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Irs free file fillable forms Publication 3920 - Main Contents Table of Contents Tax ForgivenessYears Eligible for Tax Forgiveness Amount of Tax Forgiven Refund of Taxes Paid How To Claim Tax Forgiveness Payments to SurvivorsSeptember 11th Victim Compensation Fund of 2001 Qualified Disaster Relief Payments Disability Payments Death Benefits Canceled Debt Payments to Survivors of Public Safety Officers Postponed Tax DeadlinesCovered area. Irs free file fillable forms Disaster Area Losses Estate Tax Reduction Structured Settlement Factoring Transactions Illustrated Worksheets B and C Additional Worksheets How To Get Tax Help Tax Forgiveness The IRS will forgive the federal income tax liabilities of decedents who died as a result of the Oklahoma City attack, September 11 attacks, and anthrax attacks. Irs free file fillable forms Income tax is forgiven for these decedents whether they were killed in an attack or in rescue or recovery operations. Irs free file fillable forms Any forgiven tax liability owed to the IRS will not have to be paid. Irs free file fillable forms Any forgiven tax liability that has already been paid will be refunded. Irs free file fillable forms (See Refund of Taxes Paid, later. Irs free file fillable forms ) To determine the amount of tax to be forgiven, read Years Eligible for Tax Forgiveness first. Irs free file fillable forms Then read Amount of Tax Forgiven. Irs free file fillable forms Decedents whose total forgiven tax liability for all eligible years is less than $10,000 are entitled to $10,000 minimum relief. Irs free file fillable forms Even decedents who were not required to file tax returns for the eligible tax years are entitled to $10,000 minimum relief. Irs free file fillable forms See Minimum Amount of Relief later under Amount of Tax Forgiven. Irs free file fillable forms Years Eligible for Tax Forgiveness The following paragraphs explain which years are eligible for tax forgiveness. Irs free file fillable forms Oklahoma City attack. Irs free file fillable forms   For those who died from this attack, income tax is forgiven for 1994 and all later years up to and including the year of death. Irs free file fillable forms Example 1. Irs free file fillable forms A man was killed in the bombing of the federal building in Oklahoma City on April 19, 1995. Irs free file fillable forms His income tax is forgiven for 1994 and 1995. Irs free file fillable forms Example 2. Irs free file fillable forms A woman was wounded while walking outside the federal building in Oklahoma City on April 19, 1995. Irs free file fillable forms She subsequently died of her wounds in 1996. Irs free file fillable forms Her income tax is forgiven for 1994, 1995, and 1996. Irs free file fillable forms September 11 attacks and anthrax attacks. Irs free file fillable forms   For those who die from these attacks, income tax is forgiven for 2000 and all later years up to and including the year of death. Irs free file fillable forms Example 1. Irs free file fillable forms A Pentagon employee died in the September 11 attack. Irs free file fillable forms Her income tax is forgiven for 2000 and 2001. Irs free file fillable forms Example 2. Irs free file fillable forms A visitor to the World Trade Center died in 2002 of wounds he sustained in the September 11 attack. Irs free file fillable forms His income tax liability is forgiven for 2000, 2001, and 2002. Irs free file fillable forms Amount of Tax Forgiven The IRS will forgive the decedent's income tax liability for all years eligible for tax forgiveness. Irs free file fillable forms On a joint return, only the decedent's part of the joint income tax liability is eligible for forgiveness. Irs free file fillable forms To figure the tax to be forgiven, use the following worksheets. Irs free file fillable forms Use Worksheet A for any eligible year the decedent filed a return as single, married filing separately, head of household, or qualifying widow(er). Irs free file fillable forms Use Worksheet B for any eligible year the decedent filed a joint return. Irs free file fillable forms See the illustrated Worksheet B near the end of this publication. Irs free file fillable forms Do not complete Worksheet A or B if the decedent was not required to file tax returns for the eligible tax years. Irs free file fillable forms Instead, complete Worksheet C and file a return for the decedent's last tax year. Irs free file fillable forms See Minimum Amount of Relief, later. Irs free file fillable forms If you need assistance, call the IRS at 1–866–562–5227 Monday through Friday during the following times. Irs free file fillable forms In English–7 a. Irs free file fillable forms m. Irs free file fillable forms to 10 p. Irs free file fillable forms m. Irs free file fillable forms local time. Irs free file fillable forms In Spanish–8 a. Irs free file fillable forms m. Irs free file fillable forms to 9:30 p. Irs free file fillable forms m. Irs free file fillable forms local time. Irs free file fillable forms Both spouses died. Irs free file fillable forms   If both spouses died as a result of a terrorist attack and they filed a joint return for an eligible tax year, fill out Worksheet B for each spouse for that year. Irs free file fillable forms Do this to determine if each spouse qualifies for the minimum relief of $10,000 (discussed later under Minimum Amount of Relief). Irs free file fillable forms If you are certain that neither spouse's total forgiven tax liability for all eligible years is less than $10,000, skip Worksheet B. Irs free file fillable forms However, attach a computation of the forgiven tax liability to the final income tax return or amended tax return for each eligible year. Irs free file fillable forms The forgiven tax liability is the total tax shown on the joint return minus the taxes listed in the instructions for line 4 of Worksheet B. Irs free file fillable forms Residents of community property states. Irs free file fillable forms   If the decedent was domiciled in a community property state and the spouse reported half the community income on a separate return, the surviving spouse can get a refund of taxes paid on his or her share of the decedent's income for the eligible years. Irs free file fillable forms Also, all of the decedent's income taxes paid for the eligible years will be refunded to either the executor or administrator of the estate, or to the surviving spouse if there is no legal representative. Irs free file fillable forms Worksheet B. Irs free file fillable forms Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Irs free file fillable forms 1       2 Enter the decedent's taxable income. Irs free file fillable forms Figure taxable income as if a separate return had been filed. Irs free file fillable forms See the instructions. Irs free file fillable forms 2       3 Enter the decedent's total tax. Irs free file fillable forms See the instructions. Irs free file fillable forms 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs free file fillable forms See the instructions. Irs free file fillable forms 4       5 Subtract line 4 from line 3. Irs free file fillable forms 5       6 Enter the surviving spouse's taxable income. Irs free file fillable forms Figure taxable income as if a separate return had been filed. Irs free file fillable forms See the instructions. Irs free file fillable forms 6       7 Enter the surviving spouse's total tax. Irs free file fillable forms See the instructions. Irs free file fillable forms 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Irs free file fillable forms 8       9 Subtract line 8 from line 7. Irs free file fillable forms 9       10 Add lines 5 and 9. Irs free file fillable forms 10       11 Enter the total tax from the joint return. Irs free file fillable forms See Table 1 on page 5 for the line number for years before 2002. Irs free file fillable forms 11       12 Add lines 4 and 8. Irs free file fillable forms 12       13 Subtract line 12 from line 11. Irs free file fillable forms 13       14 Divide line 5 by line 10. Irs free file fillable forms Enter the result as a decimal. Irs free file fillable forms 14       15 Tax to be forgiven. Irs free file fillable forms Multiply line 13 by line 14 and enter the result. Irs free file fillable forms 15       Note. Irs free file fillable forms If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Irs free file fillable forms Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Irs free file fillable forms If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Irs free file fillable forms The IRS will determine the amount to be refunded. Irs free file fillable forms Worksheet B. Irs free file fillable forms Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Irs free file fillable forms 1       2 Enter the decedent's taxable income. Irs free file fillable forms Figure taxable income as if a separate return had been filed. Irs free file fillable forms See the instructions. Irs free file fillable forms 2       3 Enter the decedent's total tax. Irs free file fillable forms See the instructions. Irs free file fillable forms 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs free file fillable forms See the instructions. Irs free file fillable forms 4       5 Subtract line 4 from line 3. Irs free file fillable forms 5       6 Enter the surviving spouse's taxable income. Irs free file fillable forms Figure taxable income as if a separate return had been filed. Irs free file fillable forms See the instructions. Irs free file fillable forms 6       7 Enter the surviving spouse's total tax. Irs free file fillable forms See the instructions. Irs free file fillable forms 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Irs free file fillable forms 8       9 Subtract line 8 from line 7. Irs free file fillable forms 9       10 Add lines 5 and 9. Irs free file fillable forms 10       11 Enter the total tax from the joint return. Irs free file fillable forms See Table 1 on page 5 for the line number for years before 2002. Irs free file fillable forms 11       12 Add lines 4 and 8. Irs free file fillable forms 12       13 Subtract line 12 from line 11. Irs free file fillable forms 13       14 Divide line 5 by line 10. Irs free file fillable forms Enter the result as a decimal. Irs free file fillable forms 14       15 Tax to be forgiven. Irs free file fillable forms Multiply line 13 by line 14 and enter the result. Irs free file fillable forms 15       Note. Irs free file fillable forms If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Irs free file fillable forms Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Irs free file fillable forms If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Irs free file fillable forms The IRS will determine the amount to be refunded. Irs free file fillable forms Instructions for Worksheet B Table 1. Irs free file fillable forms Total Tax Line on Decedent's Return Note: Use this table to find the total tax line on the decedent's income tax return. Irs free file fillable forms * Form 1994 1995 1996 2000 2001 1040 Line 53 Line 54 Line 51 Line 57 Line 58 1040A Line 27 Line 28 Line 28 Line 35 File Form 1040 1040EZ Line 9 Line 10 Line 10 Line 10 TeleFile Tax Record ** Line E Line J Line K 1040NR Line 51 Line 52 Line 49 Line 54 Line 54 1040NR–EZ N/A Line 17 Line 17 Line 18 File Form 1040NR * Line numbers for the 2002 forms were not available when this publication went to print. Irs free file fillable forms ** File Form 4506 to get a transcript of the decedent's account. Irs free file fillable forms Table 1. Irs free file fillable forms Total Tax Line on Decedent's Return Note: Use this table to find the total tax line on the decedent's income tax return. Irs free file fillable forms * Form 1994 1995 1996 2000 2001 1040 Line 53 Line 54 Line 51 Line 57 Line 58 1040A Line 27 Line 28 Line 28 Line 35 File Form 1040 1040EZ Line 9 Line 10 Line 10 Line 10 TeleFile Tax Record ** Line E Line J Line K 1040NR Line 51 Line 52 Line 49 Line 54 Line 54 1040NR–EZ N/A Line 17 Line 17 Line 18 File Form 1040NR * Line numbers for the 2002 forms were not available when this publication went to print. Irs free file fillable forms ** File Form 4506 to get a transcript of the decedent's account. Irs free file fillable forms Lines 2 and 6. Irs free file fillable forms   Allocate income and deductions in the same manner they would have been allocated if the spouses had filed separate returns. Irs free file fillable forms   Allocate wages and salaries to the spouse who performed the services and received the Form W-2. Irs free file fillable forms Business and investment income (including capital gains) are generally allocated to the spouse who owned the business or investment that produced the income. Irs free file fillable forms Income from a jointly owned business or investment should be allocated equally between the spouses unless there is evidence that shows a different allocation is appropriate. Irs free file fillable forms   Allocate business deductions to the owner of the business. Irs free file fillable forms Allocate personal deductions (such as itemized deductions for mortgage interest and taxes) equally between the spouses unless there is evidence that shows a different allocation is appropriate. Irs free file fillable forms Lines 3 and 7. Irs free file fillable forms   Figure the total tax as if a separate return had been filed. Irs free file fillable forms The total tax is the tax that would have been entered on the tax return line shown in Table 1 if a separate return had been filed. Irs free file fillable forms When figuring the tax using the Tax Table or Tax Rate Schedule, use the “Married filing separately” column in the Tax Table or Tax Rate Schedule Y-2. Irs free file fillable forms   When figuring the total tax, allocate credits and other taxes, if any, in the same manner as they would have been allocated if the spouses had filed separate returns. Irs free file fillable forms If a credit would not have been allowed on a separate return, allocate the credit shown on the joint return between the spouses. Irs free file fillable forms Examples of credits generally not allowed on a separate return are the child and dependent care credit, credit for the elderly, adoption credit, education credits, and earned income credit. Irs free file fillable forms Line 4. Irs free file fillable forms   Enter the total, if any, of the following taxes. Irs free file fillable forms Self-employment tax. Irs free file fillable forms Social security and Medicare tax on tip income not reported to employer. Irs free file fillable forms Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Irs free file fillable forms Tax on excess accumulation in qualified retirement plans. Irs free file fillable forms Household employment taxes. Irs free file fillable forms Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Irs free file fillable forms Tax on golden parachute payments. Irs free file fillable forms Minimum Amount of Relief The minimum amount of relief is $10,000. Irs free file fillable forms If the decedent's total forgiven tax liability for all eligible years is less than $10,000, the difference between $10,000 and the total forgiven tax liability for those years will be treated as a tax payment for the decedent's last tax year. Irs free file fillable forms The IRS will refund the difference as explained under Refund of Taxes Paid. Irs free file fillable forms Use Worksheet C to figure the additional tax payment. Irs free file fillable forms But first complete Worksheet A or B, unless the decedent was not required to file tax returns for the eligible tax years. Irs free file fillable forms Example 1. Irs free file fillable forms An individual who died in the September 11 attacks had an income tax liability of $-0- for 2000 and $6,400 for 2001. Irs free file fillable forms The $6,400 is eligible for forgiveness. Irs free file fillable forms The IRS will forgive $6,400 and treat the difference between $10,000 and $6,400 ($3,600) as a tax payment for 2001. Irs free file fillable forms Example 2. Irs free file fillable forms A child who died in the September 11 attacks had no (-0-) income tax liability for 2000 or 2001. Irs free file fillable forms The IRS will treat $10,000 as a tax payment for 2001. Irs free file fillable forms Income received after date of death. Irs free file fillable forms   Generally, income of the decedent received after the date of death must be reported on Form 1041 if the estate has gross income for the tax year of $600 or more. Irs free file fillable forms Examples are the final paycheck or dividends on stock owned by the decedent. Irs free file fillable forms However, this income is exempt from income tax and is not included on Form 1041 if it is received: After the date of the decedent's death, and Before the end of the decedent's tax year (determined without regard to