Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

How To Amend Tax Return

State Income Tax RatesFree State Return FilingHow To Correct Tax Return After FilingIrs State Tax FormsAmended Tax Return Form 2011File Just State Taxes Online FreeIrs 2012 Tax Return Forms2012 EfileAarp Tax HelpHow To File Late Tax ReturnsFile 2012 Income TaxIrs 1040ez 2011How To File A 2012 Tax ReturnFile 2010 Taxes Late1040x Filing InstructionsE-file State Taxes OnlyHow To File State Taxes Online1040 Ez InstructionsTurbotax 2012State Tax ReturnsSearch Irs2010 Tax ReturnAmend 2011 Tax Return FreeAmend TaxHow To File State Tax ReturnTaxcut ComFile 2010 Taxes With Turbotax1040ez TaxH&r Block 2011Aarp Free Tax Preparation LocationsHow Do I File My 2011 Taxes LateEz 1040 Form 2014Late Filing 2011 TaxesCan I File My 2012 Taxes NowIrs 1040ez Tax TableMilitary Tax Help1040nr Ez Online FreeFile An AmendmentFile An Amended Tax ReturnH & R Block 1040x

How To Amend Tax Return

How to amend tax return 12. How to amend tax return   Self-Employment Tax Table of Contents What's New for 2013 What's New for 2014 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Why Pay Self-Employment Tax? How To Pay Self-Employment TaxReplacing a lost social security card. How to amend tax return Name change. How to amend tax return Penalty for underpayment of estimated tax. How to amend tax return Who Must Pay Self-Employment Tax?Limited partner. How to amend tax return Community property. How to amend tax return Figuring Self-Employment EarningsLandlord Participation in Farming Methods for Figuring Net EarningsRegular Method Farm Optional Method Nonfarm Optional Method Using Both Optional Methods Reporting Self-Employment Tax What's New for 2013 Tax rates. How to amend tax return  For tax years beginning in 2013, the social security part of the self-employment tax increases from 10. How to amend tax return 4% to 12. How to amend tax return 4%. How to amend tax return The Medicare part of the tax remains at 2. How to amend tax return 9%. How to amend tax return As a result, the self-employment tax is increased from 13. How to amend tax return 3% to 15. How to amend tax return 3%. How to amend tax return Additional Medicare Tax. How to amend tax return . How to amend tax return  For tax years beginning in 2013, a 0. How to amend tax return 9% Additional Medicare Tax applies to your Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income above a threshold amount. How to amend tax return Use Form 8959, Additional Medicare Tax, to figure this tax. How to amend tax return For more information, see the Instructions for Form 8959. How to amend tax return Maximum net earnings. How to amend tax return  The maximum net self-employment earnings subject to the social security part (12. How to amend tax return 4%) of the self-employment tax increased to $113,700 for 2013. How to amend tax return There is no maximum limit on earnings subject to the Medicare part (2. How to amend tax return 9%). How to amend tax return What's New for 2014 Maximum net earnings. How to amend tax return  The maximum net self-employment earnings subject to the social security part of the self-employment tax for 2014 will be discussed in the 2013 Publication 334. How to amend tax return Introduction Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. How to amend tax return It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. How to amend tax return You usually have to pay SE tax if you are self-employed. How to amend tax return You are usually self-employed if you operate your own farm on land you either own or rent. How to amend tax return You have to figure SE tax on Schedule SE (Form 1040). How to amend tax return Farmers who have employees may have to pay the employer's share of social security and Medicare taxes, as well. How to amend tax return See chapter 13 for information on employment taxes. How to amend tax return Self-employment tax rate. How to amend tax return   For tax years beginning in 2013, the self-employment tax rate is 15. How to amend tax return 3%. How to amend tax return The rate consists of two parts: 12. How to amend tax return 4% for social security (old-age, survivors, and disability insurance) and 2. How to amend tax return 9% for Medicare (hospital insurance). How to amend tax return Topics - This chapter discusses: Why pay self-employment tax How to pay self-employment tax Who must pay self-employment tax Figuring self-employment earnings Landlord participation in farming Methods for figuring net earnings Reporting self-employment tax Useful Items - You may want to see: Publication 541 Partnerships Form (and Instructions) 1040 U. How to amend tax return S. How to amend tax return Individual Income Tax Return Sch F (Form 1040) Profit or Loss From Farming Sch SE (Form 1040) Self-Employment Tax 1065 U. How to amend tax return S. How to amend tax return Return of Partnership Income Sch K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. How to amend tax return See chapter 16 for information about getting publications and forms. How to amend tax return Why Pay Self-Employment Tax? Social security benefits are available to self-employed persons just as they are to wage earners. How to amend tax return Your payments of SE tax contribute to your coverage under the social security system. How to amend tax return Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. How to amend tax return How to become insured under social security. How to amend tax return   You must be insured under the social security system before you begin receiving social security benefits. How to amend tax return You are insured if you have the required number of credits (also called quarters of coverage). How to amend tax return Earning credits in 2013. How to amend tax return   You can earn a maximum of four credits per year. How to amend tax return For 2013, you earn one credit for each $1,160 of combined wages and self-employment earnings subject to social security tax. How to amend tax return You need $4,640 ($1,160 × 4) of combined wages and self-employment earnings subject to social security tax to earn four credits in 2013. How to amend tax return It does not matter whether the income is earned in 1 quarter or is spread over 2 or more quarters. How to amend tax return For an explanation of the number of credits you must have to be insured and the benefits available to you and your family under the social security program, consult your nearest Social Security Administration (SSA) office or visit the SSA website at www. How to amend tax return socialsecurity. How to amend tax return gov. How to amend tax return Making false statements to get or to increase social security benefits may subject you to penalties. How to amend tax return The Social Security Administration (SSA) time limit for posting self-employment earnings. How to amend tax return   Generally, the SSA will give you credit only for self-employment earnings reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. How to amend tax return    If you file your tax return or report a change in your self-employment earnings after the SSA time limit for posting self-employment earnings, the SSA may change its records, but only to remove or reduce the amount. How to amend tax return The SSA will not change its records to increase your self-employment earnings after the SSA time limit listed above. How to amend tax return How To Pay Self-Employment Tax To pay SE tax, you must have a social security number (SSN) or an individual taxpayer identification number (ITIN). How to amend tax return This section explains how to: Obtain an SSN or ITIN, and Pay your SE tax using estimated tax. How to amend tax return An ITIN does not entitle you to social security benefits. How to amend tax return Obtaining an ITIN does not change your immigration or employment status under U. How to amend tax return S. How to amend tax return law. How to amend tax return Obtaining a social security number. How to amend tax return   If you have never had an SSN, apply for one using Form SS-5, Application