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How To Amend Tax Return

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How To Amend Tax Return

How to amend tax return Publication 503 - Main Content Table of Contents Tests To Claim the CreditQualifying Person Test Earned Income Test Work-Related Expense Test Joint Return Test Provider Identification Test How To Figure the CreditFiguring Total Work-Related Expenses Earned Income Limit Dollar Limit Amount of Credit How To Claim the CreditTax credit not refundable. How to amend tax return Employment Taxes for Household Employers How To Get Tax HelpLow Income Taxpayer Clinics Tests To Claim the Credit To be able to claim the credit for child and dependent care expenses, you must file Form 1040, Form 1040A, or Form 1040NR, not Form 1040EZ or Form 1040NR-EZ, and meet all the following tests. How to amend tax return The care must be for one or more qualifying persons who are identified on Form 2441. How to amend tax return (See Qualifying Person Test. How to amend tax return ) You (and your spouse if filing jointly) must have earned income during the year. How to amend tax return (However, see Rule for student-spouse or spouse not able to care for self under Earned Income Test, later. How to amend tax return ) You must pay child and dependent care expenses so you (and your spouse if filing jointly) can work or look for work. How to amend tax return (See Work-Related Expense Test, later. How to amend tax return ) You must make payments for child and dependent care to someone you (and your spouse) cannot claim as a dependent. How to amend tax return If you make payments to your child, he or she cannot be your dependent and must be age 19 or older by the end of the year. How to amend tax return You cannot make payments to: Your spouse, or The parent of your qualifying person if your qualifying person is your child and under age 13. How to amend tax return See Payments to Relatives or Dependents under Work-Related Expense Test, later. How to amend tax return Your filing status may be single, head of household, or qualifying widow(er) with dependent child. How to amend tax return If you are married, you must file a joint return, unless an exception applies to you. How to amend tax return See Joint Return Test, later. How to amend tax return You must identify the care provider on your tax return. How to amend tax return (See Provider Identification Test, later. How to amend tax return ) If you exclude or deduct dependent care benefits provided by a dependent care benefit plan, the total amount you exclude or deduct must be less than the dollar limit for qualifying expenses (generally, $3,000 if one qualifying person was cared for or $6,000 if two or more qualifying persons were cared for). How to amend tax return (If two or more qualifying persons were cared for, the amount you exclude or deduct will always be less than the dollar limit, since the total amount you can exclude or deduct is limited to $5,000. How to amend tax return See Reduced Dollar Limit under How To Figure the Credit, later. How to amend tax return ) These tests are presented in Figure A and are also explained in detail in this publication. How to amend tax return Qualifying Person Test Your child and dependent care expenses must be for the care of one or more qualifying persons. How to amend tax return A qualifying person is: Your qualifying child who is your dependent and who was under age 13 when the care was provided (but see Child of divorced or separated parents or parents living apart , later), Your spouse who was not physically or mentally able to care for himself or herself and lived with you for more than half the year, or A person who was not physically or mentally able to care for himself or herself, lived with you for more than half the year, and either: Was your dependent, or Would have been your dependent except that: He or she received gross income of $3,900 or more, He or she filed a joint return, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. How to amend tax return Dependent defined. How to amend tax return   A dependent is a person, other than you or your spouse, for whom you can claim an exemption. How to amend tax return To be your dependent, a person must be your qualifying child (or your qualifying relative). How to amend tax return Qualifying child. How to amend tax return   To be your qualifying child, a child must live with you for more than half the year and meet other requirements. How to amend tax return More information. How to amend tax return   For more information about who is a dependent or a qualifying child, see Publication 501. How to amend tax return Physically or mentally not able to care for oneself. How to amend tax return   Persons who cannot dress, clean, or feed themselves because of physical or mental problems are considered not able to care for themselves. How to amend tax return Also, persons who must have constant attention to prevent them from injuring themselves or others are considered not able to care for themselves. How to amend tax return Person qualifying for part of year. How to amend tax return   You determine a person's qualifying status each day. How to amend tax return For example, if the person for whom you pay child and dependent care expenses no longer qualifies on September 16, count only those expenses through September 15. How to amend tax return Also see Yearly limit under Dollar Limit, later. How to amend tax return Birth or death of otherwise qualifying person. How to amend tax return   In determining whether a person is a qualifying person, a person who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the person's home more than half the time he or she was alive in 2013. How to amend tax return Taxpayer identification number. How to amend tax return   You must include on your return the name and taxpayer identification number (generally the social security number) of the qualifying person(s). How to amend tax return If the correct information is not shown, the credit may be reduced or disallowed. How to amend tax return Individual taxpayer identification number (ITIN) for aliens. How to amend tax return   If your qualifying person is a nonresident or resident alien who does not have and cannot get a social security number (SSN), use that person's ITIN. How to amend tax return The ITIN is entered wherever an SSN is requested on a tax return. How to amend tax return If the alien does not have an ITIN, he or she must apply for one. How to amend tax return See Form W-7, Application for IRS Individual Taxpayer Identification Number, for details. How to amend tax return   An ITIN is for tax use only. How to amend tax return It does not entitle the holder to social security benefits or change the holder's employment or immigration status under U. How to amend tax return S. How to amend tax return law. How to amend tax return Adoption taxpayer identification number (ATIN). How to amend tax return   If your qualifying person is a child who was placed in your home for adoption and for whom you do not have an SSN, you must get an ATIN for the child. How to amend tax return File Form W-7A, Application for Taxpayer Identification Number for Pending U. How to amend tax return S. How to amend tax return Adoptions. How to amend tax return Child of divorced or separated parents or parents living apart. How to amend tax return   Even if you cannot claim your child as a dependent, he or she is treated as your qualifying person if: The child was under age 13 or was not physically or mentally able to care for himself or herself, The child received over half of his or her support during the calendar year from one or both parents who are divorced or legally separated under a decree of divorce or separate maintenance, are separated under a written separation agreement, or lived apart at all times during the last 6 months of the calendar year, The child was in the custody of one or both parents for more than half the year, and You were the child's custodial parent. How to amend tax return   The custodial parent is the parent with whom the child lived for the greater number of nights in 2013. How to amend tax return If the child was with each parent for an equal number of nights, the custodial parent is the parent with the higher adjusted gross income. How to amend tax return For details and an exception for a parent who works at night, see Publication 501. How to amend tax return   The noncustodial parent cannot treat the child as a qualifying person even if that parent is entitled to claim the child as a dependent under the special rules for a child of divorced or separated parents. How to amend tax return Please click here for the text description of the image. How to amend tax return Figure a. How to amend tax return Can you claim the credit Earned Income Test To claim the credit, you (and your spouse if filing jointly) must have earned income during the year. How to amend tax return Earned income. How to amend tax return   Earned income includes wages, salaries, tips, other taxable employee compensation, and net earnings from self-employment. How to amend tax return A net loss from self-employment reduces earned income. How to amend tax return Earned income also includes strike benefits and any disability pay you report as wages. How to amend tax return   Generally, only taxable compensation is included. How to amend tax return However, you can elect to include nontaxable combat pay in earned income. How to amend tax return If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election. How to amend tax return (In other words, if one of you makes the election, the other one can also make it but does not have to. How to amend tax return ) Including this income will give you a larger credit only if your (or your spouse's) other earned income is less than the amount entered on line 3 of Form 2441. How to amend tax return You should figure your credit both ways and make the election if it gives you a greater tax benefit. How to amend tax return    You can choose to include your nontaxable combat pay in earned income when figuring your credit for child and dependent care expenses, even if you choose not to include it in earned income for the earned income credit or the exclusion or deduction for dependent care benefits. How to amend tax return Members of certain religious faiths opposed to social security. How to amend tax return   This section is for persons who are members of certain religious faiths that are opposed to participation in Social Security Act programs and have an IRS-approved form that exempts certain income from social security and Medicare taxes. How to amend tax return These forms are: Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, and Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits, for use by members of recognized religious groups. How to amend tax return   Each form is discussed here in terms of what is or is not earned income for purposes of the child and dependent care credit. How to amend tax return For information on the use of these forms, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. How to amend tax return Form 4361. How to amend tax return   Whether or not you have an approved Form 4361, amounts you received for performing ministerial duties as an employee are earned income. How to amend tax return This includes wages, salaries, tips, and other taxable employee compensation. How to amend tax return   However, amounts you received for ministerial duties, but not as an employee, do not count as earned income. How to amend tax return Examples include fees for performing marriages and honoraria for delivering speeches. How to amend tax return   Any amount you received for work that is not related to your ministerial duties is earned income. How to amend tax return Form 4029. How to amend tax return   Whether or not you have an approved Form 4029, all wages, salaries, tips, and other taxable employee compensation are earned income. How to amend tax return   However, amounts you received as a self-employed individual do not count as earned income. How to amend tax return What is not earned income?   Earned income does not include: Pensions and annuities, Social security and railroad retirement benefits, Workers' compensation, Interest and dividends, Unemployment compensation, Scholarships or fellowship grants, except for those reported on Form W-2 and paid to you for teaching or other services, Nontaxable workfare payments, Child support payments received, Income of a nonresident alien that is not effectively connected with a U. How to amend tax return S. How to amend tax return trade or business, or Any amount received for work while an inmate in a penal institution. How to amend tax return Rule for student-spouse or spouse not able to care for self. How to amend tax return   Your spouse is treated as having earned income for any month that he or she is: A full-time student, or Physically or mentally not able to care for himself or herself. How to amend tax return (Your spouse also must live with you for more than half the year. How to amend tax return )   If you are filing a joint return, this rule also applies to you. How to amend tax return You can be treated as having earned income for any month you are a full-time student or not able to care for yourself. How to amend tax return   Figure the earned income of the nonworking spouse, described under (1) or (2) above, as shown under Earned Income Limit under How To Figure the Credit, later. How to amend tax return   This rule applies to only one spouse for any one month. How to amend tax return If, in the same month, both you and your spouse do not work and are either full-time students or not physically or mentally able to care for yourselves, only one of you can be treated as having earned income in that month. How to amend tax return Full-time student. How to amend tax return    You are a full-time student if you are enrolled at a school for the number of hours or classes that the school considers full time. How to amend tax return You must have been a full-time student for some part of each of 5 calendar months during the year. How to amend tax return (The months need not be consecutive. How to amend tax return ) School. How to amend tax return   The term “school” includes high schools, colleges, universities, and technical, trade, and mechanical schools. How to amend tax return A school does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. How to amend tax return Work-Related Expense Test Child and dependent care expenses must be work-related to qualify for the credit. How to amend tax return Expenses are considered work-related only if both of the following are true. How to amend tax return They allow you (and your spouse if filing jointly) to work or look for work. How to amend tax return They are for a qualifying person's care. How to amend tax return Working or Looking for Work To be work-related, your expenses must allow you to work or look for work. How to amend tax return If you are married, generally both you and your spouse must work or look for work. How to amend tax return One spouse is treated as working during any month he or she is a full-time student or is not physically or mentally able to care for himself or herself. How to amend tax return Your work can be for others or in your own business or partnership. How to amend tax return It can be either full time or part time. How to amend tax return Work also includes actively looking for work. How to amend tax return However, if you do not find a job and have no earned income for the year, you cannot take this credit. How to amend tax return See Earned Income Test, earlier. How to amend tax return An expense is not considered work-related merely because you had it while you were working. How to amend tax return The purpose of the expense must be to allow you to work. How to amend tax return Whether your expenses allow you to work or look for work depends on the facts. How to amend tax return Example 1. How to amend tax return The cost of a babysitter while you and your spouse go out to eat is not normally a work-related expense. How to amend tax return Example 2. How to amend tax return You work during the day. How to amend tax return Your spouse works at night and sleeps during the day. How to amend tax return You pay for care of your 5-year-old child during the hours when you are working and your spouse is sleeping. How to amend tax return Your expenses are considered work-related. How to amend tax return Volunteer work. How to amend tax return   For this purpose, you are not considered to be working if you do unpaid volunteer work or volunteer work for a nominal salary. How to amend tax return Work for part of year. How to amend tax return   If you work or actively look for work during only part of the period covered by the expenses, then you must figure your expenses for each day. How to amend tax return For example, if you work all year and pay care expenses of $250 a month ($3,000 for the year), all the expenses are work related. How to amend tax return However, if you work or look for work for only 2 months and 15 days during the year and pay expenses of $250 a month, your work-related expenses are limited to $625 (2½ months × $250). How to amend tax return Temporary absence from work. How to amend tax return   You do not have to figure your expenses for each day during a short, temporary absence from work, such as for vacation or a minor illness, if you have to pay for care anyway. How to amend tax return Instead, you can figure your credit including the expenses you paid for the period of absence. How to amend tax return   An absence of 2 weeks or less is a short, temporary absence. How to amend tax return An absence of more than 2 weeks may be considered a short, temporary absence, depending on the circumstances. How to amend tax return Example. How to amend tax return You pay a nanny to care for your 2-year-old son and 4-year-old daughter so you can work. How to amend tax return You become ill and miss 4 months of work but receive sick pay. How to amend tax return You continue to pay the nanny to care for the children while you are ill. How to amend tax return Your absence is not a short, temporary absence, and your expenses are not considered work-related. How to amend tax return Part-time work. How to amend tax return   If you work part-time, you generally must figure your expenses for each day. How to amend tax return However, if you have to pay for care weekly, monthly, or in another way that includes both days worked and days not worked, you can figure your credit including the expenses you paid for days you did not work. How to amend tax return Any day when you work at least 1 hour