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How To Fill Out A 1040ez

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How To Fill Out A 1040ez

How to fill out a 1040ez 2. How to fill out a 1040ez   Foreclosures and Repossessions Table of Contents Amount realized and ordinary income on a recourse debt. How to fill out a 1040ez Amount realized on a nonrecourse debt. How to fill out a 1040ez If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. How to fill out a 1040ez The foreclosure or repossession is treated as a sale from which you may realize gain or loss. How to fill out a 1040ez This is true even if you voluntarily return the property to the lender. How to fill out a 1040ez If the outstanding loan balance was more than the FMV of the property and the lender cancels all or part of the remaining loan balance, you also may realize ordinary income from the cancellation of debt. How to fill out a 1040ez You must report this income on your return unless certain exceptions or exclusions apply. How to fill out a 1040ez See chapter 1 for more details. How to fill out a 1040ez Borrower's gain or loss. How to fill out a 1040ez    You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale. How to fill out a 1040ez The gain is the difference between the amount realized and your adjusted basis in the transferred property (amount realized minus adjusted basis). How to fill out a 1040ez The loss is the difference between your adjusted basis in the transferred property and the amount realized (adjusted basis minus amount realized). How to fill out a 1040ez For more information on figuring gain or loss from the sale of property, see Gain or Loss From Sales and Exchanges in Publication 544. How to fill out a 1040ez You can use Table 1-1 to figure your ordinary income from the cancellation of debt and your gain or loss from a foreclosure or repossession. How to fill out a 1040ez Amount realized and ordinary income on a recourse debt. How to fill out a 1040ez    If you are personally liable for the debt, the amount realized on the foreclosure or repossession includes the smaller of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The FMV of the transferred property. How to fill out a 1040ez The amount realized also includes any proceeds you received from the foreclosure sale. How to fill out a 1040ez If the FMV of the transferred property is less than the total outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, the difference is ordinary income from the cancellation of debt. How to fill out a 1040ez You must report this income on your return unless certain exceptions or exclusions apply. How to fill out a 1040ez See chapter 1 for more details. How to fill out a 1040ez       Example 1. How to fill out a 1040ez Tara bought a new car for $15,000. How to fill out a 1040ez She made a $2,000 downpayment and borrowed the remaining $13,000 from the dealer's credit company. How to fill out a 1040ez Tara is personally liable for the loan (recourse debt) and the car is pledged as security for the loan. How to fill out a 1040ez On August 1, 2013, the credit company repossessed the car because Tara had stopped making loan payments. How to fill out a 1040ez The balance due after taking into account the payments Tara made was $10,000. How to fill out a 1040ez The FMV of the car when it was repossessed was $9,000. How to fill out a 1040ez On November 15, 2013, the credit company forgave the remaining $1,000 balance on the loan due to insufficient assets. How to fill out a 1040ez In this case, the amount Tara realizes is $9,000. How to fill out a 1040ez This is the smaller of: The $10,000 outstanding debt immediately before the repossession reduced by the $1,000 for which she remains personally liable immediately after the repossession ($10,000 − $1,000 = $9,000), or The $9,000 FMV of the car. How to fill out a 1040ez Tara figures her gain or loss on the repossession by comparing the $9,000 amount realized with her $15,000 adjusted basis. How to fill out a 1040ez She has a $6,000 nondeductible loss. How to fill out a 1040ez After the cancellation of the remaining balance on the loan in November, Tara also has ordinary income from cancellation of debt in the amount of $1,000 (the remaining balance on the $10,000 loan after the $9,000 amount satisfied by the FMV of the repossessed car). How to fill out a 1040ez Tara must report this $1,000 on her return unless one of the exceptions or exclusions described in chapter 1 applies. How to fill out a 1040ez Example 2. How to fill out a 1040ez Lili paid $200,000 for her home. How to fill out a 1040ez She made a $15,000 downpayment and borrowed the remaining $185,000 from a bank. How to fill out a 1040ez Lili is personally liable for the mortgage loan and the house secures the loan. How to fill out a 1040ez In 2013, the bank foreclosed on the mortgage because Lili stopped making payments. How to fill out a 1040ez When the bank foreclosed the mortgage, the balance due was $180,000, the FMV of the house was $170,000, and Lili's adjusted basis was $175,000 due to a casualty loss she had deducted. How to fill out a 1040ez At the time of the foreclosure, the bank forgave $2,000 of the $10,000 debt in excess of the FMV ($180,000 minus $170,000). How to fill out a 1040ez She remained personally liable for the $8,000 balance. How to fill out a 1040ez In this case, Lili has ordinary income from the cancellation of debt in the amount of $2,000. How to fill out a 1040ez The $2,000 income from the cancellation of debt is figured by subtracting the $170,000 FMV of the house from the $172,000 difference between her total outstanding debt immediately before the transfer of property and the amount for which she remains personally liable immediately after