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Free Tax 2011

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Free Tax 2011

Free tax 2011 Publication 4492-B - Introductory Material Table of Contents Introduction Useful Items - You may want to see: Introduction This publication explains the major provisions of the Heartland Disaster Tax Relief Act of 2008 that apply only to the Midwestern disaster areas. Free tax 2011 Other benefits that may apply to taxpayers in Midwestern disaster areas are covered in Publication 547, Casualties, Disasters, and Thefts. Free tax 2011 Be sure to read both publications. Free tax 2011 Useful Items - You may want to see: Publication 526 Charitable Contributions 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 547 Casualties, Disasters, and Thefts 946 How To Depreciate Property 4492-A Information for Taxpayers Affected by the May 4, 2007, Kansas Storms and Tornadoes Form (and Instructions) 4506 Request for Copy of Tax Return 4506-T Request for Transcript of Tax Return 4684 Casualties and Thefts 5884-A Credits for Affected Midwestern Disaster Area Employers 8863 Education Credits (American Opportunity, Hope, and Lifetime Learning Credits) 8914 Exemption Amount for Taxpayers Housing Midwestern Displaced Individuals 8930 Qualified Disaster Recovery Assistance Retirement Plan Distributions and Repayments Prev  Up  Next   Home   More Online Publications
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Employment-Related Identity Theft

If you have experienced one of the following, this may be an indication your Social Security number or other personal information may have been used by another person without your permission for employment purposes.    

  1. You received a letter 4491C from the Internal Revenue Service stating that you were the victim of employment related identity theft or
  2. You received a notice from the Internal Revenue Service stating that you received wages that you did not earn or
  3. You receive a Form W-2 or 1099 from an employer for whom you did not work or
  4. You receive your annual “Notice of Earnings” statement from the Social Security Administration and the income showing on the statement is more than you have earned or
  5. Your Social Security benefits have been adjusted/denied because of wages that you did not earn

What you should do:

  • Contact the IRS at the number or fax listed on the letter or notice if you received an IRS letter or notice.
  • Contact the Social Security Administration if you received a Form W-2 from an unknown employer, your “Annual Notice of Earnings” from the Social Security Administration shows more wages than you earned or you had your Social Security benefits adjusted/denied. They will review your earnings with you to ensure their records are correct.
  • Review earnings posted to your record on your Social Security Statement. Workers, age 18 and older, may create an account to get their Statement

Additional steps you should take if you suspect that you are the victim of employment related identity theft

  • File a report with your local police department. 
  • Place a fraud alert on your credit reports by contacting any one of the three nationwide credit reporting companies: 

                        Equifax: 800-525-6285  www.equifax.com

                        Experian: 888-397-3742  www.experian.com

                        Trans Union: 800-916-8800  www.transunion.com

                            Federal Trade Commission
                            600 Pennsylvania Avenue NW
                            Washington, DC  20580  

  • Contact any banks or other financial institutions to close any accounts that are unused, have been tampered with or opened without your permission. 
  • If you have information about the identity thief that impacted your personal information negatively, file an online complaint with the Internet Crime Complaint Center (IC3). The IC3 gives victims of cyber-crime a convenient and easy-to-use reporting mechanism that alerts authorities of suspected criminal or civil violations. IC3 sends every complaint to one or more law enforcement or regulatory agencies that have jurisdiction over the matter.

If you are unable to file your tax return because another person has already filed a return under your SSN

  • You are encouraged to contact the IRS at the Identity Theft Specialized Unit (IPSU), toll free at 1-800-908-4490 so we can take steps to further secure your compromised tax account.  Assistors in this unit are specially trained in Identity Theft issues. 
  • Complete Form 14039  or Form 14039SP (Española) to report the identity theft incident, and have an identity theft indicator placed on your account to allow IRS to take protective actions.  

The IPSU hours of Operation:  Monday – Friday 7 a.m. – 7 p.m. your local time (Alaska & Hawaii follow Pacific Time)