for a Social Security Card. How to amend tax return The application is also available in Spanish. How to amend tax return You can get this form at any Social Security office or by calling 1-800-772-1213. How to amend tax return    You can also download Form SS-5 from the Social Security Administration website at  www. How to amend tax return socialsecurity. How to amend tax return gov. How to amend tax return   If you have a social security number from the time you were an employee, you must use that number. How to amend tax return Do not apply for a new one. How to amend tax return Replacing a lost social security card. How to amend tax return   If you have a number but lost your card, file Form SS-5. How to amend tax return You will get a new card showing your original number, not a new number. How to amend tax return Name change. How to amend tax return   If your name has changed since you received your social security card, complete Form SS-5 to report a name change. How to amend tax return Obtaining an individual taxpayer identification number. How to amend tax return   The IRS will issue you an ITIN, for tax use only, if you are a nonresident or resident alien and you do not have, and are not eligible to get, an SSN. How to amend tax return To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number. How to amend tax return You can get this form by calling 1-800-829-3676. How to amend tax return For more information on ITINs, see Publication 1915, Understanding Your IRS Individual Taxpayer Identification Number. How to amend tax return Form W-7 and Publication 1915 are also available in Spanish. How to amend tax return    You can also download Form W-7 from the IRS website at IRS. How to amend tax return gov. How to amend tax return Paying estimated tax. How to amend tax return   Estimated tax is the method used to pay tax (including SE tax) on income not subject to withholding. How to amend tax return You generally have to make estimated tax payments if you expect to owe tax, including SE tax, of $1,000 or more when you file your return. How to amend tax return Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay the tax. How to amend tax return   However, if at least two-thirds of your gross income for 2013 or 2014 was from farming and you file your 2014 Form 1040 and pay all the tax due by March 2, 2015, you do not have to pay any estimated tax. How to amend tax return For more information about estimated tax for farmers, see chapter 15. How to amend tax return Penalty for underpayment of estimated tax. How to amend tax return   You may have to pay a penalty if you do not pay enough estimated tax by its due date. How to amend tax return Who Must Pay Self-Employment Tax? You must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. How to amend tax return The SE tax rules apply no matter how old you are and even if you are already receiving social security or Medicare benefits. How to amend tax return Aliens. How to amend tax return   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. How to amend tax return S. How to amend tax return citizens. How to amend tax return Nonresident aliens are not subject to self-employment tax. How to amend tax return 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 to amend tax return S. How to amend tax return residents for self-employment tax purposes. How to amend tax return For more information on aliens, see Publication 519, U. How to amend tax return S. How to amend tax return Tax Guide for Aliens. How to amend tax return Are you self-employed?   You are self-employed if you carry on a trade or business (such as running a farm) as a sole proprietor, an independent contractor, a member of a partnership, or are otherwise in business for yourself. How to amend tax return A trade or business is generally an activity carried on for a livelihood or in good faith to make a profit. How to amend tax return Share farmer. How to amend tax return   You are a self-employed farmer under an income-sharing arrangement if both the following apply. How to amend tax return You produce a crop or raise livestock on land belonging to another person. How to amend tax return Your share of the crop or livestock, or the proceeds from their sale, depends on the amount produced. How to amend tax return Your net farm profit or loss from the income-sharing arrangement is reported on Schedule F (Form 1040) and included in your self-employment earnings. How to amend tax return   If you produce a crop or livestock on land belonging to another person and are to receive a specified rate of pay, a fixed sum of money, or a fixed quantity of the crop or livestock, and not a share of the crop or livestock or their proceeds, you may be either self-employed or an employee of the landowner. How to amend tax return This will depend on whether the landowner has the right to direct or control your performance of services. How to amend tax return Example. How to amend tax return A share farmer produces a crop on land owned by another person on a 50-50 crop-share basis. How to amend tax return Under the terms of their agreement, the share farmer furnishes the labor and half the cost of seed and fertilizer. How to amend tax return The landowner furnishes the machinery and equipment used to produce and harvest the crop, and half the cost of seed and fertilizer. How to amend tax return The share farmer is provided a house in which to live. How to amend tax return The landowner and the share farmer decide on a cropping plan. How to amend tax return The share farmer is a self-employed farmer for purposes of the agreement to produce the crops, and the share farmer's part of the profit or loss from the crops is reported on Schedule F (Form 1040) and included in self-employment earnings. How to amend tax return The tax treatment of the landowner is discussed later under Landlord Participation in Farming. How to amend tax return Contract farming. How to amend tax return   Under typical contract farming arrangements, the grower receives a fixed payment per unit of crops or finished livestock delivered to the processor or packing company. How to amend tax return Since the grower typically furnishes labor and bears some production risk, the payments are reported on Schedule F and are therefore subject to self-employment tax. How to amend tax return 4-H Club or FFA project. How to amend tax return   If an individual participates in a 4-H Club or Future Farmers of America (FFA) project, any net income received from sales or prizes related to the project may be subject to income tax. How to amend tax return Report the net income as “Other income” on line 21 of Form 1040. How to amend tax return If necessary, attach a statement showing the gross income and expenses. How to amend tax return The net income may not be subject to SE tax if the project is primarily for educational purposes and not for profit, and is completed by the individual under the rules and economic restrictions of the sponsoring 4-H or FFA organization. How to amend tax return Such a project is generally not considered a trade or business. How to amend tax return Partners in a partnership. How to amend tax return   Generally, you are self-employed if you are a member of a partnership that carries on a trade or business. How to amend tax return Limited partner. How to amend tax return   If you are a limited partner, your partnership income is generally not subject to SE tax. How to amend tax return However, guaranteed payments you receive for services you perform for the partnership are subject to SE tax and should be reported to you in box 14 of your Schedule K-1 (Form 1065). How to amend tax return Business Owned and Operated by Spouses. How to amend tax return   If you and your spouse jointly own and operate a farm as an unincorporated business and share in the profits and losses, you are partners in a partnership whether or not you have a formal partnership agreement. How to amend tax return You must file Form 1065, instead of Schedule F, unless you make a joint election to be