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Free Tax Filing For Low Income Families

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Free Tax Filing For Low Income Families

Free tax filing for low income families Publication 1544 - Main Content Table of Contents Why Report These Payments? Who Must File Form 8300?What Payments Must Be Reported? What Is Cash? Taxpayer Identification Number (TIN) What Is a Related Transaction? What About Suspicious Transactions? When, Where, and What To File Examples Penalties How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Free tax filing for low income families Why Report These Payments? Drug dealers and smugglers often use large cash payments to “launder” money from illegal activities. Free tax filing for low income families Laundering means converting “dirty” or illegally-gained money to “clean” money. Free tax filing for low income families The government can often trace this laundered money through the payments you report. Free tax filing for low income families Laws passed by Congress require you to report these payments. Free tax filing for low income families Your compliance with these laws provides valuable information that can stop those who evade taxes and those who profit from the drug trade and other criminal activities. Free tax filing for low income families The USA PATRIOT Act of 2001 increased the scope of these laws to help trace funds used for terrorism. Free tax filing for low income families Who Must File Form 8300? Generally, any person in a trade or business who receives more than $10,000 in cash in a single transaction or in related transactions must file Form 8300. Free tax filing for low income families For example, you may have to file Form 8300 if you are a dealer in jewelry, furniture, boats, aircraft, or automobiles; a pawnbroker; an attorney; a real estate broker; an insurance company; or a travel agency. Free tax filing for low income families Special rules for clerks of federal or state courts are discussed later under Bail received by court clerks. Free tax filing for low income families However, you do not have to file Form 8300 if the transaction is not related to your trade or business. Free tax filing for low income families For example, if you own a jewelry store and sell your personal automobile for more than $10,000 in cash, you would not submit a Form 8300 for that transaction. Free tax filing for low income families Transaction defined. Free tax filing for low income families    A “transaction” occurs when: Goods, services, or property are sold; Property is rented; Cash is exchanged for other cash; A contribution is made to a trust or escrow account; A loan is made or repaid; or Cash is converted to a negotiable instrument, such as a check or a bond. Free tax filing for low income families Person defined. Free tax filing for low income families   A “person” includes an individual, a company, a corporation, a partnership, an association, a trust, or an estate. Free tax filing for low income families   Exempt organizations, including employee plans, are also “persons. Free tax filing for low income families ” However, exempt organizations do not have to file Form 8300 for a more-than-$10,000 charitable cash contribution they receive since it is not received in the course of a trade or business. Free tax filing for low income families Foreign transactions. Free tax filing for low income families   You do not have to file Form 8300 if the entire transaction (including the receipt of cash) takes place outside of: The 50 states, The District of Columbia, Puerto Rico, or A possession or territory of the United States. Free tax filing for low income families However, you must file Form 8300 if any part of the transaction (including the receipt of cash) occurs in Puerto Rico or a possession or territory of the United States and you are subject to the Internal Revenue Code. Free tax filing for low income families Bail received by court clerks. Free tax filing for low income families   Any clerk of a federal or state court who receives more than $10,000 in cash as bail for an individual charged with any of the following criminal offenses must file Form 8300: Any federal offense involving a controlled substance, Racketeering, Money laundering, and Any state offense substantially similar to (1), (2), or (3) above. Free tax filing for low income families For more information about the rules that apply to court clerks, see Section 1. Free tax filing for low income families 6050I-2 of the Income Tax Regulations. Free tax filing for low income families What Payments Must Be Reported? You must file Form 8300 to report cash paid to you if it is: Over $10,000, Received as: One lump sum of over $10,000, Installment payments that cause the total cash received within 1 year of the initial payment to total more than $10,000, or Other previously unreportable payments that cause the total cash received within a 12-month period to total more than $10,000, Received in the course of your trade or business, Received from the same buyer (or agent), and Received in a single transaction or in related transactions (defined later). Free tax filing for low income families What Is Cash? Cash is: The coins and currency of the United States (and any other country), and A cashier's check, bank draft, traveler's check, or money order you receive, if it has a face amount of $10,000 or less and you receive it in: A designated reporting transaction (defined later), or Any transaction in which you know the payer is trying to avoid the reporting of the transaction on Form 8300. Free tax filing for low income families Cash may include a cashier's check even if it is called a “treasurer's check” or “bank check. Free tax filing for low income families ” Cash does not include a check drawn on an individual's personal account. Free tax filing for low income families A cashier's check, bank draft, traveler's check, or money order with a face amount of more than $10,000 is not treated as cash. Free tax filing for low income families These items are not defined as cash and you do not have to file Form 8300 when you receive them because, if they were bought with currency, the bank or other financial institution that issued them must file a report on FinCEN Form 104. Free tax filing for low income families Example 1. Free tax filing for low income families You are a coin dealer. Free tax filing for low income families Bob Green buys gold coins from you for $13,200. Free tax filing for low income families He pays for them with $6,200 in U. Free tax filing for low income families S. Free tax filing for low income families currency and a cashier's check having a face amount of $7,000. Free tax filing for low income families The cashier's check is treated as cash. Free tax filing for low income families You have received more than $10,000 cash and must file Form 8300 for this transaction. Free tax filing for low income families Example 2. Free tax filing for low income families You are a retail jeweler. Free tax filing for low income families Mary North buys an item of jewelry from you for $12,000. Free tax filing for low income families She pays for it with a personal check payable to you in the amount of $9,600 and traveler's checks totaling $2,400. Free tax filing for low income families Because the personal check is not treated as cash, you have not received more than $10,000 cash in the transaction. Free tax filing for low income families You do not have to file Form 8300. Free tax filing for low income families Example 3. Free tax filing for low income families You are a boat dealer. Free tax filing for low income families Emily Jones buys a boat from you for $16,500. Free tax filing for low income families She pays for it with a cashier's check payable to you in the amount of $16,500. Free tax filing for low income families The cashier's check is not treated as cash because its face amount is more than $10,000. Free tax filing for low income families You do not have to file Form 8300 for this transaction. Free tax filing for low income families Designated Reporting Transaction A designated reporting transaction is the retail sale of any of the following: A consumer durable, such as an automobile or boat. Free tax filing for low income families A consumer durable is property, other than land or buildings, that: Is suitable for personal use, Can reasonably be expected to last at least 1 year under ordinary use, Has a sales price of more than $10,000, and Can be seen or touched (tangible property). Free tax filing for low income families For example, a $20,000 car is a consumer durable, but a $20,000 dump truck or factory machine is not. Free tax filing for low income families The car is a consumer durable even if you sell it to a buyer who will use it in a business. Free tax filing for low income families A collectible (for example, a work of art, rug, antique, metal, gem, stamp, or coin). Free tax filing for low income families Travel or entertainment, if the total sales price of all items sold for the same trip or entertainment event in one transaction (or related transactions) is more than $10,000. Free tax filing for low income families To figure the total sales price of all items sold for a trip or entertainment event, you include the sales price of items such as airfare, hotel rooms, and admission tickets. Free tax filing for low income families Example. Free tax filing for low income families You are a travel agent. Free tax filing for low income families Ed Johnson asks you to charter a passenger airplane to take a group to a sports event in another city. Free tax filing for low income families He also asks you to book hotel rooms and admission tickets for the group. Free tax filing for low income families In payment, he gives you two money orders, each for $6,000. Free tax filing for low income families You have received more than $10,000 cash in this designated reporting transaction. Free tax filing for low income families You must file Form 8300. Free tax filing for low income families Retail sale. Free tax filing for low income families   The term “retail sale” means any sale made in the course of a trade or business that consists mainly of making sales to ultimate consumers. Free tax filing for low income families   Thus, if your business consists mainly of making sales to ultimate consumers, all sales you make in the course of that business are retail sales. Free tax filing for low income families This includes any sales of items that will be resold. Free tax filing for low income families Broker or intermediary. Free tax filing for low income families   A designated reporting transaction includes the retail sale of items (1), (2), or (3) of the preceding list, even if the funds are received by a broker or other intermediary, rather than directly by the seller. Free tax filing for low income families Exceptions to Definition of Cash A cashier's check, bank draft, traveler's check, or money order you received in a designated reporting transaction is not treated as cash if one of the following exceptions applies. Free tax filing for low income families Exception for certain bank loans. Free tax filing for low income families   A cashier's check, bank draft, traveler's check, or money order is not treated as cash if it is the proceeds from a bank loan. Free tax filing for low income families As proof that it is from a bank loan, you may rely on a copy of the loan document, a written statement or lien instruction from the bank, or similar proof. Free tax filing for low income families Example. Free tax filing for low income families You are a car dealer. Free tax filing for low income families Mandy White buys a new car from you for $11,500. Free tax filing for low income families She pays you with $2,000 of U. Free tax filing for low income families S. Free tax filing for low income families currency and a cashier's check for $9,500 payable to you and her. Free tax filing for low income families You can tell that the cashier's check is the proceeds of a bank loan because it includes instructions to you to have a lien put on the car as security for the loan. Free tax filing for low income families For this reason, the cashier's check is not treated as cash. Free tax filing for low income families You do not have to file Form 8300 for the transaction. Free tax filing for low income families Exception for certain installment sales. Free tax filing for low income families   A cashier's check, bank draft, traveler's check, or money order is not treated as cash if it is received in payment on a promissory note or an installment sales contract (including a lease that is considered a sale for federal tax purposes). Free tax filing for low income families However, this exception applies only if: You use similar notes or contracts in other sales to ultimate consumers in the ordinary course of your trade or business, and The total payments for the sale that you receive on or before the 60th day after the sale are 50% or less of the purchase price. Free tax filing for low income families Exception for certain down payment plans. Free tax filing for low income families   A cashier's check, bank draft, traveler's check, or money order is not treated as cash if you received it in payment for a consumer durable or collectible, and all three of the following statements are true. Free tax filing for low income families You receive it under a payment plan requiring: One or more down payments, and Payment of the rest of the purchase price by the date of sale. Free tax filing for low income families You receive it more than 60 days before the date of sale. Free tax filing for low income families You use payment plans with the same or substantially