Treasury inflation-protected securities (TIPS). Free irs tax filing online   These securities pay interest twice a year at a fixed rate, based on a principal amount adjusted to take into account inflation and deflation. Free irs tax filing online For the tax treatment of these securities, see Inflation-Indexed Debt Instruments under Original Issue Discount (OID), in Publication 550. Free irs tax filing online Bonds Sold Between Interest Dates If you sell a bond between interest payment dates, part of the sales price represents interest accrued to the date of sale. Free irs tax filing online You must report that part of the sales price as interest income for the year of sale. Free irs tax filing online If you buy a bond between interest payment dates, part of the purchase price represents interest accrued before the date of purchase. Free irs tax filing online When that interest is paid to you, treat it as a return of your capital investment, rather than interest income, by reducing your basis in the bond. Free irs tax filing online See Accrued interest on bonds under How To Report Interest Income in chapter 1 of Publication 550 for information on reporting the payment. Free irs tax filing online Insurance Life insurance proceeds paid to you as beneficiary of the insured person are usually not taxable. Free irs tax filing online But if you receive the proceeds in installments, you must usually report a part of each installment payment as interest income. Free irs tax filing online For more information about insurance proceeds received in installments, see Publication 525, Taxable and Nontaxable Income. Free irs tax filing online Annuity. Free irs tax filing online   If you buy an annuity with life insurance proceeds, the annuity payments you receive are taxed as pension and annuity income from a nonqualified plan, not as interest income. Free irs tax filing online See chapter 10 for information on pension and annuity income from nonqualified plans. Free irs tax filing online State or Local Government Obligations Interest on a bond used to finance government operations generally is not taxable if the bond is issued by a state, the District of Columbia, a possession of the United States, or any of their political subdivisions. Free irs tax filing online Bonds issued after 1982 (including tribal economic development bonds issued after February 17, 2009) by an Indian tribal government are treated as issued by a state. Free irs tax filing online Interest on these bonds is generally tax exempt if the bonds are part of an issue of which substantially all proceeds are to be used in the exercise of any essential government function. Free irs tax filing online For information on federally guaranteed bonds, mortgage revenue bonds, arbitrage bonds, private activity bonds, qualified tax credit bonds, and Build America bonds, see State or Local Government Obligations in chapter 1 of Publication 550. Free irs tax filing online Information reporting requirement. Free irs tax filing online   If you must file a tax return, you are required to show any tax-exempt interest you received on your return. Free irs tax filing online This is an information reporting requirement only. Free irs tax filing online It does not change tax-exempt interest to taxable interest. Free irs tax filing online Original Issue Discount (OID) Original issue discount (OID) is a form of interest. Free irs tax filing online You generally include OID in your income as it accrues over the term of the debt instrument, whether or not you receive any payments from the issuer. Free irs tax filing online A debt instrument generally has OID when the instrument is issued for a price that is less than its stated redemption price at maturity. Free irs tax filing online OID is the difference between the stated redemption price at maturity and the issue price. Free irs tax filing online All debt instruments that pay no interest before maturity are presumed to be issued at a discount. Free irs tax filing online Zero coupon bonds are one example of these instruments. Free irs tax filing online The OID accrual rules generally do not apply to short-term obligations (those with a fixed maturity date of 1 year or less from date of issue). Free irs tax filing online See Discount on Short-Term Obligations in chapter 1 of Publication 550. Free irs tax filing online De minimis OID. Free irs tax filing online   You can treat the discount as zero if it is less than one-fourth of 1% (. Free irs tax filing online 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Free irs tax filing online This small discount is known as “de minimis” OID. Free irs tax filing online Example 1. Free irs tax filing online You bought a 10-year bond with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. Free irs tax filing online One-fourth of 1% of $1,000 (stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. Free irs tax filing online Because the $20 discount is less than $25, the OID is treated as zero. Free irs tax filing online (If you hold the bond at maturity, you will recognize $20 ($1,000 − $980) of capital gain. Free irs tax filing online ) Example 2. Free irs tax filing online The facts are the same as in Example 1, except that the bond was issued at $950. Free irs tax filing online The OID is $50. Free irs tax filing online Because the $50 discount is more than the $25 figured in Example 1, you must include the OID in income as it accrues over the term of the bond. Free irs tax filing online Debt instrument bought after original issue. Free irs tax filing online   If you buy a debt instrument with de minimis OID at a premium, the discount is not includible in income. Free irs tax filing online If you buy a debt instrument with de minimis OID at a discount, the discount is reported under the market discount rules. Free irs tax filing online See Market Discount Bonds in chapter 1 of