For Additional Information

Page Last Reviewed or Updated: 07-Jan-2014

The Free Tax 2011

Free tax 2011 8. Free tax 2011   Qualified Tuition Program (QTP) Table of Contents Introduction What Is a Qualified Tuition ProgramDesignated beneficiary. Free tax 2011 Half-time student. Free tax 2011 How Much Can You Contribute Are Distributions TaxableFiguring the Taxable Portion of a Distribution Additional Tax on Taxable Distributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Introduction Qualified tuition programs (QTPs) are also called “529 plans. Free tax 2011 ” States may establish and maintain programs that allow you to either prepay or contribute to an account for paying a student's qualified education expenses at a postsecondary institution. Free tax 2011 Eligible educational institutions may establish and maintain programs that allow you to prepay a student's qualified education expenses. Free tax 2011 If you prepay tuition, the student (designated beneficiary) will be entitled to a waiver or a payment of qualified education expenses. Free tax 2011 You cannot deduct either payments or contributions to a QTP. Free tax 2011 For information on a specific QTP, you will need to contact the state agency or eligible educational institution that established and maintains it. Free tax 2011 What is the tax benefit of a QTP. Free tax 2011   No tax is due on a distribution from a QTP unless the amount distributed is greater than the beneficiary's adjusted qualified education expenses. Free tax 2011 See Are Distributions Taxable , later, for more information. Free tax 2011    Even if a QTP is used to finance a student's education, the student or the student's parents still may be eligible to claim the American opportunity credit or the lifetime learning credit. Free tax 2011 See Coordination With American Opportunity and Lifetime Learning Credits, later. Free tax 2011 What Is a Qualified Tuition Program A qualified tuition program is a program set up to allow you to either prepay, or contribute to an account established for paying, a student's qualified education expenses at an eligible educational institution. Free tax 2011 QTPs can be established and maintained by states (or agencies or instrumentalities of a state) and eligible educational institutions. Free tax 2011 The program must meet certain requirements. Free tax 2011 Your state government or the eligible educational institution in which you are interested can tell you whether or not they participate in a QTP. Free tax 2011 Qualified education expenses. Free tax 2011   These are expenses related to enrollment or attendance at an Eligible educational institution (defined later). Free tax 2011 As shown in the following list, to be qualified, some of the expenses must be required by the institution and some must be incurred by students who are enrolled at least half-time. Free tax 2011 See Half-time student , later. Free tax 2011 The following expenses must be required for enrollment or attendance of a Designated beneficiary (defined later) at an eligible educational institution. Free tax 2011 Tuition and fees. Free tax 2011 Books, supplies, and equipment. Free tax 2011 Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible educational institution. Free tax 2011 Expenses for room and board must be incurred by students who are enrolled at least half-time. Free tax 2011 The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Free tax 2011 The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Free tax 2011 The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Free tax 2011 You will need to contact the eligible educational institution for qualified room and board costs. Free tax 2011    For tax years after 2010, the purchase of computer technology or equipment is only a qualified education expense if the computer technology or equipment is required for enrollment or attendance at an eligible institution. Free tax 2011 Designated beneficiary. Free tax 2011   The designated beneficiary is generally the student (or future student) for whom the QTP is intended to provide benefits. Free tax 2011 The designated beneficiary can be changed after participation in the QTP begins. Free tax 2011 If a state or local government or certain tax-exempt organizations purchase an interest in a QTP as part of a scholarship program, the designated beneficiary is the person who receives the interest as a scholarship. Free tax 2011 Half-time student. Free tax 2011   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic workload for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. Free tax 2011 Eligible educational institution. Free tax 2011   For purposes of a QTP, this is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Free tax 2011 S. Free tax 2011 Department of Education. Free tax 2011 It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Free tax 2011 The educational institution should be able to tell you if it is an eligible educational institution. Free tax 2011   Certain educational institutions located outside the United States also participate in the U. Free tax 2011 S. Free tax 2011 Department of Education's Federal Student Aid (FSA) programs. Free tax 2011   How Much Can You Contribute Contributions to a QTP on behalf of any beneficiary cannot be more than the amount necessary to provide for the qualified education expenses of the beneficiary. Free tax 2011 There are no income restrictions on the individual contributors. Free tax 2011 You can contribute to both a QTP and a Coverdell ESA in the same year for the same designated beneficiary. Free tax 2011   Are Distributions Taxable The part of a distribution representing the amount paid or contributed to a QTP does not have to be included in income. Free tax 2011 This is a return of the investment in the plan. Free tax 2011 The designated beneficiary generally does not have to include in income any earnings distributed from a QTP if the total distribution is less than or equal to adjusted qualified education expenses (defined under Figuring the Taxable Portion of a Distribution , later). Free tax 2011 Earnings