the transfer ($180,000 minus $8,000). How to fill out a 1040ez She is able to exclude the $2,000 of canceled debt from her income under the qualified principal residence indebtedness rules discussed earlier. How to fill out a 1040ez Lili must also determine her gain or loss from the foreclosure. How to fill out a 1040ez In this case, the amount that she realizes is $170,000. How to fill out a 1040ez This is the smaller of: (a) the $180,000 outstanding debt immediately before the transfer reduced by the $8,000 for which she remains personally liable immediately after the transfer ($180,000 − $8,000 = $172,000) or (b) the $170,000 FMV of the house. How to fill out a 1040ez Lili figures her gain or loss on the foreclosure by comparing the $170,000 amount realized with her $175,000 adjusted basis. How to fill out a 1040ez She has a $5,000 nondeductible loss. How to fill out a 1040ez Table 1-1. How to fill out a 1040ez Worksheet for Foreclosures and Repossessions Part 1. How to fill out a 1040ez Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). How to fill out a 1040ez Otherwise, go to Part 2. How to fill out a 1040ez 1. How to fill out a 1040ez Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property   2. How to fill out a 1040ez Enter the fair market value of the transferred property   3. How to fill out a 1040ez Ordinary income from the cancellation of debt upon foreclosure or repossession. How to fill out a 1040ez * Subtract line 2 from line 1. How to fill out a 1040ez If less than zero, enter zero. How to fill out a 1040ez Next, go to Part 2   Part 2. How to fill out a 1040ez Gain or loss from foreclosure or repossession. How to fill out a 1040ez   4. How to fill out a 1040ez Enter the smaller of line 1 or line 2. How to fill out a 1040ez If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property   5. How to fill out a 1040ez Enter any proceeds you received from the foreclosure sale   6. How to fill out a 1040ez Add line 4 and line 5   7. How to fill out a 1040ez Enter the adjusted basis of the transferred property   8. How to fill out a 1040ez Gain or loss from foreclosure or repossession. How to fill out a 1040ez Subtract line 7 from line 6   * The income may not be taxable. How to fill out a 1040ez See chapter 1 for more details. How to fill out a 1040ez Amount realized on a nonrecourse debt. How to fill out a 1040ez    If you are not personally liable for repaying the debt secured by the transferred property, the amount you realize includes the full amount of the outstanding debt immediately before the transfer. How to fill out a 1040ez This is true even if the FMV of the property is less than the outstanding debt immediately before the transfer. How to fill out a 1040ez Example 1. How to fill out a 1040ez Tara bought a new car for $15,000. How to fill out a 1040ez She made a $2,000 downpayment and borrowed the remaining $13,000 from the dealer's credit company. How to fill out a 1040ez Tara is not personally liable for the loan (nonrecourse), but pledged the new car as security for the loan. How to fill out a 1040ez On August 1, 2013, the credit company repossessed the car because Tara had stopped making loan payments. How to fill out a 1040ez The balance due after taking into account the payments Tara made was $10,000. How to fill out a 1040ez The FMV of the car when it was repossessed was $9,000. How to fill out a 1040ez The amount Tara realized on the repossession is $10,000. How to fill out a 1040ez That is the outstanding amount of debt immediately before the repossession, even though the FMV of the car is less than $10,000. How to fill out a 1040ez Tara figures her gain or loss on the repossession by comparing the $10,000 amount realized with her $15,000 adjusted basis. How to fill out a 1040ez Tara has a $5,000 nondeductible loss. How to fill out a 1040ez Example 2. How to fill out a 1040ez Lili paid $200,000 for her home. How to fill out a 1040ez She made a $15,000 downpayment and borrowed the remaining $185,000 from a bank. How to fill out a 1040ez She is not personally liable for the loan, but grants the bank a mortgage. How to fill out a 1040ez The bank foreclosed on the mortgage because Lili stopped making payments. How to fill out a 1040ez When the bank foreclosed on the mortgage, the balance due was $180,000, the FMV of the house was $170,000, and Lili's adjusted basis was $175,000 due to a casualty loss she had deducted. How to fill out a 1040ez The amount Lili realized on the foreclosure is $180,000, the outstanding debt immediately before the foreclosure. How to fill out a 1040ez She figures her gain or loss by comparing the $180,000 amount realized with her $175,000 adjusted basis. How to fill out a 1040ez Lili has a $5,000 realized gain. How to fill out a 1040ez See Publication 523 to figure and report any taxable amount. How to fill out a 1040ez Forms 1099-A and 1099-C. How to fill out a 1040ez    A lender who acquires an interest in your property in a foreclosure or repossession should send you Form 1099-A, Acquisition or Abandonment of Secured Property, showing information you need to figure your gain or loss. How to fill out a 1040ez However, if the lender also cancels part of your debt and must file Form 1099-C, the lender can include the information about the foreclosure or repossession on that form instead of on Form 1099-A. How to fill out a 1040ez The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. How to fill out a 1040ez For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. How to fill out a 1040ez Prev  Up  Next   Home   More Online Publications
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City  Street Address  Days/Hours of Service  Telephone* 
Manchester  1000 Elm St. 9th Floor
Manchester, NH 03101 

