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Free tax preparation military Publication 3920 - Main Contents Table of Contents Tax ForgivenessYears Eligible for Tax Forgiveness Amount of Tax Forgiven Refund of Taxes Paid How To Claim Tax Forgiveness Payments to SurvivorsSeptember 11th Victim Compensation Fund of 2001 Qualified Disaster Relief Payments Disability Payments Death Benefits Canceled Debt Payments to Survivors of Public Safety Officers Postponed Tax DeadlinesCovered area. Free tax preparation military Disaster Area Losses Estate Tax Reduction Structured Settlement Factoring Transactions Illustrated Worksheets B and C Additional Worksheets How To Get Tax Help Tax Forgiveness The IRS will forgive the federal income tax liabilities of decedents who died as a result of the Oklahoma City attack, September 11 attacks, and anthrax attacks. Free tax preparation military Income tax is forgiven for these decedents whether they were killed in an attack or in rescue or recovery operations. Free tax preparation military Any forgiven tax liability owed to the IRS will not have to be paid. Free tax preparation military Any forgiven tax liability that has already been paid will be refunded. Free tax preparation military (See Refund of Taxes Paid, later. Free tax preparation military ) To determine the amount of tax to be forgiven, read Years Eligible for Tax Forgiveness first. Free tax preparation military Then read Amount of Tax Forgiven. Free tax preparation military Decedents whose total forgiven tax liability for all eligible years is less than $10,000 are entitled to $10,000 minimum relief. Free tax preparation military Even decedents who were not required to file tax returns for the eligible tax years are entitled to $10,000 minimum relief. Free tax preparation military See Minimum Amount of Relief later under Amount of Tax Forgiven. Free tax preparation military Years Eligible for Tax Forgiveness The following paragraphs explain which years are eligible for tax forgiveness. Free tax preparation military Oklahoma City attack. Free tax preparation military   For those who died from this attack, income tax is forgiven for 1994 and all later years up to and including the year of death. Free tax preparation military Example 1. Free tax preparation military A man was killed in the bombing of the federal building in Oklahoma City on April 19, 1995. Free tax preparation military His income tax is forgiven for 1994 and 1995. Free tax preparation military Example 2. Free tax preparation military A woman was wounded while walking outside the federal building in Oklahoma City on April 19, 1995. Free tax preparation military She subsequently died of her wounds in 1996. Free tax preparation military Her income tax is forgiven for 1994, 1995, and 1996. Free tax preparation military September 11 attacks and anthrax attacks. Free tax preparation military   For those who die from these attacks, income tax is forgiven for 2000 and all later years up to and including the year of death. Free tax preparation military Example 1. Free tax preparation military A Pentagon employee died in the September 11 attack. Free tax preparation military Her income tax is forgiven for 2000 and 2001. Free tax preparation military Example 2. Free tax preparation military A visitor to the World Trade Center died in 2002 of wounds he sustained in the September 11 attack. Free tax preparation military His income tax liability is forgiven for 2000, 2001, and 2002. Free tax preparation military Amount of Tax Forgiven The IRS will forgive the decedent's income tax liability for all years eligible for tax forgiveness. Free tax preparation military On a joint return, only the decedent's part of the joint income tax liability is eligible for forgiveness. Free tax preparation military To figure the tax to be forgiven, use the following worksheets. Free tax preparation military Use Worksheet A for any eligible year the decedent filed a return as single, married filing separately, head of household, or qualifying widow(er). Free tax preparation military Use Worksheet B for any eligible year the decedent filed a joint return. Free tax preparation military See the illustrated Worksheet B near the end of this publication. Free tax preparation military Do not complete Worksheet A or B if the decedent was not required to file tax returns for the eligible tax years. Free tax preparation military Instead, complete Worksheet C and file a return for the decedent's last tax year. Free tax preparation military See Minimum Amount of Relief, later. Free tax preparation military If you need assistance, call the IRS at 1–866–562–5227 Monday through Friday during the following times. Free tax preparation military In English–7 a. Free tax preparation military m. Free tax preparation military to 10 p. Free tax preparation military m. Free tax preparation military local time. Free tax preparation military In Spanish–8 a. Free tax preparation military m. Free tax preparation military to 9:30 p. Free tax preparation military m. Free tax preparation military local time. Free tax preparation military Both spouses died. Free tax preparation military   If both spouses died as a result of a terrorist attack and they filed a joint return for an eligible tax year, fill out Worksheet B for each spouse for that year. Free tax preparation military Do this to determine if each spouse qualifies for the minimum relief of $10,000 (discussed later under Minimum Amount of Relief). Free tax preparation military If you are certain that neither spouse's total forgiven tax liability for all eligible years is less than $10,000, skip Worksheet B. Free tax preparation military However, attach a computation of the forgiven tax liability to the final income tax return or amended tax return for each eligible year. Free tax preparation military The forgiven tax liability is the total tax shown on the joint return minus the taxes listed in the instructions for line 4 of Worksheet B. Free tax preparation military Residents of community property states. Free tax preparation military   If the decedent was domiciled in a community property state and the spouse reported half the community income on a separate return, the surviving spouse can get a refund of taxes paid on his or her share of the decedent's income for the eligible years. Free tax preparation military Also, all of the decedent's income taxes paid for the eligible years will be refunded to either the executor or administrator of the estate, or to the surviving spouse if there is no legal representative. Free tax preparation military Worksheet B. Free tax preparation military Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free tax preparation military 1       2 Enter the decedent's taxable income. Free tax preparation military Figure taxable income as if a separate return had been filed. Free tax preparation military See the instructions. Free tax preparation military 2       3 Enter the decedent's total tax. Free tax preparation military See the instructions. Free tax preparation military 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free tax preparation military See the instructions. Free tax preparation military 4       5 Subtract line 4 from line 3. Free tax preparation military 5       6 Enter the surviving spouse's taxable income. Free tax preparation military Figure taxable income as if a separate return had been filed. Free tax preparation military See the instructions. Free tax preparation military 6       7 Enter the surviving spouse's total tax. Free tax preparation military See the instructions. Free tax preparation military 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free tax preparation military 8       9 Subtract line 8 from line 7. Free tax preparation military 9       10 Add lines 5 and 9. Free tax preparation military 10       11 Enter the total tax from the joint return. Free tax preparation military See Table 1 on page 5 for the line number for years before 2002. Free tax preparation military 11       12 Add lines 4 and 8. Free tax preparation military 12       13 Subtract line 12 from line 11. Free tax preparation military 13       14 Divide line 5 by line 10. Free tax preparation military Enter the result as a decimal. Free tax preparation military 14       15 Tax to be forgiven. Free tax preparation military Multiply line 13 by line 14 and enter the result. Free tax preparation military 15       Note. Free tax preparation military If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free tax preparation military Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free tax preparation military If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free tax preparation military The IRS will determine the amount to be refunded. Free tax preparation military Worksheet B. Free tax preparation military Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free tax preparation military 1       2 Enter the decedent's taxable income. Free tax preparation military Figure taxable income as if a separate return had been filed. Free tax preparation military See the instructions. Free tax preparation military 2       3 Enter the decedent's total tax. Free tax preparation military See the instructions. Free tax preparation military 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free tax preparation military See the instructions. Free tax preparation military 4       5 Subtract line 4 from line 3. Free tax preparation military 5       6 Enter the surviving spouse's taxable income. Free tax preparation military Figure taxable income as if a separate return had been filed. Free tax preparation military See the instructions. Free tax preparation military 6       7 Enter the surviving spouse's total tax. Free tax preparation military See the instructions. Free tax preparation military 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free tax preparation military 8       9 Subtract line 8 from line 7. Free tax preparation military 9       10 Add lines 5 and 9. Free tax preparation military 10       11 Enter the total tax from the joint return. Free tax preparation military See Table 1 on page 5 for the line number for years before 2002. Free tax preparation military 11       12 Add lines 4 and 8. Free tax preparation military 12       13 Subtract line 12 from line 11. Free tax preparation military 13       14 Divide line 5 by line 10. Free tax preparation military Enter the result as a decimal. Free tax preparation military 