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How Do You File A Tax Amendment

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How Do You File A Tax Amendment

How do you file a tax amendment 12. How do you file a tax amendment   Business Deduction for Work-Related Education Table of Contents What's New Introduction Qualifying Work-Related EducationEducation Required by Employer or by Law Education To Maintain or Improve Skills Education To Meet Minimum Requirements Education That Qualifies You for a New Trade or Business What Expenses Can Be DeductedUnclaimed reimbursement. How do you file a tax amendment Transportation Expenses Travel Expenses No Double Benefit Allowed How To Treat ReimbursementsAccountable Plans Nonaccountable Plans Deducting Business ExpensesSelf-Employed Persons Employees Performing Artists and Fee-Basis Officials Impairment-Related Work Expenses Recordkeeping Illustrated Example What's New Standard mileage rate. How do you file a tax amendment  Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2013 through December 31, 2013, is 56. How do you file a tax amendment 5 cents per mile. How do you file a tax amendment For more information, see Transportation Expenses under What Expenses Can Be Deducted, later. How do you file a tax amendment Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. How do you file a tax amendment To claim such a deduction, you must: Itemize your deductions on Schedule A (Form 1040 or 1040NR) if you are an employee, File Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming if you are self-employed, and Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education , later. How do you file a tax amendment What is the tax benefit of taking a business deduction for work-related education. How do you file a tax amendment   If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. How do you file a tax amendment Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses (except for impairment-related work expenses of disabled individuals) is greater than 2% of your adjusted gross income. How do you file a tax amendment An itemized deduction reduces the amount of your income subject to tax. How do you file a tax amendment   If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. How do you file a tax amendment This reduces the amount of your income subject to both income tax and self-employment tax. How do you file a tax amendment   Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits. How do you file a tax amendment You may qualify for these other benefits even if you do not meet the requirements listed above. How do you file a tax amendment   Also, your work-related education expenses may qualify you to claim more than one tax benefit. How do you file a tax amendment Generally, you may claim any number of benefits as long as you use different expenses to figure each one. How do you file a tax amendment Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. How do you file a tax amendment This is education that meets at least one of the following two tests. How do you file a tax amendment The education is required by your employer or the law to keep your present salary, status, or job. How do you file a tax amendment The required education must serve a bona fide business purpose of your employer. How do you file a tax amendment The education maintains or improves skills needed in your present work. How do you file a tax amendment However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. How do you file a tax amendment You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. How do you file a tax amendment Use Figure 12-1, Does Your Work-Related Education Qualify as a quick check to see if your education qualifies. How do you file a tax amendment Education Required by Employer or by Law Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. How do you file a tax amendment This additional education is qualifying work-related education if all three of the following requirements are met. How do you file a tax amendment It is required for you to keep your present salary, status, or job, The requirement serves a bona fide business purpose of your employer, and The education is not part of a program that will qualify you for a new trade or business. How do you file a tax amendment When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work. How do you file a tax amendment See Education To Maintain or Improve Skills , later. How do you file a tax amendment Example. How do you file a tax amendment You are a teacher who has satisfied the minimum requirements for teaching. How do you file a tax amendment Your employer requires you to take an additional college course each year to keep your teaching job. How do you file a tax amendment If the courses will not qualify you for a new trade or business, they are qualifying work-related education even if you eventually receive a master's degree and an increase in salary because of this extra education. How do you file a tax amendment This image is too large to be displayed in the current screen. How do you file a tax amendment Please click the link to view the image. How do you file a tax amendment Figure 12-1 Education To Maintain or Improve Skills If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. How do you file a tax amendment This could include refresher courses, courses on current developments, and academic or vocational courses. How do you file a tax amendment Example. How do you file a tax amendment You repair televisions, radios, and stereo systems for XYZ Store. How do you file a tax amendment To keep up with the latest changes, you take special courses in radio and stereo service. How do you file a tax amendment These courses maintain and improve skills required in your work. How do you file a tax amendment Maintaining skills vs. How do you file a tax amendment qualifying for new job. How do you file a tax amendment   Education to maintain or improve skills needed in your present work is not qualifying education if it will also qualify you for a new trade or business. How do you file a tax amendment Education during temporary absence. How do you file a tax amendment   If you stop working for a year or less in order to get education to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. How do you file a tax amendment Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. How do you file a tax amendment Example. How do you file a tax amendment You quit your biology research job to become a full-time biology graduate student for 1 year. How do you file a tax amendment If you return to work in biology research after completing the courses, the education is related to your present work even if you do not go back to work with the same employer. How do you file a tax amendment Education during indefinite absence. How do you file a tax amendment   If you stop work for more than a year, your absence from your job is considered indefinite. How do you file a tax amendment Education during an indefinite absence, even if it maintains or improves skills needed in the work from which you are absent, is considered to qualify you for a new trade or business. How do you file a tax amendment Therefore, it is not qualifying work-related education. How do you file a tax amendment Education To Meet Minimum Requirements Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. How do you file a tax amendment The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. How do you file a tax amendment Once you have met the minimum educational requirements that were in effect when you were hired, you do not have to meet any new minimum educational requirements. How do you file a tax amendment This means that if the minimum requirements change after you were hired, any education you need to meet the new requirements can be qualifying education. How do you file a tax amendment You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. How do you file a tax amendment Example 1. How do you file a tax amendment You are a full-time engineering student. How do you file a tax amendment Although you have not received your degree or certification, you work part time as an engineer for a firm that will employ you as a full-time engineer after you finish college. How do you file a tax amendment Although your college engineering courses improve your skills in your present job, they are also needed to meet the minimum job requirements for a full-time engineer. How do you file a tax amendment The education is not