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Irs Gov 1040x

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Irs Gov 1040x

Irs gov 1040x Part Two -   Income The eight chapters in this part discuss many kinds of income. Irs gov 1040x They explain which income is and is not taxed. Irs gov 1040x See Part Three for information on gains and losses you report on Form 8949 and Schedule D (Form 1040) and for information on selling your home. Irs gov 1040x Table of Contents 5. Irs gov 1040x   Wages, Salaries, and Other EarningsReminder Introduction Useful Items - You may want to see: Employee CompensationBabysitting. Irs gov 1040x Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits 6. Irs gov 1040x   Tip IncomeIntroduction Useful Items - You may want to see: Keeping a Daily Tip RecordElectronic tip record. Irs gov 1040x Reporting Tips to Your EmployerElectronic tip statement. Irs gov 1040x Final report. Irs gov 1040x Reporting Tips on Your Tax Return Allocated Tips 7. Irs gov 1040x   Interest IncomeReminder Introduction Useful Items - You may want to see: General InformationSSN for joint account. Irs gov 1040x Custodian account for your child. Irs gov 1040x Penalty for failure to supply SSN. Irs gov 1040x Reporting backup withholding. Irs gov 1040x Savings account with parent as trustee. Irs gov 1040x Interest not reported on Form 1099-INT. Irs gov 1040x Nominees. Irs gov 1040x Incorrect amount. Irs gov 1040x Information reporting requirement. Irs gov 1040x Taxable InterestInterest subject to penalty for early withdrawal. Irs gov 1040x Money borrowed to invest in certificate of deposit. Irs gov 1040x U. Irs gov 1040x S. Irs gov 1040x Savings Bonds Education Savings Bond Program U. Irs gov 1040x S. Irs gov 1040x Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Original Issue Discount (OID) When To Report Interest IncomeConstructive receipt. Irs gov 1040x How To Report Interest IncomeSchedule B (Form 1040A or 1040). Irs gov 1040x Reporting tax-exempt interest. Irs gov 1040x U. Irs gov 1040x S. Irs gov 1040x savings bond interest previously reported. Irs gov 1040x 8. Irs gov 1040x   Dividends and Other DistributionsReminder Introduction Useful Items - You may want to see: General InformationDividends not reported on Form 1099-DIV. Irs gov 1040x Reporting tax withheld. Irs gov 1040x Nominees. Irs gov 1040x Ordinary DividendsQualified Dividends Dividends Used to Buy More Stock Money Market Funds Capital Gain DistributionsBasis adjustment. Irs gov 1040x Nondividend DistributionsLiquidating Distributions Distributions of Stock and Stock Rights Other DistributionsInformation reporting requirement. Irs gov 1040x Alternative minimum tax treatment. Irs gov 1040x How To Report Dividend IncomeInvestment interest deducted. Irs gov 1040x 9. Irs gov 1040x   Rental Income and ExpensesIntroduction Useful Items - You may want to see: Rental Income Rental ExpensesVacant while listed for sale. Irs gov 1040x Repairs and Improvements Other Expenses Property Changed to Rental Use Renting Part of Property Not Rented for Profit Personal Use of Dwelling Unit (Including Vacation Home)Example. Irs gov 1040x Dividing Expenses Dwelling Unit Used as a Home Reporting Income and Deductions DepreciationChanging your accounting method to deduct unclaimed depreciation. Irs gov 1040x Limits on Rental LossesAt-Risk Rules Passive Activity Limits How To Report Rental Income and ExpensesSchedule E (Form 1040) 10. Irs gov 1040x   Retirement Plans, Pensions, and AnnuitiesWhat's New Reminder IntroductionThe General Rule. Irs gov 1040x Individual retirement arrangements (IRAs). Irs gov 1040x Civil service retirement benefits. Irs gov 1040x Useful Items - You may want to see: General InformationIn-plan rollovers to designated Roth accounts. Irs gov 1040x How To Report Cost (Investment in the Contract) Taxation of Periodic PaymentsExclusion limited to cost. Irs gov 1040x Exclusion not limited to cost. Irs gov 1040x Simplified Method Taxation of Nonperiodic PaymentsLump-Sum Distributions RolloversIn-plan rollovers to designated Roth accounts. Irs gov 1040x Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and Beneficiaries 11. Irs gov 1040x   Social Security and Equivalent Railroad Retirement BenefitsIntroduction Useful Items - You may want to see: Are Any of Your Benefits Taxable? How To Report