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Irs 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 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 Income tax is forgiven for these decedents whether they were killed in an attack or in rescue or recovery operations. Irs Any forgiven tax liability owed to the IRS will not have to be paid. Irs Any forgiven tax liability that has already been paid will be refunded. Irs (See Refund of Taxes Paid, later. Irs ) To determine the amount of tax to be forgiven, read Years Eligible for Tax Forgiveness first. Irs Then read Amount of Tax Forgiven. Irs Decedents whose total forgiven tax liability for all eligible years is less than $10,000 are entitled to $10,000 minimum relief. Irs Even decedents who were not required to file tax returns for the eligible tax years are entitled to $10,000 minimum relief. Irs See Minimum Amount of Relief later under Amount of Tax Forgiven. Irs Years Eligible for Tax Forgiveness The following paragraphs explain which years are eligible for tax forgiveness. Irs Oklahoma City attack. Irs   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 Example 1. Irs A man was killed in the bombing of the federal building in Oklahoma City on April 19, 1995. Irs His income tax is forgiven for 1994 and 1995. Irs Example 2. Irs A woman was wounded while walking outside the federal building in Oklahoma City on April 19, 1995. Irs She subsequently died of her wounds in 1996. Irs Her income tax is forgiven for 1994, 1995, and 1996. Irs September 11 attacks and anthrax attacks. Irs   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 Example 1. Irs A Pentagon employee died in the September 11 attack. Irs Her income tax is forgiven for 2000 and 2001. Irs Example 2. Irs A visitor to the World Trade Center died in 2002 of wounds he sustained in the September 11 attack. Irs His income tax liability is forgiven for 2000, 2001, and 2002. Irs Amount of Tax Forgiven The IRS will forgive the decedent's income tax liability for all years eligible for tax forgiveness. Irs On a joint return, only the decedent's part of the joint income tax liability is eligible for forgiveness. Irs To figure the tax to be forgiven, use the following worksheets. Irs 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 Use Worksheet B for any eligible year the decedent filed a joint return. Irs See the illustrated Worksheet B near the end of this publication. Irs Do not complete Worksheet A or B if the decedent was not required to file tax returns for the eligible tax years. Irs Instead, complete Worksheet C and file a return for the decedent's last tax year. Irs See Minimum Amount of Relief, later. Irs If you need assistance, call the IRS at 1–866–562–5227 Monday through Friday during the following times. Irs In English–7 a. Irs m. Irs to 10 p. Irs m. Irs local time. Irs In Spanish–8 a. Irs m. Irs to 9:30 p. Irs m. Irs local time. Irs Both spouses died. Irs   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 Do this to determine if each spouse qualifies for the minimum relief of $10,000 (discussed later under Minimum Amount of Relief). Irs 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 However, attach a computation of the forgiven tax liability to the final income tax return or amended tax return for each eligible year. Irs 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 Residents of community property states. Irs   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 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 Worksheet B. Irs 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 1       2 Enter the decedent's taxable income. Irs Figure taxable income as if a separate return had been filed. Irs See the instructions. Irs 2       3 Enter the decedent's total tax. Irs See the instructions. Irs 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs See the instructions. Irs 4       5 Subtract line 4 from line 3. Irs 5       6 Enter the surviving spouse's taxable income. Irs Figure taxable income as if a separate return had been filed. Irs See the instructions. Irs 6       7 Enter the surviving spouse's total tax. Irs See the instructions. Irs 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Irs 8       9 Subtract line 8 from line 7. Irs 9       10 Add lines 5 and 9. Irs 10       11 Enter the total tax from the joint return. Irs See Table 1 on page 5 for the line number for years before 2002. Irs 11       12 Add lines 4 and 8. Irs 12       13 Subtract line 12 from line 11. Irs 13       14 Divide line 5 by line 10. Irs Enter the result as a decimal. Irs 14       15 Tax to be forgiven. Irs Multiply line 13 by line 14 and enter the result. Irs 15       Note. Irs 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 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 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 The IRS will determine the amount to be refunded. Irs Worksheet B. Irs 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 1       2 Enter the decedent's taxable income. Irs Figure taxable income as if a separate return had been filed. Irs See the instructions. Irs 2       3 Enter the decedent's total tax. Irs See the instructions. Irs 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs See the instructions. Irs 4       5 Subtract line 4 from line 3. Irs 5       6 Enter the surviving spouse's taxable income. Irs Figure taxable income as if a separate return had been filed. Irs See the instructions. Irs 6       7 Enter the surviving spouse's total tax. Irs See the instructions. Irs 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Irs 8       9 Subtract