similar terms when selling to ultimate consumers in the ordinary course of your trade or business. Free tax filing for low income families Exception for travel and entertainment. Free tax filing for low income families   A cashier's check, bank draft, traveler's check, or money order received for travel or entertainment is not treated as cash if all three of the following statements are true. Free tax filing for low income families You receive it under a payment plan requiring: One or more down payments, and Payment of the rest of the purchase price by the earliest date that any travel or entertainment item (such as airfare) is furnished for the trip or entertainment event. Free tax filing for low income families You receive it more than 60 days before the date on which the final payment is due. Free tax filing for low income families You use payment plans with the same or substantially similar terms when selling to ultimate consumers in the ordinary course of your trade or business. Free tax filing for low income families Taxpayer Identification Number (TIN) You must furnish the correct TIN of the person or persons from whom you receive the cash. Free tax filing for low income families If the transaction is conducted on the behalf of another person or persons, you must furnish the TIN of that person or persons. Free tax filing for low income families If you do not know a person's TIN, you have to ask for it. Free tax filing for low income families You may be subject to penalties for an incorrect or missing TIN. Free tax filing for low income families There are three types of TINs. Free tax filing for low income families The TIN for an individual, including a sole proprietor, is the individual's social security number (SSN). Free tax filing for low income families The TIN for a nonresident alien individual who needs a TIN but is not eligible to get an SSN is an IRS individual taxpayer identification number (ITIN). Free tax filing for low income families An ITIN has nine digits, similar to an SSN. Free tax filing for low income families The TIN for other persons, including corporations, partnerships, and estates, is the employer identification number (EIN). Free tax filing for low income families Exception. Free tax filing for low income families   You are not required to provide the TIN of a person who is a nonresident alien individual or a foreign organization if that person or foreign organization: Does not have income effectively connected with the conduct of a U. Free tax filing for low income families S. Free tax filing for low income families trade or business; Does not have an office or place of business, or a fiscal or paying agent in the United States; Does not file a federal tax return; Does not furnish a withholding certificate described in §1. Free tax filing for low income families 1441-1(e)(2) or (3) or 1. Free tax filing for low income families 1441-5(c)(2)(iv) or (3)(iii) to the extent required under 1. Free tax filing for low income families 1441-1(e)(4)(vii); Does not have to furnish a TIN on any return, statement, or other document as required by the income tax regulations under section 897 or 1445; or In the case of a nonresident alien individual, the individual has not chosen to file a joint federal income tax return with a spouse who is a U. Free tax filing for low income families S. Free tax filing for low income families citizen or resident. Free tax filing for low income families What Is a Related Transaction? Any transactions between a buyer (or an agent of the buyer) and a seller that occur within a 24-hour period are related transactions. Free tax filing for low income families If you receive over $10,000 in cash during two or more transactions with one buyer in a 24-hour period, you must treat the transactions as one transaction and report the payments on Form 8300. Free tax filing for low income families For example, if you sell two products for $6,000 each to the same customer in 1 day and the customer pays you in cash, these are related transactions. Free tax filing for low income families Because they total $12,000 (more than $10,000), you must file Form 8300. Free tax filing for low income families More than 24 hours between transactions. Free tax filing for low income families   Transactions are related even if they are more than 24 hours apart if you know, or have reason to know, that each is one of a series of connected transactions. Free tax filing for low income families   For example, you are a travel agent. Free tax filing for low income families A client pays you $8,000 in cash for a trip. Free tax filing for low income families Two days later, the same client pays you $3,000 more in cash to include another person on the trip. Free tax filing for low income families These are related transactions, and you must file Form 8300 to report them. Free tax filing for low income families What About Suspicious Transactions? If you receive $10,000 or less in cash, you may voluntarily file Form 8300 if the transaction appears to be suspicious. Free tax filing for low income families A transaction is suspicious if it appears that a person is trying to cause you not to file Form 8300 or is trying to cause you to file a false or incomplete Form 8300, or if there is a sign of possible illegal activity. Free tax filing for low income families If you are suspicious, you are encouraged to call the local IRS Criminal Investigation Division as soon as possible. Free tax filing for low income families Or, you can call the FinCEN Financial Institution Hotline toll free at 1-866-556-3974. Free tax filing for low income families When, Where, and What To File The amount you receive and when you receive it determine when you must file. Free tax filing for low income families Generally, you must file Form 8300 within 15 days after receiving a payment. Free tax filing for low income families If the Form 8300 due date (the 15th or last day you can timely file the form) falls on a Saturday, Sunday, or legal holiday, it is delayed until the next day that is not a Saturday, Sunday, or legal holiday. Free tax filing for low income families More than one payment. Free tax filing for low income families   In some transactions, the buyer may arrange to pay you in cash installment payments. Free tax filing for low income families If the first payment is more than $10,000, you must file Form 8300 within 15 days. Free tax filing for low income families If the first payment is not more than $10,000, you must add the first payment and any later payments made within 1 year of the first payment. Free tax filing for low income families When the total cash payments are more than $10,000, you must file Form 8300 within 15 days. Free tax filing for low income families   After you file Form 8300, you must start a new count of cash payments received from that buyer. Free tax filing for low income families If you receive more than $10,000 in additional cash payments from that buyer within a 12-month period, you must file another Form 8300. Free tax filing for low income families You must file the form within 15 days of the payment that causes the additional payments to total more than $10,000. Free tax filing for low income families   If you are already required to file Form 8300 and you receive additional payments within the 15 days before you must file, you can report all the payments on one form. Free tax filing for low income families Example. Free tax filing for low income families On January 10, you receive a cash payment of $11,000. Free tax filing for low income families You receive additional cash payments on the same transaction of $4,000 on February 15, $5,000 on March 20, and $6,000 on May 12. Free tax filing for low income families By January 25, you must file a Form 8300 for the $11,000 payment. Free tax filing for low income families By May 27, you must file an additional Form 8300 for the additional payments that total $15,000. Free tax filing for low income families Amending a Report?   If you are amending a report, check box 1a at the top of Form 8300. Free tax filing for low income families Complete the form in its entirety (Parts I-IV) and include the amended information. Free tax filing for low income families Do not attach a copy of the original report. Free tax filing for low income families Where to file. Free tax filing for low income families   Mail the form to the address given in the Form 8300 instructions. Free tax filing for low income families Required statement to buyer. Free tax filing for low income families   You must give a written or electronic statement to each person named on any Form 8300 you must file. Free tax filing for low income families You can give the statement electronically only if the recipient agrees to receive it in that format. Free tax filing for low income families The statement must show the name and address of your business, the name and phone number of a contact person, and the total amount of reportable cash you received from the person during the year. Free tax filing for low income families It must state that you are also reporting this information to the IRS. Free tax filing for low income families   You must send this statement to the buyer by January 31 of the year after the year in which you received the cash that caused you to file the form. Free tax filing for low income families    You must keep a copy of every Form 8300 you file for 5 years. Free tax filing for low income families Examples Example 1. Free tax filing for low income families Pat Brown is the sales manager for Small Town Cars. Free tax filing for low income families On January 6, 2009, Jane Smith buys a new car from Pat and pays $18,000 in cash. Free tax filing for low income families Pat asks for identification from Jane to get the necessary information to complete Form 8300. Free tax filing for low income families A filled-in form is shown in this publication. Free tax filing for low income families Pat must mail the form to the address shown in the form's instructions by January 21, 2009. Free tax filing for low income families He must also send a statement to Jane by January 31, 2010. Free tax filing for low income families Example 2. Free tax filing for low income families Using the same facts given in Example 1, suppose Jane had arranged to make cash payments of $6,000 each on January 6, February 6, and March 6. Free tax filing for low income families Pat would have to file a Form 8300 by February 26 (17 days after receiving total cash payments within 1 year over $10,000 because February 21, 2009, is a Saturday). Free tax filing for low income families Pat would not have to report the remaining $6,000 cash payment because it is not more than $10,000. Free tax filing for low income families However, he could report it if he felt it was a suspicious transaction. Free tax filing for low income families Penalties There are civil penalties for failure to: File a correct Form 8300 by the date it is due, and Provide the required statement to those named in the Form 8300. Free tax filing for low income families If you intentionally disregard the requirement to file a correct Form 8300 by the date it is due, the penalty is the greater of: $25,000, or The amount of cash you received and were required to report (up to $100,000). Free tax filing for low income families There are criminal penalties for: Willful failure to file Form 8300, Willfully filing a false or fraudulent Form 8300, Stopping or trying to stop Form 8300 from being filed, and Setting up, helping to set up, or trying to set up a transaction in a way that would make it seem unnecessary to file Form 8300. Free tax filing for low income families If you willfully fail to file Form 8300, you can be fined up to $250,000 for individuals ($500,000 for corporations) or sentenced to up to 5 years in prison, or both. Free tax filing for low income families These dollar amounts are based on Section 3571 of Title 18 of the U. Free tax filing for low income families S. Free tax filing for low income families Code. Free tax filing for low income families The penalties for failure to file may also apply to any person (including a payer) who attempts to interfere with or prevent the seller (or business) from filing a correct Form 8300. Free tax filing for low income families This includes any attempt to structure the transaction in a way that would make it seem unnecessary to file Form 8300. Free tax filing for low income families Structuring means breaking up a large cash transaction into small cash transactions. Free tax filing for low income families How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. Free tax filing for low income families By selecting the method that is best for you, you will have quick and easy access to tax help. Free tax filing for low income families Free help with your return. Free tax filing for low income families   Free help in preparing your return is available nationwide from IRS-certified volunteers. Free tax filing for low income families The Volunteer Income Tax Assistance (VITA) program is designed to help low-moderate income taxpayers and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Free tax filing for low income families Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Free tax filing for low income families To find the nearest VITA or TCE site, visit IRS. Free tax filing for low income families gov or call 1-800-906-9887 or 1-800-829-1040. Free tax filing for low income families   As part of the TCE program, AARP offers the Tax-Aide counseling program. Free tax filing for low income families To find the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP's website at www. Free tax filing for low income families aarp. Free tax filing for low income