14       15 Tax to be forgiven. Free tax preparation military Multiply line 13 by line 14 and enter the result. Free tax preparation military 15       Note. Free tax preparation military If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free tax preparation military Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free tax preparation military If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free tax preparation military The IRS will determine the amount to be refunded. Free tax preparation military Instructions for Worksheet B Table 1. Free tax preparation military Total Tax Line on Decedent's Return Note: Use this table to find the total tax line on the decedent's income tax return. Free tax preparation military * Form 1994 1995 1996 2000 2001 1040 Line 53 Line 54 Line 51 Line 57 Line 58 1040A Line 27 Line 28 Line 28 Line 35 File Form 1040 1040EZ Line 9 Line 10 Line 10 Line 10 TeleFile Tax Record ** Line E Line J Line K 1040NR Line 51 Line 52 Line 49 Line 54 Line 54 1040NR–EZ N/A Line 17 Line 17 Line 18 File Form 1040NR * Line numbers for the 2002 forms were not available when this publication went to print. Free tax preparation military ** File Form 4506 to get a transcript of the decedent's account. Free tax preparation military Table 1. Free tax preparation military Total Tax Line on Decedent's Return Note: Use this table to find the total tax line on the decedent's income tax return. Free tax preparation military * Form 1994 1995 1996 2000 2001 1040 Line 53 Line 54 Line 51 Line 57 Line 58 1040A Line 27 Line 28 Line 28 Line 35 File Form 1040 1040EZ Line 9 Line 10 Line 10 Line 10 TeleFile Tax Record ** Line E Line J Line K 1040NR Line 51 Line 52 Line 49 Line 54 Line 54 1040NR–EZ N/A Line 17 Line 17 Line 18 File Form 1040NR * Line numbers for the 2002 forms were not available when this publication went to print. Free tax preparation military ** File Form 4506 to get a transcript of the decedent's account. Free tax preparation military Lines 2 and 6. Free tax preparation military   Allocate income and deductions in the same manner they would have been allocated if the spouses had filed separate returns. Free tax preparation military   Allocate wages and salaries to the spouse who performed the services and received the Form W-2. Free tax preparation military Business and investment income (including capital gains) are generally allocated to the spouse who owned the business or investment that produced the income. Free tax preparation military Income from a jointly owned business or investment should be allocated equally between the spouses unless there is evidence that shows a different allocation is appropriate. Free tax preparation military   Allocate business deductions to the owner of the business. Free tax preparation military Allocate personal deductions (such as itemized deductions for mortgage interest and taxes) equally between the spouses unless there is evidence that shows a different allocation is appropriate. Free tax preparation military Lines 3 and 7. Free tax preparation military   Figure the total tax as if a separate return had been filed. Free tax preparation military The total tax is the tax that would have been entered on the tax return line shown in Table 1 if a separate return had been filed. Free tax preparation military When figuring the tax using the Tax Table or Tax Rate Schedule, use the “Married filing separately” column in the Tax Table or Tax Rate Schedule Y-2. Free tax preparation military   When figuring the total tax, allocate credits and other taxes, if any, in the same manner as they would have been allocated if the spouses had filed separate returns. Free tax preparation military If a credit would not have been allowed on a separate return, allocate the credit shown on the joint return between the spouses. Free tax preparation military Examples of credits generally not allowed on a separate return are the child and dependent care credit, credit for the elderly, adoption credit, education credits, and earned income credit. Free tax preparation military Line 4. Free tax preparation military   Enter the total, if any, of the following taxes. Free tax preparation military Self-employment tax. Free tax preparation military Social security and Medicare tax on tip income not reported to employer. Free tax preparation military Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Free tax preparation military Tax on excess accumulation in qualified retirement plans. Free tax preparation military Household employment taxes. Free tax preparation military Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Free tax preparation military Tax on golden parachute payments. Free tax preparation military Minimum Amount of Relief The minimum amount of relief is $10,000. Free tax preparation military If the decedent's total forgiven tax liability for all eligible years is less than $10,000, the difference between $10,000 and the total forgiven tax liability for those years will be treated as a tax payment for the decedent's last tax year. Free tax preparation military The IRS will refund the difference as explained under Refund of Taxes Paid. Free tax preparation military Use Worksheet C to figure the additional tax payment. Free tax preparation military But first complete Worksheet A or B, unless the decedent was not required to file tax returns for the eligible tax years. Free tax preparation military Example 1. Free tax preparation military An individual who died in the September 11 attacks had an income tax liability of $-0- for 2000 and $6,400 for 2001. Free tax preparation military The $6,400 is eligible for forgiveness. Free tax preparation military The IRS will forgive $6,400 and treat the difference between $10,000 and $6,400 ($3,600) as a tax payment for 2001. Free tax preparation military Example 2. Free tax preparation military A child who died in the September 11 attacks had no (-0-) income tax liability for 2000 or 2001. Free tax preparation military The IRS will treat $10,000 as a tax payment for 2001. Free tax preparation military Income received after date of death. Free tax preparation military   Generally, income of the decedent received after the date of death must be reported on Form 1041 if the estate has gross income for the tax year of $600 or more. Free tax preparation military Examples are the final paycheck or dividends on stock owned by the decedent. Free tax preparation military However, this income is exempt from income tax and is not included on Form 1041 if it is received: After the date of the decedent's death, and Before the end of the decedent's tax year (determined without regard to death). Free tax preparation military Nonqualifying income. Free tax preparation military   The following income is not exempt from tax. Free tax preparation military The tax on it is not eligible for forgiveness. Free tax preparation military Deferred compensation that would have been payable if the death had occurred because of an event other than these attacks. Free tax preparation military Amounts that would not have been payable but for an action taken after September 11, 2001. Free tax preparation military The following are examples of nonqualifying income. Free tax preparation military Amounts payable from a qualified retirement plan or IRA to the beneficiary or estate of the decedent. Free tax preparation military Amounts payable only as death or survivor's benefits from pre-existing arrangements that would have been paid if the death had occurred for another reason. Free tax preparation military Income received as a result of adjustments made by the decedent's employer to a plan or arrangement to accelerate the vesting of restricted property or the payment of nonqualified deferred compensation after the date of the attack. Free tax preparation military Interest on savings bonds cashed by the beneficiary of the decedent. Free tax preparation military If you are responsible for the estate of a decedent, see Publication 559. Free tax preparation military Publication 559 discusses how to complete and file federal income tax returns and explains your responsibility to pay any taxes due. Free tax preparation military Instructions for lines 2–9 of Worksheet C. Free tax preparation military   The tax that would have been payable on the exempt income (discussed earlier) must be considered when determining whether a decedent is entitled to the $10,000 minimum relief. Free tax preparation military To figure the tax that would have been payable, you can use lines 2 through 9 of Worksheet C. Free tax preparation military Or, if special requirements are met, you can use the alternative computation instead. Free tax preparation military See Alternative computation, later. Free tax preparation military   You have to use lines 2–9 (or the alternative computation) to figure the tax that would have been payable even if Form 1041 was not required to be filed. Free tax preparation military Use Form 1041 to figure what the taxable income would be without including the exempt income. Free tax preparation military Then enter that taxable income (even if a negative number) on line 2 of Worksheet C (or line 1 of Worksheet D, Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C)). Free tax preparation military Alternative computation. Free tax preparation military   Instead of using lines 2–8 of Worksheet C to figure the tax on exempt income (line 9 of Worksheet C), you may be able to use Worksheet D. Free tax preparation military You can use Worksheet D to figure the tax on the exempt income payable by the estate and its beneficiaries only if both of the following requirements are met. Free tax preparation military The estate claimed an income distribution deduction on line 18 (Form 1041). Free tax preparation military Each beneficiary submits the information necessary to refigure the income tax payable on the exempt income received from the decedent's estate. Free tax preparation military If requirement (2) is met but requirement (1) is not, you can still use Worksheet D if: Form 1041 was not required because exempt income was received, and The estate would have claimed an income distribution deduction if the exempt income were taxable. Free tax preparation military If you use this alternative computation, skip lines 2–8 of Worksheet C and enter the amount from line 8 of Worksheet D on line 9 of Worksheet C. Free tax preparation military Complete the rest of Worksheet C to determine the