Monday-Friday - 8:30 a.m. - 4:30 p.m.

 

Services Provided

(603) 668-6763 
Nashua  410 Amherst St.
Nashua, NH 03063 

Monday-Friday - 8:30 a.m. - 4:30 p.m.
(Closed for lunch 1:00 p.m. - 2:00 p.m.)

 

Services Provided

(603) 594-8370 
Portsmouth  80 Daniel St.
Portsmouth, NH 03801 

Monday-Friday - 8:30 a.m. - 4:30 p.m.
(Closed for lunch 1:00 p.m. - 2:00 p.m.)
 

Services Provided

(603) 430-9598 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses). 

For information on where to file your tax return please see Where to File Addresses

The Taxpayer Advocate Service: Call (603)433-0571 in Portsmouth or 1-877-777-4778 elsewhere, or see  Publication 1546, The Taxpayer Advocate Service of the IRS.

For further information, see Tax Topic 104

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
1000 Elm St., Suite 900
Manchester, NH  03101

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The How To Fill Out A 1040ez

How to fill out a 1040ez Listed Property Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Listed Property DefinedPassenger Automobile Defined Dwelling Unit Other Property Used for Transportation Computers and Related Peripheral Equipment Predominant Use TestMeeting the Predominant Use Test Qualified Business Use Method of Allocating Use Applying the Predominant Use Test Deductions After Recovery Period Leased PropertyLessor Lessee What Records Must Be KeptAdequate Records Reporting Information on Form 4562 Deductions in Later Years Appendix Topics - This chapter discusses: Listed property defined The predominant use test What records must be kept Useful Items - You may want to see: Publication 463 Travel, Entertainment, and Gift Expenses 587 Business Use of Your Home (Including Use by Day-Care Providers) 917 Business Use of a Car 946 How To Depreciate Property Form (and Instructions) 2106–EZ Unreimbursed Employee Business Expenses 2106 Employee Business Expenses 4255 Recapture of Investment Credit 4562 Depreciation and Amortization This chapter discusses some special rules and recordkeeping requirements for listed property. How to fill out a 1040ez For complete coverage of the rules, including the rules concerning passenger automobiles, see Publication 946. How to fill out a 1040ez If listed property is not used predominantly (more than 50%) in a qualified business use as discussed inPredominant Use Test, later, the section 179 deduction is not allowable and the property must be depreciated using the straight line method. How to fill out a 1040ez Listed Property Defined Listed property is any of the following: Any passenger automobile (defined later), Any other property used for transportation, Any property of a type generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video recording equipment), Any computer and related peripheral equipment, defined later, unless it is used only at a regular business establishment and owned or leased by the person operating the establishment. How to fill out a 1040ez A regular business establishment includes a portion of a dwelling unit (defined later), if, and only if, that portion is used both regularly and exclusively for business as discussed in Publication 587. How to fill out a 1040ez Any cellular telephone (or similar telecommunication equipment) placed in service or leased in a tax year beginning after 1989. How to fill out a 1040ez Passenger Automobile Defined A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (at 6,000 pounds or less of gross vehicle weight for trucks and vans). How to fill out a 1040ez It includes any part, component, or other item physically attached to the automobile or usually included in the purchase price of an automobile. How to fill out a 1040ez A passenger automobile does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business, and A vehicle used directly in the trade or business of transporting persons or property for compensation or hire. How to fill out a 1040ez Dwelling Unit A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. How to fill out a 1040ez It does not include a unit in a hotel, motel, inn, or other establishment where more than half the units are used on a transient basis. How to fill out a 1040ez Other Property Used for Transportation Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles for transporting persons or goods. How to fill out a 1040ez Listed property does not include: Any vehicle which, by reason of its design, is not likely to be used more than a minimal amount for personal purposes, such as clearly marked police and fire vehicles, ambulances, or hearses used for those purposes, Any vehicle that is designed to carry cargo and that has a loaded gross vehicle weight over 14,000 pounds, bucket trucks (cherry pickers), cement mixers, combines, cranes and derricks, delivery trucks with seating only for the driver (or only for the driver plus a folding jump seat), dump trucks (including garbage trucks), flatbed trucks, forklifts, qualified moving vans, qualified specialized utility repair trucks, and refrigerated trucks, Any passenger bus used for that purpose with a capacity of at least 20 passengers and school buses, Any tractor or other special purpose farm vehicle, and unmarked