qualifying work-related education. How do you file a tax amendment Example 2. How do you file a tax amendment You are an accountant and you have met the minimum educational requirements of your employer. How do you file a tax amendment Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. How do you file a tax amendment These additional courses can be qualifying work-related education because you have already satisfied the minimum requirements that were in effect when you were hired. How do you file a tax amendment Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. How do you file a tax amendment The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. How do you file a tax amendment If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. How do you file a tax amendment The determination of whether you are a faculty member of an educational institution must be made on the basis of the particular practices of the institution. How do you file a tax amendment You generally will be considered a faculty member when one or more of the following occurs. How do you file a tax amendment You have tenure. How do you file a tax amendment Your years of service count toward obtaining tenure. How do you file a tax amendment You have a vote in faculty decisions. How do you file a tax amendment Your school makes contributions for you to a retirement plan other than social security or a similar program. How do you file a tax amendment Example 1. How do you file a tax amendment The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. How do you file a tax amendment In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. How do you file a tax amendment If the employing school certifies to the state Department of Education that qualified teachers cannot be found, the school can hire persons with only 3 years of college. How do you file a tax amendment However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. How do you file a tax amendment Under these facts, the bachelor's degree, whether or not it includes the 10 professional education courses, is considered the minimum educational requirement for qualification as a teacher in your state. How do you file a tax amendment If you have all the required education except the fifth year, you have met the minimum educational requirements. How do you file a tax amendment The fifth year of training is qualifying work-related education unless it is part of a program of study that will qualify you for a new trade or business. How do you file a tax amendment Example 2. How do you file a tax amendment Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. How do you file a tax amendment The additional four education courses can be qualifying work-related education. How do you file a tax amendment Although you do not have all the required courses, you have already met the minimum educational requirements. How do you file a tax amendment Example 3. How do you file a tax amendment Assume the same facts as in Example 1 except that you are hired with only 3 years of college. How do you file a tax amendment The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. How do you file a tax amendment They are needed to meet the minimum educational requirements for employment as a teacher. How do you file a tax amendment Example 4. How do you file a tax amendment You have a bachelor's degree and you work as a temporary instructor at a university. How do you file a tax amendment At the same time, you take graduate courses toward an advanced degree. How do you file a tax amendment The rules of the university state that you can become a faculty member only if you get a graduate degree. How do you file a tax amendment Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. How do you file a tax amendment You have not met the minimum educational requirements to qualify you as a faculty member. How do you file a tax amendment The graduate courses are not qualifying work-related education. How do you file a tax amendment Certification in a new state. How do you file a tax amendment   Once you have met the minimum educational requirements for teachers for your state, you are considered to have met the minimum educational requirements in all states. How do you file a tax amendment This is true even if you must get additional education to be certified in another state. How do you file a tax amendment Any additional education you need is qualifying work-related education. How do you file a tax amendment You have already met the minimum requirements for teaching. How do you file a tax amendment Teaching in another state is not a new trade or business. How do you file a tax amendment Example. How do you file a tax amendment You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. How do you file a tax amendment You move to State B and are promptly hired as a teacher. How do you file a tax amendment You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. How do you file a tax amendment These additional courses are qualifying work-related education because the teaching position in State B involves the same general kind of work for which you were qualified in State A. How do you file a tax amendment Education That Qualifies You for a New Trade or Business Education that is part of a program of study that will qualify you for a new trade or business is not qualifying work-related education. How do you file a tax amendment This is true even if you do not plan to enter that trade or business. How do you file a tax amendment If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. How do you file a tax amendment Example 1. How do you file a tax amendment You are an accountant. How do you file a tax amendment Your employer requires you to get a law degree at your own expense. How do you file a tax amendment You register at a law school for the regular curriculum that leads to a law degree. How do you file a tax amendment Even if you do not intend to become a lawyer, the education is not qualifying because the law degree will qualify you for a new trade or business. How do you file a tax amendment Example 2. How do you file a tax amendment You are a general practitioner of medicine. How do you file a tax amendment You take a 2-week course to review developments in several specialized fields of medicine. How do you file a tax amendment The course does not qualify you for a new profession. How do you file a tax amendment It is qualifying work- related education because it maintains or improves skills required in your present profession. How do you file a tax amendment Example 3. How do you file a tax amendment While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. How do you file a tax amendment The program will lead to qualifying you to practice psychoanalysis. How do you file a tax amendment The psychoanalytic training does not qualify you for a new profession. How do you file a tax amendment It is qualifying work-related education because it maintains or improves skills required in your present profession. How do you file a tax amendment Bar or CPA Review Course Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying work-related education. How do you file a tax amendment They are part of a program of study that can qualify you for a new profession. How do you file a tax amendment Teaching and Related Duties All teaching and related duties are considered the same general kind of work. How do you file a tax amendment A change in duties in any of the following ways is not considered a change to a new business. How do you file a tax amendment Elementary school teacher to secondary school teacher. How do you file a tax amendment Teacher of one subject, such as biology, to teacher of another subject, such as art. How do you file a tax amendment Classroom teacher to guidance counselor. How do you file a tax amendment Classroom teacher to school administrator. How do you file a tax amendment What Expenses Can Be Deducted If your education meets the requirements described earlier under Qualifying Work-Related Education you can generally deduct your education expenses as business expenses. How do you file a tax amendment If you are not self-employed, you can deduct business expenses only if you itemize your deductions. How do you file a tax amendment You cannot deduct expenses related to tax-exempt and excluded income. How do you file a tax amendment Deductible expenses. How do you file a tax amendment   The following education expenses can be deducted. How do you file a tax amendment