and return of investment. Free tax 2011    You will receive a Form 1099-Q, from each of the programs from which you received a QTP distribution in 2013. Free tax 2011 The amount of your gross distribution (box 1) shown on each form will be divided between your earnings (box 2) and your basis, or return of investment (box 3). Free tax 2011 Form 1099-Q should be sent to you by January 31, 2014. Free tax 2011 Figuring the Taxable Portion of a Distribution To determine if total distributions for the year are more or less than the amount of qualified education expenses, you must compare the total of all QTP distributions for the tax year to the adjusted qualified education expenses. Free tax 2011 Adjusted qualified education expenses. Free tax 2011   This amount is the total qualified education expenses reduced by any tax-free educational assistance. Free tax 2011 Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Free tax 2011 Taxable earnings. Free tax 2011   Use the following steps to figure the taxable part. Free tax 2011 Multiply the total distributed earnings shown in box 2 of Form 1099-Q by a fraction. Free tax 2011 The numerator is the adjusted qualified education expenses paid during the year and the denominator is the total amount distributed during the year. Free tax 2011 Subtract the amount figured in (1) from the total distributed earnings. Free tax 2011 The result is the amount the beneficiary must include in income. Free tax 2011 Report it on Form 1040 or Form 1040NR, line 21. Free tax 2011 Example 1. Free tax 2011 In 2007, Sara Clarke's parents opened a savings account for her with a QTP maintained by their state government. Free tax 2011 Over the years they contributed $18,000 to the account. Free tax 2011 The total balance in the account was $27,000 on the date the distribution was made. Free tax 2011 In the summer of 2013, Sara enrolled in college and had $8,300 of qualified education expenses for the rest of the year. Free tax 2011 She paid her college expenses from the following sources. Free tax 2011   Gift from parents $1,600     Partial tuition scholarship (tax-free) 3,100     QTP distribution 5,300           Before Sara can determine the taxable part of her QTP distribution, she must reduce her total qualified education expenses by any tax-free educational assistance. Free tax 2011   Total qualified education expenses $8,300     Minus: Tax-free educational assistance −3,100     Equals: Adjusted qualified  education expenses (AQEE) $5,200   Since the remaining expenses ($5,200) are less than the QTP distribution, part of the earnings will be taxable. Free tax 2011 Sara's Form 1099-Q shows that $950 of the QTP distribution is earnings. Free tax 2011 Sara figures the taxable part of the distributed earnings as follows. Free tax 2011   1. Free tax 2011 $950 (earnings) × $5,200 AQEE  $5,300 distribution           =$932 (tax-free earnings)     2. Free tax 2011 $950 (earnings)−$932 (tax-free earnings)     =$18 (taxable earnings)  Sara must include $18 in income (Form 1040, line 21) as distributed QTP earnings not used for adjusted qualified education expenses. Free tax 2011 Coordination With American Opportunity and Lifetime Learning Credits An American opportunity or lifetime learning credit (education credit) can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. Free tax 2011 This means that after the beneficiary reduces qualified education expenses by tax-free educational assistance, he or she must further reduce them by the expenses taken into account in determining the credit. Free tax 2011 Example 2. Free tax 2011 Assume the same facts as in Example 1 , except that Sara's parents claimed an American opportunity credit of $2,500 (based on $4,000 expenses). Free tax 2011   Total qualified education expenses $8,300     Minus: Tax-free educational assistance −3,100     Minus: Expenses taken into account  in figuring American opportunity credit −4,000     Equals: Adjusted qualified  education expenses (AQEE) $1,200           The taxable part of the distribution is figured as follows. Free tax 2011   1. Free tax 2011 $950 (earnings) × $1,200 AQEE  $5,300 distribution           =$215 (tax-free earnings)     2. Free tax 2011 $950 (earnings)−$215 (tax-free earnings)     =$735 (taxable earnings)       Sara must include $735 in income (Form 1040, line 21). Free tax 2011 This represents distributed earnings not used for adjusted qualified education expenses. Free tax 2011 Coordination With Coverdell ESA Distributions If a designated beneficiary receives distributions from both a QTP and a Coverdell ESA in the same year, and the total of these distributions is more than the beneficiary's adjusted qualified higher education expenses, the expenses must be allocated between the distributions. Free tax 2011 For purposes of this allocation, disregard any qualified elementary and secondary education expenses. Free tax 2011 Example 3. Free tax 2011 Assume the same facts as in Example 2 , except that instead of receiving a $5,300 distribution from her QTP, Sara received $4,600 from that account and $700 from her Coverdell ESA. Free tax 2011 In this case, Sara must allocate her $1,200 of adjusted qualified higher education expenses (AQHEE) between the two distributions. Free tax 2011   $1,200 AQHEE × $700 ESA distribution  $5,300 total distribution = $158 AQHEE (ESA)     $1,200 AQHEE × $4,600 QTP distribution  $5,300 total distribution = $1,042 AQHEE (QTP)   Sara then figures the taxable portion of her Coverdell ESA distribution based on qualified higher education expenses of $158, and the taxable portion of her QTP distribution based on the other $1,042. Free tax 2011 Note. Free tax 2011 If you are required to allocate your expenses between Coverdell ESA and QTP distributions, and you have adjusted qualified elementary and secondary education expenses, see the examples in chapter 7, Coverdell Education Savings Account under Coordination With Qualified Tuition Program (QTP) Distributions . Free tax 2011 Coordination With Tuition and Fees Deduction. Free tax 2011   A tuition and fees deduction