treated as a qualified joint venture. How to amend tax return Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. How to amend tax return Qualified joint venture. How to amend tax return   If you and your spouse each materially participate as the only members of a jointly owned and operated farm, and you file a joint tax return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. How to amend tax return For an explanation of “material participation,” see the instructions for Schedule C, line G, and the instructions for Schedule F, line E. How to amend tax return   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. How to amend tax return Each of you must file a separate Schedule F and a separate Schedule SE. How to amend tax return For more information, see Qualified Joint Venture in the Instructions for Schedule SE (Form 1040). How to amend tax return Spouse employee. How to amend tax return   If your spouse is your employee, not your partner, you must withhold and pay social security and Medicare taxes for him or her. How to amend tax return For more information about employment taxes, see chapter 13. How to amend tax return Community property. How to amend tax return   If you are a partner and your distributive share of any income or loss from a trade or business carried on by the partnership is community property, treat your share as your self-employment earnings. How to amend tax return Do not treat any of your share as self-employment earnings of your spouse. How to amend tax return Figuring Self-Employment Earnings Farmer. How to amend tax return   If you are self-employed as a farmer, use Schedule F (Form 1040) to figure your self-employment earnings. How to amend tax return Partnership income or loss. How to amend tax return   If you are a member of a partnership that carries on a trade or business, the partnership should report your self-employment earnings in box 14, code A, of your Schedule K-1 (Form 1065). How to amend tax return Box 14 of Schedule K-1 may also provide amounts for gross farming or fishing income (code B) and gross nonfarm income (code C). How to amend tax return Use these amounts if you use the farm or nonfarm optional method to figure net earnings from self-employment (see Methods for Figuring Net Earnings , later). How to amend tax return   If you are a general partner, you may need to reduce these reported earnings by amounts you claim as a section 179 deduction, unreimbursed partnership expenses, or depletion on oil and gas properties. How to amend tax return   If the amount reported is a loss, include only the deductible amount when you figure your total self-employment earnings. How to amend tax return   For more information, see the Partner's Instructions for Schedule K-1 (Form 1065). How to amend tax return   For general information on partnerships, see Publication 541. How to amend tax return More than one business. How to amend tax return   If you have self-employment earnings from more than one trade, business, or profession, you generally must combine the net profit or loss from each to determine your total self-employment earnings. How to amend tax return A loss from one business reduces your profit from another business. How to amend tax return However, do not combine earnings from farm and nonfarm businesses if you are using one of the optional methods (discussed later) to figure net earnings. How to amend tax return Community property. How to amend tax return   If any of the income from a farm or business, other than a partnership, is community property under state law, it is included in the self-employment earnings of the spouse carrying on the trade or business. How to amend tax return Lost income payments. How to amend tax return   Lost income payments received from insurance or other sources for reducing or stopping farming activities are included in self-employment earnings. How to amend tax return These include USDA payments to compensate for lost income resulting from reductions in tobacco quotas and allotments. How to amend tax return Even if you are not farming when you receive the payment, it is included in self-employment earnings if it relates to your farm business (even though it is temporarily inactive). How to amend tax return A connection exists if it is clear the payment would not have been made but for your conduct of your farm business. How to amend tax return Gain or loss. How to amend tax return   A gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers is not included in self-employment earnings. How to amend tax return It does not matter whether the disposition is a sale, exchange, or involuntary conversion. How to amend tax return For example, gains or losses from the disposition of the following types of property are not included in self-employment earnings. How to amend tax return Investment property. How to amend tax return Depreciable property or other fixed assets used in your trade or business. How to amend tax return Livestock held for draft, breeding, sport, or dairy purposes, and not held primarily for sale, regardless of how long the livestock was held, or whether it was raised or purchased. How to amend tax return Unharvested standing crops sold with land held more than 1 year. How to amend tax return Timber, coal, or iron ore held for more than 1 year if an economic interest was retained, such as a right to receive coal royalties. How to amend tax return   A gain or loss from the cutting of timber is not included in self-employment earnings if the cutting is treated as a sale or exchange. How to amend tax return For more information on electing to treat the cutting of timber as a sale or exchange, see Timber in chapter 8. How to amend tax return Wages and salaries. How to amend tax return   Wages and salaries received for services performed as an employee and covered by social security or railroad retirement are not included in self-employment earnings. How to amend tax return   Wages paid in kind to you for agricultural labor, such as commodity wages, are not included in self-employment earnings. How to amend tax return Retired partner. How to amend tax return   Retirement income received by a partner from his or her partnership under a written plan is not included in self-employment earnings if all the following apply. How to amend tax return The retired partner performs no services for the partnership during the year. How to amend tax return The retired partner is owed only the retirement payments. How to amend tax return The retired partner's share (if any) of the partnership capital was fully paid to the retired partner. How to amend tax return The payments to the retired partner are lifelong periodic payments. How to amend tax return Conservation Reserve Program (CRP) payments. How to amend tax return   Under the Conservation Reserve Program (CRP), if you own or operate highly erodible or other specified cropland, you may enter into a longterm contract with the USDA, agreeing to convert to a less intensive use of that cropland. How to amend tax return You must include the annual rental payments and any onetime incentive payment you receive under the program on Schedule F, lines 4a and 4b. How to amend tax return Cost share payments you receive may qualify for the costsharing exclusion. How to amend tax return See Cost-Sharing Exclusion (Improvements), above. How to amend tax return CRP payments are reported to you on Form 1099G. How to amend tax return Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. How to amend tax return See the instructions for Schedule SE (Form 1040). How to amend tax return Self-employed health insurance deduction. How to amend tax return   You cannot deduct the self-employed health insurance deduction you report on Form 1040, line 29, from self-employment earnings on Schedule SE (Form 1040). How to amend tax return Landlord Participation in Farming As a general rule, income and deductions from rentals and from personal property leased with real estate are not included in determining self-employment earnings. How to amend tax return