line 8 from line 7. Irs 9       10 Add lines 5 and 9. Irs 10       11 Enter the total tax from the joint return. Irs See Table 1 on page 5 for the line number for years before 2002. Irs 11       12 Add lines 4 and 8. Irs 12       13 Subtract line 12 from line 11. Irs 13       14 Divide line 5 by line 10. Irs Enter the result as a decimal. Irs 14       15 Tax to be forgiven. Irs Multiply line 13 by line 14 and enter the result. Irs 15       Note. Irs 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 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 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 The IRS will determine the amount to be refunded. Irs Instructions for Worksheet B Table 1. Irs 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 * 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 ** File Form 4506 to get a transcript of the decedent's account. Irs Table 1. Irs 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 * 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 ** File Form 4506 to get a transcript of the decedent's account. Irs Lines 2 and 6. Irs   Allocate income and deductions in the same manner they would have been allocated if the spouses had filed separate returns. Irs   Allocate wages and salaries to the spouse who performed the services and received the Form W-2. Irs Business and investment income (including capital gains) are generally allocated to the spouse who owned the business or investment that produced the income. Irs 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   Allocate business deductions to the owner of the business. Irs 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 Lines 3 and 7. Irs   Figure the total tax as if a separate return had been filed. Irs 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 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   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 If a credit would not have been allowed on a separate return, allocate the credit shown on the joint return between the spouses. Irs 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 Line 4. Irs   Enter the total, if any, of the following taxes. Irs Self-employment tax. Irs Social security and Medicare tax on tip income not reported to employer. Irs Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Irs Tax on excess accumulation in qualified retirement plans. Irs Household employment taxes. Irs Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Irs Tax on golden parachute payments. Irs Minimum Amount of Relief The minimum amount of relief is $10,000. Irs 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 The IRS will refund the difference as explained under Refund of Taxes Paid. Irs Use Worksheet C to figure the additional tax payment. Irs But first complete Worksheet A or B, unless the decedent was not required to file tax returns for the eligible tax years. Irs Example 1. Irs An individual who died in the September 11 attacks had an income tax liability of $-0- for 2000 and $6,400 for 2001. Irs The $6,400 is eligible for forgiveness. Irs 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 Example 2. Irs A child who died in the September 11 attacks had no (-0-) income tax liability for 2000 or 2001. Irs The IRS will treat $10,000 as a tax payment for 2001. Irs Income received after date of death. Irs   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 Examples are the final paycheck or dividends on stock owned by the decedent. Irs 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 Nonqualifying income. Irs   The following income is not exempt from tax. Irs The tax on it is not eligible for forgiveness. Irs Deferred compensation that would have been payable if the death had occurred because of an event other than these attacks. Irs Amounts that would not have been payable but for an action taken after September 11, 2001. Irs The following are examples of nonqualifying income. Irs Amounts payable from a qualified retirement plan or IRA to the beneficiary or estate of the decedent. Irs 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 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 Interest on savings bonds cashed by the beneficiary of the decedent. Irs If you are responsible for the estate of a decedent, see Publication 559. Irs Publication 559 discusses how to complete and file federal income tax returns and explains your responsibility to pay any taxes due. Irs Instructions for lines 2–9 of Worksheet C. Irs   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 To figure the tax that would have been payable, you can use lines 2 through 9 of Worksheet C. Irs Or, if special requirements are met, you can use the alternative computation instead. Irs See Alternative computation, later. Irs   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 Use Form 1041 to figure what the taxable income would be without including the exempt income. Irs 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 Alternative computation. Irs   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 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 The estate claimed an income distribution deduction on line 18 (Form 1041). Irs Each beneficiary submits the information necessary to refigure the income tax payable on the exempt income received from the decedent's estate. Irs 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 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 Complete the rest of Worksheet C to determine the additional payment allowed. Irs Worksheet C. Irs Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Irs Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs 1 Minimum relief amount. Irs Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs 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 3       4 Add lines 2 and 3. Irs 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Irs (See Income received after date of death on page 5. Irs ) 5       6 Add lines 4 and 5. Irs 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Irs 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Irs 8       9 Tax on exempt income. Irs Subtract line 8 from line 7. Irs 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs 10       11 Add lines 9 and 10. Irs 11   12 Additional payment allowed. Irs If line 11 is $10,000 or more, enter -0- and stop here. Irs No additional amount is allowed as a tax payment. Irs Otherwise, subtract line 11 from line 1 and enter the result. Irs 12   Note. Irs The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs 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 If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs Write "Sec. Irs 692(d)(2) Payment" and the amount to the right of the entry space. Irs Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs Write “Sec. Irs 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs Worksheet C. Irs Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Irs Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs 1 Minimum relief amount. Irs Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs 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 3       4 Add lines 2 and 3. Irs 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Irs (See Income received after date of death on page 5. Irs ) 5       6 Add lines 4 and 5. Irs 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Irs 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Irs 8       9 Tax on exempt income. Irs Subtract line 8 from line 7. Irs 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs 10       11 Add lines 9 and 10. Irs 11   12 Additional payment allowed. Irs If line 11 is $10,000 or more, enter -0- and stop here. Irs No additional amount is allowed as a tax payment. Irs Otherwise, subtract line 11 from line 1 and enter the result. Irs 12   Note. Irs The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs 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 If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs Write "Sec. Irs 692(d)(2) Payment" and the amount to the right of the entry space. Irs Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs Write “Sec. Irs 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs Worksheet D. Irs 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 (See Income received after date of death on page 5. Irs ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). Irs 4   5 Figure the tax on line 1 using Schedule G (Form 1041). Irs 5   6 Estate's tax on exempt income. Irs Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. Irs Figure the total tax that would have been payable by all beneficiaries. Irs 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 Add the amounts by which each beneficiary's income tax is increased. Irs 7   8 Add lines 6 and 7. Irs Enter this amount on line 9 of Worksheet C. Irs 8   Worksheet D. Irs 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 (See Income received after date of death on page 5. Irs ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). Irs 4   5 Figure the tax on line 1 using Schedule G (Form 1041). Irs 5   6 Estate's tax on exempt income. Irs Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. Irs Figure the total tax that would have been payable by all beneficiaries. Irs 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 Add the amounts by which each beneficiary's income tax is increased. Irs 7   8 Add lines 6 and 7. Irs Enter this amount on line 9 of Worksheet C. Irs 8   Refund of Taxes Paid The IRS will refund the following forgiven income tax liabilities. Irs Income tax liabilities that have been paid. Irs Income tax liabilities treated as paid because the total tax liability for all years eligible for tax forgiveness is less than $10,000. Irs See Minimum Amount of Relief, earlier. Irs Example 1. Irs 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 The total, $14,000, is eligible for tax forgiveness. Irs However, he paid only $13,000 of that amount. Irs The IRS will refund the $13,000 paid. Irs Example 2. Irs A child who died in the September 11 attacks had no income tax liability for 2000 or 2001. Irs The child qualifies for the minimum relief of $10,000. Irs The $10,000 is treated as a tax payment for 2001 and will be refunded. Irs Period for filing a claim for credit or refund. Irs   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 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 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 Extension of time for victims of Oklahoma City attack. Irs   The period described above has been extended for victims of the Oklahoma City attack. Irs Survivors and personal representatives of these victims have until January 22, 2003, to file an original or amended return. Irs How To Claim Tax Forgiveness Use the following procedures to claim income tax forgiveness. Irs 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 Return required but not yet filed. Irs   File Form 1040 if the decedent was a U. Irs S. Irs citizen or resident. Irs File Form 1040NR if the decedent was a nonresident alien. Irs A nonresident alien is someone who is not a U. Irs S. Irs citizen or resident. Irs Return required and already filed. Irs   File a separate Form 1040X for each year you are claiming