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Free prior year tax filing free 4. Free prior year tax filing free   Transportation Table of Contents Parking fees. Free prior year tax filing free Advertising display on car. Free prior year tax filing free Car pools. Free prior year tax filing free Hauling tools or instruments. Free prior year tax filing free Union members' trips from a union hall. Free prior year tax filing free Car ExpensesStandard Mileage Rate Actual Car Expenses Leasing a Car Disposition of a Car This chapter discusses expenses you can deduct for business transportation when you are not traveling away from home as defined in chapter 1. Free prior year tax filing free These expenses include the cost of transportation by air, rail, bus, taxi, etc. Free prior year tax filing free , and the cost of driving and maintaining your car. Free prior year tax filing free Transportation expenses include the ordinary and necessary costs of all of the following. Free prior year tax filing free 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 prior year tax filing free Tax home is defined in chapter 1. Free prior year tax filing free Visiting clients or customers. Free prior year tax filing free Going to a business meeting away from your regular workplace. Free prior year tax filing free Getting from your home to a temporary workplace when you have one or more regular places of work. Free prior year tax filing free These temporary workplaces can be either within the area of your tax home or outside that area. Free prior year tax filing free Transportation expenses do not include expenses you have while traveling away from home overnight. Free prior year tax filing free Those expenses are travel expenses discussed in chapter 1 . Free prior year tax filing free However, if you use your car while traveling away from home overnight, use the rules in this chapter to figure your car expense deduction. Free prior year tax filing free See Car Expenses , later. Free prior year tax filing free Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. Free prior year tax filing free However, there may be exceptions to this general rule. Free prior year tax filing free You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. Free prior year tax filing free Also, daily transportation expenses can be deducted if: (1) you have one or more regular work locations away from your residence or (2) your residence is your principal place of business and you incur expenses going between the residence and another work location in the same trade or business, regardless of whether the work is temporary or permanent and regardless of the distance. Free prior year tax filing free Illustration of transportation expenses. Free prior year tax filing free    Figure B , earlier, illustrates the rules that apply for deducting transportation expenses when you have a regular or main job away from your home. Free prior year tax filing free You may want to refer to it when deciding whether you can deduct your transportation expenses. Free prior year tax filing free Temporary work location. Free prior year tax filing free   If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance. Free prior year tax filing free   If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise. Free prior year tax filing free   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. Free prior year tax filing free   If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. Free prior year tax filing free It will not be treated as temporary after the date you determine it will last more than 1 year. Free prior year tax filing free   If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. Free prior year tax filing free You may have deductible travel expenses as discussed in chapter 1 . Free prior year tax filing free No regular place of work. Free prior year tax filing free   If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area. Free prior year tax filing free   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. Free prior year tax filing free   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. Free prior year tax filing free These are nondeductible commuting expenses. Free prior year tax filing free Two places of work. Free prior year tax filing free   If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. Free prior year tax filing free However, if for some personal reason you do not go directly from one location to the other, you cannot deduct more than the amount it would have cost you to go directly from the first location to the second. Free prior year tax filing free   Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. Free prior year tax filing free You cannot deduct them. Free prior year tax filing free Armed Forces reservists. Free prior year tax filing free   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. Free prior year tax filing free You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work . Free prior year tax filing free   You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. Free prior year tax filing free In this case, your transportation generally is a nondeductible commuting expense. Free prior year tax filing free However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. Free prior year tax filing free   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. Free prior year tax filing free   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. Free prior year tax filing free These expenses are discussed in chapter 1 . Free prior year tax filing free   If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to gross income rather than as an itemized deduction. Free prior year tax filing free For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home under Special Rules, in chapter 6. Free prior year tax filing free Commuting expenses. Free prior year tax filing free   You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. Free prior year tax filing free These costs are personal commuting expenses. Free prior year tax filing free You cannot deduct commuting expenses no matter how far your home is from your regular place of work. Free prior year tax filing free You cannot deduct commuting expenses even if you work during the commuting trip. Free prior year tax filing free Example. Free prior year tax filing free You sometimes use your cell phone to make business calls while commuting to and from work. Free prior year tax filing free Sometimes business associates ride with you to and from work, and you have a business discussion in the car. Free prior year tax filing free These activities do not change the trip from personal to business. Free prior year tax filing free You cannot deduct your commuting expenses. Free prior year tax filing free Parking fees. Free prior year tax filing free    Fees you pay to park your car at your place of business are nondeductible commuting expenses. Free prior year tax filing free You can, however, deduct business-related parking fees when visiting a customer or client. Free prior year tax filing free Advertising display on car. Free prior year tax filing free   Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. Free prior year tax filing free If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. Free prior year tax filing free Car pools. Free prior year tax filing free   You cannot deduct the cost of using your car in a nonprofit car pool. Free prior year tax filing free Do not include payments you receive from the passengers in your income. Free prior year tax filing free These payments are considered reimbursements of your expenses. Free prior year tax filing free However, if you operate a car pool for a profit, you must include payments from passengers in your income. Free prior year tax filing free You can then deduct your car expenses (using the rules in this publication). Free prior year tax filing free Hauling tools or instruments. Free prior year tax filing free   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. Free prior year tax filing free However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car). Free prior year tax filing free Union members' trips from a union hall. Free prior year tax filing free   If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. Free prior year tax filing free Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. Free prior year tax filing free Office in the home. Free prior year tax filing free   If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. Free prior year tax filing free (See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Free prior year tax filing free ) Examples of deductible transportation. Free prior year tax filing free   The following examples show when you can deduct transportation expenses based on the location of your work and your home. Free prior year tax filing free Example 1. Free prior year tax filing free You regularly work in an office in the city where you live. Free prior year tax filing free Your employer sends you to a 1-week training session at a different office in the same city. Free prior year tax filing free You travel directly from your home to the training location and return each day. Free prior year tax filing free You can deduct the cost of your daily round-trip transportation between your home and the training location. Free prior year tax filing free Example 2. Free prior year tax filing free Your principal place of business is in your home. Free prior year tax filing free You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business. Free prior year tax filing free Example 3. Free prior year tax filing free You have no regular office, and you do not have an office in your home. Free prior year tax filing free In this case, the location of your first business contact inside the metropolitan area is considered your office. Free prior year tax filing free Transportation expenses between your home and this first contact are nondeductible commuting expenses. Free prior year tax filing free Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. Free prior year tax filing free While you cannot deduct the costs of these trips, you can deduct the costs of going from one client or customer to another. Free prior year tax filing free Car Expenses If you use your car for business purposes, you ordinarily can deduct car expenses. Free prior year tax filing free You generally can use one of the two following methods to figure your deductible expenses. Free prior year tax filing free Standard mileage rate. Free prior year tax filing free Actual car expenses. Free prior year tax filing free If you use actual expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. Free prior year tax filing free See Leasing a Car , later. Free prior year tax filing free In this publication, “car” includes a van, pickup, or panel truck. Free prior year tax filing free For the definition of “car” for depreciation purposes, see Car defined under Actual Car Expenses, later. Free prior year tax filing free Rural mail carriers. Free prior year tax filing free   If you are a rural mail carrier, you may be able to treat the qualified reimbursement you received as your allowable expense. Free prior year tax filing free Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the reimbursement in your income. Free prior year tax filing free   If your vehicle expenses are more than the amount of your reimbursement, you can deduct the unreimbursed expenses as an itemized deduction on Schedule A (Form 1040). Free prior year tax filing free You must complete Form 2106 and attach it to your Form 1040, U. Free prior year tax filing free S. Free prior year tax filing free Individual Income Tax Return. Free prior year tax filing free   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. Free prior year tax filing free It is given as an equipment maintenance allowance (EMA) to employees of the U. Free prior year tax filing free S. Free prior year tax filing free Postal Service. Free prior year tax filing free It is at the rate contained in the 1991 collective bargaining agreement. Free prior year tax filing free Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. Free prior year tax filing free See your employer for information on your reimbursement. Free prior year tax filing free    If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. Free prior year tax filing free Standard Mileage Rate You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. Free prior year tax filing free For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Free prior year tax filing free If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. Free prior year tax filing free You cannot deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees. Free prior year tax filing free See Choosing the standard mileage rate and Standard mileage rate not allowed, later. Free prior year tax filing free You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. Free prior year tax filing free See chapter 6 for more information on reimbursements . Free prior year tax filing free Choosing the standard mileage rate. Free prior year tax filing free   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Free prior year tax filing free Then, in later years, you can choose to use either the standard mileage rate or actual expenses. Free prior year tax filing free   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. Free prior year tax filing free For leases that began on or before December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that is after 1997. Free prior year tax filing free   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. Free prior year tax filing free You cannot revoke the choice. Free prior year tax filing free However, in later years, you can switch from the standard mileage rate to the actual expenses method. Free prior year tax filing free If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation. Free prior year tax filing free Example. Free prior year tax filing free Larry is an employee who occasionally uses his own car for business purposes. Free prior year tax filing free He purchased the car in 2011, but he did not claim any unreimbursed employee expenses on his 2011 tax return. Free prior year tax filing free Because Larry did not use the standard mileage rate the first year the car was available for business use, he cannot use the standard mileage rate in 2013 to claim unreimbursed employee business expenses. Free prior year tax filing free   For more information about depreciation included in the standard mileage rate, see Exception under Methods of depreciation, later. Free prior year tax filing free Standard mileage rate not allowed. Free prior year tax filing free   You cannot use the standard mileage rate if you: Use five or more cars at the same time (such as in fleet operations), Claimed a depreciation deduction for the car using any method other than straight line, for example, MACRS (as discussed later under Depreciation Deduction), Claimed a section 179 deduction (discussed later) on the car, Claimed the special depreciation allowance on the car, Claimed actual car expenses after 1997 for a car you leased, or Are a rural mail carrier who received a qualified reimbursement. Free prior year tax filing free (See Rural mail carriers , earlier. Free prior year tax filing free ) Note. Free prior year tax filing free You can elect to use the standard mileage rate if you used a car for hire (such as a taxi) unless the standard mileage