However, income and deductions from farm rentals, including government commodity program payments received by a landowner who rents land, are included if the rental arrangement provides that the landowner will, and does, materially participate in the production or management of production of the farm products on the land. How to amend tax return Crop shares. How to amend tax return   Rent paid in the form of crop shares is included in self-employment earnings for the year you sell, exchange, give away, or use the crop shares if you meet one of the four material participation tests (discussed next) at the time the crop shares are produced. How to amend tax return Feeding such crop shares to livestock is considered using them. How to amend tax return Your gross income for figuring your self-employment earnings includes the fair market value of the crop shares when they are used as feed. How to amend tax return Material participation for landlords. How to amend tax return   You materially participate if you have an arrangement with your tenant for your participation and you meet one or more of the following tests. How to amend tax return You do at least three of the following. How to amend tax return Pay, using cash or credit, at least half the direct costs of producing the crop or livestock. How to amend tax return Furnish at least half the tools, equipment, and livestock used in the production activities. How to amend tax return Advise or consult with your tenant. How to amend tax return Inspect the production activities periodically. How to amend tax return You regularly and frequently make, or take an important part in making, management decisions substantially contributing to or affecting the success of the enterprise. How to amend tax return You work 100 hours or more spread over a period of 5 weeks or more in activities connected with agricultural production. How to amend tax return You do things that, considered in their totality, show you are materially and significantly involved in the production of the farm commodities. How to amend tax return These tests may be used as general guides for determining whether you are a material participant. How to amend tax return Example. How to amend tax return Drew Houston agrees to produce a crop on J. How to amend tax return Clarke's cotton farm, with each receiving half the proceeds. How to amend tax return Clarke advises Houston when to plant, spray, and pick the cotton. How to amend tax return During the growing season, Clarke inspects the crop every few days to determine whether Houston is properly taking care of the crop. How to amend tax return Houston furnishes all labor needed to grow and harvest the crop. How to amend tax return The management decisions made by Clarke in connection with the care of the cotton crop and his regular inspection of the crop establish that he participates to a material degree in the cotton production operations. How to amend tax return The income Clarke receives from his cotton farm is included in his self-employment earnings. How to amend tax return Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. How to amend tax return The regular method. How to amend tax return The farm optional method. How to amend tax return The nonfarm optional method. How to amend tax return You must use the regular method unless you are eligible to use one or both of the optional methods. How to amend tax return See Figure 12-1 , shown later. How to amend tax return Figure 12-1. How to amend tax return Can I Use the Optional Methods? Please click here for the text description of the image. How to amend tax return Figure 12–1. How to amend tax return Can I Use the Optional Methods? 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 to amend tax return You want to receive credit for social security benefit coverage. How to amend tax return You incurred child or dependent care expenses for which you could claim a credit. How to amend tax return (An optional method may increase your earned income, which could increase your credit. How to amend tax return ) You are entitled to the earned income credit. How to amend tax return (An optional method may increase your earned income, which could increase your credit. How to amend tax return ) You are entitled to the additional child tax credit. How to amend tax return (An optional method may increase your earned income, which could increase your credit. How to amend tax return ) Effects of using an optional method. How to amend tax return   Using an optional method could increase your SE tax. How to amend tax return Paying more SE tax may result in you getting higher social security disability or retirement benefits. How to amend tax return   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 SE tax or no SE tax using the regular method. How to amend tax return   The optional methods may be used only to figure your SE tax. How to amend tax return To figure your income tax, include your actual self-employment earnings in gross income, regardless of which method you use to determine SE tax. How to amend tax return Regular Method Multiply your total self-employment earnings by 92. How to amend tax return 35% (. How to amend tax return 9235) to get your net earnings under the regular method. How to amend tax return See Short Schedule SE, line 4, or Long Schedule SE, line 4a. How to amend tax return Net earnings figured using the regular method are also called “actual net earnings. How to amend tax return ” Farm Optional Method Use the farm optional method only for self-employment earnings from a farming business. How to amend tax return You can use this method if you meet either of the following tests. How to amend tax return Your gross farm income is $6,960 or less. How to amend tax return Your net farm profits are less than $5,024. How to amend tax return Gross farm income. How to amend tax return   Your gross farm income is the total of the amounts from: Schedule F (Form 1040), line 9, and Schedule K-1 (Form 1065), box 14, code B (from farm partnerships). How to amend tax return Net farm profits. How to amend tax return   Net farm profits generally are the total of the amounts from: Schedule F (Form 1040), line 34, and Schedule K-1 (Form 1065), box 14, code A (from farm partnerships). How to amend tax return 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 to amend tax return For more information, see Partnership income or loss , earlier. How to amend tax return Figuring farm net earnings. How to amend tax return   If you meet either of the two tests explained above, use Table 12-1. How to amend tax return Figuring Farm Net Earnings , to figure your net earnings from self-employment under the farm optional method. How to amend tax return Table 12-1. How to amend tax return Figuring Farm Net Earnings IF your gross farm income  is. How to amend tax return . How to amend tax return . How to amend tax return THEN your net earnings are equal to. How to amend tax return . How to amend tax return . How to amend tax return $6,960 or less Two-thirds of your gross farm income. How to amend tax return More than $6,960 $4,640 Optional method can reduce or eliminate SE tax. How to amend tax return   If your gross farm income is $6,960 or less and your farm net earnings figured under the farm optional method are less than your actual net earnings, you can use the farm optional method to reduce or eliminate your SE tax. How to amend tax return Your actual net earnings are your net earnings figured using the regular method, explained earlier. How to amend tax return Example. How to amend tax return Your gross farm income is $540 and your net farm profit is $460. How to amend tax return Consequently, your net earnings figured under the farm optional method are $360 (2/3 of $540) and your actual net earnings are $425 (92. How to amend tax return 35% of $460). How to amend tax return You owe no SE tax if you use the optional method because your net earnings under the farm optional method are less than $400. How to amend tax return Nonfarm Optional Method This is an