Your BenefitsHow Much Is Taxable? Examples Deductions Related to Your BenefitsRepayments More Than Gross Benefits 12. Irs gov 1040x   Other IncomeIntroduction Useful Items - You may want to see: Bartering Canceled DebtsInterest included in canceled debt. Irs gov 1040x Exceptions Host or Hostess Life Insurance ProceedsSurviving spouse. Irs gov 1040x Endowment Contract Proceeds Accelerated Death Benefits Public Safety Officer Killed in the Line of Duty Partnership Income S Corporation Income RecoveriesItemized Deduction Recoveries Rents from Personal Property RepaymentsMethod 1. Irs gov 1040x Method 2. Irs gov 1040x RoyaltiesDepletion. Irs gov 1040x Coal and iron ore. Irs gov 1040x Sale of property interest. Irs gov 1040x Part of future production sold. Irs gov 1040x Unemployment BenefitsTypes of unemployment compensation. Irs gov 1040x Governmental program. Irs gov 1040x Repayment of unemployment compensation. Irs gov 1040x Tax withholding. Irs gov 1040x Repayment of benefits. Irs gov 1040x Welfare and Other Public Assistance Benefits Other IncomeEmotional distress. Irs gov 1040x Deduction for costs involved in unlawful discrimination suits. Irs gov 1040x Energy conservation measure. Irs gov 1040x Dwelling unit. Irs gov 1040x Current income required to be distributed. Irs gov 1040x Current income not required to be distributed. Irs gov 1040x How to report. Irs gov 1040x Losses. Irs gov 1040x Grantor trust. Irs gov 1040x Nonemployee compensation. Irs gov 1040x Corporate director. Irs gov 1040x Personal representatives. Irs gov 1040x Manager of trade or business for bankruptcy estate. Irs gov 1040x Notary public. Irs gov 1040x Election precinct official. Irs gov 1040x Difficulty-of-care payments. Irs gov 1040x Maintaining space in home. Irs gov 1040x Reporting taxable payments. Irs gov 1040x Lotteries and raffles. Irs gov 1040x Form W-2G. Irs gov 1040x Reporting winnings and recordkeeping. Irs gov 1040x Inherited pension or IRA. Irs gov 1040x Employee awards or bonuses. Irs gov 1040x Pulitzer, Nobel, and similar prizes. Irs gov 1040x Payment for services. Irs gov 1040x VA payments. Irs gov 1040x Prizes. Irs gov 1040x Strike and lockout benefits. Irs gov 1040x Prev  Up  Next   Home   More Online Publications
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Form W-2 Wage and Tax Statement
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Instruction W-2 & W-3 General Instructions for Forms W-2 and W-3
Form W-2AS American Samoa Wage and Tax Statement
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Instruction W-2G & 5754 Instructions for Forms W-2G and 5754
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Instruction 1098 Instructions for Form 1098
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Instruction 1098-C Instructions for Form 1098-C
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Instruction 1098-E & 1098-T Instructions for Forms 1098-E and 1098-T
Instruction 1099-GENERAL General Instructions for Certain Information Returns (Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G)
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Instruction 1099-A & C Instructions for Forms 1099-A and 1099-C
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Instruction 1099-CAP Instructions for Form 1099-CAP
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Instruction 1099-DIV Instructions for Form 1099-DIV
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Instruction 1099-G Instructions for Form 1099-G
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Instruction 1099-INT & OID Instructions for Forms 1099-INT and 1099-OID
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Instruction 1099-MISC Instructions for Form 1099-MISC
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Form 1099-Q Payments From Qualified Education Programs (Under Sections 529 and 530)
Instruction 1099-Q Instructions for Form 1099-Q
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Instruction 1099-R & 5498 Instructions for Forms 1099-R and 5498
Form 1099-S Proceeds from Real Estate Transactions
Instruction 1099-S Instructions for Form 1099-S
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Instruction 1099-SA & 5498-SA Instructions for Forms 1099-SA and 5498-SA
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Form W-4 Employee's Withholding Allowance Certificate