rate is otherwise not allowed, as discussed above. Free prior year tax filing free Five or more cars. Free prior year tax filing free   If you own or lease five or more cars that are used for business at the same time, you cannot use the standard mileage rate for the business use of any car. Free prior year tax filing free However, you may be able to deduct your actual expenses for operating each of the cars in your business. Free prior year tax filing free See Actual Car Expenses , later, for information on how to figure your deduction. Free prior year tax filing free   You are not using five or more cars for business at the same time if you alternate using (use at different times) the cars for business. Free prior year tax filing free   The following examples illustrate the rules for when you can and cannot use the standard mileage rate for five or more cars. Free prior year tax filing free Example 1. Free prior year tax filing free Marcia, a salesperson, owns three cars and two vans that she alternates using for calling on her customers. Free prior year tax filing free She can use the standard mileage rate for the business mileage of the three cars and the two vans because she does not use them at the same time. Free prior year tax filing free Example 2. Free prior year tax filing free Tony and his employees use his four pickup trucks in his landscaping business. Free prior year tax filing free During the year, he traded in two of his old trucks for two newer ones. Free prior year tax filing free Tony can use the standard mileage rate for the business mileage of all six of the trucks he owned during the year. Free prior year tax filing free Example 3. Free prior year tax filing free Chris owns a repair shop and an insurance business. Free prior year tax filing free He and his employees use his two pickup trucks and van for the repair shop. Free prior year tax filing free Chris alternates using his two cars for the insurance business. Free prior year tax filing free No one else uses the cars for business purposes. Free prior year tax filing free Chris can use the standard mileage rate for the business use of the pickup trucks, van, and the cars because he never has more than four vehicles used for business at the same time. Free prior year tax filing free Example 4. Free prior year tax filing free Maureen owns a car and four vans that are used in her housecleaning business. Free prior year tax filing free Her employees use the vans, and she uses the car to travel to various customers. Free prior year tax filing free Maureen cannot use the standard mileage rate for the car or the vans. Free prior year tax filing free This is because all five vehicles are used in Maureen's business at the same time. Free prior year tax filing free She must use actual expenses for all vehicles. Free prior year tax filing free Interest. Free prior year tax filing free   If you are an employee, you cannot deduct any interest paid on a car loan. Free prior year tax filing free This applies even if you use the car 100% for business as an employee. Free prior year tax filing free   However, if you are self-employed and use your car in your business, you can deduct that part of the interest expense that represents your business use of the car. Free prior year tax filing free For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). Free prior year tax filing free You cannot deduct the part of the interest expense that represents your personal use of the car. Free prior year tax filing free    If you use a home equity loan to purchase your car, you may be able to deduct the interest. Free prior year tax filing free See Publication 936, Home Mortgage Interest Deduction, for more information. Free prior year tax filing free Personal property taxes. Free prior year tax filing free   If you itemize your deductions on Schedule A (Form 1040), you can deduct on line 7 state and local personal property taxes on motor vehicles. Free prior year tax filing free You can take this deduction even if you use the standard mileage rate or if you do not use the car for business. Free prior year tax filing free   If you are self-employed and use your car in your business, you can deduct the business part of state and local personal property taxes on motor vehicles on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). Free prior year tax filing free If you itemize your deductions, you can include the remainder of your state and local personal property taxes on the car on Schedule A (Form 1040). Free prior year tax filing free Parking fees and tolls. Free prior year tax filing free   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. Free prior year tax filing free (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. Free prior year tax filing free ) Sale, trade-in, or other disposition. Free prior year tax filing free   If you sell, trade in, or otherwise dispose of your car, you may have a gain or loss on the transaction or an adjustment to the basis of your new car. Free prior year tax filing free See Disposition of a Car , later. Free prior year tax filing free Actual Car Expenses If you do not use the standard mileage rate, you may be able to deduct your actual car expenses. Free prior year tax filing free If you qualify to use both methods, you may want to figure your deduction both ways to see which gives you a larger deduction. Free prior year tax filing free Actual car expenses include: Depreciation Licenses Lease  payments Registration  fees Gas Insurance Repairs Oil Garage rent Tires Tolls Parking fees   If you have fully depreciated a car that you still use in your business, you can continue to claim your other actual car expenses. Free prior year tax filing free Continue to keep records, as explained later in chapter 5 . Free prior year tax filing free Business and personal use. Free prior year tax filing free   If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. Free prior year tax filing free You can divide your expense based on the miles driven for each purpose. Free prior year tax filing free Example. Free prior year tax filing free You are a sales representative for a clothing firm and drive your car 20,000 miles during the year: 12,000 miles for business and 8,000 miles for personal use. Free prior year tax filing free You can claim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense. Free prior year tax filing free Employer-provided vehicle. Free prior year tax filing free   If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. Free prior year tax filing free You cannot use the standard mileage rate. Free prior year tax filing free See Vehicle Provided by Your Employer in chapter 6. Free prior year tax filing free Interest on car loans. Free prior year tax filing free   If you are an employee, you cannot deduct any interest paid on a car loan. Free prior year tax filing free This interest is treated as personal interest and is not deductible. Free prior year tax filing free If you are self-employed and use your car in that business, see Interest , earlier, under Standard Mileage Rate. Free prior year tax filing free Taxes paid on your car. Free prior year tax filing free   If you are an employee, you can deduct personal property taxes paid on your car if you itemize deductions. Free prior year tax filing free Enter the amount paid on line 7 of Schedule A (Form 1040). Free prior year tax filing free Sales taxes. Free prior year tax filing free   Generally, sales taxes on your car are part of your car's basis and are recovered through depreciation, discussed later. Free prior year tax filing free Fines and collateral. Free prior year tax filing free   You cannot deduct fines you pay or collateral you forfeit for traffic violations. Free prior year tax filing free Casualty and theft losses. Free prior year tax filing free   If your car is damaged, destroyed, or stolen, you may be able to deduct part of the loss not covered by insurance. Free prior year tax filing free See Publication 547, Casualties, Disasters, and Thefts, for information on deducting a loss on your car. Free prior year tax filing free Depreciation and section 179 deductions. Free prior year tax filing free   Generally, the cost of a car, plus sales tax and improvements, is a capital expense. Free prior year tax filing free Because the benefits last longer than 1 year, you generally cannot deduct a capital expense. Free prior year tax filing free However, you can recover this cost through the section 179 deduction (the deduction allowed by section 179 of the Internal Revenue Code), special depreciation allowance, and depreciation deductions. Free prior year tax filing free Depreciation allows you to recover the cost over more than 1 year by deducting part of it each year. Free prior year tax filing free The section 179 deduction , special depreciation allowance , and depreciation deductions are discussed later. Free prior year tax filing free   Generally, there are limits on these deductions. Free prior year tax filing free Special rules apply if you use your car 50% or less in your work or business. Free prior year tax filing free   You can claim a section 179 deduction and use a depreciation method other than straight line only if you do not use the standard mileage rate to figure your business-related car expenses in the year you first place a car in service. Free prior year tax filing free   If, in the year you first place a car in service, you claim either a section 179 deduction or use a depreciation method other than straight line for its estimated useful life, you cannot use the standard mileage rate on that car in any future year. Free prior year tax filing free Car defined. Free prior year tax filing free   For depreciation purposes, a car is any four-wheeled vehicle (including a truck or van) made primarily for use on public streets, roads, and highways. Free prior year tax filing free Its unloaded gross vehicle weight must not be more than 6,000 pounds. Free prior year tax filing free A car includes any part, component, or other item physically attached to it or usually included in the purchase price. Free prior year tax filing free   A car does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a business, A vehicle used directly in the business of transporting persons or property for pay or hire, or A truck or van that is a qualified nonpersonal use vehicle. Free prior year tax filing free Qualified nonpersonal use vehicles. Free prior year tax filing free   These are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Free prior year tax filing free They include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Free prior year tax filing free Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles. Free prior year tax filing free More information. Free prior year tax filing free   See Depreciation Deduction , later, for more information on how to depreciate your vehicle. Free prior year tax filing free Section 179 Deduction The section 179 deduction allows you to treat a portion or all of the cost of a car as a current expense. Free prior year tax filing free If you choose to deduct all or part of the cost as a current expense, you must reduce your depreciable basis in the car by the amount of the section 179 deduction. Free prior year tax filing free There is a limit on the total section 179 deduction, special depreciation allowance, and depreciation deduction for cars, trucks, and vans that may reduce or eliminate any benefit from claiming the section 179 deduction. Free prior year tax filing free See Depreciation Limits, later. Free prior year tax filing free You can claim the section 179 deduction only in the year you place the car in service. Free prior year tax filing free For this purpose, a car is placed in service when it is ready and available for a specifically assigned use, whether in a trade or business, a tax-exempt activity, a personal activity, or for the production of income. Free prior year tax filing free Even if you are not using the property, it is in service when it is ready and available for its specifically assigned use. Free prior year tax filing free A car first used for personal purposes cannot qualify for the deduction in a later year when its use changes to business. Free prior year tax filing free Example. Free prior year tax filing free In 2012, you bought a new car and used it for personal purposes. Free prior year tax filing free In 2013, you began to use it for business. Free prior year tax filing free Changing its use to business use does not qualify the cost of your car for a section 179 deduction in 2013. Free prior year tax filing free However, you can claim a depreciation deduction for the business use of the car starting in 2013. Free prior year tax filing free See Depreciation Deduction , later. Free prior year tax filing free More than 50% business use requirement. Free prior year tax filing free   You must use the property more than 50% for business to claim any section 179 deduction. Free prior year tax filing free If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. Free prior year tax filing free The result is the cost of the property that can qualify for the section 179 deduction. Free prior year tax filing free Example. Free prior year tax filing free Peter purchased a car in April 2013 for $24,500 and used it 60% for business. Free prior year tax filing free Based on his business usage, the total cost of Peter's car that qualifies for the section 179 deduction is $14,700 ($24,500 cost × 60% business use). Free prior year tax filing free But see Limit on total section 179, special depreciation allowance, and depreciation deduction , discussed later. Free prior year tax filing free Limits. Free prior year tax filing free   There are limits on: The amount of the section 179 deduction, The section 179 deduction for sport utility and certain other vehicles, and The total amount of the section 179 deduction, special depreciation allowance, and depreciation deduction (discussed later ) you can claim for a qualified property. Free prior year tax filing free Limit on the amount of the section 179 deduction. Free prior year tax filing free   For 2013, the total amount you can choose to deduct under section 179 generally cannot be more than $500,000. Free prior year tax filing free   If the cost of your section 179 property placed in service in 2013 is over $2,000,000, you must reduce the $500,000 dollar limit (but not below zero) by the amount of cost over $2,000,000. Free prior year tax filing free If the cost of your section 179 property placed in service during 2013 is $2,500,000 or more, you cannot take a section 179 deduction. Free prior year tax filing free   The total amount you can deduct under section 179 each year after you apply the limits listed above cannot be more than the taxable income from the active conduct of any trade or business during the year. Free prior year tax filing free   If you are married and file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service. Free prior year tax filing free   If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit. Free prior year tax filing free You must allocate the dollar limit (after any reduction) between you. Free prior year tax filing free   For more information on the above section 179 deduction limits, see Publication 946. Free prior year tax filing free Limit for sport utility and certain other vehicles. Free prior year tax filing free   For sport utility and