optional method available for determining net earnings from nonfarm self-employment, much like the farm optional method. How to amend tax return If you are also engaged in a nonfarm business, you may be able to use this method to figure your nonfarm net earnings. How to amend tax return You can use this method even if you do not use the farm optional method for determining your farm net earnings and even if you have a net loss from your nonfarm business. How to amend tax return For more information about the nonfarm optional method, see Publication 334. How to amend tax return You cannot combine farm and nonfarm self-employment earnings to figure your net earnings under either of the optional methods. How to amend tax return Using Both Optional Methods If you use both optional methods, you must add the net earnings figured under each method to arrive at your total net earnings from self-employment. How to amend tax return You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. How to amend tax return If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. How to amend tax return Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. How to amend tax return Then, enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. How to amend tax return Most taxpayers can use Section A–Short Schedule SE to figure their SE tax. How to amend tax return However, certain taxpayers must use Section B–Long Schedule SE. How to amend tax return Use the chart on page 1 of Schedule SE to find out which one to use. How to amend tax return 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 to amend tax return Deduction for employer-equivalent portion of self-employment tax. How to amend tax return   You can deduct the employer-equivalent portion of your SE tax in figuring your adjusted gross income. How to amend tax return This deduction only affects your income tax. How to amend tax return It does not affect either your net earnings from self-employment or your SE tax. How to amend tax return   To deduct the tax, enter on Form 1040, line 27, the amount shown on Section A, Line 6, or Section B, line 13, Deduction for employer-equivalent portion of self-employment tax, of the Schedule SE. How to amend tax return Joint return. How to amend tax return   Even if you file a joint return, you cannot file a joint Schedule SE. How to amend tax return This is true whether one spouse or both spouses have self-employment earnings. How to amend tax return Your spouse is not considered self-employed just because you are. How to amend tax return If both of you have self-employment earnings, each of you must complete a separate Schedule SE. How to amend tax return 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 to amend tax return Attach both schedules to the joint return. How to amend tax return If you and your spouse operate a business as a partnership, see Business Owned and Operated by Spouses and Qualified joint venture , earlier, under Who Must Pay Self-Employment Tax . How to amend tax return Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Tax Information for Students

1040 Central
1040 Central has been updated for the last few weeks of Filing Season 2014.

Tax Benefits for Education Information
Tax credits, deductions and savings plans can help taxpayers with their expenses for higher education. You could save money from the cost of tuition, books and fees or deduct interest you pay on a qualified student loan.

Federal Student Aid
This U.S. Department of Education Federal Student Aid website provides information about preparing for education, choosing a school, applying for admission, financial aid and more.

Order a Transcript Online
Order your tax return or tax account transcript online.

IRS History
The roots of the IRS go back to the Civil War when President Lincoln and Congress, in 1862, created the position of commissioner of Internal Revenue and enacted an income tax to pay war expenses.

IRS Social Media
The IRS uses social media tools, including the IRS2Go phone app, to share the latest information on tax changes, initiatives, products and services.

Page Last Reviewed or Updated: 27-Mar-2014

The How To Amend Tax Return

How to amend tax return 2. How to amend tax return   Possession Source Income Table of Contents Types of IncomeCompensation for Labor or Personal Services Investment Income Sales or Other Dispositions of Property Scholarships, Fellowships, Grants, Prizes, and Awards Effectively Connected Income In order to determine where to file your return and which form(s) you need to complete, you must determine the source of each item of income you received during the tax year. How to amend tax return Income you received from sources within, or that was effectively connected with the conduct of a trade or business within, the relevant possession must be identified separately from U. How to amend tax return S. How to amend tax return or foreign source income. How to amend tax return This chapter discusses the rules for determining if the source of your income is from: American Samoa, The Commonwealth of the Northern Mariana Islands (CNMI), The Commonwealth of Puerto Rico (Puerto Rico), Guam, or The U. How to amend tax return S. How to amend tax return Virgin Islands (USVI). How to amend tax return Generally, the same rules that apply for determining U. How to amend tax return S. How to amend tax return source income also apply for determining possession source income. How to amend tax return However, there are some important exceptions to these rules. How to amend tax return Both the general rules and the exceptions are discussed in this chapter. How to amend tax return U. How to amend tax return S. How to amend tax return income rule. How to amend tax return   This rule states that income is not possession source income if, under the rules of Internal Revenue Code sections 861–865, it is treated as income: From sources within the United States, or Effectively connected with the conduct of a trade or business within the United States. How to amend tax return Table 2-1 shows the general rules for determining whether income is from sources within the United States. How to amend tax return Table 2-1. How to amend tax return General Rules for Determining U. How to amend tax return S. How to amend tax return Source of Income Item of Income Factor Determining Source Salaries, wages, and other compensation for labor or personal services Where labor or services performed Pensions Contributions: Where services were performed that earned the pension Investment earnings: Where pension trust is located Interest Residence of payer Dividends Where corporation created or organized Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. How to amend tax return Where property is used Sale of business inventory—purchased Where sold Sale of business inventory—produced Allocation if produced and sold in different locations Sale of real property Location of property Sale of personal property Seller's tax home (but see Special Rules for Gains From Dispositions of Certain Property , later, for exceptions) Sale of natural resources Allocation based on fair market value of product at export terminal. How to amend tax return For more information, see Regulations section 1. How to amend tax return 863-1(b). How to amend tax return Types of Income This section looks at the most common types of income received by individuals, and the rules for determining the source of the income. How to amend tax return Generally, the same rules shown in Table 2-1 are used to determine if you have possession source income. How to amend tax return Compensation for Labor or Personal Services Income from labor or personal services includes wages, salaries, commissions, fees, per diem allowances, employee allowances and bonuses, and fringe benefits. How to amend tax return It also includes income earned by sole proprietors and general partners from providing personal services in the course of their trade or business. How to amend tax return Services performed wholly within a relevant possession. How to amend