families org/money/taxaide. Free tax filing for low income families   For more information on these programs, go to IRS. Free tax filing for low income families gov and enter keyword “VITA” in the upper right-hand corner. Free tax filing for low income families Internet. Free tax filing for low income families You can access the IRS website at IRS. Free tax filing for low income families gov 24 hours a day, 7 days a week to: Check the status of your 2011 refund. Free tax filing for low income families Go to IRS. Free tax filing for low income families gov and click on Where's My Refund. Free tax filing for low income families Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. Free tax filing for low income families If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Free tax filing for low income families Have your 2011 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Free tax filing for low income families E-file your return. Free tax filing for low income families Find out about commercial tax preparation and e-file services available free to eligible taxpayers. Free tax filing for low income families Download forms, including talking tax forms, instructions, and publications. Free tax filing for low income families Order IRS products online. Free tax filing for low income families Research your tax questions online. Free tax filing for low income families Search publications online by topic or keyword. Free tax filing for low income families Use the online Internal Revenue Code, regulations, or other official guidance. Free tax filing for low income families View Internal Revenue Bulletins (IRBs) published in the last few years. Free tax filing for low income families Figure your withholding allowances using the withholding calculator online at  www. Free tax filing for low income families irs. Free tax filing for low income families gov/individuals. Free tax filing for low income families Determine if Form 6251 must be filed by using our Alternative Minimum Tax (AMT) Assistant available online at  www. Free tax filing for low income families irs. Free tax filing for low income families gov/individuals. Free tax filing for low income families Sign up to receive local and national tax news by email. Free tax filing for low income families Get information on starting and operating a small business. Free tax filing for low income families Phone. Free tax filing for low income families Many services are available by phone. Free tax filing for low income families   Ordering forms, instructions, and publications. Free tax filing for low income families Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions. Free tax filing for low income families You should receive your order within 10 days. Free tax filing for low income families Asking tax questions. Free tax filing for low income families Call the IRS with your tax questions at 1-800-829-1040. Free tax filing for low income families Solving problems. Free tax filing for low income families You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. Free tax filing for low income families An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Free tax filing for low income families Call your local Taxpayer Assistance Center for an appointment. Free tax filing for low income families To find the number, go to www. Free tax filing for low income families irs. Free tax filing for low income families gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Free tax filing for low income families TTY/TDD equipment. Free tax filing for low income families If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. Free tax filing for low income families TeleTax topics. Free tax filing for low income families Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. Free tax filing for low income families Refund information. Free tax filing for low income families You can check the status of your refund on the new IRS phone app. Free tax filing for low income families Download the free IRS2Go app by visiting the iTunes app store or the Android Marketplace. Free tax filing for low income families IRS2Go is a new way to provide you with information and tools. Free tax filing for low income families To check the status of your refund by phone, call 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). Free tax filing for low income families Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. Free tax filing for low income families If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Free tax filing for low income families Have your 2011 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Free tax filing for low income families If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. Free tax filing for low income families Other refund information. Free tax filing for low income families To check the status of a prior-year refund or amended return refund, call 1-800-829-1040. Free tax filing for low income families Evaluating the quality of our telephone services. Free tax filing for low income families To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. Free tax filing for low income families One method is for a second IRS representative to listen in on or record random telephone calls. Free tax filing for low income families Another is to ask some callers to complete a short survey at the end of the call. Free tax filing for low income families Walk-in. Free tax filing for low income families Many products and services are available on a walk-in basis. Free tax filing for low income families   Products. Free tax filing for low income families You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Free tax filing for low income families Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. Free tax filing for low income families Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. Free tax filing for low income families Services. Free tax filing for low income families You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. Free tax filing for low income families An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Free tax filing for low income families If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. Free tax filing for low income families No appointment is necessary—just walk in. Free tax filing for low income families If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. Free tax filing for low income families A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. Free tax filing for low income families If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. Free tax filing for low income families All other issues will be handled without an appointment. Free tax filing for low income families To find the number of your local office, go to www. Free tax filing for low income families irs. Free tax filing for low income families gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Free tax filing for low income families Mail. Free tax filing for low income families You can send your order for forms, instructions, and publications to the address below. Free tax filing for low income families You should receive a response within 10 days after your request is received. Free tax filing for low income families  Internal Revenue Service 1201 N. Free tax filing for low income families Mitsubishi Motorway Bloomington, IL 61705-6613 Taxpayer Advocate Service. Free tax filing for low income families   The Taxpayer Advocate Service (TAS) is your voice at the IRS. Free tax filing for low income families Our job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights. Free tax filing for low income families We offer free help to guide you through the often-confusing process of resolving tax problems that you haven’t been able to solve on your own. Free tax filing for low income families Remember, the worst thing you can do is nothing at all. Free tax filing for low income families   TAS can help if you can’t resolve your problem with the IRS and: Your problem is causing financial difficulties for you, your family, or your business. Free tax filing for low income families You face (or your business is facing) an immediate threat of adverse action. Free tax filing for low income families You have tried repeatedly to contact the IRS but no one has responded, or the IRS has not responded to you by the date promised. Free tax filing for low income families   If you qualify for our help, we’ll do everything we can to get your problem resolved. Free tax filing for low income families You will be assigned to one advocate who will be with you at every turn. Free tax filing for low income families We have offices in every state, the District of Columbia, and Puerto Rico. Free tax filing for low income families Although TAS is independent within the IRS, our advocates know how to work with the IRS to get your problems resolved. Free tax filing for low income families And our services are always free. Free tax filing for low income families   As a taxpayer, you have rights that the IRS must abide by in its dealings with you. Free tax filing for low income families Our tax toolkit at www. Free tax filing for low income families TaxpayerAdvocate. Free tax filing for low income families irs. Free tax filing for low income families gov can help you understand these rights. Free tax filing for low income families   If you think TAS might be able to help you, call your local advocate, whose number is in your phone book and on our website at www. Free tax filing for low income families irs. Free tax filing for low income families gov/advocate. Free tax filing for low income families You can also call our toll-free number at 1-877-777-4778. Free tax filing for low income families   TAS also handles large-scale or systemic problems that affect many taxpayers. Free tax filing for low income families If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. Free tax filing for low income families irs. Free tax filing for low income families gov/advocate. Free tax filing for low income families Low Income Taxpayer Clinics (LITCs). Free tax filing for low income families   Low Income Taxpayer Clinics (LITCs) are independent from the IRS. Free tax filing for low income families Some clinics serve individuals whose income is below a certain level and who need to resolve a tax problem. Free tax filing for low income families These clinics provide professional representation before the IRS or in court on audits, appeals, tax collection disputes, and other issues for free or for a small fee. Free tax filing for low income families Some clinics can provide information about taxpayer rights and responsibilities in many different languages for individuals who speak English as a second language. Free tax filing for low income families For more information and to find a clinic near you, see the LITC page on www. Free tax filing for low income families irs. Free tax filing for low income families gov/advocate or IRS Publication 4134, Low Income Taxpayer Clinic List. Free tax filing for low income families This publication is also available by calling 1-800-829-3676 or at your local IRS office. Free tax filing for low income families Free tax services. Free tax filing for low income families   Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. Free tax filing for low income families Learn about free tax information from the IRS, including publications, services, and education and assistance programs. Free tax filing for low income families The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. Free tax filing for low income families The majority of the information and services listed in this publication are available to you free of charge. Free tax filing for low income families If there is a fee associated with a resource or service, it is listed in the publication. Free tax filing for low income families   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. Free tax filing for low income families DVD for tax products. Free tax filing for low income families You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. Free tax filing for low income families Prior-year forms, instructions, and publications. Free tax filing for low income families Tax Map: an electronic research tool and finding aid. Free tax filing for low income families Tax law frequently asked questions. Free tax filing for low income families Tax Topics from the IRS telephone response system. Free tax filing for low income families Internal Revenue Code—Title 26 of the U. Free tax filing for low income families S. Free tax filing for low income families Code. Free tax filing for low income families Links to other Internet based Tax Research Materials. Free tax filing for low income families Fill-in, print, and save features for most tax forms. Free tax filing for low income families Internal Revenue Bulletins. Free tax filing for low income families Toll-free and email technical support. Free tax filing for low income families Two releases during the year. Free tax filing for low income families  – The first release will ship the beginning of January. Free tax filing for low income families  – The final release will ship the beginning of March. Free tax filing for low income families Purchase the DVD from National Technical Information Service (NTIS) at www. Free tax filing for low income families irs. Free tax filing for low income families gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee). Free tax filing for low income families This image is too large to be displayed in the current screen. Free tax filing for low income families Please click the link to view the image. Free tax filing for low income families Fill-in Form 8300 Prev  Up  Next   Home   More Online Publications
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Understanding your 2800C Letter