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Form W-4(SP) Employee's Withholding Allowance Certificate (Spanish version)
Form W-4V Voluntary Withholding Request
Form 940 Employer's Annual Federal Unemployment (FUTA) Tax Return
Instruction 940 Instructions for Form 940
Form 940 Sch A Multi-State Employer and Credit Reduction Information
Form 941 Employer's QUARTERLY Federal Tax Return
Instruction 941 Instructions for Form 941
Form 941 Sch B Report of Tax Liability for Semiweekly Schedule Depositors
Instruction 941 Sch B Instructions for Schedule B (Form 941)
Form 941 Sch D Report of Discrepancies Caused by Acquisitions, Statutory Mergers, or Consolidations
Instruction 941 Sch D Instructions for Schedule D (Form 941)
Form 941 Sch R Allocation Schedule for Aggregate Form 941 Filers
Form 941-SS Employer's QUARTERLY Federal Tax Return (American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands)
Instruction 941-SS Instructions for Form 941-SS
Form 941-X Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund
Instruction 941-X Instructions for Form 941-X
Form 943 Employer's Annual Federal Tax Return for Agricultural Employees
Instruction 943 Instructions for Form 943
Form 943-A Agricultural Employer's Record of Federal Tax Liability
Form 943-X Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund
Instruction 943-X Instructions for Form 943-X
Form 944 Employer's ANNUAL Federal Tax Return
Instruction 944 Instructions for Form 944
Form 944-X Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund
Instruction 944-X Instructions for Form 944-X
Form 945 Annual Return of Withheld Federal Income Tax
Instruction 945 Instructions for Form 945
Form 945-A Annual Record of Federal Tax Liability
Form 945-X Adjusted Annual Return of Withheld Federal Income Tax or Claim for Refund
Instruction 945-X Instructions for Form 945-X
Form 3921 Exercise of an Incentive Stock Option Under Section 422(b)
Form 3922 Transfer of Stock Acquired Through An Employee Stock Purchase Plan Under Section 423(c)
Instruction 3921 & 3922 Instructions for Forms 3921 and 3922
Form 5754 Statement by Person(s) Receiving Gambling Winnings
Publication 15 (Circular E), Employer's Tax Guide
Publication 15-A Employer's Supplemental Tax Guide
Publication 15-B Employer's Tax Guide to Fringe Benefits
Publication 51 (Circular A), Agricultural Employer's Tax Guide
Publication 80 (Circular SS), Federal Tax Guide for Employers in the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands
Publication 1244 Employee's Daily Record of Tips and Report to Employer
Publication 1494 Tables for Figuring Amount Exempt from Levy on Wages, Salary, and Other Income (Forms 668-W(ACS), 668-W(c)(DO) and 668-W(ICS))

Page Last Reviewed or Updated: 23-Jan-2014

The Irs Gov 1040x

Irs gov 1040x 5. Irs gov 1040x   Soil and Water Conservation Expenses Table of Contents Introduction Topics - This chapter discusses: Business of Farming Plan Certification Conservation ExpensesWater well. Irs gov 1040x Assessment by Conservation DistrictAssessment for Depreciable Property 25% Limit on DeductionNet operating loss. Irs gov 1040x When to Deduct or Capitalize Sale of a Farm Introduction If you are in the business of farming, you can choose to deduct certain expenses for: Soil or water conservation, Prevention of erosion of land used in farming, or Endangered species recovery. Irs gov 1040x Otherwise, these are capital expenses that must be added to the basis of the land. Irs gov 1040x (See chapter 6 for information on determining basis. Irs gov 1040x ) Conservation expenses for land in a foreign country do not qualify for this special treatment. Irs gov 1040x The deduction for conservation expenses cannot be more than 25% of your gross income from farming. Irs gov 1040x See 25% Limit on Deduction , later. Irs gov 1040x Although some expenses are not deductible as soil and water conservation expenses, they may be deductible as ordinary and necessary farm expenses. Irs gov 1040x These include interest and taxes, the cost of periodically clearing brush from productive land, the regular removal of sediment from a drainage ditch, and expenses paid or incurred primarily to produce an agricultural crop that may also conserve soil. Irs gov 1040x You must include in income most government payments for approved conservation