Tuition, books, supplies, lab fees, and similar items. How do you file a tax amendment Certain transportation and travel costs. How do you file a tax amendment Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. How do you file a tax amendment Nondeductible expenses. How do you file a tax amendment   You cannot deduct personal or capital expenses. How do you file a tax amendment For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. How do you file a tax amendment This amount is a personal expense. How do you file a tax amendment Unclaimed reimbursement. How do you file a tax amendment   If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses that apply to that unclaimed reimbursement. How do you file a tax amendment Example. How do you file a tax amendment Your employer agrees to pay your education expenses if you file a voucher showing your expenses. How do you file a tax amendment You do not file a voucher and you do not get reimbursed. How do you file a tax amendment Because you did not file a voucher, you cannot deduct the expenses on your tax return. How do you file a tax amendment Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. How do you file a tax amendment If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. How do you file a tax amendment Temporary basis. How do you file a tax amendment   You go to school on a temporary basis if either of the following situations applies to you. How do you file a tax amendment Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. How do you file a tax amendment Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. How do you file a tax amendment Your attendance is temporary up to the date you determine it will last more than 1 year. How do you file a tax amendment If you are in either situation (1) or (2) above, your attendance is not temporary if facts and circumstances indicate otherwise. How do you file a tax amendment Attendance not on a temporary basis. How do you file a tax amendment   You do not go to school on a temporary basis if either of the following situations apply to you. How do you file a tax amendment Your attendance at school is realistically expected to last more than 1 year. How do you file a tax amendment It does not matter how long you actually attend. How do you file a tax amendment Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. How do you file a tax amendment Your attendance is not temporary after the date you determine it will last more than 1 year. How do you file a tax amendment Deductible Transportation Expenses If you are regularly employed and go directly from home to school on a temporary basis, you can deduct the round-trip costs of transportation between your home and school. How do you file a tax amendment This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. How do you file a tax amendment Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. How do you file a tax amendment Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. How do you file a tax amendment Example 1. How do you file a tax amendment You regularly work in a nearby town, and go directly from work to home. How do you file a tax amendment You also attend school every work night for 3 months to take a course that improves your job skills. How do you file a tax amendment Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. How do you file a tax amendment This is true regardless of the distance traveled. How do you file a tax amendment Example 2. How do you file a tax amendment Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. How do you file a tax amendment You can deduct your transportation expenses from your regular work site to school and then home. How do you file a tax amendment Example 3. How do you file a tax amendment Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. How do you file a tax amendment Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. How do you file a tax amendment Example 4. How do you file a tax amendment Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. How do you file a tax amendment Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. How do you file a tax amendment If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. How do you file a tax amendment If you go from work to home to school and return home, your transportation expenses cannot be more than if you had gone directly from work to school. How do you file a tax amendment Using your car. How do you file a tax amendment    If you use your car (whether you own or lease it) for transportation to school, you can deduct your actual expenses or use the standard mileage rate to figure the amount you can deduct. How do you file a tax amendment The standard mileage rate for miles driven from January 1, 2013 through December 31, 2013, is 56. How do you file a tax amendment 5 cents per mile. How do you file a tax amendment Whichever method you use, you can also deduct parking fees and tolls. How do you file a tax amendment See Publication 463, chapter 4, for information on deducting your actual expenses of using a car. How do you file a tax amendment Travel Expenses You can deduct expenses for travel, meals (see 50% limit on meals , later), and lodging if you travel overnight mainly to obtain qualifying work-related education. How do you file a tax amendment Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. How do you file a tax amendment For more information, see chapter 1 of Publication 463. How do you file a tax amendment You cannot deduct expenses for personal activities such as sightseeing, visiting, or entertaining. How do you file a tax amendment Mainly personal travel. How do you file a tax amendment   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. How do you file a tax amendment You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. How do you file a tax amendment   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. How do you file a tax amendment An important factor is the comparison of time spent on personal activities with time spent on educational activities. How do you file a tax amendment If you spend more time on personal activities, the trip is considered mainly educational only if you can show a substantial nonpersonal reason for traveling to a particular location. How do you file a tax amendment Example 1. How do you file a tax amendment John works in Newark, New Jersey. How do you file a tax amendment He traveled to Chicago to take a deductible 1-week course at the request of his employer. How do you file a tax amendment His main reason for going to Chicago was to take the course. How do you file a tax amendment While there, he took a sightseeing trip, entertained some friends, and took a side trip to Pleasantville for a day. How do you file a tax amendment Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. How do you file a tax amendment He cannot deduct his transportation expenses of going to Pleasantville. How do you file a tax amendment He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. How do you file a tax amendment Example 2. How do you file a tax amendment Sue works in Boston. How do you file a tax amendment She went to a university in Michigan to take a course for work. How do you file a tax amendment The course is qualifying work-related education. How do you file a tax amendment She took one course, which is one-fourth of a full course load of study. How do you file a tax amendment She spent the rest of the time on personal activities. How do you file a tax amendment Her reasons for taking the course in Michigan were all personal. How do you file a tax amendment Sue's trip is mainly personal because three-fourths of her time is considered personal time. How do you file a tax amendment She cannot deduct the cost of her round-trip train ticket to Michigan. How do you file a tax amendment She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. How do you file a tax amendment Example 3. How do you file a tax amendment Dave works in Nashville and recently traveled to California to take a 2-week seminar. How do you file a tax amendment The seminar is qualifying work-related education. How do you file a tax amendment While there, he spent an extra 8 weeks on personal activities. How do you file a tax amendment The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. How do you file a tax amendment Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. How do you file a tax amendment He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. How do you file a tax amendment Cruises and