We sent you this letter because we believe your employee may have filed an incorrect Form W-4, Employee's Withholding Allowance Certificate.  

What you need to do

Begin withholding income tax from this employee's wages based on the following withholding rates, effective 60 days from the date of this letter:  

  • Withholding rate (marital status): single
  • Withholding allowances:  0000   

You may want to…

  • Search keyword "withholding compliance" for more information on income tax withholding
  • Download the following materials:
    • Publication 15 (Circular E), Employer's Tax Guide  
    • Publication 51 (Circular A), Agricultural Employer's Tax Guide

Answers to Common Questions

If the IRS determines that an employee doesn’t have enough federal income tax withheld, what will you ask an employer to do?
If we determine that an employee doesn’t have enough withholding, we’ll send you a lock-in letter that specifies the maximum number of withholding allowances permitted for the employee. You must withhold tax as indicated in the lock-in letter by the date specified unless we notify you otherwise. This date is 60 days after the date of the lock-in letter. Once a lock-in rate is effective, an employer can’t decrease withholding unless the IRS approves it.
 

You’ll also receive a copy of the letter to give to the employee. If the employee no longer works for you, you don’t need to do anything. However, if the employee returns to work within 12 months, you should begin withholding income tax from the employee’s wages based on the withholding rate in the letter.

The letter will explain how the employee can provide additional information to help us determine the appropriate number of withholding exemptions. We’ll give the employee some time before the lock-in rate is effective to submit a new Form W-4 and a statement that supports the claims made on it. The employee must send the Form W-4 and the statement to the IRS address as shown on this webpage.

If an employer no longer has to submit Forms W-4 claiming complete exemption from withholding or claiming more than 10 allowances, how does the IRS determine adequate withholding?
We‘re more effectively using information in our records and reported on Form W-2 wage statements to ensure that employees have enough federal income tax withheld.

After I lock in withholding on an employee, what do I do if I receive a revised Form W-4 from the employee?
You must disregard any Form W-4 that decreases the amount of withholding. The employee must submit for IRS approval any new Form W-4 and a statement that supports his or her request to decrease federal income tax withholding. The employee should send the Form W-4 and statement to the address on the lock-in letter. We’ll notify you if we approve the employee’s request. However, if the employee submits a Form W-4 that claims fewer withholding allowances than the maximum number specified in the lock-in letter, you must increase withholding based on that Form W-4.

As an employer who has received a modification letter (Letter 2808C) from the Withholding Compliance Program, do I wait for another 60 days to change the marital status or number of allowances as indicated in the modification letter?
The changes to the marital status or number of allowances become effective immediately upon receipt of the Letter 2808C.

Our employees can submit or change their Forms W-4 on line. How can I prevent them from changing their Forms W-4 after the IRS has locked them in?
You’ll need to block employees who have been locked-in from using an on-line Form W-4 system to decrease their withholding.

How to get help

  • Call toll free 1-855-839-2235 weekdays between 8:00 a.m. and 8:00 p.m.
  • Send a fax to 1-855-202-8300
  • Write to:

    Internal Revenue Service
    Compliance Services
    Withholding Compliance Unit
    P.O. Box 9047, Stop 837
    Andover, MA 01810-0947
Page Last Reviewed or Updated: 10-Jan-2014

