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H&r block federal free 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. H&r block federal free 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. H&r block federal free Income tax is forgiven for these decedents whether they were killed in an attack or in rescue or recovery operations. H&r block federal free Any forgiven tax liability owed to the IRS will not have to be paid. H&r block federal free Any forgiven tax liability that has already been paid will be refunded. H&r block federal free (See Refund of Taxes Paid, later. H&r block federal free ) To determine the amount of tax to be forgiven, read Years Eligible for Tax Forgiveness first. H&r block federal free Then read Amount of Tax Forgiven. H&r block federal free Decedents whose total forgiven tax liability for all eligible years is less than $10,000 are entitled to $10,000 minimum relief. H&r block federal free Even decedents who were not required to file tax returns for the eligible tax years are entitled to $10,000 minimum relief. H&r block federal free See Minimum Amount of Relief later under Amount of Tax Forgiven. H&r block federal free Years Eligible for Tax Forgiveness The following paragraphs explain which years are eligible for tax forgiveness. H&r block federal free Oklahoma City attack. H&r block federal free   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. H&r block federal free Example 1. H&r block federal free A man was killed in the bombing of the federal building in Oklahoma City on April 19, 1995. H&r block federal free His income tax is forgiven for 1994 and 1995. H&r block federal free Example 2. H&r block federal free A woman was wounded while walking outside the federal building in Oklahoma City on April 19, 1995. H&r block federal free She subsequently died of her wounds in 1996. H&r block federal free Her income tax is forgiven for 1994, 1995, and 1996. H&r block federal free September 11 attacks and anthrax attacks. H&r block federal free   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. H&r block federal free Example 1. H&r block federal free A Pentagon employee died in the September 11 attack. H&r block federal free Her income tax is forgiven for 2000 and 2001. H&r block federal free Example 2. H&r block federal free A visitor to the World Trade Center died in 2002 of wounds he sustained in the September 11 attack. H&r block federal free His income tax liability is forgiven for 2000, 2001, and 2002. H&r block federal free Amount of Tax Forgiven The IRS will forgive the decedent's income tax liability for all years eligible for tax forgiveness. H&r block federal free On a joint return, only the decedent's part of the joint income tax liability is eligible for forgiveness. H&r block federal free To figure the tax to be forgiven, use the following worksheets. H&r block federal free Use Worksheet A for any eligible year the decedent filed a return as single, married filing separately, head of household, or qualifying widow(er). H&r block federal free Use Worksheet B for any eligible year the decedent filed a joint return. H&r block federal free See the illustrated Worksheet B near the end of this publication. H&r block federal free Do not complete Worksheet A or B if the decedent was not required to file tax returns for the eligible tax years. H&r block federal free Instead, complete Worksheet C and file a return for the decedent's last tax year. H&r block federal free See Minimum Amount of Relief, later. H&r block federal free If you need assistance, call the IRS at 1–866–562–5227 Monday through Friday during the following times. H&r block federal free In English–7 a. H&r block federal free m. H&r block federal free to 10 p. H&r block federal free m. H&r block federal free local time. H&r block federal free In Spanish–8 a. H&r block federal free m. H&r block federal free to 9:30 p. H&r block federal free m. H&r block federal free local time. H&r block federal free Both spouses died. H&r block federal free   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. H&r block federal free Do this to determine if each spouse qualifies for the minimum relief of $10,000 (discussed later under Minimum Amount of Relief). H&r block federal free If you are certain that neither spouse's total forgiven tax liability for all eligible years is less than $10,000, skip Worksheet B. H&r block federal free However, attach a computation of the forgiven tax liability to the final income tax return or amended tax return for each eligible year. H&r block federal free 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. H&r block federal free Residents of community property states. H&r block federal free   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. H&r block federal free 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. H&r block federal free Worksheet B. H&r block federal free 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. H&r block federal free 1       2 Enter the decedent's taxable income. H&r block federal free Figure taxable income as if a separate return had been filed. H&r block federal free See the instructions. H&r block federal free 2       3 Enter the decedent's total tax. H&r block federal free See the instructions. H&r block federal free 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. H&r block federal free See the instructions. H&r block federal free 4       5 Subtract line 4 from line 3. H&r block federal free 5       6 Enter the surviving spouse's taxable income. H&r block federal free Figure taxable income as if a separate return had been filed. H&r block federal free See the instructions. H&r block federal free 6       7 Enter the surviving spouse's total tax. H&r block federal free See the instructions. H&r block federal free 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. H&r block federal free 8       9 Subtract line 8 from line 7. H&r block federal free 9       10 Add lines 5 and 9. H&r block federal free 10       11 Enter the total tax from the joint return. H&r block federal free See Table 1 on page 5 for the line number for years before 2002. H&r block federal free 11       12 Add lines 4 and 8. H&r block federal free 12       13 Subtract line 12 from line 11. H&r block federal free 13       14 Divide line 5 by line 10. H&r block federal free Enter the result as a decimal. H&r block federal free 14       15 Tax to be forgiven. H&r block federal free Multiply line 13 by line 14 and enter the result. H&r block federal free 15       Note. H&r block federal free 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. H&r block federal free 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. H&r block federal free 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. H&r block federal free The IRS will determine the amount to be refunded. H&r block federal free Worksheet B. H&r block federal free 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. H&r block federal free 1       2 Enter the decedent's taxable income. H&r block federal free Figure taxable income as if a separate return had been filed. H&r block federal free See the instructions. H&r block federal free 2       3 Enter the decedent's total tax. H&r block federal free See the instructions. H&r block federal free 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. H&r block federal free See the instructions. H&r block federal free 4       5 Subtract line 4 from line 3. H&r block federal free 5       6 Enter the surviving spouse's taxable income. H&r block federal free Figure taxable income as if a separate return had been filed. H&r block federal free See the instructions. H&r block federal free 6       7 Enter the surviving spouse's total tax. H&r block federal free See the instructions. H&r block federal free 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. H&r block federal free 8       9 Subtract line 8 from line 7. H&r block federal free 9       10 Add lines 5 and 9. H&r block federal free 10       11 Enter the total tax from the joint return. H&r block federal free See Table 1 on page 5 for the line number for years before 2002. H&r block federal free 11       12 Add lines 4 and 8. H&r block federal free 12       13 Subtract line 12 from line 11. H&r block federal free 13       14 Divide line 5 by line 10. H&r block federal free Enter the result as a decimal. H&r block federal free 14       15 Tax to be forgiven. H&r block federal free Multiply line 13 by line 14 and enter the result. H&r block federal free 15       Note. H&r block federal free 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. H&r block federal free 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. H&r block federal free 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. H&r block federal free The IRS will determine the amount to be refunded. H&r block federal free Instructions for Worksheet B Table 1. H&r block federal free Total Tax Line on Decedent's Return Note: Use this table to find the total tax line on the decedent's income tax return. H&r block federal free * 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. H&r block federal free ** File Form 4506 to get a transcript of the decedent's account. H&r block federal free Table 1. H&r block federal free Total Tax Line on Decedent's Return Note: Use this table to find the total tax line on the decedent's income tax return. H&r block federal free * 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. H&r block federal free ** File Form 4506 to get a transcript of the decedent's account. H&r block federal free Lines 2 and 6. H&r block federal free   Allocate income and deductions in the same manner they would have been allocated if the spouses had filed separate returns. H&r block federal free   Allocate wages and salaries to the spouse who performed the services and received the Form W-2. H&r block federal free Business and investment income (including capital gains) are generally allocated to the spouse who owned the business or investment that produced the income. H&r block federal free 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. H&r block federal free   Allocate business deductions to the owner of the business. H&r block federal free 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. H&r block federal free Lines 3 and 7. H&r block federal free   Figure the total tax as if a separate return had been filed. H&r block federal free 