practices. Irs gov 1040x However, you can exclude some payments you receive under certain cost-sharing conservation programs. Irs gov 1040x For more information, see Agricultural Program Payments in chapter 3. Irs gov 1040x To get the full deduction to which you are entitled, you should maintain your records to clearly distinguish between your ordinary and necessary farm business expenses and your soil and water conservation expenses. Irs gov 1040x Topics - This chapter discusses: Business of farming Plan certification Conservation expenses Assessment by conservation district 25% limit on deduction When to deduct or capitalize Sale of a farm Business of Farming For purposes of soil and water conservation expenses, you are in the business of farming if you cultivate, operate, or manage a farm for profit, either as an owner or a tenant. Irs gov 1040x You are not in the business of farming if you cultivate or operate a farm for recreation or pleasure, rather than for profit. Irs gov 1040x You are not farming if you are engaged only in forestry or the growing of timber. Irs gov 1040x Farm defined. Irs gov 1040x   A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. Irs gov 1040x It also includes plantations, ranches, ranges, and orchards. Irs gov 1040x A fish farm is an area where fish and other marine animals are grown or raised and artificially fed, protected, etc. Irs gov 1040x It does not include an area where they are merely caught or harvested. Irs gov 1040x A plant nursery is a farm for purposes of deducting soil and water conservation expenses. Irs gov 1040x Farm rental. Irs gov 1040x   If you own a farm and receive farm rental payments based on farm production, either in cash or crop shares, you are in the business of farming. Irs gov 1040x If you get cash rental for a farm you own that is not used in farm production, you cannot deduct soil and water conservation expenses for that farm. Irs gov 1040x   If you receive a fixed rental payment that is not based on farm production, you are in the business of farming only if you materially participate in operating or managing the farm. Irs gov 1040x Example. Irs gov 1040x You own a farm in Iowa and live in California. Irs gov 1040x You rent the farm for $175 in cash per acre and do not materially participate in producing or managing production of the crops grown on the farm. Irs gov 1040x You cannot deduct your soil conservation expenses for this farm. Irs gov 1040x You must capitalize the expenses and add them to the basis of the land. Irs gov 1040x     For more information, see Material participation for landlords under Landlord Participation in Farming in chapter 12. Irs gov 1040x Plan Certification You can deduct soil and water conservation expenses only if they are consistent with a plan approved by the Natural Resources Conservation Service (NRCS) of the Department of Agriculture. Irs gov 1040x If no such plan exists, the expenses must be consistent with a soil conservation plan of a comparable state agency. Irs gov 1040x Keep a copy of the plan with your books and records to support your deductions. Irs gov 1040x Conservation plan. Irs gov 1040x   A conservation plan includes the farming conservation practices approved for the area where your farmland is located. Irs gov 1040x There are three types of approved plans. Irs gov 1040x NRCS individual site plans. Irs gov 1040x These plans are issued individually to farmers who request assistance from NRCS to develop a conservation plan designed specifically for their farmland. Irs gov 1040x NRCS county plans. Irs gov 1040x These plans include a listing of farm conservation practices approved for the county where the farmland is located. Irs gov 1040x You can deduct expenses for conservation practices not included on the NRCS county plans only if the practice is a part of an individual site plan. Irs gov 1040x Comparable state agency plans. Irs gov 1040x These plans are approved by state agencies and can be approved individual site plans or county plans. Irs gov 1040x   A list of NRCS conservation programs is available at www. Irs gov 1040x nrcs. Irs gov 1040x usda. Irs gov 1040x gov/programs. Irs gov 1040x Individual site plans can be obtained from NRCS offices and the comparable state agencies. Irs gov 1040x Conservation Expenses You can deduct conservation