The Free Tax Filing For Low Income Families

Free tax filing for low income families 4. Free tax filing for low income families   Transportation Table of Contents Parking fees. Free tax filing for low income families Advertising display on car. Free tax filing for low income families Car pools. Free tax filing for low income families Hauling tools or instruments. Free tax filing for low income families Union members' trips from a union hall. Free tax filing for low income families 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 tax filing for low income families These expenses include the cost of transportation by air, rail, bus, taxi, etc. Free tax filing for low income families , and the cost of driving and maintaining your car. Free tax filing for low income families Transportation expenses include the ordinary and necessary costs of all of the following. Free tax filing for low income families 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 tax filing for low income families Tax home is defined in chapter 1. Free tax filing for low income families Visiting clients or customers. Free tax filing for low income families Going to a business meeting away from your regular workplace. Free tax filing for low income families Getting from your home to a temporary workplace when you have one or more regular places of work. Free tax filing for low income families These temporary workplaces can be either within the area of your tax home or outside that area. Free tax filing for low income families Transportation expenses do not include expenses you have while traveling away from home overnight. Free tax filing for low income families Those expenses are travel expenses discussed in chapter 1 . Free tax filing for low income families 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 tax filing for low income families See Car Expenses , later. Free tax filing for low income families Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. Free tax filing for low income families However, there may be exceptions to this general rule. Free tax filing for low income families You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. Free tax filing for low income families 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 tax filing for low income families Illustration of transportation expenses. Free tax filing for low income families    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 tax filing for low income families You may want to refer to it when deciding whether you can deduct your transportation expenses. Free tax filing for low income families Temporary work location. Free tax filing for low income families   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 tax filing for low income families   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 tax filing for low income families   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 tax filing for low income families   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 tax filing for low income families It will not be treated as temporary after the date you determine it will last more than 1 year. Free tax filing for low income families   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 tax filing for low income families You may have deductible travel expenses as discussed in chapter 1 . Free tax filing for low income families No regular place of work. Free tax filing for low income families   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 tax filing for low income families   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. Free tax filing for low income families   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. Free tax filing for low income families These are nondeductible commuting expenses. Free tax filing for low income families Two places of work. Free tax filing for low income families   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 tax filing for low income families 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 tax filing for low income families   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 tax filing for low income families You cannot deduct them. Free tax filing for low income families Armed Forces reservists. Free tax filing for low income families   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 tax filing for low income families You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work . Free tax filing for low income families   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 tax filing for low income families In this case, your transportation generally is a nondeductible commuting expense. Free tax filing for low income families 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 tax filing for low income families   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 tax filing for low income families   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. Free tax filing for low income families These expenses are discussed in chapter 1 . Free tax filing for low income families   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 tax filing for low income families For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home under Special Rules, in chapter 6. Free tax filing for low income families Commuting expenses. Free tax filing for low income families   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 tax filing for low income families These costs are personal commuting expenses. Free tax filing for low income families You cannot deduct commuting expenses no matter how far your home is from your regular place of work. Free tax filing for low income families You cannot deduct commuting expenses even if you work during the commuting trip. Free tax filing for low income families Example. Free tax filing for low income families You sometimes use your cell phone to make business calls while commuting to and from work. Free tax filing for low income families Sometimes business associates ride with you to and from work, and you have a business discussion in the car. Free tax filing for low income families These activities do not change the trip from personal to business. Free tax filing for low income families You cannot deduct your commuting expenses. Free tax filing for low income families Parking fees. Free tax filing for low income families    Fees you pay to park your car at your place of business are nondeductible commuting expenses. Free tax filing for low income families You can, however, deduct business-related parking fees when visiting a customer or client. Free tax filing for low income families Advertising display on car. Free tax filing for low income families   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 tax filing for low income families If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. Free tax filing for low income families Car pools. Free tax filing for low income families   You cannot deduct the cost of using your car in a nonprofit car pool. Free tax filing for low income families Do not include payments you receive from the passengers in your income. Free tax filing for low income families These payments are considered reimbursements of your expenses. Free tax filing for low income families However, if you operate a car pool for a profit, you must include payments from passengers in your income. Free tax filing for low income families You can then deduct your car expenses (using the rules in this publication). Free tax filing for low income families Hauling tools or instruments. Free tax filing for low income families   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. Free tax filing for low income families 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 tax filing for low income families Union members' trips from a union hall. Free tax filing for low income families   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 tax filing for low income families Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. Free tax filing for low income families Office in the home. Free tax filing for low income families   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 tax filing for low income families (See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Free tax filing for low income families ) Examples of deductible transportation. Free tax filing for low income families   The following examples show when you can deduct transportation expenses based on the location of your work and your home. Free tax filing for low income families Example 1. Free tax filing for low income families You regularly work in an office in the city where you live. Free tax filing for low income families Your employer sends you to a 1-week training session at a different office in the same city. Free tax filing for low income families You travel directly from your home to the training location and return each day. Free tax filing for low income families You can deduct the cost of your daily round-trip transportation between your home and the training location. Free tax filing for low income families Example 2. Free tax filing for low income families Your principal place of business is in your home. Free tax filing for low income families 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 tax filing for low income families Example 3. Free tax filing for low income families You have no regular office, and you do not have an office in your home. Free tax filing for low income families In this case, the location of your first business contact inside the metropolitan area is considered your office. Free tax filing for low income families Transportation expenses between your home and this first contact are nondeductible commuting expenses. Free tax filing for low income families Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. Free tax filing for low income families While you cannot deduct the costs of these trips, you can deduct the costs of going from one client or customer to another. Free tax filing for low income families Car Expenses If you use your car for business purposes, you ordinarily can deduct car expenses. Free tax filing for low income families You generally can use one of the two following methods to figure your deductible expenses. Free tax filing for low income families Standard mileage rate. Free tax filing for low income families Actual car expenses. Free tax filing for low income families 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 tax filing for low income families See Leasing a Car , later. Free tax filing for low income families In this publication, “car” includes a van, pickup, or panel truck. Free tax filing for low income families For the definition of “car” for depreciation purposes, see Car defined under Actual Car Expenses, later. Free tax filing for low income families Rural mail carriers. Free tax filing for low income families   If you are a rural mail carrier, you may be able to treat the qualified reimbursement you received as your allowable expense. Free tax filing for low income families Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the reimbursement in your income. Free tax filing for low income families   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 tax filing for low income families You must complete Form 2106 and attach it to your Form 1040, U. Free tax filing for low income families S. Free tax filing for low income families Individual Income Tax Return. Free tax filing for low income families   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. Free tax filing for low income families It is given as an equipment maintenance allowance (EMA) to employees of the U. Free tax filing for low income families S. Free tax filing for low income families Postal Service. Free tax filing for low income families It is at the rate contained in the 1991 collective bargaining agreement. Free tax filing for low income families Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. Free tax filing for low income families See your employer for information on your reimbursement. Free tax filing for low income families    If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. Free tax filing for low income families 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 tax filing for low income families For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Free tax filing for low income families If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. Free tax filing for low income families You cannot deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees. Free tax filing for low income families See Choosing the standard mileage rate and Standard mileage rate not allowed, later. Free tax filing for low income families 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 tax filing for low income families See chapter 6 for more information on reimbursements . Free tax filing for low income families Choosing the standard mileage rate. Free tax filing for low income families   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 tax filing for low income families Then, in later years, you can choose to use either the standard mileage rate or actual expenses. Free tax filing for low income families   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. Free tax filing for low income families 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 tax filing for low income families   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. Free tax filing for low income families You cannot revoke the choice. Free tax filing for low income families However, in later years, you can switch from the standard mileage rate to the actual expenses method. Free tax filing for low income families 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 tax filing for low income families Example. Free tax filing for low income families Larry is an employee who occasionally uses his own car for business purposes. Free tax filing for low income families He purchased the car in 2011, but he did not claim any unreimbursed employee expenses on his 2011 tax return. Free tax filing for low income families 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 tax filing for low income families   For more information about depreciation included in the standard mileage rate, see Exception under Methods of depreciation, later. Free tax filing for low income families Standard mileage rate not allowed. Free tax filing for low income families   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 tax filing for low income families (See Rural mail carriers , earlier. Free tax filing for low income families ) Note. Free tax filing for low income families 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 tax filing for low income families Five or more cars. Free tax filing for low income families   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 tax filing for low income families However, you may be able to deduct your actual expenses for operating each of the cars in your business. Free tax filing for low income families See Actual Car Expenses , later, for information on how to figure your deduction. Free tax filing for low income families   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 tax filing for low income families   The following examples illustrate the rules for when you can and cannot use the standard mileage rate for five or more cars. Free tax filing for low income families Example 1. Free tax filing for low income families Marcia, a salesperson, owns three cars and two vans that she alternates using for calling on her customers. Free tax filing for low income families 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 