tax return   Generally, all pay you receive for services performed in a relevant possession is considered to be from sources within that possession. How to amend tax return However, there is an exception for income earned as a member of the U. How to amend tax return S. How to amend tax return Armed Forces or a civilian spouse. How to amend tax return U. How to amend tax return S. How to amend tax return Armed Forces. How to amend tax return   If you are a bona fide resident of a relevant possession, your military service pay will be sourced in that possession even if you perform the services in the United States or another possession. How to amend tax return However, if you are not a bona fide resident of a possession, your military service pay will be income from the  United States even if you perform services in a possession. How to amend tax return Civilian spouse of active duty member of the U. How to amend tax return S. How to amend tax return Armed Forces. How to amend tax return   If you are a bona fide resident of a U. How to amend tax return S. How to amend tax return possession and choose to keep that possession as your tax residence under MSRRA when relocating with your servicemember spouse under military orders, the source of income for your labor or personal services is considered to be that possession. How to amend tax return Likewise, if your tax residence is in one of the 50 states or the District of Columbia before relocating and you choose to keep it as your tax residence, the source of income for services performed in any of the U. How to amend tax return S. How to amend tax return possessions is considered to be the United States and, specifically, your state of residence or the District of Columbia. How to amend tax return Services performed partly inside and partly outside a relevant possession. How to amend tax return   If you are an employee and receive compensation for labor or personal services performed both inside and outside the relevant possession, special rules apply in determining the source of the compensation. How to amend tax return Compensation (other than certain fringe benefits) is sourced on a time basis. How to amend tax return Certain fringe benefits (such as housing and education) are sourced on a geographical basis. How to amend tax return   Or, you may be permitted to use an alternative basis to determine the source of compensation. How to amend tax return See Alternative basis , later. How to amend tax return   If you are self-employed, determine the source of your income for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. How to amend tax return In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. How to amend tax return Time basis. How to amend tax return   Use a time basis to figure your compensation for labor or personal services from the relevant possession (other than the fringe benefits discussed later). How to amend tax return Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed  services in the relevant  possession during the year     Total number of days you  performed services during the year           You can use a unit of time less than a day in the above fraction, if appropriate. How to amend tax return The time period for which the income is made does not have to be a year. How to amend tax return Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. How to amend tax return Example. How to amend tax return In 2013, you worked in your employer's office in the United States for 60 days and in the Puerto Rico office for 180 days, earning a total of $80,000 for the year. How to amend tax return Your Puerto Rico source income is $60,000, figured as follows. How to amend tax return       180 days 240 days × $80,000 = $60,000                 Multi-year compensation. How to amend tax return   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. How to amend tax return Multi-year compensation is compensation that is included in your income in 1 tax year but is attributable to a period that includes 2 or more tax years. How to amend tax return You determine the period to which the income is attributable based on the facts and circumstances of your case. How to amend tax return For more information on multi-year compensation, see Treasury Decision (T. How to amend tax return D. How to amend tax return ) 9212 and Regulations section 1. How to amend tax return 861-4, 2005-35 I. How to amend tax return R. How to amend tax return B. How to amend tax return 429, available at www. How to amend tax return irs. How to amend tax return gov/irb/2005-35_IRB/ar14. How to amend tax return html. How to amend tax return Certain fringe benefits sourced on a geographical basis. How to amend tax return   If you received any of the following fringe benefits as compensation for labor or services performed as an employee partly inside and partly outside a relevant possession, you must source that income on a geographical basis. How to amend tax return Housing. How to amend tax return Education. How to amend tax return Local transportation. How to amend tax return Tax reimbursement. How to amend tax return Hazardous or hardship duty pay. How to amend tax return Moving expense reimbursement. How to amend tax return For information on determining the source of the fringe benefits listed above, see Regulations section 1. How to amend tax return 861-4. How to amend tax return Alternative basis. How to amend tax return   You can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your income than the time or geographical basis. How to amend tax return If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your income. How to amend tax return De minimis exception. How to amend tax return   There is an exception to the rule for determining the source of income earned in a possession. How to amend tax return Generally, you will not have income from a possession if during a tax year you: Are a U. How to amend tax return S. How to amend tax return citizen or resident, Are not a bona fide resident of that possession, Are not employed by or under contract with an individual, partnership, or corporation that is engaged in a trade or business in that possession, Temporarily perform services in that possession for 90 days or less, and Earned $3,000 or less from such services. How to amend tax return This exception began with income earned during your 2008 tax year. How to amend tax return Pensions. How to amend tax return   Generally, pension income has two components: contributions to the pension plan and the earnings accrued from investing those contributions. How to amend tax return The contribution portion is sourced according to where services were performed that earned the pension. How to amend tax return The investment earnings portion is sourced according to the location of the pension trust. How to amend tax return Example. How to amend tax return You are a U. How to amend tax return S. How to amend tax return citizen who worked in Puerto Rico for a U. How to amend tax return S. How to amend tax return company. How to amend tax return All services were performed in Puerto Rico. How to amend tax return Upon retirement you remained in Puerto Rico and began receiving your pension from the U. How to amend tax return S. How to amend tax return pension trust of your employer. How to amend tax return Distributions from the U. How to amend tax return S. How to amend tax return pension trust must be allocated between (1) contributions, which are Puerto Rico source income, and (2) investment earnings, which are U. How to amend tax return S. How to amend tax return source income. How to amend tax return Investment Income This category includes such income as interest, dividends, rents, and royalties. How to amend tax return Interest income. How to amend tax return   The source of interest income is generally determined by the residence of the payer. How to amend tax return Interest paid by corporations created or organized in a relevant possession (possession corporation) or by individuals who are bona fide residents of a relevant