additional payment allowed. Free tax preparation military Worksheet C. Free tax preparation military Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Free tax preparation military Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free tax preparation military 1 Minimum relief amount. Free tax preparation military Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free tax preparation military 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Free tax preparation military 3       4 Add lines 2 and 3. Free tax preparation military 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Free tax preparation military (See Income received after date of death on page 5. Free tax preparation military ) 5       6 Add lines 4 and 5. Free tax preparation military 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Free tax preparation military 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Free tax preparation military 8       9 Tax on exempt income. Free tax preparation military Subtract line 8 from line 7. Free tax preparation military 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free tax preparation military If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free tax preparation military 10       11 Add lines 9 and 10. Free tax preparation military 11   12 Additional payment allowed. Free tax preparation military If line 11 is $10,000 or more, enter -0- and stop here. Free tax preparation military No additional amount is allowed as a tax payment. Free tax preparation military Otherwise, subtract line 11 from line 1 and enter the result. Free tax preparation military 12   Note. Free tax preparation military The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free tax preparation military Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free tax preparation military If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free tax preparation military Write "Sec. Free tax preparation military 692(d)(2) Payment" and the amount to the right of the entry space. Free tax preparation military Also indicate whether a Form 1041 is being filed for the decedent's estate. Free tax preparation military If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free tax preparation military Write “Sec. Free tax preparation military 692(d)(2) Payment” on the dotted line to the left of the entry space. Free tax preparation military Worksheet C. Free tax preparation military Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Free tax preparation military Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free tax preparation military 1 Minimum relief amount. Free tax preparation military Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free tax preparation military 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Free tax preparation military 3       4 Add lines 2 and 3. Free tax preparation military 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Free tax preparation military (See Income received after date of death on page 5. Free tax preparation military ) 5       6 Add lines 4 and 5. Free tax preparation military 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Free tax preparation military 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Free tax preparation military 8       9 Tax on exempt income. Free tax preparation military Subtract line 8 from line 7. Free tax preparation military 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free tax preparation military If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free tax preparation military 10       11 Add lines 9 and 10. Free tax preparation military 11   12 Additional payment allowed. Free tax preparation military If line 11 is $10,000 or more, enter -0- and stop here. Free tax preparation military No additional amount is allowed as a tax payment. Free tax preparation military Otherwise, subtract line 11 from line 1 and enter the result. Free tax preparation military 12   Note. Free tax preparation military The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free tax preparation military Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free tax preparation military If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free tax preparation military Write "Sec. Free tax preparation military 692(d)(2) Payment" and the amount to the right of the entry space. Free tax preparation military Also indicate whether a Form 1041 is being filed for the decedent's estate. Free tax preparation military If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free tax preparation military Write “Sec. Free tax preparation military 692(d)(2) Payment” on the dotted line to the left of the entry space. Free tax preparation military Worksheet D. Free tax preparation military Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C) 1 Enter the taxable income from line 22 (Form 1041) 1   2 Enter exempt income received after death minus expenses allocable to exempt income. Free tax preparation military (See Income received after date of death on page 5. Free tax preparation military ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). Free tax preparation military 4   5 Figure the tax on line 1 using Schedule G (Form 1041). Free tax preparation military 5   6 Estate's tax on exempt income. Free tax preparation military Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. Free tax preparation military Figure the total tax that would have been payable by all beneficiaries. Free tax preparation military Do this by including in each beneficiary's gross income the exempt income received from the decedent's estate and refiguring the income tax. Free tax preparation military Add the amounts by which each beneficiary's income tax is increased. Free tax preparation military 7   8 Add lines 6 and 7. Free tax preparation military Enter this amount on line 9 of Worksheet C. Free tax preparation military 8   Worksheet D. Free tax preparation military Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C) 1 Enter the taxable income from line 22 (Form 1041) 1   2 Enter exempt income received after death minus expenses allocable to exempt income. Free tax preparation military (See Income received after date of death on page 5. Free tax preparation military ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). Free tax preparation military 4   5 Figure the tax on line 1 using Schedule G (Form 1041). Free tax preparation military 5   6 Estate's tax on exempt income. Free tax preparation military Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. Free tax preparation military Figure the total tax that would have been payable by all beneficiaries. Free tax preparation military Do this by including in each beneficiary's gross income the exempt income received from the decedent's estate and refiguring the income tax. Free tax preparation military Add the amounts by which each beneficiary's income tax is increased. Free tax preparation military 7   8 Add lines 6 and 7. Free tax preparation military Enter this amount on line 9 of Worksheet C. Free tax preparation military 8   Refund of Taxes Paid The IRS will refund the following forgiven income tax liabilities. Free tax preparation military Income tax liabilities that have been paid. Free tax preparation military Income tax liabilities treated as paid because the total tax liability for all years eligible for tax forgiveness is less than $10,000. Free tax preparation military See Minimum Amount of Relief, earlier. Free tax preparation military Example 1. Free tax preparation military A man who died in the September 11 attacks had an income tax liability of $7,500 for 2000 and $6,500 for 2001. Free tax preparation military The total, $14,000, is eligible for tax forgiveness. Free tax preparation military However, he paid only $13,000 of that amount. Free tax preparation military The IRS will refund the $13,000 paid. Free tax preparation military Example 2. Free tax preparation military A child who died in the September 11 attacks had no income tax liability for 2000 or 2001. Free tax preparation military The child qualifies for the minimum relief of $10,000. Free tax preparation military The $10,000 is treated as a tax payment for 2001 and will be refunded. Free tax preparation military Period for filing a claim for credit or refund. Free tax preparation military   To obtain a tax refund on a previously filed income tax return, file an amended return (Form 1040X or an amended Form 1041) within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever is later. Free tax preparation military For example, you have until April 15, 2004, to file an amended return on a 2000 Form 1040, 1040A, or 1040EZ that was filed by April 16, 2001, and for which the tax was paid when due. Free tax preparation military To obtain a refund on a return that has not been filed, file the return within 3 years of the original due date of the return. Free tax preparation military Extension of time for victims of Oklahoma City attack. Free tax preparation military   The period described above has been extended for victims of the Oklahoma City attack. Free tax preparation military Survivors and personal representatives of these victims have until January 22, 2003, to file an original or amended return. Free tax preparation military How To Claim Tax Forgiveness Use the following procedures to claim income tax forgiveness. Free tax preparation military Which Form To Use The form you use depends on whether an income tax return for the eligible year was already filed for the decedent. Free tax preparation military Return required but not yet filed. Free tax preparation military   File Form 1040 if the decedent was a U. Free tax preparation military S. Free tax preparation military citizen or resident. Free tax preparation military File Form 1040NR if the decedent was a nonresident alien. Free tax preparation military A nonresident alien is someone who is not a U. Free tax preparation military S. Free tax preparation military citizen or resident. Free tax preparation military Return required and already filed. Free tax preparation military   File a separate Form 1040X for each year you are claiming tax relief. Free tax preparation military Return not required and not filed. Free tax preparation military   File Form 1040 only for the year of death if the decedent was a U. Free tax preparation military S. Free tax preparation military citizen or resident. Free tax preparation military File Form 1040NR if the decedent was a nonresident alien. Free tax preparation military Return not required but already filed. Free tax preparation military   File Form 1040X only for the year of death. Free tax preparation military How to complete the returns. Free tax preparation military   Fill out Form 1040 or 1040NR according to its instructions but do not reduce the decedent's tax liability by any taxes that will be forgiven. Free tax preparation military Attach to each return a computation of the income tax to be forgiven or a copy of Worksheet A or B. Free tax preparation military If filing Form 1040 or Form 1040NR, also attach any Forms W–2. Free tax preparation military If the total forgiven tax liability for all eligible years is less than $10,000, attach to the decedent's final return a computation of the additional tax payment allowed or a copy of Worksheet C. Free tax preparation military Also, please write one of the following across the top of page 1 of each return. Free tax preparation military KITA—Oklahoma City KITA—9/11 KITA—Anthrax “KITA” means “killed in terrorist attack. Free tax preparation military ” Need a copy of a previously filed return?   