vehicles used by law enforcement officers if the use is officially authorized, and Any vehicle, such as a taxicab, if substantially all its use is in the trade or business of providing services to transport persons or property for compensation or hire by unrelated persons. How to fill out a 1040ez Computers and Related Peripheral Equipment A computer is a programmable electronically activated device that: Is capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention, and Consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. How to fill out a 1040ez Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. How to fill out a 1040ez Computer or peripheral equipment does not include: Any equipment which is an integral part of property which is not a computer, Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment, and Equipment of a kind, used primarily for the user's amusement or entertainment, such as video games. How to fill out a 1040ez Predominant Use Test If “listed property,” defined earlier, placed in service after June 18, 1984, is not used predominantly (more than 50%) in a qualified business use during any tax year: The section 179 deduction on the property is not allowable, and You must depreciate the property using the straight line method. How to fill out a 1040ez Listed property placed in service before 1987. How to fill out a 1040ez   For listed property placed in service before 1987, depreciate the property over the following period: Class of Property Listed Property Recovery Period 3-year property 5 years 5-year property 12 years 10-year property 25 years 18-year real property 40 years 19-year real property 40 years If you must use the above recovery periods for listed property not used predominantly in a trade or business, use the percentages from Table 16 titled Listed Property Not Used Predominantly (Other Than 18- or 19-year Real Property), and Table 17 for 18- or 19-year real property, near the end of this publication in the Appendix. How to fill out a 1040ez Listed property placed in service after 1986. How to fill out a 1040ez   For information on listed property placed in service after 1986, see Publication 946. How to fill out a 1040ez Meeting the Predominant Use Test Listed property meets the predominant use test for any tax year if its business use is more than 50% of its total use. How to fill out a 1040ez You must allocate the use of any item of listed property used for more than one purpose during the tax year among its various uses. How to fill out a 1040ez The percentage of investment use of listed property cannot be used as part of the percentage of qualified business use to meet the predominant use test. How to fill out a 1040ez However, the combined total of business and investment use is taken into account to figure your depreciation deduction for the property. How to fill out a 1040ez Note: Property does not stop being predominantly used in a qualified business use because of a transfer at death. How to fill out a 1040ez Example. How to fill out a 1040ez Sarah Bradley uses a home computer 50% of the time to manage her investments. How to fill out a 1040ez She also uses the computer 40% of the time in her part-time consumer research business. How to fill out a 1040ez Sarah's home computer is listed property because it is not used at a regular business establishment. How to fill out a 1040ez Because her business use of the computer does not exceed 50%, the computer is not predominantly used in a qualified business use for the tax year. How to fill out a 1040ez Because she does not meet the predominant use test, she cannot elect a section 179 deduction for this property. How to fill out a 1040ez Her combined rate of business/investment use for determining her depreciation deduction is 90%. How to fill out a 1040ez Qualified Business Use A qualified business use is any use in your trade or business. How to fill out a 1040ez However, it does not include: The use of property held merely to produce income (investment use), The leasing of property to any 5% owner or related person (to the point that the property is used by a 5% owner or person related to the owner or lessee of the property), The use of property as compensation for the performance of services by a 5% owner or related person, or The use of property as compensation for the performance of services by any person (other than a5% owner or related person) unless the value of the use is included in that person's gross income for the use of the property and income tax is withheld on that amount where required. How to fill out a 1040ez See Employees, later. How to fill out a 1040ez 5% owner. How to fill out a 1040ez   A 5% owner of a business, other than a corporation, is any person who owns more than 5% of the capital or profits interest in the business. How to fill out a 1040ez   A 5% owner of a corporation is any person who owns, or is considered to own: More than 5% of the outstanding stock of the corporation, or Stock possessing more than 5% of the total combined voting power of all stock in the corporation. How to fill out a 1040ez Related person. How to fill out a 1040ez   A related person is anyone related to a taxpayer