death). Irs free file fillable forms Nonqualifying income. Irs free file fillable forms   The following income is not exempt from tax. Irs free file fillable forms The tax on it is not eligible for forgiveness. Irs free file fillable forms Deferred compensation that would have been payable if the death had occurred because of an event other than these attacks. Irs free file fillable forms Amounts that would not have been payable but for an action taken after September 11, 2001. Irs free file fillable forms The following are examples of nonqualifying income. Irs free file fillable forms Amounts payable from a qualified retirement plan or IRA to the beneficiary or estate of the decedent. Irs free file fillable forms Amounts payable only as death or survivor's benefits from pre-existing arrangements that would have been paid if the death had occurred for another reason. Irs free file fillable forms Income received as a result of adjustments made by the decedent's employer to a plan or arrangement to accelerate the vesting of restricted property or the payment of nonqualified deferred compensation after the date of the attack. Irs free file fillable forms Interest on savings bonds cashed by the beneficiary of the decedent. Irs free file fillable forms If you are responsible for the estate of a decedent, see Publication 559. Irs free file fillable forms Publication 559 discusses how to complete and file federal income tax returns and explains your responsibility to pay any taxes due. Irs free file fillable forms Instructions for lines 2–9 of Worksheet C. Irs free file fillable forms   The tax that would have been payable on the exempt income (discussed earlier) must be considered when determining whether a decedent is entitled to the $10,000 minimum relief. Irs free file fillable forms To figure the tax that would have been payable, you can use lines 2 through 9 of Worksheet C. Irs free file fillable forms Or, if special requirements are met, you can use the alternative computation instead. Irs free file fillable forms See Alternative computation, later. Irs free file fillable forms   You have to use lines 2–9 (or the alternative computation) to figure the tax that would have been payable even if Form 1041 was not required to be filed. Irs free file fillable forms Use Form 1041 to figure what the taxable income would be without including the exempt income. Irs free file fillable forms Then enter that taxable income (even if a negative number) on line 2 of Worksheet C (or line 1 of Worksheet D, Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C)). Irs free file fillable forms Alternative computation. Irs free file fillable forms   Instead of using lines 2–8 of Worksheet C to figure the tax on exempt income (line 9 of Worksheet C), you may be able to use Worksheet D. Irs free file fillable forms You can use Worksheet D to figure the tax on the exempt income payable by the estate and its beneficiaries only if both of the following requirements are met. Irs free file fillable forms The estate claimed an income distribution deduction on line 18 (Form 1041). Irs free file fillable forms Each beneficiary submits the information necessary to refigure the income tax payable on the exempt income received from the decedent's estate. Irs free file fillable forms If requirement (2) is met but requirement (1) is not, you can still use Worksheet D if: Form 1041 was not required because exempt income was received, and The estate would have claimed an income distribution deduction if the exempt income were taxable. Irs free file fillable forms If you use this alternative computation, skip lines 2–8 of Worksheet C and enter the amount from line 8 of Worksheet D on line 9 of Worksheet C. Irs free file fillable forms Complete the rest of Worksheet C to determine the additional payment allowed. Irs free file fillable forms Worksheet C. Irs free file fillable forms Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Irs free file fillable forms Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs free file fillable forms 1 Minimum relief amount. Irs free file fillable forms Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs free file fillable forms 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Irs free file fillable forms 3       4 Add lines 2 and 3. Irs free file fillable forms 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Irs free file fillable forms (See Income received after date of death on page 5. Irs free file fillable forms ) 5       6 Add lines 4 and 5. Irs free file fillable forms 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Irs free file fillable forms 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Irs free file fillable forms 8       9 Tax on exempt income. Irs free file fillable forms Subtract line 8 from line 7. Irs free file fillable forms 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs free file fillable forms If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs free file fillable forms 10       11 Add lines 9 and 10. Irs free file fillable forms 11   12 Additional payment allowed. Irs free file fillable forms If line 11 is $10,000 or more, enter -0- and stop here. Irs free file fillable forms No additional amount is allowed as a tax payment. Irs free file fillable forms Otherwise, subtract line 11 from line 1 and enter the result. Irs free file fillable forms 12   Note. Irs free file fillable forms The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs free file fillable forms Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Irs free file fillable forms If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs free file fillable forms Write "Sec. Irs free file fillable forms 692(d)(2) Payment" and the amount to the right of the entry space. Irs free file fillable forms Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs free file fillable forms If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs free file fillable forms Write “Sec. Irs free file fillable forms 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs free file fillable forms Worksheet C. Irs free file fillable forms Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Irs free file fillable forms Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs free file fillable forms 1 Minimum relief amount. Irs free file fillable forms Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs free file fillable forms 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Irs free file fillable forms 3       4 Add lines 2 and 3. Irs free file fillable forms 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Irs free file fillable forms (See Income received after date of death on page 5. Irs free file fillable forms ) 5       6 Add lines 4 and 5. Irs free file fillable forms 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Irs free file fillable forms 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Irs free file fillable forms 8       9 Tax on exempt income. Irs free file fillable forms Subtract line 8 from line 7. Irs free file fillable forms 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs free file fillable forms If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs free file fillable forms 10       11 Add lines 9 and 10. Irs free file fillable forms 11   12 Additional payment allowed. Irs free file fillable forms If line 11 is $10,000 or more, enter -0- and stop here. Irs free file fillable forms No additional amount is allowed as a tax payment. Irs free file fillable forms Otherwise, subtract line 11 from line 1 and enter the result. Irs free file fillable forms 12   Note. Irs free file fillable forms The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs free file fillable forms Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Irs free file fillable forms If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs free file fillable forms Write "Sec. Irs free file fillable forms 692(d)(2) Payment" and the amount to the right of the entry space. Irs free file fillable forms Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs free file fillable forms If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs free file fillable forms Write “Sec. Irs free file fillable forms 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs free file fillable forms Worksheet D. Irs free file fillable forms Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C) 1 Enter the taxable income from line 22 (Form 1041) 1   2 Enter exempt income received after death minus expenses allocable to exempt income. Irs free file fillable forms (See Income received after date of death on page 5. Irs free file fillable forms ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). Irs free file fillable forms 4   5 Figure the tax on line 1 using Schedule G (Form 1041). Irs free file fillable forms 5   6 Estate's tax on exempt income. Irs free file fillable forms Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. Irs free file fillable forms Figure the total tax that would have been payable by all beneficiaries. Irs free file fillable forms Do this by including in each beneficiary's gross income the exempt income received from the decedent's estate and refiguring the income tax. Irs free file fillable forms Add the amounts by which each beneficiary's income tax is increased. Irs free file fillable forms 7   8 Add lines 6 and 7. Irs free file fillable forms Enter this amount on line 9 of Worksheet C. Irs free file fillable forms 8   Worksheet D. Irs free file fillable forms Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C) 1 Enter the taxable income from line 22 (Form 1041) 1   2 Enter exempt income received after death minus expenses allocable to exempt income. Irs free file fillable forms (See Income received after date of death on page 5. Irs free file fillable forms ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). Irs free file fillable forms 4   5 Figure the tax on line 1 using Schedule G (Form 1041). Irs free file fillable forms 5   6 Estate's tax on exempt income. Irs free file fillable forms Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. Irs free file fillable forms Figure the total tax that would have been payable by all beneficiaries. Irs free file fillable forms Do this by including in each beneficiary's gross income the exempt income received from the decedent's estate and refiguring the income tax. Irs free file fillable forms Add the amounts by which each beneficiary's income tax is increased. Irs free file fillable forms 7   8 Add lines 6 and 7. Irs free file fillable forms Enter this amount on line 9 of Worksheet C. Irs free file fillable forms 8   Refund of Taxes Paid The IRS will refund the following forgiven income tax liabilities. Irs free file fillable forms Income tax liabilities that have been paid. Irs free file fillable forms Income tax liabilities treated as paid because the total tax liability for all years eligible for tax forgiveness is less than $10,000. Irs free file fillable forms See Minimum Amount of Relief, earlier. Irs free file fillable forms Example 1. Irs free file fillable forms A man who died in the September 11 attacks had an income tax liability of $7,500 for 2000 and $6,500 for 2001. Irs free file fillable forms The total, $14,000, is eligible for tax forgiveness. Irs free file fillable forms However, he paid only $13,000 of that amount. Irs free file fillable forms The IRS will refund the $13,000 paid. Irs free file fillable forms Example 2. Irs free file fillable forms A child who died in the September 11 attacks had no income tax liability for 2000 or 2001. Irs free file fillable forms The child qualifies for the minimum relief of $10,000. Irs free file fillable forms The $10,000 is treated as a tax payment for 2001 and will be refunded. Irs free file fillable forms Period for filing a claim for credit or refund. Irs free file fillable forms   To obtain a tax refund on a previously filed income tax return, file an amended return (Form 1040X or an amended Form 1041) within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever is later. Irs free file fillable forms For example, you have until April 15, 2004, to file an amended return on a 2000 Form 1040, 1040A, or 1040EZ that was filed by April 16, 2001, and for which the tax was paid when due. Irs free file fillable forms To obtain a refund on a return that has not been filed, file the return within 3 years of the original due date of the return. Irs free file fillable forms Extension of time for victims of Oklahoma City attack. Irs free file fillable forms   The period described above has been extended for victims of the Oklahoma City attack. Irs free file fillable forms Survivors and personal representatives of these victims have until January 22, 2003, to file an original or amended return. Irs free file fillable forms How To Claim Tax Forgiveness Use the following procedures to claim income tax forgiveness. Irs free file fillable forms Which Form To Use The form you use depends on whether an income tax return for the eligible year was already filed for the decedent. Irs free file fillable forms Return required but not yet filed. Irs free file fillable forms   File Form 1040 if the decedent was a U. Irs free file fillable forms S. Irs free file fillable forms citizen or resident. Irs free file fillable forms File Form 1040NR if the decedent was a nonresident alien. Irs free file fillable forms A nonresident alien is someone who is not a U. Irs free file fillable forms S. Irs free file fillable forms citizen or resident. Irs free file fillable forms Return required and already filed. Irs free file fillable forms   File a separate Form 1040X for each year you are claiming tax relief. Irs free file fillable forms Return not required and not filed. Irs free file fillable forms   File Form 1040 only for the year of death if the decedent was a U. Irs free file fillable forms S. Irs free file fillable forms citizen or resident. Irs free file fillable forms File Form 1040NR if the decedent was a nonresident alien. Irs free file fillable forms Return not required but already filed. Irs free file fillable forms   File Form 1040X only for the year of death. Irs free file fillable forms How to complete the returns. Irs free file fillable forms   Fill out Form 1040 or 1040NR according to its instructions but do not reduce the decedent's tax liability by any taxes that will be forgiven. Irs free file fillable forms Attach to each return a computation of the income tax to be forgiven or a copy of Worksheet A or B. Irs free file fillable forms If filing Form 1040 or Form 1040NR, also attach any Forms W–2. Irs free file fillable forms If the total forgiven tax liability for all eligible years is less than $10,000, attach to the decedent's final return a computation of the additional tax payment allowed or a copy of Worksheet C. Irs free file fillable forms Also, please write one of the following across the top of page 1 of each return. Irs free file fillable forms KITA—Oklahoma City KITA—9/11 KITA—Anthrax “KITA” means “killed in terrorist attack. Irs free file fillable forms ” Need a copy of a previously filed return?   