expenses only for land you or your tenant are using, or have used in the past, for farming. Irs gov 1040x These expenses include, but are not limited to, the following. Irs gov 1040x The treatment or movement of earth, such as: Leveling, Conditioning, Grading, Terracing, Contour furrowing, and Restoration of soil fertility. Irs gov 1040x The construction, control, and protection of: Diversion channels, Drainage ditches, Irrigation ditches, Earthen dams, and Watercourses, outlets, and ponds. Irs gov 1040x The eradication of brush. Irs gov 1040x The planting of windbreaks. Irs gov 1040x You cannot deduct expenses to drain or fill wetlands, or to prepare land for center pivot irrigation systems, as soil and water conservation expenses. Irs gov 1040x These expenses are added to the basis of the land. Irs gov 1040x If you choose to deduct soil and water conservation expenses, you cannot exclude from gross income any cost-sharing payments you receive for those expenses. Irs gov 1040x See chapter 3 for information about payments eligible for the cost-sharing exclusion. Irs gov 1040x New farm or farmland. Irs gov 1040x   If you acquire a new farm or new farmland from someone who was using it in farming immediately before you acquired the land, soil and water conservation expenses you incur on it will be treated as made on land used in farming at the time the expenses were paid or incurred. Irs gov 1040x You can deduct soil and water conservation expenses for this land if your use of it is substantially a continuation of its use in farming. Irs gov 1040x The new farming activity does not have to be the same as the old farming activity. Irs gov 1040x For example, if you buy land that was used for grazing cattle and then prepare it for use as an apple orchard, you can deduct your conservation expenses. Irs gov 1040x Land not used for farming. Irs gov 1040x   If your conservation expenses benefit both land that does not qualify as land used for farming and land that does qualify, you must allocate the expenses between the two types of land. Irs gov 1040x For example, if the expenses benefit 200 acres of your land, but only 120 acres of this land are used for farming, then you can deduct 60% (120 ÷ 200) of the expenses. Irs gov 1040x You can use another method to allocate these expenses if you can clearly show that your method is more reasonable. Irs gov 1040x Depreciable conservation assets. Irs gov 1040x   You generally cannot deduct your expenses for depreciable conservation assets. Irs gov 1040x However, you can deduct certain amounts you pay or incur for an assessment for depreciable property that a soil and water conservation or drainage district levies against your farm. Irs gov 1040x See Assessment for Depreciable Property , later. Irs gov 1040x   You must capitalize expenses to buy, build, install, or improve depreciable structures or facilities. Irs gov 1040x These expenses include those for materials, supplies, wages, fuel, hauling, and moving dirt when making structures such as tanks, reservoirs, pipes, culverts, canals, dams, wells, or pumps composed of masonry, concrete, tile, metal, or wood. Irs gov 1040x You recover your capital investment through annual allowances for depreciation. Irs gov 1040x   You can deduct soil and water conservation expenses for nondepreciable earthen items. Irs gov 1040x Nondepreciable earthen items include certain dams, ponds, and terraces described under Property Having a Determinable Useful Life in chapter 7. Irs gov 1040x Water well. Irs gov 1040x   You cannot deduct the cost of drilling a water well for irrigation and other agricultural purposes as a soil and water conservation expense. Irs gov 1040x It is a capital expense. Irs gov 1040x You recover your cost through depreciation. Irs gov 1040x You also must capitalize your cost for drilling a test hole. Irs gov 1040x If the test hole produces no water and you continue drilling, the cost of the test hole is added to the cost of the producing well. Irs gov 1040x You can recover the total cost through depreciation deductions. Irs gov 1040x   If a test hole, dry hole, or dried-up well (resulting from prolonged lack of rain, for instance) is abandoned, you can deduct your unrecovered cost in the year of abandonment. Irs gov 1040x Abandonment means that all economic benefits from the