as discussed under Related persons, in chapter 2 under Nonqualifying Property in Publication 946. How to fill out a 1040ez Entertainment Use The use of listed property for entertainment, recreation, or amusement purposes is treated as a qualified business use only to the extent that expenses (other than interest and property tax expenses) for its use are deductible as ordinary and necessary business expenses. How to fill out a 1040ez See Publication 463. How to fill out a 1040ez Leasing or Compensatory Use of Aircraft If at least 25% of the total use of any aircraft during the tax year is for a qualified business use, the leasing or compensatory use of the aircraft by a 5% owner or related person is treated as a qualified business use. How to fill out a 1040ez Commuting The use of a vehicle for commuting is not business use, regardless of whether work is performed during the trip. How to fill out a 1040ez Use of Your Passenger Automobile by Another Person If someone else uses your automobile, that use is not business use unless: That use is directly connected with your business, The value of the use is property reported by you as income to the other person and tax is withheld on the income where required, or The value of the use results in a payment of fair market rent. How to fill out a 1040ez Any payment to you for the use of the automobile is treated as a rent payment for 3). How to fill out a 1040ez Employees Any use by an employee of his or her own listed property (or listed property rented by an employee) in performing services as an employee is not business use unless: The use is for the employer's convenience, and The use is required as a condition of employment. How to fill out a 1040ez Use for the employer's convenience. How to fill out a 1040ez   Whether the use of listed property is for the employer's convenience must be determined from all the facts. How to fill out a 1040ez The use is for the employer's convenience if it is for a substantial business reason of the employer. How to fill out a 1040ez The use of listed property during the employee's regular working hours to carry on the employer's business is generally for the employer's convenience. How to fill out a 1040ez Use required as a condition of employment. How to fill out a 1040ez   Whether the use of listed property is a condition of employment depends on all the facts and circumstances. How to fill out a 1040ez The use of property must be required for the employee to perform duties properly. How to fill out a 1040ez The employer need not explicitly require the employee to use the property. How to fill out a 1040ez A mere statement by the employer that the use of the property is a condition of employment is not sufficient. How to fill out a 1040ez Example 1. How to fill out a 1040ez Virginia Sycamore is employed as a courier with We Deliver which provides local courier services. How to fill out a 1040ez She owns and uses a motorcycle to deliver packages to downtown offices. How to fill out a 1040ez We Deliver explicitly requires all delivery persons to own a small car or motorcycle for use in their employment. How to fill out a 1040ez The company reimburses delivery persons for their costs. How to fill out a 1040ez Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. How to fill out a 1040ez Example 2. How to fill out a 1040ez Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. How to fill out a 1040ez He must travel to these sites on a regular basis. How to fill out a 1040ez Uplift does not furnish an automobile or explicitly require him to use his own automobile. How to fill out a 1040ez However, it reimburses him for any costs he incurs in traveling to the various sites. How to fill out a 1040ez The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. How to fill out a 1040ez Method of Allocating Use For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. How to fill out a 1040ez You determine the percentage of qualified business use by dividing the number of miles the vehicle is driven for business purposes during the year by the total number of miles the vehicle is driven for all purposes (including business miles) during the year. How to fill out a 1040ez For other items of listed property, allocate the property's use on the basis of the most appropriate unit of time. How to fill out a 1040ez For example, you can determine the percentage of business use of a computer by dividing the number of hours the computer is used for business purposes during the year by the total number of hours the computer is used for all purposes (including business hours) during the year. How to fill out a 1040ez Applying the Predominant Use Test You must apply the predominant use test for an item of listed property each year of the recovery period. How to fill out a 1040ez First Recovery Year If any item of listed property is not used predominantly in a qualified business use in the year it is placed in service: The property is not eligible for a section 179 deduction, and The depreciation deduction must be figured using the straight line method. How to fill out a 1040ez Note: The required use of the straight line method for an item of listed property that