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. H&r block federal free 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. H&r block federal free   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. H&r block federal free If a credit would not have been allowed on a separate return, allocate the credit shown on the joint return between the spouses. H&r block federal free 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. H&r block federal free Line 4. H&r block federal free   Enter the total, if any, of the following taxes. H&r block federal free Self-employment tax. H&r block federal free Social security and Medicare tax on tip income not reported to employer. H&r block federal free Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). H&r block federal free Tax on excess accumulation in qualified retirement plans. H&r block federal free Household employment taxes. H&r block federal free Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. H&r block federal free Tax on golden parachute payments. H&r block federal free Minimum Amount of Relief The minimum amount of relief is $10,000. H&r block federal free 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. H&r block federal free The IRS will refund the difference as explained under Refund of Taxes Paid. H&r block federal free Use Worksheet C to figure the additional tax payment. H&r block federal free But first complete Worksheet A or B, unless the decedent was not required to file tax returns for the eligible tax years. H&r block federal free Example 1. H&r block federal free An individual who died in the September 11 attacks had an income tax liability of $-0- for 2000 and $6,400 for 2001. H&r block federal free The $6,400 is eligible for forgiveness. H&r block federal free The IRS will forgive $6,400 and treat the difference between $10,000 and $6,400 ($3,600) as a tax payment for 2001. H&r block federal free Example 2. H&r block federal free A child who died in the September 11 attacks had no (-0-) income tax liability for 2000 or 2001. H&r block federal free The IRS will treat $10,000 as a tax payment for 2001. H&r block federal free Income received after date of death. H&r block federal free   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. H&r block federal free Examples are the final paycheck or dividends on stock owned by the decedent. H&r block federal free 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). H&r block federal free Nonqualifying income. H&r block federal free   The following income is not exempt from tax. H&r block federal free The tax on it is not eligible for forgiveness. H&r block federal free Deferred compensation that would have been payable if the death had occurred because of an event other than these attacks. H&r block federal free Amounts that would not have been payable but for an action taken after September 11, 2001. H&r block federal free The following are examples of nonqualifying income. H&r block federal free Amounts payable from a qualified retirement plan or IRA to the beneficiary or estate of the decedent. H&r block federal free 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. H&r block federal free 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. H&r block federal free Interest on savings bonds cashed by the beneficiary of the decedent. H&r block federal free If you are responsible for the estate of a decedent, see Publication 559. H&r block federal free Publication 559 discusses how to complete and file federal income tax returns and explains your responsibility to pay any taxes due. H&r block federal free Instructions for lines 2–9 of Worksheet C. H&r block federal free   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. H&r block federal free To figure the tax that would have been payable, you can use lines 2 through 9 of Worksheet C. H&r block federal free Or, if special requirements are met, you can use the alternative computation instead. H&r block federal free See Alternative computation, later. H&r block federal free   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. H&r block federal free Use Form 1041 to figure what the taxable income would be without including the exempt income. H&r block federal free 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)). H&r block federal free Alternative computation. H&r block federal free   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. H&r block federal free 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. H&r block federal free The estate claimed an income distribution deduction on line 18 (Form 1041). H&r block federal free Each beneficiary submits the information necessary to refigure the income tax payable on the exempt income received from the decedent's estate. H&r block federal free 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. H&r block federal free 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. H&r block federal free Complete the rest of Worksheet C to determine the additional payment allowed. H&r block federal free Worksheet C. H&r block federal free Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. H&r block federal free Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. H&r block federal free 1 Minimum relief amount. H&r block federal free Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. H&r block federal free 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . H&r block federal free 3       4 Add lines 2 and 3. H&r block federal free 4       5 Enter exempt income received after death minus expenses allocable to exempt income. H&r block federal free (See Income received after date of death on page 5. H&r block federal free ) 5       6 Add lines 4 and 5. H&r block federal free 6       7 Figure the tax on line 6 using Schedule G (Form 1041). H&r block federal free 7       8 Figure the tax on line 4 using Schedule G (Form 1041). H&r block federal free 8       9 Tax on exempt income. H&r block federal free Subtract line 8 from line 7. H&r block federal free 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. H&r block federal free If the decedent was not required to file tax returns for the eligible tax years, enter -0-. H&r block federal free 10       11 Add lines 9 and 10. H&r block federal free 11   12 Additional payment allowed. H&r block federal free If line 11 is $10,000 or more, enter -0- and stop here. H&r block federal free No additional amount is allowed as a tax payment. H&r block federal free Otherwise, subtract line 11 from line 1 and enter the result. H&r block federal free 12   Note. H&r block federal free The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). H&r block federal free 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. H&r block federal free If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. H&r block federal free Write "Sec. H&r block federal free 692(d)(2) Payment" and the amount to the right of the entry space. H&r block federal free Also indicate whether a Form 1041 is being filed for the decedent's estate. H&r block federal free If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). H&r block federal free Write “Sec. H&r block federal free 692(d)(2) Payment” on the dotted line to the left of the entry space. H&r block federal free Worksheet C. H&r block federal free Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. H&r block federal free Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. H&r block federal free 1 Minimum relief amount. H&r block federal free Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. H&r block federal free 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . H&r block federal free 3       4 Add lines 2 and 3. H&r block federal free 4       5 Enter exempt income received after death minus expenses allocable to exempt income. H&r block federal free (See Income received after date of death on page 5. H&r block federal free ) 5       6 Add lines 4 and 5. H&r block federal free 6       7 Figure the tax on line 6 using Schedule G (Form 1041). H&r block federal free 7       8 Figure the tax on line 4 using Schedule G (Form 1041). H&r block federal free 8       9 Tax on exempt income. H&r block federal free Subtract line 8 from line 7. H&r block federal free 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. H&r block federal free If the decedent was not required to file tax returns for the eligible tax years, enter -0-. H&r block federal free 10       11 Add lines 9 and 10. H&r block federal free 11   12 Additional payment allowed. H&r block federal free If line 11 is $10,000 or more, enter -0- and stop here. H&r block federal free No additional amount is allowed as a tax payment. H&r block federal free Otherwise, subtract line 11 from line 1 and enter the result. H&r block federal free 12   Note. H&r block federal free The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). H&r block federal free 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. H&r block federal free If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. H&r block federal free Write "Sec. H&r block federal free 692(d)(2) Payment" and the amount to the right of the entry space. H&r block federal free Also indicate whether a Form 1041 is being filed for the decedent's estate. H&r block federal free If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). H&r block federal free Write “Sec. H&r block federal free 692(d)(2) Payment” on the dotted line to the left of the entry space. H&r block federal free Worksheet D. H&r block federal free 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. H&r block federal free (See Income received after date of death on page 5. H&r block federal free ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). H&r block federal free 4   5 Figure the tax on line 1 using Schedule G (Form 1041). H&r block federal free 5   6 Estate's tax on exempt income. H&r block federal free Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. H&r block federal free Figure the total tax that would have been payable by all beneficiaries. H&r block federal free Do this by including in each beneficiary's gross income the exempt income received from the decedent's estate and refiguring the income tax. H&r block federal free Add the amounts by which each beneficiary's income tax is increased. H&r block federal free 7   8 Add lines 6 and 7. H&r block federal free Enter this amount on line 9 of Worksheet C. H&r block federal free 