conventions. How do you file a tax amendment   Certain cruises and conventions offer seminars or courses as part of their itinerary. How do you file a tax amendment Even if the seminars or courses are work related, your deduction for travel may be limited. How do you file a tax amendment This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. How do you file a tax amendment   For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and Conventions in chapter 1 of Publication 463. How do you file a tax amendment 50% limit on meals. How do you file a tax amendment   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. How do you file a tax amendment If you were reimbursed for the meals, see How To Treat Reimbursements , later. How do you file a tax amendment   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. How do you file a tax amendment Travel as Education You cannot deduct the cost of travel as a form of education even if it is directly related to your duties in your work or business. How do you file a tax amendment Example. How do you file a tax amendment You are a French language teacher. How do you file a tax amendment While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. How do you file a tax amendment You chose your itinerary and most of your activities to improve your French language skills. How do you file a tax amendment You cannot deduct your travel expenses as education expenses. How do you file a tax amendment This is true even if you spent most of your time learning French by visiting French schools and families, attending movies or plays, and engaging in similar activities. How do you file a tax amendment No Double Benefit Allowed You cannot do either of the following. How do you file a tax amendment Deduct work-related education expenses as business expenses if you benefit from these expenses under any other provision of the law, for example, as a tuition and fees deduction. How do you file a tax amendment Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. How do you file a tax amendment See Adjustments to Qualifying Work-Related Education Expenses, next. How do you file a tax amendment Adjustments to Qualifying Work-Related Education Expenses If you pay qualifying work-related education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. How do you file a tax amendment You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. How do you file a tax amendment Tax-free educational assistance. How do you file a tax amendment   This includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions). How do you file a tax amendment Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. How do you file a tax amendment Amounts that do not reduce qualifying work-related education expenses. How do you file a tax amendment   Do not reduce the qualifying work-related education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. How do you file a tax amendment Also, do not reduce the qualifying work-related education expenses by any scholarship or fellowship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualifying work-related education expenses. How do you file a tax amendment How To Treat Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. How do you file a tax amendment There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. How do you file a tax amendment You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. How do you file a tax amendment Note. How do you file a tax amendment The following rules about reimbursement arrangements also apply to expense allowances received from your employer. How do you file a tax amendment Accountable Plans To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules. How do you file a tax amendment Your expenses must have a business connection. How do you file a tax amendment This means your expenses must be deductible under the rules for qualifying work-related education explained earlier. How do you file a tax amendment You must adequately account to your employer for your expenses within a reasonable period of time. How do you file a tax amendment You must return any reimbursement or allowance in excess of the expenses accounted for within a reasonable period of time. How do you file a tax amendment If you are reimbursed under an accountable plan, your employer should not include any reimbursement in your income in box 1 of your Form W-2. How do you file a tax amendment If your employer included reimbursements in box 1 of your Form W-2 and you meet all three rules for accountable plans, ask your employer for a corrected Form W-2. How do you file a tax amendment Accountable plan rules not met. How do you file a tax amendment   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules for accountable plans. How do you file a tax amendment Those expenses that fail to meet the three rules are treated as having been reimbursed under a Nonaccountable Plan (discussed later). How do you file a tax amendment Expenses equal reimbursement. How do you file a tax amendment   Under an accountable plan, if your expenses equal your reimbursement, you do not complete Form 2106 or 2106-EZ. How do you file a tax amendment Because your expenses and reimbursements are equal, you do not have a deduction. How do you file a tax amendment Excess expenses. How do you file a tax amendment   If your expenses are more than your reimbursement, you can deduct your excess expenses. How do you file a tax amendment This is discussed later, under Deducting Business Expenses . How do you file a tax amendment Allocating your reimbursements for meals. How do you file a tax amendment   Because your excess meal expenses are subject to the 50% limit, you must figure them separately from your other expenses. How do you file a tax amendment If your employer paid you a single amount to cover both meals and other expenses, you must allocate the reimbursement so that you can figure your excess meal expenses separately. How do you file a tax amendment Make the allocation as follows. How do you file a tax amendment Divide your meal expenses by your total expenses. How do you file a tax amendment Multiply your total reimbursement by the result from (1). How do you file a tax amendment This is the allocated reimbursement for your meal expenses. How do you file a tax amendment Subtract the amount figured in (2) from your total reimbursement. How do you file a tax amendment The difference is the allocated reimbursement for your other expenses of qualifying work-related education. How do you file a tax amendment Example. How do you file a tax amendment Your employer paid you an expense allowance of $2,000 under an accountable plan. How do you file a tax amendment The allowance was to cover all of your expenses of traveling away from home to take a 2-week training course for work. How do you file a tax amendment There was no indication of how much of the reimbursement was for each type of expense. How do you file a tax amendment Your actual expenses equal $2,500 ($425 for meals + $700 lodging + $150 transportation expenses + $1,225 for books and tuition). How do you file a tax amendment Using the steps listed above, allocate the reimbursement between the $425 meal expenses and the $2,075 other expenses. How do you file a tax amendment   1. How do you file a tax amendment $425 meal expenses  $2,500 total expenses = . How do you file a tax amendment 17   2. How do you file a tax amendment $2,000 (reimbursement)×. How do you file a tax amendment 17     =$340 (allocated reimbursement for meal expenses)   3. How do you file a tax amendment $2,000 (reimbursement)−$340 (meals)     = $1,660 (allocated reimbursement for other qualifying work-related education expenses) Your excess meal expenses are $85 ($425 − $340) and your excess other expenses are $415 ($2,075 − $1,660). How do you file a tax amendment After you apply the 50% limit to your meals, you have a deduction for work-related education expenses of $458 (($85 × 50%) + $415). How do you file a tax amendment Nonaccountable Plans Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other pay and report the total in box 1 of your Form W-2. How do you file a tax amendment You can deduct your expenses regardless of whether they are more than, less than, or equal to your reimbursement. How do you file a tax amendment This is discussed later under Deducting Business Expenses . How do you file a tax amendment An illustrated example of a nonaccountable plan, using Form 2106-EZ, is shown at the end of this chapter. How do you