certain other vehicles placed in service in 2013, the portion of the vehicle's cost taken into account in figuring your section 179 deduction is limited to $25,000. Free prior year tax filing free This rule applies to any four-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways, that is not subject to any of the passenger automobile limits explained under Depreciation Limits , later, and that is rated at no more than 14,000 pounds gross vehicle weight. Free prior year tax filing free However, the $25,000 limit does not apply to any vehicle: Designed to have a seating capacity of more than nine persons behind the driver's seat, Equipped with a cargo area of at least 6 feet in interior length that is an open area or is designed for use as an open area but is enclosed by a cap and is not readily accessible directly from the passenger compartment, or That has an integral enclosure, fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield. Free prior year tax filing free    Limit on total section 179, special depreciation allowance, and depreciation deduction. Free prior year tax filing free   Generally, the total amount of section 179, special depreciation allowance, and depreciation deduction you can claim for a car that is qualified property and that you placed in service in 2013 is $11,160. Free prior year tax filing free The limit is reduced if your business use of the car is less than 100%. Free prior year tax filing free See Depreciation Limits , later, for more information. Free prior year tax filing free Example. Free prior year tax filing free In the earlier example under More than 50% business use requirement, Peter had a car with a cost (for purposes of the section 179 deduction) of $14,700. Free prior year tax filing free However, based on Peter's business usage of his car, the total of his section 179, special depreciation allowance, and depreciation deductions is limited to $6,696 ($11,160 limit x 60% business use). Free prior year tax filing free Cost of car. Free prior year tax filing free   For purposes of the section 179 deduction, the cost of the car does not include any amount figured by reference to any other property held by you at any time. Free prior year tax filing free For example, if you buy (for cash and a trade-in) a new car to use in your business, your cost for purposes of the section 179 deduction does not include your adjusted basis in the car you trade in for the new car. Free prior year tax filing free Your cost includes only the cash you paid. Free prior year tax filing free Basis of car for depreciation. Free prior year tax filing free   The amount of the section 179 deduction reduces your basis in your car. Free prior year tax filing free If you choose the section 179 deduction, you must subtract the amount of the deduction from the cost of your car. Free prior year tax filing free The resulting amount is the basis in your car you use to figure your depreciation deduction. Free prior year tax filing free When to choose. Free prior year tax filing free   If you want to take the section 179 deduction, you must make the choice in the tax year you place the car in service for business or work. Free prior year tax filing free How to choose. Free prior year tax filing free    Employees use Form 2106 to make this choice and report the section 179 deduction. Free prior year tax filing free All others use Form 4562. Free prior year tax filing free   File the appropriate form with either of the following. Free prior year tax filing free Your original tax return filed for the year the property was placed in service (whether or not you file it timely). Free prior year tax filing free An amended return filed within the time prescribed by law. Free prior year tax filing free An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. Free prior year tax filing free The amended return must also include any resulting adjustments to taxable income. Free prior year tax filing free    You must keep records that show the specific identification of each piece of qualifying section 179 property. Free prior year tax filing free These records must show how you acquired the property, the person you acquired it from, and when you placed it in service. Free prior year tax filing free Revoking an election. Free prior year tax filing free   An election (or any specification made in the election) to take a section 179 deduction for 2013 can only be revoked with the Commissioner's approval. Free prior year tax filing free Recapture of section 179 deduction. Free prior year tax filing free   To be eligible to claim the section 179 deduction, you must use your car more than 50% for business or work in the year you acquired it. Free prior year tax filing free If your business use of the car is 50% or less in a later tax year during the recovery period, you have to recapture (include in income) in that later year any excess depreciation. Free prior year tax filing free Any section 179 deduction claimed on the car is included in calculating the excess depreciation. Free prior year tax filing free For information on this calculation, see Excess depreciation , later in this chapter under Car Used 50% or Less for Business. Free prior year tax filing free Dispositions. Free prior year tax filing free   If you dispose of a car on which you had claimed the section 179 deduction, the amount of that deduction is treated as a depreciation deduction for recapture purposes. Free prior year tax filing free You treat any gain on the disposition of the property as ordinary income up to the amount of the section 179 deduction and any allowable depreciation (unless you establish the amount actually allowed). Free prior year tax filing free For information on the disposition of a car, see Disposition of a Car , later. Free prior year tax filing free Special Depreciation Allowance You may be able to claim the special depreciation allowance for your car, truck, or van, if it is qualified property and was placed in service in 2013. Free prior year tax filing free The allowance is an additional depreciation deduction of 50% of the car's depreciable basis (after any section 179 deduction, but before figuring your regular depreciation deduction under MACRS). Free prior year tax filing free The special depreciation allowance applies only for the first year the car is placed in service. Free prior year tax filing free To qualify for the allowance more than 50% of the use of the car must be in a qualified business use (as defined under Depreciation Deduction, later). Free prior year tax filing free Combined depreciation. Free prior year tax filing free   Your combined section 179 deduction, special depreciation allowance, and regular MACRS depreciation deduction is limited to the maximum allowable depreciation deduction for cars of $11,160 ($3,160 if you elect not to claim the special depreciation allowance). Free prior year tax filing free For trucks and vans, the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). Free prior year tax filing free See Depreciation Limits , later in this chapter. Free prior year tax filing free Qualified car. Free prior year tax filing free   To be a qualified car (including trucks and vans), the car must meet all of the following tests. Free prior year tax filing free You purchased the car new on or after January 1, 2008, but only if no binding written contract to acquire the car existed before January 1, 2008, You placed the car in service in your trade or business before January 1, 2014, You used the car more than 50% in a qualified business use. Free prior year tax filing free Election not to claim the special depreciation allowance. Free prior year tax filing free   You can elect not to claim the special depreciation allowance for your car, truck, or van, that is qualified property. Free prior year tax filing free If you make this election, it applies to all 5-year property placed in service during the year. Free prior year tax filing free   To make the election, attach a statement to your timely filed return (including extensions) indicating the class of property (5-year for cars) for which you are making the election and that you are electing not to claim the special depreciation allowance for qualified property acquired on or after January 1, 2008. Free prior year tax filing free    Unless you elect not to claim the special depreciation allowance, you must reduce the car's adjusted basis by the amount of the allowance, even if the allowance was not claimed. Free prior year tax filing free Depreciation Deduction If you use actual car expenses to figure your deduction for a car you own and use in your business, you can claim a depreciation deduction. Free prior year tax filing free This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car. Free prior year tax filing free You generally need to know the following things about the car you intend to depreciate. Free prior year tax filing free Your basis in the car. Free prior year tax filing free The date you place the car in service. Free prior year tax filing free The method of depreciation and recovery period you will use. Free prior year tax filing free Basis. Free prior year tax filing free   Your basis in a car for figuring depreciation is generally its cost. Free prior year tax filing free This includes any amount you borrow or pay in cash, other property, or services. Free prior year tax filing free   Generally, you figure depreciation on your car, truck, or van using your unadjusted basis (see Unadjusted basis , later). Free prior year tax filing free However, in some situations you will use your adjusted basis (your basis reduced by depreciation allowed or allowable in earlier years). Free prior year tax filing free For one of these situations see Exception under Methods of depreciation, later. Free prior year tax filing free   If you change the use of a car from personal to business, your basis for depreciation is the lesser of the fair market value or your adjusted basis in the car on the date of conversion. Free prior year tax filing free Additional rules concerning basis are discussed later in this chapter under Unadjusted basis . Free prior year tax filing free Placed in service. Free prior year tax filing free   You generally place a car in service when it is available for use in your work or business, in an income-producing activity, or in a personal activity. Free prior year tax filing free Depreciation begins when the car is placed in service for use in your work or business or for the production of income. Free prior year tax filing free   For purposes of computing depreciation, if you first start using the car only for personal use and later convert it to business use, you place the car in service on the date of conversion. Free prior year tax filing free Car placed in service and disposed of in the same year. Free prior year tax filing free   If you place a car in service and dispose of it in the same tax year, you cannot claim any depreciation deduction for that car. Free prior year tax filing free Methods of depreciation. Free prior year tax filing free   Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery System (MACRS). Free prior year tax filing free MACRS is discussed later in this chapter. Free prior year tax filing free Exception. Free prior year tax filing free   If you used the standard mileage rate in the first year of business use and change to the actual expenses method in a later year, you cannot depreciate your car under the MACRS rules. Free prior year tax filing free You must use straight line depreciation over the estimated remaining useful life of the car. Free prior year tax filing free   To figure depreciation under the straight line method, you must reduce your basis in the car (but not below zero) by a set rate per mile for all miles for which you used the standard mileage rate. Free prior year tax filing free The rate per mile varies depending on the year(s) you used the standard mileage rate. Free prior year tax filing free For the rate(s) to use, see Depreciation adjustment when you used the standard mileage rate under Disposition of a Car, later. Free prior year tax filing free   This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis . Free prior year tax filing free You must use your adjusted basis in your car to figure your depreciation deduction. Free prior year tax filing free For additional information on the straight line method of depreciation, see Publication 946. Free prior year tax filing free More-than-50%-use test. Free prior year tax filing free   Generally, you must use your car more than 50% for qualified business use (defined next) during the year to use MACRS. Free prior year tax filing free You must meet this more-than-50%-use test each year of the recovery period (6 years under MACRS) for your car. Free prior year tax filing free   If your business use is 50% or less, you must use the straight line method to depreciate your car. Free prior year tax filing free This is explained later under Car Used 50% or Less for Business . Free prior year tax filing free Qualified business use. Free prior year tax filing free   A qualified business use is any use in your trade or business. Free prior year tax filing free It does not include use for the production of income (investment use). Free prior year tax filing free However, you do combine your business and investment use to compute your depreciation deduction for the tax year. Free prior year tax filing free Use of your car by another person. Free prior year tax filing free   Do not treat any use of your car by another person as use in your trade or business unless that use meets one of the following conditions. Free prior year tax filing free It is directly connected with your business. Free prior year tax filing free It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income). Free prior year tax filing free It results in a payment of fair market rent. Free prior year tax filing free This includes any payment to you for the use of your car. Free prior year tax filing free Business use changes. Free prior year tax filing free   If you used your car more than 50% in qualified business use in the year you placed it in service, but 50% or less in a later year (including the year of disposition), you have to change to the straight line method of depreciation. Free prior year tax filing free See Qualified business use 50% or less in a later year under Car Used 50% or Less for Business, later. Free prior year tax filing free    Property does not cease to be used more than 50% in qualified business use by reason of a transfer at death. Free prior year tax filing free Use for more than one purpose. Free prior year tax filing free   If you use your car for more than one purpose during the tax year, you must allocate the use to the various purposes. Free prior year tax filing free You do this on the basis of mileage. Free prior year tax filing free Figure the percentage of qualified business use by dividing the number of miles you drive your car for business purposes during the year by the total number of miles you drive the car during the year for any purpose. Free prior year tax filing free Change from personal to business use. Free prior year tax filing free   If you change the use of a car from 100% personal use to business use during the tax year, you may not have mileage records for the time before the change to business use. Free prior year tax filing free In this case, you