tax relief. Irs Return not required and not filed. Irs   File Form 1040 only for the year of death if the decedent was a U. Irs S. Irs citizen or resident. Irs File Form 1040NR if the decedent was a nonresident alien. Irs Return not required but already filed. Irs   File Form 1040X only for the year of death. Irs How to complete the returns. Irs   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 Attach to each return a computation of the income tax to be forgiven or a copy of Worksheet A or B. Irs If filing Form 1040 or Form 1040NR, also attach any Forms W–2. Irs 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 Also, please write one of the following across the top of page 1 of each return. Irs KITA—Oklahoma City KITA—9/11 KITA—Anthrax “KITA” means “killed in terrorist attack. Irs ” 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 If you need a copy, use Form 4506. Irs The IRS will provide a free copy of the tax return if you write “DISASTER” in the top margin of Form 4506. Irs Attach Letters Testamentary or other evidence to establish that you are authorized to act for the decedent's estate. Irs Send Form 4506 to the address shown in the form instructions. Irs Taxpayer identification number. Irs   A taxpayer identification number must be furnished on the decedent's returns. Irs This is usually the decedent's social security number (SSN). Irs However, a nonresident alien who is not eligible to get an SSN should have an individual taxpayer identification number (ITIN). Irs If the decedent was a nonresident alien, had neither an SSN nor an ITIN, and was not required to file a U. Irs S. Irs income tax return for any tax year, do not apply for an ITIN. Irs You may claim a refund by filing Form 1040NR without an SSN or ITIN. Irs Necessary Documents Please attach the following documents to the return or amended return. Irs Proof of death. Irs   Attach a copy of the death certificate. Irs If the Department of Defense issued DD Form 1300, Report of Casualty, you can attach that form instead of the death certificate. Irs Form 1310. Irs   You must send Form 1310 with all returns and claims for refund, unless either of the following applies. Irs You are a surviving spouse filing an original or amended joint return with the decedent. Irs 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 A personal representative is an executor or administrator of a decedent's estate, as certified or appointed by the court. Irs A copy of the decedent's will cannot be accepted as evidence that you are the personal representative. Irs      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 Include a statement saying an amended return will be filed as soon as the necessary tax information is available. Irs Where To File The IRS has set up a special office for processing returns and claims for tax forgiveness. Irs Use one of the addresses shown below. Irs Where you file the returns or claims depends on whether you use the U. Irs S. Irs Postal Service or a private delivery service. Irs Please do not send these returns or claims to any of the addresses shown in the tax form instructions. Irs U. Irs S. Irs Postal Service. Irs   If you use the U. Irs S. Irs Postal Service, file these returns and claims at the following address. Irs Internal Revenue Service P. Irs O. Irs Box 4053 Woburn, MA 01888 Private delivery service. Irs   Private delivery services cannot deliver items to P. Irs O. Irs boxes. Irs If you use a private delivery service, file these returns and claims at the following address. Irs Internal Revenue Service Stop 661 310 Lowell St. Irs Andover, MA 01810 Designated private delivery services. Irs   You can use the following private delivery services to file these returns and claims. Irs Airborne Express (Airborne): Overnight Air Express Service, Next Afternoon Service, and Second Day Service. Irs DHL Worldwide Express (DHL): DHL “Same Day” Service, and DHL USA Overnight. Irs Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, and FedEx 2Day. Irs United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Irs M. Irs , UPS Worldwide Express Plus, and UPS Worldwide Express. Irs The private delivery service can tell you how to get written proof of the mailing date. Irs Payments to Survivors The following section discusses the tax treatment of certain amounts received by survivors. Irs September 11th Victim Compensation Fund of 2001 Payments from the September 11th Victim Compensation Fund of 2001 are not included in income. Irs Qualified Disaster Relief Payments Qualified disaster relief payments are not included in income. Irs These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). Irs No withholding applies to these payments. Irs Qualified disaster relief payments include payments you receive (regardless of the source) after September 10, 2001, for the following expenses. Irs Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a terrorist attack. Irs Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a terrorist attack. Irs (A personal residence can be a rented residence or one you own. Irs ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a terrorist attack. Irs Qualified disaster relief payments also include the following. Irs 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 Amounts paid by a federal, state, or local government in connection with a terrorist attack to those affected by the attack. Irs 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 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 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 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 