file a tax amendment Reimbursements for nondeductible expenses. How do you file a tax amendment   Reimbursements you received for nondeductible expenses are treated as paid under a nonaccountable plan. How do you file a tax amendment You must include them in your income. How do you file a tax amendment For example, you must include in your income reimbursements your employer gave you for expenses of education that: You need to meet the minimum educational requirements for your job, or Is part of a program of study that can qualify you for a new trade or business. How do you file a tax amendment   For more information on accountable and nonaccountable plans, see chapter 6 of Publication 463. How do you file a tax amendment Deducting Business Expenses Self-employed persons and employees report their business expenses differently. How do you file a tax amendment The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. How do you file a tax amendment Self-Employed Persons If you are self-employed, you must report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses (generally Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040)). How do you file a tax amendment If your education expenses include expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those items. How do you file a tax amendment See the instructions for the form you file for information on how to complete it. How do you file a tax amendment Employees If you are an employee, you can deduct the cost of qualifying work-related education only if you: Did not receive (and were not entitled to receive) any reimbursement from your employer, Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or Received reimbursement under an accountable plan, but the amount received was less than your expenses for which you claimed reimbursement. How do you file a tax amendment If either (1) or (2) applies, you can deduct the total qualifying cost. How do you file a tax amendment If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. How do you file a tax amendment In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your deduction for any other employee business expenses on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. How do you file a tax amendment (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. How do you file a tax amendment ) This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. How do you file a tax amendment Form 2106 or 2106-EZ. How do you file a tax amendment   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or 2106-EZ. How do you file a tax amendment Form not required. How do you file a tax amendment   Do not complete either Form 2106 or 2106-EZ if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are not claiming travel, transportation, meal, or entertainment expenses. How do you file a tax amendment   If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. How do you file a tax amendment (Special rules for expenses of certain Performing Artists and Fee-Basis Officials and for Impairment-Related Work Expenses are explained later. How do you file a tax amendment ) Using Form 2106-EZ. How do you file a tax amendment   This form is shorter and easier to use than Form 2106. How do you file a tax amendment Generally, you can use this form if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are using the standard mileage rate if you are claiming vehicle expenses. How do you file a tax amendment   If you do not meet both of these requirements, use Form 2106. How do you file a tax amendment Performing Artists and Fee-Basis Officials If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee basis, you can deduct the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction. How do you file a tax amendment Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24, or Form 1040NR, line 35. How do you file a tax amendment You do not have to itemize your deductions on Schedule A (Form 1040 or 1040NR), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. How do you file a tax amendment You must complete Form 2106 or 2106-EZ to figure your deduction even if you meet the requirements described earlier under Form not required . How do you file a tax amendment For more information on qualified performing artists, see chapter 6 of Publication 463. How do you file a tax amendment Impairment-Related Work Expenses If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related education, you can deduct these expenses on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14. How do you file a tax amendment They are not subject to the 2%-of-adjusted-gross-income limit. How do you file a tax amendment To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . How do you file a tax amendment For more information on impairment-related work expenses, see chapter 6 of Publication 463. How do you file a tax amendment Recordkeeping You must keep records as proof of any deduction claimed on your tax return. How do you file a tax amendment Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. How do you file a tax amendment If you are an employee who is reimbursed for expenses and you give your records and documentation to your employer, you do not have to keep duplicate copies of this information. How do you file a tax amendment However, you should keep your records for a 3-year period if: You claim deductions for expenses that are more than your reimbursement, Your employer does not use adequate accounting procedures to verify expense accounts, You are related to your employer, or Your expenses are reimbursed under a nonaccountable plan. How do you file a tax amendment Examples of records to keep. How do you file a tax amendment   If any of the above cases apply to you, you must be able to prove that your expenses are deductible. How do you file a tax amendment You should keep adequate records or have sufficient evidence that will support your expenses. How do you file a tax amendment Estimates or approximations do not qualify as proof of an expense. How do you file a tax amendment Some examples of what can be used to help prove your expenses are: Documents, such as transcripts, course descriptions, catalogs, etc. How do you file a tax amendment , showing periods of enrollment in educational institutions, principal subjects studied, and descriptions of educational activity. How do you file a tax amendment Canceled checks and receipts to verify amounts you spent for: Tuition and books, Meals and lodging while away from home overnight for educational purposes, Travel and transportation, and Other education expenses. How do you file a tax amendment Statements from your employer explaining whether the education was necessary for you to keep your job, salary, or status; how the education helped maintain or improve skills needed in your job; how much reimbursement you received; and, if you are a teacher, the type of certificate and subjects taught. How do you file a tax amendment Complete information about any scholarship or fellowship grants, including amounts you received during the year. How do you file a tax amendment Illustrated Example Victor Jones teaches math at a private high school in North Carolina. How do you file a tax amendment He was selected to attend a 3-week math seminar at a university in California. How do you file a tax amendment The seminar will improve his skills in his current job and is qualifying work-related education. How do you file a tax amendment He was reimbursed for his expenses under his employer's nonaccountable plan, so his reimbursement of $2,100 is included in the wages shown in box 1 of his Form W-2. How do you file a tax amendment Victor will file Form 1040. How do you file a tax amendment His actual expenses for the seminar are as follows:   Lodging   $1,050     Meals   526     Airfare   550     Taxi fares   50     Tuition and books   400     Total Expenses   $2,576   Victor files Form 2106-EZ with his tax return. How do you file a tax amendment He shows his expenses for the seminar in Part I of the form. How do you file a tax amendment He enters $1,650 ($1,050 + $550 + $50) on line 3 to account for his lodging, airfare, and taxi fares. How do you file a tax amendment He enters $400 on line 4 for his tuition and books. How do you file a tax amendment On the line provided for total meals and entertainment expenses, Victor enters $526 for meal expenses. How do you file a tax amendment He multiplies that amount by 50% and enters the result, $263, on line 5. How do you file a tax amendment On line 6, Victor totals the amounts from lines 3 through 5. How do you file a tax amendment He carries the total, $2,313, to Schedule A (Form 1040), line 21. How do you file a tax amendment Since he does not claim any vehicle expenses, Victor leaves Part II blank. How do you file a tax amendment His filled-in form is shown on the next page. How do you file a tax amendment This image is too large to be displayed in the current screen. How do you file a tax amendment Please click the link to view the image. How do you file a tax amendment Form 2106-EZ for V. How do you file a tax amendment Jones Prev  Up  Next   Home   More Online Publications