possession is considered income from sources within that possession. How to amend tax return   However, there is an exception to this rule if you are a bona fide resident of a relevant possession, receive interest from a corporation created or organized in that possession, and are a shareholder of that corporation who owns, directly or indirectly, at least 10% of the total voting stock of the corporation. How to amend tax return See Regulations section 1. How to amend tax return 937-2(i) for more information. How to amend tax return Dividends. How to amend tax return   Generally, dividends paid by a corporation created or organized in a relevant possession will be considered income from sources within that possession. How to amend tax return There are additional rules for bona fide residents of a relevant possession who receive dividend income from possession corporations, and who own, directly or indirectly, at least 10% of the voting stock of the corporation. How to amend tax return For more information, see Regulations section 1. How to amend tax return 937-2(g). How to amend tax return Rental income. How to amend tax return   Rents from property located in a relevant possession are treated as income from sources within that possession. How to amend tax return Royalties. How to amend tax return   Royalties from natural resources located in a relevant possession are considered income from sources within that possession. How to amend tax return   Also considered possession source income are royalties received for the use of, or for the privilege of using, in a relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property. How to amend tax return Sales or Other Dispositions of Property The source rules for sales or other dispositions of property are varied. How to amend tax return The most common situations are discussed below. How to amend tax return Real property. How to amend tax return   Real property includes land and buildings, and generally anything built on, growing on, or attached to land. How to amend tax return The location of the property generally determines the source of income from the sale. How to amend tax return For example, if you are a bona fide resident of Guam and sell your home that is located in Guam, the gain on the sale is sourced in Guam. How to amend tax return If, however, the home you sold was located in the United States, the gain is U. How to amend tax return S. How to amend tax return source income. How to amend tax return Personal property. How to amend tax return   The term “personal property” refers to property (such as machinery, equipment, or furniture) that is not real property. How to amend tax return Generally, gain (or loss) from the sale or other disposition is sourced according to the seller's tax home. How to amend tax return If personal property is sold by a bona fide resident of a relevant possession, the gain (or loss) from the sale is treated as sourced within that possession. How to amend tax return   This rule does not apply to the sale of inventory, intangible property, depreciable personal property, or property sold through a foreign office or fixed place of business. How to amend tax return The rules applying to sales of inventory are discussed below. How to amend tax return For information on sales of the other types of property mentioned, see Internal Revenue Code section 865. How to amend tax return Inventory. How to amend tax return   Your inventory is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. How to amend tax return The source of income from the sale of inventory depends on whether the inventory was purchased or produced. How to amend tax return Purchased. How to amend tax return   Income from the sale of inventory that you purchased is sourced where you sell the property. How to amend tax return Generally, this is where title to the property passes to the buyer. How to amend tax return Produced. How to amend tax return   Income from the sale of inventory that you produced in a relevant possession and sold outside that possession (or vice versa) is sourced based on an allocation. How to amend tax return For information on making the allocation, see Regulations section 1. How to amend tax return 863-3(f). How to amend tax return Special Rules for Gains From Dispositions of Certain Property There are special rules for gains from dispositions of certain investment property (for example, stocks, bonds, debt instruments, diamonds, and gold) owned by a U. How to amend tax return S. How to amend tax return citizen or resident alien prior to becoming a bona fide resident of a possession. How to amend tax return You are subject to these special rules if you meet both of the following conditions. How to amend tax return For the tax year for which the source of the gain must be determined, you are a bona fide resident of the relevant possession. How to amend tax return For any of the 10 years preceding that year, you were a citizen or resident alien of the United States (other than a bona fide resident of the relevant possession). How to amend tax return If you meet these conditions, gains from the disposition of this property will not be treated as income from sources within the relevant possession for purposes of the Internal Revenue Code. How to amend tax return Accordingly, bona fide residents of American Samoa and Puerto Rico, for example, may not exclude the gain on their U. How to amend tax return S. How to amend tax return tax return. How to amend tax return (See chapter 3 for additional filing information. How to amend tax return ) With respect to the CNMI, Guam, and the USVI, the gain from the disposition of this property will not meet the requirements for certain tax rules that may allow bona fide residents of those possessions to reduce or obtain a rebate of taxes on income from sources within the relevant possessions. How to amend tax return These rules apply to dispositions after April 11, 2005. How to amend tax return For details, see Regulations section 1. How to amend tax return 937-2(f)(1) and Examples 1 and 2 of section 1. How to amend tax return 937-2(k). How to amend tax return Example 1. How to amend tax return In 2007, Cheryl Jones, a U. How to amend tax return S. How to amend tax return citizen, lived in the United States and paid $1,000 for 100 shares of stock in the Rose Corporation, a U. How to amend tax return S. How to amend tax return corporation listed on the New York Stock Exchange. How to amend tax return On March 1, 2010, she moved to Puerto Rico and changed her tax home to Puerto Rico on the same date. How to amend tax return Cheryl satisfied the presence test in 2010 and, under the year-of-move exception, she was considered a bona fide resident of Puerto Rico for the rest of 2010. How to amend tax return On March 1, 2010, the closing value of Cheryl's stock in the Rose Corporation was $2,000. How to amend tax return On January 5, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold all her Rose Corporation stock for $7,000. How to amend tax return Under the earlier rules, none of Cheryl's $6,000 gain will be treated as income from sources within Puerto Rico. How to amend tax return The source rules discussed in the preceding paragraphs supplement, and may apply in conjunction with, an existing special rule. How to amend tax return This existing special rule applies if you are a U. How to amend tax return S. How to amend tax return citizen or resident alien who becomes a bona fide resident of American Samoa, the CNMI, or Guam, and who has gain from the disposition of certain U. How to amend tax return S. How to amend tax return assets during the 10-year period beginning when you became a bona fide resident. How to amend tax return The gain is U. How to amend tax return S. How to amend tax return source income that generally is subject to U. How to amend tax return S. How to amend tax return tax if the property is either (1) located in the United States; (2) stock issued by a U. How to amend tax return S. How to amend tax return corporation or a debt