Publication 550. Free irs tax filing online Exceptions to reporting OID. Free irs tax filing online   The OID rules discussed in this chapter do not apply to the following debt instruments. Free irs tax filing online Tax-exempt obligations. Free irs tax filing online (However, see Stripped tax-exempt obligations under Stripped Bonds and Coupons in chapter 1 of Publication 550). Free irs tax filing online U. Free irs tax filing online S. Free irs tax filing online savings bonds. Free irs tax filing online Short-term debt instruments (those with a fixed maturity date of not more than 1 year from the date of issue). Free irs tax filing online Obligations issued by an individual before March 2, 1984. Free irs tax filing online Loans between individuals if all the following are true. Free irs tax filing online The lender is not in the business of lending money. Free irs tax filing online The amount of the loan, plus the amount of any outstanding prior loans between the same individuals, is $10,000 or less. Free irs tax filing online Avoiding any federal tax is not one of the principal purposes of the loan. Free irs tax filing online Form 1099-OID. Free irs tax filing online   The issuer of the debt instrument (or your broker if you held the instrument through a broker) should give you Form 1099-OID, or a similar statement, if the total OID for the calendar year is $10 or more. Free irs tax filing online Form 1099-OID will show, in box 1, the amount of OID for the part of the year that you held the bond. Free irs tax filing online It also will show, in box 2, the stated interest you must include in your income. Free irs tax filing online A copy of Form 1099-OID will be sent to the IRS. Free irs tax filing online Do not file your copy with your return. Free irs tax filing online Keep it for your records. Free irs tax filing online   In most cases, you must report the entire amount in boxes 1 and 2 of Form 1099-OID as interest income. Free irs tax filing online But see Refiguring OID shown on Form 1099-OID, later in this discussion, for more information. Free irs tax filing online Form 1099-OID not received. Free irs tax filing online   If you had OID for the year but did not receive a Form 1099-OID, you can find tables on IRS. Free irs tax filing online gov that list total OID on certain debt instruments and have information that will help you figure OID. Free irs tax filing online For the latest OID tables, go to www. Free irs tax filing online irs. Free irs tax filing online gov and enter “OID tables” in the Search box. Free irs tax filing online If your debt instrument is not listed, consult the issuer for further information about the accrued OID for the year. Free irs tax filing online Nominee. Free irs tax filing online   If someone else is the holder of record (the registered owner) of an OID instrument belonging to you and receives a Form 1099-OID on your behalf, that person must give you a Form 1099-OID. Free irs tax filing online Refiguring OID shown on Form 1099-OID. Free irs tax filing online   You must refigure the OID shown in box 1 or box 8 of Form 1099-OID if either of the following apply. Free irs tax filing online You bought the debt instrument after its original issue and paid a premium or an acquisition premium. Free irs tax filing online The debt instrument is a stripped bond or a stripped coupon (including certain zero coupon instruments). Free irs tax filing online For information about figuring the correct amount of OID to include in your income, see Figuring OID on Long-Term Debt Instruments in Publication 1212. Free irs tax filing online Refiguring periodic interest shown on Form 1099-OID. Free irs tax filing online   If you disposed of a debt instrument or acquired it from another holder during the year, see Bonds Sold Between Interest Dates , earlier, for information about the treatment of periodic interest that may be shown in box 2 of Form 1099-OID for that instrument. Free irs tax filing online Certificates of deposit (CDs). Free irs tax filing online   If you buy a CD with a maturity of more than 1 year, you must include in income each year a part of the total interest due and report it in the same manner as other OID. Free irs tax filing online   This also applies to similar deposit arrangements with banks, building and loan associations, etc. Free irs tax filing online , including: Time deposits, Bonus plans, Savings certificates, Deferred income certificates, Bonus savings certificates, and Growth savings certificates. Free irs tax filing online Bearer CDs. Free irs tax filing online   CDs issued after 1982 generally must be in registered form. Free irs tax filing online Bearer CDs are CDs not in registered form. Free irs tax filing online They are not issued in the depositor's name and are transferable from one individual to another. Free irs tax filing online   Banks must provide the IRS and the person redeeming a bearer CD with a Form 1099-INT. Free irs tax filing online More information. Free irs tax filing online   See chapter 1 of Publication 550 for more information about OID and related topics, such as market discount bonds. Free irs tax filing online When To Report Interest Income When to report your interest income depends on whether you use the cash method or an accrual method to report income. Free irs tax filing online Cash method. Free irs tax filing online   Most individual taxpayers use the cash method. Free irs tax filing online If you use this method, you generally report your interest income in the year in which you actually or constructively receive it. Free irs tax filing online However, there are special rules for reporting the discount on certain debt instruments. Free irs tax filing online See U. Free irs tax filing online S. Free irs tax filing online Savings Bonds and Original Issue Discount (OID) , earlier. Free irs tax filing online Example. Free irs tax filing