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 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 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 If that period has expired, you are granted an extension. Irs You have until January 22, 2003, to file Form 1040X to exclude the death benefits. Irs On top of page 1 of Form 1040X, write “Extension of Limitations Under PL 107–134, sec. Irs 102(b)(2). Irs ” 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 The lender is not required to report the canceled debt on Form 1099–C, Cancellation of Debt. Irs 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 Bureau of Justice Assistance payments. Irs   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 Government plan annuity. Irs   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 This exclusion applies to the amount of the annuity based on the officer's service as a public safety officer. Irs For this purpose, the term public safety officer includes police and law enforcement officers, firefighters, and rescue squad and ambulance crews. Irs More information. Irs   For more information, see Publication 559. Irs 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 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 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 Affected taxpayers. Irs   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Irs Any individual whose main home is located in a covered area (defined later). Irs Any business entity or sole proprietor whose principal place of business is located in a covered area. Irs Any individual, business entity, or sole proprietor whose records needed to meet a postponed deadline are maintained in a covered area. Irs The main home or principal place of business does not have to be located in the covered area. Irs Any estate or trust whose tax records necessary to meet a postponed tax deadline are maintained in a covered area. Irs Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered area. Irs The spouse on a joint return with a taxpayer who is eligible for postponements. Irs Any other person determined by the IRS to be affected by a terrorist attack. Irs Covered area. Irs   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 Abatement of interest. Irs   The IRS may abate (forgive) the interest on any underpaid income tax for the length of any postponement. Irs 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 You must make this choice to deduct your loss on your 2000 return by the later of the following dates. Irs The due date (without extensions) for filing your 2001 income tax return (April 15, 2002, if you are a calendar year taxpayer). Irs The due date (with extensions) for the 2000 return. Irs For more information about disaster area losses, see Publication 547. Irs 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 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 The estate tax is reduced by credits against the estate tax, including the unified credit and the state death tax credit. Irs These credits may reduce or eliminate the estate tax due. Irs 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 Recovery from the September 11th Victim Compensation Fund. Irs   The value of claims for a decedent's pain and suffering is normally included in the gross estate. Irs 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 Thus, there are no federal estate tax consequences if an estate or beneficiary receives a recovery from this fund. Irs Which estates must file a return. Irs   For decedents dying in 2001, Form 706 must be filed by the executor for the estate of every U. Irs S. Irs citizen or resident whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $675,000. Irs 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 Use Form 4768, Application for Extension of Time To File a Return and/or Pay U. Irs S. Irs Estate (and Generation-Skipping Transfer) Taxes, to apply for an extension. Irs Where to file. Irs   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 Internal Revenue Service E & G Department/Stop 824T 201 W. Irs Rivercenter Blvd. Irs Covington, KY 41011 More information. Irs   For more information on the federal estate tax, see the instructions for Form 706. Irs 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 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 However, this tax will not apply to transactions entered into from February 22, 2002, to July 1, 2002, if certain requirements are met. Irs For information about these requirements, see Internal Revenue Code section 5891. Irs Worksheet B Illustrated. Irs 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 1 2000 2001   2 Enter the decedent's taxable income. Irs Figure taxable income as if a separate return had been filed. Irs See the instructions. Irs 2 $17,259 $14,295   3 Enter the decedent's total tax. Irs See the instructions. Irs 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs See the instructions. Irs 4 3,532 3,109   5 Subtract line 4 from line 3. Irs 5 2,591 2,141   6 Enter the surviving spouse's taxable income. Irs Figure taxable income as if a separate return had been filed. Irs See the instructions for line 2. Irs 6 29,025 29,850   7 Enter the surviving spouse's total tax. Irs See the instructions. Irs 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 8 0 0   9 Subtract line 8 from line 7. Irs 9 5,277 5,391   10 Add lines 5 and 9. Irs 10 7,868 7,532   11 Enter the total tax from the joint return. Irs See Table 1 on page 5 for the line number for years before 2002. Irs 11 10,789 9,728   12 Add lines 4 and 8. Irs 12 3,532 3,109   13 Subtract line 12 from line 