is a day of work. How to amend tax return Example 1. How to amend tax return You work 3 days a week. How to amend tax return While you work, your 6-year-old child attends a dependent care center, which complies with all state and local regulations. How to amend tax return You can pay the center $150 for any 3 days a week or $250 for 5 days a week. How to amend tax return Your child attends the center 5 days a week. How to amend tax return Your work-related expenses are limited to $150 a week. How to amend tax return Example 2. How to amend tax return The facts are the same as in Example 1 except the center does not offer a 3-day option. How to amend tax return The entire $250 weekly fee may be a work-related expense. How to amend tax return Care of a Qualifying Person To be work-related, your expenses must be to provide care for a qualifying person. How to amend tax return You do not have to choose the least expensive way of providing the care. How to amend tax return The cost of a paid care provider may be an expense for the care of a qualifying person even if another care provider is available at no cost. How to amend tax return Expenses are for the care of a qualifying person only if their main purpose is the person's well-being and protection. How to amend tax return Expenses for household services qualify if part of the services is for the care of qualifying persons. How to amend tax return See Household Services, later. How to amend tax return Expenses not for care. How to amend tax return   Expenses for care do not include amounts you pay for food, lodging, clothing, education, and entertainment. How to amend tax return However, you can include small amounts paid for these items if they are incidental to and cannot be separated from the cost of caring for the qualifying person. How to amend tax return Otherwise, see the discussion of Expenses partly work-related, later. How to amend tax return   Child support payments are not for care and do not qualify for the credit. How to amend tax return Education. How to amend tax return   Expenses for a child in nursery school, preschool, or similar programs for children below the level of kindergarten are expenses for care. How to amend tax return   Expenses to attend kindergarten or a higher grade are not expenses for care. How to amend tax return Do not use these expenses to figure your credit. How to amend tax return   However, expenses for before- or after-school care of a child in kindergarten or a higher grade may be expenses for care. How to amend tax return   Summer school and tutoring programs are not for care. How to amend tax return Example 1. How to amend tax return You take your 3-year-old child to a nursery school that provides lunch and a few educational activities as part of its preschool childcare service. How to amend tax return The lunch and educational activities are incidental to the childcare, and their cost cannot be separated from the cost of care. How to amend tax return You can count the total cost when you figure the credit. How to amend tax return Example 2. How to amend tax return You place your 10-year-old child in a boarding school so you can work full time. How to amend tax return Only the part of the boarding school expense that is for the care of your child is a work-related expense. How to amend tax return You can count that part of the expense in figuring your credit if it can be separated from the cost of education. How to amend tax return You cannot count any part of the amount you pay the school for your child's education. How to amend tax return Care outside your home. How to amend tax return   You can count the cost of care provided outside your home if the care is for your dependent under age 13 or any other qualifying person who regularly spends at least 8 hours each day in your home. How to amend tax return Dependent care center. How to amend tax return   You can count care provided outside your home by a dependent care center only if the center complies with all state and local regulations that apply to these centers. How to amend tax return   A dependent care center is a place that provides care for more than six persons (other than persons who live there) and receives a fee, payment, or grant for providing services for any of those persons, even if the center is not run for profit. How to amend tax return Camp. How to amend tax return   The cost of sending your child to an overnight camp is not considered a work-related expense. How to amend tax return    The cost of sending your child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers or soccer. How to amend tax return Transportation. How to amend tax return   If a care provider takes a qualifying person to or from a place where care is provided, that transportation is for the care of the qualifying person. How to amend tax return This includes transportation by bus, subway, taxi, or private car. How to amend tax return However, transportation not provided by a care provider is not for the care of a qualifying person. How to amend tax return Also, if you pay the transportation cost for the care provider to come to your home, that expense is not for care of a qualifying person. How to amend tax return Fees and deposits. How to amend tax return   Fees you paid to an agency to get the services of a care provider, deposits you paid to an agency or preschool, application fees, and other indirect expenses are work-related expenses if you have to pay them to get care, even though they are not directly for care. How to amend tax return However, a forfeited deposit is not for the care of a qualifying person if care is not provided. How to amend tax return Example 1. How to amend tax return You paid a fee to an agency to get the services of the nanny who cares for your 2-year-old daughter while you work. How to amend tax return The fee you paid is a work-related expense. How to amend tax return Example 2. How to amend tax return You placed a deposit with a preschool to reserve a place for your 3-year-old child. How to amend tax return You later sent your child to a different preschool and forfeited the deposit. How to amend tax return The forfeited deposit is not for care and so is not a work-related expense. How to amend tax return Household Services Expenses you pay for household services meet the work-related expense test if they are at least partly for the well-being and protection of a qualifying person. How to amend tax return Definition. How to amend tax return   Household services are ordinary and usual services done in and around your home that are necessary to run your home. How to amend tax return They include the services of a housekeeper, maid, or cook. How to amend tax return However, they do not include the services of a chauffeur, bartender, or gardener. How to amend tax return Housekeeper. How to amend tax return   In this publication, the term housekeeper refers to any household employee whose services include the care of a qualifying person. How to amend tax return Expenses partly work-related. How to amend tax return   If part of an expense is work-related (for either household services or the care of a qualifying person) and part is for other purposes, you have to divide the expense. How to amend tax return To figure your credit, count only the part that is work-related. How to amend tax return However, you do not have to divide the expense if only a small part is for other purposes. How to amend tax return Example. How to amend tax return You pay a housekeeper to care for your 9-year-old and 15-year-old children so you can work. How to amend tax return The housekeeper spends most of the time doing normal household work and spends 30 minutes a day driving you to and from work. How to amend tax return You do not have to divide the expenses. How to amend tax return You can treat the entire expense of the housekeeper as work-related because the time spent driving is minimal. How to amend tax return Nor do you have to divide the expenses between the two children, even though the expenses are partly for the 15-year-old child who is not a qualifying person, because the expense is also partly for the care of your 9-year-old child, who is a qualifying person. How to amend tax return However, the dollar limit (discussed later) is based on one qualifying person, not two. How to amend tax return Meals and lodging provided for housekeeper. How to amend tax return   If you have expenses for meals that your housekeeper eats in your home because of his or her employment, count these as work-related expenses. How to amend tax return If you have extra expenses for providing lodging in your home to the housekeeper, count these as work-related expenses also. How to amend tax return Example. How to amend tax return To provide lodging to the housekeeper, you move to an apartment with an extra bedroom. How to amend tax return You can count the extra rent and utility expenses for the housekeeper's bedroom as work-related. How to amend tax return However, if your housekeeper moves into an existing bedroom in your home, you can count only the extra utility expenses as work-related. How to amend tax return Taxes paid on wages. How to amend tax return   The taxes you pay on wages for qualifying child and dependent care services are work-related expenses. How to amend tax return For more information on a household employer's tax responsibilities, see Employment Taxes for Household Employers, later. How to amend tax return Payments to Relatives or Dependents You can count work-related payments you make to relatives who are not your dependents, even if they live in your home. How to amend tax return However, do not count any amounts you pay to: A dependent for whom you (or your spouse if filing jointly) can claim an exemption, Your child who was under age 19 at the end of the year, even if he or she is not your dependent, A person who was your spouse any time during the year, or The parent of your qualifying person if your qualifying person is your child and under age 13. How to amend tax return Joint Return Test Generally, married couples must file a joint return to take the credit. How to amend tax return However, if you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. How to amend tax return Legally separated. How to amend tax return   You are not considered married if you are legally separated from your spouse under a decree of divorce or separate maintenance. How to amend tax return You may be eligible to take the credit on your return using head of household filing status. How to amend tax return Married and living apart. How to amend tax return   You are not considered married and are eligible to take the credit if all the following apply. How to amend tax return You file a return apart from your spouse. How to amend tax return Your home is the home of a qualifying person for more than half the year. How to amend tax return You pay more than half the cost of keeping up your home for the year. How to amend tax return Your spouse does not live in your home for the last 6 months of the year. How to amend tax return Costs of keeping up a home. How to amend tax return   The costs of keeping up a home normally include property taxes, mortgage interest, rent, utility charges, home repairs, insurance on the home, and food eaten at home. How to amend tax return   The costs of keeping up a home do not include payments for clothing, education, medical treatment, vacations, life insurance, transportation, or mortgage principal. How to amend tax return   They also do not include the purchase, permanent improvement, or replacement of property. How to amend tax return For example, you cannot include the cost of replacing a water heater. How to amend tax return However, you can include the cost of repairing a water heater. How to amend tax return Death of spouse. How to amend tax return   If your spouse died during the year and you do not remarry before the end of the year, you generally must file a joint return to take the credit. How to amend tax return If you do remarry before the end of the year, the credit can be claimed on your deceased spouse's own return. How to amend tax return Provider Identification Test You must identify all persons or organizations that provide care for your child or dependent. How to amend tax return Use Form 2441, Part I, to show the information. How to amend tax return If you do not have any care providers and you are filing Form 2441 only to report taxable income in Part III, enter “none” in line 1, column (a). How to amend tax return Information needed. How to amend tax return   To identify the care provider, you must give the provider's: Name, Address, and Taxpayer identification number. How to amend tax return    If the care provider is an individual, the taxpayer identification number is his or her social security number or individual taxpayer identification number. How to amend tax return If the care provider is an organization, then it is the employer identification number (EIN). How to amend tax return   You do not have to show the taxpayer identification number if the care provider is a tax-exempt organization (such as a church or school). How to amend tax return In this case, enter “Tax-Exempt” in the space where Form 2441 asks for the number. How to amend tax return   If you cannot provide all of the information or the information is incorrect, you must be able to show that you used due diligence (discussed later) in trying to furnish the necessary information. How to amend tax return Getting the information. How to amend tax return    You can use Form W-10, Dependent Care Provider's Identification and Certification, to request the required information from the care provider. How to amend tax return If you do not use Form W-10, you can get the information from one of the other sources listed in the instructions for Form W-10, including: A copy of the provider's social security card, A copy of the provider's completed Form W-4, Employee's Withholding Allowance Certificate, if he or she is your household employee, A copy of the statement furnished by your employer if the provider is your employer's dependent care plan, or A letter or invoice from the provider if it shows the necessary information. How to amend tax return    You should keep this information with your tax records. How to amend tax return Do not send Form W-10 (or other document containing this information) to the Internal Revenue Service. How to amend tax return Due diligence. How to amend tax return   If the care provider information you give is incorrect or incomplete, your credit may not be allowed. How to amend tax return However, if you can show that you used due diligence in trying to supply the information, you can still claim the credit. How to amend tax return   You can show due diligence by getting and keeping the provider's completed Form W-10 or one of the other sources of information just listed. How to amend tax return Care providers can be penalized if they do not provide this information to you or if they provide incorrect information. How to amend tax return Provider refusal. How to amend tax return    If the provider refuses to give you the identifying information, you should report on Form 2441 whatever information you have (such as the name and address). How to amend tax return Enter “See Attached Statement” in the columns calling for the information you do not have. How to amend tax return Then attach a statement explaining that you requested the information from the care provider, but the provider did not give you the information. How to amend tax return Be sure to write your name and social security number on this statement. How to amend tax return The statement will show that you used due diligence in trying to furnish the necessary information. How to amend tax return U. How to amend tax return S. How to amend tax return citizens and resident aliens living abroad. How to amend tax return   If you are living abroad, your care provider may not have, and may not be required to get, a U. How to amend tax return S. How to amend tax return taxpayer identification number (for example, an SSN or an EIN). How to amend tax return If so, enter “LAFCP” (Living Abroad Foreign Care Provider) in the space for the care provider's taxpayer identification number. How to amend tax return How To Figure the Credit Your credit is a percentage of your work-related expenses. How to amend tax return Your expenses are subject to the earned income limit and the dollar limit. How to amend tax return The percentage is based on your adjusted gross income. How to amend tax return Figuring Total Work-Related Expenses To figure the credit for 2013 work-related expenses, count only those you paid by December 31, 2013. How to amend tax return Expenses prepaid in an earlier year. How to amend tax return   If you pay for services before they are provided, you can count the prepaid expenses only in the year the care is received. How to amend tax return Claim the expenses for the later year as if they were actually paid in that later year. How to amend tax return Expenses not paid until the following year. How to amend tax return   Do not count 2012 expenses that you paid in 2013 as work-related expenses for 2013. How to amend tax return You may be able to claim an additional credit for them on your 2013 return, but you must figure it separately. How to amend tax return See Payments for prior year's expenses under Amount of Credit, later. How to amend tax return If you had expenses in 2013 that you did not pay until 2014, you cannot count them when figuring your 2013 credit. How to amend tax return You may be able to claim a credit for them on your 2014 return. How to amend tax return Expenses reimbursed. How to amend tax return   If a state social services agency pays you a nontaxable amount to reimburse you for some of your child and dependent care expenses, you cannot count the expenses that are reimbursed as work-related expenses. How to amend tax return Example. How to amend tax return You paid work-related expenses of $3,000. How to amend tax return You are reimbursed $2,000 by a state social services agency. How to amend tax return You can use only $1,000 to figure your credit. How to amend tax return Medical expenses. How to amend tax return   Some expenses for the care of qualifying persons who are not able to care for themselves may qualify as work-related expenses and also as medical expenses. How to amend tax return You can use them either way, but you cannot use the same expenses to claim both a credit and a medical expense deduction. How to amend tax return   If you use these expenses to figure the credit and they are more than the earned income limit or the dollar limit, discussed later, you can add the