You will find it easier to prepare Form 1040X if you have a copy of the decedent's previously filed tax return. Irs free file fillable forms If you need a copy, use Form 4506. Irs free file fillable forms The IRS will provide a free copy of the tax return if you write “DISASTER” in the top margin of Form 4506. Irs free file fillable forms Attach Letters Testamentary or other evidence to establish that you are authorized to act for the decedent's estate. Irs free file fillable forms Send Form 4506 to the address shown in the form instructions. Irs free file fillable forms Taxpayer identification number. Irs free file fillable forms   A taxpayer identification number must be furnished on the decedent's returns. Irs free file fillable forms This is usually the decedent's social security number (SSN). Irs free file fillable forms However, a nonresident alien who is not eligible to get an SSN should have an individual taxpayer identification number (ITIN). Irs free file fillable forms If the decedent was a nonresident alien, had neither an SSN nor an ITIN, and was not required to file a U. Irs free file fillable forms S. Irs free file fillable forms income tax return for any tax year, do not apply for an ITIN. Irs free file fillable forms You may claim a refund by filing Form 1040NR without an SSN or ITIN. Irs free file fillable forms Necessary Documents Please attach the following documents to the return or amended return. Irs free file fillable forms Proof of death. Irs free file fillable forms   Attach a copy of the death certificate. Irs free file fillable forms If the Department of Defense issued DD Form 1300, Report of Casualty, you can attach that form instead of the death certificate. Irs free file fillable forms Form 1310. Irs free file fillable forms   You must send Form 1310 with all returns and claims for refund, unless either of the following applies. Irs free file fillable forms You are a surviving spouse filing an original or amended joint return with the decedent. Irs free file fillable forms You are a personal representative filing an original Form 1040 or Form 1040NR for the decedent and a court certificate showing your appointment is attached to the return. Irs free file fillable forms A personal representative is an executor or administrator of a decedent's estate, as certified or appointed by the court. Irs free file fillable forms A copy of the decedent's will cannot be accepted as evidence that you are the personal representative. Irs free file fillable forms      If you have proof of death but do not have enough tax information to file a timely claim for a refund, file Form 1040X with Form 1310. Irs free file fillable forms Include a statement saying an amended return will be filed as soon as the necessary tax information is available. Irs free file fillable forms Where To File The IRS has set up a special office for processing returns and claims for tax forgiveness. Irs free file fillable forms Use one of the addresses shown below. Irs free file fillable forms Where you file the returns or claims depends on whether you use the U. Irs free file fillable forms S. Irs free file fillable forms Postal Service or a private delivery service. Irs free file fillable forms Please do not send these returns or claims to any of the addresses shown in the tax form instructions. Irs free file fillable forms U. Irs free file fillable forms S. Irs free file fillable forms Postal Service. Irs free file fillable forms   If you use the U. Irs free file fillable forms S. Irs free file fillable forms Postal Service, file these returns and claims at the following address. Irs free file fillable forms Internal Revenue Service P. Irs free file fillable forms O. Irs free file fillable forms Box 4053 Woburn, MA 01888 Private delivery service. Irs free file fillable forms   Private delivery services cannot deliver items to P. Irs free file fillable forms O. Irs free file fillable forms boxes. Irs free file fillable forms If you use a private delivery service, file these returns and claims at the following address. Irs free file fillable forms Internal Revenue Service Stop 661 310 Lowell St. Irs free file fillable forms Andover, MA 01810 Designated private delivery services. Irs free file fillable forms   You can use the following private delivery services to file these returns and claims. Irs free file fillable forms Airborne Express (Airborne): Overnight Air Express Service, Next Afternoon Service, and Second Day Service. Irs free file fillable forms DHL Worldwide Express (DHL): DHL “Same Day” Service, and DHL USA Overnight. Irs free file fillable forms Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, and FedEx 2Day. Irs free file fillable forms United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Irs free file fillable forms M. Irs free file fillable forms , UPS Worldwide Express Plus, and UPS Worldwide Express. Irs free file fillable forms The private delivery service can tell you how to get written proof of the mailing date. Irs free file fillable forms Payments to Survivors The following section discusses the tax treatment of certain amounts received by survivors. Irs free file fillable forms September 11th Victim Compensation Fund of 2001 Payments from the September 11th Victim Compensation Fund of 2001 are not included in income. Irs free file fillable forms Qualified Disaster Relief Payments Qualified disaster relief payments are not included in income. Irs free file fillable forms These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). Irs free file fillable forms No withholding applies to these payments. Irs free file fillable forms Qualified disaster relief payments include payments you receive (regardless of the source) after September 10, 2001, for the following expenses. Irs free file fillable forms Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a terrorist attack. Irs free file fillable forms Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a terrorist attack. Irs free file fillable forms (A personal residence can be a rented residence or one you own. Irs free file fillable forms ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a terrorist attack. Irs free file fillable forms Qualified disaster relief payments also include the following. Irs free file fillable forms Payments made by common carriers (for example, American Airlines and United Airlines regarding the September 11 attacks) because of death or physical injury incurred as a result of a terrorist attack. Irs free file fillable forms Amounts paid by a federal, state, or local government in connection with a terrorist attack to those affected by the attack. Irs free file fillable forms Qualified disaster relief payments do not include: Insurance or other reimbursements for expenses, or Income replacement payments, such as payments of lost wages, lost business income, or unemployment compensation. Irs free file fillable forms Disability Payments For tax years ending after September 10, 2001, disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies), whether outside or within the United States, are not included in income. Irs free file fillable forms Death Benefits Payments received by an individual or the estate of a decedent from the employer of an employee who died as a result of the Oklahoma City or September 11 terrorist attacks, or as a result of the anthrax attacks, are not included in income. Irs free file fillable forms Only the amount that exceeds the benefits that would have been payable if the death had occurred for a reason other than a terrorist or anthrax attack is excludable. Irs free file fillable forms However, the exclusion does apply to incidental death benefits paid under a qualified retirement plan even if these amounts would have been payable if the death had occurred for a reason other than a terrorist or anthrax attack. Irs free file fillable forms If you included death benefits in income on a previously filed return and they are now excludable under the above rule, file Form 1040X to amend that return. Irs free file fillable forms For information on the period for filing Form 1040X, see Period for filing claim for credit or refund earlier under Refund of Taxes Paid. Irs free file fillable forms If that period has expired, you are granted an extension. Irs free file fillable forms You have until January 22, 2003, to file Form 1040X to exclude the death benefits. Irs free file fillable forms On top of page 1 of Form 1040X, write “Extension of Limitations Under PL 107–134, sec. Irs free file fillable forms 102(b)(2). Irs free file fillable forms ” Canceled Debt Canceled debt is not included in your income (or the income of the estate) if: You (or the estate) were liable, or became liable, for the debt of a decedent, and The debt was canceled after September 10, 2001, and before January 1, 2002, because the decedent died as a result of the September 11 attacks or anthrax attacks. Irs free file fillable forms The lender is not required to report the canceled debt on Form 1099–C, Cancellation of Debt. Irs free file fillable forms Payments to Survivors of Public Safety Officers If you are a survivor of a public safety officer who died in the line of duty, certain amounts you receive are not included in income. Irs free file fillable forms Bureau of Justice Assistance payments. Irs free file fillable forms   If you are a surviving dependent of a public safety officer (law enforcement officer or firefighter) who died in the line of duty, do not include in your income the death benefit paid to you by the Bureau of Justice Assistance. Irs free file fillable forms Government plan annuity. Irs free file fillable forms   If you receive a survivor annuity as the child or spouse (or former spouse) of a public safety officer who was killed in the line of duty, you generally do not have to include it in income. Irs free file fillable forms This exclusion applies to the amount of the annuity based on the officer's service as a public safety officer. Irs free file fillable forms For this purpose, the term public safety officer includes police and law enforcement officers, firefighters, and rescue squad and ambulance crews. Irs free file fillable forms More information. Irs free file fillable forms   For more information, see Publication 559. Irs free file fillable forms Postponed Tax Deadlines The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a terrorist attack. Irs free file fillable forms The tax deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. Irs free file fillable forms If any tax deadline is postponed, the IRS will publicize the postponement in the affected area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Irs free file fillable forms Affected taxpayers. Irs free file fillable forms   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Irs free file fillable forms Any individual whose main home is located in a covered area (defined later). Irs free file fillable forms Any business entity or sole proprietor whose principal place of business is located in a covered area. Irs free file fillable forms Any individual, business entity, or sole proprietor whose records needed to meet a postponed deadline are maintained in a covered area. Irs free file fillable forms The main home or principal place of business does not have to be located in the covered area. Irs free file fillable forms Any estate or trust whose tax records necessary to meet a postponed tax deadline are maintained in a covered area. Irs free file fillable forms Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered area. Irs free file fillable forms The spouse on a joint return with a taxpayer who is eligible for postponements. Irs free file fillable forms Any other person determined by the IRS to be affected by a terrorist attack. Irs free file fillable forms Covered area. Irs free file fillable forms   This is an area in which a terrorist attack took place and in which the IRS has decided to postpone tax deadlines for up to 1 year. Irs free file fillable forms Abatement of interest. Irs free file fillable forms   The IRS may abate (forgive) the interest on any underpaid income tax for the length of any postponement. Irs free file fillable forms Disaster Area Losses If your property was damaged or destroyed as a result of the September 11 attacks, you can choose to deduct your disaster loss on your 2000 return (or amended return) rather than on your 2001 return. Irs free file fillable forms You must make this choice to deduct your loss on your 2000 return by the later of the following dates. Irs free file fillable forms The due date (without extensions) for filing your 2001 income tax return (April 15, 2002, if you are a calendar year taxpayer). Irs free file fillable forms The due date (with extensions) for the 2000 return. Irs free file fillable forms For more information about disaster area losses, see Publication 547. Irs free file fillable forms Estate Tax Reduction The federal estate tax is reduced for taxable estates of individuals who died as a result of the Oklahoma City attack, the September 11 attacks, and the anthrax attacks. Irs free file fillable forms The estate tax is computed using a new rate schedule on page 25 of the November 2001 revision of the instructions for Form 706. Irs free file fillable forms The estate tax is reduced by credits against the estate tax, including the unified credit and the state death tax credit. Irs free file fillable forms These credits may reduce or eliminate the estate tax due. Irs free file fillable forms A special rule extends until January 22, 2003, the period of time allowed to file a claim for a refund of estate taxes that have been paid. Irs free file fillable forms Recovery from the September 11th Victim Compensation Fund. Irs free file fillable forms   The value of claims for a decedent's pain and suffering is normally included in the gross estate. Irs free file fillable forms However, if the estate chooses to seek recovery from this fund, the IRS has determined that, in view of the unique circumstances of this situation and the high likelihood that such claims will be valued at a nominal or zero amount, the claims will be valued at zero for estate tax purposes. Irs free file fillable forms Thus, there are no federal estate tax consequences if an estate or beneficiary receives a recovery from this fund. Irs free file fillable forms Which estates must file a return. Irs free file fillable forms   For decedents dying in 2001, Form 706 must be filed by the executor for the estate of every U. Irs free file fillable forms S. Irs free file fillable forms citizen or resident whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $675,000. Irs free file fillable forms Form 706 must be filed within 9 months after the date of decedent's death unless you receive an extension of time to file. Irs free file fillable forms Use Form 4768, Application for Extension of Time To File a Return and/or Pay U. Irs free file fillable forms S. Irs free file fillable forms Estate (and Generation-Skipping Transfer) Taxes, to apply for an extension. Irs free file fillable forms Where to file. Irs free file fillable forms   Returns on which the new rate schedule is used should be sent to the following address, which was not available when Form 706 went to print. Irs free file fillable forms Internal Revenue Service E & G Department/Stop 824T 201 W. Irs free file fillable forms Rivercenter Blvd. Irs free file fillable forms Covington, KY 41011 More information. Irs free file fillable forms   For more information on the federal estate tax, see the instructions for Form 706. Irs free file fillable forms Structured Settlement Factoring Transactions A person who acquires payment rights in a structured settlement arrangement after February 21, 2002, may be subject to a 40% excise tax unless the transfer of the payment rights was approved in advance in a qualified order. Irs free file fillable forms The excise tax is figured on the excess of the undiscounted amount of the payments being acquired over the total amount actually paid to acquire them. Irs free file fillable forms However, this tax will not apply to transactions entered into from February 22, 2002, to July 1, 2002, if certain requirements are met. Irs free file fillable forms For information about these requirements, see Internal Revenue Code section 5891. Irs free file fillable forms Worksheet B Illustrated. Irs free file fillable forms Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Irs free file fillable forms 1 2000 2001   2 Enter the decedent's taxable income. Irs free file fillable forms Figure taxable income as if a separate return had been filed. Irs free file fillable forms See the instructions. Irs free file fillable forms 2 $17,259 $14,295   3 Enter the decedent's total tax. Irs free file fillable forms See the instructions. Irs free file fillable forms 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs free file fillable forms See the instructions. Irs free file fillable forms 4 3,532 3,109   5 Subtract line 4 from line 3. Irs free file fillable forms 5 2,591 2,141   6 Enter the surviving spouse's taxable income. Irs free file fillable forms Figure taxable income as if a separate return had been filed. Irs free file fillable forms See the instructions for line 2. Irs free file fillable forms 6 29,025 29,850   7 Enter the surviving spouse's total tax. Irs free file fillable forms See the instructions. Irs free file fillable forms 7 5,277 5,391   8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Irs free file fillable forms 8 0 0   9 Subtract line 8 from line 7. Irs free file fillable forms 9 5,277 5,391   10 Add lines 5 and 9. Irs free file fillable forms 10 7,868 7,532   11 Enter the total tax from the joint return. Irs free file fillable forms See Table 1 on page 5 for the line number for years before 2002. Irs free file fillable forms 11 10,789 9,728   12 Add lines 4 and 8. Irs free file fillable forms 12 3,532 3,109   13 Subtract line 12 from line 11. Irs free file fillable forms 13 7,257 6,619   14 Divide line 5 by line 10. Irs free file fillable forms Enter the result as a decimal. Irs free file fillable forms 14 . Irs free file fillable forms 329 . Irs free file fillable forms 284   15 Tax to be forgiven. Irs free file fillable forms Multiply line 13 by line 14 and enter the result. Irs free file fillable forms 15 $2,388 $1,880   Note. Irs free file fillable forms If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Irs free file fillable forms Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Irs free file fillable forms If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Irs free file fillable forms The IRS will determine the amount to be refunded. Irs free file fillable forms Worksheet B Illustrated. Irs