well are terminated. Irs gov 1040x For example, filling or sealing a well excavation or casing so that all economic benefits from the well are terminated constitutes an abandonment. Irs gov 1040x Endangered species recovery expenses. Irs gov 1040x   If you are in the business of farming and meet other specific requirements, you can choose to deduct the conservation expenses discussed earlier as endangered species recovery expenses. Irs gov 1040x Otherwise, these are capital expenses that must be added to the basis of the land. Irs gov 1040x   The expenses must be paid or incurred for the purpose of achieving site-specific management actions recommended in a recovery plan approved under section 4(f) of the Endangered Species Act of 1973. Irs gov 1040x See Internal Revenue Code section 175 for more information. Irs gov 1040x Assessment by Conservation District In some localities, a soil or water conservation or drainage district incurs expenses for soil or water conservation and levies an assessment against the farmers who benefit from the expenses. Irs gov 1040x You can deduct as a conservation expense amounts you pay or incur for the part of an assessment that: Covers expenses you could deduct if you had paid them directly, or Covers expenses for depreciable property used in the district's business. Irs gov 1040x Assessment for Depreciable Property You generally can deduct as a conservation expense amounts you pay or incur for the part of a conservation or drainage district assessment that covers expenses for depreciable property. Irs gov 1040x This includes items such as pumps, locks, concrete structures (including dams and weir gates), draglines, and similar equipment. Irs gov 1040x The depreciable property must be used in the district's soil and water conservation activities. Irs gov 1040x However, the following limits apply to these assessments. Irs gov 1040x The total assessment limit. Irs gov 1040x The yearly assessment limit. Irs gov 1040x After you apply these limits, the amount you can deduct is added to your other conservation expenses for the year. Irs gov 1040x The total for these expenses is then subject to the 25% of gross income from farming limit on the deduction, discussed later. Irs gov 1040x See Table 5-1 for a brief summary of these limits. Irs gov 1040x Table 5-1. Irs gov 1040x Limits on Deducting an Assessment by a Conservation District for Depreciable Property Total Limit on Deduction for Assessment for Depreciable Property Yearly Limit on Deduction for Assessment for Depreciable Property Yearly Limit for All Conservation Expenses 10% of: $500 + 10% of: 25% of: Total assessment against all members of the district for the property. Irs gov 1040x Your deductible share of the cost to the district for the property. Irs gov 1040x Your gross income from farming. Irs gov 1040x No one taxpayer can deduct more than 10% of the total assessment. Irs gov 1040x Any amount over 10% is a capital expense and is added to the basis of your land. Irs gov 1040x If an assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. Irs gov 1040x If the amount you pay or incur for any year is more than the limit, you can deduct for that year only 10% of your deductible share of the cost. Irs gov 1040x You can deduct the remainder in equal amounts over the next 9 tax years. Irs gov 1040x Limit for all conservation expenses, including assessments for depreciable property. Irs gov 1040x Amounts greater than 25% can be carried to the following year and added to that year's expenses. Irs gov 1040x The total is then subject to the 25% of gross income from farming limit in that year. Irs gov 1040x To ensure your deduction is within the deduction limits, keep records to show the following. Irs gov 1040x The total assessment against all members of the district for the depreciable property. Irs gov 1040x Your deductible share of the cost to the district for the depreciable property. Irs gov 1040x Your gross income from farming. Irs gov 1040x Total assessment limit. Irs gov 1040x   You cannot deduct more than 10% of the total amount assessed to all members of the conservation or drainage district for the depreciable property. Irs gov 1040x This applies whether you pay the assessment in one payment or in installments. Irs gov 1040x If your assessment is more than 10% of the total