tax filing for low income families Example 2. Free tax filing for low income families Tony and his employees use his four pickup trucks in his landscaping business. Free tax filing for low income families During the year, he traded in two of his old trucks for two newer ones. Free tax filing for low income families Tony can use the standard mileage rate for the business mileage of all six of the trucks he owned during the year. Free tax filing for low income families Example 3. Free tax filing for low income families Chris owns a repair shop and an insurance business. Free tax filing for low income families He and his employees use his two pickup trucks and van for the repair shop. Free tax filing for low income families Chris alternates using his two cars for the insurance business. Free tax filing for low income families No one else uses the cars for business purposes. Free tax filing for low income families 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 tax filing for low income families Example 4. Free tax filing for low income families Maureen owns a car and four vans that are used in her housecleaning business. Free tax filing for low income families Her employees use the vans, and she uses the car to travel to various customers. Free tax filing for low income families Maureen cannot use the standard mileage rate for the car or the vans. Free tax filing for low income families This is because all five vehicles are used in Maureen's business at the same time. Free tax filing for low income families She must use actual expenses for all vehicles. Free tax filing for low income families Interest. Free tax filing for low income families   If you are an employee, you cannot deduct any interest paid on a car loan. Free tax filing for low income families This applies even if you use the car 100% for business as an employee. Free tax filing for low income families   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 tax filing for low income families For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). Free tax filing for low income families You cannot deduct the part of the interest expense that represents your personal use of the car. Free tax filing for low income families    If you use a home equity loan to purchase your car, you may be able to deduct the interest. Free tax filing for low income families See Publication 936, Home Mortgage Interest Deduction, for more information. Free tax filing for low income families Personal property taxes. Free tax filing for low income families   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 tax filing for low income families You can take this deduction even if you use the standard mileage rate or if you do not use the car for business. Free tax filing for low income families   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 tax filing for low income families 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 tax filing for low income families Parking fees and tolls. Free tax filing for low income families   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. Free tax filing for low income families (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. Free tax filing for low income families ) Sale, trade-in, or other disposition. Free tax filing for low income families   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 tax filing for low income families See Disposition of a Car , later. Free tax filing for low income families Actual Car Expenses If you do not use the standard mileage rate, you may be able to deduct your actual car expenses. Free tax filing for low income families 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 tax filing for low income families 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 tax filing for low income families Continue to keep records, as explained later in chapter 5 . Free tax filing for low income families Business and personal use. Free tax filing for low income families   If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. Free tax filing for low income families You can divide your expense based on the miles driven for each purpose. Free tax filing for low income families Example. Free tax filing for low income families 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 tax filing for low income families You can claim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense. Free tax filing for low income families Employer-provided vehicle. Free tax filing for low income families   If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. Free tax filing for low income families You cannot use the standard mileage rate. Free tax filing for low income families See Vehicle Provided by Your Employer in chapter 6. Free tax filing for low income families Interest on car loans. Free tax filing for low income families   If you are an employee, you cannot deduct any interest paid on a car loan. Free tax filing for low income families This interest is treated as personal interest and is not deductible. Free tax filing for low income families If you are self-employed and use your car in that business, see Interest , earlier, under Standard Mileage Rate. Free tax filing for low income families Taxes paid on your car. Free tax filing for low income families   If you are an employee, you can deduct personal property taxes paid on your car if you itemize deductions. Free tax filing for low income families Enter the amount paid on line 7 of Schedule A (Form 1040). Free tax filing for low income families Sales taxes. Free tax filing for low income families   Generally, sales taxes on your car are part of your car's basis and are recovered through depreciation, discussed later. Free tax filing for low income families Fines and collateral. Free tax filing for low income families   You cannot deduct fines you pay or collateral you forfeit for traffic violations. Free tax filing for low income families Casualty and theft losses. Free tax filing for low income families   If your car is damaged, destroyed, or stolen, you may be able to deduct part of the loss not covered by insurance. Free tax filing for low income families See Publication 547, Casualties, Disasters, and Thefts, for information on deducting a loss on your car. Free tax filing for low income families Depreciation and section 179 deductions. Free tax filing for low income families   Generally, the cost of a car, plus sales tax and improvements, is a capital expense. Free tax filing for low income families Because the benefits last longer than 1 year, you generally cannot deduct a capital expense. Free tax filing for low income families 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 tax filing for low income families Depreciation allows you to recover the cost over more than 1 year by deducting part of it each year. Free tax filing for low income families The section 179 deduction , special depreciation allowance , and depreciation deductions are discussed later. Free tax filing for low income families   Generally, there are limits on these deductions. Free tax filing for low income families Special rules apply if you use your car 50% or less in your work or business. Free tax filing for low income families   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 tax filing for low income families   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 tax filing for low income families Car defined. Free tax filing for low income families   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 tax filing for low income families Its unloaded gross vehicle weight must not be more than 6,000 pounds. Free tax filing for low income families A car includes any part, component, or other item physically attached to it or usually included in the purchase price. Free tax filing for low income families   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 tax filing for low income families Qualified nonpersonal use vehicles. Free tax filing for low income families   These are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Free tax filing for low income families 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 tax filing for low income families Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles. Free tax filing for low income families More information. Free tax filing for low income families   See Depreciation Deduction , later, for more information on how to depreciate your vehicle. Free tax filing for low income families 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 tax filing for low income families 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 tax filing for low income families 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 tax filing for low income families See Depreciation Limits, later. Free tax filing for low income families You can claim the section 179 deduction only in the year you place the car in service. Free tax filing for low income families 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 tax filing for low income families Even if you are not using the property, it is in service when it is ready and available for its specifically assigned use. Free tax filing for low income families A car first used for personal purposes cannot qualify for the deduction in a later year when its use changes to business. Free tax filing for low income families Example. Free tax filing for low income families In 2012, you bought a new car and used it for personal purposes. Free tax filing for low income families In 2013, you began to use it for business. Free tax filing for low income families Changing its use to business use does not qualify the cost of your car for a section 179 deduction in 2013. Free tax filing for low income families However, you can claim a depreciation deduction for the business use of the car starting in 2013. Free tax filing for low income families See Depreciation Deduction , later. Free tax filing for low income families More than 50% business use requirement. Free tax filing for low income families   You must use the property more than 50% for business to claim any section 179 deduction. Free tax filing for low income families If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. Free tax filing for low income families The result is the cost of the property that can qualify for the section 179 deduction. Free tax filing for low income families Example. Free tax filing for low income families Peter purchased a car in April 2013 for $24,500 and used it 60% for business. Free tax filing for low income families 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 tax filing for low income families But see Limit on total section 179, special depreciation allowance, and depreciation deduction , discussed later. Free tax filing for low income families Limits. Free tax filing for low income families   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 tax filing for low income families Limit on the amount of the section 179 deduction. Free tax filing for low income families   For 2013, the total amount you can choose to deduct under section 179 generally cannot be more than $500,000. Free tax filing for low income families   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 tax filing for low income families 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 tax filing for low income families   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 tax filing for low income families   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 tax filing for low income families   If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit. Free tax filing for low income families You must allocate the dollar limit (after any reduction) between you. Free tax filing for low income families   For more information on the above section 179 deduction limits, see Publication 946. Free tax filing for low income families Limit for sport utility and certain other vehicles. Free tax filing for low income families   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 tax filing for low income families 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 tax filing for low income families 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 tax filing for low income families    Limit on total section 179, special depreciation allowance, and depreciation deduction. Free tax filing for low income families   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 tax filing for low income families The limit is reduced if your business use of the car is less than 100%. Free tax filing for low income families See Depreciation Limits , later, for more information. Free tax filing for low income families Example. Free tax filing for low income families 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 tax filing for low income families 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 tax filing for low income families Cost of car. Free tax filing for low income families   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 tax filing for low income families 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 tax filing for low income families Your cost includes only the cash you paid. Free tax filing for low income families Basis of car for depreciation. Free tax filing for low income families   The amount of the section 179 deduction reduces your basis in your car. Free tax filing for low income families If you choose the section 179 deduction, you must subtract the amount of the deduction from the cost of your car. Free tax filing for low income families The resulting amount is the basis in your car you use to figure your depreciation deduction. Free tax filing for low income families When to choose. Free tax filing for low income families   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 tax filing for low income families How to choose. Free tax filing for low income families    Employees use Form 2106 to make this choice and report the section 179 deduction. Free tax filing for low income families All others use Form 4562. Free tax filing for low income families   File the appropriate form with either of the following. Free tax filing for low income families Your original tax return filed for the year the property was placed in service (whether or not you file it timely). Free tax filing for low income families An amended return filed within the time prescribed by law. Free tax filing for low income families 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 tax filing for low income families The amended return must also include any resulting adjustments to taxable income. Free tax filing for low income families    You must keep records that show the specific identification of each piece of qualifying section 179 property. Free tax filing for low income families These records must show how you acquired the property, the person you acquired it from, and when you placed it in service. Free tax filing for low income families Revoking an election. Free tax filing for low income families   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 tax filing for low income families Recapture of section 179 deduction. Free tax filing for low income families   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 tax filing for low income families 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 tax filing for low income families Any section 179 deduction claimed on the car is included in calculating the excess depreciation. Free tax filing for low income families For information on this calculation, see Excess depreciation , later in this chapter under Car Used 50% or Less for Business. Free tax filing for low income families