free file fillable forms Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Irs free file fillable forms 1 2000 2001   2 Enter the decedent's taxable income. Irs free file fillable forms Figure taxable income as if a separate return had been filed. Irs free file fillable forms See the instructions. Irs free file fillable forms 2 $17,259 $14,295   3 Enter the decedent's total tax. Irs free file fillable forms See the instructions. Irs free file fillable forms 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs free file fillable forms See the instructions. Irs free file fillable forms 4 3,532 3,109   5 Subtract line 4 from line 3. Irs free file fillable forms 5 2,591 2,141   6 Enter the surviving spouse's taxable income. Irs free file fillable forms Figure taxable income as if a separate return had been filed. Irs free file fillable forms See the instructions for line 2. Irs free file fillable forms 6 29,025 29,850   7 Enter the surviving spouse's total tax. Irs free file fillable forms See the instructions. Irs free file fillable forms 7 5,277 5,391   8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Irs free file fillable forms 8 0 0   9 Subtract line 8 from line 7. Irs free file fillable forms 9 5,277 5,391   10 Add lines 5 and 9. Irs free file fillable forms 10 7,868 7,532   11 Enter the total tax from the joint return. Irs free file fillable forms See Table 1 on page 5 for the line number for years before 2002. Irs free file fillable forms 11 10,789 9,728   12 Add lines 4 and 8. Irs free file fillable forms 12 3,532 3,109   13 Subtract line 12 from line 11. Irs free file fillable forms 13 7,257 6,619   14 Divide line 5 by line 10. Irs free file fillable forms Enter the result as a decimal. Irs free file fillable forms 14 . Irs free file fillable forms 329 . Irs free file fillable forms 284   15 Tax to be forgiven. Irs free file fillable forms Multiply line 13 by line 14 and enter the result. Irs free file fillable forms 15 $2,388 $1,880   Note. Irs free file fillable forms If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Irs free file fillable forms Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Irs free file fillable forms If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Irs free file fillable forms The IRS will determine the amount to be refunded. Irs free file fillable forms Illustrated Worksheets B and C A wife lost her husband in the September 11 attack on the World Trade Center. Irs free file fillable forms They filed a joint return for 2000 and the wife chose to file a joint return as a surviving spouse for 2001. Irs free file fillable forms The returns for 2000 and 2001 showed the following income, deductions, and tax liabilities. Irs free file fillable forms After the husband died, his estate received income of $4,000. Irs free file fillable forms Of that amount, $1,000 is net profit from Schedule C received before the end of 2001. Irs free file fillable forms This net profit is exempt from income tax as explained earlier under Income received after date of death. Irs free file fillable forms The wife files Form 1041 because the gross income of the estate for the tax year ($3,000) is $600 or more. Irs free file fillable forms To determine how much of the husband's tax liability for 2000 and 2001 is to be forgiven, the wife completes Worksheet B. Irs free file fillable forms She also completes Worksheet C because the forgiven tax liabilities for 2000 and 2001 (line 15 of Worksheet B) total less than $10,000. Irs free file fillable forms To claim tax relief for 2000, the wife files Form 1040X and attaches a copy of Worksheet B. Irs free file fillable forms To claim tax relief for 2001, she files Form 1040 and attaches copies of Worksheets B and C. Irs free file fillable forms   2000 2001 Wages (wife) $35,000 $36,000 Net profit from Schedule C, Profit or Loss From Business (husband) 25,000 22,000 Interest income (joint account) 1,000 1,100 Deduction for ½ of self-employment tax (husband) (1,766) (1,555) Standard deduction (7,350) (7,600) Personal exemptions (2) (5,600) (5,800) Taxable income $46,284 $44,145 Joint income tax liability $7,257 $6,619 Plus: Self-employment tax (husband) 3,532 3,109 Total tax liability $10,789 $9,728   2000 2001 Wages (wife) $35,000 $36,000 Net profit from Schedule C, Profit or Loss From Business (husband) 25,000 22,000 Interest income (joint account) 1,000 1,100 Deduction for ½ of self-employment tax (husband) (1,766) (1,555) Standard deduction (7,350) (7,600) Personal exemptions (2) (5,600) (5,800) Taxable income $46,284 $44,145 Joint income tax liability $7,257 $6,619 Plus: Self-employment tax (husband) 3,532 3,109 Total tax liability $10,789 $9,728 Worksheet C Illustrated. Irs free file fillable forms Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Irs free file fillable forms Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs free file fillable forms 1 Minimum relief amount. Irs free file fillable forms Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs free file fillable forms 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2 2,400     3 Enter the distribution deduction from line 18 (Form 1041) . Irs free file fillable forms 3 0     4 Add lines 2 and 3. Irs free file fillable forms 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. Irs free file fillable forms (See Income received after date of death on page 5. Irs free file fillable forms ) 5 1,000     6 Add lines 4 and 5. Irs free file fillable forms 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). Irs free file fillable forms 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). Irs free file fillable forms 8 435     9 Tax on exempt income. Irs free file fillable forms Subtract line 8 from line 7. Irs free file fillable forms 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs free file fillable forms If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs free file fillable forms 10 4,268     11 Add lines 9 and 10. Irs free file fillable forms 11 $4,543 12 Additional payment allowed. Irs free file fillable forms If line 11 is $10,000 or more, enter -0- and stop here. Irs free file fillable forms No additional amount is allowed as a tax payment. Irs free file fillable forms Otherwise, subtract line 11 from line 1 and enter the result. Irs free file fillable forms 12 $5,457 Note. Irs free file fillable forms The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs free file fillable forms Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Irs free file fillable forms If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs free file fillable forms Write "Sec. Irs free file fillable forms 692(d)(2) Payment" and the amount to the right of the entry space. Irs free file fillable forms Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs free file fillable forms If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs free file fillable forms Write “Sec. Irs free file fillable forms 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs free file fillable forms Worksheet C Illustrated. Irs free file fillable forms Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Irs free file fillable forms Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs free file fillable forms 1 Minimum relief amount. Irs free file fillable forms Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs free file fillable forms 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2 2,400     3 Enter the distribution deduction from line 18 (Form 1041) . Irs free file fillable forms 3 0     4 Add lines 2 and 3. Irs free file fillable forms 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. Irs free file fillable forms (See Income received after date of death on page 5. Irs free file fillable forms ) 5 1,000     6 Add lines 4 and 5. Irs free file fillable forms 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). Irs free file fillable forms 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). Irs free file fillable forms 8 435     9 Tax on exempt income. Irs free file fillable forms Subtract line 8 from line 7. Irs free file fillable forms 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs free file fillable forms If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs free file fillable forms 10 4,268     11 Add lines 9 and 10. Irs free file fillable forms 11 $4,543 12 Additional payment allowed. Irs free file fillable forms If line 11 is $10,000 or more, enter -0- and stop here. Irs free file fillable forms No additional amount is allowed as a tax payment. Irs free file fillable forms Otherwise, subtract line 11 from line 1 and enter the result. Irs free file fillable forms 12 $5,457 Note. Irs free file fillable forms The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs free file fillable forms Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Irs free file fillable forms If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs free file fillable forms Write "Sec. Irs free file fillable forms 692(d)(2) Payment" and the amount to the right of the entry space. Irs free file fillable forms Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs free file fillable forms If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs free file fillable forms Write “Sec. Irs free file fillable forms 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs free file fillable forms Additional Worksheets The following additional worksheets are provided for your convenience. Irs free file fillable forms Worksheet A. Irs free file fillable forms Figuring the Tax To Be Forgiven (For Decedents Who Filed a Return as Single, Married Filing Separately, Head of Household, or Qualifying Widow(er))         (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for tax forgiveness. Irs free file fillable forms 1       2 Enter the total tax from the decedent's income tax return. Irs free file fillable forms See Table 1 on page 5 for the line number for years before 2002. Irs free file fillable forms 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Irs free file fillable forms (These taxes are not eligible for forgiveness. Irs free file fillable forms )           a Self-employment tax. Irs free file fillable forms 3a         b Social security and Medicare tax on tip income not reported to employer. Irs free file fillable forms 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Irs free file fillable forms 3c         d Tax on excess accumulation in qualified retirement plans. Irs free file fillable forms 3d         e Household employment taxes. Irs free file fillable forms 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Irs free file fillable forms 3f         g Tax on golden parachute payments. Irs free file fillable forms 3g       4 Add lines 3a through 3g. Irs free file fillable forms 4       5 Tax to be forgiven. Irs free file fillable forms Subtract line 4 from line 2. Irs free file fillable forms 5       Note. Irs free file fillable forms If the total of columns (A), (B), and (C) of line 5 (including any amounts shown on line 15 of Worksheet B) is less than $10,000, also complete Worksheet C. Irs free file fillable forms Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Irs free file fillable forms If filing Form 1040X for an eligible year, enter the amount from line 5 above on Form 1040X in column B of line 10 as a decrease in tax. Irs free file fillable forms The IRS will determine the amount to be refunded. Irs free file fillable forms Worksheet A. Irs free file fillable forms Figuring the Tax To Be Forgiven (For Decedents Who Filed a Return as Single, Married Filing Separately, Head of Household, or Qualifying Widow(er))         (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for tax forgiveness. Irs free file fillable forms 1       2 Enter the total tax from the decedent's income tax return. Irs free file fillable forms See Table 1 on page 5 for the line number for years before 2002. Irs free file fillable forms 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Irs free file fillable forms (These taxes are not eligible for forgiveness. Irs free file fillable forms )           a Self-employment tax. Irs free file fillable forms 3a         b Social security and Medicare tax on tip income not reported to employer. Irs free file fillable forms 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Irs free file fillable forms 3c         d Tax on excess accumulation in qualified retirement plans. Irs free file fillable forms 3d         e Household employment taxes. Irs free file fillable forms 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Irs free file fillable forms 3f         g Tax on golden parachute payments. Irs free file fillable forms 3g       4 Add lines 3a through 3g. Irs free file fillable forms 4       5 Tax to be forgiven. Irs free file fillable forms Subtract line 4 from line 2. Irs free file fillable forms 5       Note. Irs free file fillable forms If the total of columns (A), (B), and (C) of line 5 (including any amounts shown on line 15 of Worksheet B) is less than $10,000, also complete Worksheet C. Irs free file fillable forms Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Irs free file fillable forms If filing Form 1040X for an eligible year, enter the amount from line 5 above on Form 1040X in column B of line 10 as a decrease in tax. Irs free file fillable forms The IRS will determine the amount to be refunded. Irs free file fillable forms Worksheet B. Irs free file fillable forms Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Irs free file fillable forms 1       2 Enter the decedent's taxable income. Irs free file fillable forms Figure taxable income as if a separate return had been filed. Irs free file fillable forms See the instructions. Irs free file fillable forms 2       3 Enter the decedent's total tax. Irs free file fillable forms See the instructions. Irs free file fillable forms 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs free file fillable forms See the instructions. Irs free file fillable forms 4       5 Subtract line 4 from line 3. Irs free file fillable forms 5       6 Enter the surviving spouse's taxable income. Irs free file fillable forms Figure taxable income as if a separate return had been filed. Irs free file fillable forms See the instructions. Irs free file fillable forms 6       7 Enter the surviving spouse's total tax. Irs free file fillable forms See the instructions. Irs free file fillable forms 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Irs free file fillable forms 8       9 Subtract line 8 from line 7. Irs free file fillable forms 9       10 Add lines 5 and 9. Irs free file fillable forms 10       11 Enter the total tax from the joint return. Irs free file fillable forms See Table 1 on page 5 for the line number for years before 2002. Irs free file fillable forms 11       12 Add lines 4 and 8. Irs free file fillable forms 12       13 Subtract line 12 from line 11. Irs free file fillable forms 13       14 Divide line 5 by line 10. Irs free file fillable forms Enter the result as a decimal. Irs free file fillable forms 14       15 Tax to be forgiven. Irs free file fillable forms Multiply line 13 by line 14 and enter the result. Irs free file fillable forms 15       Note. Irs free file fillable forms If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Irs free file fillable forms Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Irs free file fillable forms If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Irs free file fillable forms The IRS will determine the amount to be refunded. Irs free file fillable forms Worksheet B. Irs free file fillable forms Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Irs free file fillable forms 1       2 Enter the decedent's taxable income. Irs free file fillable forms Figure taxable income as if a separate return had been filed. Irs free file fillable forms See the instructions. Irs free file fillable forms 2       3 Enter the decedent's total tax. Irs free file fillable forms See the instructions. Irs free file fillable forms 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs free file fillable forms See the instructions. Irs free file fillable forms 4       5 Subtract line 4 from line 3. Irs free file fillable forms 5       6 Enter the surviving spouse's taxable income. Irs free file fillable forms Figure taxable income as if a separate return had been filed. Irs free file fillable forms See the instructions. Irs free file fillable forms 6       7 Enter the surviving spouse's total tax. Irs free file fillable forms See the instructions. Irs free file fillable forms 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Irs free file fillable forms 8       9 Subtract line 8 from line 7. Irs free file fillable forms 9       10 Add lines 5 and 9. Irs free file fillable forms 10       11 Enter the total tax from the joint return. Irs free file fillable forms See Table 1 on page 5 for the line number for years before 2002. Irs free