excess to your medical expenses. How to amend tax return However, if you use your total expenses to figure your medical expense deduction, you cannot use any part of them to figure your credit. How to amend tax return For information on medical expenses, see Publication 502, Medical and Dental Expenses. How to amend tax return    Amounts excluded from your income under your employer's dependent care benefits plan cannot be used to claim a medical expense deduction. How to amend tax return Dependent Care Benefits If you receive dependent care benefits, your dollar limit for purposes of the credit may be reduced. How to amend tax return See Reduced Dollar Limit, later. How to amend tax return But, even if you cannot take the credit, you may be able to take an exclusion or deduction for the dependent care benefits. How to amend tax return Dependent care benefits. How to amend tax return    Dependent care benefits include: Amounts your employer paid directly to either you or your care provider for the care of your qualifying person while you work, The fair market value of care in a daycare facility provided or sponsored by your employer, and Pre-tax contributions you made under a dependent care flexible spending arrangement. How to amend tax return Your salary may have been reduced to pay for these benefits. How to amend tax return If you received benefits as an employee, they should be shown in box 10 of your Form W-2, Wage and Tax Statement. How to amend tax return See Statement for employee, later. How to amend tax return Benefits you received as a partner should be shown in box 13 of your Schedule K-1 (Form 1065) with code O. How to amend tax return   Enter the amount of these benefits on Form 2441, Part III, line 12. How to amend tax return Exclusion or deduction. How to amend tax return   If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. How to amend tax return Your employer can tell you whether your benefit plan qualifies. How to amend tax return To claim the exclusion, you must complete Part III of Form 2441. How to amend tax return You cannot use Form 1040EZ. How to amend tax return   If you are self-employed and receive benefits from a qualified dependent care benefit plan, you are treated as both employer and employee. How to amend tax return Therefore, you would not get an exclusion from wages. How to amend tax return Instead, you would get a deduction on Form 1040, Schedule C, line 14; Schedule E, line 19 or 28; or Schedule F, line 15. How to amend tax return To claim the deduction, you must use Form 2441. How to amend tax return   The amount you can exclude or deduct is limited to the smallest of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). How to amend tax return   The definition of earned income for the exclusion or deduction is the same as the definition used when figuring the credit except that earned income for the exclusion or deduction does not include any dependent care benefits you receive. How to amend tax return    You can choose to include your nontaxable combat pay in earned income when figuring your exclusion or deduction, even if you choose not to include it in earned income for the earned income credit or the credit for child and dependent care expenses. How to amend tax return Statement for employee. How to amend tax return   Your employer must give you a Form W-2 (or similar statement), showing in box 10 the total amount of dependent care benefits provided to you during the year under a qualified plan. How to amend tax return Your employer will also include any dependent care benefits over $5,000 in your wages shown on your Form W-2 in box 1. How to amend tax return Effect of exclusion on credit. How to amend tax return   If you exclude dependent care benefits from your income, the amount of the excluded benefits: Is not included in your work-related expenses, and Reduces the dollar limit, discussed later. How to amend tax return Earned Income Limit The amount of work-related expenses you use to figure your credit cannot be more than: Your earned income for the year, if you are single at the end of the year, or The smaller of your or your spouse's earned income for the year if you are married at the end of the year. How to amend tax return Earned income for the purpose of figuring the credit is defined under Earned Income Test, earlier. How to amend tax return For purposes of item (2), use your spouse's earned income for the entire year, even if you were married for only part of the year. How to amend tax return Example. How to amend tax return You remarried on December 3. How to amend tax return Your earned income for the year was $18,000. How to amend tax return Your new spouse's earned income for the year was $2,000. How to amend tax return You paid work-related expenses of $3,000 for the care of your 5-year-old child and qualified to claim the credit. How to amend tax return The amount of expenses you use to figure your credit cannot be more than $2,000 (the smaller of your earned income or that of your spouse). How to amend tax return Separated spouse. How to amend tax return   If you are legally separated or married and living apart from your spouse (as described under Joint Return Test, earlier), you are not considered married for purposes of the earned income limit. How to amend tax return Use only your income in figuring the earned income limit. How to amend tax return Surviving spouse. How to amend tax return   If your spouse died during the year and you file a joint return as a surviving spouse, you may, but are not required to, take into account the earned income of your spouse who died during the year. How to amend tax return Community property laws. How to amend tax return   Disregard community property laws when you figure earned income for this credit. How to amend tax return Self-employment earnings. How to amend tax return   If you are self-employed, include your net earnings in earned income. How to amend tax return For purposes of the child and dependent care credit, net earnings from self-employment generally means the amount from Schedule SE (either Section A or Section B), line 3, minus any deduction for self-employment tax on Form 1040 or Form 1040NR, line 27. How to amend tax return Include your self-employment earnings in earned income, even if they are less than $400 and you did not file Schedule SE. How to amend tax return Clergy or church employee. How to amend tax return   If you are a member of the clergy or a church employee, see the Instructions for Form 2441 for details. How to amend tax return Statutory employee. How to amend tax return   If you filed Schedule C (Form 1040) or C-EZ (Form 1040) to report income as a statutory employee, also include as earned income the amount from line 1 of that Schedule C (Form 1040) or C-EZ (Form 1040). How to amend tax return Net loss. How to amend tax return   You must reduce your earned income by any net loss from self-employment. How to amend tax return Optional method if earnings are low or a net loss. How to amend tax return   If your net earnings from self-employment are low or you have a net loss, you may be able to figure your net earnings by using an optional method instead of the regular method. How to amend tax return Get Publication 334, Tax Guide for Small Business, for details. How to amend tax return If you use an optional method to figure net earnings for self-employment tax purposes, include those net earnings in your earned income for this credit. How to amend tax return In this case, subtract any deduction you claimed on Form 1040 or Form 1040NR, line 27, from the total of the amounts on Schedule SE, Section B, lines 3 and 4b, to figure your net earnings. How to amend tax return You or your spouse is a student or not able to care for self. How to amend tax return   Your spouse who is either a full-time student or not able to care for himself or herself is treated as having earned income. How to amend tax return His or her earned income for each month is considered to be at least $250 if there is one qualifying person in your home, or at least $500 if there are two or more. How to amend tax return Spouse works. How to amend tax return   If your spouse works during that month, use the higher of $250 (or $500) or his or her actual earned income for that month. How to amend tax return Spouse qualifies for part of month. How to amend tax return   If your spouse is a full-time student or not able to care for himself or herself for only part of a month, the full $250 (or $500) still applies for that month. How to amend tax return You are a student or not able to care for self. How to amend tax return   These rules also apply if you are a student or not able to care for yourself and are filing a joint return. How to amend tax return For each month or part of a month you are a student or not able to care for yourself, your earned income is considered to be at least $250 (or $500). How to amend tax return If you also work during that month, use the higher of $250 (or $500) or your actual earned income for that month. How to amend tax return Both spouses qualify. How to amend tax return   If, in the same month, both you and your spouse are either full-time students or not able to care for yourselves, only one spouse can be considered to have this earned income of $250 (or $500) for that month. How to amend tax return Example. How to amend tax return Jim works and keeps up a home for himself and his wife Sharon. How to amend tax return Because of an accident, Sharon is not able to care for herself for 11 months during the tax year. How to amend tax return During the 11 months, Jim pays $3,300 of work-related expenses for Sharon's care. How to amend tax return These expenses also qualify as medical expenses. How to amend tax return Their adjusted gross income is $29,000 and the entire amount is Jim's earned income. How to amend tax return Jim and Sharon's earned income limit is the smallest of the following amounts. How to amend tax return   Jim and Sharon's Earned Income Limit   1) Work-related expenses Jim paid $   3,300   2) Jim's earned income $   29,000   3) Income considered earned by Sharon (11 × $250) $    2,750   Jim and Sharon can use $2,750 to figure the credit and treat the balance of $550 ($3,300 − $2,750) as a medical expense. How to amend tax return However, if they use the $3,300 first as a medical expense, they cannot use any part of that amount to figure the credit. How to amend tax return Dollar Limit There is a dollar limit on the amount of your work-related expenses you can use to figure the credit. How to amend tax return This limit is $3,000 for one qualifying person, or $6,000 for two or more qualifying persons. How to amend tax return If you paid work-related expenses for the care of two or more qualifying persons, the applicable dollar limit is $6,000. How to amend tax return This limit does not need to be divided equally among them. How to amend tax return For example, if your work-related expenses for the care of one qualifying person are $3,200 and your work-related expenses for another qualifying person are $2,800, you can use the total, $6,000, when figuring the credit. How to amend tax return Yearly limit. How to amend tax return   The dollar limit is a yearly limit. How to amend tax return The amount of the dollar limit remains the same no matter how long, during the year, you have a qualifying person in your household. How to amend tax return Use the $3,000 limit if you paid work-related expenses for the care of one qualifying person at any time during the year. How to amend tax return Use $6,000 if you paid work-related expenses for the care of more than one qualifying person at any time during the year. How to amend tax return Example 1. How to amend tax return You pay $500 a month for after-school care for your son. How to amend tax return He turned 13 on May 1 and is no longer a qualifying person. How to amend tax return You can use the $2,000 of expenses for his care January through April to figure your credit because it is not more than the $3,000 yearly limit. How to amend tax return Example 2. How to amend tax return In July of this year, to permit your spouse to begin a new job, you enrolled your 3-year-old daughter in a nursery school that provides preschool childcare. How to amend tax return You paid $300 per month for the childcare. How to amend tax return You can use the full $1,800 you paid ($300 × 6 months) as qualified expenses because it is not more than the $3,000 yearly limit. How to amend tax return Reduced Dollar Limit If you received dependent care benefits that you exclude or deduct from your income, you must subtract that amount from the dollar limit that applies to you. How to amend tax return Your reduced dollar limit is figured on Form 2441, Part III. How to amend tax return See Dependent Care Benefits, earlier, for information on excluding or deducting these benefits. How to amend tax return Example 1. How to amend tax return George is a widower with one child and earns $24,000 a year. How to amend tax return He pays work-related expenses of $2,900 for the care of his 4-year-old child and qualifies to claim the credit for child and dependent care expenses. How to amend tax return His employer pays an additional $1,000 under a qualified dependent care benefit plan. How to amend tax return This $1,000 is excluded from George's income. How to amend tax return Although the dollar limit for his work-related expenses is $3,000 (one qualifying person), George figures his credit on only $2,000 of the $2,900 work-related expenses he paid. How to amend tax return This is because his dollar limit is reduced as shown next. How to amend tax return   George's Reduced Dollar Limit 1) Maximum allowable expenses for one qualifying person $3,000 2) Minus: Dependent care benefits George excludes from income −1,000 3) Reduced dollar limit on expenses George can use for the credit $2,000 Example 2. How to amend tax return Randall is married and both he and his wife are employed. How to amend tax return Each has earned income in excess of $6,000. How to amend tax return They have two children, Anne and Andy, ages 2 and 4, who attend a daycare facility licensed and regulated by the state. How to amend tax return Randall's work-related expenses are $6,000 for the year. How to amend tax return Randall's employer has a dependent care assistance program as part of its cafeteria plan, which allows employees to make pre-tax contributions to a dependent care flexible spending arrangement. How to amend tax return Randall has elected to take the maximum $5,000 exclusion from his salary to cover dependent care expenses through this program. How to amend tax return Although the dollar limit for his work-related expenses is $6,000 (two or more qualifying persons), Randall figures his credit on only $1,000 of the $6,000 work-related expense paid. How to amend tax return This is because his dollar limit is reduced as shown next. How to amend tax return   Randall's Reduced Dollar Limit 1) Maximum allowable expenses for two qualifying persons $6,000 2) Minus: Dependent care benefits selected from employer's cafeteria plan and  excluded from Randall's income −5,000 3) Reduced dollar limit on work-related expenses Randall can use for the credit $1,000 Amount of Credit To determine the amount of your credit, multiply your work-related expenses (after applying the earned income and dollar limits) by a percentage. How to amend tax return This percentage depends on your adjusted gross income shown on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37. How to amend tax return The following table shows the percentage to use based on adjusted gross income. How to amend tax return   IF your adjusted gross income is: THEN the       Over:       But not over:   percentage is:       $0   —   $15,000   35%       15,000   —   17,000   34%       17,000   —   19,000   33%       19,000   —   21,000   32%       21,000   —   23,000   31%       23,000   —   25,000   30%       25,000   —   27,000   29%       27,000   —   29,000   28%       29,000   —   31,000   27%       31,000   —   33,000   26%       33,000   —   35,000   25%       35,000   —   37,000   24%       37,000   —   39,000   23%       39,000   —   41,000   22%       41,000   —   43,000   21%       43,000   —   No limit   20%   To qualify for the credit, you must have one or more qualifying persons. How to amend tax return You should show the expenses for each person on Form 2441, line 2, column (c). How to amend tax return However, it is possible a qualifying person could have no expenses and a second qualifying person could have expenses exceeding $3,000. How to amend tax return You should list -0- for the one person and the actual amount for the second person. How to amend tax return The $6,000 limit that applies to two or more qualifying persons would still be used to compute your credit unless you already excluded or deducted, in Part III of Form 2441, certain dependent care benefits paid to you (or on your behalf) by your employer. How to amend tax return Example. How to amend tax return Roger and Megan Paris have two qualifying children. How to amend tax return They received $1,000 of dependent care benefits from Megan's employer during 2013, but they incurred a total of $19,500 of child and dependent care expenses. How to amend tax return They complete Part III of Form 2441 to exclude the $1,000 from their taxable income (offsetting $1,000 of their expenses). How to amend tax return Roger and Megan continue to line 27 to figure their credit using the remaining $18,500 of expenses. How to amend tax return Line 30 tells them to complete line 2 without including any dependent care benefits. How to amend tax return They complete line 2 of Form 2441, listing both Susan and James, as shown in the Line 2 example above. How to amend tax return Line 2 Example (a) Qualifying person's name (b) Qualifying person's social security number (c) Qualified expenses you incurred and paid in 2013 for the person listed in column (a) First Last Susan Paris 123-00-6789 -0- James Paris 987-00-4321 18,500. How to amend tax return 00 All of Susan's expenses were covered by the $1,000 of employer-provided dependent care benefits. How to amend tax return However, their son James has special needs and they paid $18,500 for his care. How to amend tax return Line 3 imposes a $5,000 limit for two or more children ($6,000 limit, minus $1,000 already excluded from income = $5,000) and Roger and Megan continue to complete the form. How to amend tax return Even though line 2 indicates one of the Paris children did not have any dependent care expenses, it does not change the fact that they had two qualifying children for the purposes of Form 2441. How to amend tax return Payments for