figure the percentage of business use for the year as follows. Free prior year tax filing free Determine the percentage of business use for the period following the change. Free prior year tax filing free Do this by dividing business miles by total miles driven during that period. Free prior year tax filing free Multiply the percentage in (1) by a fraction. Free prior year tax filing free The numerator (top number) is the number of months the car is used for business and the denominator (bottom number) is 12. Free prior year tax filing free Example. Free prior year tax filing free You use a car only for personal purposes during the first 6 months of the year. Free prior year tax filing free During the last 6 months of the year, you drive the car a total of 15,000 miles of which 12,000 miles are for business. Free prior year tax filing free This gives you a business use percentage of 80% (12,000 ÷ 15,000) for that period. Free prior year tax filing free Your business use for the year is 40% (80% × 6/12). Free prior year tax filing free Limits. Free prior year tax filing free   The amount you can claim for section 179, special depreciation allowance, and depreciation deductions may be limited. Free prior year tax filing free The maximum amount you can claim depends on the year in which you placed your car in service. Free prior year tax filing free You have to reduce the maximum amount if you did not use the car exclusively for business. Free prior year tax filing free See Depreciation Limits , later. Free prior year tax filing free Unadjusted basis. Free prior year tax filing free   You use your unadjusted basis (often referred to as your basis or your basis for depreciation) to figure your depreciation using the MACRS depreciation chart, explained later under Modified Accelerated Cost Recovery System (MACRS) . Free prior year tax filing free Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts. Free prior year tax filing free   To figure your unadjusted basis, begin with your car's original basis, which generally is its cost. Free prior year tax filing free Cost includes sales taxes (see Sales taxes , earlier), destination charges, and dealer preparation. Free prior year tax filing free Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. Free prior year tax filing free Decrease your basis by any section 179 deduction, special depreciation allowance, gas guzzler tax, clean-fuel vehicle deduction (for vehicles placed in service before Jan. Free prior year tax filing free 1, 2006), and alternative motor vehicle credit. Free prior year tax filing free   See Form 8910 for information on the alternative motor vehicle credit. Free prior year tax filing free If your business use later falls to 50% or less, you may have to recapture (include in your income) any excess depreciation. Free prior year tax filing free See Car Used 50% or Less for Business, later, for more information. Free prior year tax filing free If you acquired the car by gift or inheritance, see Publication 551, Basis of Assets, for information on your basis in the car. Free prior year tax filing free Improvements. Free prior year tax filing free   A major improvement to a car is treated as a new item of 5-year recovery property. Free prior year tax filing free It is treated as placed in service in the year the improvement is made. Free prior year tax filing free It does not matter how old the car is when the improvement is added. Free prior year tax filing free Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. Free prior year tax filing free However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. Free prior year tax filing free Your car's depreciation deduction for the year (plus any section 179 deduction, special depreciation allowance, and depreciation on any improvements) cannot be more than the depreciation limit that applies for that year. Free prior year tax filing free See Depreciation Limits , later. Free prior year tax filing free Car trade-in. Free prior year tax filing free   If you traded one car (the “old car”) for another car (the “new car”) in 2013, there are two ways you can treat the transaction. Free prior year tax filing free You can elect to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. Free prior year tax filing free If you make this election, you treat the old car as disposed of at the time of the trade-in. Free prior year tax filing free The depreciable basis of the new car is the adjusted basis of the old car (figured as if 100% of the car's use had been for business purposes) plus any additional amount you paid for the new car. Free prior year tax filing free You then figure your depreciation deduction for the new car beginning with the date you placed it in service. Free prior year tax filing free You make this election by completing Form 2106, Part II, Section D. Free prior year tax filing free This method is explained later, beginning at Effect of trade-in on basis . Free prior year tax filing free If you do not make the election described in (1), you must figure depreciation separately for the remaining basis of the old car and for any additional amount you paid for the new car. Free prior year tax filing free You must apply two depreciation limits (see Depreciation Limits , later). Free prior year tax filing free The limit that applies to the remaining basis of the old car generally is the amount that would have been allowed had you not traded in the old car. Free prior year tax filing free The limit that applies to the additional amount you paid for the new car generally is the limit that applies for the tax year, reduced by the depreciation allowance for the remaining basis of the old car. Free prior year tax filing free You must use Form 4562 to compute your depreciation deduction. Free prior year tax filing free You cannot use Form 2106, Part II, Section D. Free prior year tax filing free This method is explained in Publication 946. Free prior year tax filing free   If you elect to use the method described in (1), you must do so on a timely filed tax return (including extensions). Free prior year tax filing free Otherwise, you must use the method described in (2). Free prior year tax filing free Effect of trade-in on basis. Free prior year tax filing free   The discussion that follows applies to trade-ins of cars in 2013, where the election was made to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. Free prior year tax filing free For information on how to figure depreciation for cars involved in a like-kind exchange (trade-in) in 2013, for which the election was not made, see Publication 946 and Regulations section 1. Free prior year tax filing free 168(i)-6(d)(3). Free prior year tax filing free Traded car used only for business. Free prior year tax filing free   If you trade in a car you used only in your business for another car that will be used only in your business, your original basis in the new car is your adjusted basis in the old car, plus any additional amount you pay for the new car. Free prior year tax filing free Example. Free prior year tax filing free Paul trades in a car that has an adjusted basis of $5,000 for a new car. Free prior year tax filing free In addition, he pays cash of $20,000 for the new car. Free prior year tax filing free His original basis of the new car is $25,000 (his $5,000 adjusted basis in the old car plus the $20,000 cash paid). Free prior year tax filing free Paul's unadjusted basis is $25,000 unless he claims the section 179 deduction, special depreciation allowance, or has other increases or decreases to his original basis, discussed under Unadjusted basis , earlier. Free prior year tax filing free Traded car used partly in business. Free prior year tax filing free   If you trade in a car you used partly in your business for a new car you will use in your business, you must make a “trade-in” adjustment for the personal use of the old car. Free prior year tax filing free This adjustment has the effect of reducing your basis in your old car, but not below zero, for purposes of figuring your depreciation deduction for the new car. Free prior year tax filing free (This adjustment is not used, however, when you determine the gain or loss on the later disposition of the new car. Free prior year tax filing free See Publication 544, Sales and Other Dispositions of Assets, for information on how to report the disposition of your car. Free prior year tax filing free )   To figure the unadjusted basis of your new car for depreciation, first add to your adjusted basis in the old car any additional amount you pay for the new car. Free prior year tax filing free Then subtract from that total the excess, if any, of: The total of the amounts that would have been allowable as depreciation during the tax years before the trade if 100% of the use of the car had been business and investment use, over The total of the amounts actually allowed as depreciation during those years. Free prior year tax filing free For information about figuring depreciation, see Modified Accelerated Cost Recovery System (MACRS) , which follows Example 2, later. Free prior year tax filing free Modified Accelerated Cost Recovery System (MACRS). Free prior year tax filing free   The Modified Accelerated Cost Recovery System (MACRS) is the name given to the tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income. Free prior year tax filing free   The maximum amount you can deduct is limited, depending on the year you placed your car in service. Free prior year tax filing free See Depreciation Limits , later. Free prior year tax filing free Recovery period. Free prior year tax filing free   Under MACRS, cars are classified as 5-year property. Free prior year tax filing free You actually depreciate the cost of a car, truck, or van over a period of 6 calendar years. Free prior year tax filing free This is because your car is generally treated as placed in service in the middle of the year, and you claim depreciation for one-half of both the first year and the sixth year. Free prior year tax filing free Depreciation deduction for certain Indian reservation property. Free prior year tax filing free   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations after 1993 and before 2014. Free prior year tax filing free The recovery that applies for a business-use car is 3 years instead of 5 years. Free prior year tax filing free However, the depreciation limits, discussed later, will still apply. Free prior year tax filing free   For more information on the qualifications for this shorter recovery period and the percentages to use in figuring the depreciation deduction, see chapter 4 of Publication 946. Free prior year tax filing free Depreciation methods. Free prior year tax filing free   You can use one of the following methods to depreciate your car. Free prior year tax filing free The 200% declining balance method (200% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. Free prior year tax filing free The 150% declining balance method (150% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. Free prior year tax filing free The straight line method (SL) over a 5-year recovery period. Free prior year tax filing free    If you use Table 4-1 (discussed later under MACRS depreciation chart) to determine your depreciation rate for 2013, you do not need to determine in what year using the straight line method provides an equal or greater deduction. Free prior year tax filing free This is because the chart has the switch to the straight line method built into its rates. Free prior year tax filing free   Before choosing a method, you may wish to consider the following facts. Free prior year tax filing free Using the straight line method provides equal yearly deductions throughout the recovery period. Free prior year tax filing free Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year. Free prior year tax filing free MACRS depreciation chart. Free prior year tax filing free   A 2013 MACRS Depreciation Chart and instructions are included in this chapter as Table 4-1 . Free prior year tax filing free Using this table will make it easy for you to figure the 2013 depreciation deduction for your car. Free prior year tax filing free A similar chart appears in the Instructions for Form 2106. Free prior year tax filing free    You may have to use the tables in Publication 946 instead of using this MACRS Depreciation Chart. Free prior year tax filing free   You must use the Depreciation Tables in Publication 946 rather than the 2013 MACRS Depreciation Chart in this publication if any one of the following four conditions applies to you. Free prior year tax filing free You file your return on a fiscal year basis. Free prior year tax filing free You file your return for a short tax year (less than 12 months). Free prior year tax filing free During the year, all of the following conditions apply. Free prior year tax filing free You placed some property in service from January through September. Free prior year tax filing free You placed some property in service from October through December. Free prior year tax filing free Your basis in the property you placed in service from October through December (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) was more than 40% of your total bases in all property you placed in service during the year. Free prior year tax filing free   You placed qualified property in service on an Indian reservation. Free prior year tax filing free Depreciation in future years. Free prior year tax filing free   If you use the percentages from the chart, you generally must continue to use them for the entire recovery period of your car. Free prior year tax filing free However, you cannot continue to use the chart if your basis in your car is adjusted because of a casualty. Free prior year tax filing free In that case, for the year of the adjustment and the remaining recovery period, figure the depreciation without the chart using your adjusted basis in the car at the end of the year of the adjustment and over the remaining recovery period. Free prior year tax filing free See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. Free prior year tax filing free    In future years, do not use the chart in this edition of the publication. Free prior year tax filing free Instead, use the chart in the publication or the form instructions for those future years. Free prior year tax filing free Disposition of car during recovery period. Free prior year tax filing free   If you dispose of the car before the end of the recovery period, you are generally allowed a half year of depreciation in the year of disposition unless you purchased the car during the last quarter of a year. Free prior year tax filing free See Depreciation deduction for the year of disposition under Disposition of a Car, later, for information on how to figure the depreciation allowed in the year of disposition. Free prior year tax filing free How to use the 2013 chart. Free prior year tax filing free   To figure your depreciation deduction for 2013, find the percentage in the column of Table 4-1 based on the date that you first placed the car in service and the depreciation method that you are using. Free prior year tax filing free Multiply the unadjusted basis of your car (defined earlier) by that percentage to determine the amount of your depreciation deduction. Free prior year tax filing free If you prefer to figure your depreciation deduction without the