does not meet the predominant use test is not the same as electing the straight line method. How to fill out a 1040ez It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. How to fill out a 1040ez Years After the First Recovery Year If you use listed property predominantly (more than 50%) in a qualified business use in the tax year you place it in service, but not in a subsequent tax year during the recovery period, the following rules apply: Figure depreciation using the straight line method. How to fill out a 1040ez Do this for each year, beginning with the year you no longer use the property predominantly in a qualified business use, and Figure any excess depreciation on the property and add it to: Your gross income, and The adjusted basis of your property. How to fill out a 1040ez See Recapture of excess depreciation, next. How to fill out a 1040ez Recapture of excess depreciation. How to fill out a 1040ez   You must include any excess depreciation in your gross income for the first tax year the property is not predominantly used in a qualified business use. How to fill out a 1040ez Any excess depreciation must also be added to the adjusted basis of your property. How to fill out a 1040ez Excess depreciation is the excess (if any) of: The amount of depreciation allowable for the property (including any section 179 deduction claimed) for tax years before the first tax year the property was not predominantly used in a qualified business use, over The amount of depreciation that would have been allowable for those years if the property were not used predominantly in a qualified business use for the year it was placed in service. How to fill out a 1040ez This means you figure your depreciation using the percentages fromTable 16 or 17. How to fill out a 1040ez For information on investment credit recapture, see the instructions for Form 4255. How to fill out a 1040ez Deductions After Recovery Period When listed property (other than passenger automobiles) is used for business, investment, and personal purposes, no deduction is ever allowable for the personal use. How to fill out a 1040ez In tax years after the recovery period, you must determine if there is any unrecovered basis remaining before you compute the depreciation deduction for that tax year. How to fill out a 1040ez To make this determination, figure the depreciation for earlier tax years as if your property were used 100% for business or investment purposes, beginning with the first tax year in which some or all use is for business or investment. How to fill out a 1040ez See Car Used 50% or Less for Business in Publication 917. How to fill out a 1040ez Leased Property The limitations on cost recovery deductions apply to the rental of listed property. How to fill out a 1040ez The following discussion covers the rules that apply to the lessor (the owner of the property) and the lessee (the person who rents the property from the owner). How to fill out a 1040ez SeeLeasing a Car in Publication 917 for a discussion of leased passenger automobiles. How to fill out a 1040ez Lessor The limitations on cost recovery generally do not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. How to fill out a 1040ez A person is considered regularly engaged in the business of leasing listed property only if contracts for leasing of listed property are entered into with some frequency over a continuous period of time. How to fill out a 1040ez This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of the person's business in its entirety. How to fill out a 1040ez Occasional or incidental leasing activity is insufficient. How to fill out a 1040ez For example, a person leasing only one passenger automobile during a tax year is not regularly engaged in the business of leasing automobiles. How to fill out a 1040ez An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. How to fill out a 1040ez Lessee A lessee of listed property (other than passenger automobiles), must include an amount in gross income called the inclusion amount for the first tax year the property is not used predominantly in a qualified business use. How to fill out a 1040ez Inclusion amount for property leased before 1987. How to fill out a 1040ez   You determine the inclusion amount for property leased after June 18, 1984 and before 1987 by multiplying the fair market value of the property by both the average business/investment use percentage and the applicable percentage. How to fill out a 1040ez You can find the applicable percentages for listed property that is 5- or 10-year recovery property in Tables 19 or 20 in Appendix A of Publication 946. How to fill out a 1040ez   The lease term for listed property other than 18- or 19-year real property, and residential rental or nonresidential real property, includes options to renew. How to fill out a 1040ez For 18- or 19-year real property and residential rental or nonresidential real property that is listed property, the period of the lease does not include any option to renew at fair market value, determined at the time of renewal. How to fill out a 1040ez You treat two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property as one lease. How to