online On September 1, 2011, you loaned another individual $2,000 at 12%, compounded annually. Free irs tax filing online You are not in the business of lending money. Free irs tax filing online The note stated that principal and interest would be due on August 31, 2013. Free irs tax filing online In 2013, you received $2,508. Free irs tax filing online 80 ($2,000 principal and $508. Free irs tax filing online 80 interest). Free irs tax filing online If you use the cash method, you must include in income on your 2013 return the $508. Free irs tax filing online 80 interest you received in that year. Free irs tax filing online Constructive receipt. Free irs tax filing online   You constructively receive income when it is credited to your account or made available to you. Free irs tax filing online You do not need to have physical possession of it. Free irs tax filing online For example, you are considered to receive interest, dividends, or other earnings on any deposit or account in a bank, savings and loan, or similar financial institution, or interest on life insurance policy dividends left to accumulate, when they are credited to your account and subject to your withdrawal. Free irs tax filing online This is true even if they are not yet entered in your passbook. Free irs tax filing online   You constructively receive income on the deposit or account even if you must: Make withdrawals in multiples of even amounts, Give a notice to withdraw before making the withdrawal, Withdraw all or part of the account to withdraw the earnings, or Pay a penalty on early withdrawals, unless the interest you are to receive on an early withdrawal or redemption is substantially less than the interest payable at maturity. Free irs tax filing online Accrual method. Free irs tax filing online   If you use an accrual method, you report your interest income when you earn it, whether or not you have received it. Free irs tax filing online Interest is earned over the term of the debt instrument. Free irs tax filing online Example. Free irs tax filing online If, in the previous example, you use an accrual method, you must include the interest in your income as you earn it. Free irs tax filing online You would report the interest as follows: 2011, $80; 2012, $249. Free irs tax filing online 60; and 2013, $179. Free irs tax filing online 20. Free irs tax filing online Coupon bonds. Free irs tax filing online   Interest on coupon bonds is taxable in the year the coupon becomes due and payable. Free irs tax filing online It does not matter when you mail the coupon for payment. Free irs tax filing online How To Report Interest Income Generally, you report all your taxable interest income on Form 1040, line 8a; Form 1040A, line 8a; or Form 1040EZ, line 2. Free irs tax filing online You cannot use Form 1040EZ if your taxable interest income is more than $1,500. Free irs tax filing online Instead, you must use Form 1040A or Form 1040. Free irs tax filing online Form 1040A. Free irs tax filing online   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040A and any of the following are true. Free irs tax filing online Your taxable interest income is more than $1,500. Free irs tax filing online You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Free irs tax filing online You received interest from a seller-financed mortgage, and the buyer used the property as a home. Free irs tax filing online You received a Form 1099-INT for U. Free irs tax filing online S. Free irs tax filing online savings bond interest that includes amounts you reported before 2013. Free irs tax filing online You received, as a nominee, interest that actually belongs to someone else. Free irs tax filing online You received a Form 1099-INT for interest on frozen deposits. Free irs tax filing online You are reporting OID in an amount less than the amount shown on Form 1099-OID. Free irs tax filing online You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Free irs tax filing online You acquired taxable bonds after 1987 and choose to reduce interest income from the bonds by any amortizable bond premium (see Bond Premium Amortization in chapter 3 of Publication 550). Free irs tax filing online List each payer's name and the amount of interest income received from each payer on line 1. Free irs tax filing online If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Free irs tax filing online   You cannot use Form 1040A if you must use Form 1040, as described next. Free irs tax filing online Form 1040. Free irs tax filing online   You must use Form 1040 instead of Form 1040A or Form 1040EZ if: You forfeited interest income because of the early withdrawal of a time deposit; You acquired taxable bonds after 1987, you choose to reduce interest income from the bonds by any amortizable bond premium, and you are deducting the excess of bond premium amortization for the accrual period over the qualified stated interest for the period (see Bond Premium Amortization in chapter 3 of Publication 550); or You received tax-exempt interest from private activity bonds issued after August 7, 1986. Free irs tax filing online Schedule B (Form 1040A or 1040). Free irs tax filing online   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040 and any of the following apply. Free irs tax filing online Your taxable interest income is more than $1,500. Free irs tax filing online You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Free irs tax filing online You received interest from a seller-financed mortgage, and the buyer used the property as a home. Free irs tax filing online You received a Form 1099-INT for U. Free irs tax filing online S. Free irs tax filing online savings bond interest that includes amounts you reported before 2013. Free irs tax filing online You received, as a nominee, interest that actually belongs to someone else. Free irs tax filing online You received a Form 