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How do you file a tax amendment 10. How do you file a tax amendment   Self-Employment (SE) Tax Table of Contents Who Must Pay SE Tax?Special Rules and Exceptions Figuring Earnings Subject to SE Tax Farm Optional Method Using Both Optional Methods Reporting Self-Employment Tax The SE tax rules apply no matter how old you are and even if you are already receiving social security and Medicare benefits. How do you file a tax amendment Who Must Pay SE Tax? Generally, you must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. How do you file a tax amendment Use Schedule SE to figure net earnings from self-employment. How do you file a tax amendment Sole proprietor or independent contractor. How do you file a tax amendment   If you are self-employed as a sole proprietor or independent contractor, you generally use Schedule C or C-EZ (Form 1040) to figure your earnings subject to SE tax. How do you file a tax amendment SE tax rate. How do you file a tax amendment    For 2013, the SE tax rate on net earnings is 15. How do you file a tax amendment 3% (12. How do you file a tax amendment 4% social security tax plus 2. How do you file a tax amendment 9% Medicare tax). How do you file a tax amendment Maximum earnings subject to self-employment tax. How do you file a tax amendment    Only the first $113,700 of your combined wages, tips, and net earnings in 2013 is subject to any combination of the 12. How do you file a tax amendment 4% social security part of SE tax, social security tax, or railroad retirement (tier 1) tax. How do you file a tax amendment   All of your combined wages, tips, and net earnings in 2013 are subject to any combination of the 2. How do you file a tax amendment 9% Medicare part of SE tax, social security tax, or railroad retirement (tier 1) tax. How do you file a tax amendment   If your wages and tips are subject to either social security or railroad retirement (tier 1) tax, or both, and total at least $113,700, do not pay the 12. How do you file a tax amendment 4% social security part of the SE tax on any of your net earnings. How do you file a tax amendment However, you must pay the 2. How do you file a tax amendment 9% Medicare part of the SE tax on all your net earnings. How do you file a tax amendment Special Rules and Exceptions Aliens. How do you file a tax amendment   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. How do you file a tax amendment S. How do you file a tax amendment citizens. How do you file a tax amendment Nonresident aliens are not subject to SE tax unless an international social security agreement in effect determines that they are covered under the U. How do you file a tax amendment S. How do you file a tax amendment social security system. How do you file a tax amendment However, residents of the Virgin Islands, Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, or American Samoa are subject to self-employment tax, as they are considered U. How do you file a tax amendment S. How do you file a tax amendment residents for self-employment tax purposes. How do you file a tax amendment For more information on aliens, see Publication 519, U. How do you file a tax amendment S. How do you file a tax amendment Tax Guide for Aliens. How do you file a tax amendment Child employed by parent. How do you file a tax amendment   You are not subject to SE tax if you are under age 18 and you are working for your father or mother. How do you file a tax amendment Church employee. How do you file a tax amendment    If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes, you are subject to SE tax if you receive $108. How do you file a tax amendment 28 or more in wages from the church or organization. How do you file a tax amendment For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. How do you file a tax amendment Fishing crew member. How do you file a tax amendment   If you are a member of the crew on a boat that catches fish or other water life, your earnings are subject to SE tax if all the following conditions apply. How do you file a tax amendment You do not get any pay for the work except your share of the catch or a share of the proceeds from the sale of the catch, unless the pay meets all the following conditions. How do you file a tax amendment The pay is not more than $100 per trip. How do you file a tax amendment The pay is received only if there is a minimum catch. How do you file a tax amendment The pay is solely for additional duties (such as mate, engineer, or cook) for which additional cash pay is traditional in the fishing industry. How do you file a tax amendment You get a share of the catch or a share of the proceeds from the sale of the catch. How do you file a tax amendment Your share depends on the amount of the catch. How do you file a tax amendment The boat's operating crew normally numbers fewer than 10 individuals. How do you file a tax amendment (An operating crew is considered as normally made up of fewer than 10 if the average size of the crew on trips made during the last four calendar quarters is fewer than 10. How do you file a tax amendment ) Notary public. How do you file a tax amendment   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ but are not subject to self-employment tax (see the Instructions for Schedule SE (Form 1040)). How do you file a tax amendment State or local government employee. How do you file a tax amendment   You are subject to SE tax if you are an employee of a state or local government, are paid solely on a fee basis, and your services are not covered under a federal-state social security agreement. How do you file a tax amendment Foreign government or international organization employee. How do you file a tax amendment   You are subject to SE tax if both the following conditions are true. How do you file a tax amendment You are a U. How do you file a tax amendment S. How do you file a tax amendment citizen employed in the United States, Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, or the Virgin Islands by: A foreign government, A wholly-owned agency of a foreign government, or An international organization. How do you file a tax amendment Your employer is not required to withhold social security and Medicare taxes from your wages. How do you file a tax amendment U. How do you file a tax amendment S. How do you file a tax amendment citizen or resident alien residing abroad. How do you file a tax amendment    If you are a self-employed U. How do you file a tax amendment S. How do you file a tax amendment citizen or resident alien living outside the United States, in most cases you must pay SE tax. How do you file a tax amendment Do not reduce your foreign earnings from self-employment by your foreign earned income exclusion. How do you file a tax amendment Exception. How do you file a tax amendment    The United States has social security agreements with many countries to eliminate double taxation under two social security systems. How do you file a tax amendment Under these agreements, you generally must only pay social security and Medicare taxes to the country in which you live. How do you file a tax amendment The country to which you must pay the tax will issue a certificate which serves as proof of exemption from social security tax in the other country. How do you file a tax amendment   For more information, see the Instructions for Schedule SE (Form 1040). How do you file a tax amendment More Than One Business If you have earnings subject to SE tax from more than one trade, business, or profession, you must combine the net profit (or loss) from each to determine your total earnings subject to SE tax. How do you file a tax amendment A loss from one business reduces your profit from another business. How do you file a tax amendment Community Property Income If any of the income from a