You will find it easier to prepare Form 1040X if you have a copy of the decedent's previously filed tax return. Free tax preparation military If you need a copy, use Form 4506. Free tax preparation military The IRS will provide a free copy of the tax return if you write “DISASTER” in the top margin of Form 4506. Free tax preparation military Attach Letters Testamentary or other evidence to establish that you are authorized to act for the decedent's estate. Free tax preparation military Send Form 4506 to the address shown in the form instructions. Free tax preparation military Taxpayer identification number. Free tax preparation military   A taxpayer identification number must be furnished on the decedent's returns. Free tax preparation military This is usually the decedent's social security number (SSN). Free tax preparation military However, a nonresident alien who is not eligible to get an SSN should have an individual taxpayer identification number (ITIN). Free tax preparation military If the decedent was a nonresident alien, had neither an SSN nor an ITIN, and was not required to file a U. Free tax preparation military S. Free tax preparation military income tax return for any tax year, do not apply for an ITIN. Free tax preparation military You may claim a refund by filing Form 1040NR without an SSN or ITIN. Free tax preparation military Necessary Documents Please attach the following documents to the return or amended return. Free tax preparation military Proof of death. Free tax preparation military   Attach a copy of the death certificate. Free tax preparation military If the Department of Defense issued DD Form 1300, Report of Casualty, you can attach that form instead of the death certificate. Free tax preparation military Form 1310. Free tax preparation military   You must send Form 1310 with all returns and claims for refund, unless either of the following applies. Free tax preparation military You are a surviving spouse filing an original or amended joint return with the decedent. Free tax preparation military You are a personal representative filing an original Form 1040 or Form 1040NR for the decedent and a court certificate showing your appointment is attached to the return. Free tax preparation military A personal representative is an executor or administrator of a decedent's estate, as certified or appointed by the court. Free tax preparation military A copy of the decedent's will cannot be accepted as evidence that you are the personal representative. Free tax preparation military      If you have proof of death but do not have enough tax information to file a timely claim for a refund, file Form 1040X with Form 1310. Free tax preparation military Include a statement saying an amended return will be filed as soon as the necessary tax information is available. Free tax preparation military Where To File The IRS has set up a special office for processing returns and claims for tax forgiveness. Free tax preparation military Use one of the addresses shown below. Free tax preparation military Where you file the returns or claims depends on whether you use the U. Free tax preparation military S. Free tax preparation military Postal Service or a private delivery service. Free tax preparation military Please do not send these returns or claims to any of the addresses shown in the tax form instructions. Free tax preparation military U. Free tax preparation military S. Free tax preparation military Postal Service. Free tax preparation military   If you use the U. Free tax preparation military S. Free tax preparation military Postal Service, file these returns and claims at the following address. Free tax preparation military Internal Revenue Service P. Free tax preparation military O. Free tax preparation military Box 4053 Woburn, MA 01888 Private delivery service. Free tax preparation military   Private delivery services cannot deliver items to P. Free tax preparation military O. Free tax preparation military boxes. Free tax preparation military If you use a private delivery service, file these returns and claims at the following address. Free tax preparation military Internal Revenue Service Stop 661 310 Lowell St. Free tax preparation military Andover, MA 01810 Designated private delivery services. Free tax preparation military   You can use the following private delivery services to file these returns and claims. Free tax preparation military Airborne Express (Airborne): Overnight Air Express Service, Next Afternoon Service, and Second Day Service. Free tax preparation military DHL Worldwide Express (DHL): DHL “Same Day” Service, and DHL USA Overnight. Free tax preparation military Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, and FedEx 2Day. Free tax preparation military United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Free tax preparation military M. Free tax preparation military , UPS Worldwide Express Plus, and UPS Worldwide Express. Free tax preparation military The private delivery service can tell you how to get written proof of the mailing date. Free tax preparation military Payments to Survivors The following section discusses the tax treatment of certain amounts received by survivors. Free tax preparation military September 11th Victim Compensation Fund of 2001 Payments from the September 11th Victim Compensation Fund of 2001 are not included in income. Free tax preparation military Qualified Disaster Relief Payments Qualified disaster relief payments are not included in income. Free tax preparation military These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). Free tax preparation military No withholding applies to these payments. Free tax preparation military Qualified disaster relief payments include payments you receive (regardless of the source) after September 10, 2001, for the following expenses. Free tax preparation military Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a terrorist attack. Free tax preparation military Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a terrorist attack. Free tax preparation military (A personal residence can be a rented residence or one you own. Free tax preparation military ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a terrorist attack. Free tax preparation military Qualified disaster relief payments also include the following. Free tax preparation military Payments made by common carriers (for example, American Airlines and United Airlines regarding the September 11 attacks) because of death or physical injury incurred as a result of a terrorist attack. Free tax preparation military Amounts paid by a federal, state, or local government in connection with a terrorist attack to those affected by the attack. Free tax preparation military Qualified disaster relief payments do not include: Insurance or other reimbursements for expenses, or Income replacement payments, such as payments of lost wages, lost business income, or unemployment compensation. Free tax preparation military Disability Payments For tax years ending after September 10, 2001, disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies), whether outside or within the United States, are not included in income. Free tax preparation military Death Benefits Payments received by an individual or the estate of a decedent from the employer of an employee who died as a result of the Oklahoma City or September 11 terrorist attacks, or as a result of the anthrax attacks, are not included in income. Free tax preparation military Only the amount that exceeds the benefits that would have been payable if the death had occurred for a reason other than a terrorist or anthrax attack is excludable. Free tax preparation military However, the exclusion does apply to incidental death benefits paid under a qualified retirement plan even if these amounts would have been payable if the death had occurred for a reason other than a terrorist or anthrax attack. Free tax preparation military If you included death benefits in income on a previously filed return and they are now excludable under the above rule, file Form 1040X to amend that return. Free tax preparation military For information on the period for filing Form 1040X, see Period for filing claim for credit or refund earlier under Refund of Taxes Paid. Free tax preparation military If that period has expired, you are granted an extension. Free tax preparation military You have until January 22, 2003, to file Form 1040X to exclude the death benefits. Free tax preparation military On top of page 1 of Form 1040X, write “Extension of Limitations Under PL 107–134, sec. Free tax preparation military 102(b)(2). Free tax preparation military ” Canceled Debt Canceled debt is not included in your income (or the income of the estate) if: You (or the estate) were liable, or became liable, for the debt of a decedent, and The debt was canceled after September 10, 2001, and before January 1, 2002, because the decedent died as a result of the September 11 attacks or anthrax attacks. Free tax preparation military The lender is not required to report the canceled debt on Form 1099–C, Cancellation of Debt. Free tax preparation military Payments to Survivors of Public Safety Officers If you are a survivor of a public safety officer who died in the line of duty, certain amounts you receive are not included in income. Free tax preparation