file fillable forms 11       12 Add lines 4 and 8. Irs free file fillable forms 12       13 Subtract line 12 from line 11. Irs free file fillable forms 13       14 Divide line 5 by line 10. Irs free file fillable forms Enter the result as a decimal. Irs free file fillable forms 14       15 Tax to be forgiven. Irs free file fillable forms Multiply line 13 by line 14 and enter the result. Irs free file fillable forms 15       Note. Irs free file fillable forms If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Irs free file fillable forms Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Irs free file fillable forms If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Irs free file fillable forms The IRS will determine the amount to be refunded. Irs free file fillable forms Worksheet C. Irs free file fillable forms Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. Irs free file fillable forms Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs free file fillable forms 1 Minimum tax forgiveness. Irs free file fillable forms Note. Irs free file fillable forms Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs free file fillable forms 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Irs free file fillable forms 3       4 Add lines 2 and 3. Irs free file fillable forms 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Irs free file fillable forms (See Income received after date of death on page 5. Irs free file fillable forms ) 5       6 Add lines 4 and 5. Irs free file fillable forms 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Irs free file fillable forms 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Irs free file fillable forms 8       9 Tax on exempt income. Irs free file fillable forms Subtract line 8 from line 7. Irs free file fillable forms 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs free file fillable forms If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs free file fillable forms 10       11 Add lines 9 and 10. Irs free file fillable forms 11   12 Additional payment allowed. Irs free file fillable forms If line 11 is $10,000 or more, enter -0- and stop here. Irs free file fillable forms No additional amount is allowed as a tax payment. Irs free file fillable forms Otherwise, subtract line 11 from line 1 and enter the result. Irs free file fillable forms 12   Note. Irs free file fillable forms The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs free file fillable forms Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Irs free file fillable forms If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs free file fillable forms Write "Sec. Irs free file fillable forms 692(d)(2) Payment" and the amount to the right of the entry space. Irs free file fillable forms Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs free file fillable forms If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs free file fillable forms Write “Sec. Irs free file fillable forms 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs free file fillable forms Worksheet C. Irs free file fillable forms Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. Irs free file fillable forms Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs free file fillable forms 1 Minimum tax forgiveness. Irs free file fillable forms Note. Irs free file fillable forms Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs free file fillable forms 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Irs free file fillable forms 3       4 Add lines 2 and 3. Irs free file fillable forms 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Irs free file fillable forms (See Income received after date of death on page 5. Irs free file fillable forms ) 5       6 Add lines 4 and 5. Irs free file fillable forms 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Irs free file fillable forms 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Irs free file fillable forms 8       9 Tax on exempt income. Irs free file fillable forms Subtract line 8 from line 7. Irs free file fillable forms 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs free file fillable forms If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs free file fillable forms 10       11 Add lines 9 and 10. Irs free file fillable forms 11   12 Additional payment allowed. Irs free file fillable forms If line 11 is $10,000 or more, enter -0- and stop here. Irs free file fillable forms No additional amount is allowed as a tax payment. Irs free file fillable forms Otherwise, subtract line 11 from line 1 and enter the result. Irs free file fillable forms 12   Note. Irs free file fillable forms The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs free file fillable forms Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Irs free file fillable forms If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs free file fillable forms Write "Sec. Irs free file fillable forms 692(d)(2) Payment" and the amount to the right of the entry space. Irs free file fillable forms Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs free file fillable forms If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs free file fillable forms Write “Sec. Irs free file fillable forms 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs free file fillable forms How To Get Tax Help Special IRS assistance. Irs free file fillable forms   The IRS is providing special help for those affected by the terrorist attacks, as well as survivors and personal representatives of the victims. Irs free file fillable forms We have set up a special toll-free number for people who may have trouble filing or paying their taxes because they were affected by the terrorist attacks, or who have other tax issues related to the attacks. Irs free file fillable forms Call 1–866–562–5227 Monday through Friday In English–7 a. Irs free file fillable forms m. Irs free file fillable forms to 10 p. Irs free file fillable forms m. Irs free file fillable forms local time In Spanish–8 a. Irs free file fillable forms m. Irs free file fillable forms to 9:30 p. Irs free file fillable forms m. Irs free file fillable forms local time   The IRS web site at www. Irs free file fillable forms irs. Irs free file fillable forms gov has notices and other tax relief information. Irs free file fillable forms Check it periodically for any new guidance or to see if Congress has enacted new legislation. Irs free file fillable forms   Business taxpayers affected by the attacks can e-mail their questions to corp. Irs free file fillable forms disaster. Irs free file fillable forms relief@irs. Irs free file fillable forms gov. Irs free file fillable forms   For current information on Presidentially declared disaster areas, check the Federal Emergency Management Agency Web site at www. Irs free file fillable forms fema. Irs free file fillable forms gov. Irs free file fillable forms Other help from the IRS. Irs free file fillable forms   You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. Irs free file fillable forms By selecting the method that is best for you, you will have quick and easy access to tax help. Irs free file fillable forms Contacting your Taxpayer Advocate. Irs free file fillable forms   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. Irs free file fillable forms   The Taxpayer Advocate represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. Irs free file fillable forms While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review. Irs free file fillable forms   To contact your Taxpayer Advocate: Call the Taxpayer Advocate at 1–877–777–4778. Irs free file fillable forms Call the IRS at 1–800–829–1040. Irs free file fillable forms Call, write, or fax the Taxpayer Advocate office in your area. Irs free file fillable forms Call 1–800–829–4059 if you are a TTY/TDD user. Irs free file fillable forms   For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS. Irs free file fillable forms Free tax services. Irs free file fillable forms   To find out what services are available, get Publication 910, Guide to Free Tax Services. Irs free file fillable forms It contains a list of free tax publications and an index of tax topics. Irs free file fillable forms It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. Irs free file fillable forms Personal computer. Irs free file fillable forms With your personal computer and modem, you can access the IRS on the Internet at www. Irs free file fillable forms irs. Irs free file fillable forms gov. Irs free file fillable forms While visiting our web site, you can: Find answers to questions you may have. Irs free file fillable forms Download forms and publications or search for forms and pub
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Irs free file fillable forms 7. Irs free file fillable forms   Coverdell Education Savings Account (ESA) Table of Contents Introduction What Is a Coverdell ESAQualified Education Expenses ContributionsContribution Limits Additional Tax on Excess Contributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Transfer Because of Divorce DistributionsTax-Free Distributions Taxable Distributions When Assets Must Be Distributed Introduction If your modified adjusted gross income (MAGI) is less than $110,000 ($220,000 if filing a joint return), you may be able to establish a Coverdell ESA to finance the qualified education expenses of a designated beneficiary. Irs free file fillable forms For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return. Irs free file fillable forms There is no limit on the number of separate Coverdell ESAs that can be established for a designated beneficiary. Irs free file fillable forms However, total contributions for the beneficiary in any year cannot be more than $2,000, no matter how many accounts have been established. Irs free file fillable forms See Contributions , later. Irs free file fillable forms This benefit applies not only to higher education expenses, but also to elementary and secondary education expenses. Irs free file fillable forms What is the tax benefit of the Coverdell ESA. Irs free file fillable forms   Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. Irs free file fillable forms   If, for a year, distributions from an account are not more than a designated beneficiary's qualified education expenses at an eligible educational institution, the beneficiary will not owe tax on the distributions. Irs free file fillable forms See Tax-Free Distributions , later. Irs free file fillable forms    Table 7-1 summarizes the main features of the Coverdell ESA. Irs free file fillable forms Table 7-1. Irs free file fillable forms Coverdell ESA at a Glance Do not rely on this table alone. Irs free file fillable forms It provides only general highlights. Irs free file fillable forms See the text for definitions of terms in bold type and for more complete explanations. Irs free file fillable forms Question Answer What is a Coverdell ESA? A savings account that is set up to pay the qualified education expenses of a designated beneficiary. Irs free file fillable forms Where can it be established? It can be opened in the United States at any bank or other IRS-approved entity that offers Coverdell ESAs. Irs free file fillable forms Who can have a Coverdell ESA? Any beneficiary who is under age 18 or is a special needs beneficiary. Irs free file fillable forms Who can contribute to a Coverdell ESA? Generally, any individual (including the beneficiary) whose modified adjusted gross income for the year is less than $110,000 ($220,000 in the case of a joint return). Irs free file fillable forms Are distributions tax free? Yes, if the distributions are not more than the beneficiary's adjusted qualified education expenses for the year. Irs free file fillable forms What Is a Coverdell ESA A Coverdell ESA is a trust or custodial account created or organized in the United States only for the purpose of paying the qualified education expenses of the Designated beneficiary (defined later) of the account. Irs free file fillable forms When the account is established, the designated beneficiary must be under age 18 or a special needs beneficiary. Irs free file fillable forms To be treated as a Coverdell ESA, the account must be designated as a Coverdell ESA when it is created. Irs free file fillable forms The document creating and governing the account must be in writing and must satisfy the following requirements. Irs free file fillable forms The trustee or custodian must be a bank or an entity approved by the IRS. Irs free file fillable forms The document must provide that the trustee or custodian can only accept a contribution that meets all of the following conditions. Irs free file fillable forms The contribution is in cash. Irs free file fillable forms The contribution is made before the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. Irs free file fillable forms The contribution would not result in total contributions for the year (not including rollover contributions) being more than $2,000. Irs free file fillable forms Money in the account cannot be invested in life insurance contracts. Irs free file fillable forms Money in the account cannot be combined with other property except in a common trust fund or common investment fund. Irs free file fillable forms The balance in the account generally must be distributed within 30 days after the earlier of the following events. Irs free file fillable forms The beneficiary reaches age 30, unless the beneficiary is a special needs beneficiary. Irs free file fillable forms The beneficiary's death. Irs free file fillable forms Qualified Education Expenses Generally, these are expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution. Irs free file fillable forms For purposes of Coverdell ESAs, the expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses. Irs free file fillable forms Designated beneficiary. Irs free file fillable forms   This is the individual named in the document creating the trust or custodial account to receive the benefit of the funds in the account. Irs free file fillable forms Contributions to a qualified tuition program (QTP). Irs free file fillable forms   A contribution to a QTP is a qualified education expense if the contribution is on behalf of the designated beneficiary of the Coverdell ESA. Irs free file fillable forms In the case of a change in beneficiary, this is a qualified expense only if the new beneficiary is a family member of that designated beneficiary. Irs free file fillable forms See chapter 8, Qualified Tuition Program . Irs free file fillable forms Eligible Educational Institution For purposes of Coverdell ESAs, an eligible educational institution can be either an eligible postsecondary school or an eligible elementary or secondary school. Irs free file fillable forms Eligible postsecondary school. Irs free file fillable forms   This is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Irs free file fillable forms S. Irs free file fillable forms Department of Education. Irs free file fillable forms It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Irs free file fillable forms The educational institution should be able to tell you if it is an eligible educational institution. Irs free file fillable forms   Certain educational institutions located outside the United States also participate in the U. Irs free file fillable forms S. Irs free file fillable forms Department of Education's Federal Student Aid (FSA) programs. Irs free file fillable forms Eligible elementary or secondary school. Irs free file fillable forms   This is any public, private, or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law. Irs free file fillable forms Qualified Higher Education Expenses These are expenses related to enrollment or attendance at an eligible postsecondary school. Irs free file fillable forms As shown in the following list, to be qualified, some of the expenses must be required by the school and some must be incurred by students who are enrolled at least half-time. Irs free file fillable forms The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school. Irs free file fillable forms Tuition and fees. Irs free file fillable forms Books, supplies, and equipment. Irs free file fillable forms Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible postsecondary school. Irs free file fillable forms Expenses for room and board must be incurred by students who are enrolled at least half-time (defined below). Irs free file fillable forms The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Irs free file fillable forms The allowance for room and board, as determined by the school, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Irs free file fillable forms The actual amount charged if the student is residing in housing owned or operated by the school. Irs free file fillable forms Half-time student. Irs free file fillable forms   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. Irs