8   Worksheet D. H&r block federal free 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. H&r block federal free (See Income received after date of death on page 5. H&r block federal free ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). H&r block federal free 4   5 Figure the tax on line 1 using Schedule G (Form 1041). H&r block federal free 5   6 Estate's tax on exempt income. H&r block federal free Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. H&r block federal free Figure the total tax that would have been payable by all beneficiaries. H&r block federal free Do this by including in each beneficiary's gross income the exempt income received from the decedent's estate and refiguring the income tax. H&r block federal free Add the amounts by which each beneficiary's income tax is increased. H&r block federal free 7   8 Add lines 6 and 7. H&r block federal free Enter this amount on line 9 of Worksheet C. H&r block federal free 8   Refund of Taxes Paid The IRS will refund the following forgiven income tax liabilities. H&r block federal free Income tax liabilities that have been paid. H&r block federal free Income tax liabilities treated as paid because the total tax liability for all years eligible for tax forgiveness is less than $10,000. H&r block federal free See Minimum Amount of Relief, earlier. H&r block federal free Example 1. H&r block federal free A man who died in the September 11 attacks had an income tax liability of $7,500 for 2000 and $6,500 for 2001. H&r block federal free The total, $14,000, is eligible for tax forgiveness. H&r block federal free However, he paid only $13,000 of that amount. H&r block federal free The IRS will refund the $13,000 paid. H&r block federal free Example 2. H&r block federal free A child who died in the September 11 attacks had no income tax liability for 2000 or 2001. H&r block federal free The child qualifies for the minimum relief of $10,000. H&r block federal free The $10,000 is treated as a tax payment for 2001 and will be refunded. H&r block federal free Period for filing a claim for credit or refund. H&r block federal free   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. H&r block federal free 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. H&r block federal free 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. H&r block federal free Extension of time for victims of Oklahoma City attack. H&r block federal free   The period described above has been extended for victims of the Oklahoma City attack. H&r block federal free Survivors and personal representatives of these victims have until January 22, 2003, to file an original or amended return. H&r block federal free How To Claim Tax Forgiveness Use the following procedures to claim income tax forgiveness. H&r block federal free 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. H&r block federal free Return required but not yet filed. H&r block federal free   File Form 1040 if the decedent was a U. H&r block federal free S. H&r block federal free citizen or resident. H&r block federal free File Form 1040NR if the decedent was a nonresident alien. H&r block federal free A nonresident alien is someone who is not a U. H&r block federal free S. H&r block federal free citizen or resident. H&r block federal free Return required and already filed. H&r block federal free   File a separate Form 1040X for each year you are claiming tax relief. H&r block federal free Return not required and not filed. H&r block federal free   File Form 1040 only for the year of death if the decedent was a U. H&r block federal free S. H&r block federal free citizen or resident. H&r block federal free File Form 1040NR if the decedent was a nonresident alien. H&r block federal free Return not required but already filed. H&r block federal free   File Form 1040X only for the year of death. H&r block federal free How to complete the returns. H&r block federal free   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. H&r block federal free Attach to each return a computation of the income tax to be forgiven or a copy of Worksheet A or B. H&r block federal free If filing Form 1040 or Form 1040NR, also attach any Forms W–2. H&r block federal free 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. H&r block federal free Also, please write one of the following across the top of page 1 of each return. H&r block federal free KITA—Oklahoma City KITA—9/11 KITA—Anthrax “KITA” means “killed in terrorist attack. H&r block federal free ” 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. H&r block federal free If you need a copy, use Form 4506. H&r block federal free The IRS will provide a free copy of the tax return if you write “DISASTER” in the top margin of Form 4506. H&r block federal free Attach Letters Testamentary or other evidence to establish that you are authorized to act for the decedent's estate. H&r block federal free Send Form 4506 to the address shown in the form instructions. H&r block federal free Taxpayer identification number. H&r block federal free   A taxpayer identification number must be furnished on the decedent's returns. H&r block federal free This is usually the decedent's social security number (SSN). H&r block federal free However, a nonresident alien who is not eligible to get an SSN should have an individual taxpayer identification number (ITIN). H&r block federal free If the decedent was a nonresident alien, had neither an SSN nor an ITIN, and was not required to file a U. H&r block federal free S. H&r block federal free income tax return for any tax year, do not apply for an ITIN. H&r block federal free You may claim a refund by filing Form 1040NR without an SSN or ITIN. H&r block federal free Necessary Documents Please attach the following documents to the return or amended return. H&r block federal free Proof of death. H&r block federal free   Attach a copy of the death certificate. H&r block federal free If the Department of Defense issued DD Form 1300, Report of Casualty, you can attach that form instead of the death certificate. H&r block federal free Form 1310. H&r block federal free   You must send Form 1310 with all returns and claims for refund, unless either of the following applies. H&r block federal free You are a surviving spouse filing an original or amended joint return with the decedent. H&r block federal free 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. H&r block federal free A personal representative is an executor or administrator of a decedent's estate, as certified or appointed by the court. H&r block federal free A copy of the decedent's will cannot be accepted as evidence that you are the personal representative. H&r block federal free      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. H&r block federal free Include a statement saying an amended return will be filed as soon as the necessary tax information is available. H&r block federal free Where To File The IRS has set up a special office for processing returns and claims for tax forgiveness. H&r block federal free Use one of the addresses shown below. H&r block federal free Where you file the returns or claims depends on whether you use the U. H&r block federal free S. H&r block federal free Postal Service or a private delivery service. H&r block federal free Please do not send these returns or claims to any of the addresses shown in the tax form instructions. H&r block federal free U. H&r block federal free S. H&r block federal free Postal Service. H&r block federal free   If you use the U. H&r block federal free S. H&r block federal free Postal Service, file these returns and claims at the following address. H&r block federal free Internal Revenue Service P. H&r block federal free O. H&r block federal free Box 4053 Woburn, MA 01888 Private delivery service. H&r block federal free   Private delivery services cannot deliver items to P. H&r block federal free O. H&r block federal free boxes. H&r block federal free If you use a private delivery service, file these returns and claims at the following address. H&r block federal free Internal Revenue Service Stop 661 310 Lowell St. H&r block federal free Andover, MA 01810 Designated private delivery services. H&r block federal free   You can use the following private delivery services to file these returns and claims. H&r block federal free Airborne Express (Airborne): Overnight Air Express Service, Next Afternoon Service, and Second Day Service. H&r block federal free DHL Worldwide Express (DHL): DHL “Same Day” Service, and DHL USA Overnight. H&r block federal free Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, and FedEx 2Day. H&r block federal free United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. H&r block federal free M. H&r block federal free , UPS Worldwide Express Plus, and UPS Worldwide Express. H&r block federal free The private delivery service can tell you how to get written proof of the mailing date. H&r block federal free Payments to Survivors The following section discusses the tax treatment of certain amounts received by survivors. H&r block federal free September 11th Victim Compensation Fund of 2001 Payments from the September 11th Victim Compensation Fund of 2001 are not included in income. H&r block federal free Qualified Disaster Relief Payments Qualified disaster relief payments are not included in income. H&r block federal free These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). H&r block federal free No withholding applies to these payments. H&r block federal free Qualified disaster relief payments include payments you receive (regardless of the source) after September 10, 2001, for the following expenses. H&r block federal free Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a terrorist attack. H&r block federal free Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a terrorist attack. H&r block federal free (A personal residence can be a rented residence or one you own. H&r block federal free ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a terrorist attack. H&r block federal free Qualified disaster relief payments also include the following. H&r block federal free 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. H&r block federal free Amounts paid by a federal, state, or local government in connection with a terrorist attack to those affected by the attack. H&r block federal free 