1099-INT for interest on frozen deposits. Free irs tax filing online You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Free irs tax filing online You are reporting OID in an amount less than the amount shown on Form 1099-OID. Free irs tax filing online Statement (2) in the preceding list under Form 1040 is true. Free irs tax filing online In Part I, line 1, list each payer's name and the amount received from each. Free irs tax filing online If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Free irs tax filing online Reporting tax-exempt interest. Free irs tax filing online   Total your tax-exempt interest (such as interest or accrued OID on certain state and municipal bonds, including tax-exempt interest on zero coupon municipal bonds) and exempt-interest dividends from a mutual fund as shown on Form 1099-INT, box 8, and on Form 1099-DIV, box 10. Free irs tax filing online Add these amounts to any other tax-exempt interest you received. Free irs tax filing online Report the total on line 8b of Form 1040A or 1040. Free irs tax filing online   If you file Form 1040EZ, enter “TEI” and the amount in the space to the left of line 2. Free irs tax filing online Do not add tax-exempt interest in the total on Form 1040EZ, line 2. Free irs tax filing online   Form 1099-INT, box 9, and Form 1099-DIV, box 11, show the tax-exempt interest subject to the alternative minimum tax on Form 6251. Free irs tax filing online These amounts are already included in the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Free irs tax filing online Do not add the amounts in Form 1099-INT, box 9 and Form 1099-DIV, box 11 to, or subtract them from, the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Free irs tax filing online    Do not report interest from an individual retirement account (IRA) as tax-exempt interest. Free irs tax filing online Form 1099-INT. Free irs tax filing online   Your taxable interest income, except for interest from U. Free irs tax filing online S. Free irs tax filing online savings bonds and Treasury obligations, is shown in box 1 of Form 1099-INT. Free irs tax filing online Add this amount to any other taxable interest income you received. Free irs tax filing online You must report all of your taxable interest income even if you do not receive a Form 1099-INT. Free irs tax filing online Generally, contact your financial institution if you do not receive a Form 1099-INT by February 15. Free irs tax filing online Your identifying number may be truncated on any paper Form 1099-INT you receive. Free irs tax filing online   If you forfeited interest income because of the early withdrawal of a time deposit, the deductible amount will be shown on Form 1099-INT in box 2. Free irs tax filing online See Penalty on early withdrawal of savings in chapter 1 of Publication 550. Free irs tax filing online   Box 3 of Form 1099-INT shows the interest income you received from U. Free irs tax filing online S. Free irs tax filing online savings bonds, Treasury bills, Treasury notes, and Treasury bonds. Free irs tax filing online Add the amount shown in box 3 to any other taxable interest income you received, unless part of the amount in box 3 was previously included in your interest income. Free irs tax filing online If part of the amount shown in box 3 was previously included in your interest income, see U. Free irs tax filing online S. Free irs tax filing online savings bond interest previously reported , later. Free irs tax filing online   Box 4 of Form 1099-INT will contain an amount if you were subject to backup withholding. Free irs tax filing online Report the amount from box 4 on Form 1040EZ, line 7; on Form 1040A, line 36; or Form 1040, line 62 (federal income tax withheld). Free irs tax filing online   Box 5 of Form 1099-INT shows investment expenses you may be able to deduct as an itemized deduction. Free irs tax filing online See chapter 28 for more information about investment expenses. Free irs tax filing online   If there are entries in boxes 6 and 7 of Form 1099-INT, you must file Form 1040. Free irs tax filing online You may be able to take a credit for the amount shown in box 6 unless you deduct this amount on line 8 of Schedule A (Form 1040). Free irs tax filing online To take the credit, you may have to file Form 1116, Foreign Tax Credit. Free irs tax filing online For more information, see Publication 514, Foreign Tax Credit for Individuals. Free irs tax filing online U. Free irs tax filing online S. Free irs tax filing online savings bond interest previously reported. Free irs tax filing online   If you received a Form 1099-INT for U. Free irs tax filing online S. Free irs tax filing online savings bond interest, the form may show interest you do not have to report. Free irs tax filing online See Form 1099-INT for U. Free irs tax filing online S. Free irs tax filing online savings bonds interest , earlier, under U. Free irs tax filing online S. Free irs tax filing online Savings Bonds. Free irs tax filing online   On Schedule B (Form 1040A or 1040), Part I, line 1, report all the interest shown on your Form 1099-INT. Free irs tax filing online Then follow these steps. Free irs tax filing online Several lines above line 2, enter a subtotal of all interest listed on line 1. Free irs tax filing online Below the subtotal enter “U. Free irs tax filing online S. Free irs tax filing online Savings Bond Interest Previously Reported” and enter amounts previously reported or interest accrued before you received the bond. Free irs tax filing online Subtract these amounts from the subtotal and enter the result on line 2. Free irs tax filing online More information. Free irs tax filing online   For more information about how to report interest income, see chapter 1 of Publication 550 or the instructions for the form you must file. Free irs tax filing online Prev  Up  Next   Home   More Online Publications