Dispositions. Free tax filing for low income families   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 tax filing for low income families 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 tax filing for low income families For information on the disposition of a car, see Disposition of a Car , later. Free tax filing for low income families 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 tax filing for low income families 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 tax filing for low income families The special depreciation allowance applies only for the first year the car is placed in service. Free tax filing for low income families 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 tax filing for low income families Combined depreciation. Free tax filing for low income families   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 tax filing for low income families 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 tax filing for low income families See Depreciation Limits , later in this chapter. Free tax filing for low income families Qualified car. Free tax filing for low income families   To be a qualified car (including trucks and vans), the car must meet all of the following tests. Free tax filing for low income families 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 tax filing for low income families Election not to claim the special depreciation allowance. Free tax filing for low income families   You can elect not to claim the special depreciation allowance for your car, truck, or van, that is qualified property. Free tax filing for low income families If you make this election, it applies to all 5-year property placed in service during the year. Free tax filing for low income families   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 tax filing for low income families    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 tax filing for low income families 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 tax filing for low income families This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car. Free tax filing for low income families You generally need to know the following things about the car you intend to depreciate. Free tax filing for low income families Your basis in the car. Free tax filing for low income families The date you place the car in service. Free tax filing for low income families The method of depreciation and recovery period you will use. Free tax filing for low income families Basis. Free tax filing for low income families   Your basis in a car for figuring depreciation is generally its cost. Free tax filing for low income families This includes any amount you borrow or pay in cash, other property, or services. Free tax filing for low income families   Generally, you figure depreciation on your car, truck, or van using your unadjusted basis (see Unadjusted basis , later). Free tax filing for low income families However, in some situations you will use your adjusted basis (your basis reduced by depreciation allowed or allowable in earlier years). Free tax filing for low income families For one of these situations see Exception under Methods of depreciation, later. Free tax filing for low income families   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 tax filing for low income families Additional rules concerning basis are discussed later in this chapter under Unadjusted basis . Free tax filing for low income families Placed in service. Free tax filing for low income families   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 tax filing for low income families Depreciation begins when the car is placed in service for use in your work or business or for the production of income. Free tax filing for low income families   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 tax filing for low income families Car placed in service and disposed of in the same year. Free tax filing for low income families   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 tax filing for low income families Methods of depreciation. Free tax filing for low income families   Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery System (MACRS). Free tax filing for low income families MACRS is discussed later in this chapter. Free tax filing for low income families Exception. Free tax filing for low income families   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 tax filing for low income families You must use straight line depreciation over the estimated remaining useful life of the car. Free tax filing for low income families   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 tax filing for low income families The rate per mile varies depending on the year(s) you used the standard mileage rate. Free tax filing for low income families For the rate(s) to use, see Depreciation adjustment when you used the standard mileage rate under Disposition of a Car, later. Free tax filing for low income families   This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis . Free tax filing for low income families You must use your adjusted basis in your car to figure your depreciation deduction. Free tax filing for low income families For additional information on the straight line method of depreciation, see Publication 946. Free tax filing for low income families More-than-50%-use test. Free tax filing for low income families   Generally, you must use your car more than 50% for qualified business use (defined next) during the year to use MACRS. Free tax filing for low income families You must meet this more-than-50%-use test each year of the recovery period (6 years under MACRS) for your car. Free tax filing for low income families   If your business use is 50% or less, you must use the straight line method to depreciate your car. Free tax filing for low income families This is explained later under Car Used 50% or Less for Business . Free tax filing for low income families Qualified business use. Free tax filing for low income families   A qualified business use is any use in your trade or business. Free tax filing for low income families It does not include use for the production of income (investment use). Free tax filing for low income families However, you do combine your business and investment use to compute your depreciation deduction for the tax year. Free tax filing for low income families Use of your car by another person. Free tax filing for low income families   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 tax filing for low income families It is directly connected with your business. Free tax filing for low income families It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income). Free tax filing for low income families It results in a payment of fair market rent. Free tax filing for low income families This includes any payment to you for the use of your car. Free tax filing for low income families Business use changes. Free tax filing for low income families   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 tax filing for low income families See Qualified business use 50% or less in a later year under Car Used 50% or Less for Business, later. Free tax filing for low income families    Property does not cease to be used more than 50% in qualified business use by reason of a transfer at death. Free tax filing for low income families Use for more than one purpose. Free tax filing for low income families   If you use your car for more than one purpose during the tax year, you must allocate the use to the various purposes. Free tax filing for low income families You do this on the basis of mileage. Free tax filing for low income families 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 tax filing for low income families Change from personal to business use. Free tax filing for low income families   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 tax filing for low income families In this case, you figure the percentage of business use for the year as follows. Free tax filing for low income families Determine the percentage of business use for the period following the change. Free tax filing for low income families Do this by dividing business miles by total miles driven during that period. Free tax filing for low income families Multiply the percentage in (1) by a fraction. Free tax filing for low income families The numerator (top number) is the number of months the car is used for business and the denominator (bottom number) is 12. Free tax filing for low income families Example. Free tax filing for low income families You use a car only for personal purposes during the first 6 months of the year. Free tax filing for low income families 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 tax filing for low income families This gives you a business use percentage of 80% (12,000 ÷ 15,000) for that period. Free tax filing for low income families Your business use for the year is 40% (80% × 6/12). Free tax filing for low income families Limits. Free tax filing for low income families   The amount you can claim for section 179, special depreciation allowance, and depreciation deductions may be limited. Free tax filing for low income families The maximum amount you can claim depends on the year in which you placed your car in service. Free tax filing for low income families You have to reduce the maximum amount if you did not use the car exclusively for business. Free tax filing for low income families See Depreciation Limits , later. Free tax filing for low income families Unadjusted basis. Free tax filing for low income families   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 tax filing for low income families Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts. Free tax filing for low income families   To figure your unadjusted basis, begin with your car's original basis, which generally is its cost. Free tax filing for low income families Cost includes sales taxes (see Sales taxes , earlier), destination charges, and dealer preparation. Free tax filing for low income families Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. Free tax filing for low income families 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 tax filing for low income families 1, 2006), and alternative motor vehicle credit. Free tax filing for low income families   See Form 8910 for information on the alternative motor vehicle credit. Free tax filing for low income families If your business use later falls to 50% or less, you may have to recapture (include in your income) any excess depreciation. Free tax filing for low income families See Car Used 50% or Less for Business, later, for more information. Free tax filing for low income families If you acquired the car by gift or inheritance, see Publication 551, Basis of Assets, for information on your basis in the car. Free tax filing for low income families Improvements. Free tax filing for low income families   A major improvement to a car is treated as a new item of 5-year recovery property. Free tax filing for low income families It is treated as placed in service in the year the improvement is made. Free tax filing for low income families It does not matter how old the car is when the improvement is added. Free tax filing for low income families Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. Free tax filing for low income families However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. Free tax filing for low income families 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 tax filing for low income families See Depreciation Limits , later. Free tax filing for low income families Car trade-in. Free tax filing for low income families   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 tax filing for low income families You can elect to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. Free tax filing for low income families If you make this election, you treat the old car as disposed of at the time of the trade-in. Free tax filing for low income families 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 tax filing for low income families You then figure your depreciation deduction for the new car beginning with the date you placed it in service. Free tax filing for low income families You make this election by completing Form 2106, Part II, Section D. Free tax filing for low income families This method is explained later, beginning at Effect of trade-in on basis . Free tax filing for low income families 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 tax filing for low income families You must apply two depreciation limits (see Depreciation Limits , later). Free tax filing for low income families 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 tax filing for low income families 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 tax filing for low income families You must use Form 4562 to compute your depreciation deduction. Free tax filing for low income families You cannot use Form 2106, Part II, Section D. Free tax filing for low income families This method is explained in Publication 946. Free tax filing for low income families   If you elect to use the method described in (1), you must do so on a timely filed tax return (including extensions). Free tax filing for low income families Otherwise, you must use the method described in (2). Free tax filing for low income families Effect of trade-in on basis. Free tax filing for low income families   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 tax filing for low income families 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 tax filing for low income families 168(i)-6(d)(3). Free tax filing for low income families Traded car used only for business. Free tax filing for low income families   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 tax filing for low income families Example. Free tax filing for low income families Paul trades in a car that has an adjusted basis of $5,000 for a new car. Free tax filing for low income families In addition, he pays cash of $20,000 for the new car. Free tax filing for low income families 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 tax filing for low income families 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 tax filing for low income families Traded car used partly in business. Free tax filing for low income families   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 tax filing for low income families 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 tax filing for low income families (This adjustment is not used, however, when you determine the gain or loss on the later disposition of the new car. Free tax filing for low income families See Publication 544, Sales and Other Dispositions of Assets, for information on how to report the disposition of your car. Free tax filing for low income families )   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 tax filing for low income families 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 tax filing for low income families For information about figuring depreciation, see Modified Accelerated Cost Recovery System (MACRS) , which follows Example 2, later. Free tax filing for low income families Modified Accelerated Cost Recovery System (MACRS). Free tax filing for low income families   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 tax filing for low income families   The maximum amount you can deduct is limited, depending on the year you placed your car in service. Free tax filing for low income families See Depreciation Limits , later. Free tax filing for low