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. H&r block federal free 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. H&r block federal free 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. H&r block federal free 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. H&r block federal free 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. H&r block federal free 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. H&r block federal free For information on the period for filing Form 1040X, see Period for filing claim for credit or refund earlier under Refund of Taxes Paid. H&r block federal free If that period has expired, you are granted an extension. H&r block federal free You have until January 22, 2003, to file Form 1040X to exclude the death benefits. H&r block federal free On top of page 1 of Form 1040X, write “Extension of Limitations Under PL 107–134, sec. H&r block federal free 102(b)(2). H&r block federal free ” 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. H&r block federal free The lender is not required to report the canceled debt on Form 1099–C, Cancellation of Debt. H&r block federal free 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. H&r block federal free Bureau of Justice Assistance payments. H&r block federal free   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. H&r block federal free Government plan annuity. H&r block federal free   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. H&r block federal free This exclusion applies to the amount of the annuity based on the officer's service as a public safety officer. H&r block federal free For this purpose, the term public safety officer includes police and law enforcement officers, firefighters, and rescue squad and ambulance crews. H&r block federal free More information. H&r block federal free   For more information, see Publication 559. H&r block federal free Postponed Tax Deadlines The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a terrorist attack. H&r block federal free 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. H&r block federal free 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). H&r block federal free Affected taxpayers. H&r block federal free   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. H&r block federal free Any individual whose main home is located in a covered area (defined later). H&r block federal free Any business entity or sole proprietor whose principal place of business is located in a covered area. H&r block federal free Any individual, business entity, or sole proprietor whose records needed to meet a postponed deadline are maintained in a covered area. H&r block federal free The main home or principal place of business does not have to be located in the covered area. H&r block federal free Any estate or trust whose tax records necessary to meet a postponed tax deadline are maintained in a covered area. H&r block federal free Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered area. H&r block federal free The spouse on a joint return with a taxpayer who is eligible for postponements. H&r block federal free Any other person determined by the IRS to be affected by a terrorist attack. H&r block federal free Covered area. H&r block federal free   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. H&r block federal free Abatement of interest. H&r block federal free   The IRS may abate (forgive) the interest on any underpaid income tax for the length of any postponement. H&r block federal free 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. H&r block federal free You must make this choice to deduct your loss on your 2000 return by the later of the following dates. H&r block federal free The due date (without extensions) for filing your 2001 income tax return (April 15, 2002, if you are a calendar year taxpayer). H&r block federal free The due date (with extensions) for the 2000 return. H&r block federal free For more information about disaster area losses, see Publication 547. H&r block federal free 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. H&r block federal free The estate tax is computed using a new rate schedule on page 25 of the November 2001 revision of the instructions for Form 706. H&r block federal free The estate tax is reduced by credits against the estate tax, including the unified credit and the state death tax credit. H&r block federal free These credits may reduce or eliminate the estate tax due. H&r block federal free 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. H&r block federal free Recovery from the September 11th Victim Compensation Fund. H&r block federal free   The value of claims for a decedent's pain and suffering is normally included in the gross estate. H&r block federal free 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. H&r block federal free Thus, there are no federal estate tax consequences if an estate or beneficiary receives a recovery from this fund. H&r block federal free Which estates must file a return. H&r block federal free   For decedents dying in 2001, Form 706 must be filed by the executor for the estate of every U. H&r block federal free S. H&r block federal free citizen or resident whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $675,000. H&r block federal free Form 706 must be filed within 9 months after the date of decedent's death unless you receive an extension of time to file. H&r block federal free Use Form 4768, Application for Extension of Time To File a Return and/or Pay U. H&r block federal free S. H&r block federal free Estate (and Generation-Skipping Transfer) Taxes, to apply for an extension. H&r block federal free Where to file. H&r block federal free   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. H&r block federal free Internal Revenue Service E & G Department/Stop 824T 201 W. H&r block federal free Rivercenter Blvd. H&r block federal free Covington, KY 41011 More information. H&r block federal free   For more information on the federal estate tax, see the instructions for Form 706. H&r block federal free 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. H&r block federal free 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. H&r block federal free However, this tax will not apply to transactions entered into from February 22, 2002, to July 1, 2002, if certain requirements are met. H&r block federal free For information about these requirements, see Internal Revenue Code section 5891. H&r block federal free Worksheet B Illustrated. H&r block federal free 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. H&r block federal free 1 2000 2001   2 Enter the decedent's taxable income. H&r block federal free Figure taxable income as if a separate return had been filed. H&r block federal free See the instructions. H&r block federal free 2 $17,259 $14,295   3 Enter the decedent's total tax. H&r block federal free See the instructions. H&r block federal free 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. H&r block federal free See the instructions. H&r block federal free 4 3,532 3,109   5 Subtract line 4 from line 3. H&r block federal free 5 2,591 2,141   6 Enter the surviving spouse's taxable income. H&r block federal free Figure taxable income as if a separate return had been filed. H&r block federal free See the instructions for line 2. H&r block federal free 6 29,025 29,850   7 Enter the surviving spouse's total tax. H&r block federal free See the instructions. H&r block federal free 7 5,277 5,391   8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. H&r block federal free 8 0 0   9 Subtract line 8 from line 7. H&r block federal free 9 5,277 5,391   10 Add lines 5 and 9. H&r block federal free 10 7,868 7,532   11 Enter the total tax from the joint return. H&r block federal free See Table 1 on page 5 for the line number for years before 2002. H&r block federal free 11 10,789 9,728   12 Add lines 4 and 8. H&r block federal free 12 3,532 3,109   13 Subtract line 12 from line 11. H&r block federal free 13 7,257 6,619   14 Divide line 5 by line 10. H&r block federal free Enter the result as a decimal. H&r block federal free 14 . H&r block federal free 329 . H&r block federal free 284   15 Tax to be forgiven. H&r block federal free Multiply line 13 by line 14 and enter the result. H&r block federal free 15 $2,388 $1,880   Note. H&r block federal free 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. H&r block federal free 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. H&r block federal free 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. H&r block federal free The IRS will determine the amount to be refunded. H&r block federal free Worksheet B Illustrated. H&r block federal free 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. H&r block federal free 1 2000 2001   2 Enter the decedent's taxable income. H&r block federal free Figure taxable income as if a separate return had been filed. H&r block federal free See the instructions. H&r block federal free 2 $17,259 $14,295   3 Enter the decedent's total tax. H&r block federal free See the instructions. H&r block federal free 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. H&r block federal free See the instructions. H&r block federal free 4 3,532 3,109   5 Subtract line 4 from line 3. H&r block federal free 5 2,591 2,141   6 Enter the surviving spouse's taxable income. H&r block federal free Figure taxable income as if a separate return had been filed. H&r block federal free See the instructions for line 2. H&r block federal free 6 29,025 29,850   7 Enter the surviving spouse's total tax. H&r block federal free See the instructions. H&r block federal free 7 5,277 5,391   8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. H&r block federal free 8 0 0   9 Subtract line 8 from line 7. H&r block federal free 9 5,277 5,391   10 Add lines 5 and 9. H&r block federal free 10 7,868 7,532   11 Enter the total tax from the joint return. H&r block federal free See Table 1 on page 5 for the line number for years before 2002. H&r block federal free 11 10,789 9,728   12 Add lines 4 and 8. H&r block federal free 12 3,532 3,109   13 Subtract line 12 from line 11. H&r block federal free 13 7,257 6,619   14 Divide line 5 by line 10. H&r block federal free Enter the result as a decimal. H&r block federal free 14 . H&r block federal free 329 . H&r block federal free 284   15 Tax to be forgiven. H&r block federal free