prior year's expenses. How to amend tax return   If you had work-related expenses in 2012 that you paid in 2013, you may be able to increase the credit on your 2013 return. How to amend tax return Attach a statement to your form showing how you figured the additional amount from 2012. How to amend tax return Then enter “CPYE” (Credit for Prior Year Expenses) and the amount of the credit on the dotted line next to line 9 on Form 2441. How to amend tax return Also enter the name and taxpayer identification number of the person for whom you paid the prior year's expenses. How to amend tax return Then add this credit to the amount on line 9, and replace the amount on line 9 with the total. How to amend tax return See Worksheet A. How to amend tax return Example. How to amend tax return In 2012, Sam and Kate had childcare expenses of $2,600 for their 12-year-old child. How to amend tax return Of the $2,600, they paid $2,000 in 2012 and $600 in 2013. How to amend tax return Their adjusted gross income for 2012 was $30,000. How to amend tax return Sam's earned income of $14,000 was less than Kate's earned income. How to amend tax return A credit for their 2012 expenses paid in 2013 is not allowed in 2012. How to amend tax return It is allowed for the 2013 tax year, but they must use their adjusted gross income for 2012 to compute the amount. How to amend tax return The filled-in Worksheet A they used to figure this credit is shown later. How to amend tax return Sam and Kate add the $162 from line 13 of this worksheet to their 2013 credit and enter the total on their Form 2441, line 9. How to amend tax return They enter “CPYE $162” and their child's name and SSN in the space to the left of line 9. How to amend tax return Worksheet A. How to amend tax return Worksheet for 2012 Expenses Paid in 2013 Use this worksheet to figure the credit you may claim for 2012 expenses paid in 2013. How to amend tax return 1. How to amend tax return   Enter your 2012 qualified expenses paid in 2012 1. How to amend tax return     2. How to amend tax return   Enter your 2012 qualified expenses paid in 2013 2. How to amend tax return     3. How to amend tax return   Add the amounts on lines 1 and 2 3. How to amend tax return     4. How to amend tax return   Enter $3,000 if care was for one qualifying person ($6,000 if for two or more) 4. How to amend tax return     5. How to amend tax return   Enter any dependent care benefits received for 2012 and excluded from your income (from your 2012 Form 2441, line 25) 5. How to amend tax return     6. How to amend tax return   Subtract the amount on line 5 from the amount on line 4 and enter the result 6. How to amend tax return     7. How to amend tax return   Compare your earned income for 2012 and your spouse's earned income for 2012 and enter the smaller amount 7. How to amend tax return     8. How to amend tax return   Compare the amounts on lines 3, 6, and 7 and enter the smallest amount 8. How to amend tax return     9. How to amend tax return   Enter the amount on which you figured the credit for 2012 (from your 2012 Form 2441, line 6) 9. How to amend tax return     10. How to amend tax return   Subtract the amount on line 9 from the amount on line 8 and enter the result. How to amend tax return If zero or less, stop here. How to amend tax return You cannot increase your 2013 credit by any previous year's expenses 10. How to amend tax return     11. How to amend tax return   Enter your 2012 adjusted gross income (from your 2012 Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37) 11. How to amend tax return     12. How to amend tax return   Find your 2012 adjusted gross income in the table below and enter the corresponding decimal amount here 12. How to amend tax return             IF your 2012 adjusted gross income is:   THEN the decimal                 Over:   But not over:     amount is:                 $0 — $15,000     . How to amend tax return 35                 15,000 — 17,000     . How to amend tax return 34                 17,000 — 19,000     . How to amend tax return 33                 19,000 — 21,000     . How to amend tax return 32                 21,000 — 23,000     . How to amend tax return 31                 23,000 — 25,000     . How to amend tax return 30                 25,000 — 27,000     . How to amend tax return 29                 27,000 — 29,000     . How to amend tax return 28                 29,000 — 31,000     . How to amend tax return 27                 31,000 — 33,000     . How to amend tax return 26                 33,000 — 35,000     . How to amend tax return 25                 35,000 — 37,000     . How to amend tax return 24                 37,000 — 39,000     . How to amend tax return 23                 39,000 — 41,000     . How to amend tax return 22                 41,000 — 43,000     . How to amend tax return 21                 43,000 — No limit     . How to amend tax return 20           13. How to amend tax return   Multiply line 10 by line 12. How to amend tax return Add this amount to your 2013 credit and enter the total on your 2013 Form 2441, line 9. How to amend tax return Enter the following on the dotted line next to line 9 of Form 2441: “CPYE” The amount of this credit for a prior year's expenses           Also, attach a statement to your tax return showing the name and taxpayer identification number of the person for whom you paid the prior year's expenses and how you figured the credit 13. How to amend tax return       Worksheet A. How to amend tax return Filled-in Worksheet for 2012 Expenses Paid in 2013 Use this worksheet to figure the credit you may claim for 2012 expenses paid in 2013. How to amend tax return 1. How to amend tax return   Enter your 2012 qualified expenses paid in 2012 1. How to amend tax return   $2,000 2. How to amend tax return   Enter your 2012 qualified expenses paid in 2013 2. How to amend tax return   600 3. How to amend tax return   Add the amounts on lines 1 and 2 3. How to amend tax return   2,600 4. How to amend tax return   Enter $3,000 if care was for one qualifying person ($6,000 if for two or more) 4. How to amend tax return   3,000 5. How to amend tax return   Enter any dependent care benefits received for 2012 and excluded from your income (from your 2012 Form 2441, line 25) 5. How to amend tax return   0 6. How to amend tax return   Subtract the amount on line 5 from the amount on line 4 and enter the result 6. How to amend tax return   3,000 7. How to amend tax return   Compare your earned income for 2012 and your spouse's earned income for 2012 and enter the smaller amount 7. How to amend tax return   14,000 8. How to amend tax return   Compare the amounts on lines 3, 6, and 7 and enter the smallest amount 8. How to amend tax return   2,600 9. How to amend tax return   Enter the amount on which you figured the credit for 2012 (from your 2012 Form 2441, line 6) 9. How to amend tax return   2,000 10. How to amend tax return   Subtract the amount on line 9 from the amount on line 8 and enter the result. How to amend tax return If zero or less, stop here. How to amend tax return You cannot increase your 2013 credit by any previous year's expenses 10. How to amend tax return   600 11. How to amend tax return   Enter your 2012 adjusted gross income (from your 2012 Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37) 11. How to amend tax return   30,000 12. How to amend tax return   Find your 2012 adjusted gross income in the table below and enter the corresponding decimal amount here 12. How to amend tax return   . How to amend tax return 27         IF your 2012 adjusted gross income is:   THEN the decimal                 Over   But not over     amount is:                 $0 — $15,000     . How to amend tax return 35                 15,000 — 17,000     . How to amend tax return 34                 17,000 — 19,000     . How to amend tax return 33                 19,000 — 21,000     . How to amend tax return 32                 21,000 — 23,000     . How to amend tax return 31                 23,000 — 25,000     . How to amend tax return 30                 25,000 — 27,000     . How to amend tax return 29                 27,000 — 29,000     . How to amend tax return 28                 29,000 — 31,000     . How to amend tax return 27                 31,000 — 33,000     . How to amend tax return 26                 33,000 — 35,000     . How to amend tax return 25                 35,000 — 37,000     . How to amend tax return 24                 37,000 — 39,000     . How to amend tax return 23                 39,000 — 41,000     . How to amend tax return 22                 41,000 — 43,000     . How to amend tax return 21                 43,000 — No limit     . How to amend tax return 20           13. How to amend tax return   Multiply line 10 by line 12. How to amend tax return Add this amount to your 2013 credit and enter the total on your 2013 Form 2441, line 9. How to amend tax return Enter the following on the dotted line next to line 9 of Form 2441: “CPYE” The amount of this credit for a prior year's expenses             Also, attach a statement to your tax return showing the name and taxpayer identification number of the person for whom you paid the prior year's expenses and how you figured the credit 13. How to amend tax return   $162   How To Claim the Credit To claim the credit, you can file Form 1040, Form 1040A, or Form 1040NR. How to amend tax return You cannot claim the credit on Form 1040EZ or Form 1040NR-EZ. How to amend tax return Form 1040, Form 1040A, or Form 1040NR. How to amend tax return    You must complete Form 2441 and attach it to your Form 1040, Form 1040A, or Form 1040NR. How to amend tax return Enter the credit on your Form 1040, line 48; Form 1040A, line 29; or Form 1040NR, line 46. How to amend tax return Limit on credit. How to amend tax return    The amount of credit you can claim is limited to your tax. How to amend tax return For more information, see the Instructions for Form 2441. How to amend tax return Tax credit not refundable. How to amend tax return   You cannot get a refund for any part of the credit that is more than this limit. How to amend tax return Recordkeeping. How to amend tax return You should keep records of your work-related expenses. How to amend tax return Also, if your dependent or spouse is not able to care for himself or herself, your records should show both the nature and length of the disability. How to amend tax return Other records you should keep to support your claim for the credit are described under Provider Identification Test, earlier. How to amend tax return Employment Taxes for Household Employers If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer. How to amend tax return If you are a household employer, you will need an employer identification number (EIN) and you may have to pay employment taxes. How to amend tax return If the individuals who work in your home are self-employed, you are not liable for any of the taxes discussed in this section. How to amend tax return Self-employed persons who are in business for themselves are not household employees. How to amend tax return Usually, you are not a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business. How to amend tax return If you use a placement agency that exercises control over what work is done and how it will be done by a babysitter or companion who works in your home, the worker is not your employee. How to amend tax return This control could include providing rules of conduct and appearance and requiring regular reports. How to amend tax return In this case, you do not have to pay employment taxes. How to amend tax return But, if an agency merely gives you a list of sitters and you hire one from that list, and pay the sitter directly, the sitter may be your employee. How to amend tax return If you have a household employee, you may be subject to: Social security and Medicare taxes, Federal unemployment tax, and Federal income tax withholding. How to amend tax return Social security and Medicare taxes are generally withheld from the employee's pay and matched by the employer. How to amend tax return Federal unemployment (FUTA) tax is paid by the employer only and provides for payments of unemployment compensation to workers who have lost their jobs. How to amend tax return Federal income tax is withheld from the employee's total pay if the employee asks you to do so and you agree. How to amend tax return For more information on a household employer's tax responsibilities, see Publication 926 and Schedule H (Form 1040) and its instructions. How to amend tax return State employment tax. How to amend tax return   You may also have to pay state unemployment tax. How to amend tax return Contact your state unemployment tax office for information. How to amend tax return You should also find out whether you need to pay or collect other state employment taxes or carry worker's compensation insurance. How to amend tax return For a list of state unemployment tax agencies, visit the U. How to amend tax return S. How to amend tax return Department of Labor's website. How to amend tax return To find that website, use the link in Publication 926 or search online. How to amend tax return How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. How to amend tax return Free help with your tax return. How to amend tax return   You can get free help preparing your return nationwide from IRS-certified volunteers. How to amend tax return The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. How to amend tax return The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. How to amend tax return Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. How to amend tax return In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. How to amend tax return To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. How to amend tax return gov, download the IRS2Go app, or call 1-800-906-9887. How to amend tax return   As part of the TCE program, AARP offers the Tax-Aide counseling program. How to amend tax return To find the nearest AARP Tax-Aide site, visit AARP's website at www. How to amend tax return aarp. How to amend tax return org/money/taxaide or call 1-888-227-7669. How to amend tax return For more information on these programs, go to IRS. How to amend tax return gov and enter “VITA” in the search box. How to amend tax return Internet. How to amend tax return    IRS. How to amend tax return gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. How to amend tax return Download the free IRS2Go app from the iTunes app store or from Google Play. How to amend tax return Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. How to amend tax return Check the status of your 2013 refund with the Where's My Refund? application on IRS. How to amend tax return gov or download the IRS2Go app and select the Refund Status option. How to amend tax return The IRS issues more than 9 out of 10 refunds in less than 21 days. How to amend tax return Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. How to amend tax return You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. How to amend tax return The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. How to amend tax return Use the Interactive Tax Assistant (ITA) to research your tax questions. How to amend tax return No need to wait on the phone or stand in line. How to amend tax return The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. How to amend tax return When you reach the response screen, you can print the entire interview and the final response for your records. How to amend tax return New subject areas are added on a regular basis. How to amend tax return  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. How to amend tax return gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. How to amend tax return You can use the IRS Tax Map, to search publications and instructions by topic or keyword. How to amend tax return The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. How to amend tax return When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. How to amend tax return Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. How to amend tax return You can also ask the IRS to mail a return or an account transcript to you. How to amend tax return Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. How to amend tax return gov or by calling 1-800-908-9946. How to amend tax return Tax return and tax account transcripts are generally available for the current year and the past three years. How to amend tax return Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. How to amend tax return Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. How to amend tax return If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. How to amend tax return Check the status of your amended return using Where's My Amended Return? Go to IRS. How to amend tax return gov and enter Where's My Amended Return? in the search box. How to amend tax return You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. How to amend tax return It can take up to 3 weeks from the date you mailed it to show up in our system. How to amend tax return Make a payment using one of several safe and convenient electronic payment options available on IRS. How to amend tax return gov. How to amend tax return Select the Payment tab on the front page of IRS. How to amend tax return gov for more information. How to amend tax return Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. How to amend tax return Figure your income tax withholding with the IRS Withholding Calculator on IRS. How to amend tax return gov. How to amend tax return Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. How to amend tax return Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. How to amend tax return gov. How to amend tax return Request an Electronic Filing PIN by going to IRS. How to amend tax return gov and entering Electronic Filing PIN in the search box. How to amend tax return Download forms, instructions and publications, including accessible versions for people with disabilities. How to amend tax return Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. How to amend tax return gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. How to amend tax return An employee can answer questions about your tax account or help you set up a payment plan. How to amend tax return Before you visit, check the Office Locator on IRS. How to amend tax return gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. How to amend tax return If you have a special need, such as a disability, you can request an appointment. How to amend tax return Call the local number listed in the Office Locator, or look in the phone book under Unit
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Understanding Your CP237 Notice