amount assessed, both the following rules apply. Irs gov 1040x The amount over 10% is a capital expense and is added to the basis of your land. Irs gov 1040x If the assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. Irs gov 1040x Yearly assessment limit. Irs gov 1040x   The maximum amount you can deduct in any one year is the total of 10% of your deductible share of the cost as explained earlier, plus $500. Irs gov 1040x If the amount you pay or incur is equal to or less than the maximum amount, you can deduct it in the year it is paid or incurred. Irs gov 1040x If the amount you pay or incur is more, you can deduct in that year only 10% of your deductible share of the cost. Irs gov 1040x You can deduct the remainder in equal amounts over the next 9 tax years. Irs gov 1040x Your total conservation expense deduction for each year is also subject to the 25% of gross income from farming limit on the deduction, discussed later. Irs gov 1040x Example 1. Irs gov 1040x This year, the soil conservation district levies and you pay an assessment of $2,400 against your farm. Irs gov 1040x Of the assessment, $1,500 is for digging drainage ditches. Irs gov 1040x You can deduct this part as a soil or conservation expense as if you had paid it directly. Irs gov 1040x The remaining $900 is for depreciable equipment to be used in the district's irrigation activities. Irs gov 1040x The total amount assessed by the district against all its members for the depreciable equipment is $7,000. Irs gov 1040x The total amount you can deduct for the depreciable equipment is limited to 10% of the total amount assessed by the district against all its members for depreciable equipment, or $700. Irs gov 1040x The $200 excess ($900 − $700) is a capital expense you must add to the basis of your farm. Irs gov 1040x To figure the maximum amount you can deduct for the depreciable equipment this year, multiply your deductible share of the total assessment ($700) by 10%. Irs gov 1040x Add $500 to the result for a total of $570. Irs gov 1040x Your deductible share, $700, is greater than the maximum amount deductible in one year, so you can deduct only $70 of the amount you paid or incurred for depreciable property this year (10% of $700). Irs gov 1040x You can deduct the balance at the rate of $70 a year over the next 9 years. Irs gov 1040x You add $70 to the $1,500 portion of the assessment for drainage ditches. Irs gov 1040x You can deduct $1,570 of the $2,400 assessment as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed later. Irs gov 1040x Example 2. Irs gov 1040x Assume the same facts in Example 1 except that $1,850 of the $2,400 assessment is for digging drainage ditches and $550 is for depreciable equipment. Irs gov 1040x The total amount assessed by the district against all its members for depreciable equipment is $5,500. Irs gov 1040x The total amount you can deduct for the depreciable equipment is limited to 10% of this amount, or $550. Irs gov 1040x The maximum amount you can deduct this year for the depreciable equipment is $555 (10% of your deductible share of the total assessment, $55, plus $500). Irs gov 1040x Since your deductible share is less than the maximum amount deductible in one year, you can deduct the entire $550 this year. Irs gov 1040x You can deduct the entire assessment, $2,400, as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed below. Irs gov 1040x Sale or other disposal of land during 9-year period. Irs gov 1040x   If you dispose of the land during the 9-year period for deducting conservation expenses subject to the yearly limit, any amounts you have not yet deducted because of this limit are added to the basis of the property. Irs gov 1040x Death of farmer during 9-year period. Irs gov 1040x   If a farmer dies during the 9-year period, any remaining amounts not yet deducted are deducted in the year of death. Irs gov 1040x 25% Limit on Deduction The total deduction for conservation expenses in any tax year is limited to 25% of your gross income from farming for the year. Irs gov 1040x Gross income from farming. Irs gov 1040x   Gross income from farming is the income you derive in the business of farming from the production of crops, fish, fruits, other agricultural products, or livestock. Irs gov 1040x Gains from sales of draft, breeding, or dairy