Multiply line 13 by line 14 and enter the result. H&r block federal free 15 $2,388 $1,880   Note. H&r block federal free 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. H&r block federal free 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. H&r block federal free 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. H&r block federal free The IRS will determine the amount to be refunded. H&r block federal free Illustrated Worksheets B and C A wife lost her husband in the September 11 attack on the World Trade Center. H&r block federal free They filed a joint return for 2000 and the wife chose to file a joint return as a surviving spouse for 2001. H&r block federal free The returns for 2000 and 2001 showed the following income, deductions, and tax liabilities. H&r block federal free After the husband died, his estate received income of $4,000. H&r block federal free Of that amount, $1,000 is net profit from Schedule C received before the end of 2001. H&r block federal free This net profit is exempt from income tax as explained earlier under Income received after date of death. H&r block federal free The wife files Form 1041 because the gross income of the estate for the tax year ($3,000) is $600 or more. H&r block federal free To determine how much of the husband's tax liability for 2000 and 2001 is to be forgiven, the wife completes Worksheet B. H&r block federal free She also completes Worksheet C because the forgiven tax liabilities for 2000 and 2001 (line 15 of Worksheet B) total less than $10,000. H&r block federal free To claim tax relief for 2000, the wife files Form 1040X and attaches a copy of Worksheet B. H&r block federal free To claim tax relief for 2001, she files Form 1040 and attaches copies of Worksheets B and C. H&r block federal free   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. H&r block federal free Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. H&r block federal free Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. H&r block federal free 1 Minimum relief amount. H&r block federal free Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. H&r block federal free 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) . H&r block federal free 3 0     4 Add lines 2 and 3. H&r block federal free 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. H&r block federal free (See Income received after date of death on page 5. H&r block federal free ) 5 1,000     6 Add lines 4 and 5. H&r block federal free 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). H&r block federal free 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). H&r block federal free 8 435     9 Tax on exempt income. H&r block federal free Subtract line 8 from line 7. H&r block federal free 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. H&r block federal free If the decedent was not required to file tax returns for the eligible tax years, enter -0-. H&r block federal free 10 4,268     11 Add lines 9 and 10. H&r block federal free 11 $4,543 12 Additional payment allowed. H&r block federal free If line 11 is $10,000 or more, enter -0- and stop here. H&r block federal free No additional amount is allowed as a tax payment. H&r block federal free Otherwise, subtract line 11 from line 1 and enter the result. H&r block federal free 12 $5,457 Note. H&r block federal free The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). H&r block federal free 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. H&r block federal free If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. H&r block federal free Write "Sec. H&r block federal free 692(d)(2) Payment" and the amount to the right of the entry space. H&r block federal free Also indicate whether a Form 1041 is being filed for the decedent's estate. H&r block federal free If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). H&r block federal free Write “Sec. H&r block federal free 692(d)(2) Payment” on the dotted line to the left of the entry space. H&r block federal free Worksheet C Illustrated. H&r block federal free Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. H&r block federal free Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. H&r block federal free 1 Minimum relief amount. H&r block federal free Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. H&r block federal free 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) . H&r block federal free 3 0     4 Add lines 2 and 3. H&r block federal free 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. H&r block federal free (See Income received after date of death on page 5. H&r block federal free ) 5 1,000     6 Add lines 4 and 5. H&r block federal free 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). H&r block federal free 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). H&r block federal free 8 435     9 Tax on exempt income. H&r block federal free Subtract line 8 from line 7. H&r block federal free 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. H&r block federal free If the decedent was not required to file tax returns for the eligible tax years, enter -0-. H&r block federal free 10 4,268     11 Add lines 9 and 10. H&r block federal free 11 $4,543 12 Additional payment allowed. H&r block federal free If line 11 is $10,000 or more, enter -0- and stop here. H&r block federal free No additional amount is allowed as a tax payment. H&r block federal free Otherwise, subtract line 11 from line 1 and enter the result. H&r block federal free 12 $5,457 Note. H&r block federal free The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). H&r block federal free 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. H&r block federal free If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. H&r block federal free Write "Sec. H&r block federal free 692(d)(2) Payment" and the amount to the right of the entry space. H&r block federal free Also indicate whether a Form 1041 is being filed for the decedent's estate. H&r block federal free If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). H&r block federal free Write “Sec. H&r block federal free 692(d)(2) Payment” on the dotted line to the left of the entry space. H&r block federal free Additional Worksheets The following additional worksheets are provided for your convenience. H&r block federal free Worksheet A. H&r block federal free 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. H&r block federal free 1       2 Enter the total tax from the decedent's income tax return. H&r block federal free See Table 1 on page 5 for the line number for years before 2002. H&r block federal free 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. H&r block federal free (These taxes are not eligible for forgiveness. H&r block federal free )           a Self-employment tax. H&r block federal free 3a         b Social security and Medicare tax on tip income not reported to employer. H&r block federal free 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). H&r block federal free 3c         d Tax on excess accumulation in qualified retirement plans. H&r block federal free 3d         e Household employment taxes. H&r block federal free 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. H&r block federal free 3f         g Tax on golden parachute payments. H&r block federal free 3g       4 Add lines 3a through 3g. H&r block federal free 4       5 Tax to be forgiven. H&r block federal free Subtract line 4 from line 2. H&r block federal free 5       Note. H&r block federal free 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. H&r block federal free 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. H&r block federal free 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. H&r block federal free The IRS will determine the amount to be refunded. H&r block federal free Worksheet A. H&r block federal free 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. H&r block federal free 1       2 Enter the total tax from the decedent's income tax return. H&r block federal free See Table 1 on page 5 for the line number for years before 2002. H&r block federal free 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. H&r block federal free (These taxes are not eligible for forgiveness. H&r block federal free )           a Self-employment tax. H&r block federal free 3a         b Social security and Medicare tax on tip income not reported to employer. H&r block federal free 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). H&r block federal free 3c         d Tax on excess accumulation in qualified retirement plans. H&r block federal free 3d         e Household employment taxes. H&r block federal free 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. H&r block federal free 3f         g Tax on golden parachute payments. H&r block federal free 3g       4 Add lines 3a through 3g. H&r block federal free 4       5 Tax to be forgiven. H&r block federal free Subtract line 4 from line 2. H&r block federal free 5       Note. H&r block federal free 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. H&r block federal free 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. H&r block federal free 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. H&r block federal free The IRS will determine the amount to be refunded. H&r block federal free Worksheet B. H&r block federal free 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. H&r block federal free 1       2 Enter the decedent's taxable income. H&r block federal free Figure taxable income as if a separate return had been filed. H&r block federal free See the instructions. H&r block federal free 2       3 Enter the decedent's total tax. H&r block federal free See the instructions. H&r block federal free 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. H&r block federal free See the instructions. H&r block federal free 4       5 Subtract line 4 from line 3. H&r block federal free 5       6 Enter the surviving spouse's taxable income. H&r block federal free Figure taxable income as if a separate return had been filed. H&r block federal free See the instructions. H&r block federal free 6       7 Enter the surviving spouse's total tax. H&r block federal free See the instructions. H&r block federal free 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. H&r block federal free 8       9 Subtract line 8 from line 7. H&r block federal free 9       10 Add lines 5 and 