help of the chart, see Publication 946. Free prior year tax filing free    Your deduction cannot be more than the maximum depreciation limit for cars. Free prior year tax filing free See Depreciation Limits, later. Free prior year tax filing free Example. Free prior year tax filing free Phil bought a used truck in February 2012 to use exclusively in his landscape business. Free prior year tax filing free He paid $9,200 for the truck with no trade-in. Free prior year tax filing free Phil did not claim any section 179 deduction, the truck did not qualify for the special depreciation allowance, and he chose to use the 200% DB method to get the largest depreciation deduction in the early years. Free prior year tax filing free Phil used the MACRS depreciation chart in 2012 to find his percentage. Free prior year tax filing free The unadjusted basis of his truck equals its cost because Phil used it exclusively for business. Free prior year tax filing free He multiplied the unadjusted basis of his truck, $9,200, by the percentage that applied, 20%, to figure his 2012 depreciation deduction of $1,840. Free prior year tax filing free In 2013, Phil used the truck for personal purposes when he repaired his father's cabin. Free prior year tax filing free His records show that the business use of his truck was 90% in 2013. Free prior year tax filing free Phil used Table 4-1 to find his percentage. Free prior year tax filing free Reading down the first column for the date placed in service and across to the 200% DB column, he locates his percentage, 32%. Free prior year tax filing free He multiplies the unadjusted basis of his truck, $8,280 ($9,200 cost × 90% business use), by 32% to figure his 2013 depreciation deduction of $2,650. Free prior year tax filing free Depreciation Limits There are limits on the amount you can deduct for depreciation of your car, truck, or van. Free prior year tax filing free The section 179 deduction and special depreciation allowance are treated as depreciation for purposes of the limits. Free prior year tax filing free The maximum amount you can deduct each year depends on the year you place the car in service. Free prior year tax filing free These limits are shown in the following tables. Free prior year tax filing free   Maximum Depreciation Deduction for Cars Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2012–2013 $11,1601 $5,100 $3,050 $1,875 2010–2011 11,0602 4,900 2,950 1,775 2008–2009 10,9603 4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6103 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7104 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6605 4,900 2,950 1,775 2001–2002 7,6605 4,900 2,950 1,775 2000 3,060 4,900 2,950 1,775 1$3,160 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Free prior year tax filing free 2$3,060 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Free prior year tax filing free 3$2,960 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Free prior year tax filing free 4$7,660 if you acquired the car before 5/6/2003. Free prior year tax filing free $3,060 if the car is not qualified property or if you elect not to claim any special depreciation allowance. Free prior year tax filing free 5$3,060 if you acquired the car before 9/11/2001, the car is not qualified property, or you elect not to claim the special depreciation allowance. Free prior year tax filing free Trucks and vans. Free prior year tax filing free   For 2013, the maximum depreciation deductions for trucks and vans are generally higher than those for cars. Free prior year tax filing free A truck or van is a passenger automobile that is classified by the manufacturer as a truck or van and rated at 6,000 pounds gross vehicle weight or less. Free prior year tax filing free For trucks and vans placed in service before 2003, use the Maximum Depreciation Deduction for Cars table. Free prior year tax filing free Maximum Depreciation Deduction for Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 $11,3601 $5,300 $3,150 $1,875 2011 11,2601 5,200 3,150 1,875 2010 11,1601 5,100 3,050 1,875 2009 11,0601 4,900 2,950 1,775 2008 11,1601 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2005–2006 3,260 5,200 3,150 1,875 2004 10,9101 5,300 3,150 1,875 2003 11,0101,2 5,400 3,250 1,975 1If the special depreciation allowance does not apply or you make the election not to claim the special depreciation allowance, the first-year limit is $3,360 for 2012 and 2013, $3,260 for 2011, $3,160 for 2010, $3,060 for 2009, $3,160 for 2008, $3,260 for 2004, and $3,360 for 2003. Free prior year tax filing free 2If the truck or van was acquired before 5/06/2003, the truck or van is qualified property, and you claim the special depreciation allowance for the truck or van, the maximum deduction is $7,960. Free prior year tax filing free Car used less than full year. Free prior year tax filing free   The depreciation limits are not reduced if you use a car for less than a full year. Free prior year tax filing free This means that you do not reduce the limit when you either place a car in service or dispose of a car during the year. Free prior year tax filing free However, the depreciation limits are reduced if you do not use the car exclusively for business and investment purposes. Free prior year tax filing free See Reduction for personal use , next. Free prior year tax filing free Reduction for personal use. Free prior year tax filing free   The depreciation limits are reduced based on your percentage of personal use. Free prior year tax filing free If you use a car less than 100% in your business or work, you must determine the depreciation deduction limit by multiplying the limit amount by the percentage of business and investment use during the tax year. Free prior year tax filing free Section 179 deduction. Free prior year tax filing free   The section 179 deduction is treated as a depreciation deduction. Free prior year tax filing free If you place a car that is not a truck or van in service in 2013, use it only for business, and choose the section 179 deduction, the special depreciation allowance, and the depreciation deduction for that car for 2013 is limited to $11,160. Free prior year tax filing free Example. Free prior year tax filing free On September 4, 2013, Jack bought a used car for $10,000 and placed it in service. Free prior year tax filing free He used it 80% for his business, and he chooses to take a section 179 deduction for the car. Free prior year tax filing free The car is not qualified property for purposes of the special depreciation allowance. Free prior year tax filing free Before applying the limit, Jack figures his maximum section 179 deduction to be $8,000. Free prior year tax filing free This is the cost of his qualifying property (up to the maximum $500,000 amount) multiplied by his business use ($10,000 × 80%). Free prior year tax filing free Jack then figures that his section 179 deduction for 2013 is limited to $2,528 (80% of $3,160). Free prior year tax filing free He then figures his unadjusted basis of $5,472 (($10,000 × 80%) − $2,528) for determining his depreciation deduction. Free prior year tax filing free Jack has reached his maximum depreciation deduction for 2013. Free prior year tax filing free For 2014, Jack will use his unadjusted basis of $5,472 to figure his depreciation deduction. Free prior year tax filing free Deductions in years after the recovery period. Free prior year tax filing free   If the depreciation deductions for your car are reduced under the passenger automobile limits (discussed earlier), you will have unrecovered basis in your car at the end of the recovery period. Free prior year tax filing free If you continue to use your car for business, you can deduct that unrecovered basis (subject to depreciation limits) after the recovery period ends. Free prior year tax filing free Unrecovered basis. Free prior year tax filing free   This is your cost or other basis in the car reduced by any clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), alternative motor vehicle credit, electric vehicle credit, gas guzzler tax, and depreciation (including any special depreciation allowance , discussed earlier, unless you elect not to claim it) and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use. Free prior year tax filing free The recovery period. Free prior year tax filing free   For 5-year property, your recovery period is 6 calendar years. Free prior year tax filing free A part year's depreciation is allowed in the first calendar year, a full year's depreciation is allowed in each of the next 4 calendar years, and a part year's depreciation is allowed in the 6th calendar year. Free prior year tax filing free   Under MACRS, your recovery period is the same whether you use declining balance or straight line depreciation. Free prior year tax filing free You determine your unrecovered basis in the 7th year after you placed the car in service. Free prior year tax filing free How to treat unrecovered basis. Free prior year tax filing free   If you continue to use your car for business after the recovery period, you can claim a depreciation deduction in each succeeding tax year until you recover your basis in the car. Free prior year tax filing free The maximum amount you can deduct each year is determined by the date you placed the car in service and your business-use percentage. Free prior year tax filing free For example, no deduction is allowed for a year you use your car 100% for personal purposes. Free prior year tax filing free Example. Free prior year tax filing free In April 2007, Bob bought and placed in service a car he used exclusively in his business. Free prior year tax filing free The car cost $31,500. Free prior year tax filing free Bob did not claim a section 179 deduction or the special depreciation allowance for the car. Free prior year tax filing free He continued to use the car 100% in his business throughout the recovery period (2007 through 2012). Free prior year tax filing free For those years, Bob used the MACRS Depreciation Chart (200% declining balance method) and the Maximum Depreciation Deduction for Cars table, earlier, for the applicable tax year to compute his depreciation deductions during the recovery period. Free prior year tax filing free Bob's depreciation deductions were subject to the depreciation limits so he will have unrecovered basis at the end of the recovery period as shown in the following table. Free prior year tax filing free      MACRS     Deprec. Free prior year tax filing free Year % Amount Limit Allowed 2007 20. Free prior year tax filing free 00 $6,300 $3,060 $ 3,060 2008 32. Free prior year tax filing free 00 10,080 4,900 4,900 2009 19. Free prior year tax filing free 20 6,048 2,850 2,850 2010 11. Free prior year tax filing free 52 3,629 1,775 1,775 2011 11. Free prior year tax filing free 52 3,629 1,775 1,775 2012 5. Free prior year tax filing free 76 1,814 1,775 1,775 Total $31,500   16,135 For the correct limit, see Maximum Depreciation Deduction for Cars under “Depreciation Limits,” earlier, for the maximum amount of depreciation allowed each year. Free prior year tax filing free   At the end of 2012, Bob had an unrecovered basis in the car of $15,365 ($31,500 – $16,135). Free prior year tax filing free If Bob continued to use the car 100% for business in 2013 and later years, he can claim a depreciation deduction equal to the lesser of $1,775 or his remaining unrecovered basis. Free prior year tax filing free   If Bob's business use of the car was less than 100% during any year, his depreciation deduction would be less than the maximum amount allowable for that year. Free prior year tax filing free However, in determining his unrecovered basis in the car, he would still reduce his original basis by the maximum amount allowable as if the business use had been 100%. Free prior year tax filing free For example, if Bob had used his car 60% for business instead of 100%, his allowable depreciation deductions would have been $9,681 ($16,135 × 60%), but he still would have to reduce his basis by $16,135 to determine his unrecovered basis. Free prior year tax filing free Table 4-1. Free prior year tax filing free 2013 MACRS Depreciation Chart (Use to Figure Depreciation for 2013. Free prior year tax filing free ) If you claim actual expenses for your car, use the chart below to find the depreciation method and percentage to use for your 2013 return for cars placed in service in 2013. Free prior year tax filing free   First, using the left column, find the date you first placed the car in service in 2013. Free prior year tax filing free Then select the depreciation method and percentage from column (a), (b), or (c) following the rules explained in this chapter. Free prior year tax filing free For cars placed in service before 2013, you must use the same method you used on last year's return unless a decline in your business use requires you to change to the straight line method. Free prior year tax filing free Refer back to the MACRS Depreciation Chart for the year you placed the car in service. Free prior year tax filing free (See Car Used 50% or Less for Business . Free prior year tax filing free )  Multiply the unadjusted basis of your car by your business use percentage. Free prior year tax filing free Multiply the result by the percentage you found in the chart to find the amount of your depreciation deduction for 2013. Free prior year tax filing free (Also see Depreciation Limits . Free prior year tax filing free )   If you placed your car in service after September of any year and you placed other business property in service during the same year, you may have to use the Jan. Free prior year tax filing free 1—Sept. Free prior year tax filing free 30 percentage instead of the Oct. Free prior year tax filing free 1—Dec. Free prior year tax filing free 31 percentage for your car. Free prior year tax filing free               To find out if this applies to you, determine: 1) the basis of all business property you placed in service after September of that year and 2) the basis of all business property you placed in service during that entire year. Free prior year tax filing free If the basis of the property placed in service after September is not more than 40% of the basis of all property (certain property is excluded) placed in service for the entire year, use the percentage for Jan. Free prior year tax filing free 1—Sept. Free prior year tax filing free 30 for figuring depreciation for your car. Free prior year tax filing free See Which Convention Applies? in chapter 4 of Publication 946 for more details. Free prior year tax filing free               Example. Free prior year tax filing free You buy machinery (basis of $32,000) in May 2013 and a new van (basis of $20,000) in October 2013, both used 100% in your business. Free prior year tax filing free You
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Page Last Reviewed or Updated: 19-Feb-2014

The Free Prior Year Tax Filing Free