We sent you a replacement refund check.


What you need to do

  • If you have the expired check, please destroy it.
  • When you receive the new check, remember to cash it.

You may want to...

  • Call 1-800-829-3676 (1-800-TAX-FORM) to order forms and publications.

Answers to Common Questions

 

When will I receive my replacement check?
You should receive the replacement check within 30 days.

Can I request that you mail my refund check to an alternate address?
Refund checks are mailed only to the address of record, which is the address provided on the tax return or the result of a permanent address change request submitted after the return is filed.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.


Understanding your notice

Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

Notice CP237, Page 1

Page Last Reviewed or Updated: 07-Aug-2013

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The How To Amend Tax Return

How to amend tax return Publication 1212 - Main Content Table of Contents Definitions Debt Instruments on the OID List Debt Instruments Not on the OID List Information for Brokers and Other MiddlemenShort-Term Obligations Redeemed at Maturity Long-Term Debt Instruments Certificates of Deposit Bearer Bonds and Coupons Backup Withholding Information for Owners of OID Debt InstrumentsExceptions. How to amend tax return Adjustment for premium. How to amend tax return Adjustment for acquisition premium. How to amend tax return Adjustment for market discount. How to amend tax return Form 1099-OID How To Report OID Figuring OID on Long-Term Debt Instruments Figuring OID on Stripped Bonds and Coupons How To Get Tax HelpLow Income Taxpayer Clinics Definitions The following terms are used throughout this publication. How to amend tax return “Original issue discount” is defined first. How to amend tax return The other terms are listed alphabetically. How to amend tax return Original issue discount (OID). How to amend tax return   OID is a form of interest. How to amend tax return It is the excess of a debt instrument's stated redemption price at maturity over its issue price (acquisition price for a stripped bond or coupon). How to amend tax return Zero coupon bonds and debt instruments that pay no stated interest until maturity are examples of debt instruments that have OID. How to amend tax return Accrual period. How to amend tax return   An accrual period is an interval of time used to measure OID. How to amend tax return The length of an accrual period can be 6 months, a year, or some other period, depending on when the debt instrument was issued. How to amend tax return Acquisition premium. How to amend tax return   Acquisition premium is the excess of a debt instrument's adjusted basis immediately after purchase, including purchase at original issue, over the debt instrument's adjusted issue price at that time. How to amend tax return A debt instrument does not have acquisition premium, however, if the debt instrument was purchased at a premium. How to amend tax return See Premium, later. How to amend tax return Adjusted issue price. How to amend tax return   The adjusted issue price of a debt instrument at the beginning of an accrual period is used to figure the OID allocable to that period. How to amend tax return In general, the adjusted issue price at the beginning of the debt instrument's first accrual period is its issue price. How to amend tax return The adjusted issue price at the beginning of any subsequent accrual period is the sum of the issue price and all the OID includible in income before that accrual period minus any payment previously made on the debt instrument, other than a payment of qualified stated interest. How to amend tax return Debt instrument. How to amend tax return   The term “debt instrument” means any instrument or contractual arrangement that constitutes indebtedness under general principles of federal income tax law (including, for example, a bond, debenture, note, certificate, or other evidence of indebtedness). How to amend tax return It generally does not include an annuity contract. How to amend tax return Issue price. How to amend tax return   For debt instruments listed in Section I-A and Section I-B, the issue price generally is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of these instruments was sold. How to amend tax return Market discount. How to amend tax return   Market discount arises when a debt instrument purchased in the secondary market has decreased in value since its issue date, generally because of an increase in interest rates. How to amend tax return An OID debt instrument has market discount if your adjusted basis in the debt instrument immediately after you acquired it (usually its purchase price) was less than the debt instrument's issue price plus the total OID that accrued before you acquired it. How to amend tax return The market discount is the difference between the issue price plus accrued OID and your adjusted basis. How to amend tax return Premium. How to amend tax return   A debt instrument is purchased at a premium if its adjusted basis immediately after purchase is greater than the total of all amounts payable on the debt instrument after the purchase date, other than qualified stated interest. How to amend tax return The premium is the excess of the adjusted basis over the payable amounts. How to amend tax return See Publication 550 for information on the tax treatment of bond premium. How to amend tax return Qualified stated interest. How to amend tax return   In general, qualified stated interest is stated interest that is unconditionally payable in cash or property (other than debt instruments of the issuer) at least annually over the term of the debt instrument at a single fixed rate. How to amend tax return Stated redemption price at maturity. How to amend tax return   A debt instrument's stated redemption price at maturity is the sum of all amounts (principal and interest) payable on the debt instrument other than qualified stated interest. How to amend tax return Yield to maturity (YTM). How to amend tax return   In general, the YTM is the discount rate that, when used in figuring the present value of all principal and interest payments, produces an amount equal to the issue price of the debt instrument. How to amend tax return The YTM is generally shown on the face of the debt instrument or in the literature you receive from your broker. How to amend tax return If you do not have this information, consult your broker, tax advisor, or the issuer. How to amend tax return Debt Instruments on the OID List The OID list on the IRS website can be used by brokers and other middlemen to prepare information returns. How to amend tax return If you own a listed debt instrument, you generally should not rely on the information in the OID list to determine (or compare) the OID to be reported on your tax return. How to amend tax return The OID amounts listed are figured without reference to the price or date at which you acquired the debt instrument. How to amend tax return For information about determining the OID to be reported on your tax return, see the instructions for figuring OID under Information for Owners of OID Debt Instruments, later. How to amend tax return The following discussions explain what information is contained in each section of the list. How to amend tax return Section I. How to amend tax return   This section contains publicly offered, long-term debt instruments. How to amend tax return Section I-A: Corporate Debt Instruments Issued Before 1985. How to amend tax return Section I-B: Corporate Debt Instruments Issued After 1984. How to amend tax return Section I-C: Inflation-Indexed Debt Instruments. How to amend tax return For each publicly offered debt instrument in Section I, the list contains the following information. How to amend tax return The name of the issuer. How to amend tax return The Committee on Uniform Security Identification Procedures (CUSIP) number. How to amend tax return The issue date. How to amend tax return The maturity date. How to amend tax return The issue price expressed as a percent of principal or of stated redemption price at maturity. How to amend tax return The annual stated or coupon interest rate. How to amend tax return (This rate is shown as 0. How to amend tax return 00 if no annual interest payments are provided. How to amend tax return ) The yield to maturity will be added to Section I-B for bonds issued after December 31, 2006. How to amend tax return The total OID accrued up to January 1 of a calendar year. How to amend tax return (This information is not available for every instrument. How to amend tax return ) For long-term debt instruments issued after July 1, 1982, the daily OID for the accrual periods falling in a calendar year and a subsequent year. How to amend tax return The total OID per $1,000 of principal or maturity value for a calendar year and a subsequent year. How to amend tax return Section II. How to amend tax return   This section contains stripped coupons and principal components of U. How to amend tax return S. How to amend tax return Treasury and Government-Sponsored Enterprise debt instruments. How to amend tax return These stripped components are available through the Department of the Treasury's Separate Trading of Registered Interest and Principal of Securities (STRIPS) program and government-sponsored enterprises such as the Resolution Funding Corporation. How to amend tax return This section also includes debt instruments backed by U. How to amend tax return S. How to amend tax return Treasury securities that represent ownership interests in those securities. How to amend tax return   The obligations listed in Section II are arranged by maturity date. How to amend tax return The amounts listed are the total OID for a calendar year per $1,000 of redemption price. How to amend tax return Section III. How to amend tax return   This section contains short-term discount obligations. How to amend tax return Section III-A: Short-Term U. How to amend tax return S. How to amend tax return Treasury Bills. How to amend tax return Section III-B: Federal Home Loan Banks. How to amend tax return Section III-C: Federal National Mortgage Association. How to amend tax return Section III-D: Federal Farm Credit Banks. How to amend tax return Section III-E: Federal Home Loan Mortgage Corporation. How to amend tax return Section III-F: Federal Agricultural Mortgage Corporation. How to amend tax return    Information that supplements Section III-A is available on the Internet at http://www. How to amend tax return treasurydirect. How to amend tax return gov/tdhome. How to amend tax return htm. How to amend tax return   The short-term obligations listed in this section are arranged by maturity date. How to amend tax return For each obligation, the list contains the CUSIP number, maturity date, issue date, issue price (expressed as a percent of principal), and discount to be reported as interest for a calendar year per $1,000 of redemption price. How to amend tax return Brokers and other middlemen should rely on the issue price information in Section III only if they are unable to determine the price actually paid by the owner. How to amend tax return Debt Instruments Not on the OID List The list of debt instruments discussed earlier does not contain the following items. How to amend tax return U. How to amend tax return S. How to amend tax return savings bonds. How to amend tax return Certificates of deposit and other face-amount certificates issued at a discount, including syndicated certificates of deposit. How to amend tax return Obligations issued by tax-exempt organizations. How to amend tax return OID debt instruments that matured or were entirely called by the issuer before the tables were posted on the IRS website. How to amend tax return Mortgage-backed securities and mortgage participation certificates. How to amend tax return Long-term OID debt instruments issued before May 28, 1969. How to amend tax return Short-term obligations, other than the obligations listed in Section III. How to amend tax return Debt instruments issued at a discount by states or their political subdivisions. How to amend tax return REMIC regular interests and CDOs. How to amend tax return Commercial paper and banker's acceptances issued at a discount. How to amend tax return Obligations issued at a discount by individuals. How to amend tax return Foreign obligations not traded in the United States and obligations not issued in the United States. How to amend tax return Information for Brokers and Other Middlemen The following discussions contain specific instructions for brokers and middlemen who hold or redeem a debt instrument for the owner. How to amend tax return In general, you must file a Form 1099 for the debt instrument if the interest or OID to be included in the owner's income for a calendar year totals $10 or more. How to amend tax return You also must file a Form 1099 if you were required to deduct and withhold tax, even if the interest or OID is less than $10. How to amend tax return See Backup Withholding, later. How to amend tax return If you must file a Form 1099, furnish a copy to the owner of the debt instrument by January 31 in the year it is due. How to amend tax return File all your Forms 1099 with the IRS, accompanied by Form 1096, by February 28 in the year it is due (March 31 if you file electronically). How to amend tax return Electronic payee statements. How to amend tax return   You can issue Form 1099-OID electronically with the consent of the recipient. How to amend tax return More information. How to amend tax return   For more information, including penalties for failure to file (or furnish) required information returns or statements, see the General Instructions for Certain Information Returns (Forms 1098, 1099, 3921, 3922, 5498, and W-2G) for the appropriate calendar year. How to amend tax return Short-Term Obligations Redeemed at Maturity If you redeem a short-term discount obligation for the owner at maturity, you must report the discount as interest on Form 1099-INT. How to amend tax return To figure the discount, use the purchase price shown on the owner's copy of the purchase confirmation receipt or similar record, or the price shown in your transaction records. How to amend tax return If you sell the obligation for the owner before maturity, you must file Form 1099-B to reflect the gross proceeds to the seller. How to amend tax return Do not report the accrued discount to the date of sale on either Form 1099-INT or Form 1099-OID. How to amend tax return If the owner's purchase price cannot be determined, figure the discount as if the owner had purchased the obligation at its original issue price. How to amend tax return A special rule is used to determine the original issue price for information reporting on U. How to amend tax return S. How to amend tax return Treasury bills (T-bills) listed in Section III-A. How to amend tax return Under this rule, you treat as the original issue price of the T-bill the noncompetitive (weighted average of accepted auction bids) discount price for the longest-maturity T-bill maturing on the same date as the T-bill being redeemed. How to amend tax return This noncompetitive discount price is the issue price (expressed as a percent of principal) shown in Section III-A. How to amend tax return A similar rule is used to figure the discount on short-term discount obligations issued by the organizations listed in Section III-B through Section III-F. How to amend tax return Example 1. How to amend tax return There are 13-week and 26-week T-bills maturing on the same date as the T-bill being redeemed. How to amend tax return The price actually paid by the owner cannot be established by owner or middleman records. How to amend tax return You treat as the issue price of the T-bill the noncompetitive discount price (expressed as a percent of principal) shown in Section III-A for a 26-week bill maturing on the same date as the T-bill redeemed. How to amend tax return The interest you report on Form 1099-INT is the OID (per $1,000 of principal) shown in Section III-A for that obligation. How to amend tax return Long-Term Debt Instruments If you hold a long-term OID debt instrument as a nominee for the true owner, you generally must file Form 1099-OID. How to amend tax return For this purpose, you can rely on Section I of the OID list to determine the following information. How to amend tax return Whether a debt instrument has OID. How to amend tax return The OID to be reported on the Form 1099-OID. How to amend tax return In general, you must report OID on publicly offered, long-term debt instruments listed in Section I. How to amend tax return You also can report OID on other long-term debt instruments. How to amend tax return Form 1099-OID. How to amend tax return   On Form 1099-OID for a calendar year show the following information. How to amend tax return Box 1. How to amend tax return The OID for the actual dates the owner held the debt instruments during a calendar year. How to amend tax return To determine this amount, see Figuring OID, next. How to amend tax return Box 2. How to amend tax return The qualified stated interest paid or credited during the calendar year. How to amend tax return Interest reported here is not reported on Form 1099-INT. How to amend tax return The qualified stated interest on Treasury inflation-protected securities may be reported on Form 1099-INT in box 3 instead. How to amend tax return Box 3. How to amend tax return Any interest or principal forfeited because of an early withdrawal that the owner can deduct from gross income. How to amend tax return Do not reduce the amounts in boxes 1 and 2 by the forfeiture. How to amend tax return Box 4. How to amend tax return Any backup withholding for this debt instrument. How to amend tax return Box 7. How to amend tax return The CUSIP number, if any. How to amend tax return If there is no CUSIP number, give a description of the debt instrument, including the abbreviation for the stock exchange, the abbreviation used by the stock exchange for the issuer, the coupon rate, and the year of maturity (for example, NYSE XYZ 12. How to amend tax return 50 2006). How to amend tax return If the issuer of the debt instrument is other than the payer, show the name of the issuer in this box. How to amend tax return Box 8. How to amend tax return The OID on a U. How to amend tax return S. How to amend tax return Treasury obligation for the part of the year the owner held the debt instrument. How to amend tax return Box 9. How to amend tax return Investment expenses passed on to holders of a single-class REMIC. How to amend tax return Boxes 10-12. How to amend tax return Use to report any state income tax withheld for this debt instrument. How to amend tax return Figuring OID. How to amend tax return   You can determine the OID on a long-term debt instrument by using either of the following. How to amend tax return Section I of the OID list. How to amend tax return The income tax regulations. How to amend tax return Using Section I. How to amend tax return   If the owner held the debt instrument for the entire calendar year, report the OID shown in Section I for the calendar year. How to amend tax return Because OID is listed for each $1,000 of stated redemption price at maturity, you must adjust the listed amount to reflect the debt instrument's actual stated redemption price at maturity. How to amend tax return For example, if the debt instrument's stated redemption price at maturity is $500, report one-half the listed OID. How to amend tax return   If the owner held the debt instrument for less than the entire calendar year, figure the OID to report as follows. How to amend tax return Look up the daily OID for the first accrual period in the calendar year during which the owner held the debt instrument. How to amend tax return Multiply the daily OID by the number of days the owner held the debt instrument during that accrual period. How to amend tax return Repeat steps (1) and (2) for any remaining accrual periods for the year during which the owner held the debt instrument. How to amend tax return Add the results in steps (2) and (3) to determine the owner's OID per $1,000 of stated redemption price at maturity. How to amend