9. H&r block federal free 10       11 Enter the total tax from the joint return. H&r block federal free See Table 1 on page 5 for the line number for years before 2002. H&r block federal free 11       12 Add lines 4 and 8. H&r block federal free 12       13 Subtract line 12 from line 11. H&r block federal free 13       14 Divide line 5 by line 10. H&r block federal free Enter the result as a decimal. H&r block federal free 14       15 Tax to be forgiven. H&r block federal free Multiply line 13 by line 14 and enter the result. H&r block federal free 15       Note. H&r block federal free 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. H&r block federal free 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. H&r block federal free 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. H&r block federal free The IRS will determine the amount to be refunded. H&r block federal free Worksheet B. H&r block federal free 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. H&r block federal free 1       2 Enter the decedent's taxable income. H&r block federal free Figure taxable income as if a separate return had been filed. H&r block federal free See the instructions. H&r block federal free 2       3 Enter the decedent's total tax. H&r block federal free See the instructions. H&r block federal free 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. H&r block federal free See the instructions. H&r block federal free 4       5 Subtract line 4 from line 3. H&r block federal free 5       6 Enter the surviving spouse's taxable income. H&r block federal free Figure taxable income as if a separate return had been filed. H&r block federal free See the instructions. H&r block federal free 6       7 Enter the surviving spouse's total tax. H&r block federal free See the instructions. H&r block federal free 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. H&r block federal free 8       9 Subtract line 8 from line 7. H&r block federal free 9       10 Add lines 5 and 9. H&r block federal free 10       11 Enter the total tax from the joint return. H&r block federal free See Table 1 on page 5 for the line number for years before 2002. H&r block federal free 11       12 Add lines 4 and 8. H&r block federal free 12       13 Subtract line 12 from line 11. H&r block federal free 13       14 Divide line 5 by line 10. H&r block federal free Enter the result as a decimal. H&r block federal free 14       15 Tax to be forgiven. H&r block federal free Multiply line 13 by line 14 and enter the result. H&r block federal free 15       Note. H&r block federal free 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. H&r block federal free 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. H&r block federal free 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. H&r block federal free The IRS will determine the amount to be refunded. H&r block federal free Worksheet C. H&r block federal free Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. H&r block federal free Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. H&r block federal free 1 Minimum tax forgiveness. H&r block federal free Note. H&r block federal free Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. H&r block federal free 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . H&r block federal free 3       4 Add lines 2 and 3. H&r block federal free 4       5 Enter exempt income received after death minus expenses allocable to exempt income. H&r block federal free (See Income received after date of death on page 5. H&r block federal free ) 5       6 Add lines 4 and 5. H&r block federal free 6       7 Figure the tax on line 6 using Schedule G (Form 1041). H&r block federal free 7       8 Figure the tax on line 4 using Schedule G (Form 1041). H&r block federal free 8       9 Tax on exempt income. H&r block federal free Subtract line 8 from line 7. H&r block federal free 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. H&r block federal free If the decedent was not required to file tax returns for the eligible tax years, enter -0-. H&r block federal free 10       11 Add lines 9 and 10. H&r block federal free 11   12 Additional payment allowed. H&r block federal free If line 11 is $10,000 or more, enter -0- and stop here. H&r block federal free No additional amount is allowed as a tax payment. H&r block federal free Otherwise, subtract line 11 from line 1 and enter the result. H&r block federal free 12   Note. H&r block federal free The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). H&r block federal free 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. H&r block federal free If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. H&r block federal free Write "Sec. H&r block federal free 692(d)(2) Payment" and the amount to the right of the entry space. H&r block federal free Also indicate whether a Form 1041 is being filed for the decedent's estate. H&r block federal free If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). H&r block federal free Write “Sec. H&r block federal free 692(d)(2) Payment” on the dotted line to the left of the entry space. H&r block federal free Worksheet C. H&r block federal free Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. H&r block federal free Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. H&r block federal free 1 Minimum tax forgiveness. H&r block federal free Note. H&r block federal free Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. H&r block federal free 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . H&r block federal free 3       4 Add lines 2 and 3. H&r block federal free 4       5 Enter exempt income received after death minus expenses allocable to exempt income. H&r block federal free (See Income received after date of death on page 5. H&r block federal free ) 5       6 Add lines 4 and 5. H&r block federal free 6       7 Figure the tax on line 6 using Schedule G (Form 1041). H&r block federal free 7       8 Figure the tax on line 4 using Schedule G (Form 1041). H&r block federal free 8       9 Tax on exempt income. H&r block federal free Subtract line 8 from line 7. H&r block federal free 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. H&r block federal free If the decedent was not required to file tax returns for the eligible tax years, enter -0-. H&r block federal free 10       11 Add lines 9 and 10. H&r block federal free 11   12 Additional payment allowed. H&r block federal free If line 11 is $10,000 or more, enter -0- and stop here. H&r block federal free No additional amount is allowed as a tax payment. H&r block federal free Otherwise, subtract line 11 from line 1 and enter the result. H&r block federal free 12   Note. H&r block federal free The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). H&r block federal free 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. H&r block federal free If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. H&r block federal free Write "Sec. H&r block federal free 692(d)(2) Payment" and the amount to the right of the entry space. H&r block federal free Also indicate whether a Form 1041 is being filed for the decedent's estate. H&r block federal free If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). H&r block federal free Write “Sec. H&r block federal free 692(d)(2) Payment” on the dotted line to the left of the entry space. H&r block federal free How To Get Tax Help Special IRS assistance. H&r block federal free   The IRS is providing special help for those affected by the terrorist attacks, as well as survivors and personal representatives of the victims. H&r block federal free 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. H&r block federal free Call 1–866–562–5227 Monday through Friday In English–7 a. H&r block federal free m. H&r block federal free to 10 p. H&r block federal free m. H&r block federal free local time In Spanish–8 a. H&r block federal free m. H&r block federal free to 9:30 p. H&r block federal free m. H&r block federal free local time   The IRS web site at www. H&r block federal free irs. H&r block federal free gov has notices and other tax relief information. H&r block federal free Check it periodically for any new guidance or to see if Congress has enacted new legislation. H&r block federal free   Business taxpayers affected by the attacks can e-mail their questions to corp. H&r block federal free disaster. H&r block federal free relief@irs. H&r block federal free gov. H&r block federal free   For current information on Presidentially declared disaster areas, check the Federal Emergency Management Agency Web site at www. H&r block federal free fema. H&r block federal free gov. H&r block federal free Other help from the IRS. H&r block federal free   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. H&r block federal free By selecting the method that is best for you, you will have quick and easy access to tax help. H&r block federal free Contacting your Taxpayer Advocate. H&r block federal free   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. H&r block federal free   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. H&r block federal free 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. H&r block federal free   To contact your Taxpayer Advocate: Call the Taxpayer Advocate at 1–877–777–4778. H&r block federal free Call the IRS at 1–800–829–1040. H&r block federal free Call, write, or fax the Taxpayer Advocate office in your area. H&r block federal free Call 1–800–829–4059 if you are a TTY/TDD user. H&r block federal free   For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS. H&r block federal free Free tax services. H&r block federal free   To find out what services are available, get Publication 910, Guide to Free Tax Services. H&r block federal free It contains a list of free tax publications and an index of tax topics. H&r block federal free It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. H&r block federal free Personal computer. H&r block federal free With your personal computer and modem, you can access the IRS on the Internet at www. H&r block federal free irs. H&r block federal free gov. H&r block federal free While visiting our web site, you can: Find answers to questions you may have. H&r block federal free Download forms and publications or search for forms and pub
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Withholding Compliance Questions & Answers