Free prior year tax filing free Internal Revenue Bulletin:  2013-7  February 11, 2013  Rev. Free prior year tax filing free Proc. Free prior year tax filing free 2013-16 Table of Contents SECTION 1. Free prior year tax filing free PURPOSE SECTION 2. Free prior year tax filing free BACKGROUND—HAMP AND THE HAMP PRINCIPAL REDUCTION ALTERNATIVE SECTION 3. Free prior year tax filing free BACKGROUND—APPLICABLE PROVISIONS OF LAW SECTION 4. Free prior year tax filing free FEDERAL INCOME TAX TREATMENT SECTION 5. Free prior year tax filing free INFORMATION-REPORTING OBLIGATIONS SECTION 6. Free prior year tax filing free HAMP-PRA BORROWERS’ REPORTING OF DISCHARGES OF INDEBTEDNESS UNDER HAMP-PRA SECTION 7. Free prior year tax filing free PENALTY RELIEF FOR 2012 SECTION 8. Free prior year tax filing free SCOPE AND EFFECTIVE DATE SECTION 9. Free prior year tax filing free DRAFTING INFORMATION SECTION 1. Free prior year tax filing free PURPOSE This revenue procedure provides guidance to mortgage loan holders, loan servicers, and borrowers who are participating in the Department of the Treasury’s (Treasury) and Department of Housing and Urban Development’s (HUD) Home Affordable Modification Program® (HAMP®). Free prior year tax filing free Under HAMP, a borrower may be eligible for principal reduction of the outstanding balance of a qualifying mortgage pursuant to the program’s Principal Reduction AlternativeSM (PRA). Free prior year tax filing free In appropriate cases, HAMP has been offering the PRA as part of a HAMP loan modification since the last quarter of 2010. Free prior year tax filing free Current plans call for HAMP to continue accepting new borrowers through the end of 2013. Free prior year tax filing free The Internal Revenue Service (Service) is providing this guidance to address the tax consequences for borrowers (HAMP-PRA borrowers) who are participating in the PRA and the reporting obligations for participating mortgage loan holders and servicers. Free prior year tax filing free SECTION 2. Free prior year tax filing free BACKGROUND—HAMP AND THE HAMP PRINCIPAL REDUCTION ALTERNATIVE . Free prior year tax filing free 01 To help distressed borrowers lower their monthly mortgage payments, Treasury and HUD established HAMP for mortgage loans that are not owned or guaranteed by the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). Free prior year tax filing free A description of the program can be found at www. Free prior year tax filing free makinghomeaffordable. Free prior year tax filing free gov. Free prior year tax filing free . Free prior year tax filing free 02 Under HAMP, a participating loan servicer, acting on behalf of the mortgage loan holder, must consider a sequence of modification steps for each eligible borrower’s mortgage loan until the borrower’s monthly payment is reduced to a monthly payment amount determined under the HAMP guidelines. Free prior year tax filing free These steps include a reduction in the mortgage loan’s interest rate, an extension of the mortgage loan’s term, and a reduction in the mortgage loan’s principal balance. Free prior year tax filing free . Free prior year tax filing free 03 In some cases, the unpaid principal balance of the modified mortgage loan is divided into (1) an amount that bears stated interest and that is used to calculate the borrower’s new monthly mortgage payment (the “Non-forbearance Portion”), and (2) a forbearance amount, which does not bear stated interest and on which periodic payments of stated principal are not required. Free prior year tax filing free The stated principal of the forbearance amount is due upon the earliest of the borrower’s transfer of the property, payoff of the balance on the Non-forbearance Portion of the mortgage loan, or maturity of the mortgage loan. Free prior year tax filing free However, as noted in section 2. Free prior year tax filing free 06 of this revenue procedure, a HAMP-PRA borrower sometimes may not have to pay all or a portion of the forbearance amount. Free prior year tax filing free (The forbearance amount associated with a HAMP-PRA principal reduction is called the “PRA Forbearance Amount. Free prior year tax filing free ”) . Free prior year tax filing free 04 If a mortgage loan is being considered for a HAMP modification and the amount owed on the mortgage loan is greater than 115 percent of the value of the property, then the servicer must consider whether principal reduction under PRA should be used as part of the HAMP modification. Free prior year tax filing free . Free prior year tax filing free 05 The first step toward a HAMP modification is a trial period plan, in which the borrower’s monthly mortgage payment is set at a monthly payment amount determined under the HAMP guidelines. Free prior year tax filing free The trial period plan effective date is the due date for the first of the reduced payments that are to be made under the trial period plan. Free prior year tax filing free (It is the first day of either the first or the second month after the servicer transmits the trial period notice to the borrower. Free prior year tax filing free ) In general, the trial period is three months, and, during this period, the borrower must satisfy certain conditions before the changes to the terms of the mortgage loan become permanent (the “Trial Period Conditions”). Free prior year tax filing free Specifically, depending on the borrower’s trial period payment history, the borrower’s compliance with HAMP and servicer guidelines, and his or her satisfaction of all other Trial Period Conditions, the borrower will be offered a permanent modification of the terms of the mortgage loan, including monthly mortgage payments that are lower than those under the old mortgage loan. Free prior year tax filing free Until the effective date of a permanent modification, the terms of the existing mortgage loan continue to apply. Free prior year tax filing free . Free prior year tax filing free 06 After the mortgage loan is permanently modified under HAMP, if the modified mortgage loan is in good standing on the first, second, or third annual anniversary of the trial period plan effective date (the “Three-year Period”), the servicer must reduce the unpaid principal balance of the mortgage loan on the respective anniversary date by one-third of the initial PRA Forbearance Amount. Free prior year tax filing free (The servicer allocates the entire reduction to the remaining PRA Forbearance Amount. Free prior year tax filing free ) In general, if a HAMP-PRA borrower’s mortgage loan is in good standing and if the HAMP-PRA borrower pays in full the Non-forbearance Portion of the mortgage loan prior to the reduction of the entire PRA Forbearance Amount, the servicer must reduce the remaining outstanding principal balance of the mortgage loan by the remaining PRA Forbearance Amount. Free prior year tax filing free . Free prior year tax filing free 07 In connection with every HAMP loan modification, the HAMP program administrator (acting on behalf of the federal government) provides incentives to the borrower, the servicer, and the investor (that is, the holder of the mortgage loan). Free prior year tax filing free If a HAMP loan modification includes a PRA principal reduction, the HAMP program administrator makes additional incentive payments to the investor. Free prior year tax filing free These additional incentives are called “PRA Investor Incentive Payments” and are generally spread over three years. Free prior year tax filing free The size of the PRA Investor Incentive Payments depends on the amount of principal reduced, the loan-to-value ratio at the time of the HAMP modification, and the loan’s payment history before the modification. Free prior year tax filing free The PRA Investor Incentive Payments range from 18 to 63 percent of the principal amounts reduced. Free prior year tax filing free For purposes of this revenue procedure, the excess of the initial PRA Forbearance Amount of a mortgage loan over the aggregate PRA Investor Incentive Payments scheduled to be paid with respect to that loan is called the “PRA Adjusted Forbearance Amount. Free prior year tax filing free ” . Free prior year tax filing free 08 A PRA Investor Incentive Payment is earned by the investor on each date on which the servicer reduces the unpaid principal balance of the mortgage loan by a portion of the PRA Forbearance Amount (generally, on the first three annual anniversaries of the trial period plan effective date). Free prior year tax filing free . Free prior year tax filing free 09 If a HAMP-PRA borrower’s early payment in full of the Non-forbearance Portion of the mortgage loan accelerates the reduction of the remaining PRA Forbearance Amount (described above in section 2. Free prior year tax filing free 06 of this revenue procedure), the remaining PRA Investor Incentive Payments from the HAMP program administrator are also accelerated. Free prior year tax filing free . Free prior year tax filing free 10 If, prior to completion of the Three-year Period, a mortgage loan ceases to be in good standing because of the HAMP-PRA borrower’s payment history, then the remaining PRA Forbearance Amount is not further reduced and is due when the HAMP-PRA borrower transfers the property, the HAMP-PRA borrower refinances, or otherwise pays off the Non-forbearance Portion of the mortgage loan, or the mortgage loan matures. Free prior year tax filing free SECTION 3. Free prior year tax filing free BACKGROUND—APPLICABLE PROVISIONS OF LAW . Free prior year tax filing free 01 Under § 61 of the Internal Revenue Code, except as otherwise provided in subtitle A, gross income means all income from whatever source derived, including income from discharge of indebtedness. Free prior year tax filing free See § 61(a)(12). Free prior year tax filing free . Free prior year tax filing free 02 Under § 1. Free prior year tax filing free 1001-3 of the Income Tax Regulations, if a debt instrument undergoes a significant modification, then the modification results in an exchange of the original debt instrument for the modified debt instrument. Free prior year tax filing free In general, an agreement to change a term of a debt instrument is a modification at the time the borrower and holder enter into the agreement, even if the change in term is not immediately effective. Free prior year tax filing free However, if the change is conditioned on reasonable closing conditions, a modification occurs on the closing date of the agreement. Free prior year tax filing free See § 1. Free prior year tax filing free 1001-3(c)(6). Free prior year tax filing free . Free prior year tax filing free 03 Under § 108(e)(10), in the case of a debt-for-debt exchange (including a deemed exchange under § 1. Free prior year tax filing free 1001-3), the borrower is treated as having satisfied the original debt instrument with an amount of money equal to the issue price of the new debt instrument. Free prior year tax filing free If the amount of debt satisfied in this manner exceeds that issue price, the borrower realizes discharge of indebtedness income on the exchange. Free prior year tax filing free See also § 1. Free prior year tax filing free 61-12(c). Free prior year tax filing free . Free prior year tax filing free 04 The issue price of a non-publicly traded debt instrument issued for non-publicly traded property generally reflects the amount of principal that the borrower is required to pay to the holder of the instrument. Free prior year tax filing free If a borrower has the ability to avoid paying certain amounts (including principal) without violating the terms of the instrument, the payment schedule for the instrument is generally determined based on an assumption that the borrower will avoid any requirement to make those payments. Free prior year tax filing free See, e. Free prior year tax filing free g. Free prior year tax filing free , §§ 1. Free prior year tax filing free 1272-1(c)(5) and 1. Free prior year tax filing free 1274-2(d). Free prior year tax filing free . Free prior year tax filing free 05 Under § 108(a), gross income does not include any amount that but for § 108(a) would be includible in gross income by reason of the discharge (in whole or in part) of a taxpayer’s indebtedness if (1) the indebtedness discharged is qualified principal residence indebtedness that is discharged before January 1, 2014, or (2) the discharge occurs when the taxpayer is insolvent. Free prior year tax filing free Section 108(a)(1)(E) and 108(a)(1)(B). Free prior year tax filing free (Although § 108 contains other exclusions as well, this revenue procedure focuses on these two exclusions because they are the most likely to apply to the greatest number of HAMP-PRA borrowers. Free prior year tax filing free ) . Free prior year tax filing free 06 Under §§ 108(h) and 163(h)(3)(B), qualified principal residence indebtedness is any indebtedness that is incurred by a borrower to buy, build, or substantially improve the borrower’s principal residence and is secured by that residence. Free prior year tax filing free . Free prior year tax filing free 07 Qualified principal residence indebtedness also includes a loan secured by the borrower’s principal residence that refinances qualified principal residence indebtedness, but only to the extent of the amount of the refinanced indebtedness. Free prior year tax filing free See §§ 108(h) and 163(h)(3)(B)(i). Free prior year tax filing free . Free prior year tax filing free 08 The maximum amount of discharged indebtedness that a borrower may exclude from gross income under the qualified principal residence indebtedness exclusion is $2,000,000 ($1,000,000 for a married individual filing a separate return). Free prior year tax filing free Under § 108(h)(4), if only part of the discharged indebtedness is qualified principal residence indebtedness, then the exclusion applies only to the amount of the discharged indebtedness that exceeds the amount of the loan (determined immediately before the discharge) that is not qualified principal residence indebtedness. Free prior year tax filing free . Free prior year tax filing free 09 Under § 108(a)(3), the insolvency exclusion applies to the lesser of the amount of the debt discharged or the amount by which the taxpayer is insolvent immediately before the discharge. Free prior year tax filing free . Free prior year tax filing free 10 Section 108(d)(3) provides that, for purposes of the insolvency exclusion, a taxpayer is insolvent to the extent that the taxpayer’s total liabilities exceed the fair market value of all of the taxpayer’s assets immediately before the discharge of indebtedness. Free prior year tax filing free Under § 108(a)(2)(C), the qualified principal residence indebtedness exclusion takes precedence over the insolvency exclusion when both exclusions apply to discharged indebtedness, unless the taxpayer elects to apply the insolvency exclusion. Free prior year tax filing free . Free prior year tax filing free 11 If an amount is excluded from gross income as a discharge of qualified principal residence indebtedness, the taxpayer must reduce the basis of the taxpayer’s principal residence. Free prior year tax filing free See § 108(h)(1). Free prior year tax filing free If a discharged amount is excluded from gross income because the taxpayer was insolvent when the discharge occurred, the taxpayer must reduce certain tax attributes (possibly including basis). Free prior year tax filing free See § 108(b). Free prior year tax filing free For further discussion of income from the discharge of indebtedness, the qualified principal residence indebtedness exclusion, the insolvency exclusion, and other exclusions from gross income that may apply, see Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals). Free prior year tax filing free . Free prior year tax filing free 12 Taxpayers who exclude any discharged amounts