military Bureau of Justice Assistance payments. Free tax preparation military   If you are a surviving dependent of a public safety officer (law enforcement officer or firefighter) who died in the line of duty, do not include in your income the death benefit paid to you by the Bureau of Justice Assistance. Free tax preparation military Government plan annuity. Free tax preparation military   If you receive a survivor annuity as the child or spouse (or former spouse) of a public safety officer who was killed in the line of duty, you generally do not have to include it in income. Free tax preparation military This exclusion applies to the amount of the annuity based on the officer's service as a public safety officer. Free tax preparation military For this purpose, the term public safety officer includes police and law enforcement officers, firefighters, and rescue squad and ambulance crews. Free tax preparation military More information. Free tax preparation military   For more information, see Publication 559. Free tax preparation military Postponed Tax Deadlines The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a terrorist attack. Free tax preparation military The tax deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. Free tax preparation military If any tax deadline is postponed, the IRS will publicize the postponement in the affected area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Free tax preparation military Affected taxpayers. Free tax preparation military   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Free tax preparation military Any individual whose main home is located in a covered area (defined later). Free tax preparation military Any business entity or sole proprietor whose principal place of business is located in a covered area. Free tax preparation military Any individual, business entity, or sole proprietor whose records needed to meet a postponed deadline are maintained in a covered area. Free tax preparation military The main home or principal place of business does not have to be located in the covered area. Free tax preparation military Any estate or trust whose tax records necessary to meet a postponed tax deadline are maintained in a covered area. Free tax preparation military Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered area. Free tax preparation military The spouse on a joint return with a taxpayer who is eligible for postponements. Free tax preparation military Any other person determined by the IRS to be affected by a terrorist attack. Free tax preparation military Covered area. Free tax preparation military   This is an area in which a terrorist attack took place and in which the IRS has decided to postpone tax deadlines for up to 1 year. Free tax preparation military Abatement of interest. Free tax preparation military   The IRS may abate (forgive) the interest on any underpaid income tax for the length of any postponement. Free tax preparation military Disaster Area Losses If your property was damaged or destroyed as a result of the September 11 attacks, you can choose to deduct your disaster loss on your 2000 return (or amended return) rather than on your 2001 return. Free tax preparation military You must make this choice to deduct your loss on your 2000 return by the later of the following dates. Free tax preparation military The due date (without extensions) for filing your 2001 income tax return (April 15, 2002, if you are a calendar year taxpayer). Free tax preparation military The due date (with extensions) for the 2000 return. Free tax preparation military For more information about disaster area losses, see Publication 547. Free tax preparation military Estate Tax Reduction The federal estate tax is reduced for taxable estates of individuals who died as a result of the Oklahoma City attack, the September 11 attacks, and the anthrax attacks. Free tax preparation military The estate tax is computed using a new rate schedule on page 25 of the November 2001 revision of the instructions for Form 706. Free tax preparation military The estate tax is reduced by credits against the estate tax, including the unified credit and the state death tax credit. Free tax preparation military These credits may reduce or eliminate the estate tax due. Free tax preparation military A special rule extends until January 22, 2003, the period of time allowed to file a claim for a refund of estate taxes that have been paid. Free tax preparation military Recovery from the September 11th Victim Compensation Fund. Free tax preparation military   The value of claims for a decedent's pain and suffering is normally included in the gross estate. Free tax preparation military However, if the estate chooses to seek recovery from this fund, the IRS has determined that, in view of the unique circumstances of this situation and the high likelihood that such claims will be valued at a nominal or zero amount, the claims will be valued at zero for estate tax purposes. Free tax preparation military Thus, there are no federal estate tax consequences if an estate or beneficiary receives a recovery from this fund. Free tax preparation military Which estates must file a return. Free tax preparation military   For decedents dying in 2001, Form 706 must be filed by the executor for the estate of every U. Free tax preparation military S. Free tax preparation military citizen or resident whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $675,000. Free tax preparation military Form 706 must be filed within 9 months after the date of decedent's death unless you receive an extension of time to file. Free tax preparation military Use Form 4768, Application for Extension of Time To File a Return and/or Pay U. Free tax preparation military S. Free tax preparation military Estate (and Generation-Skipping Transfer) Taxes, to apply for an extension. Free tax preparation military Where to file. Free tax preparation military   Returns on which the new rate schedule is used should be sent to the following address, which was not available when Form 706 went to print. Free tax preparation military Internal Revenue Service E & G Department/Stop 824T 201 W. Free tax preparation military Rivercenter Blvd. Free tax preparation military Covington, KY 41011 More information. Free tax preparation military   For more information on the federal estate tax, see the instructions for Form 706. Free tax preparation military Structured Settlement Factoring Transactions A person who acquires payment rights in a structured settlement arrangement after February 21, 2002, may be subject to a 40% excise tax unless the transfer of the payment rights was approved in advance in a qualified order. Free tax preparation military The excise tax is figured on the excess of the undiscounted amount of the payments being acquired over the total amount actually paid to acquire them. Free tax preparation military However, this tax will not apply to transactions entered into from February 22, 2002, to July 1, 2002, if certain requirements are met. Free tax preparation military For information about these requirements, see Internal Revenue Code section 5891. Free tax preparation military Worksheet B Illustrated. Free tax preparation military Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free tax preparation military 1 2000 2001   2 Enter the decedent's taxable income. Free tax preparation military Figure taxable income as if a separate return had been filed. Free tax preparation military See the instructions. Free tax preparation military 2 $17,259 $14,295   3 Enter the decedent's total tax. Free tax preparation military See the instructions. Free tax preparation military 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free tax preparation military See the instructions. Free tax preparation military 4 3,532 3,109   5 Subtract line 4 from line 3. Free tax preparation military 5 2,591 2,141   6 Enter the surviving spouse's taxable income. Free tax preparation military Figure taxable income as if a separate return had been filed. Free tax preparation military See the instructions for line 2. Free tax preparation military 6 29,025 29,850   7 Enter the surviving spouse's total tax. Free tax preparation military See the instructions. Free tax preparation military 7 5,277 5,391   8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free tax preparation military 8 0 0   9 Subtract line 8 from line 7. Free tax preparation military 9 5,277 5,391   10 Add lines 5 and 9. Free tax preparation military 10 7,868 7,532   11 Enter the total tax from the joint return. Free tax preparation military See Table 1 on page 5 for the line number for years before 2002. Free tax preparation military 11 10,789 9,728   12 Add lines 4 and 8. Free tax preparation military 12 3,532 3,109   13 Subtract line 12 from line 11. Free tax preparation military 13 7,257 6,619   14 Divide line 5 by line 10. Free tax preparation military Enter the result as a decimal. Free tax preparation military 14 . Free tax preparation military 329 . Free tax preparation military 284   15 Tax to be forgiven. Free tax preparation military Multiply line 13 by line 14 and enter the result. Free tax preparation military 15 $2,388 $1,880   Note. Free tax preparation military If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free tax preparation military Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free tax preparation military If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free tax preparation military The IRS will determine the amount to be refunded. Free tax preparation military Worksheet B Illustrated. Free tax preparation military Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free tax preparation military 1 2000 2001   2 Enter the decedent's taxable income. Free tax preparation military Figure taxable income as if a separate return had been filed. Free tax preparation military See the instructions. Free tax preparation military 2 $17,259 $14,295   3 Enter the decedent's total tax. Free tax preparation military See the instructions. Free tax preparation military 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free tax preparation military See the instructions. Free tax preparation military 4 3,532 3,109   5 Subtract line 4 from line 3. Free tax preparation military 5 2,591 2,141   6 Enter the surviving spouse's taxable income. Free tax preparation military Figure taxable income as if a separate return had been filed. Free tax preparation military See