trade or business, other than a partnership, is community property income under state law, it is included in the earnings subject to SE tax of the spouse carrying on the trade or business. How do you file a tax amendment Gain or Loss Do not include in earnings subject to SE tax a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. How do you file a tax amendment It does not matter whether the disposition is a sale, exchange, or an involuntary conversion. How do you file a tax amendment Lost Income Payments If you are self-employed and reduce or stop your business activities, any payment you receive from insurance or other sources for the lost business income is included in earnings subject to SE tax. How do you file a tax amendment If you are not working when you receive the payment, it still relates to your business and is included in earnings subject to SE tax, even though your business is temporarily inactive. How do you file a tax amendment Figuring Earnings Subject to SE Tax Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. How do you file a tax amendment The regular method. How do you file a tax amendment The nonfarm optional method. How do you file a tax amendment The farm optional method. How do you file a tax amendment You must use the regular method unless you are eligible to use one or both of the optional methods. How do you file a tax amendment Why use an optional method?    You may want to use the optional methods (discussed later) when you have a loss or a small net profit and any one of the following applies. How do you file a tax amendment You want to receive credit for social security benefit coverage. How do you file a tax amendment You incurred child or dependent care expenses for which you could claim a credit. How do you file a tax amendment (An optional method may increase your earned income, which could increase your credit. How do you file a tax amendment ) You are entitled to the earned income credit. How do you file a tax amendment (An optional method may increase your earned income, which could increase your credit. How do you file a tax amendment ) You are entitled to the additional child tax credit. How do you file a tax amendment (An optional method may increase your earned income, which could increase your credit. How do you file a tax amendment ) Effects of using an optional method. How do you file a tax amendment   Using an optional method could increase your SE tax. How do you file a tax amendment Paying more SE tax could result in your getting higher benefits when you retire. How do you file a tax amendment   If you use either or both optional methods, you must figure and pay the SE tax due under these methods even if you would have had a smaller tax or no tax using the regular method. How do you file a tax amendment   The optional methods may be used only to figure your SE tax. How do you file a tax amendment To figure your income tax, include your actual earnings in gross income, regardless of which method you use to determine SE tax. How do you file a tax amendment Regular Method Multiply your total earnings subject to SE tax by 92. How do you file a tax amendment 35% (. How do you file a tax amendment 9235) to get your net earnings under the regular method. How do you file a tax amendment See Short Schedule SE, line 4, or Long Schedule SE, line 4a. How do you file a tax amendment Net earnings figured using the regular method are also called actual net earnings. How do you file a tax amendment Nonfarm Optional Method Use the nonfarm optional method only for earnings that do not come from farming. How do you file a tax amendment You may use this method if you meet all the following tests. How do you file a tax amendment You are self-employed on a regular basis. How do you file a tax amendment This means that your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. How do you file a tax amendment The net earnings can be from either farm or nonfarm earnings or both. How do you file a tax amendment You have used this method less than 5 years. How do you file a tax amendment (There is a 5-year lifetime limit. How do you file a tax amendment ) The years do not have to be one after another. How do you file a tax amendment Your net nonfarm profits were: Less than $5,024, and Less than 72. How do you file a tax amendment 189% of your gross nonfarm income. How do you file a tax amendment Net nonfarm profits. How do you file a tax amendment   Net nonfarm profit generally is the total of the amounts from: Line 31, Schedule C (Form 1040), Line 3, Schedule C-EZ (Form 1040), Box 14, code A, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J1, Schedule K-1 (Form 1065-B). How do you file a tax amendment   However, you may need to adjust the amount reported on Schedule K-1 if you are a general partner or if it is a loss. How do you file a tax amendment Gross nonfarm income. How do you file a tax amendment   Your gross nonfarm income generally is the total of the amounts from: Line 7, Schedule C (Form 1040), Line 1, Schedule C-EZ (Form 1040), Box 14, code C, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J2, Schedule K-1 (Form 1065-B). How do you file a tax amendment Figuring Nonfarm Net Earnings If you meet the three tests explained earlier, use the following table to figure your net earnings from self-employment under the nonfarm optional method. How do you file a tax amendment Table 10-1. How do you file a tax amendment Figuring Nonfarm Net Earnings IF your gross nonfarm income is. How do you file a tax amendment . How do you file a tax amendment . How do you file a tax amendment THEN your net earnings are equal to. How do you file a tax amendment . How do you file a tax amendment . How do you file a tax amendment $6,960 or less Two-thirds of your gross nonfarm income. How do you file a tax amendment More than $6,960 $4,640 Actual net earnings. How do you file a tax amendment   Your actual net earnings are 92. How do you file a tax amendment 35% of your total earnings subject to SE tax (that is, multiply total earnings subject to SE tax by 92. How do you file a tax amendment 35% (. How do you file a tax amendment 9235) to get actual net earnings). How do you file a tax amendment Actual net earnings are equivalent to net earnings figured using the regular method. How do you file a tax amendment Optional net earnings less than actual net earnings. How do you file a tax amendment   You cannot use this method to report an amount less than your actual net earnings from self-employment. How do you file a tax amendment Gross nonfarm income of $6,960 or less. How do you file a tax amendment   The following examples illustrate how to figure net earnings when gross nonfarm income is $6,960 or less. How do you file a tax amendment Example 1. How do you file a tax amendment Net nonfarm profit less than $5,024 and less than 72. How do you file a tax amendment 189% of gross nonfarm income. How do you file a tax amendment Ann Green runs a craft business. How do you file a tax amendment Her actual net earnings from self-employment were $800 in 2011 and $900 in 2012. How do you file a tax amendment She meets the test for being self-employed on a regular basis. How do you file a tax amendment She has used the nonfarm optional method less than 5 years. How do you file a tax amendment Her gross income and net profit in 2013 are as follows: Gross nonfarm income $5,400 Net nonfarm profit $1,200 Ann's actual net earnings for 2013 are $1,108 ($1,200 × . How do you file a tax amendment 9235). How do you file a tax amendment Because her net profit is less than $5,024 and less than 72. How do you file a tax amendment 189% of her gross income, she can use the nonfarm optional method to figure net earnings of $3,600 (2/3 × $5,400). How do you file a tax amendment Because these net earnings are higher than her actual net earnings, she can report net earnings of $3,600 for 2013. How do you file a tax amendment Example 2. How do you file a tax amendment Net nonfarm profit less than $5,024 but not less than 72. How do you file a tax amendment 189% of gross nonfarm income. How do you file a tax amendment Assume that in Example 1 Ann's gross income is $1,000 and her net profit is $800. How do you file a tax amendment She must use the regular method to figure her net earnings. How do you file a tax amendment She cannot use the nonfarm optional method because her net profit is not less than 72. How do you file a tax amendment 189% of her gross income. How do you file a tax amendment