tax return If necessary, adjust the OID in (4) to reflect the debt instrument's stated redemption price at maturity. How to amend tax return Report the result on Form 1099-OID in box 1. How to amend tax return Using the income tax regulations. How to amend tax return   Instead of using Section I to figure OID, you can use the regulations under sections 1272 through 1275 of the Internal Revenue Code. How to amend tax return For example, under the regulations, you can use monthly accrual periods in figuring OID for a debt instrument issued after April 3, 1994, that provides for monthly payments. How to amend tax return (If you use Section I-B, the OID is figured using 6-month accrual periods. How to amend tax return )   For a general explanation of the rules for figuring OID under the regulations, see Figuring OID on Long-Term Debt Instruments under Information for Owners of OID Debt Instruments, later. How to amend tax return Certificates of Deposit If you hold a bank certificate of deposit (CD) as a nominee, you must determine whether the CD has OID and any OID includible in the income of the owner. How to amend tax return You must file an information return showing the reportable interest and OID, if any, on the CD. How to amend tax return These rules apply whether or not you sold the CD to the owner. How to amend tax return Report OID on a CD in the same way as OID on other debt instruments. How to amend tax return See Short-Term Obligations Redeemed at Maturity and Long-Term Debt Instruments, earlier. How to amend tax return Bearer Bonds and Coupons If a coupon from a bearer bond is presented to you for collection before the bond matures, you generally must report the interest on Form 1099-INT. How to amend tax return However, do not report the interest if either of the following apply. How to amend tax return You hold the bond as a nominee for the true owner. How to amend tax return The payee is a foreign person. How to amend tax return See Payments to foreign person under Backup Withholding, later. How to amend tax return Because you cannot assume the presenter of the coupon also owns the bond, you should not report OID on the bond on Form 1099-OID. How to amend tax return The coupon may have been “stripped” (separated) from the bond and separately purchased. How to amend tax return However, if a long-term bearer bond on the OID list is presented to you for redemption upon call or maturity, you should prepare a Form 1099-OID showing the OID for that calendar year, as well as any coupon interest payments collected at the time of redemption. How to amend tax return Backup Withholding If you report OID on Form 1099-OID or interest on Form 1099-INT for a calendar year, you may be required to apply backup withholding to the reportable payment at a rate of 28%. How to amend tax return The backup withholding is deducted at the time a cash payment is made. How to amend tax return See Pub. How to amend tax return 1281, Backup Withholding for Missing and Incorrect Name/TIN(s), for more information. How to amend tax return Backup withholding generally applies in the following situations. How to amend tax return The payee does not give you a taxpayer identification number (TIN). How to amend tax return The IRS notifies you that the payee gave an incorrect TIN. How to amend tax return The IRS notifies you that the payee is subject to backup withholding due to payee underreporting. How to amend tax return For debt instruments acquired after 1983: The payee does not certify, under penalties of perjury, that he or she is not subject to backup withholding under (3), or The payee does not certify, under penalties of perjury, that the TIN given is correct. How to amend tax return However, for short-term discount obligations (other than government obligations), bearer bonds and coupons, and U. How to amend tax return S. How to amend tax return savings bonds, backup withholding applies only if the payee does not give you a TIN or gives you an obviously incorrect number for a TIN. How to amend tax return Short-term obligations. How to amend tax return   Backup withholding applies to OID on a short-term obligation only when the OID is paid at maturity. How to amend tax return However, backup withholding applies to any interest payable before maturity when the interest is paid or credited. How to amend tax return   If the owner of a short-term obligation at maturity is not the original owner and can establish the purchase price of the obligation, the amount subject to backup withholding must be determined by treating the purchase price as the issue price. How to amend tax return However, you can choose to disregard that price if it would require significant manual intervention in the computer or recordkeeping system used for the obligation. How to amend tax return If the purchase price of a listed obligation is not established or is disregarded, you must use the issue price shown in Section III. How to amend tax return Long-term obligations. How to amend tax return   If no cash payments are made on a long-term obligation before maturity, backup withholding applies only at maturity. How to amend tax return The amount subject to backup withholding is the OID includible in the owner's gross income for the calendar year when the obligation matures. How to amend tax return The amount to be withheld is limited to the cash paid. How to amend tax return Registered long-term obligations with cash payments. How to amend tax return   If a registered long-term obligation has cash payments before maturity, backup withholding applies when a cash payment is made. How to amend tax return The amount subject to backup withholding is the total of the qualified stated interest (defined earlier under Definitions) and OID includible in the owner's gross income for the calendar year when the payment is made. How to amend tax return If more than one cash payment is made during the year, the OID subject to withholding for the year must be allocated among the expected cash payments in the ratio that each bears to the total of the expected cash payments. How to amend tax return For any payment, the required withholding is limited to the cash paid. How to amend tax return Payee not the original owner. How to amend tax return   If the payee is not the original owner of the obligation, the OID subject to backup withholding is the OID includible in the gross income of all owners during the calendar year (without regard to any amount paid by the new owner at the time of transfer). How to amend tax return The amount subject to backup withholding at maturity of a listed obligation must be determined using the issue price shown in Section I. How to amend tax return Bearer long-term obligations with cash payments. How to amend tax return   If a bearer long-term obligation has cash payments before maturity, backup withholding applies when the cash payments are made. How to amend tax return For payments before maturity, the amount subject to withholding is the qualified stated interest (defined earlier under Definitions) includible in the owner's gross income for the calendar year. How to amend tax return For a payment at maturity, the amount subject to withholding is only the total of any qualified stated interest paid at maturity and the OID includible in the owner's gross income for the calendar year when the obligation matures. How to amend tax return The required withholding at maturity is limited to the cash paid. How to amend tax return Sales and redemptions. How to amend tax return   If you report the gross proceeds from a sale, exchange, or redemption of a debt instrument on Form 1099-B for a calendar year, you may be required to withhold 28% of the amount reported. How to amend tax return Backup withholding applies in the following situations. How to amend tax return The payee does not give you a TIN. How to amend tax return The IRS notifies you that the payee gave an incorrect TIN. How to amend tax return For debt instruments held in an account opened after 1983, the payee does not certify, under penalties of perjury, that the TIN given is correct. How to amend tax return Payments outside the United States to U. How to amend tax return S. How to amend tax return person. How to amend tax return   The requirements for backup withholding and information reporting apply to payments of OID and interest made outside the United States to a U. How to amend tax return S. How to amend tax return person, a controlled foreign corporation, or a foreign person at least 50% of whose income for the preceding 3-year period is effectively connected with the conduct of a U. How to amend tax return S. How to amend tax return trade or business. How to amend tax return Payments to foreign person. How to amend tax return   The following discussions explain the rules for backup withholding and information reporting on payments to foreign persons. How to amend tax return U. How to amend tax return S. How to amend tax return -source amount. How to amend tax return   Backup withholding and information reporting are not required for payments of U. How to amend tax return S. How to amend tax return -source OID, interest, or proceeds from a sale or redemption of an OID instrument if the payee has given you proof (generally the appropriate Form W-8 or an acceptable substitute) that the payee is a foreign person. How to amend tax return A U. How to amend tax return S. How to amend tax return resident is not a foreign person. How to amend tax return For proof of the payee's foreign status, you can rely on the appropriate Form W-8 or on documentary evidence for payments made outside the United States to an offshore account or, in case of broker proceeds, a sale effected outside the United States. How to amend tax return Receipt of the appropriate Form W-8 does not relieve you from information reporting and backup withholding if you actually know the payee is a U. How to amend tax return S. How to amend tax return person. How to amend tax return   For information about the 28% withholding tax that may apply to payments of U. How to amend tax return S. How to amend tax return -source OID or interest to foreign persons, see Publication 515. How to amend tax return Foreign-source amount. How to amend tax return   Backup withholding and information reporting are not required for payments of foreign-source OID and interest made outside the United States. How to amend tax return However, if the payments are made inside the United States, the requirements for backup withholding and information reporting will apply unless the payee has given you the appropriate Form W-8 or acceptable substitute as proof that the payee is a foreign person. How to amend tax return More information. How to amend tax return   For more information about backup withholding and information reporting on foreign-source amounts or payments to foreign persons, see Regulations section 1. How to amend tax return 6049-5. How to amend tax return Information for Owners of OID Debt Instruments This section is for persons who prepare their own tax returns. How to amend tax return It discusses the income tax rules for figuring and reporting OID on long-term debt instruments. How to amend tax return It also includes a similar discussion for stripped bonds and coupons, such as zero coupon bonds available through the Department of the Treasury's STRIPS program and government-sponsored enterprises such as the Resolution Funding Corporation. How to amend tax return However, the information provided does not cover every situation. How to amend tax return More information can be found in the regulations under sections 1271 through 1275 of the Internal Revenue Code. How to amend tax return Including OID in income. How to amend tax return   Generally, you include OID in income as it accrues each year, whether or not you receive any payments from the debt instrument issuer. How to amend tax return Exceptions. How to amend tax return   The rules for including OID in income as it accrues generally do not apply to the following debt instruments. How to amend tax return U. How to amend tax return S. How to amend tax return savings bonds. How to amend tax return Tax-exempt obligations. How to amend tax return (However, see Tax-Exempt Bonds and Coupons, later. How to amend tax return ) Obligations issued by individuals before March 2, 1984. How to amend tax return Loans of $10,000 or less between individuals who are not in the business of lending money. How to amend tax return (The dollar limit includes outstanding prior loans by the lender to the borrower. How to amend tax return ) This exception does not apply if a principal purpose of the loan is to avoid any federal tax. How to amend tax return   See chapter 1 of Publication 550 for information about the rules for these and other types of discounted debt instruments, such as short-term and market discount obligations. How to amend tax return Publication 550 also discusses rules for holders of REMIC interests and CDOs. How to amend tax return De minimis rule. How to amend tax return   You can treat OID as zero if the total OID on a debt instrument is less than one-fourth of 1% (. How to amend tax return 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. How to amend tax return Debt instruments with de minimis OID are not listed in this publication. How to amend tax return There are special rules to determine the de minimis amount in the case of debt instruments that provide for more than one payment of principal. How to amend tax return Also, the de minimis rules generally do not apply to tax-exempt obligations. How to amend tax return Example 2. How to amend tax return You bought at issuance a 10-year debt instrument with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. How to amend tax return One-fourth of 1% of $1,000 (the stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. How to amend tax return Under the de minimis rule, you can treat the OID as zero because the $20 discount is less than $25. How to amend tax return Example 3. How to amend tax return Assume the same facts as Example 2, except the debt instrument was issued at $950. How to amend tax return You must report part of the $50 OID each year because it is more than $25. How to amend tax return Choice to report all interest as OID. How to amend tax return   Generally, you can choose to treat all interest on a debt instrument acquired after April 3, 1994, as OID and include it in gross income by using the constant yield method. How to amend tax return See Constant yield method under Debt Instruments Issued After 1984, later, for more information. How to amend tax return   For this choice, interest includes stated interest, acquisition discount, OID, de minimis OID, market discount, de minimis market discount, and unstated interest, as adjusted by any amortizable bond premium or acquisition premium. How to amend tax return For more information, see Regulations section 1. How to amend tax return 1272-3. How to amend tax return Purchase after date of original issue. How to amend tax return   A debt instrument you purchased after the date of original issue may have premium, acquisition premium, or market discount. How to amend tax return If so, the OID reported to you on Form 1099-OID may have to be adjusted. How to amend tax return For more information, see Showing an OID adjustment under How To Report OID, later. How to amend tax return The following rules generally do not apply to contingent payment debt instruments. How to amend tax return Adjustment for premium. How to amend tax return   If your debt instrument (other than an inflation-indexed debt instrument) has premium, do not report any OID as ordinary income. How to amend tax return Your adjustment is the total OID shown on your Form 1099-OID. How to amend tax return Adjustment for acquisition premium. How to amend tax return   If your debt instrument has acquisition premium, reduce the OID you report. How to amend tax return Your adjustment is the difference between the OID shown on your Form 1099-OID and the reduced OID amount figured using the rules explained later under Figuring OID on Long-Term Debt Instruments. How to amend tax return Adjustment for market discount. How to amend tax return   If your debt instrument has market discount that you choose to include in income currently, increase the OID you report. How to amend tax return Your adjustment is the accrued market discount for the year. How to amend tax return See Market Discount Bonds in chapter 1 of Publication 550 for information on how to figure accrued market discount and include it in your income currently and for other information about market discount bonds. How to amend tax return If you choose to use the constant yield method to figure accrued market discount, also see Figuring OID on Long-Term Debt Instruments, later. How to amend tax return The constant yield method of figuring accrued OID, explained in those discussions under Constant yield method, is also used to figure accrued market discount. How to amend tax return For more information concerning premium or market discount on an inflation-indexed debt instrument, see Regulations section 1. How to amend tax return 1275-7. How to amend tax return Sale, exchange, or redemption. How to amend tax return   Generally, you treat your gain or loss from the sale, exchange, or redemption of a discounted debt instrument as a capital gain or loss if you held the debt instrument as a capital asset. How to amend tax return If you sold the debt instrument through a broker, you should receive Form 1099-B or an equivalent statement from the broker. How to amend tax return Use the Form 1099-B or other statement and your brokerage statements to complete Form 8949, and Schedule D (Form 1040). How to amend tax return   Your gain or loss is the difference between the amount you realized on the sale, exchange, or redemption and your basis in the debt instrument. How to amend tax return Your basis, generally, is your cost increased by the OID you have included in income each year you held it. How to amend tax return In general, to determine your gain or loss on a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. How to amend tax return   See chapter 4 of Publication 550 for more information about the tax treatment of the sale or redemption of discounted debt instruments. How to amend tax return Example 4. How to amend tax return Larry, a calendar year taxpayer, bought a corporate debt instrument at original issue for $86,235. How to amend tax return 00 on November 1 of Year 1. How to amend tax return The 15-year debt instrument matures on October 31 of Year 16 at a stated redemption price of $100,000. How to amend tax return The debt instrument provides for semiannual payments of interest at 10%. How to amend tax return Assume the debt instrument is a capital asset in Larry's hands. How to amend tax return The debt instrument has $13,765. How to amend tax return 00 of OID ($100,000 stated redemption price at maturity minus $86,235. How to amend tax return 00 issue price). How to amend tax return Larry sold the debt instrument for $90,000 on November 1 of Year 4. How to amend tax return Including the OID he will report for the period he held the debt instrument in Year 4, Larry has included $4,556. How to amend tax return 00 of OID in income and has increased his basis by that amount to $90,791. How to amend tax return 00. How to amend tax return Larry has realized a loss of $791. How to amend tax return 00. How to amend tax return All of Larry's loss is capital loss. How to amend tax return Form 1099-OID The issuer of the debt instrument (or your broker, if you purchased or held the debt instrument through a broker) should give you a copy of Form 1099-OID or a similar statement if the accrued OID for the calendar year is $10 or more and the term of the debt instrument is more than 1 year. How to amend tax return Form 1099-OID shows all OID income in box 1 except OID on a U. How to amend tax return S. How to amend tax return Treasury obligation, which is shown in box 8. How to amend tax return It also shows, in box 2, any qualified stated interest you must include in income. How to amend tax return (However, any qualified stated interest on Treasury inflation-protected securities can be reported on Form 1099-INT in box 3. How to amend tax return ) A copy of Form 1099-OID will be sent to the IRS. How to amend tax return Do not attach your copy to your tax return. How to amend tax return Keep it for your records. How to amend tax return If you are required to file a tax return and you receive Form 1099-OID showing taxable amounts, you must report these amounts on your return. How to amend tax return A 20% accuracy-related penalty may be charged for underpayment of tax due to either negligence or disregard of rules and regulations or substantial understatement of tax. How to amend tax return Form 1099-OID not received. How to amend tax return   If you held an OID debt instrument for a calendar year but did not receive a Form 1099-OID, refer to the discussions under Figuring OID on Long-Term Debt Instruments, later, for information on the OID you must report. How to amend tax return Refiguring OID. How to amend tax return   You must refigure the OID shown on Form 1099-OID, in box 1 or box 8, to determine the proper amount to include in income if one of the following applies. How to amend tax return You bought the debt instrument at a premium or at an acquisition premium. How to amend tax return The debt instrument is a stripped bond or coupon (including zero coupon bonds backed by U. How to amend tax return S. How to amend tax return Treasury securities). How to amend tax return The debt instrument is a contingent payment or inflation-indexed debt instrument. How to amend tax return See the discussions under Figuring OID on Long-Term Debt Instruments or Figuring OID on Stripped Bonds and Coupons, later, for the specific computations. How to amend tax return Refiguring interest. How to amend tax return   If you disposed of a debt instrument or acquired it from another holder between interest dates, see the discussion under Bonds Sold Between Interest Dates in chapter 1 of Publication 550 for information about refiguring the interest shown on Form 1099-OID in box 2. How to amend tax return Nominee. How to amend tax return   If you are the holder of an OID debt instrument and you receive a Form 1099-OID that shows your taxpayer identification number and includes amounts belonging to another person, you are considered a “nominee. How to amend tax return ” You must file another Form 1099-OID for each actual owner, showing the OID for the owner. How to amend tax return Show the owner of the debt instrument as the “recipient” and you as the “payer. How to amend tax return ”   Complete Form 1099-OID and Form 1096 and file the forms with the Internal Revenue Service Center for your area. How to amend tax return You must also give a copy of the Form 1099-OID to the actual owner. How to amend tax return However, you are not required to file a nominee return to show amounts belonging to your spouse. How to amend tax return See the Form 1099 instructions for more information. How to amend tax return   When preparing your tax return, follow the instructions under Showing an OID adjustment in the next discussion. How to amend tax return How To Report OID Generally, you report your taxable interest and OID income on the interest line of Form 1040EZ, Form 1040A, or Form 1040. How to amend tax return Form 1040 or Form 1040A required. How to amend tax return   You must use Form 1040 or Form 1040A (you cannot use Form 1040EZ) under either of the following conditions. How to amend tax return You received a Form 1099-OID as a nominee for the actual owner. How to amend tax return Your total interest and OID income for the year was more than $1,500. How to amend tax return Form 1040 required. How to amend tax return   You must use Form 1040 (you cannot use Form 1040A or Form 1040EZ) if you are reporting more or less OID than the amount shown on Form 1099-OID, other than because you are a nominee. How to amend tax return For example, if you paid a premium or an acquisition premium when you purchased the debt instrument, you must use Form 1040 because you will report less OID than shown on Form 1099-OID. How to amend tax return Also, you must use Form 1040 if you were charged an early withdrawal penalty. How to amend tax return Where to report. How to amend tax return   List each payer's name (if a brokerage firm gave you a Form 1099, list the brokerage firm as the payer) and the amount received from each payer on Form 1040A, Schedule B, Part I, line 1, or Form 1040, Schedule B, line 1. How to amend tax return Include all OID and periodic interest shown on any Form 1099-OID, boxes 1, 2, and 8, you received for the tax year. How to amend tax return Also include any other OID and interest income for which you did not receive a Form 1099. How to amend tax return Showing an OID adjustment. How to amend tax return   If you use Form 1040 to report more or less OID than shown on Form 1099-OID, list the full OID on Schedule B, Part I, line 1, and follow the instructions under 1 or 2, next. How to amend tax return   If you use Form 1040A to report the OID shown on a Form 1099-OID you received as a nominee for the actual owner, list the full OID on Schedule B, Part I, line 1 and follow the instructions under 1. How to amend tax return If the OID, as adjusted, is less than the amount shown on Form 1099-OID, show the adjustment as follows. How to amend tax return Under your last entry on line 1, subtotal all interest and OID income listed on line 1. How to amend tax return Below the subtotal, write “Nominee Distribution” or “OID Adjustment” and show the OID you are not required to report. How to amend tax return Subtract that OID from the subtotal and enter the result on line 2. How to amend tax return If the OID, as adjusted, is more than the amount shown on Form 1099-OID, show the adjustment as follows. How to amend tax return Under your last entry on line 1, subtotal all interest and OID income listed on line 1. How to amend tax return Below the subtotal, write “OID Adjustment” and show the additional OID. How to amend tax return Add that OID to the subtotal and enter the result on line 2. How to amend tax return Figuring OID on Long-Term Debt Instruments How you figure the OID on a long-term debt instrument depends on the date it was issued. How to amend tax return It also may depend on the type of the debt instrument. How to amend tax return There are different rules for each of the following debt instruments. How to amend tax return Corporate debt instruments issued after 1954 and before May 28, 1969, and government debt instruments issued after 1954 and before July 2, 1982. How to amend tax return Corporate debt instruments issued after May 27, 1969, and before July 2, 1982. How to amend tax return Debt instruments issued after July 1, 1982, and before 1985. How to amend tax return Debt instruments issued after 1984 (other than debt instruments described in (5) and (6)). How to amend tax return Contingent payment debt instruments issued after August 12, 1996. How to amend tax return Inflation-indexed debt instruments (including Treasury inflation-protected securities) issued after January 5, 1997. How to amend tax return Zero coupon bonds. How to amend tax return   The rules for figuring OID on zero coupon bonds backed by U. How to amend tax return S. How to amend tax return Treasury securities are discussed under Figuring OID on Stripped Bonds and Coupons, later. How to amend tax return Corporate Debt Instruments Issued After 1954 and Before May 28, 1969, and Government Debt Instruments Issued After 1954 and Before July 2, 1982 If you hold these debt instruments as capital assets, you include OID in income only in the year the debt instrument is sold, exchanged, or redeemed, and only if you have a gain. How to amend tax return The OID, which is taxed as ordinary income, generally equals the following amount. How to amend tax return   number of full months you held the debt instrument  number of full months from date of original issue to date of maturity X original issue discount The balance of the gain is capital gain. How to amend tax return If there is a loss on the sale of the debt instrument, the entire loss is a capital loss and no OID is reported. How to amend tax return Corporate Debt Instruments Issued After May 27, 1969, and Before July 2, 1982 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments. How to amend tax return For information about showing the correct OID on your tax return, see the discussion under How To Report OID, earlier. How to amend tax return Your basis in the debt instrument is increased by the OID you include in income. How to amend tax return Form 1099-OID. How to amend tax return   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. How to amend tax return However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. How to amend tax return See Reduction for acquisition premium, later. How to amend tax return If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-A available at www. How to amend tax return irs. How to amend tax return gov/pub1212 by clicking the link under Recent Developments. How to amend tax return Form 1099-OID not received. How to amend tax return    The OID listed is for each $1,000 of redemption price. How to amend tax return You must adjust the listed amount if your debt instrument has a different principal amount. How to amend tax return For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. How to amend tax return   If you held the debt instrument the entire year, use the OID shown in Section I-A for a calendar year. How to amend tax return (If your debt instrument is not listed in Section I-A, consult the issuer for information about the issue price and the OID that accrued for that year. How to amend tax return ) If you did not hold the debt instrument the entire year, figure your OID using the following method. How to amend tax return Divide the OID shown by 12. How to amend tax return Multiply the result in (1) by the number of complete and partial months (for example, 6½ months) you held the debt instrument during a calendar year. How to amend tax return This is the OID to include in income unless you paid an acquisition premium. How to amend tax return The reduction for acquisition premium is discussed next. How to amend tax return Reduction for acquisition premium. How to amend tax return   If you bought the debt instrument at an acquisition premium, figure the OID to include in income as follows. How to amend tax return Divide the total OID on the debt instrument by the number of complete months, and any part of a month, from the date of original issue to the maturity date. How to amend tax return This is the monthly OID. How to amend tax return Subtract from your cost the issue price and the accumulated OID from the date of issue to the date of purchase. How to amend tax return (If the result is zero or less, stop here. How to amend tax return You did not pay an acquisition premium. How to amend tax return ) Divide the amount figured in (2) by the number of complete months, and any part of a month, from the date of your purchase to the maturity date. How to amend tax return Subtract the amount figured in (3) from the amount figured in (1). How to amend tax return This is the OID to include in income for each month you hold the debt instrument during the year. How to amend tax return Transfers during the month. How to amend tax return   If you buy or sell a debt instrument on any day other than the same day of the month as the date of original issue, the ratable monthly portion of OID for the month of sale is divided between the seller and the buyer according to the number of days each held the debt instrument. How to amend tax return Your holding period for this purpose begins the day you acquire the debt instrument and ends the day before you dispose of it. How to amend tax return Debt Instruments Issued After July 1, 1982, and Before 1985 If you hold these debt instruments as capital assets, you must include part of the OID in income each year you own the debt instruments and increase your basis by the amount included. How to amend tax return For information about showing the correct OID on your tax return, see How To Report OID, earlier. How to amend tax return Form 1099-OID. How to amend tax return   You should receive a Form 1099-OID showing OID for the part of the year you held the debt instrument. How to amend tax return However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. How to amend tax return See Constant yield method and the discussions on acquisition premium that follow, later. How to amend tax return If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-A available at www. How to amend tax return irs. How to amend tax return gov/pub1212 by clicking the link under Recent Developments. How to amend tax return Form 1099-OID not received. How to amend tax return    The OID listed is for each $1,000 of redemption price. How to amend tax return You must adjust the listed amount if your debt instrument has a different principal amount. How to amend tax return For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. How to amend tax return   If you held the debt instrument the entire year, use the OID shown in Section I-A. How to amend tax return (If your instrument is not listed in Section I-A, consult the issuer for information about the issue price, the yield to maturity, and the OID that accrued for that year. How to amend tax return ) If you did not hold the debt instrument the entire year, figure your OID using either of the following methods. How to amend tax return Method 1. How to amend tax return    Divide the total OID for a calendar year by 365 (366 for leap years). How to amend tax return Multiply the result in (1) by the number of days you held the debt instrument during that particular year. How to amend tax return  This computation is an approximation and may result in a slightly higher OID than Method 2. How to amend tax return Method 2. How to amend tax return    Look up the daily OID for the first accrual period you held the debt instrument during a calendar year. How to amend tax return (See Accrual period under Constant yield method, next. How to amend tax return ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. How to amend tax return If you held the debt instrument for part of both accrual periods, repeat (1) and (2) for the second accrual period. How to amend tax return Add the results of (2) and (3). How to amend tax return This is the OID to include in income, unless you paid an acquisition premium. How to amend tax return (The reduction for acquisition premium is discussed later. How to amend tax return ) Constant yield method. How to amend tax return   This discussion shows how to figure OID on debt instruments issued after July 1, 1982, and before 1985, using a constant yield method. How to amend tax return OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. How to amend tax return   Figure the OID allocable to any accrual period as follows. How to amend tax return Multiply the adjusted issue price at the beginning of the accrual period by the debt instrument's yield to maturity. How to amend tax return Subtract from the result in (1) any qualified stated interest allocable to the accrual period. How to amend tax return Accrual period. How to amend tax return   An accrual period for any OID debt instrument issued after July 1, 1982, and before 1985 is each 1-year period beginning on the date of the issue of the obligation and each anniversary thereafter, or the shorter period to maturity for the last accrual period. How to amend tax return Your tax year will usually include parts of two accrual periods. How to amend tax return Daily OID. How to amend tax return   The OID for any accrual period is allocated equally to each day in the accrual period. How to amend tax return You must include in income the sum of the OID amounts for each day you hold the debt instrument during the year. How to amend tax return If your tax year includes parts of two or more accrual periods, you must include the proper daily OID amounts for each accrual period. How to amend tax return Figuring daily OID. How to amend tax return   The daily OID for the initial accrual period is figured using the following formula. How to amend tax return   (ip × ytm) − qsi     p   ip = issue price ytm = yield to maturity qsi = qualified stated interest p = number of days in accrual period         The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. How to amend tax return Reduction for acquisition premium on debt instruments purchased before July 19, 1984. How to amend tax return   If you bought the debt instrument at an acquisition premium before July 19, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. How to amend tax return Figure the daily acquisition premium by dividing the total acquisition premium by the number of days in the period beginning on your purchase date and ending on the day before the date of maturity. How to amend tax return Reduction for acquisition premium on debt instruments purchased after July 18, 1984. How to amend tax return   If you bought the debt instrument at an acquisition premium after July 18, 1984, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. How to amend tax return However, the method of figuring the daily acquisition premium is different from the method described in the preceding discussion. How to amend tax return To figure the daily acquisition premium under this method, multiply the daily OID by the following fraction. How to amend tax return The numerator is the acquisition premium. How to amend tax return The denominator is the total OID remaining for the debt instrument after your purchase date. How to amend tax return Section I-A is available at www. How to amend tax return irs. How to amend tax return gov/pub1212 and clicking the link under Recent Developments. How to amend tax return Using Section I-A to figure accumulated OID. How to amend tax return   If you bought your corporate debt instrument in a calendar year or the subsequent year, you can figure the accumulated OID to the date of purchase by adding the following amounts. How to amend tax return The amount from the “Total OID to January 1, YYYY” column for your debt instrument. How to amend tax return The OID from January 1 of a calendar year to the date of purchase, figured as follows. How to amend tax return Multiply the daily OID for the first accrual period in the calendar year by the number of days from January 1 to the date of purchase, or the end of the accrual period if the debt instrument was purchased in the second or third accrual period. How to amend tax return Multiply the daily OID for each subsequent accrual period by the number of days in the period to the date of purchase or the end of the accrual period, whichever applies. How to amend tax return Add the amounts figured in (2a) and (2b). How to amend tax return Debt Instruments Issued After 1984 If you hold debt instruments issued after 1984, you must report part of the OID in gross income each year that you own the debt instruments. How to amend tax return You must include the OID in gross income whether or not you hold the debt instrument as a capital asset. How to amend tax return Your basis in the debt instrument is increased by the OID you include in income. How to amend tax return For information about showing the correct OID on your tax return, see How To Report OID, earlier. How to amend tax return Form 1099-OID. How to amend tax return   You should receive a Form 1099-OID showing OID for the part of a calendar year you held the debt instrument. How to amend tax return However, if you paid an acquisition premium, you may need to refigure the OID to report on your tax return. How to amend tax return See Constant yield method and Reduction for acquisition premium, later. How to amend tax return   You may also need to refigure the OID for a contingent payment or inflation-indexed debt instrument on which the amount reported on Form 1099-OID is inaccurate. How to amend tax return See Contingent Payment Debt Instruments or Inflation-Indexed Debt Instruments, later. How to amend tax return If you held an OID debt instrument in a calendar year but did not receive a Form 1099-OID, see Form 1099-OID not received, immediately below, and refer to Section I-B available at www. How to amend tax return irs. How to amend tax return gov/pub1212 by clicking the link under Recent Developments. How