can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. Free tax 2011 Losses on QTP Investments If you have a loss on your investment in a QTP account, you may be able to take the loss on your income tax return. Free tax 2011 You can take the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. Free tax 2011 Your basis is the total amount of contributions to that QTP account. Free tax 2011 You claim the loss as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23 (Schedule A (Form 1040NR), line 9), subject to the 2%-of-adjusted-gross-income limit. Free tax 2011 If you have distributions from more than one QTP account during a year, you must combine the information (amount of distribution, basis, etc. Free tax 2011 ) from all such accounts in order to determine your taxable earnings for the year. Free tax 2011 By doing this, the loss from one QTP account reduces the distributed earnings (if any) from any other QTP accounts. Free tax 2011 Example 1. Free tax 2011 In 2013, Taylor received a final distribution of $1,000 from QTP #1. Free tax 2011 His unrecovered basis in that account before the distribution was $3,000. Free tax 2011 If Taylor itemizes his deductions, he can claim the $2,000 loss on Schedule A (Form 1040). Free tax 2011 Example 2. Free tax 2011 Assume the same facts as in Example 1 , except that Taylor also had a distribution of $9,000 from QTP #2, giving him total distributions for 2013 of $10,000. Free tax 2011 His total basis in these distributions was $4,500 ($3,000 for QTP #1 and $1,500 for QTP #2). Free tax 2011 Taylor's adjusted qualified education expenses for 2013 totaled $6,000. Free tax 2011 In order to figure his taxable earnings, Taylor combines the two accounts and determines his taxable earnings as follows. Free tax 2011   1. Free tax 2011 $10,000 (total distribution)−$4,500 (basis portion of distribution)     = $5,500 (earnings included in distribution)   2. Free tax 2011 $5,500 (earnings) x $6,000 AQEE  $10,000 distribution           =$3,300 (tax-free earnings)     3. Free tax 2011 $5,500 (earnings)−$3,300 (tax-free earnings)     =$2,200 (taxable earnings)                 Taylor must include $2,200 in income on Form 1040, line 21. Free tax 2011 Because Taylor's accounts must be combined, he cannot deduct his $2,000 loss (QTP #1) on Schedule A (Form 1040). Free tax 2011 Instead, the $2,000 loss reduces the total earnings that were distributed, thereby reducing his taxable earnings. Free tax 2011 Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. Free tax 2011 Exceptions. Free tax 2011   The 10% additional tax does not apply to distributions: Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. Free tax 2011 Made because the designated beneficiary is disabled. Free tax 2011 A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. Free tax 2011 A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. Free tax 2011 Included in income because the designated beneficiary received: A tax-free scholarship or fellowship (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), or Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Free tax 2011 Made on account of the attendance of the designated beneficiary at a U. Free tax 2011 S. Free tax 2011 military academy (such as the USNA at Annapolis). Free tax 2011 This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U. Free tax 2011 S. Free tax 2011 Code) attributable to such attendance. Free tax 2011 Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits , earlier. Free tax 2011 ) Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. Free tax 2011 Figuring the additional tax. Free tax 2011    Use Part II of Form 5329, to figure any additional tax. Free tax 2011 Report the amount on Form 1040, line 58, or Form 1040NR, line 56. Free tax 2011 Rollovers and Other Transfers Assets can be rolled over or transferred from one QTP to another. Free tax 2011 In addition, the designated beneficiary can be changed without transferring accounts. Free tax 2011 Rollovers Any amount distributed from a QTP is not taxable if it is rolled over to another QTP for the benefit of the same beneficiary or for the benefit of a member of the beneficiary's family (including the beneficiary's spouse). Free tax 2011 An amount is rolled over if it is paid to another QTP within 60 days after the date of the distribution. Free tax 2011 Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. Free tax 2011 These are not taxable distributions. Free tax 2011 Members of the beneficiary's family. Free tax 2011   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. Free tax 2011 Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. Free tax 2011 Brother, sister, stepbrother, or stepsister. Free tax 2011 Father or mother or ancestor of either. Free tax 2011 Stepfather or stepmother. Free tax 2011 Son or daughter of a brother or sister. Free tax 2011 Brother or sister of father or mother. Free tax 2011 Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. Free tax 2011 The spouse of any individual listed above. Free tax 2011 First cousin. Free tax 2011 Example. Free tax 2011 When Aaron graduated from college last year he had $5,000 left in his QTP. Free tax 2011 He wanted to give this money to his younger brother, who was in junior high school. Free tax 2011 In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his brother's QTP within 60 days of the distribution. Free tax 2011 If the rollover is to another QTP for the same beneficiary, only one rollover is allowed within 12 months of a previous transfer to any QTP for that designated beneficiary. Free tax 2011 Changing the Designated Beneficiary There are no income tax consequences if the designated beneficiary of an account is changed to a member of the beneficiary's family. Free tax 2011 See Members of the beneficiary's family , earlier. Free tax 2011 Example. Free tax 2011 Assume the same situation as in the last example. Free tax 2011 Instead of closing his QTP and paying the distribution into his brother's QTP, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his brother. 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