free file fillable forms Qualified Elementary and Secondary Education Expenses These are expenses related to enrollment or attendance at an eligible elementary or secondary school. Irs free file fillable forms As shown in the following list, to be qualified, some of the expenses must be required or provided by the school. Irs free file fillable forms There are special rules for computer-related expenses. Irs free file fillable forms The following expenses must be incurred by a designated beneficiary in connection with enrollment or attendance at an eligible elementary or secondary school. Irs free file fillable forms Tuition and fees. Irs free file fillable forms Books, supplies, and equipment. Irs free file fillable forms Academic tutoring. Irs free file fillable forms Special needs services for a special needs beneficiary. Irs free file fillable forms The following expenses must be required or provided by an eligible elementary or secondary school in connection with attendance or enrollment at the school. Irs free file fillable forms Room and board. Irs free file fillable forms Uniforms. Irs free file fillable forms Transportation. Irs free file fillable forms Supplementary items and services (including extended day programs). Irs free file fillable forms The purchase of computer technology, equipment, or Internet access and related services is a qualified elementary and secondary education expense if it is to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is in elementary or secondary school. Irs free file fillable forms (This does not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature. Irs free file fillable forms ) Contributions Any individual (including the designated beneficiary) can contribute to a Coverdell ESA if the individual's MAGI (defined later under Contribution Limits ) for the year is less than $110,000. Irs free file fillable forms For individuals filing joint returns, that amount is $220,000. Irs free file fillable forms Organizations, such as corporations and trusts, can also contribute to Coverdell ESAs. Irs free file fillable forms There is no requirement that an organization's income be below a certain level. Irs free file fillable forms Contributions must meet all of the following requirements. Irs free file fillable forms They must be in cash. Irs free file fillable forms They cannot be made after the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. Irs free file fillable forms They must be made by the due date of the contributor's tax return (not including extensions). Irs free file fillable forms Contributions can be made to one or several Coverdell ESAs for the same designated beneficiary provided that the total contributions are not more than the contribution limits (defined later) for a year. Irs free file fillable forms Contributions can be made, without penalty, to both a Coverdell ESA and a QTP in the same year for the same beneficiary. Irs free file fillable forms Table 7-2 summarizes many of the features of contributing to a Coverdell ESA. Irs free file fillable forms When contributions considered made. Irs free file fillable forms   Contributions made to a Coverdell ESA for the preceding tax year are considered to have been made on the last day of the preceding year. Irs free file fillable forms They must be made by the due date (not including extensions) for filing your return for the preceding year. Irs free file fillable forms   For example, if you make a contribution to a Coverdell ESA in February 2014, and you designate it as a contribution for 2013, you are considered to have made that contribution on December 31, 2013. Irs free file fillable forms Contribution Limits There are two yearly limits: One on the total amount that can be contributed for each designated beneficiary in any year, and One on the amount that any individual can contribute for any one designated beneficiary for a year. Irs free file fillable forms Limit for each designated beneficiary. Irs free file fillable forms   For 2013, the total of all contributions to all Coverdell ESAs set up for the benefit of any one designated beneficiary cannot be more than $2,000. Irs free file fillable forms This includes contributions (other than rollovers) to all the beneficiary's Coverdell ESAs from all sources. Irs free file fillable forms Rollovers are discussed under Rollovers and Other Transfers , later. Irs free file fillable forms Example. Irs free file fillable forms When Maria Luna was born in 2012, three separate Coverdell ESAs were set up for her, one by her parents, one by her grandfather, and one by her aunt. Irs free file fillable forms In 2013, the total of all contributions to Maria's three Coverdell ESAs cannot be more than $2,000. Irs free file fillable forms For example, if her grandfather contributed $2,000 to one of her Coverdell ESAs, no one else could contribute to any of her three accounts. Irs free file fillable forms Or, if her parents contributed $1,000 and her aunt $600, her grandfather or someone else could contribute no more than $400. Irs free file fillable forms These contributions could be put into any of Maria's Coverdell ESA accounts. Irs free file fillable forms Limit for each contributor. Irs free file fillable forms   Generally, you can contribute up to $2,000 for each designated beneficiary for 2013. Irs free file fillable forms This is the most you can contribute for the benefit of any one beneficiary for the year, regardless of the number of Coverdell ESAs set up for the beneficiary. Irs free file fillable forms Example. Irs free file fillable forms The facts are the same as in the previous example except that Maria Luna's older brother, Edgar, also has a Coverdell ESA. Irs free file fillable forms If their grandfather contributed $2,000 to Maria's Coverdell ESA in 2013, he could also contribute $2,000 to Edgar's Coverdell ESA. Irs free file fillable forms Reduced limit. Irs free file fillable forms   Your contribution limit may be reduced. Irs free file fillable forms If your MAGI (defined on this page) is between $95,000 and $110,000 (between $190,000 and $220,000 if filing a joint return), the $2,000 limit for each designated beneficiary is gradually reduced (see Figuring the limit , later). Irs free file fillable forms If your MAGI is $110,000 or more ($220,000 or more if filing a joint return), you cannot contribute to anyone's Coverdell ESA. Irs free file fillable forms Table 7-2. Irs free file fillable forms Coverdell ESA Contributions at a Glance Do not rely on this table alone. Irs free file fillable forms It provides only general highlights. Irs free file fillable forms See the text for more complete explanations. Irs free file fillable forms Question Answer Are contributions deductible? No. Irs free file fillable forms What is the annual contribution limit per designated beneficiary? $2,000 for each designated beneficiary. Irs free file fillable forms What if more than one Coverdell ESA has been opened for the same designated beneficiary? The annual contribution limit is $2,000 for each beneficiary, no matter how many Coverdell ESAs are set up for that beneficiary. Irs free file fillable forms What if more than one individual makes contributions for the same designated beneficiary? The annual contribution limit is $2,000 per beneficiary, no matter how many individuals contribute. Irs free file fillable forms Can contributions other than cash be made to a Coverdell ESA? No. Irs free file fillable forms When must contributions stop? No contributions can be made to a beneficiary's Coverdell ESA after he or she reaches age 18, unless the beneficiary is a special needs beneficiary. Irs free file fillable forms Modified adjusted gross income (MAGI). Irs free file fillable forms   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. Irs free file fillable forms MAGI when using Form 1040A. Irs free file fillable forms   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. Irs free file fillable forms MAGI when using Form 1040. Irs free file fillable forms   If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Irs free file fillable forms MAGI when using Form 1040NR. Irs free file fillable forms   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form. Irs free file fillable forms MAGI when using Form 1040NR-EZ. Irs free file fillable forms   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form. Irs free file fillable forms   If you have any of these adjustments, you can use Worksheet 7-1. Irs free file fillable forms MAGI for a Coverdell ESA , later, to figure your MAGI for Form 1040. Irs free file fillable forms Worksheet 7-1. Irs free file fillable forms MAGI for a Coverdell ESA 1. Irs free file fillable forms Enter your adjusted gross income  (Form 1040, line 38)   1. Irs free file fillable forms   2. Irs free file fillable forms Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. Irs free file fillable forms       3. Irs free file fillable forms Enter your foreign housing deduction (Form 2555, line 50)   3. Irs free file fillable forms         4. Irs free file fillable forms Enter the amount of income from Puerto Rico you are excluding   4. Irs free file fillable forms       5. Irs free file fillable forms Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. Irs free file fillable forms       6. Irs free file fillable forms Add lines 2, 3, 4, and 5   6. Irs free file fillable forms   7. Irs free file fillable forms Add lines 1 and 6. Irs free file fillable forms This is your  modified adjusted gross income   7. Irs free file fillable forms   Figuring the limit. Irs free file fillable forms    To figure the limit on the amount you can contribute for each designated beneficiary, multiply $2,000 by a fraction. Irs free file fillable forms The numerator (top number) is your MAGI minus $95,000 ($190,000 if filing a joint return). Irs free file fillable forms The denominator (bottom number) is $15,000 ($30,000 if filing a joint return). Irs free file fillable forms Subtract the result from $2,000. Irs free file fillable forms This is the amount you can contribute for each beneficiary. Irs free file fillable forms You can use Worksheet 7-2. Irs free file fillable forms Coverdell ESA Contribution Limit to figure the limit on contributions. Irs free file fillable forms    Worksheet 7-2. Irs free file fillable forms Coverdell ESA Contribution Limit 1. Irs free file fillable forms Maximum contribution   1. Irs free file fillable forms $2,000 2. Irs free file fillable forms Enter your modified adjusted gross income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. Irs free file fillable forms   3. Irs free file fillable forms Enter $190,000 if married filing jointly; $95,000 for all other filers   3. Irs free file fillable forms   4. Irs free file fillable forms Subtract line 3 from line 2. Irs free file fillable forms If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. Irs free file fillable forms   5. Irs free file fillable forms Enter $30,000 if married filing jointly; $15,000 for all other filers   5. Irs free file fillable forms     Note. Irs free file fillable forms If the amount on line 4 is greater than or equal to the amount on line 5, stop here. Irs free file fillable forms You are not allowed to contribute to a Coverdell ESA for 2013. Irs free file fillable forms       6. Irs free file fillable forms Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. Irs free file fillable forms . Irs free file fillable forms 7. Irs free file fillable forms Multiply line 1 by line 6   7. Irs free file fillable forms   8. Irs free file fillable forms Subtract line 7 from line 1   8. Irs free file fillable forms   Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. Irs free file fillable forms Example. Irs free file fillable forms Paul, who is single, had a MAGI of $96,500 for 2013. Irs free file fillable forms Paul can contribute up to $1,800 in 2013 for each beneficiary, as shown in the illustrated Worksheet 7-2, Coverdell ESA Contribution Limit–Illustrated. Irs free file fillable forms Worksheet 7-2. Irs free file fillable forms Coverdell ESA Contribution Limit—Illustrated 1. Irs free file fillable forms Maximum contribution   1. Irs free file fillable forms $2,000 2. Irs free file fillable forms Enter your modified adjusted gross  income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. Irs free file fillable forms 96,500 3. Irs free file fillable forms Enter $190,000 if married filing jointly; $95,000 for all other filers   3. Irs free file fillable forms 95,000 4. Irs free file fillable forms Subtract line 3 from line 2. Irs free file fillable forms If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. Irs free file fillable forms 1,500 5. Irs free file fillable forms Enter $30,000 if married filing jointly; $15,000 for all other filers   5. Irs free file fillable forms 15,000   Note. Irs free file fillable forms If the amount on line 4 is greater than or equal to the amount on line 5,  stop here. Irs free file fillable forms You are not allowed to  contribute to a Coverdell ESA for 2013. Irs free file fillable forms       6. Irs free file fillable forms Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. Irs free file fillable forms . Irs free file fillable forms 100 7. Irs free file fillable forms Multiply line 1 by line 6   7. Irs free file fillable forms 200 8. Irs free file fillable forms Subtract line 7 from line 1   8. Irs free file fillable forms 1,800 Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. Irs free file fillable forms Additional Tax on Excess Contributions The beneficiary must pay a 6% excise tax each year on excess contributions that are in a Coverdell ESA at the end of the year. Irs free file fillable forms Excess contributions are the total of the following two amounts. Irs free file fillable forms Contributions to any designated beneficiary's Coverdell ESA for the year that are more than $2,000 (or, if less, the total of each contributor's limit for the year, as discussed earlier). Irs free file fillable forms Excess contributions for the preceding year, reduced by the total of the following two amounts: Distributions (other than those rolled over as discussed later) during the year, and The contribution limit for the current year minus the amount contributed for the current year. Irs free file fillable forms Exceptions. Irs free file fillable forms   The excise tax does not apply if excess contributions made during 2013 (and any earnings on them) are distributed before the first day of the sixth month of the following tax year (June 1, 2014, for a calendar year taxpayer). Irs free file fillable forms   However, you must include the distributed earnings in gross income for the year in which the excess contribution was made. Irs free file fillable forms You should receive Form 1099-Q, Payments From Qualified Education Programs, from each institution from which excess contributions were distributed. Irs free file fillable forms Box 2 of that form will show the amount of earnings on your excess contributions. Irs free file fillable forms Code “2” or “3” entered in the blank box below boxes 5 and 6 indicate the year in which the earnings are taxable. Irs free file fillable forms See Instructions for Recipient on the back of copy B of your Form 1099-Q. Irs free file fillable forms Enter the amount of earnings on line 21 of Form 1040 (or Form 1040NR) for the applicable tax year. Irs free file fillable forms For more information, see Taxable Distributions , later. Irs free file fillable forms   The excise tax does not apply to any rollover contribution. Irs free file fillable forms Note. Irs free file fillable forms Contributions made in one year for the preceding tax year are considered to have been made on the last day of the preceding year. Irs free file fillable forms Example. Irs free file fillable forms In 2012, Greta's parents and grandparents contributed a total of $2,300 to Greta's Coverdell ESA— an excess contribution of $300. Irs free file fillable forms Because Greta did not withdraw the excess before June 1, 2013, she had to pay an additional tax of $18 (6% × $300) when she filed her 2012 tax return. Irs free file fillable forms In 2013, excess contributions of $500 were made to Greta's account, however, she withdrew $250 from that account to use for qualified education expenses. Irs free file fillable forms Using the steps shown earlier under Additional Tax on Excess Contributions , Greta figures the excess contribution in her account at the end of 2013 as follows. Irs free file fillable forms (1)   $500 excess contributions made in 2013     + (2)   $300 excess contributions in ESA at end of 2012     − (2a)   $250 distribution during 2013         $550 excess at end of 2013   × 6%=$33           If Greta limits 2014 contributions to $1,450 ($2,000 maximum allowed − $550 excess contributions from 2013), she will not owe any additional tax in 2014 for excess contributions. Irs