fill out a 1040ez Special rules. How to fill out a 1040ez   The lessee adds the inclusion amount to gross income in the next tax year if: The lease term begins within 9 months before the close of the lessee's tax year, The lessee does not use the property predominantly in a qualified business use during that portion of the tax year, and The lease term continues into the lessee's next tax year. How to fill out a 1040ez The lessee determines the inclusion amount by taking into account the average of the business/investment use for both tax years and the applicable percentage for the tax year the lease term begins. How to fill out a 1040ez   If the lease term is less than one year, the amount included in gross income is the amount that bears the same ratio to the additional inclusion amount as the number of days in the lease term bears to 365. How to fill out a 1040ez Maximum inclusion amount. How to fill out a 1040ez   The inclusion amount cannot be more than the sum of the deductible amounts of rent allocable to the lessee's tax year in which the amount must be included in gross income. How to fill out a 1040ez What Records Must Be Kept You cannot take any depreciation or section 179 deduction for the use of listed property (including passenger automobiles) unless you can prove business/investment use with adequate records or sufficient evidence to support your own statements. How to fill out a 1040ez How long to keep records. How to fill out a 1040ez   For listed property, records must be kept for as long as any excess depreciation can be recaptured (included in income). How to fill out a 1040ez Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. How to fill out a 1040ez It is not necessary to record information in an account book, diary, or similar record if the information is already shown on the receipt. How to fill out a 1040ez However, your records should back up your receipts in an orderly manner. How to fill out a 1040ez Elements of Expenditure or Use The records or other documentary evidence must support: The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses, The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year, The date of the expenditure or use, and The business or investment purpose for the expenditure or use. How to fill out a 1040ez Written documents of your expenditure or use are generally better evidence than oral statements alone. How to fill out a 1040ez A written record prepared at or near the time of the expenditure or use has greater value as proof of the expenditure or use. How to fill out a 1040ez A daily log is not required. How to fill out a 1040ez However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time and backed up by other documents is preferable to a statement prepared later. How to fill out a 1040ez Timeliness The elements of an expenditure or use must be recorded at the time you have full knowledge of the elements. How to fill out a 1040ez An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use is generally considered a timely record if in the regular course of business: The statement is submitted by an employee to the employer, or The statement is submitted by an independent contractor to the client or customer. How to fill out a 1040ez For example, a log maintained on a weekly basis, which accounts for use during the week, will be considered a record made at or near the time of use. How to fill out a 1040ez Business Purpose Supported An adequate record of business purpose must generally be in the form of a written statement. How to fill out a 1040ez However, the amount of backup necessary to establish a business purpose depends on the facts and circumstances of each case. How to fill out a 1040ez A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. How to fill out a 1040ez For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. How to fill out a 1040ez Business Use Supported An adequate record contains enough information on each element of every business or investment use. How to fill out a 1040ez The amount of detail required to support the use depends on the facts and circumstances. How to fill out a 1040ez For example, a taxpayer whose only business use of a truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. How to fill out a 1040ez Although an adequate record generally must be written, a record of the business use of listed property, such as a computer or automobile, can be prepared in a computer memory device using a logging program. How to fill out a 1040ez Separate or Combined Expenditures or Uses Each use by you is normally considered a separate use. How to fill out a 1040ez However, repeated uses can be combined as a single item. How to fill out a 1040ez Each expenditure is recorded as a separate item and not combined with other expenditures. How to fill out a 1040ez If you choose, however, amounts spent for the use of listed property during a tax year, such as for gasoline or automobile repairs, can be combined. How to fill out a 1040ez If these expenses are combined, you do not need to support the business purpose of each expense. How to fill out a 1040ez Instead, you can divide the expenses based on the total business use of the listed property. How to fill out a 1040ez Uses which can be considered part of a single use, such as a round trip or uninterrupted business use, can be accounted for by a single record. How to fill out a 1040ez For example, use of a truck to make deliveries at several locations which begin and end at the business premises and can include a stop at the business in between deliveries can be accounted for by a single record of miles driven. How to fill out a 1040ez Use of a passenger automobile by a salesperson for a business trip away from home over a period of time can be accounted for by a single record of miles traveled. How to fill out a 1040ez Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. How to fill out a 1040ez Confidential Information If any of the information on the elements of an expenditure or use is confidential, it does not need to be in the account book or similar record if it is recorded at or near the time of the expenditure or use. How to fill out a 1040ez It must be kept elsewhere and made available as support to the district director on request. How to fill out a 1040ez Substantial Compliance If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the district director's satisfaction, you can establish this element by any evidence the district director deems adequate. How to fill out a 1040ez If you fail to establish that you have substantially complied with the adequate records requirement for an element of an expenditure or use to the district director's satisfaction, you must establish the element: By your own oral or written statement containing detailed information as to the element, and By other evidence sufficient to establish the element. How to fill out a 1040ez If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. How to fill out a 1040ez If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. How to fill out a 1040ez Sampling You can maintain an adequate record for portions of a tax year and use that record to support your business and investment use for the entire tax year if it can be shown by other evidence that the periods for which an adequate record is maintained are representative of use throughout the year. How to fill out a 1040ez Loss of Records When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. How to fill out a 1040ez Reporting Information on Form 4562 If you claim a deduction for any listed property, you must provide the requested information on page 2, Section B of Form 4562. How to fill out a 1040ez If you claim a deduction for any vehicle, you must answer certain questions onpage 2 of Form 4562 to provide information about the vehicle use. How to fill out a 1040ez Employees. How to fill out a 1040ez   Employees claiming the standard mileage rate or actual expenses (including depreciation) must use Form 2106 instead of Part V of Form 4562. How to fill out a 1040ez Employees claiming the standard mileage rate may be able to use Form 2106–EZ. How to fill out a 1040ez Employer who provides vehicles to employees. How to fill out a 1040ez   An employer who provides vehicles to employees must obtain enough information from those employees to provide the requested information onForm 4562. How to fill out a 1040ez   An employer who provides more than five vehicles to employees need not include any information on his or her tax return. How to fill out a 1040ez Instead, the employer must obtain the information from his or her employees and indicate on his or her return that the information was obtained and is being retained. How to fill out a 1040ez   You do not need to provide the information requested on page 2 of Form 4562 if, as an employer: You can satisfy the requirements of a written policy statement for vehicles either not used for personal purposes, or not used for personal purposes other than commuting, or You treat all vehicle use by employees as personal use. How to fill out a 1040ez See the instructions for Form 4562. How to fill out a 1040ez Deductions in Later Years When listed property is used for business, investment, and personal purposes, no deduction is allowable for its personal use either in the current year or any later tax year. How to fill out a 1040ez In later years, you must determine if there is any remaining unadjusted or unrecovered basis before you compute the depreciation deduction for that tax year. How to fill out a 1040ez In making this determination, figure the depreciation deductions for earlier tax years as if the listed property were used 100% for business or investment purposes in those years, beginning with the first tax year in which some or all of the property use is for business or investment. How to fill out a 1040ez For more information about deductions after the recovery period for automobiles, see Publication 917. How to fill out a 1040ez Appendix The following tables are for use in figuring depreciation deductions under the ACRS system. How to fill out a 1040ez Table 1. How to fill out a 1040ez 15-Year Real Property* (Other Than Low-Inclome Housing) Table 3. How to fill out a 1040ez Low-Income Housing* Table 6 - Table 9 Table 6 - Table 9 Table 10 - Table 13 Table 14 - Table 17 Prev  Up  Next   Home   More Online Publications