livestock are included. Irs gov 1040x Gains from sales of assets such as farm machinery, or from the disposition of land, are not included. Irs gov 1040x Carryover of deduction. Irs gov 1040x   If your deductible conservation expenses in any year are more than 25% of your gross income from farming for that year, you can carry the unused deduction over to later years. Irs gov 1040x However, the deduction in any later year is limited to 25% of the gross income from farming for that year as well. Irs gov 1040x Example. Irs gov 1040x In 2012, you have gross income of $32,000 from two farms. Irs gov 1040x During the year, you incurred $10,000 of deductible soil and water conservation expenses for one of the farms. Irs gov 1040x However, your deduction is limited to 25% of $32,000, or $8,000. Irs gov 1040x The $2,000 excess ($10,000 − $8,000) is carried over to 2013 and added to deductible soil and water conservation expenses made in that year. Irs gov 1040x The total of the 2012 carryover plus 2013 expenses is deductible in 2013, subject to the limit of 25% of your gross income from farming in 2013. Irs gov 1040x Any expenses over the limit in that year are carried to 2014 and later years. Irs gov 1040x Net operating loss. Irs gov 1040x   The deduction for soil and water conservation expenses, after applying the 25% limit, is included when figuring a net operating loss (NOL) for the year. Irs gov 1040x If the NOL is carried to another year, the soil and water conservation deduction included in the NOL is not subject to the 25% limit in the year to which it is carried. Irs gov 1040x When to Deduct or Capitalize If you choose to deduct soil and water conservation expenses, you must deduct the total allowable amount on your tax return for the first year you pay or incur these expenses. Irs gov 1040x If you do not choose to deduct the expenses, you must capitalize them. Irs gov 1040x Change of method. Irs gov 1040x   If you want to change your method for the treatment of soil and water conservation expenses, or you want to treat the expenses for a particular project or a single farm in a different manner, you must get the approval of the IRS. Irs gov 1040x To get this approval, submit a written request by the due date of your return for the first tax year you want the new method to apply. Irs gov 1040x You or your authorized representative must sign the request. Irs gov 1040x   The request must include the following information. Irs gov 1040x Your name and address. Irs gov 1040x The first tax year the method or change of method is to apply. Irs gov 1040x Whether the method or change of method applies to all your soil and water conservation expenses or only to those for a particular project or farm. Irs gov 1040x If the method or change of method does not apply to all your expenses, identify the project or farm to which the expenses apply. Irs gov 1040x The total expenses you paid or incurred in the first tax year the method or change of method is to apply. Irs gov 1040x A statement that you will account separately in your books for the expenses to which this method or change of method relates. Irs gov 1040x Send your request to the following  address. Irs gov 1040x  Department of the Treasury Internal Revenue Service Center Cincinnati, OH 45999  For more information, see Change in  Accounting Method in chapter 2. Irs gov 1040x Sale of a Farm If you sell your farm, you cannot adjust the basis of the land at the time of the sale for any unused carryover of soil and water conservation expenses (except for deductions of assessments for depreciable property, discussed earlier). Irs gov 1040x However, if you acquire another farm and return to the business of farming, you can start taking deductions again for the unused carryovers. Irs gov 1040x Gain on sale of farmland. Irs gov 1040x   If you held the land 5 years or less before you sold it, gain on the sale of the land is treated as ordinary income up to the amount you previously deducted for soil and water conservation expenses. Irs gov 1040x If you held the land less than 10 but more than 5 years, the gain is treated as ordinary income up to a specified percentage of the previous deductions. Irs gov 1040x See Section 1252 property under Other Gains in chapter 9. Irs gov 1040x Prev  Up  Next   Home   More Online Publications