free file fillable forms Figuring and reporting the additional tax. Irs free file fillable forms   You figure this excise tax in Part V of Form 5329. Irs free file fillable forms Report the additional tax on Form 1040, line 58 (or Form 1040NR, line 56). Irs free file fillable forms Rollovers and Other Transfers Assets can be rolled over from one Coverdell ESA to another or the designated beneficiary can be changed. Irs free file fillable forms The beneficiary's interest can be transferred to a spouse or former spouse because of divorce. Irs free file fillable forms Rollovers Any amount distributed from a Coverdell ESA is not taxable if it is rolled over to another Coverdell ESA for the benefit of the same beneficiary or a member of the beneficiary's family (including the beneficiary's spouse) who is under age 30. Irs free file fillable forms This age limitation does not apply if the new beneficiary is a special needs beneficiary. Irs free file fillable forms An amount is rolled over if it is paid to another Coverdell ESA within 60 days after the date of the distribution. Irs free file fillable forms Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. Irs free file fillable forms These are not taxable distributions. Irs free file fillable forms Members of the beneficiary's family. Irs free file fillable forms   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. Irs free file fillable forms Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. Irs free file fillable forms Brother, sister, stepbrother, or stepsister. Irs free file fillable forms Father or mother or ancestor of either. Irs free file fillable forms Stepfather or stepmother. Irs free file fillable forms Son or daughter of a brother or sister. Irs free file fillable forms Brother or sister of father or mother. Irs free file fillable forms Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. Irs free file fillable forms The spouse of any individual listed above. Irs free file fillable forms First cousin. Irs free file fillable forms Example. Irs free file fillable forms When Aaron graduated from college last year he had $5,000 left in his Coverdell ESA. Irs free file fillable forms He wanted to give this money to his younger sister, who was still in high school. Irs free file fillable forms In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his sister's Coverdell ESA within 60 days of the distribution. Irs free file fillable forms Only one rollover per Coverdell ESA is allowed during the 12-month period ending on the date of the payment or distribution. Irs free file fillable forms This rule does not apply to the rollover of a military death gratuity or payment from Servicemembers' Group Life Insurance (SGLI). Irs free file fillable forms Military death gratuity. Irs free file fillable forms   If you received a military death gratuity or a payment from Servicemembers' Group Life Insurance (SGLI), you may roll over all or part of the amount received to one or more Coverdell ESAs for the benefit of members of the beneficiary's family (see Members of the beneficiary's family , earlier). Irs free file fillable forms Such payments are made to an eligible survivor upon the death of a member of the armed forces. Irs free file fillable forms The contribution to a Coverdell ESA from survivor benefits received cannot be made later than 1 year after the date on which you receive the gratuity or SGLI payment. Irs free file fillable forms   This rollover contribution is not subject to (but is in addition to) the contribution limits discussed earlier under Contribution Limits . Irs free file fillable forms The amount you roll over cannot exceed the total survivor benefits you received, reduced by contributions from these benefits to a Roth IRA or other Coverdell ESAs. Irs free file fillable forms   The amount contributed from the survivor benefits is treated as part of your basis (cost) in the Coverdell ESA, and will not be taxed when distributed. Irs free file fillable forms See Distributions , later. Irs free file fillable forms The limit of one rollover per Coverdell ESA during a 12-month period does not apply to a military death gratuity or SGLI payment. Irs free file fillable forms Changing the Designated Beneficiary The designated beneficiary can be changed. Irs free file fillable forms See Members of the beneficiary's family , earlier. Irs free file fillable forms There are no tax consequences if, at the time of the change, the new beneficiary is under age 30 or is a special needs beneficiary. Irs free file fillable forms Example. Irs free file fillable forms Assume the same situation for Aaron as in the last example (see Rollovers , earlier). Irs free file fillable forms Instead of closing his Coverdell ESA and paying the distribution into his sister's Coverdell ESA, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his sister. Irs free file fillable forms Transfer Because of Divorce If a spouse or former spouse receives a Coverdell ESA under a divorce or separation instrument, it is not a taxable transfer. Irs free file fillable forms After the transfer, the spouse or former spouse treats the Coverdell ESA as his or her own. Irs free file fillable forms Example. Irs free file fillable forms In their divorce settlement, Peg received her ex-husband's Coverdell ESA. Irs free file fillable forms In this process, the account was transferred into her name. Irs free file fillable forms Peg now treats the funds in this Coverdell ESA as if she were the original owner. Irs free file fillable forms Distributions The designated beneficiary of a Coverdell ESA can take a distribution at any time. Irs free file fillable forms Whether the distributions are tax free depends, in part, on whether the distributions are equal to or less than the amount of Adjusted qualified education expenses (defined later) that the beneficiary has in the same tax year. Irs free file fillable forms See Table 7-3, Coverdell ESA Distributions at a Glance, for highlights. Irs free file fillable forms Table 7-3. Irs free file fillable forms Coverdell ESA Distributions at a Glance Do not rely on this table alone. Irs free file fillable forms It provides only general highlights. Irs free file fillable forms See the text for definitions of terms in bold type and for more complete explanations. Irs free file fillable forms Question Answer Is a distribution from a Coverdell ESA to pay for a designated beneficiary's qualified education expenses tax free? Generally, yes, to the extent the amount of the distribution is not more than the designated beneficiary's adjusted qualified education expenses. Irs free file fillable forms After the designated beneficiary completes his or her education at an eligible educational institution, can amounts remaining in the Coverdell ESA be distributed? Yes. Irs free file fillable forms Amounts must be distributed when the designated beneficiary reaches age 30, unless he or she is a special needs beneficiary. Irs free file fillable forms Also, certain transfers to members of the beneficiary's family are permitted. Irs free file fillable forms Does the designated beneficiary need to be enrolled for a minimum number of courses to take a tax-free distribution? No. Irs free file fillable forms Adjusted qualified education expenses. Irs free file fillable forms   To determine if total distributions for the year are more than the amount of qualified education expenses, reduce total qualified education expenses by any tax-free educational assistance. Irs free file fillable forms Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Irs free file fillable forms The amount you get by subtracting tax-free educational assistance from your total qualified education expenses is your adjusted qualified education expenses. Irs free file fillable forms Tax-Free Distributions Generally, distributions are tax free if they are not more than the beneficiary's adjusted qualified education expenses for the year. Irs free file fillable forms Do not report tax-free distributions (including qualifying rollovers) on your tax return. Irs free file fillable forms Taxable Distributions A portion of the distributions is generally taxable to the beneficiary if the total distributions are more than the beneficiary's adjusted qualified education expenses for the year. Irs free file fillable forms Excess distribution. Irs free file fillable forms   This is the part of the total distribution that is more than the beneficiary's adjusted qualified education expenses for the year. Irs free file fillable forms Earnings and basis. Irs free file fillable forms   You will receive a Form 1099-Q for each of the Coverdell ESAs from which money was distributed in 2013. Irs free file fillable forms The amount of your gross distribution will be shown in box 1. Irs free file fillable forms For 2013, instead of dividing the gross distribution between your earnings (box 2) and your basis (already-taxed amount) (box 3), the payer or trustee may report the fair market value (account balance) of the Coverdell ESA as of December 31, 2013. Irs free file fillable forms This will be shown in the blank box below boxes 5 and 6. Irs free file fillable forms   The amount contributed from survivor benefits (see Military death gratuity , earlier) is treated as part of your basis and will not be taxed when distributed. Irs free file fillable forms Figuring the Taxable Portion of a Distribution The taxable portion is the amount of the excess distribution that represents earnings that have accumulated tax free in the account. Irs free file fillable forms Figure the taxable portion for 2013 as shown in the following steps. Irs free file fillable forms Multiply the total amount distributed by a fraction. Irs free file fillable forms The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the value (balance) of the account at the end of 2013 plus the amount distributed during 2013. Irs free file fillable forms Subtract the amount figured in (1) from the total amount distributed during 2013. Irs free file fillable forms The result is the amount of earnings included in the distribution(s). Irs free file fillable forms Multiply the amount of earnings figured in (2) by a fraction. Irs free file fillable forms The numerator is the adjusted qualified education expenses paid during 2013 and the denominator is the total amount distributed during 2013. Irs free file fillable forms Subtract the amount figured in (3) from the amount figured in (2). Irs free file fillable forms The result is the amount the beneficiary must include in income. Irs free file fillable forms The taxable amount must be reported on Form 1040 or Form 1040NR, line 21. Irs free file fillable forms Example. Irs free file fillable forms You received an $850 distribution from your Coverdell ESA, to which $1,500 had been contributed before 2013. Irs free file fillable forms There were no contributions in 2013. Irs free file fillable forms This is your first distribution from the account, so your basis in the account on December 31, 2012, was $1,500. Irs free file fillable forms The value (balance) of your account on December 31, 2013, was $950. Irs free file fillable forms You had $700 of adjusted qualified education expenses (AQEE) for the year. Irs free file fillable forms Using the steps in Figuring the Taxable Portion of a Distribution , earlier, figure the taxable portion of your distribution as follows. Irs free file fillable forms   1. Irs free file fillable forms $850 (distribution) × $1,500 basis + $0 contributions  $950 value + $850 distribution       =$708 (basis portion of distribution)     2. Irs free file fillable forms $850 (distribution)−$708 (basis portion of distribution)     =$142 (earnings included in distribution)   3. Irs free file fillable forms $142 (earnings) × $700 AQEE  $850 distribution           =$117 (tax-free earnings)     4. Irs free file fillable forms $142 (earnings)−$117 (tax-free earnings)=$25 (taxable earnings)                 You must include $25 in income as distributed earnings not used for qualified education expenses. Irs free file fillable forms Report this amount on Form 1040, line 21, listing the type and amount of income on the dotted line. Irs free file fillable forms Worksheet 7-3, Coverdell ESA–Taxable Distributions and Basis , at the end of this chapter, can help you figure your adjusted qualified education expenses, how much of your distribution must be included in income, and the remaining basis in your Coverdell ESA(s). Irs free file fillable forms Coordination With American Opportunity and Lifetime Learning Credits The American opportunity or lifetime learning credit can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits. Irs free file fillable forms This means the beneficiary must reduce qualified higher education expenses by tax-free educational assistance, and then further reduce them by any expenses taken into account in determining an American opportunity or lifetime learning credit. Irs free file fillable forms Example. Irs free file fillable forms Derek Green had $5,800 of qualified higher education expenses for 2013, his first year in college. Irs free file fillable forms He paid his college expenses from the following sources. Irs free file fillable forms     Partial tuition scholarship (tax free) $1,500     Coverdell ESA distribution 1,000     Gift from parents 2,100     Earnings from part-time job 1,200           Of his $5,800 of qualified higher education expenses, $4,000 was tuition and related expenses that also qualified for an American opportunity credit. Irs free file fillable forms Derek's parents claimed a $2,500 American opportunity credit (based on $4,000 expenses) on their tax return. Irs free file fillable forms Before Derek can determine the taxable portion of his Coverdell ESA distribution, he must reduce his total qualified higher education expenses. Irs free file fillable forms     Total qualified higher education expenses $5,800     Minus: Tax-free educational assistance −1,500     Minus: Expenses taken into account in  figuring American opportunity credit − 4,000     Equals: Adjusted qualified higher education  expenses (AQHEE) $ 300           Since the adjusted qualified higher education expenses ($300) are less than the Coverdell ESA distribution ($1,000), part of the distribution will be taxable. Irs free file fillable forms The balance in Derek's account was $1,800 on December 31, 2013. Irs free file fillable forms Prior to 2013, $2,100 had been contributed to this account. Irs free file fillable forms Contributions for 2013 totaled $400. Irs free file fillable forms Using the four steps outlined earlier, Derek figures the taxable portion of his distribution as shown below. Irs free file fillable forms   1. Irs free file fillable forms $1,000 (distribution) × $2,100 basis + $400 contributions  $1,800 value + $1,000 distribution           =$893 (basis portion of distribution)     2. Irs free file fillable forms $1,000 (distribution)−$893 (basis portion of distribution)     = $107 (earnings included in distribution)   3. Irs free file fillable forms $107 (earnings) × $300 AQHEE  $1,000 distribution       =$32 (tax-free earnings)     4. Irs free file fillable forms $107 (earnings)−$32 (tax-free earnings)=$75 (taxable earnings)                 Derek must include $75 in income (Form 1040, line 21). Irs free file fillable forms This is the amount of distributed earnings not used for adjusted qualified higher education expenses. Irs free file fillable forms Coordination With Qualified Tuition Program (QTP) Distributions If a designated beneficiary receives distributions from both a Coverdell ESA and a QTP in the same year, and the total distribution is more than the beneficiary's adjusted qualified higher education expenses, those expenses must be allocated between the distribution from the Coverdell ESA and the distribution from the QTP before figuring how much of each distribution is taxable. Irs free file fillable forms The following two examples illustrate possible allocations. Irs free file fillable forms Example 1. Irs free file fillable forms In 2013, Beatrice graduated from high school and began her first semester of college. Irs free file fillable forms That year, she had $1,000 of qualified elementary and secondary education expenses (QESEE) for high school and $3,000 of qualified higher education expenses (QHEE) for college. Irs free file fillable forms To pay these expenses, Beatrice withdrew $800 from her Coverdell ESA and $4,200 from her QTP. Irs free file fillable forms No one claimed Beatrice as a dependent, nor was she eligible for an education credit. Irs free file fillable forms She did not receive any tax-free educational assistance in 2013. Irs free file fillable forms Beatrice must allocate her total qualified education expenses between the two distributions. Irs free file fillable forms Beatrice knows that tax-free treatment will be available if she applies