income families Recovery period. Free tax filing for low income families   Under MACRS, cars are classified as 5-year property. Free tax filing for low income families You actually depreciate the cost of a car, truck, or van over a period of 6 calendar years. Free tax filing for low income families 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 tax filing for low income families Depreciation deduction for certain Indian reservation property. Free tax filing for low income families   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations after 1993 and before 2014. Free tax filing for low income families The recovery that applies for a business-use car is 3 years instead of 5 years. Free tax filing for low income families However, the depreciation limits, discussed later, will still apply. Free tax filing for low income families   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 tax filing for low income families Depreciation methods. Free tax filing for low income families   You can use one of the following methods to depreciate your car. Free tax filing for low income families 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 tax filing for low income families 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 tax filing for low income families The straight line method (SL) over a 5-year recovery period. Free tax filing for low income families    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 tax filing for low income families This is because the chart has the switch to the straight line method built into its rates. Free tax filing for low income families   Before choosing a method, you may wish to consider the following facts. Free tax filing for low income families Using the straight line method provides equal yearly deductions throughout the recovery period. Free tax filing for low income families Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year. Free tax filing for low income families MACRS depreciation chart. Free tax filing for low income families   A 2013 MACRS Depreciation Chart and instructions are included in this chapter as Table 4-1 . Free tax filing for low income families Using this table will make it easy for you to figure the 2013 depreciation deduction for your car. Free tax filing for low income families A similar chart appears in the Instructions for Form 2106. Free tax filing for low income families    You may have to use the tables in Publication 946 instead of using this MACRS Depreciation Chart. Free tax filing for low income families   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 tax filing for low income families You file your return on a fiscal year basis. Free tax filing for low income families You file your return for a short tax year (less than 12 months). Free tax filing for low income families During the year, all of the following conditions apply. Free tax filing for low income families You placed some property in service from January through September. Free tax filing for low income families You placed some property in service from October through December. Free tax filing for low income families 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 tax filing for low income families   You placed qualified property in service on an Indian reservation. Free tax filing for low income families Depreciation in future years. Free tax filing for low income families   If you use the percentages from the chart, you generally must continue to use them for the entire recovery period of your car. Free tax filing for low income families However, you cannot continue to use the chart if your basis in your car is adjusted because of a casualty. Free tax filing for low income families 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 tax filing for low income families See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. Free tax filing for low income families    In future years, do not use the chart in this edition of the publication. Free tax filing for low income families Instead, use the chart in the publication or the form instructions for those future years. Free tax filing for low income families Disposition of car during recovery period. Free tax filing for low income families   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 tax filing for low income families 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 tax filing for low income families How to use the 2013 chart. Free tax filing for low income families   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 tax filing for low income families Multiply the unadjusted basis of your car (defined earlier) by that percentage to determine the amount of your depreciation deduction. Free tax filing for low income families If you prefer to figure your depreciation deduction without the help of the chart, see Publication 946. Free tax filing for low income families    Your deduction cannot be more than the maximum depreciation limit for cars. Free tax filing for low income families See Depreciation Limits, later. Free tax filing for low income families Example. Free tax filing for low income families Phil bought a used truck in February 2012 to use exclusively in his landscape business. Free tax filing for low income families He paid $9,200 for the truck with no trade-in. Free tax filing for low income families 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 tax filing for low income families Phil used the MACRS depreciation chart in 2012 to find his percentage. Free tax filing for low income families The unadjusted basis of his truck equals its cost because Phil used it exclusively for business. Free tax filing for low income families 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 tax filing for low income families In 2013, Phil used the truck for personal purposes when he repaired his father's cabin. Free tax filing for low income families His records show that the business use of his truck was 90% in 2013. Free tax filing for low income families Phil used Table 4-1 to find his percentage. Free tax filing for low income families Reading down the first column for the date placed in service and across to the 200% DB column, he locates his percentage, 32%. Free tax filing for low income families 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 tax filing for low income families Depreciation Limits There are limits on the amount you can deduct for depreciation of your car, truck, or van. Free tax filing for low income families The section 179 deduction and special depreciation allowance are treated as depreciation for purposes of the limits. Free tax filing for low income families The maximum amount you can deduct each year depends on the year you place the car in service. Free tax filing for low income families These limits are shown in the following tables. Free tax filing for low income families   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 tax filing for low income families 2$3,060 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Free tax filing for low income families 3$2,960 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Free tax filing for low income families 4$7,660 if you acquired the car before 5/6/2003. Free tax filing for low income families $3,060 if the car is not qualified property or if you elect not to claim any special depreciation allowance. Free tax filing for low income families 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 tax filing for low income families Trucks and vans. Free tax filing for low income families   For 2013, the maximum depreciation deductions for trucks and vans are generally higher than those for cars. Free tax filing for low income families 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 tax filing for low income families For trucks and vans placed in service before 2003, use the Maximum Depreciation Deduction for Cars table. Free tax filing for low income families 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 tax filing for low income families 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 tax filing for low income families Car used less than full year. Free tax filing for low income families   The depreciation limits are not reduced if you use a car for less than a full year. Free tax filing for low income families 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 tax filing for low income families However, the depreciation limits are reduced if you do not use the car exclusively for business and investment purposes. Free tax filing for low income families See Reduction for personal use , next. Free tax filing for low income families Reduction for personal use. Free tax filing for low income families   The depreciation limits are reduced based on your percentage of personal use. Free tax filing for low income families 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 tax filing for low income families Section 179 deduction. Free tax filing for low income families   The section 179 deduction is treated as a depreciation deduction. Free tax filing for low income families 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 tax filing for low income families Example. Free tax filing for low income families On September 4, 2013, Jack bought a used car for $10,000 and placed it in service. Free tax filing for low income families He used it 80% for his business, and he chooses to take a section 179 deduction for the car. Free tax filing for low income families The car is not qualified property for purposes of the special depreciation allowance. Free tax filing for low income families Before applying the limit, Jack figures his maximum section 179 deduction to be $8,000. Free tax filing for low income families This is the cost of his qualifying property (up to the maximum $500,000 amount) multiplied by his business use ($10,000 × 80%). Free tax filing for low income families Jack then figures that his section 179 deduction for 2013 is limited to $2,528 (80% of $3,160). Free tax filing for low income families He then figures his unadjusted basis of $5,472 (($10,000 × 80%) − $2,528) for determining his depreciation deduction. Free tax filing for low income families Jack has reached his maximum depreciation deduction for 2013. Free tax filing for low income families For 2014, Jack will use his unadjusted basis of $5,472 to figure his depreciation deduction. Free tax filing for low income families Deductions in years after the recovery period. Free tax filing for low income families   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 tax filing for low income families 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 tax filing for low income families Unrecovered basis. Free tax filing for low income families   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 tax filing for low income families The recovery period. Free tax filing for low income families   For 5-year property, your recovery period is 6 calendar years. Free tax filing for low income families 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 tax filing for low income families   Under MACRS, your recovery period is the same whether you use declining balance or straight line depreciation. Free tax filing for low income families You determine your unrecovered basis in the 7th year after you placed the car in service. Free tax filing for low income families How to treat unrecovered basis. Free tax filing for low income families   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 tax filing for low income families 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 tax filing for low income families For example, no deduction is allowed for a year you use your car 100% for personal purposes. Free tax filing for low income families Example. Free tax filing for low income families In April 2007, Bob bought and placed in service a car he used exclusively in his business. Free tax filing for low income families The car cost $31,500. Free tax filing for low income families Bob did not claim a section 179 deduction or the special depreciation allowance for the car. Free tax filing for low income families He continued to use the car 100% in his business throughout the recovery period (2007 through 2012). Free tax filing for low income families 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 tax filing for low income families 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 tax filing for low income families      MACRS     Deprec. Free tax filing for low income families Year % Amount Limit Allowed 2007 20. Free tax filing for low income families 00 $6,300 $3,060 $ 3,060 2008 32. Free tax filing for low income families 00 10,080 4,900 4,900 2009 19. Free tax filing for low income families 20 6,048 2,850 2,850 2010 11. Free tax filing for low income families 52 3,629 1,775 1,775 2011 11. Free tax filing for low income families 52 3,629 1,775 1,775 2012 5. Free tax filing for low income families 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 tax filing for low income families   At the end of 2012, Bob had an unrecovered basis in the car of $15,365 ($31,500 – $16,135). Free tax filing for low income families 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 tax filing for low income families   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 tax filing for low income families 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 tax filing for low income families 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 tax filing for low income families Table 4-1. Free tax filing for low income families 2013 MACRS Depreciation Chart (Use to Figure Depreciation for 2013. Free tax filing for low income families ) 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 tax filing for low income families   First, using the left column, find the date you first placed the car in service in 2013. Free tax filing for low income families Then select the depreciation method and percentage from column (a), (b), or (c) following the rules explained in this chapter. Free tax filing for low income families 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 tax filing for low income families Refer back to the MACRS Depreciation Chart for the year you placed the car in service. Free tax filing for low income families (See Car Used 50% or Less for Business . Free tax filing for low income families )  Multiply the unadjusted basis of your car by your business use percentage. Free tax filing for low income families Multiply the result by the percentage you found in the chart to find the amount of your depreciation deduction for 2013. Free tax filing for low income families (Also see Depreciation Limits . Free tax filing for low income families )   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 tax filing for low income families 1—Sept. Free tax filing for low income families 30 percentage instead of the Oct. Free tax filing for low income families 1—Dec. Free tax filing for low income families 31 percentage for your car. Free tax filing for low income families               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 tax filing for low income families 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 tax filing for low income families 1—Sept. Free tax filing for low income families 30 for figuring depreciation for your car. Free tax filing for low income families See Which Convention Applies? in chapter 4 of Publication 946 for more details. Free tax filing for low income families               Example. Free tax filing for low income families 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 tax filing for low income families You