from gross income report both the exclusion and the resulting reduction in basis or other tax attributes on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment). Free prior year tax filing free See Form 982 instructions and Publication 4681. Free prior year tax filing free This form is to be filed with the tax return for the taxable year in which the amount is discharged but is excluded from gross income. Free prior year tax filing free . Free prior year tax filing free 13 Governmental payments made to or on behalf of individuals or other persons are included within the broad definition of gross income under § 61 unless an exception applies. Free prior year tax filing free See Notice 2003-18, 2003-1 C. Free prior year tax filing free B. Free prior year tax filing free 699, and Rev. Free prior year tax filing free Rul. Free prior year tax filing free 79-356, 1979-2 C. Free prior year tax filing free B. Free prior year tax filing free 28. Free prior year tax filing free However, if disbursements are made by a governmental unit to individuals in the interest of the general welfare (that is, are generally based on individual or family need) and the disbursements do not represent compensation for services, then the amounts disbursed are excluded from the income of the recipient (general welfare exclusion). Free prior year tax filing free See Rev. Free prior year tax filing free Rul. Free prior year tax filing free 2005-46, 2005-2 C. Free prior year tax filing free B. Free prior year tax filing free 120, and Rev. Free prior year tax filing free Rul. Free prior year tax filing free 75-246, 1975-1 C. Free prior year tax filing free B. Free prior year tax filing free 24. Free prior year tax filing free . Free prior year tax filing free 14 Under § 451 and § 1. Free prior year tax filing free 451-1(a), a taxpayer that uses the cash receipts and disbursements method of accounting includes income in gross income when the taxpayer actually or constructively receives the income. Free prior year tax filing free . Free prior year tax filing free 15 Section 6041 requires every person engaged in a trade or business (including the United States and its agencies) to (1) file an information return (Form 1099-MISC, Miscellaneous Income, is used for this purpose) for each calendar year in which the person makes, in the course of its trade or business, payments to another person of fixed or determinable income aggregating $600 or more, and (2) furnish a copy of the information return to that other person. Free prior year tax filing free See § 6041(a) and (d) and § 1. Free prior year tax filing free 6041-1(a)(1) and (b). Free prior year tax filing free . Free prior year tax filing free 16 Section 6050P requires applicable entities (including the United States and its agencies, financial entities, and any organization a significant trade or business of which is the lending of money) to (1) file an information return (Form 1099-C, Cancellation of Debt, is used for this purpose) for each calendar year in which it discharges indebtedness of another person of $600 or more, and (2) furnish a copy of the information return to that other person. Free prior year tax filing free See § 6050P(a)-(c) and §§ 1. Free prior year tax filing free 6050P-1(a) and 1. Free prior year tax filing free 6050P-2(a) and (d). Free prior year tax filing free . Free prior year tax filing free 17 Section 6721 imposes penalties with respect to information returns required to be filed with the Service. Free prior year tax filing free These penalties apply in the case of a failure to timely file an information return, a failure to include all required information on the return, or the inclusion of incorrect information on the return. Free prior year tax filing free Section 6724(d)(1) includes Forms 1099-MISC and 1099-C in the term “information return. Free prior year tax filing free ” . Free prior year tax filing free 18 Section 6722 imposes penalties with respect to payee statements required to be furnished to payees. Free prior year tax filing free These penalties apply in the case of a failure to timely furnish a payee statement, a failure to include all required information on the statement, or the inclusion of incorrect information on the payee statement. Free prior year tax filing free Section 6724(d)(2) includes in the term “payee statement” copies of Forms 1099-MISC and 1099-C that are required to be furnished to taxpayers. Free prior year tax filing free SECTION 4. Free prior year tax filing free FEDERAL INCOME TAX TREATMENT . Free prior year tax filing free 01 Because a HAMP modification with a PRA principal reduction is a significant modification, it results in a deemed debt-for-debt exchange in which the HAMP-PRA borrower satisfies the old mortgage loan by issuing a new one. Free prior year tax filing free See § 1. Free prior year tax filing free 1001-3. Free prior year tax filing free At the time of the modification, therefore, under § 108 and this revenue procedure, the HAMP-PRA borrower realizes discharge of indebtedness income equal to any excess of the adjusted issue price of the old mortgage loan (which was satisfied in the deemed exchange) over the issue price of the new (post-modification) mortgage loan. Free prior year tax filing free See also § 61(a)(12) and § 1. Free prior year tax filing free 61-12(c). Free prior year tax filing free . Free prior year tax filing free 02 A HAMP-PRA borrower has the ability to avoid payment of the PRA Adjusted Forbearance Amount. Free prior year tax filing free Because the HAMP-PRA borrower has this ability, that amount should not be taken into account in determining the issue price of the new mortgage loan. Free prior year tax filing free Because the issue price of the new mortgage loan does not include the PRA Adjusted Forbearance Amount, the PRA Adjusted Forbearance Amount contributes to the excess of the adjusted issue price of the old mortgage loan (which was satisfied in the deemed exchange) over the issue price of the new mortgage loan. Free prior year tax filing free . Free prior year tax filing free 03 On the other hand, the investor has not given up its right to receive the remainder of the PRA Forbearance Amount, because the HAMP program administrator is expected to make those payments on the HAMP-PRA borrower’s behalf by making the PRA Investor Incentive Payments. Free prior year tax filing free Because the remainder of the PRA Forbearance Amount is payable in this manner, that remainder is included in the issue price of the new mortgage loan. Free prior year tax filing free . Free prior year tax filing free 04 The Trial Period Conditions are reasonable closing conditions that must be satisfied before the changes to the terms of the mortgage loan become permanent. Free prior year tax filing free Therefore, for purposes of § 1. Free prior year tax filing free 1001-3, the date of the modification is the date of the permanent modification. Free prior year tax filing free . Free prior year tax filing free 05 Unless an exclusion applies, the HAMP-PRA borrower includes in gross income the discharge of indebtedness income described in section 4. Free prior year tax filing free 01 of this revenue procedure for the taxable year in which the permanent modification occurs. Free prior year tax filing free Under certain conditions, however, section 6 of this revenue procedure permits a borrower to report the discharge of indebtedness under HAMP-PRA over the Three-year Period. Free prior year tax filing free The qualified principal residence indebtedness exclusion under § 108(a)(1)(E) and the insolvency exclusion under § 108(a)(1)(B) are two exclusions that may apply to the discharge. Free prior year tax filing free . Free prior year tax filing free 06 The PRA Investor Incentive Payment is treated as a payment on the mortgage loan by the HAMP program administrator on behalf of the HAMP-PRA borrower. Free prior year tax filing free . Free prior year tax filing free 07 To the extent that the HAMP-PRA borrower uses the property as the HAMP-PRA borrower’s principal residence or the property is occupied by the HAMP-PRA borrower’s legal dependent, parent, or grandparent without rent being charged or collected, the HAMP-PRA borrower excludes from his or her gross income under the general welfare exclusion the PRA Investor Incentive Payments that the HAMP program administrator makes to the investor in the mortgage loan. Free prior year tax filing free This is consistent with Rev. Free prior year tax filing free Rul. Free prior year tax filing free 2009-19, 2009-28 I. Free prior year tax filing free R. Free prior year tax filing free B. Free prior year tax filing free 111, which addressed the treatment of Pay-for-Performance Success Payments. Free prior year tax filing free . Free prior year tax filing free 08 To the extent that the HAMP-PRA borrower uses the property as a rental property or holds the property vacant and available for rent, the HAMP-PRA borrower includes PRA Investor Incentive Payments in gross income. Free prior year tax filing free If the HAMP-PRA borrower uses the cash receipts and disbursements method of accounting, then the HAMP-PRA borrower includes a PRA Investor Incentive Payment in gross income in the taxable year in which it is applied as a payment on the HAMP-PRA borrower’s mortgage loan. Free prior year tax filing free . Free prior year tax filing free 09 As described in section 2. Free prior year tax filing free 09 of this revenue procedure, if a HAMP-PRA borrower pays in full the Non-forbearance Portion of the mortgage loan while the loan is in good standing and prior to completion of the Three-year Period, that payment accelerates both the reduction in the remaining PRA Forbearance Amount and the PRA Investor Incentive Payments from the HAMP program administrator. Free prior year tax filing free To the extent that the HAMP-PRA borrower is described in section 4. Free prior year tax filing free 07 of this revenue procedure, the HAMP-PRA borrower excludes from his or her gross income under the general welfare exclusion the accelerated PRA Investor Incentive Payments. Free prior year tax filing free To the extent that the HAMP-PRA borrower is described in section 4. Free prior year tax filing free 08 of this revenue procedure, the HAMP-PRA borrower includes in income in the year of the acceleration the remaining amount of the PRA Investor Incentive Payment. Free prior year tax filing free SECTION 5. Free prior year tax filing free INFORMATION-REPORTING OBLIGATIONS . Free prior year tax filing free 01 Under § 6050P, the investor is required to file a Form 1099-C with respect to a borrower who realizes discharge of indebtedness of $600 or more. Free prior year tax filing free A copy of this form is required to be furnished to the borrower. Free prior year tax filing free . Free prior year tax filing free 02 As stated in sections 4. Free prior year tax filing free 01 and 4. Free prior year tax filing free 04 of this revenue procedure, the HAMP-PRA discharge of indebtedness is realized at the time of the permanent modification of the mortgage loan. Free prior year tax filing free . Free prior year tax filing free 03 An investor is an applicable entity that is required under § 1. Free prior year tax filing free 6050P-1 and this revenue procedure to issue a Form 1099-C for discharge of indebtedness. Free prior year tax filing free Under § 1. Free prior year tax filing free 6050P-1(b)(2)(F), the permanent modification of a mortgage loan is an identifiable event. Free prior year tax filing free Identifiable events determine when Forms 1099-C have to be issued. Free prior year tax filing free Thus, the Form 1099-C is issued for the calendar year in which the permanent mortgage loan modification occurs. Free prior year tax filing free This rule under § 1. Free prior year tax filing free 6050P-1(b)(2)(F) applies even if, under section 6 of this revenue procedure, the HAMP-PRA borrower chooses to treat the HAMP-PRA discharge as being realized at the times when the unpaid principal balance of the new mortgage loan is reduced. Free prior year tax filing free . Free prior year tax filing free 04 The investor (or the loan servicer acting on behalf of the investor) reports the full amount of the discharge on the Form 1099-C regardless of whether some or all of the amount is excludible from income under the qualified principal residence indebtedness exclusion, the insolvency exclusion, or any other exclusion that may apply. Free prior year tax filing free That discharged amount will generally be the PRA Adjusted Forbearance Amount (which does not include the amounts expected to be satisfied by PRA Investor Incentive Payments). Free prior year tax filing free . Free prior year tax filing free 05 To the extent that PRA Investor Incentive Payments are made on behalf of a HAMP-PRA borrower who is described in section 4. Free prior year tax filing free 07 of this revenue procedure, the PRA Investor Incentive Payments are excluded from the gross income of the HAMP-PRA borrower, and thus they are not fixed or determinable income to the HAMP-PRA borrower. Free prior year tax filing free Under § 6041, these payments are not subject to information reporting. Free prior year tax filing free See Notice 2011-14, 2011-11 I. Free prior year tax filing free R. Free prior year tax filing free B. Free prior year tax filing free 544, 546. Free prior year tax filing free . Free prior year tax filing free 06 To the extent that PRA Investor Incentive Payments are made on behalf of a HAMP-PRA borrower who is described in section 4. Free prior year tax filing free 08 of this revenue procedure, the PRA Investor Incentive Payments are includible in gross income as fixed or determinable income in the taxable year required by the HAMP-PRA borrower’s method of accounting. Free prior year tax filing free The payment is subject to the information reporting requirements of § 6041, as described in section 3. Free prior year tax filing free 15 of this revenue procedure. Free prior year tax filing free Accordingly, the HAMP program administrator is required to issue a Form 1099-MISC reporting the PRA Investor Incentive Payment. Free prior year tax filing free SECTION 6. Free prior year tax filing free HAMP-PRA BORROWERS’ REPORTING OF DISCHARGES OF INDEBTEDNESS UNDER HAMP-PRA . Free prior year tax filing free 01 In general. Free prior year tax filing free The HAMP-PRA program began in the last quarter of 2010, and since that time there has been uncertainty about whether the amount of the discharge of indebtedness should be reported in the year of the permanent modification or over the Three-year Period (when the unpaid principal balance on the new mortgage loan is reduced). Free prior year tax filing free As a result, some HAMP-PRA borrowers have been reporting the discharge of indebtedness under HAMP-PRA over the Three-year Period. Free prior year tax filing free Given the temporary nature of the program and the issuance of this guidance after participation in the program has begun, in the interests of equitable and sound tax administration, HAMP-PRA borrowers may report discharges of indebtedness under HAMP-PRA under the rules in this section 6. Free prior year tax filing free A HAMP-PRA borrower may choose to report discharges of indebtedness under HAMP-PRA pursuant to the rules in this section 6 only if the borrower applies the same borrower option under section 6. Free prior year tax filing