the instructions for line 2. Free tax preparation military 6 29,025 29,850   7 Enter the surviving spouse's total tax. Free tax preparation military See the instructions. Free tax preparation military 7 5,277 5,391   8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free tax preparation military 8 0 0   9 Subtract line 8 from line 7. Free tax preparation military 9 5,277 5,391   10 Add lines 5 and 9. Free tax preparation military 10 7,868 7,532   11 Enter the total tax from the joint return. Free tax preparation military See Table 1 on page 5 for the line number for years before 2002. Free tax preparation military 11 10,789 9,728   12 Add lines 4 and 8. Free tax preparation military 12 3,532 3,109   13 Subtract line 12 from line 11. Free tax preparation military 13 7,257 6,619   14 Divide line 5 by line 10. Free tax preparation military Enter the result as a decimal. Free tax preparation military 14 . Free tax preparation military 329 . Free tax preparation military 284   15 Tax to be forgiven. Free tax preparation military Multiply line 13 by line 14 and enter the result. Free tax preparation military 15 $2,388 $1,880   Note. Free tax preparation military If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free tax preparation military Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free tax preparation military If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free tax preparation military The IRS will determine the amount to be refunded. Free tax preparation military Illustrated Worksheets B and C A wife lost her husband in the September 11 attack on the World Trade Center. Free tax preparation military They filed a joint return for 2000 and the wife chose to file a joint return as a surviving spouse for 2001. Free tax preparation military The returns for 2000 and 2001 showed the following income, deductions, and tax liabilities. Free tax preparation military After the husband died, his estate received income of $4,000. Free tax preparation military Of that amount, $1,000 is net profit from Schedule C received before the end of 2001. Free tax preparation military This net profit is exempt from income tax as explained earlier under Income received after date of death. Free tax preparation military The wife files Form 1041 because the gross income of the estate for the tax year ($3,000) is $600 or more. Free tax preparation military To determine how much of the husband's tax liability for 2000 and 2001 is to be forgiven, the wife completes Worksheet B. Free tax preparation military She also completes Worksheet C because the forgiven tax liabilities for 2000 and 2001 (line 15 of Worksheet B) total less than $10,000. Free tax preparation military To claim tax relief for 2000, the wife files Form 1040X and attaches a copy of Worksheet B. Free tax preparation military To claim tax relief for 2001, she files Form 1040 and attaches copies of Worksheets B and C. Free tax preparation military   2000 2001 Wages (wife) $35,000 $36,000 Net profit from Schedule C, Profit or Loss From Business (husband) 25,000 22,000 Interest income (joint account) 1,000 1,100 Deduction for ½ of self-employment tax (husband) (1,766) (1,555) Standard deduction (7,350) (7,600) Personal exemptions (2) (5,600) (5,800) Taxable income $46,284 $44,145 Joint income tax liability $7,257 $6,619 Plus: Self-employment tax (husband) 3,532 3,109 Total tax liability $10,789 $9,728   2000 2001 Wages (wife) $35,000 $36,000 Net profit from Schedule C, Profit or Loss From Business (husband) 25,000 22,000 Interest income (joint account) 1,000 1,100 Deduction for ½ of self-employment tax (husband) (1,766) (1,555) Standard deduction (7,350) (7,600) Personal exemptions (2) (5,600) (5,800) Taxable income $46,284 $44,145 Joint income tax liability $7,257 $6,619 Plus: Self-employment tax (husband) 3,532 3,109 Total tax liability $10,789 $9,728 Worksheet C Illustrated. Free tax preparation military Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Free tax preparation military Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free tax preparation military 1 Minimum relief amount. Free tax preparation military Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free tax preparation military 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2 2,400     3 Enter the distribution deduction from line 18 (Form 1041) . Free tax preparation military 3 0     4 Add lines 2 and 3. Free tax preparation military 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. Free tax preparation military (See Income received after date of death on page 5. Free tax preparation military ) 5 1,000     6 Add lines 4 and 5. Free tax preparation military 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). Free tax preparation military 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). Free tax preparation military 8 435     9 Tax on exempt income. Free tax preparation military Subtract line 8 from line 7. Free tax preparation military 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free tax preparation military If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free tax preparation military 10 4,268     11 Add lines 9 and 10. Free tax preparation military 11 $4,543 12 Additional payment allowed. Free tax preparation military If line 11 is $10,000 or more, enter -0- and stop here. Free tax preparation military No additional amount is allowed as a tax payment. Free tax preparation military Otherwise, subtract line 11 from line 1 and enter the result. Free tax preparation military 12 $5,457 Note. Free tax preparation military The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free tax preparation military Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free tax preparation military If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free tax preparation military Write "Sec. Free tax preparation military 692(d)(2) Payment" and the amount to the right of the entry space. Free tax preparation military Also indicate whether a Form 1041 is being filed for the decedent's estate. Free tax preparation military If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free tax preparation military Write “Sec. Free tax preparation military 692(d)(2) Payment” on the dotted line to the left of the entry space. Free tax preparation military Worksheet C Illustrated. Free tax preparation military Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Free tax preparation military Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free tax preparation military 1 Minimum relief amount. Free tax preparation military Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free tax preparation military 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2 2,400     3 Enter the distribution deduction from line 18 (Form 1041) . Free tax preparation military 3 0     4 Add lines 2 and 3. Free tax preparation military 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. Free tax preparation military (See Income received after date of death on page 5. Free tax preparation military ) 5 1,000     6 Add lines 4 and 5. Free tax preparation military 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). Free tax preparation military 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). Free tax preparation military 8 435     9 Tax on exempt income. Free tax preparation military Subtract line 8 from line 7. Free tax preparation military 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free tax preparation military If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free tax preparation military 10 4,268     11 Add lines 9 and 10. Free tax preparation military 11 $4,543 12 Additional payment allowed. Free tax preparation military If line 11 is $10,000 or more, enter -0- and stop here. Free tax preparation military No additional amount is allowed as a tax payment. Free tax preparation military Otherwise, subtract line 11 from line 1 and enter the result. Free tax preparation military 12 $5,457 Note. Free tax preparation military The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free tax preparation military Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free tax preparation military If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free tax preparation military Write "Sec. Free tax preparation military 692(d)(2) Payment" and the amount to the right of the entry space. Free tax preparation military Also indicate whether a Form 1041 is being filed for the decedent's estate. Free tax preparation military If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free tax preparation military Write “Sec. Free tax preparation military 692(d)(2) Payment” on the dotted line to the left of the entry space. Free tax preparation military Additional Worksheets The following additional worksheets are provided for your convenience. Free tax preparation military Worksheet A. Free tax preparation military Figuring the Tax To Be Forgiven (For Decedents Who Filed a Return as Single, Married Filing Separately, Head of Household, or Qualifying Widow(er))         (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for tax forgiveness. Free tax preparation military 1       2 Enter the total tax from the decedent's income tax return. Free tax preparation military See Table 1 on page 5 for the line number for years before 2002. Free tax preparation military 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Free tax preparation military (These taxes are not eligible for forgiveness. Free tax preparation military )           a Self-employment tax. Free tax preparation military 3a         b Social security and Medicare tax on tip income not reported to employer. Free tax preparation military 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Free tax preparation military 3c         d Tax on excess accumulation in qualified retirement plans. Free tax preparation military 3d         e Household employment taxes. Free tax preparation military 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Free tax preparation military 3f         g Tax on golden parachute payments. Free tax preparation military 3g       4 Add lines 3a through 3g. Free tax preparation military 4       5 Tax to be forgiven. Free tax preparation military Subtract line 4 from line 2. Free tax preparation military 5       Note. Free tax preparation military If the total of columns (A), (B), and (C) of line 5 (including any amounts shown on line 15 of Worksheet B) is less than $10,000, also complete Worksheet C. Free tax preparation military Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free tax preparation military If filing Form 1040X for an eligible year, enter the amount from line 5 above on Form 1040X in column B of line 10 as a decrease in tax. Free tax preparation military The IRS will determine the amount to be refunded. Free tax preparation military Worksheet A. Free tax preparation military Figuring the Tax To Be Forgiven (For Decedents Who Filed a Return as Single, Married Filing Separately, Head of Household, or Qualifying Widow(er))         (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for tax forgiveness. Free tax preparation military 1       2 Enter the total tax from the decedent's income tax return. Free tax preparation military See Table 1 on page 5 for the line number for years before 2002. Free tax preparation military 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Free tax preparation military (These taxes are not eligible for forgiveness. Free tax preparation military )           a Self-employment tax. Free tax preparation military 3a         b Social security and Medicare tax on tip income not reported to employer. Free tax preparation military 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Free tax preparation military 3c         d Tax on excess accumulation in qualified retirement plans. Free tax preparation military 3d         e Household employment taxes. Free tax preparation military 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Free tax preparation military 3f         g Tax on golden parachute payments. Free tax preparation military 3g       4 Add lines 3a through 3g. Free tax preparation military 4       5 Tax to be forgiven. Free tax preparation military Subtract line 4 from line 2. Free tax preparation military 5       Note. Free tax preparation military If the total of columns (A), (B), and (C) of line 5 (including any amounts shown on line 15 of Worksheet B) is less than $10,000, also complete Worksheet C. Free tax preparation military Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free tax preparation military If filing Form 1040X for an eligible year, enter the amount from line 5 above on Form 1040X in column B of line 10 as a decrease in tax. Free tax preparation military The IRS will determine the amount to be refunded. Free tax preparation military Worksheet B. Free tax preparation military Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free tax preparation military 1       2 Enter the decedent's taxable income. Free tax preparation military Figure taxable income as if a separate return had been filed. Free tax preparation military See the instructions. Free tax preparation military 2       3 Enter the decedent's total tax. Free tax preparation military See the instructions. Free tax preparation military 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free tax preparation military See the instructions. Free tax preparation military 4       5 Subtract line 4 from line 3. Free tax preparation military 5       6 Enter the surviving spouse's taxable income. Free tax preparation military Figure taxable income as if a separate return had been filed. Free tax preparation military See the instructions. Free tax preparation military 6       7 Enter the surviving spouse's total tax. Free tax preparation military See the instructions. Free tax preparation military 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free tax preparation military 8       9 Subtract line 8 from line 7. Free tax preparation military 9       10 Add lines 5 and 9. Free tax preparation military 10       11 Enter the total tax from the joint return. Free tax preparation military See Table 1 on page 5 for the line number for years before 2002. Free tax preparation military 11       12 Add lines 4 and 8. Free tax preparation military 12       13 Subtract line 12 from line 11. Free tax preparation military 13       14 Divide line 5 by line 10. Free tax preparation military Enter the result as a decimal. Free tax preparation military 14       15 Tax to be forgiven. Free tax preparation military Multiply line 13 by line 14 and enter the result. Free tax preparation military 15       Note. Free tax preparation military If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free tax preparation military Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free tax preparation military If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free tax preparation military The IRS will determine the amount to be refunded. Free tax preparation military Worksheet B. Free tax preparation military Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free tax preparation military 1       2 Enter the decedent's taxable income. Free tax preparation military Figure taxable income as if a separate return had been filed. Free tax preparation military See the instructions. Free tax preparation military 2       3 Enter the decedent's total tax. Free tax preparation military See the instructions. Free tax preparation military 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free tax preparation military See the instructions. Free tax preparation military 4       5 Subtract line 4 from line 3. Free tax preparation military 5       6 Enter the surviving spouse's taxable income. Free tax preparation military Figure taxable income as if a separate return had been filed. Free tax preparation military See the instructions. Free tax preparation military 6       7 Enter the surviving spouse's total tax. Free tax preparation military See the instructions. Free tax preparation military 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free tax preparation military 8       9 Subtract line 8 from line 7. Free tax preparation military 9       10 Add lines 5 and 9. Free tax preparation military 10       11 Enter the total tax from the joint return. Free tax preparation military See Table 1 on page 5 for the line number for years before 2002. Free tax preparation military 11       12 Add lines 4 and 8. Free tax preparation military 12       13 Subtract line 12 from line 11. Free tax preparation military 13       14 Divide line 5 by line 10. Free tax preparation military Enter the result as a decimal. Free tax preparation military 14       15 Tax to be forgiven. Free tax preparation military Multiply line 13 by line 14 and enter the result. Free tax preparation military 15       Note. Free tax preparation military If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free tax preparation military Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free tax preparation military If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free tax preparation military The IRS will determine the amount to be refunded. Free tax preparation military Worksheet C. Free tax preparation military Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. Free tax preparation military Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free tax preparation military 1 Minimum tax forgiveness. Free tax preparation military Note. Free tax preparation military Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free tax preparation military 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Free tax preparation military 3       4 Add lines 2 and 3. Free tax preparation military 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Free tax preparation military (See Income received after date of death on page 5. Free tax preparation military ) 5       6 Add lines 4 and 5. Free tax preparation military 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Free tax preparation military 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Free tax preparation military 8       9 Tax on exempt income. Free tax preparation military Subtract line 8 from line 7. Free tax preparation military 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free tax preparation military If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free tax preparation military 10       11 Add lines 9 and 10. Free tax preparation military 11   12 Additional payment allowed. Free tax preparation military If line 11 is $10,000 or more, enter -0- and stop here. Free tax preparation military No additional amount is allowed as a tax payment. Free tax preparation military Otherwise, subtract line 11 from line 1 and enter the result. Free tax preparation military 12   Note. Free tax preparation military The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free tax preparation military Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free tax preparation military If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free tax preparation military Write "Sec. Free tax preparation military 692(d)(2) Payment" and the amount to the right of the entry space. Free tax preparation military Also indicate whether a Form 1041 is being filed for the decedent's estate. Free tax preparation military If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free tax preparation military Write “Sec. Free tax preparation military 692(d)(2) Payment” on the dotted line to the left of the entry space. Free tax preparation military Worksheet C. Free tax preparation military Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. Free tax preparation military Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free tax preparation military 1 Minimum tax forgiveness. Free tax preparation military Note. Free tax preparation military Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free tax preparation military 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Free tax preparation military 3       4 Add lines 2 and 3. Free tax preparation military 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Free tax preparation military (See Income received after date of death on page 5. Free tax preparation military ) 5       6 Add lines 4 and 5. Free tax preparation military 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Free tax preparation military 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Free tax preparation military 8       9 Tax on exempt income. Free tax preparation military Subtract line 8 from line 7. Free tax preparation military 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free tax preparation military If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free tax preparation military 10       11 Add lines 9 and 10. Free tax preparation military 11   12 Additional payment allowed. Free tax preparation military If line 11 is $10,000 or more, enter -0- and stop here. Free tax