11. Irs 13 7,257 6,619   14 Divide line 5 by line 10. Irs Enter the result as a decimal. Irs 14 . Irs 329 . Irs 284   15 Tax to be forgiven. Irs Multiply line 13 by line 14 and enter the result. Irs 15 $2,388 $1,880   Note. Irs 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 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 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 The IRS will determine the amount to be refunded. Irs Worksheet B Illustrated. Irs 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 1 2000 2001   2 Enter the decedent's taxable income. Irs Figure taxable income as if a separate return had been filed. Irs See the instructions. Irs 2 $17,259 $14,295   3 Enter the decedent's total tax. Irs See the instructions. Irs 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs See the instructions. Irs 4 3,532 3,109   5 Subtract line 4 from line 3. Irs 5 2,591 2,141   6 Enter the surviving spouse's taxable income. Irs Figure taxable income as if a separate return had been filed. Irs See the instructions for line 2. Irs 6 29,025 29,850   7 Enter the surviving spouse's total tax. Irs See the instructions. Irs 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 8 0 0   9 Subtract line 8 from line 7. Irs 9 5,277 5,391   10 Add lines 5 and 9. Irs 10 7,868 7,532   11 Enter the total tax from the joint return. Irs See Table 1 on page 5 for the line number for years before 2002. Irs 11 10,789 9,728   12 Add lines 4 and 8. Irs 12 3,532 3,109   13 Subtract line 12 from line 11. Irs 13 7,257 6,619   14 Divide line 5 by line 10. Irs Enter the result as a decimal. Irs 14 . Irs 329 . Irs 284   15 Tax to be forgiven. Irs Multiply line 13 by line 14 and enter the result. Irs 15 $2,388 $1,880   Note. Irs 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 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 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 The IRS will determine the amount to be refunded. Irs Illustrated Worksheets B and C A wife lost her husband in the September 11 attack on the World Trade Center. Irs They filed a joint return for 2000 and the wife chose to file a joint return as a surviving spouse for 2001. Irs The returns for 2000 and 2001 showed the following income, deductions, and tax liabilities. Irs After the husband died, his estate received income of $4,000. Irs Of that amount, $1,000 is net profit from Schedule C received before the end of 2001. Irs This net profit is exempt from income tax as explained earlier under Income received after date of death. Irs The wife files Form 1041 because the gross income of the estate for the tax year ($3,000) is $600 or more. Irs To determine how much of the husband's tax liability for 2000 and 2001 is to be forgiven, the wife completes Worksheet B. Irs 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 To claim tax relief for 2000, the wife files Form 1040X and attaches a copy of Worksheet B. Irs To claim tax relief for 2001, she files Form 1040 and attaches copies of Worksheets B and C. Irs   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 Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Irs Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs 1 Minimum relief amount. Irs Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs 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 3 0     4 Add lines 2 and 3. Irs 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. Irs (See Income received after date of death on page 5. Irs ) 5 1,000     6 Add lines 4 and 5. Irs 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). Irs 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). Irs 8 435     9 Tax on exempt income. Irs Subtract line 8 from line 7. Irs 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs 10 4,268     11 Add lines 9 and 10. Irs 11 $4,543 12 Additional payment allowed. Irs If line 11 is $10,000 or more, enter -0- and stop here. Irs No additional amount is allowed as a tax payment. Irs Otherwise, subtract line 11 from line 1 and enter the result. Irs 12 $5,457 Note. Irs The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs 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 If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs Write "Sec. Irs 692(d)(2) Payment" and the amount to the right of the entry space. Irs Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs Write “Sec. Irs 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs Worksheet C Illustrated. Irs Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Irs Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs 1 Minimum relief amount. Irs Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs 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 3 0     4 Add lines 2 and 3. Irs 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. Irs (See Income received after date of death on page 5. Irs ) 5 1,000     6 Add lines 4 and 5. Irs 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). Irs 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). Irs 8 435     9 Tax on exempt income. Irs Subtract line 8 from line 7. Irs 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs 10 4,268     11 Add lines 9 and 10. Irs 11 $4,543 12 Additional payment allowed. Irs If line 11 is $10,000 or more, enter -0- and stop here. Irs No additional amount is allowed as a tax payment. Irs Otherwise, subtract line 11 from line 1 and enter the result. Irs 12 $5,457 Note. Irs The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs 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 If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs Write "Sec. Irs 692(d)(2) Payment" and the