free 02 of this revenue procedure consistently to the taxable year of the permanent modification and to all subsequent taxable years. Free prior year tax filing free Thus, a HAMP-PRA borrower may not choose a borrower option under section 6. Free prior year tax filing free 02 of this revenue procedure if a statute of limitations has expired for any of the taxable years that are necessary for consistent application of that option. Free prior year tax filing free . Free prior year tax filing free 02 HAMP-PRA borrower options. Free prior year tax filing free A HAMP-PRA borrower may treat the HAMP-PRA discharge as being realized in either of the following ways— (1) One hundred percent of the PRA Adjusted Forbearance Amount at the time of the permanent modification; or (2) One third of the PRA Adjusted Forbearance Amount on each of the first three annual anniversaries of the trial period plan effective date (described in section 2. Free prior year tax filing free 06 of this revenue procedure), when, as required by the terms of the new mortgage loan, the servicer reduces the unpaid principal balance of the new mortgage loan. Free prior year tax filing free If some or all of the reduction in the unpaid principal balance is accelerated (as described in section 2. Free prior year tax filing free 06 of this revenue procedure) because the HAMP-PRA borrower prepays the Non-forbearance Portion of the mortgage loan, then the HAMP-PRA discharge represented by the amount of the reduction that was accelerated is treated as being realized at the time of the accelerated reduction. Free prior year tax filing free . Free prior year tax filing free 03 HAMP-PRA borrowers who choose to realize the HAMP-PRA discharge at the time of the permanent modification. Free prior year tax filing free (1) If a HAMP-PRA borrower chooses to treat the HAMP-PRA discharge as being realized at the time of the permanent modification, then for the taxable year in which the permanent modification occurs, the HAMP-PRA borrower reports on Form 982 the amount, if any, of the discharge that is excluded from gross income and includes in gross income any remaining discharge. Free prior year tax filing free (2) If a HAMP-PRA borrower’s mortgage loan was permanently modified under HAMP in 2010 or 2011, and if the borrower was reporting the discharge of indebtedness using the method described in section 6. Free prior year tax filing free 02(2) of this revenue procedure, then the borrower may change to reporting the discharge of indebtedness using the method described in section 6. Free prior year tax filing free 02(1) of this revenue procedure by filing a 2012 Form 982 with the borrower’s timely filed (with extensions) 2012 income tax return. Free prior year tax filing free This section 6. Free prior year tax filing free 03(2) applies only if the change to reporting the discharge using the method described in section 6. Free prior year tax filing free 02(1) of this revenue procedure does not change the borrower’s federal income tax liability (including any change in federal income tax liability due to a change in basis or tax attributes (under § 108(h)(1) or § 108(b))) for any taxable year prior to the borrower’s 2012 taxable year. Free prior year tax filing free To make this change, the borrower must— (i) Compute the amount of discharge of indebtedness that would be included in income under § 61(a)(12) or excluded from gross income under § 108, basing the computation of the discharge on the facts as of the year of the permanent modification; and (ii) Report on a 2012 Form 982 the reduction in basis or tax attributes (under § 108(h)(1) or § 108(b)) due to the permanent modification that the borrower would have reported on the Form 982 for the taxable year of the permanent modification, minus any reductions due to the permanent modification that the borrower actually reported on Forms 982 for taxable years prior to 2012. Free prior year tax filing free (3) Example. Free prior year tax filing free The following example illustrates the application of section 6. Free prior year tax filing free 03(2) of this revenue procedure. Free prior year tax filing free In 2010, B’s basis in B’s principal residence was $330,000. Free prior year tax filing free In 2010, B’s mortgage loan on the principal residence is permanently modified under HAMP-PRA. Free prior year tax filing free B realized $30,000 of cancellation of indebtedness from the permanent modification, all of which qualifies for the exclusion from income for qualified principal residence indebtedness under § 108(a)(1)(E). Free prior year tax filing free The trial period plan effective date also fell in 2010. Free prior year tax filing free B’s federal income tax return for 2010 was consistent with B’s reporting this discharge of indebtedness using the method described in section 6. Free prior year tax filing free 02(2) of this revenue procedure. Free prior year tax filing free That is, B’s 2010 return did not include income from discharge of indebtedness under HAMP-PRA, nor did the return contain a Form 982 reporting exclusion of any such discharge of indebtedness. Free prior year tax filing free The next year, B reported on line 10(b) of the 2011 Form 982 that B filed with B’s 2011 federal income tax return a $10,000 reduction in basis in the principal residence. Free prior year tax filing free For 2012, B chooses to change to reporting the discharge of indebtedness using the method described in section 6. Free prior year tax filing free 02(1) of this revenue procedure. Free prior year tax filing free Thus, B files a 2012 Form 982 with B’s timely filed (including extensions) 2012 federal income tax return, and on line 10(b) of that form, B reports a $20,000 basis reduction in the principal residence ($30,000 basis reduction that B would have excluded from income in 2010 using the method described in section 6. Free prior year tax filing free 02(1) of this revenue procedure, minus the $10,000 basis reduction that B reported on B’s 2011 Form 982). Free prior year tax filing free (4) If a HAMP-PRA borrower reports the entire HAMP-PRA discharge using the method described in section 6. Free prior year tax filing free 02(1) of this revenue procedure, and if that HAMP-PRA borrower’s mortgage loan ceases to be in good standing during the Three-year Period as described in section 2. Free prior year tax filing free 10 of this revenue procedure, then some or all of the anticipated reductions in the PRA Adjusted Forbearance Amount will not take place. Free prior year tax filing free Because the amount of these anticipated reductions was not included in determining the issue price of the new mortgage loan that, pursuant to § 1. Free prior year tax filing free 1001-3, the HAMP-PRA borrower is deemed to issue in satisfaction of the old mortgage loan, the issue price of the new mortgage loan was understated. Free prior year tax filing free Under these circumstances, the discharge of indebtedness income determined as of the date of the permanent modification will have been overstated. Free prior year tax filing free (5) The Service will not challenge a HAMP-PRA borrower who is described in section 6. Free prior year tax filing free 03(4) of this revenue procedure and who takes the following corrective measures: (i) If a HAMP-PRA borrower included any of the discharge of indebtedness in gross income, the HAMP-PRA borrower may file an amended return that does not include the amount of the discharge of indebtedness that was previously reported as gross income but that, because of the HAMP-PRA borrower’s failure to keep the new mortgage loan in good standing, was not ultimately discharged. Free prior year tax filing free The amended return should be for the taxable year in which the income was included (that is, the year of the permanent modification), provided the applicable statute of limitations remains open for that taxable year. Free prior year tax filing free (ii) If the HAMP-PRA borrower did not include any of the discharge of indebtedness in gross income (that is, if the HAMP-PRA borrower excluded all of it), the HAMP-PRA borrower may file a new Form 982 that the Service will treat as superseding the earlier Form 982. Free prior year tax filing free The new Form 982 will reflect the revised reduction in basis or in tax attributes (under § 108(h)(1) or § 108(b)). Free prior year tax filing free The new Form 982 should be the Form 982 for the year of the permanent modification and should be filed with the return for the taxable year in which the HAMP-PRA borrower’s mortgage loan ceased to be in good standing. Free prior year tax filing free . Free prior year tax filing free 04 HAMP-PRA borrowers who choose to treat the HAMP-PRA discharge as being realized on the dates on which the unpaid principal balance of the mortgage loan is reduced. Free prior year tax filing free (1) If a HAMP-PRA borrower chooses to realize the HAMP-PRA discharge at the times that the unpaid principal balance on the new mortgage loan is reduced, instead of at the time of the permanent modification, then the HAMP-PRA borrower’s federal income tax returns for the taxable year that contains the permanent modification and for the subsequent taxable years must not treat any of the discharge as being realized at the time of the permanent modification and must treat the entire HAMP-PRA discharge as being realized in the amounts—and at the times—of the reductions in the unpaid principal balance. Free prior year tax filing free Except as described in the last sentence of this paragraph, therefore, the income tax return for the year of the permanent modification must include no gross income from—nor report on Form 982 an exclusion of—any amount of the HAMP-PRA discharge. Free prior year tax filing free Instead, the HAMP-PRA discharge is included in gross income (or is reported on Form 982 as excluded from gross income) in the subsequent years in which the unpaid principal balance is reduced. Free prior year tax filing free If the first such reduction occurs in the year of the permanent modification, however, then the amount of any such reduction is reflected as an inclusion or exclusion on the federal income tax return for that year. Free prior year tax filing free (2) A HAMP-PRA borrower who has been using the method described in section 6. Free prior year tax filing free 02(1) of this revenue procedure may change to the method described in section 6. Free prior year tax filing free 02(2) but must comply with the consistency and open-year requirements described in section 6. Free prior year tax filing free 01 of this revenue procedure. Free prior year tax filing free SECTION 7. Free prior year tax filing free PENALTY RELIEF FOR 2012 . Free prior year tax filing free 01 The Service will not assert penalties under § 6721 or § 6722 against an investor for failing to timely file and furnish a 2012 Form 1099-C as required by section 5. Free prior year tax filing free 03 through 5. Free prior year tax filing free 04 and section 8. Free prior year tax filing free 02 of this revenue procedure with respect to discharge of indebtedness resulting from HAMP-PRA permanent modifications that take place during calendar year 2012 if the following requirements are satisfied: (1) Not later than February 28, 2013, a statement is sent to the HAMP-PRA borrower containing the following: (a) The HAMP-PRA borrower’s name, address, and taxpayer identification number; and (b) The date and amount of the discharge of indebtedness (as described in sections 4. Free prior year tax filing free 01 through 4. Free prior year tax filing free 04 of this revenue procedure) that is required to be reported for 2012. Free prior year tax filing free (2) Not later than March 28, 2013, a statement is sent to the Service. Free prior year tax filing free It must be in the form of a single statement that separately lists for each HAMP-PRA borrower the information specified in section 7. Free prior year tax filing free 01(1) of this revenue procedure. Free prior year tax filing free The statement should be sent to the Service at the following address: Internal Revenue Service Center Stop 6728AUSC Austin, TX 73301 . Free prior year tax filing free 02 The Service will not assert penalties under § 6721 or § 6722 with respect to any Forms 1099-MISC for 2012 that sections 5. Free prior year tax filing free 06 and 8. Free prior year tax filing free 02 of this revenue procedure require to be filed with the Service and furnished to taxpayers. Free prior year tax filing free . Free prior year tax filing free 03 Section 8. Free prior year tax filing free 03 and 8. Free prior year tax filing free 04 of this revenue procedure, below, describes penalty relief regarding Forms 1099-C and 1099-MISC for 2010 and 2011. Free prior year tax filing free SECTION 8. Free prior year tax filing free SCOPE AND EFFECTIVE DATE . Free prior year tax filing free 01 This revenue procedure applies to all borrowers, investors, and servicers who participate, or have participated, in the HAMP-PRA, regardless of when the permanent modification occurs. Free prior year tax filing free . Free prior year tax filing free 02 Section 5 of this revenue procedure is effective for Forms 1099-C and 1099-MISC due or filed after January 24, 2013. Free prior year tax filing free . Free prior year tax filing free 03 Because of the effective date in section 8. Free prior year tax filing free 02 of this revenue procedure, an investor is not subject to penalties under § 6721 or § 6722 on the grounds that the investor failed to timely file and furnish a 2010 or 2011 Form 1099-C as described in section 5. Free prior year tax filing free 03 through 5. Free prior year tax filing free 04 of this revenue procedure (or on the grounds that the investor filed or furnished a 2010 or 2011 Form 1099-C that is inconsistent with section 5. Free prior year tax filing free 03 through 5. Free prior year tax filing free 04 of this revenue procedure), provided that the investor demonstrates a good faith attempt to comply with the requirements of § 6050P and that the failure was not due to willful neglect. Free prior year tax filing free . Free prior year tax filing free 04 Because of the effective date in section 8. Free prior year tax filing free 02 of this revenue procedure, the Service will not assert penalties under § 6721 or § 6722 on the grounds of a failure to timely file and furnish a 2010 or 2011 Form 1099-MISC, as described in section 5. Free prior year tax filing free 06 of this revenue procedure. Free prior year tax filing free SECTION 9. Free prior year tax filing free DRAFTING INFORMATION The principal authors of this revenue procedure are Ronald J. Free prior year tax filing free Goldstein of the Office of Chief Counsel (Procedure and Administration); Shareen S. Free prior year tax filing free Pflanz and Sheldon A. Free prior year tax filing free Iskow of the Office of Chief Counsel (Income Tax and Accounting); and Andrea M. Free prior year tax filing free Hoffenson of the Office of Chief Counsel (Financial Institutions and Products). Free prior year tax filing free For further information regarding this revenue procedure, contact Procedure and Administration branch 1 at (202) 622-4910, Income Tax and Accounting branch 4 at (202) 622-4920, or Financial Institutions and Products branch 1 at (202) 622-3920 (not toll-free calls). Free prior year tax filing free Prev  Up  Next   Home   More Internal Revenue Bulletins