her $800 Coverdell ESA distribution toward her $1,000 of qualified education expenses for high school. Irs free file fillable forms The qualified expenses are greater than the distribution, making the $800 Coverdell ESA distribution tax free. Irs free file fillable forms Next, Beatrice matches her $4,200 QTP distribution to her $3,000 of QHEE, and finds she has an excess QTP distribution of $1,200 ($4,200 QTP − $3,000 QHEE). Irs free file fillable forms She cannot use the extra $200 of high school expenses (from (1) above) against the QTP distribution because those expenses do not qualify a QTP for tax-free treatment. Irs free file fillable forms Finally, Beatrice figures the taxable and tax-free portions of her QTP distribution based on her $3,000 of QHEE. Irs free file fillable forms (See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program for more information. Irs free file fillable forms ) Example 2. Irs free file fillable forms Assume the same facts as in Example 1 , except that Beatrice withdrew $1,800 from her Coverdell ESA and $3,200 from her QTP. Irs free file fillable forms In this case, she allocates her qualified education expenses as follows. Irs free file fillable forms Using the same reasoning as in Example 1, Beatrice matches $1,000 of her Coverdell ESA distribution to her $1,000 of QESEE—she has $800 of her distribution remaining. Irs free file fillable forms Because higher education expenses can also qualify a Coverdell ESA distribution for tax-free treatment, Beatrice allocates her $3,000 of QHEE between the remaining $800 Coverdell ESA and the $3,200 QTP distributions ($4,000 total). Irs free file fillable forms   $3,000 QHEE × $800 ESA distribution  $4,000 total distribution = $600 QHEE (ESA)     $3,000 QHEE × $3,200 QTP distribution  $4,000 total distribution = $2,400 QHEE (QTP)   Beatrice then figures the taxable part of her: Coverdell ESA distribution based on qualified education expenses of $1,600 ($1,000 QESEE + $600 QHEE). Irs free file fillable forms See Figuring the Taxable Portion of a Distribution , earlier, in this chapter. Irs free file fillable forms   QTP distribution based on her $2,400 of QHEE (see Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program). Irs free file fillable forms The above examples show two types of allocation between distributions from a Coverdell ESA and a QTP. Irs free file fillable forms However, you do not have to allocate your expenses in the same way. Irs free file fillable forms You can use any reasonable method. Irs free file fillable forms Losses on Coverdell ESA Investments If you have a loss on your investment in a Coverdell ESA, you may be able to deduct the loss on your income tax return. Irs free file fillable forms You can deduct the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. Irs free file fillable forms Your basis is the total amount of contributions to that Coverdell ESA. Irs free file fillable forms You claim the loss as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23 (Schedule A (Form 1040NR), line 9), subject to the 2%-of-adjusted-gross-income limit. Irs free file fillable forms If you have distributions from more than one Coverdell ESA account during a year, you must combine the information (amount of distribution, basis, etc. Irs free file fillable forms ) from all such accounts in order to determine your taxable earnings for the year. Irs free file fillable forms By doing this, the loss from one ESA account reduces the distributed earnings (if any) from any other ESA account. Irs free file fillable forms For examples of the calculation, see Losses on QTP Investments in chapter 8, Qualified Tuition Program. Irs free file fillable forms Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. Irs free file fillable forms Exceptions. Irs free file fillable forms   The 10% additional tax does not apply to distributions: Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. Irs free file fillable forms Made because the designated beneficiary is disabled. Irs free file fillable forms A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. Irs free file fillable forms A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. Irs free file fillable forms Included in income because the designated beneficiary received: A tax-free scholarship or fellowship (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), or Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Irs free file fillable forms Made on account of the attendance of the designated beneficiary at a U. Irs free file fillable forms S. Irs free file fillable forms military academy (such as the USMA at West Point). Irs free file fillable forms This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U. Irs free file fillable forms S. Irs free file fillable forms Code) attributable to such attendance. Irs free file fillable forms Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits , earlier). Irs free file fillable forms Made before June 1, 2014, of an excess 2013 contribution (and any earnings on it). Irs free file fillable forms The distributed earnings must be included in gross income for the year in which the excess contribution was made. Irs free file fillable forms Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. Irs free file fillable forms Figuring the additional tax. Irs free file fillable forms    Use Part II of Form 5329, to figure any additional tax. Irs free file fillable forms Report the amount on Form 1040, line 58, or Form 1040NR, line 56. Irs free file fillable forms When Assets Must Be Distributed Any assets remaining in a Coverdell ESA must be distributed when either one of the following two events occurs. Irs free file fillable forms The designated beneficiary reaches age 30. Irs free file fillable forms In this case, the remaining assets must be distributed within 30 days after the beneficiary reaches age 30. Irs free file fillable forms However, this rule does not apply if the beneficiary is a special needs beneficiary. Irs free file fillable forms The designated beneficiary dies before reaching age 30. Irs free file fillable forms In this case, the remaining assets must generally be distributed within 30 days after the date of death. Irs free file fillable forms Exception for Transfer to Surviving Spouse or Family Member If a Coverdell ESA is transferred to a surviving spouse or other family member as the result of the death of the designated beneficiary, the Coverdell ESA retains its status. Irs free file fillable forms (“Family member” was defined earlier under Rollovers . Irs free file fillable forms ) This means the spouse or other family member can treat the Coverdell ESA as his or her own and does not need to withdraw the assets until he or she reaches age 30. Irs free file fillable forms This age limitation does not apply if the new beneficiary is a special needs beneficiary. Irs free file fillable forms There are no tax consequences as a result of the transfer. Irs free file fillable forms How To Figure the Taxable Earnings When a total distribution is made because the designated beneficiary either reached age 30 or died, the earnings that accumulated tax free in the account must be included in taxable income. Irs free file fillable forms You determine these earnings as shown in the following two steps. Irs free file fillable forms Multiply the amount distributed by a fraction. Irs free file fillable forms The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the balance in the account at the end of 2013 plus the amount distributed during 2013. Irs free file fillable forms Subtract the amount figured in (1) from the total amount distributed during 2013. Irs free file fillable forms The result is the amount of earnings included in the distribution. Irs free file fillable forms For an example, see steps (1) and (2) of the Example under Figuring the Taxable Portion of a Distribution, earlier. Irs free file fillable forms The beneficiary or other person receiving the distribution must report this amount on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line. Irs free file fillable forms Worksheet 7-3 Instructions. Irs free file fillable forms Coverdell ESA—Taxable Distributions and Basis Line G. Irs free file fillable forms Enter the total distributions received from all Coverdell ESAs during 2013. Irs free file fillable forms Do not include amounts rolled over to another ESA within 60 days (only one rollover is allowed during any 12-month period). Irs free file fillable forms Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year for which the contributions were made. Irs free file fillable forms Line 2. Irs free file fillable forms Your basis (amount already taxed) in this Coverdell ESA as of December 31, 2012, is the total of:   •All contributions to this Coverdell ESA before 2013 •Minus the tax-free portion of any distributions from this Coverdell ESA before 2013. Irs free file fillable forms   If your last distribution from this Coverdell ESA was before 2013, you must start with the basis in your account as of the end of the last year in which you took a distribution. Irs free file fillable forms For years before 2002, you can find that amount on the last line of the worksheet in the Instructions for Form 8606, Nondeductible IRAs, that you completed for that year. Irs free file fillable forms For years after 2001, you can find that amount by using the ending basis from the worksheet in Publication 970 for that year. Irs free file fillable forms You can determine your basis in this Coverdell ESA as of December 31, 2012, by adding to the basis as of the end of that year any contributions made to that account after the year of the distribution and before 2013. Irs free file fillable forms Line 4. Irs free file fillable forms Enter the total distributions received from this Coverdell ESA in 2013. Irs free file fillable forms Do not include amounts rolled over to another Coverdell ESA within 60 days (only one rollover is allowed during any 12-month period). Irs free file fillable forms   Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year of the contributions. Irs free file fillable forms Line 7. Irs free file fillable forms Enter the total value of this Coverdell ESA as of December 31, 2013, plus any outstanding rollovers contributed to the account after 2012, but before the end of the 60-day rollover period. Irs free file fillable forms A statement should be sent to you by January 31, 2014, for this Coverdell ESA showing the value on December 31, 2013. Irs free file fillable forms   A rollover is a tax-free withdrawal from one Coverdell ESA that is contributed to another Coverdell ESA. Irs free file fillable forms An outstanding rollover is any amount withdrawn within 60 days before the end of 2013 (November 2 through December 31) that was rolled over after December 31, 2013, but within the 60-day rollover period. Irs free file fillable forms Worksheet 7-3. Irs free file fillable forms Coverdell ESA—Taxable Distributions and Basis How to complete this worksheet. Irs free file fillable forms • • • Complete Part I, lines A through H, on only one worksheet. Irs free file fillable forms  Complete a separate Part II, lines 1 through 15, for each of your Coverdell ESAs. Irs free file fillable forms  Complete Part III, the Summary (line 16), on only one worksheet. Irs free file fillable forms Part I. Irs free file fillable forms Qualified Education Expenses (Complete for total expenses)       A. Irs free file fillable forms Enter your total qualified education expenses for 2013   A. Irs free file fillable forms   B. Irs free file fillable forms Enter those qualified education expenses paid for with tax-free educational assistance (for example, tax-free scholarships, veterans' educational benefits, Pell grants, employer-provided educational assistance)   B. Irs free file fillable forms         C. Irs free file fillable forms Enter those qualified higher education expenses deducted on Schedule C or C-EZ (Form 1040). Irs free file fillable forms Schedule F (Form 1040), or as a miscellaneous itemized deduction on Schedule A (Form 1040 or 1040NR)   C. Irs free file fillable forms         D. Irs free file fillable forms Enter those qualified higher education expenses on which  an American opportunity or lifetime learning credit was based   D. Irs free file fillable forms         E. Irs free file fillable forms Add lines B, C, and D   D. Irs free file fillable forms   F. Irs free file fillable forms Subtract line E from line A. Irs free file fillable forms This is your adjusted qualified education expense for 2013   E. Irs free file fillable forms   G. Irs free file fillable forms Enter your total distributions from all Coverdell ESAs during 2013. Irs free file fillable forms Do not include rollovers  or the return of excess contributions (see instructions)   F. Irs free file fillable forms   H. Irs free file fillable forms Divide line F by line G. Irs free file fillable forms Enter the result as a decimal (rounded to at least 3 places). Irs free file fillable forms If the  result is 1. Irs free file fillable forms 000 or more, enter 1. Irs free file fillable forms 000   G. Irs free file fillable forms . Irs free file fillable forms Part II. Irs free file fillable forms Taxable Distributions and Basis (Complete separately for each account) 1. Irs free file fillable forms Enter the amount contributed to this Coverdell ESA for 2013, including contributions made for 2013 from January 1, 2014, through April 15, 2014. Irs free file fillable forms Do not include rollovers or the return of excess contributions   1. Irs free file fillable forms   2. Irs free file fillable forms Enter your basis in this Coverdell ESA as of December 31, 2012 (see instructions)   2. Irs free file fillable forms   3. Irs free file fillable forms Add lines 1 and 2   3. Irs free file fillable forms   4. Irs free file fillable forms Enter the total distributions from this Coverdell ESA during 2013. Irs free file fillable forms Do not include rollovers  or the return of excess contributions (see instructions)   4. Irs free file fillable forms   5. Irs free file fillable forms Multiply line 4 by line H. Irs free file fillable forms This is the amount of adjusted qualified  education expense attributable to this Coverdell ESA   5. Irs free file fillable forms         6. Irs free file fillable forms Subtract line 5 from line 4   6. Irs free file fillable forms         7. Irs free file fillable forms Enter the total value of this Coverdell ESA as of December 31, 2013,  plus any outstanding rollovers (see instructions)   7. Irs free file fillable forms         8. Irs free file fillable forms Add lines 4 and 7   8. Irs free file fillable forms         9. Irs free file fillable forms Divide line 3 by line 8. Irs free file fillable forms Enter the result as a decimal (rounded to  at least 3 places). Irs free file fillable forms If the result is 1. Irs free file fillable forms 000 or more, enter 1. Irs free file fillable forms 000   9. Irs free file fillable forms . Irs free file fillable forms       10. Irs free file fillable forms Multiply line 4 by line 9. Irs free file fillable forms This is the amount of basis allocated to your  distributions, and is tax free   10. Irs free file fillable forms     Note. Irs free file fillable forms If line 6 is zero, skip lines 11 through 13, enter -0- on line 14, and go to line 15. Irs free file fillable forms       11. Irs free file fillable forms Subtract line 10 from line 4   11. Irs free file fillable forms   12. Irs free file fillable forms Divide line 5 by line 4. Irs free file fillable forms Enter the result as a decimal (rounded to  at least 3 places). Irs free file fillable forms If the result is 1. Irs free file fillable forms 000 or more, enter 1. Irs free file fillable forms 000   12. Irs free file fillable forms . Irs free file fillable forms       13. Irs free file fillable forms Multiply line 11 by line 12. Irs free file fillable forms This is the amount of qualified education  expenses allocated to your distributions, and is tax free   13. Irs free file fillable forms   14. Irs free file fillable forms Subtract line 13 from line 11. Irs free file fillable forms This is the portion of the distributions from this  Coverdell ESA in 2013 that you must include in income   14. Irs free file fillable forms   15. Irs free file fillable forms Subtract line 10 from line 3. Irs free file fillable forms This is your basis in this Coverdell ESA as of December 31, 2013   15. Irs free file fillable forms   Part III. Irs free file fillable forms Summary (Complete only once)       16. Irs free file fillable forms Taxable amount. Irs free file fillable forms Add together all amounts on line 14 for all your Coverdell ESAs. Irs free file fillable forms Enter here  and include on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line   16. Irs free file fillable forms   Prev  Up  Next   Home   More Online Publications