preparation military No additional amount is allowed as a tax payment. Free tax preparation military Otherwise, subtract line 11 from line 1 and enter the result. Free tax preparation military 12   Note. Free tax preparation military The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free tax preparation military Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free tax preparation military If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free tax preparation military Write "Sec. Free tax preparation military 692(d)(2) Payment" and the amount to the right of the entry space. Free tax preparation military Also indicate whether a Form 1041 is being filed for the decedent's estate. Free tax preparation military If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free tax preparation military Write “Sec. Free tax preparation military 692(d)(2) Payment” on the dotted line to the left of the entry space. Free tax preparation military How To Get Tax Help Special IRS assistance. Free tax preparation military   The IRS is providing special help for those affected by the terrorist attacks, as well as survivors and personal representatives of the victims. Free tax preparation military We have set up a special toll-free number for people who may have trouble filing or paying their taxes because they were affected by the terrorist attacks, or who have other tax issues related to the attacks. Free tax preparation military Call 1–866–562–5227 Monday through Friday In English–7 a. Free tax preparation military m. Free tax preparation military to 10 p. Free tax preparation military m. Free tax preparation military local time In Spanish–8 a. Free tax preparation military m. Free tax preparation military to 9:30 p. Free tax preparation military m. Free tax preparation military local time   The IRS web site at www. Free tax preparation military irs. Free tax preparation military gov has notices and other tax relief information. Free tax preparation military Check it periodically for any new guidance or to see if Congress has enacted new legislation. Free tax preparation military   Business taxpayers affected by the attacks can e-mail their questions to corp. Free tax preparation military disaster. Free tax preparation military relief@irs. Free tax preparation military gov. Free tax preparation military   For current information on Presidentially declared disaster areas, check the Federal Emergency Management Agency Web site at www. Free tax preparation military fema. Free tax preparation military gov. Free tax preparation military Other help from the IRS. Free tax preparation military   You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. Free tax preparation military By selecting the method that is best for you, you will have quick and easy access to tax help. Free tax preparation military Contacting your Taxpayer Advocate. Free tax preparation military   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. Free tax preparation military   The Taxpayer Advocate represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. Free tax preparation military While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review. Free tax preparation military   To contact your Taxpayer Advocate: Call the Taxpayer Advocate at 1–877–777–4778. Free tax preparation military Call the IRS at 1–800–829–1040. Free tax preparation military Call, write, or fax the Taxpayer Advocate office in your area. Free tax preparation military Call 1–800–829–4059 if you are a TTY/TDD user. Free tax preparation military   For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS. Free tax preparation military Free tax services. Free tax preparation military   To find out what services are available, get Publication 910, Guide to Free Tax Services. Free tax preparation military It contains a list of free tax publications and an index of tax topics. Free tax preparation military It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. Free tax preparation military Personal computer. Free tax preparation military With your personal computer and modem, you can access the IRS on the Internet at www. Free tax preparation military irs. Free tax preparation military gov. Free tax preparation military While visiting our web site, you can: Find answers to questions you may have. Free tax preparation military Download forms and publications or search for forms and pub
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OPM manages the civil service of the federal government, coordinates recruiting of new government employees, and manages their health insurance and retirement benefits programs. OPM also provides resources for locating student jobs, summer jobs, scholarships, and internships.

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The Free Tax Preparation Military

Free tax preparation military 5. Free tax preparation military   Student Loan Cancellations and Repayment Assistance Table of Contents Introduction Student Loan CancellationQualifying Loans Student Loan Repayment Assistance Introduction Generally, if you are responsible for making loan payments, and the loan is canceled (forgiven), you must include the amount that was forgiven in your gross income for tax purposes. Free tax preparation military However, if you fulfill certain requirements, two types of student loan assistance may be tax free. Free tax preparation military The types of assistance discussed in this chapter are: Student loan cancellation, and Student loan repayment assistance. Free tax preparation military Student Loan Cancellation If your student loan is canceled, you may not have to include any amount in income. Free tax preparation military This section describes the requirements for tax-free treatment of canceled student loans. Free tax preparation military Qualifying Loans To qualify for tax-free treatment, for the cancellation of your loan, your loan must have been made by a qualified lender to assist you in attending an eligible educational institution and contain a provision that all or part of the debt will be canceled if you work: For a certain period of time, In certain professions, and For any of a broad class of employers. Free tax preparation military The cancellation of your loan will not qualify for tax-free treatment if it is cancelled because of services you performed for the educational institution that made the loan or other organization that provided the funds. Free tax preparation military See Exception, later. Free tax preparation military Eligible educational institution. Free tax preparation military   This is an educational institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities. Free tax preparation military Qualified lenders. Free tax preparation military   These include the following. Free tax preparation military The United States, or an instrumentality thereof. Free tax preparation military A state, territory, or possession of the United States, or the District of Columbia, or any political subdivision thereof. Free tax preparation military A public benefit corporation that is tax-exempt under section 501(c)(3); and that has assumed control of a state, county, or municipal hospital; and whose employees are considered public employees under state law. Free tax preparation military An eligible educational institution, if the loan is made: As part of an agreement with an entity described in (1), (2), (3) under which the funds to make the loan were provided to the educational institution, or Under a program of the educational institution that is designed to encourage its students to serve in occupations with unmet needs or in areas with unmet needs where the services provided by the students (or former students) are for or under the direction of a governmental unit or a tax-exempt section 501(c)(3) organization. Free tax preparation military   Occupations with unmet needs include medicine, nursing, teaching, and law. Free tax preparation military Section 501(c)(3) organization. Free tax preparation military   This is any corporation, community chest, fund, or foundation organized and operated exclusively for one or more of the following purposes. Free tax preparation military Charitable. Free tax preparation military Religious. Free tax preparation military Educational. Free tax preparation military Scientific. Free tax preparation military Literary. Free tax preparation military Testing for public safety. Free tax preparation military Fostering national or international amateur sports competition (but only if none of its activities involve providing athletic facilities or equipment). Free tax preparation military The prevention of cruelty to children or animals. Free tax preparation military Exception. Free tax preparation military   The cancellation of your loan does not qualify as tax-free student loan cancellation if your student loan was made by an educational institution and is canceled because of services you performed for the educational institution or other organization that provided the funds. Free tax preparation military Refinanced Loan If you refinanced a student loan with another loan from an eligible educational institution or a tax-exempt organization, that loan may also be considered as made by a qualified lender. Free tax preparation military The refinanced loan is considered made by a qualified lender if it is made under a program of the refinancing organization that is designed to encourage students to serve in occupations with unmet needs or in areas with unmet needs where the services required of the students are for or under the direction of a governmental unit or a tax-exempt section 501(c)(3) organization. Free tax preparation military Student Loan Repayment Assistance Student loan repayments made to you are tax free if you received them for any of the following: The National Health Service Corps (NHSC) Loan Repayment Program (NHSC Loan Repayment Program). Free tax preparation military A state education loan repayment program eligible for funds under the Public Health Service Act. Free tax preparation military Any other state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health services in under served or health professional shortage areas (as determined by such state). Free tax preparation military You cannot deduct the interest you paid on a student loan to the extent payments were made through your participation in the above programs. Free tax preparation military Prev  Up  Next   Home   More Online Publications