amount to the right of the entry space. Irs Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs Write “Sec. Irs 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs Additional Worksheets The following additional worksheets are provided for your convenience. Irs Worksheet A. Irs 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 1       2 Enter the total tax from the decedent's income tax return. Irs See Table 1 on page 5 for the line number for years before 2002. Irs 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Irs (These taxes are not eligible for forgiveness. Irs )           a Self-employment tax. Irs 3a         b Social security and Medicare tax on tip income not reported to employer. Irs 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Irs 3c         d Tax on excess accumulation in qualified retirement plans. Irs 3d         e Household employment taxes. Irs 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Irs 3f         g Tax on golden parachute payments. Irs 3g       4 Add lines 3a through 3g. Irs 4       5 Tax to be forgiven. Irs Subtract line 4 from line 2. Irs 5       Note. Irs 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 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 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 The IRS will determine the amount to be refunded. Irs Worksheet A. Irs 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 1       2 Enter the total tax from the decedent's income tax return. Irs See Table 1 on page 5 for the line number for years before 2002. Irs 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Irs (These taxes are not eligible for forgiveness. Irs )           a Self-employment tax. Irs 3a         b Social security and Medicare tax on tip income not reported to employer. Irs 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Irs 3c         d Tax on excess accumulation in qualified retirement plans. Irs 3d         e Household employment taxes. Irs 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Irs 3f         g Tax on golden parachute payments. Irs 3g       4 Add lines 3a through 3g. Irs 4       5 Tax to be forgiven. Irs Subtract line 4 from line 2. Irs 5       Note. Irs 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 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 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 The IRS will determine the amount to be refunded. Irs Worksheet B. Irs 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 1       2 Enter the decedent's taxable income. Irs Figure taxable income as if a separate return had been filed. Irs See the instructions. Irs 2       3 Enter the decedent's total tax. Irs See the instructions. Irs 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs See the instructions. Irs 4       5 Subtract line 4 from line 3. Irs 5       6 Enter the surviving spouse's taxable income. Irs Figure taxable income as if a separate return had been filed. Irs See the instructions. Irs 6       7 Enter the surviving spouse's total tax. Irs See the instructions. Irs 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Irs 8       9 Subtract line 8 from line 7. Irs 9       10 Add lines 5 and 9. Irs 10       11 Enter the total tax from the joint return. Irs See Table 1 on page 5 for the line number for years before 2002. Irs 11       12 Add lines 4 and 8. Irs 12       13 Subtract line 12 from line 11. Irs 13       14 Divide line 5 by line 10. Irs Enter the result as a decimal. Irs 14       15 Tax to be forgiven. Irs Multiply line 13 by line 14 and enter the result. Irs 15       Note. Irs 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 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 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 The IRS will determine the amount to be refunded. Irs Worksheet B. Irs 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 1       2 Enter the decedent's taxable income. Irs Figure taxable income as if a separate return had been filed. Irs See the instructions. Irs 2       3 Enter the decedent's total tax. Irs See the instructions. Irs 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs See the instructions. Irs 4       5 Subtract line 4 from line 3. Irs 5       6 Enter the surviving spouse's taxable income. Irs Figure taxable income as if a separate return had been filed. Irs See the instructions. Irs 6       7 Enter the surviving spouse's total tax. Irs See the instructions. Irs 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Irs 8       9 Subtract line 8 from line 7. Irs 9       10 Add lines 5 and 9. Irs 10       11 Enter the total tax from the joint return. Irs See Table 1 on page 5 for the line number for years before 2002. Irs 11       12 Add lines 4 and 8. Irs 12       13 Subtract line 12 from line 11. Irs 13       14 Divide line 5 by line 10. Irs Enter the result as a decimal. Irs 14       15 Tax to be forgiven. Irs Multiply line 13 by line 14 and enter the result. Irs 15       Note. Irs 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 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 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 The IRS will determine the amount to be refunded. Irs Worksheet C. Irs Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. Irs Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs 1 Minimum tax forgiveness. Irs Note. Irs Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs 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 3       4 Add lines 2 and 3. Irs 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Irs (See Income received after date of death on page 5. Irs ) 5       6 Add lines 4 and 5. