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Irs E File 2012

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Irs E File 2012

Irs e file 2012 18. Irs e file 2012   Alimony Table of Contents IntroductionSpouse or former spouse. Irs e file 2012 Divorce or separation instrument. Irs e file 2012 Useful Items - You may want to see: General RulesMortgage payments. Irs e file 2012 Taxes and insurance. Irs e file 2012 Other payments to a third party. Irs e file 2012 Instruments Executed After 1984Payments to a third party. Irs e file 2012 Exception. Irs e file 2012 Substitute payments. Irs e file 2012 Specifically designated as child support. Irs e file 2012 Contingency relating to your child. Irs e file 2012 Clearly associated with a contingency. Irs e file 2012 How To Deduct Alimony Paid How To Report Alimony Received Recapture Rule Introduction This chapter discusses the rules that apply if you pay or receive alimony. Irs e file 2012 It covers the following topics. Irs e file 2012 What payments are alimony. Irs e file 2012 What payments are not alimony, such as child support. Irs e file 2012 How to deduct alimony you paid. Irs e file 2012 How to report alimony you received as income. Irs e file 2012 Whether you must recapture the tax benefits of alimony. Irs e file 2012 Recapture means adding back in your income all or part of a deduction you took in a prior year. Irs e file 2012 Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. Irs e file 2012 It does not include voluntary payments that are not made under a divorce or separation instrument. Irs e file 2012 Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. Irs e file 2012 Although this chapter is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony. Irs e file 2012 To be alimony, a payment must meet certain requirements. Irs e file 2012 Different requirements generally apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. Irs e file 2012 This chapter discusses the rules for payments under instruments executed after 1984. Irs e file 2012 If you need the rules for payments under pre-1985 instruments, get and keep a copy of the 2004 version of Publication 504. Irs e file 2012 That was the last year the information on pre-1985 instruments was included in Publication 504. Irs e file 2012 Use Table 18-1 in this chapter as a guide to determine whether certain payments are considered alimony. Irs e file 2012 Definitions. Irs e file 2012   The following definitions apply throughout this chapter. Irs e file 2012 Spouse or former spouse. Irs e file 2012   Unless otherwise stated, the term “spouse” includes former spouse. Irs e file 2012 Divorce or separation instrument. Irs e file 2012   The term “divorce or separation instrument” means: A decree of divorce or separate maintenance or a written instrument incident to that decree, A written separation agreement, or A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. Irs e file 2012 This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement). Irs e file 2012 Useful Items - You may want to see: Publication 504 Divorced or Separated Individuals General Rules The following rules apply to alimony regardless of when the divorce or separation instrument was executed. Irs e file 2012 Payments not alimony. Irs e file 2012   Not all payments under a divorce or separation instrument are alimony. Irs e file 2012 Alimony does not include: Child support, Noncash property settlements, Payments that are your spouse's part of community income, as explained under Community Property in Publication 504, Payments to keep up the payer's property, or Use of the payer's property. Irs e file 2012 Payments to a third party. Irs e file 2012   Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify. Irs e file 2012 These include payments for your spouse's medical expenses, housing costs (rent, utilities, etc. Irs e file 2012 ), taxes, tuition, etc. Irs e file 2012 The payments are treated as received by your spouse and then paid to the third party. Irs e file 2012 Life insurance premiums. Irs e file 2012   Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy. Irs e file 2012 Payments for jointly-owned home. Irs e file 2012   If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse, some of your payments may be alimony. Irs e file 2012 Mortgage payments. Irs e file 2012   If you must pay all the mortgage payments (principal and interest) on a jointly-owned home, and they otherwise qualify as alimony, you can deduct one-half of the total payments as alimony. Irs e file 2012 If you itemize deductions and the home is a qualified home, you can claim one-half of the interest in figuring your deductible interest. Irs e file 2012 Your spouse must report one-half of the payments as alimony received. Irs e file 2012 If your spouse itemizes deductions and the home is a qualified home, he or she can claim one-half of the interest on the mortgage in figuring deductible interest. Irs e file 2012 Taxes and insurance. Irs e file 2012   If you must pay all the real estate taxes or insurance on a home held as tenants in common, you can deduct one-half of these payments as alimony. Irs e file 2012 Your spouse must report one-half of these payments as alimony received. Irs e file 2012 If you and your spouse itemize deductions, you can each claim one-half of the real estate taxes and none of the home insurance. Irs e file 2012    If your home is held as tenants by the entirety or joint tenants, none of your payments for taxes or insurance are alimony. Irs e file 2012 But if you itemize deductions, you can claim all of the real estate taxes and none of the home insurance. Irs e file 2012 Other payments to a third party. Irs e file 2012   If you made other third-party payments, see Publication 504 to see whether any part of the payments qualifies as alimony. Irs e file 2012 Instruments Executed After 1984 The following rules for alimony apply to payments under divorce or separation instruments executed after 1984. Irs e file 2012 Exception for instruments executed before 1985. Irs e file 2012   There are two situations where the rules for instruments executed after 1984 apply to instruments executed before 1985. Irs e file 2012 A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply. Irs e file 2012 A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that: Changes the amount or period of payment, or Adds or deletes any contingency or condition. Irs e file 2012   For the rules for alimony payments under pre-1985 instruments not meeting these exceptions, get the 2004 version of Publication 504 at www. Irs e file 2012 irs. Irs e file 2012 gov/pub504. Irs e file 2012 Example 1. Irs e file 2012 In November 1984, you and your former spouse executed a written separation agreement. Irs e file 2012 In February 1985, a decree of divorce was substituted for the written separation agreement. Irs e file 2012 The decree of divorce did not change the terms for the alimony you pay your former spouse. Irs e file 2012 The decree of divorce is treated as executed before 1985. Irs e file 2012 Alimony payments under this decree are not subject to the rules for payments under instruments executed after 1984. Irs e file 2012 Example 2. Irs e file 2012 Assume the same facts as in Example 1 except that the decree of divorce changed the amount of the alimony. Irs e file 2012 In this example, the decree of divorce is not treated as executed before 1985. Irs e file 2012 The alimony payments are subject to the rules for payments under instruments executed after 1984. Irs e file 2012 Alimony requirements. Irs e file 2012   A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met. Irs e file 2012 The payment is in cash. Irs e file 2012 The instrument does not designate the payment as not alimony. Irs e file 2012 Spouses legally separated under a decree of divorce or separate maintenance are not members of the same household. Irs e file 2012 There is no liability to make any payment (in cash or property) after the death of the recipient spouse. Irs e file 2012 The payment is not treated as child support. Irs e file 2012 Each of these requirements is discussed below. Irs e file 2012 Cash payment requirement. Irs e file 2012   Only cash payments, including checks and money orders, qualify as alimony. Irs e file 2012 The following do not qualify as alimony. Irs e file 2012 Transfers of services or property (including a debt instrument of a third party or an annuity contract). Irs e file 2012 Execution of a debt instrument by the payer. Irs e file 2012 The use of the payer's property. Irs e file 2012 Payments to a third party. Irs e file 2012   Cash payments to a third party under the terms of your divorce or separation instrument can qualify as cash payments to your spouse. Irs e file 2012 See Payments to a third party under General Rules, earlier. Irs e file 2012   Also, cash payments made to a third party at the written request of your spouse may qualify as alimony if all the following requirements are met. Irs e file 2012 The payments are in lieu of payments of alimony directly to your spouse. Irs e file 2012 The written request states that both spouses intend the payments to be treated as alimony. Irs e file 2012 You receive the written request from your spouse before you file your return for the year you made the payments. Irs e file 2012 Payments designated as not alimony. Irs e file 2012   You and your spouse can designate that otherwise qualifying payments are not alimony. Irs e file 2012 You do this by including a provision in your divorce or separation instrument that states the payments are not deductible as alimony by you and are excludable from your spouse's income. Irs e file 2012 For this purpose, any instrument (written statement) signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement (and therefore a divorce or separation instrument). Irs e file 2012 If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order. Irs e file 2012   Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. Irs e file 2012 The copy must be attached each year the designation applies. Irs e file 2012 Spouses cannot be members of the same household. Irs e file 2012    Payments to your spouse while you are members of the same household are not alimony if you are legally separated under a decree of divorce or separate maintenance. Irs e file 2012 A home you formerly shared is considered one household, even if you physically separate yourselves in the home. Irs e file 2012   You are not treated as members of the same household if one of you is preparing to leave the household and does leave no later than 1 month after the date of the payment. Irs e file 2012 Exception. Irs e file 2012   If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree, or other court order may qualify as alimony even if you are members of the same household when the payment is made. Irs e file 2012 Table 18-1. Irs e file 2012 Alimony Requirements (Instruments Executed After 1984) Payments ARE alimony if all of the following are true: Payments are NOT alimony if any of the following are true: Payments are required by a divorce or separation instrument. Irs e file 2012 Payments are not required by a divorce or separation instrument. Irs e file 2012 Payer and recipient spouse do not file a joint return with each other. Irs e file 2012 Payer and recipient spouse file a joint return with each other. Irs e file 2012 Payment is in cash (including checks or money orders). Irs e file 2012 Payment is: Not in cash, A noncash property settlement, Spouse's part of community income, or To keep up the payer's property. Irs e file 2012 Payment is not designated in the instrument as not alimony. Irs e file 2012 Payment is designated in the instrument as not alimony. Irs e file 2012 Spouses legally separated under a decree of divorce or separate maintenance are not members of the same household. Irs e file 2012 Spouses legally separated under a decree of divorce or separate maintenance are members of the same household. Irs e file 2012 Payments are not required after death of the recipient spouse. Irs e file 2012 Payments are required after death of the recipient spouse. Irs e file 2012 Payment is not treated as child support. Irs e file 2012 Payment is treated as child support. Irs e file 2012 These payments are deductible by the payer and includible in income by the recipient. Irs e file 2012 These payments are neither deductible by the payer nor includible in income by the recipient. Irs e file 2012 Liability for payments after death of recipient spouse. Irs e file 2012   If any part of payments you make must continue to be made for any period after your spouse's death, that part of your payments is not alimony, whether made before or after the death. Irs e file 2012 If all of the payments would continue, then none of the payments made before or after the death are alimony. Irs e file 2012   The divorce or separation instrument does not have to expressly state that the payments cease upon the death of your spouse if, for example, the liability for continued payments would end under state law. Irs e file 2012 Example. Irs e file 2012 You must pay your former spouse $10,000 in cash each year for 10 years. Irs e file 2012 Your divorce decree states that the payments will end upon your former spouse's death. Irs e file 2012 You must also pay your former spouse or your former spouse's estate $20,000 in cash each year for 10 years. Irs e file 2012 The death of your spouse would not terminate these payments under state law. Irs e file 2012 The $10,000 annual payments may qualify as alimony. Irs e file 2012 The $20,000 annual payments that do not end upon your former spouse's death are not alimony. Irs e file 2012 Substitute payments. Irs e file 2012   If you must make any payments in cash or property after your spouse's death as a substitute for continuing otherwise qualifying payments before the death, the otherwise qualifying payments are not alimony. Irs e file 2012 To the extent that your payments begin, accelerate, or increase because of the death of your spouse, otherwise qualifying payments you made may be treated as payments that were not alimony. Irs e file 2012 Whether or not such payments will be treated as not alimony depends on all the facts and circumstances. Irs e file 2012 Example 1. Irs e file 2012 Under your divorce decree, you must pay your former spouse $30,000 annually. Irs e file 2012 The payments will stop at the end of 6 years or upon your former spouse's death, if earlier. Irs e file 2012 Your former spouse has custody of your minor children. Irs e file 2012 The decree provides that if any child is still a minor at your spouse's death, you must pay $10,000 annually to a trust until the youngest child reaches the age of majority. Irs e file 2012 The trust income and corpus (principal) are to be used for your children's benefit. Irs e file 2012 These facts indicate that the payments to be made after your former spouse's death are a substitute for $10,000 of the $30,000 annual payments. Irs e file 2012 Of each of the $30,000 annual payments, $10,000 is not alimony. Irs e file 2012 Example 2. Irs e file 2012 Under your divorce decree, you must pay your former spouse $30,000 annually. Irs e file 2012 The payments will stop at the end of 15 years or upon your former spouse's death, if earlier. Irs e file 2012 The decree provides that if your former spouse dies before the end of the 15-year period, you must pay the estate the difference between $450,000 ($30,000 × 15) and the total amount paid up to that time. Irs e file 2012 For example, if your spouse dies at the end of the tenth year, you must pay the estate $150,000 ($450,000 − $300,000). Irs e file 2012 These facts indicate that the lump-sum payment to be made after your former spouse's death is a substitute for the full amount of the $30,000 annual payments. Irs e file 2012 None of the annual payments are alimony. Irs e file 2012 The result would be the same if the payment required at death were to be discounted by an appropriate interest factor to account for the prepayment. Irs e file 2012 Child support. Irs e file 2012   A payment that is specifically designated as child support or treated as specifically designated as child support under your divorce or separation instrument is not alimony. Irs e file 2012 The amount of child support may vary over time. Irs e file 2012 Child support payments are not deductible by the payer and are not taxable to the recipient. Irs e file 2012 Specifically designated as child support. Irs e file 2012   A payment will be treated as specifically designated as child support to the extent that the payment is reduced either: On the happening of a contingency relating to your child, or At a time that can be clearly associated with the contingency. Irs e file 2012 A payment may be treated as specifically designated as child support even if other separate payments are specifically designated as child support. Irs e file 2012 Contingency relating to your child. Irs e file 2012   A contingency relates to your child if it depends on any event relating to that child. Irs e file 2012 It does not matter whether the event is certain or likely to occur. Irs e file 2012 Events relating to your child include the child's: Becoming employed, Dying, Leaving the household, Leaving school, Marrying, or Reaching a specified age or income level. Irs e file 2012 Clearly associated with a contingency. Irs e file 2012   Payments that would otherwise qualify as alimony are presumed to be reduced at a time clearly associated with the happening of a contingency relating to your child only in the following situations. Irs e file 2012 The payments are to be reduced not more than 6 months before or after the date the child will reach 18, 21, or local age of majority. Irs e file 2012 The payments are to be reduced on two or more occasions that occur not more than 1 year before or after a different one of your children reaches a certain age from 18 to 24. Irs e file 2012 This certain age must be the same for each child, but need not be a whole number of years. Irs e file 2012 In all other situations, reductions in payments are not treated as clearly associated with the happening of a contingency relating to your child. Irs e file 2012   Either you or the IRS can overcome the presumption in the two situations above. Irs e file 2012 This is done by showing that the time at which the payments are to be reduced was determined independently of any contingencies relating to your children. Irs e file 2012 For example, if you can show that the period of alimony payments is customary in the local jurisdiction, such as a period equal to one-half of the duration of the marriage, you can overcome the presumption and may be able to treat the amount as alimony. Irs e file 2012 How To Deduct Alimony Paid You can deduct alimony you paid, whether or not you itemize deductions on your return. Irs e file 2012 You must file Form 1040. Irs e file 2012 You cannot use Form 1040A or Form 1040EZ. Irs e file 2012 Enter the amount of alimony you paid on Form 1040, line 31a. Irs e file 2012 In the space provided on line 31b, enter your spouse's social security number (SSN) or individual taxpayer identification number (ITIN). Irs e file 2012 If you paid alimony to more than one person, enter the SSN or ITIN of one of the recipients. Irs e file 2012 Show the SSN or ITIN and amount paid to each other recipient on an attached statement. Irs e file 2012 Enter your total payments on line 31a. Irs e file 2012 You must provide your spouse's SSN or ITIN. Irs e file 2012 If you do not, you may have to pay a $50 penalty and your deduction may be disallowed. Irs e file 2012 For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. Irs e file 2012 How To Report Alimony Received Report alimony you received as income on Form 1040, line 11. Irs e file 2012 You cannot use Form 1040A or Form 1040EZ. Irs e file 2012 You must give the person who paid the alimony your SSN or ITIN. Irs e file 2012 If you do not, you may have to pay a $50 penalty. Irs e file 2012 Recapture Rule If your alimony payments decrease or end during the first 3 calendar years, you may be subject to the recapture rule. Irs e file 2012 If you are subject to this rule, you have to include in income in the third year part of the alimony payments you previously deducted. Irs e file 2012 Your spouse can deduct in the third year part of the alimony payments he or she previously included in income. Irs e file 2012 The 3-year period starts with the first calendar year you make a payment qualifying as alimony under a decree of divorce or separate maintenance or a written separation agreement. Irs e file 2012 Do not include any time in which payments were being made under temporary support orders. Irs e file 2012 The second and third years are the next 2 calendar years, whether or not payments are made during those years. Irs e file 2012 The reasons for a reduction or end of alimony payments that can require a recapture include: A change in your divorce or separation instrument, A failure to make timely payments, A reduction in your ability to provide support, or A reduction in your spouse's support needs. Irs e file 2012 When to apply the recapture rule. Irs e file 2012   You are subject to the recapture rule in the third year if the alimony you pay in the third year decreases by more than $15,000 from the second year or the alimony you pay in the second and third years decreases significantly from the alimony you pay in the first year. Irs e file 2012   When you figure a decrease in alimony, do not include the following amounts. Irs e file 2012 Payments made under a temporary support order. Irs e file 2012 Payments required over a period of at least 3 calendar years that vary because they are a fixed part of your income from a business or property, or from compensation for employment or self-employment. Irs e file 2012 Payments that decrease because of the death of either spouse or the remarriage of the spouse receiving the payments before the end of the third year. Irs e file 2012 Figuring the recapture. Irs e file 2012   You can use Worksheet 1 in Publication 504 to figure recaptured alimony. Irs e file 2012 Including the recapture in income. Irs e file 2012   If you must include a recapture amount in income, show it on Form 1040, line 11 (“Alimony received”). Irs e file 2012 Cross out “received” and enter “recapture. Irs e file 2012 ” On the dotted line next to the amount, enter your spouse's last name and SSN or ITIN. Irs e file 2012 Deducting the recapture. Irs e file 2012   If you can deduct a recapture amount, show it on Form 1040, line 31a (“Alimony paid”). Irs e file 2012 Cross out “paid” and enter “recapture. Irs e file 2012 ” In the space provided, enter your spouse's SSN or ITIN. Irs e file 2012 Prev  Up  Next   Home   More Online Publications
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The Irs E File 2012

Irs e file 2012 5. Irs e file 2012   Recordkeeping Table of Contents How To Prove ExpensesWhat Are Adequate Records? What If I Have Incomplete Records? Separating and Combining Expenses How Long To Keep Records and Receipts Examples of Records If you deduct travel, entertainment, gift, or transportation expenses, you must be able to prove (substantiate) certain elements of expense. Irs e file 2012 This chapter discusses the records you need to keep to prove these expenses. Irs e file 2012 If you keep timely and accurate records, you will have support to show the IRS if your tax return is ever examined. Irs e file 2012 You will also have proof of expenses that your employer may require if you are reimbursed under an accountable plan. Irs e file 2012 These plans are discussed in chapter 6 under Reimbursements . Irs e file 2012 How To Prove Expenses Table 5-1 is a summary of records you need to prove each expense discussed in this publication. Irs e file 2012 You must be able to prove the elements listed across the top portion of the chart. Irs e file 2012 You prove them by having the information and receipts (where needed) for the expenses listed in the first column. Irs e file 2012 You cannot deduct amounts that you approximate or estimate. Irs e file 2012 You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. Irs e file 2012 You must generally prepare a written record for it to be considered adequate. Irs e file 2012 This is because written evidence is more reliable than oral evidence alone. Irs e file 2012 However, if you prepare a record on a computer, it is considered an adequate record. Irs e file 2012 What Are Adequate Records? You should keep the proof you need in an account book, diary, log, statement of expense, trip sheets, or similar record. Irs e file 2012 You should also keep documentary evidence that, together with your record, will support each element of an expense. Irs e file 2012 Documentary evidence. Irs e file 2012   You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses. Irs e file 2012 Exception. Irs e file 2012   Documentary evidence is not needed if any of the following conditions apply. Irs e file 2012 You have meals or lodging expenses while traveling away from home for which you account to your employer under an accountable plan, and you use a per diem allowance method that includes meals and/or lodging. Irs e file 2012 ( Accountable plans and per diem allowances are discussed in chapter 6. Irs e file 2012 ) Your expense, other than lodging, is less than $75. Irs e file 2012 You have a transportation expense for which a receipt is not readily available. Irs e file 2012 Adequate evidence. Irs e file 2012   Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense. Irs e file 2012   For example, a hotel receipt is enough to support expenses for business travel if it has all of the following information. Irs e file 2012 The name and location of the hotel. Irs e file 2012 The dates you stayed there. Irs e file 2012 Separate amounts for charges such as lodging, meals, and telephone calls. Irs e file 2012   A restaurant receipt is enough to prove an expense for a business meal if it has all of the following information. Irs e file 2012 The name and location of the restaurant. Irs e file 2012 The number of people served. Irs e file 2012 The date and amount of the expense. Irs e file 2012 If a charge is made for items other than food and beverages, the receipt must show that this is the case. Irs e file 2012 Canceled check. Irs e file 2012   A canceled check, together with a bill from the payee, ordinarily establishes the cost. Irs e file 2012 However, a canceled check by itself does not prove a business expense without other evidence to show that it was for a business purpose. Irs e file 2012 Duplicate information. Irs e file 2012   You do not have to record information in your account book or other record that duplicates information shown on a receipt as long as your records and receipts complement each other in an orderly manner. Irs e file 2012   You do not have to record amounts your employer pays directly for any ticket or other travel item. Irs e file 2012 However, if you charge these items to your employer, through a credit card or otherwise, you must keep a record of the amounts you spend. Irs e file 2012 Timely-kept records. Irs e file 2012   You should record the elements of an expense or of a business use at or near the time of the expense or use and support it with sufficient documentary evidence. Irs e file 2012 A timely-kept record has more value than a statement prepared later when generally there is a lack of accurate recall. Irs e file 2012   You do not need to write down the elements of every expense on the day of the expense. Irs e file 2012 If you maintain a log on a weekly basis that accounts for use during the week, the log is considered a timely-kept record. Irs e file 2012   If you give your employer, client, or customer an expense account statement, it can also be considered a timely-kept record. Irs e file 2012 This is true if you copy it from your account book, diary, log, statement of expense, trip sheets, or similar record. Irs e file 2012 Proving business purpose. Irs e file 2012   You must generally provide a written statement of the business purpose of an expense. Irs e file 2012 However, the degree of proof varies according to the circumstances in each case. Irs e file 2012 If the business purpose of an expense is clear from the surrounding circumstances, then you do not need to give a written explanation. Irs e file 2012 Example. Irs e file 2012 If you are a sales representative who calls on customers on an established sales route, you do not have to give a written explanation of the business purpose for traveling that route. Irs e file 2012 You can satisfy the requirements by recording the length of the delivery route once, the date of each trip at or near the time of the trips, and the total miles you drove the car during the tax year. Irs e file 2012 You could also establish the date of each trip with a receipt, record of delivery, or other documentary evidence. Irs e file 2012 Confidential information. Irs e file 2012   You do not need to put confidential information relating to an element of a deductible expense (such as the place, business purpose, or business relationship) in your account book, diary, or other record. Irs e file 2012 However, you do have to record the information elsewhere at or near the time of the expense and have it available to fully prove that element of the expense. Irs e file 2012 What If I Have Incomplete Records? If you do not have complete records to prove an element of an expense, then you must prove the element with: Your own written or oral statement containing specific information about the element, and Other supporting evidence that is sufficient to establish the element. Irs e file 2012 If the element is the description of a gift, or the cost, time, place, or date of an expense, the supporting evidence must be either direct evidence or documentary evidence. Irs e file 2012 Direct evidence can be written statements or the oral testimony of your guests or other witnesses setting forth detailed information about the element. Irs e file 2012 Documentary evidence can be receipts, paid bills, or similar evidence. Irs e file 2012 If the element is either the business relationship of your guests or the business purpose of the amount spent, the supporting evidence can be circumstantial rather than direct. Irs e file 2012 For example, the nature of your work, such as making deliveries, provides circumstantial evidence of the use of your car for business purposes. Irs e file 2012 Invoices of deliveries establish when you used the car for business. Irs e file 2012 Table 5-1. Irs e file 2012 How To Prove Certain Business Expenses IF you have expenses for . Irs e file 2012 . Irs e file 2012 THEN you must keep records that show details of the following elements . Irs e file 2012 . Irs e file 2012 . Irs e file 2012   Amount Time Place or  Description Business Purpose Business Relationship Travel Cost of each separate expense for travel, lodging, and meals. Irs e file 2012 Incidental expenses may be totaled in reasonable categories such as taxis, fees and tips, etc. Irs e file 2012 Dates you left and returned for each trip and number of days spent on business. Irs e file 2012 Destination or area of your travel (name of city, town, or other designation). Irs e file 2012 Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. Irs e file 2012    Relationship: N/A Entertainment Cost of each separate expense. Irs e file 2012 Incidental expenses such as taxis, telephones, etc. Irs e file 2012 , may be totaled on a daily basis. Irs e file 2012 Date of entertainment. Irs e file 2012 (Also see Business Purpose. Irs e file 2012 ) Name and address or location of place of entertainment. Irs e file 2012 Type of entertainment if not otherwise apparent. Irs e file 2012 (Also see Business Purpose. Irs e file 2012 ) Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. Irs e file 2012  For entertainment, the nature of the business discussion or activity. Irs e file 2012 If the entertainment was directly before or after a business discussion: the date, place, nature, and duration of the business discussion, and the identities of the persons who took part in both the business discussion and the entertainment activity. Irs e file 2012    Relationship: Occupations or other information (such as names, titles, or other designations) about the recipients that shows their business relationship to you. Irs e file 2012  For entertainment, you must also prove that you or your employee was present if the entertainment was a business meal. Irs e file 2012 Gifts Cost of the gift. Irs e file 2012 Date of the gift. Irs e file 2012 Description of the gift. Irs e file 2012   Transportation Cost of each separate expense. Irs e file 2012 For car expenses, the cost of the car and any improvements, the date you started using it for business, the mileage for each business use, and the total miles for the year. Irs e file 2012 Date of the expense. Irs e file 2012 For car expenses, the date of the use of the car. Irs e file 2012 Your business destination. Irs e file 2012 Purpose: Business purpose for the expense. Irs e file 2012    Relationship: N/A Sampling. Irs e file 2012   You can keep an adequate record for parts of a tax year and use that record to prove the amount of business or investment use for the entire year. Irs e file 2012 You must demonstrate by other evidence that the periods for which an adequate record is kept are representative of the use throughout the tax year. Irs e file 2012 Example. Irs e file 2012 You use your car to visit the offices of clients, meet with suppliers and other subcontractors, and pick up and deliver items to clients. Irs e file 2012 There is no other business use of the car, but you and your family use the car for personal purposes. Irs e file 2012 You keep adequate records during the first week of each month that show that 75% of the use of the car is for business. Irs e file 2012 Invoices and bills show that your business use continues at the same rate during the later weeks of each month. Irs e file 2012 Your weekly records are representative of the use of the car each month and are sufficient evidence to support the percentage of business use for the year. Irs e file 2012 Exceptional circumstances. Irs e file 2012   You can satisfy the substantiation requirements with other evidence if, because of the nature of the situation in which an expense is made, you cannot get a receipt. Irs e file 2012 This applies if all the following are true. Irs e file 2012 You were unable to obtain evidence for an element of the expense or use that completely satisfies the requirements explained earlier under What Are Adequate Records . Irs e file 2012 You are unable to obtain evidence for an element that completely satisfies the two rules listed earlier under What If I Have Incomplete Records . Irs e file 2012 You have presented other evidence for the element that is the best proof possible under the circumstances. Irs e file 2012 Destroyed records. Irs e file 2012   If you cannot produce a receipt because of reasons beyond your control, you can prove a deduction by reconstructing your records or expenses. Irs e file 2012 Reasons beyond your control include fire, flood, and other casualties. Irs e file 2012    Table 5-2. Irs e file 2012 Daily Business Mileage and Expense Log Name:       Odometer Readings Expenses Date Destination  (City, Town, or Area) Business Purpose Start Stop Miles  this trip Type  (Gas, oil, tolls, etc. Irs e file 2012 ) Amount                                                                                                                   Weekly  Total             Total Year-to-Date             Separating and Combining Expenses This section explains when expenses must be kept separate and when expenses can be combined. Irs e file 2012 Separating expenses. Irs e file 2012   Each separate payment is generally considered a separate expense. Irs e file 2012 For example, if you entertain a customer or client at dinner and then go to the theater, the dinner expense and the cost of the theater tickets are two separate expenses. Irs e file 2012 You must record them separately in your records. Irs e file 2012 Season or series tickets. Irs e file 2012   If you buy season or series tickets for business use, you must treat each ticket in the series as a separate item. Irs e file 2012 To determine the cost of individual tickets, divide the total cost (but not more than face value) by the number of games or performances in the series. Irs e file 2012 You must keep records to show whether you use each ticket as a gift or entertainment. Irs e file 2012 Also, you must be able to prove the cost of nonluxury box seat tickets if you rent a skybox or other private luxury box for more than one event. Irs e file 2012 See Entertainment tickets in chapter 2. Irs e file 2012 Combining items. Irs e file 2012   You can make one daily entry in your record for reasonable categories of expenses. Irs e file 2012 Examples are taxi fares, telephone calls, or other incidental travel costs. Irs e file 2012 Meals should be in a separate category. Irs e file 2012 You can include tips for meal-related services with the costs of the meals. Irs e file 2012   Expenses of a similar nature occurring during the course of a single event are considered a single expense. Irs e file 2012 For example, if during entertainment at a cocktail lounge, you pay separately for each serving of refreshments, the total expense for the refreshments is treated as a single expense. Irs e file 2012 Car expenses. Irs e file 2012   You can account for several uses of your car that can be considered part of a single use, such as a round trip or uninterrupted business use, with a single record. Irs e file 2012 Minimal personal use, such as a stop for lunch on the way between two business stops, is not an interruption of business use. Irs e file 2012 Example. Irs e file 2012 You make deliveries at several different locations on a route that begins and ends at your employer's business premises and that includes a stop at the business premises between two deliveries. Irs e file 2012 You can account for these using a single record of miles driven. Irs e file 2012 Gift expenses. Irs e file 2012   You do not always have to record the name of each recipient of a gift. Irs e file 2012 A general listing will be enough if it is evident that you are not trying to avoid the $25 annual limit on the amount you can deduct for gifts to any one person. Irs e file 2012 For example, if you buy a large number of tickets to local high school basketball games and give one or two tickets to each of many customers, it is usually enough to record a general description of the recipients. Irs e file 2012 Allocating total cost. Irs e file 2012   If you can prove the total cost of travel or entertainment but you cannot prove how much it cost for each person who participated in the event, you may have to allocate the total cost among you and your guests on a pro rata basis. Irs e file 2012 To do so, you must establish the number of persons who participated in the event. Irs e file 2012   An allocation would be needed, for example, if you did not have a business relationship with all of your guests. Irs e file 2012 See Allocating between business and nonbusiness in chapter 2. Irs e file 2012 If your return is examined. Irs e file 2012    If your return is examined, you may have to provide additional information to the IRS. Irs e file 2012 This information could be needed to clarify or to establish the accuracy or reliability of information contained in your records, statements, testimony, or documentary evidence before a deduction is allowed. Irs e file 2012    THIS IS NOT AN OFFICIAL INTERNAL REVENUE FORM Table 5-3. Irs e file 2012 Weekly Traveling Expense and Entertainment Record From: To: Name: Expenses Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total 1. Irs e file 2012 Travel Expenses: Airlines                                 Excess Baggage                                 Bus – Train                                 Cab and Limousine                                 Tips                                 Porter                                 2. Irs e file 2012 Meals and Lodging:  Breakfast                                 Lunch                                 Dinner                                 Hotel and Motel  (Detail in Schedule B)                                 3. Irs e file 2012 Entertainment  (Detail in Schedule C)                                 4. Irs e file 2012 Other Expenses:  Postage                                 Telephone & Telegraph                                 Stationery & Printing                                 Stenographer                                 Sample Room                                 Advertising                                 Assistant(s)                                 Trade Shows                                 5. Irs e file 2012 Car Expenses: (List all car expenses - the division between business and personal expenses may be made at the end of the year. Irs e file 2012 ) (Detail mileage in Schedule A. Irs e file 2012 ) Gas, oil, lube, wash                                 Repairs, parts                                 Tires, supplies                                 Parking fees, tolls                                 6. Irs e file 2012 Other (Identify)                                 Total                                 Note: Attach receipted bills for (1) ALL lodging and (2) any other expenses of $75. Irs e file 2012 00 or more. Irs e file 2012 Schedule A – Car Mileage: End                 Start                 Total                 Business Mileage                 Schedule B – Lodging Hotel or Motel Name                 City                 Schedule C – Entertainment Date Item Place Amount Business Purpose Business Relationship                                             WEEKLY REIMBURSEMENTS:     Travel and transportation expenses     Other reimbursements     TOTAL   How Long To Keep Records and Receipts You must keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Irs e file 2012 Generally, this means you must keep records that support your deduction (or an item of income) for 3 years from the date you file the income tax return on which the deduction is claimed. Irs e file 2012 A return filed early is considered filed on the due date. Irs e file 2012 For a more complete explanation of how long to keep records, see Publication 583, Starting a Business and Keeping Records. Irs e file 2012 You must keep records of the business use of your car for each year of the recovery period. Irs e file 2012 See More-than-50%-use test in chapter 4 under Depreciation Deduction. Irs e file 2012 Reimbursed for expenses. Irs e file 2012   Employees who give their records and documentation to their employers and are reimbursed for their expenses generally do not have to keep copies of this information. Irs e file 2012 However, you may have to prove your expenses if any of the following conditions apply. Irs e file 2012 You claim deductions for expenses that are more than reimbursements. Irs e file 2012 Your expenses are reimbursed under a nonaccountable plan. Irs e file 2012 Your employer does not use adequate accounting procedures to verify expense accounts. Irs e file 2012 You are related to your employer as defined under Per Diem and Car Allowances , in chapter 6. Irs e file 2012 Reimbursements , adequate accounting , and nonaccountable plans are discussed in chapter 6. Irs e file 2012 Examples of Records Table 5-2 and Table 5-3 are examples of worksheets which can be used for tracking business expenses. Irs e file 2012 Prev  Up  Next   Home   More Online Publications