Example 3. How do you file a tax amendment Net loss from a nonfarm business. How do you file a tax amendment Assume that in Example 1 Ann has a net loss of $700. How do you file a tax amendment She can use the nonfarm optional method and report $3,600 (2/3 × $5,400) as her net earnings. How do you file a tax amendment Example 4. How do you file a tax amendment Nonfarm net earnings less than $400. How do you file a tax amendment Assume that in Example 1 Ann has gross income of $525 and a net profit of $175. How do you file a tax amendment In this situation, she would not pay any SE tax under either the regular method or the nonfarm optional method because her net earnings under both methods are less than $400. How do you file a tax amendment Gross nonfarm income of more than $6,960. How do you file a tax amendment   The following examples illustrate how to figure net earnings when gross nonfarm income is more than $6,960. How do you file a tax amendment Example 1. How do you file a tax amendment Net nonfarm profit less than $5,024 and less than 72. How do you file a tax amendment 189% of gross nonfarm income. How do you file a tax amendment John White runs an appliance repair shop. How do you file a tax amendment His actual net earnings from self-employment were $10,500 in 2011 and $9,500 in 2012. How do you file a tax amendment He meets the test for being self-employed on a regular basis. How do you file a tax amendment He has used the nonfarm optional method less than 5 years. How do you file a tax amendment His gross income and net profit in 2013 are as follows: Gross nonfarm income $12,000 Net nonfarm profit $1,200 John's actual net earnings for 2013 are $1,108 ($1,200 × . How do you file a tax amendment 9235). How do you file a tax amendment Because his net profit is less than $5,024 and less than 72. How do you file a tax amendment 189% of his gross income, he can use the nonfarm optional method to figure net earnings of $4,640. How do you file a tax amendment Because these net earnings are higher than his actual net earnings, he can report net earnings of $4,640 for 2013. How do you file a tax amendment Example 2. How do you file a tax amendment Net nonfarm profit not less than $5,024. How do you file a tax amendment Assume that in Example 1 John's net profit is $5,400. How do you file a tax amendment He must use the regular method. How do you file a tax amendment He cannot use the nonfarm optional method because his net nonfarm profit is not less than $5,024. How do you file a tax amendment Example 3. How do you file a tax amendment Net loss from a nonfarm business. How do you file a tax amendment Assume that in Example 1 John has a net loss of $700. How do you file a tax amendment He can use the nonfarm optional method and report $4,640 as his net earnings from self-employment. How do you file a tax amendment Farm Optional Method Use the farm optional method only for earnings from a farming business. How do you file a tax amendment See Publication 225 for information about this method. How do you file a tax amendment Using Both Optional Methods If you have both farm and nonfarm earnings, you may be able to use both optional methods to determine your net earnings from self-employment. How do you file a tax amendment To figure your net earnings using both optional methods, you must: Figure your farm and nonfarm net earnings separately under each method. How do you file a tax amendment Do not combine farm earnings with nonfarm earnings to figure your net earnings under either method. How do you file a tax amendment Add the net earnings figured under each method to arrive at your total net earnings from self-employment. How do you file a tax amendment You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. How do you file a tax amendment If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. How do you file a tax amendment Example. How do you file a tax amendment You are a self-employed farmer. How do you file a tax amendment You also operate a retail grocery store. How do you file a tax amendment Your gross income, actual net earnings from self-employment, and optional farm and optional nonfarm net earnings from self-employment are shown in Table 10-2. How do you file a tax amendment Table 10-2. How do you file a tax amendment Example—Farm and Nonfarm Earnings Income and Earnings Farm Nonfarm Gross income $3,000 $6,000 Actual net earnings $900 $500 Optional net earnings (2/3 of gross income) $2,000 $4,000 Table 10-3 shows four methods or combinations of methods you can use to figure net earnings from self-employment using the farm and nonfarm gross income and actual net earnings shown in Table 10-2. How do you file a tax amendment Method 1. How do you file a tax amendment Using the regular method for both farm and nonfarm income. How do you file a tax amendment Method 2. How do you file a tax amendment Using the optional method for farm income and the regular method for nonfarm income. How do you file a tax amendment Method 3. How do you file a tax amendment Using the regular method for farm income and the optional method for nonfarm income. How do you file a tax amendment Method 4. How do you file a tax amendment Using the optional method for both farm and nonfarm income. How do you file a tax amendment Note. How do you file a tax amendment Actual net earnings is the same as net earnings figured using the regular method. How do you file a tax amendment Table 10-3. How do you file a tax amendment Example—Net Earnings Net Earnings 1 2 3 4 Actual  farm $ 900   $ 900   Optional  farm   $ 2,000   $ 2,000 Actual nonfarm $ 500 $ 500     Optional nonfarm     $4,000 $4,000 Amount you can report: $1,400 $2,500 $4,900 $4,640* *Limited to $4,640 because you used both optional methods. How do you file a tax amendment Fiscal Year Filer If you use a tax year other than the calendar year, you must use the tax rate and maximum earnings limit in effect at the beginning of your tax year. How do you file a tax amendment Even if the tax rate or maximum earnings limit changes during your tax year, continue to use the same rate and limit throughout your tax year. How do you file a tax amendment Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. How do you file a tax amendment Then enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. How do you file a tax amendment Most taxpayers can use Section A—Short Schedule SE to figure their SE tax. How do you file a tax amendment However, certain taxpayers must use Section B—Long Schedule SE. How do you file a tax amendment If you have to pay SE tax, you must file Form 1040 (with Schedule SE attached) even if you do not otherwise have to file a federal income tax return. How do you file a tax amendment Joint return. How do you file a tax amendment   Even if you file a joint return, you cannot file a joint Schedule SE. How do you file a tax amendment This is true whether one spouse or both spouses have earnings subject to SE tax. How do you file a tax amendment If both of you have earnings subject to SE tax, each of you must complete a separate Schedule SE. How do you file a tax amendment However, if one spouse uses the Short Schedule SE and the other spouse has to use the Long Schedule SE, both can use the same form. How do you file a tax amendment Attach both schedules to the joint return. How do you file a tax amendment More than one business. How do you file a tax amendment   If you have more than one trade or business, you must combine the net profit (or loss) from each business to figure your SE tax. How do you file a tax amendment A loss from one business will reduce your profit from another business. How do you file a tax amendment File one Schedule SE showing the earnings from self-employment, but file a separate Schedule C, C-EZ, or F for each business. How do you file a tax amendment Example. How do you file a tax amendment You are the sole proprietor of two separate businesses. How do you file a tax amendment You operate a restaurant that made a net profit of $25,000. How do you file a tax amendment You also have a cabinetmaking business that had a net loss of $500. How do you file a tax amendment You must file a Schedule C for the restaurant showing your net profit of $25,000 and another Schedule C for the cabinetmaking business showing your net loss of $500. How do you file a tax amendment You file Schedule SE showing total earnings subject to SE tax of $24,500. How do you file a tax amendment Prev  Up  Next   Home   More Online Publications