Q1: In the past, as an employer, I was required to submit all Forms W-4 that claimed complete exemption from withholding (when $200 or more in weekly wages were regularly expected) or claimed more than 10 allowances. What Forms W-4 do I now have to submit to the IRS?

A1: Employers are no longer required to routinely submit Forms W-4 to the IRS.  However, in certain circumstances, the IRS may direct you to submit copies of Forms W-4 for certain employees in order to ensure that the employees have adequate withholding. You are now required to submit the Forms W-4 to IRS only if directed to do so in a written notice or pursuant to specified criteria set forth in future published guidance.

 


Q2: If an employer no longer has to submit Forms W-4 claiming complete exemption from withholding or claiming more than 10 allowances, how does the IRS determine adequate withholding?

A2: The IRS is making more effective use of information contained in its records along with information reported on Form W-2 wage statements to ensure that employees have enough federal income tax withheld. 
 


Q3: If the IRS determines that an employee does not have enough federal income tax withheld, what will an employer be asked to do?

A3: If the IRS determines that an employee does not have enough withholding, we will notify you to increase the amount of withholding tax by issuing a “lock-in” letter that specifies the maximum number of withholding allowances permitted for the employee. You will also receive a copy for the employee that identifies the maximum number of withholding exemptions permitted and the process by which the employee can provide additional information to the IRS for purposes of determining the appropriate number of withholding exemptions. If the employee still works for you, you must furnish the employee copy to the employee. If the employee no longer works for you, NO ACTION IS REQUIRED AT THIS TIME. However if the employee should return to work within twelve (12) months, you should begin withholding income tax from the employee’s wages based on the withholding rate stated in this letter.The employee will be given a period of time before the lock-in rate is effective to submit for approval to the IRS a new Form W-4 and a statement supporting the claims made on the Form W-4 that would decrease federal income tax withholding. The employee must send the Form W-4 and statement directly to the IRS office designated on the lock-in letter. You must withhold tax in accordance with the lock-in letter as of the date specified in the lock-in letter, unless otherwise notified by the IRS. You will be required to take this action no sooner than 45 calendar days after the date of the lock-in letter. Once a lock-in rate is effective, an employer can not decrease withholding unless approved by the IRS.

 


Q4: As an employer, after I lock in withholding on an employee based on a lock-in letter from the IRS, what do I do if I receive a revised Form W-4 from the employee?

A4: After the receipt of a lock-in letter, you must disregard any Form W-4 that decreases the amount of withholding. The employee must submit for approval to the IRS any new Form W-4 and a statement supporting the claims made on the Form W-4 that would decrease federal income tax withholding. The employee should send the Form W-4 and statement directly to the address on the lock-in letter. The IRS will notify you to withhold at a specific rate if the employee’s request is approved. However, if, at any time, the employee furnishes a Form W-4 that claims a number of withholding allowances less than the maximum number specified in the lock-in letter, the employer must increase withholding by withholding tax based on that Form W-4.