obligation of a U. How to amend tax return S. How to amend tax return person or of the United States, a state (or political subdivision), or the District of Columbia; or (3) property that has a basis in whole or in part by reference to property described in (1) or (2). How to amend tax return See chapter 3 for filing information. How to amend tax return Special election. How to amend tax return   For dispositions after April 11, 2005, you can choose to treat the part of gain (or loss) attributable to the time you held the property while a bona fide resident of the relevant possession (the possession holding period) as gain (or loss) from sources within that possession. How to amend tax return Make the election by reporting the gain attributable to the possession holding period on your income tax return for the year of disposition. How to amend tax return This election overrides both of the special rules discussed earlier. How to amend tax return   There are two methods for figuring the gain for the possession holding period, one for marketable securities and another for other types of investment property. How to amend tax return Marketable securities. How to amend tax return   Marketable securities are those actively traded on an established financial market, such as stock in a publicly held corporation. How to amend tax return Under the special election, allocate the gain (or loss) by figuring the appreciation separately for your possession and U. How to amend tax return S. How to amend tax return holding periods. How to amend tax return   Your possession holding period begins on the first day you do not have a tax home outside the relevant possession. How to amend tax return The gain (or loss) attributable to the possession holding period is the difference in fair market value of the security at the close of the market on the first and last days of this holding period. How to amend tax return This is your gain (or loss) that is treated as being from sources within the relevant possession. How to amend tax return If you were a bona fide resident of the relevant possession for more than one continuous period, combine the gains (or losses) from each possession holding period. How to amend tax return Example 2. How to amend tax return Assume the same facts as in Example 1, except that Cheryl makes the special election to allocate the gain between her U. How to amend tax return S. How to amend tax return and possession holding periods. How to amend tax return Cheryl's possession holding period began March 1, 2010, the date her tax home changed to Puerto Rico. How to amend tax return Therefore, the portion of gain attributable to her possession holding period is $5,000 ($7,000 sale price – $2,000 closing value on first day of the possession holding period). How to amend tax return By reporting $5,000 of her $6,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. How to amend tax return Other personal property. How to amend tax return   For personal property other than marketable securities, use a time-based allocation. How to amend tax return Figure the gain (or loss) attributable to the possession holding period by multiplying your total gain (or loss) by the following fraction. How to amend tax return      Number of days in the  possession holding period     Total number of days  in your holding period         The result is your gain (or loss) that is treated as being from sources within the relevant possession. How to amend tax return Example 3. How to amend tax return In addition to the stock in Rose Corporation, Cheryl acquired a 5% interest in the Alder Partnership on January 1, 2009. How to amend tax return On March 1, 2010, when she established bona fide residency in Puerto Rico, her partnership interest was not considered a marketable security. How to amend tax return On September 16, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold her interest in Alder Partnership for a $100,000 gain. How to amend tax return She had owned the interest for a total of 1,720 days. How to amend tax return Cheryl's possession holding period (from March 1, 2010, through September 16, 2013) is 1,296 days. How to amend tax return The portion of her gain attributable to Puerto Rico is $75,349 ($100,000 x (1,296 Puerto Rico days ÷ 1,720 total days)). How to amend tax return By reporting $75,349 of her $100,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. How to amend tax return Scholarships, Fellowships, Grants, Prizes, and Awards The source of these types of income is generally the residence of the payer, regardless of who actually disburses the funds. How to amend tax return Therefore, in order to be possession source income, the payer must be a resident of the relevant possession, such as an individual who is a bona fide resident or a corporation created or organized in that possession. How to amend tax return These rules do not apply to amounts paid as salary or other compensation for services. How to amend tax return See Compensation for Labor or Personal Services, earlier in this chapter, for the source rules that apply. How to amend tax return Effectively Connected Income In limited circumstances, some kinds of income from sources outside the relevant possession must be treated as effectively connected with a trade or business in that possession. How to amend tax return These circumstances are listed below. How to amend tax return You have an office or other fixed place of business in the relevant possession to which the income can be attributed. How to amend tax return That office or place of business is a material factor in producing the income. How to amend tax return The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. How to amend tax return An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. How to amend tax return The three kinds of income from sources outside the relevant possession to which these rules apply are the following. How to amend tax return Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the relevant possession or from any interest in such property. How to amend tax return Included are rents or royalties for the use of, or for the privilege of using, outside the relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the relevant possession. How to amend tax return Dividends or interest from the active conduct of a banking, financing, or similar business in the relevant possession. How to amend tax return Income, gain, or loss from the sale or exchange outside the relevant possession, through the office or other fixed place of business in the relevant possession, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. How to amend tax return Item (3) will not apply if you sold the property for use, consumption, or disposition outside the relevant possession and an office or other fixed place of business in a foreign country was a material factor in the sale. How to amend tax return Example. How to amend tax return Marcy Jackson is a bona fide resident of American Samoa. How to amend tax return Her business, which she conducts from an office in American Samoa, is developing and selling specialized computer software. How to amend tax return A software purchaser will frequently pay Marcy an additional amount to install the software on the purchaser's operating system and to ensure that the software is functioning properly. How to amend tax return Marcy installs the software at the purchaser's place of business, which may be in American Samoa, in the United States, or in another country. How to amend tax return The income from selling the software is effectively connected with the conduct of Marcy's business in American Samoa, even though the product's destination may be outside the possession. How to amend tax return However, the compensation she receives for installing the software (personal services) outside of American Samoa is not effectively connected with the conduct of her business in the possession—the income is sourced where she performs the services. How to amend tax return Prev  Up  Next   Home   More Online Publications