to amend tax return Form 1099-OID not received. How to amend tax return   The OID listed is for each $1,000 of redemption price. How to amend tax return You must adjust the listed amount if your debt instrument has a different principal amount. How to amend tax return For example, if you have a debt instrument with a $500 principal amount, use one-half the listed amount to figure your OID. How to amend tax return   Use the OID shown in Section I-B for a calendar year if you held the debt instrument the entire year. How to amend tax return (If your debt instrument is not listed in Section I-B, consult the issuer for information about the issue price, the yield to maturity, and the OID that accrued for that year. How to amend tax return ) If you did not hold the debt instrument the entire year, figure your OID as follows. How to amend tax return Look up the daily OID for the first accrual period in which you held the debt instrument during a calendar year. How to amend tax return (See Accrual period under Constant yield method, later. How to amend tax return ) Multiply the daily OID by the number of days you held the debt instrument during that accrual period. How to amend tax return Repeat (1) and (2) for any remaining accrual periods in which you held the debt instrument. How to amend tax return Add the results of (2) and (3). How to amend tax return This is the OID to include in income for that year, unless you paid an acquisition premium. How to amend tax return (The reduction for acquisition premium is discussed later. How to amend tax return ) Tax-exempt bond. How to amend tax return   If you own a tax-exempt bond, figure your basis in the bond by adding to your cost the OID you would have included in income if the bond had been taxable. How to amend tax return You need to make this adjustment to determine if you have a gain or loss on a later disposition of the bond. How to amend tax return In general, use the rules that follow to determine your OID. How to amend tax return Constant yield method. How to amend tax return   This discussion shows how to figure OID on debt instruments issued after 1984 using a constant yield method. How to amend tax return (The special rules that apply to contingent payment debt instruments and inflation-indexed debt instruments are explained later. How to amend tax return ) OID is allocated over the life of the debt instrument through adjustments to the issue price for each accrual period. How to amend tax return   Figure the OID allocable to any accrual period as follows. How to amend tax return Multiply the adjusted issue price at the beginning of the accrual period by a fraction. How to amend tax return The numerator of the fraction is the debt instrument's yield to maturity and the denominator is the number of accrual periods per year. How to amend tax return The yield must be stated appropriately taking into account the length of the particular accrual period. How to amend tax return Subtract from the result in (1) any qualified stated interest allocable to the accrual period. How to amend tax return Accrual period. How to amend tax return   For debt instruments issued after 1984 and before April 4, 1994, an accrual period is each 6-month period that ends on the day that corresponds to the stated maturity date of the debt instrument or the date 6 months before that date. How to amend tax return For example, a debt instrument maturing on March 31 has accrual periods that end on September 30 and March 31 of each calendar year. How to amend tax return Any short period is included as the first accrual period. How to amend tax return   For debt instruments issued after April 3, 1994, accrual periods may be of any length and may vary in length over the term of the debt instrument, as long as each accrual period is no longer than 1 year and all payments are made on the first or last day of an accrual period. How to amend tax return However, the OID listed for these debt instruments in Section I-B has been figured using 6-month accrual periods. How to amend tax return Daily OID. How to amend tax return   The OID for any accrual period is allocated equally to each day in the accrual period. How to amend tax return Figure the amount to include in income by adding the OID for each day you hold the debt instrument during the year. How to amend tax return Since your tax year will usually include parts of two or more accrual periods, you must include the proper daily OID for each accrual period. How to amend tax return If your debt instrument has 6-month accrual periods, your tax year will usually include one full 6-month accrual period and parts of two other 6-month periods. How to amend tax return Figuring daily OID. How to amend tax return   The daily OID for the initial accrual period is figured using the following formula. How to amend tax return   (ip × ytm/n) − qsi     p   ip = issue price ytm = yield to maturity n = number of accrual periods in 1 year qsi = qualified stated interest p = number of days in accrual period       The daily OID for subsequent accrual periods is figured the same way except the adjusted issue price at the beginning of each period is used in the formula instead of the issue price. How to amend tax return Example 5. How to amend tax return On January 1 of Year 1, you bought a 15-year, 10% debt instrument of A Corporation at original issue for $86,235. How to amend tax return 17. How to amend tax return According to the prospectus, the debt instrument matures on December 31 of Year 15 at a stated redemption price of $100,000. How to amend tax return The yield to maturity is 12%, compounded semiannually. How to amend tax return The debt instrument provides for qualified stated interest payments of $5,000 on June 30 and December 31 of each calendar year. How to amend tax return The accrual periods are the 6-month periods ending on each of these dates. How to amend tax return The number of days for the first accrual period (January 1 through June 30) is 181 days (182 for leap years). How to amend tax return The daily OID for the first accrual period is figured as follows. How to amend tax return   ($86,235. How to amend tax return 17 x . How to amend tax return 12/2) – $5,000     181 days     = $174. How to amend tax return 11020 = $. How to amend tax return 96193   181           The adjusted issue price at the beginning of the second accrual period is the issue price plus the OID previously includible in income ($86,235. How to amend tax return 17 + $174. How to amend tax return 11), or $86,409. How to amend tax return 28. How to amend tax return The number of days for the second accrual period (July 1 through December 31) is 184 days. How to amend tax return The daily OID for the second accrual period is figured as follows. How to amend tax return   ($86,409. How to amend tax return 28 x . How to amend tax return 12/2) – $5,000     184 days     = $184. How to amend tax return 55681 = $1. How to amend tax return 00303   184 Since the first and second accrual periods coincide exactly with your tax year, you include in income for Year 1 the OID allocable to the first two accrual periods, $174. How to amend tax return 11 ($. How to amend tax return 95665 × 182 days) plus $184. How to amend tax return 56 ($1. How to amend tax return 00303 × 184 days), or $358. How to amend tax return 67. How to amend tax return Add the OID to the $10,000 interest you report on your income tax return for Year 1. How to amend tax return Example 6. How to amend tax return Assume the same facts as in Example 5, except that you bought the debt instrument at original issue on May 1 of Year 1, with a maturity date of April 30, Year 16. How to amend tax return Also, the interest payment dates are October 31 and April 30 of each calendar year. How to amend tax return The accrual periods are the 6-month periods ending on each of these dates. How to amend tax return The number of days for the first accrual period (May 1 through October 31) is 184 days. How to amend tax return The daily OID for the first accrual period is figured as follows. How to amend tax return   ($86,235. How to amend tax return 17 x . How to amend tax return 12/2) – $5,000     184 days     = $174. How to amend tax return 11020 = $. How to amend tax return 94625   184           The number of days for the second accrual period (November 1 through April 30) is 181 days (182 for leap years). How to amend tax return The daily OID for the second accrual period is figured as follows. How to amend tax return   ($86,409. How to amend tax return 28 x . How to amend tax return 12/2) – $5,000     181 days     = $184. How to amend tax return 55681 = $1. How to amend tax return 01965   181 If you hold the debt instrument through the end of Year 1, you must include $236. How to amend tax return 31 of OID in income. How to amend tax return This is $174. How to amend tax return 11 ($. How to amend tax return 94625 × 184 days) for the period May 1 through October 31 plus $62. How to amend tax return 20 ($1. How to amend tax return 01965 × 61 days) for the period November 1 through December 31. How to amend tax return The OID is added to the $5,000 interest income paid on October 31 of Year 1. How to amend tax return Your basis in the debt instrument is increased by the OID you include in income. How to amend tax return On January 1 of Year 2, your basis in the A Corporation debt instrument is $86,471. How to amend tax return 48 ($86,235. How to amend tax return 17 + $236. How to amend tax return 31). How to amend tax return Short first accrual period. How to amend tax return   You may have to make adjustments if a debt instrument has a short first accrual period. How to amend tax return For example, a debt instrument with 6-month accrual periods that is issued on February 15 and matures on October 31 has a short first accrual period that ends April 30. How to amend tax return (The remaining accrual periods begin on May 1 and November 1. How to amend tax return ) For this short period, figure the daily OID as described earlier, but adjust the yield for the length of the short accrual period. How to amend tax return You may use any reasonable compounding method in determining OID for a short period. How to amend tax return Examples of reasonable compounding methods include continuous compounding and monthly compounding (that is, simple interest within a month). How to amend tax return Consult your tax advisor for more information about making this computation. How to amend tax return   The OID for the final accrual period is the difference between the amount payable at maturity (other than a payment of qualified stated interest) and the adjusted issue price at the beginning of the final accrual period. How to amend tax return Reduction for acquisition premium. How to amend tax return   If you bought the debt instrument at an acquisition premium, figure the OID includible in income by reducing the daily OID by the daily acquisition premium. How to amend tax return To figure the daily acquisition premium, multiply the daily OID by the following fraction. How to amend tax return The numerator is the acquisition premium. How to amend tax return The denominator is the total OID remaining for the debt instrument after your purchase date. How to amend tax return Example 7. How to amend tax return Assume the same facts as in Example 6, except that you bought the debt instrument on November 1 of Year 1 for $87,000, after its original issue on May 1 of Year 1. How to amend tax return The adjusted issue price on November 1 of Year 1 is $86,409. How to amend tax return 28 ($86,235. How to amend tax return 17 + $174. How to amend tax return 11). How to amend tax return In this case, you paid an acquisition premium of $590. How to amend tax return 72 ($87,000 − $86,409. How to amend tax return 28). How to amend tax return The daily OID for the accrual period November 1 through April 30, reduced for the acquisition premium, is figured as follows. How to amend tax return 1) Daily OID on date of purchase (2nd accrual period) $1. How to amend tax return 01965*  2)  Acquisition premium $590. How to amend tax return 72    3)  Total OID remaining after purchase date ($13,764. How to amend tax return 83 − $174. How to amend tax return 11) 13,590. How to amend tax return 72   4) Line 2 ÷ line 3 . How to amend tax return 04346  5)  Line 1 × line 4 . How to amend tax return 04432  6)  Daily OID reduced for the acquisition premium. How to amend tax return Line 1 − line 5 $0. How to amend tax return 97533  * As shown in Example 6. How to amend tax return The total OID to include in income for Year 1 is $59. How to amend tax return 50 ($. How to amend tax return 97533 × 61 days). How to amend tax return Contingent Payment Debt Instruments This discussion shows how to figure OID on a contingent payment debt instrument issued after August 12, 1996, that was issued for cash or publicly traded property. How to amend tax return In general, a contingent payment debt instrument provides for one or more payments that are contingent as to timing or amount. How to amend tax return If you hold a contingent payment bond, you must report OID as it accrues each year. How to amend tax return Because the actual payments on a contingent payment debt instrument cannot be known in advance, issuers and holders cannot use the constant yield method (discussed earlier under Debt Instruments Issued After 1984) without making certain assumptions about the payments on the debt instrument. How to amend tax return To figure OID accruals on contingent payment debt instruments, holders and issuers must use the noncontingent bond method. How to amend tax return Noncontingent bond method. How to amend tax return    Under this method, the issuer must compute a comparable yield for the debt instrument and, based on this yield, construct a projected payment schedule for the instrument, which includes a projected fixed amount for each contingent payment. How to amend tax return In general, holders and issuers accrue OID on this projected payment schedule using the constant yield method that applies to fixed payment debt instruments. How to amend tax return When a contingent payment differs from the projected fixed amount, the holders and issuers make adjustments to their OID accruals. How to amend tax return If the actual contingent payment is larger than expected, both the issuer and the holder increase their OID accruals. How to amend tax return If the actual contingent payment is smaller than expected, holders and issuers generally decrease their OID accruals. How to amend tax return Form 1099-OID. How to amend tax return   The amount shown on Form 1099-OID in box 1 you receive for a contingent payment debt instrument may not be the correct amount to include in income. How to amend tax return For example, the amount may not be correct if the contingent payment was different from the projected amount. How to amend tax return If the amount in box 1 is not correct, you must figure the OID to report on your return under the following rules. How to amend tax return For information on showing an OID adjustment on your tax return, see How To Report OID, earlier. How to amend tax return Figuring OID. How to amend tax return   To figure OID on a contingent payment debt instrument, you need to know the “comparable yield” and “projected payment schedule” of the debt instrument. How to amend tax return The issuer must make these available to you. How to amend tax return Comparable yield. How to amend tax return   The comparable yield generally is the yield at which the issuer would issue a fixed rate debt instrument with terms and conditions similar to those of the contingent payment debt instrument. How to amend tax return The comparable yield is determined as of the debt instrument's issue date. How to amend tax return Projected payment schedule. How to amend tax return   The projected payment schedule for a contingent payment debt instrument includes all fixed payments due under the instrument and a projected fixed amount for each contingent payment. How to amend tax return The projected payment schedule is created by the issuer as of the debt instrument's issue date. How to amend tax return It is used to determine the issuer's and holder's interest accruals and adjustments. How to amend tax return Steps for figuring OID. How to amend tax return   Figure the OID on a contingent payment debt instrument in two steps. How to amend tax return Figure the OID using the constant yield method (discussed earlier under Debt Instruments Issued After 1984 ) that applies to fixed payment debt instruments. How to amend tax return Use the comparable yield as the yield to maturity. How to amend tax return In general, use the projected payment schedule to determine the instrument's adjusted issue price at the beginning of each accrual period (other than the initial period). How to amend tax return Do not treat any amount payable as qualified stated interest. How to amend tax return Adjust the OID in (1) to account for actual contingent payments. How to amend tax return If the contingent payment is greater than the projected fixed amount, you have a positive adjustment. How to amend tax return If the contingent payment is less than the projected fixed amount, you have a negative adjustment. How to amend tax return Net positive adjustment. How to amend tax return   A net positive adjustment exists for a tax year when the total of any positive adjustments described in (2) above for the tax year is more than the total of any negative adjustments for the tax year. How to amend tax return Treat a net positive adjustment as additional OID for the tax year. How to amend tax return Net negative adjustment. How to amend tax return   A net negative adjustment exists for a tax year when the total of any negative adjustments described in (2) above for the tax year is more than the total of any positive adjustments for the tax year. How to amend tax return Use a net negative adjustment to offset OID on the debt instrument for the tax year. How to amend tax return If the net negative adjustment is more than the OID on the debt instrument for the tax year, you can claim the difference as an ordinary loss. How to amend tax return However, the amount you can claim as an ordinary loss is limited to the OID on the debt instrument you included in income in prior tax years. How to amend tax return You must carry forward any net negative adjustment that is more than the total OID for the tax year and prior tax years and treat it as a negative adjustment in the next tax year. How to amend tax return Basis adjustments. How to amend tax return   In general, increase your basis in a contingent payment debt instrument by the OID included in income. How to amend tax return Your basis, however, is not affected by any negative or positive adjustments. How to amend tax return Decrease your basis by any noncontingent payment received and the projected contingent payment scheduled to be received. How to amend tax return Treatment of gain or loss on sale or exchange. How to amend tax return   If you sell a contingent payment debt instrument at a gain, your gain is ordinary income (interest income), even if you hold the debt instrument as a capital asset. How to amend tax return If you sell a contingent payment debt instrument at a loss, your loss is an ordinary loss to the extent of your prior OID accruals on the debt instrument. How to amend tax return If the debt instrument is a capital asset, treat any loss that is more than your prior OID accruals as a capital loss. How to amend tax return See Regulations section 1. How to amend tax return 1275-4 for exceptions to these rules. How to amend tax return Premium, acquisition premium, and market discount. How to amend tax return   The rules for accruing premium, acquisition premium, and market discount do not apply to a contingent payment debt instrument. How to amend tax return See Regulations section 1. How to amend tax return 1275-4 to determine how to account for these items. How to amend tax return Inflation-Indexed Debt Instruments This discussion shows how you figure OID on certain inflation-indexed debt instruments issued after January 5, 1997. How to amend tax return An inflation-indexed debt instrument is generally a debt instrument on which the payments are adjusted for inflation and d