 


Q5: As an employer who has received a modification letter (letter 2808C) from the WHC program, do I wait for another 60 days to change the marital status and/or number of allowances per the modification letter?

A5: No, the modifications to the marital status and/or number of allowances become effective immediately upon receipt of the letter 2808C.

 


Q6: I have been directed to lock in an employee’s withholding. What happens if I do not lock in the employee’s withholding as directed?

A6: Those employers who do not follow the IRS lock-in instructions will be liable for paying the additional amount of tax that should have been withheld. 

 


Q7: Our employees can submit or change their Forms W-4 on line. How can I prevent them from changing their Forms W-4 after they have been locked-in by the IRS?

A7: You will need to block employees who have been locked-in from using an on line Form W-4 system to decrease their withholding.

 


Q8:  What should I do if an employee submits a valid Form W-4 that appears to be claiming an incorrect withholding amount?

A8: You should withhold federal income tax based on the allowances claimed on the Form W-4.  But, you should advise the employee that the IRS may review withholding to ensure it is adequate, and that the IRS may direct you, as the employer, to withhold income tax for the employee at a certain rate if the review indicates the employee’s withholding is inadequate. Once this occurs the employee will not be allowed to decrease their withholding unless approved by the IRS.

 


Q9: What do I do if an employee hands me a substitute Form W-4 developed by the employee?

A9:  Employers may refuse to accept a substitute form developed by an employee and the employee submitting such a form will be treated as failing to furnish a Form W-4.  In such case, you should inform the employee that you will not accept this form and offer the employee an opportunity to complete an official Form W-4 or a substitute Form W-4 developed by you. Until the employee furnishes a new Form W-4, the employer must withhold from the employee as from a single person claiming no allowances; if, however, a prior Form W-4 is in effect for the employee, the employer must continue to withhold based on the prior Form W-4.  As an employer, a substitute withholding exemption certificate developed by you can be used in lieu of the official Form W-4, if you provide all the tables, instructions, and worksheets contained in the Form W-4 in effect at that time to the employee.  

 


Q10: What do I do if an employee hands me an official IRS Form W-4 that is clearly altered?

A10: Any alteration of a Form W-4 (e.g. crossed out penalties of perjury statement above the signature) will cause the Form W-4 to be invalid. If an employer receives an invalid Form W-4, the employee will be treated as failing to furnish a Form W-4; the employer must inform the employee that the Form W-4 is invalid, and must request another Form W-4 from the employee. Until the employee furnishes a new Form W-4, the employer must withhold from the employee as from a single person claiming no allowances. If, however, a prior Form W-4 is in effect for the employee, the employer must continue to withhold based on the prior Form W-4.

 


Q11: I heard my employer no longer has to routinely submit Forms W-4 to the IRS.  How will this affect me as an employee?

A11: There is no change in the requirement that employees have adequate income tax withholding. The withholding calculator found on www.irs.gov is available to help employees determine the proper amount of federal income tax withholding. Another useful resource, Publication 505, “Tax Withholding and Estimated Taxes" is available on the IRS Web site or can be obtained by calling 1-800-TAX-FORM (829-3676).  Individuals who do not have sufficient income tax withholding are subject to penalties. The IRS will be making more effective use of information contained in its records along with information reported on Form W-2 wage statements to ensure that employees have enough federal income tax withheld. 

 


Q12: As an employee, what happens if the IRS determines that I do not have adequate withholding?

A12: The IRS may direct your employer to withhold federal income tax at an increased rate to ensure you have adequate withholding by issuing a lock-in letter. At that point, your employer must disregard any Form W-4 that decreases the amount of withholding. You will receive a copy of the lock-in letter. You will be given a period of time before the lock-in rate is put in effect to submit for approval to the IRS a new Form W-4 and a statement supporting the claims made on the Form W-4 that would decrease your federal income tax withholding. You should send the Form W-4 and statement directly to the address on the lock-in letter. Once a lock-in letter is issued, you will not be allowed to decrease your withholding unless approved by the IRS.

 


Q13: What if I don’t want to submit a Form W-4 to my employer?

A13: Your employer is required to withhold income tax from your wages as if you are single with zero allowances if you do not submit a Form W-4.

 

 


Q14: How can you be released from the Withholding Compliance Program?

A14: You must continue to file returns and pay your taxes due. If you timely meet all your filing and payment obligations for three consecutive years, you can request that we release you from the Withholding Compliance Program.

Page Last Reviewed or Updated: 20-Mar-2014

The H&r Block Federal Free

H&r block federal free 11. H&r block federal free   Employer-Provided Educational Assistance Table of Contents Introduction Working condition fringe benefit. H&r block federal free Introduction If you receive educational assistance benefits from your employer under an educational assistance program, you can exclude up to $5,250 of those benefits each year. H&r block federal free This means your employer should not include those benefits with your wages, tips, and other compensation shown in box 1 of your Form W-2. H&r block federal free This also means that you do not have to include the benefits on your income tax return. H&r block federal free You cannot use any of the tax-free education expenses paid for by your employer as the basis for any other deduction or credit, including the American opportunity credit and lifetime learning credit. H&r block federal free Educational assistance program. H&r block federal free   To qualify as an educational assistance program, the plan must be written and must meet certain other requirements. H&r block federal free Your employer can tell you whether there is a qualified program where you work. H&r block federal free Educational assistance benefits. H&r block federal free   Tax-free educational assistance benefits include payments for tuition, fees and similar expenses, books, supplies, and equipment. H&r block federal free Education generally includes any form of instruction or training that improves or develops your capabilities. H&r block federal free The payments do not have to be for work-related courses or courses that are part of a degree program. H&r block federal free   Educational assistance benefits do not include payments for the following items. H&r block federal free Meals, lodging, or transportation. H&r block federal free Tools or supplies (other than textbooks) that you can keep after completing the course of instruction. H&r block federal free Courses involving sports, games, or hobbies unless they: Have a reasonable relationship to the business of your employer, or Are required as part of a degree program. H&r block federal free Benefits over $5,250. H&r block federal free   If your employer pays more than $5,250 in educational assistance benefits for you during the year, you must generally pay tax on the amount over $5,250. H&r block federal free Your employer should include in your wages (Form W-2, box 1) the amount that you must include in income. H&r block federal free Working condition fringe benefit. H&r block federal free    However, if the benefits over $5,250 also qualify as a working condition fringe benefit, your employer does not have to include them in your wages. H&r block federal free A working condition fringe benefit is a benefit which, had you paid for it, you could deduct as an employee business expense. H&r block federal free For more information on working condition fringe benefits, see Working Condition Benefits in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits. H&r block federal free Prev  Up  Next   Home   More Online Publications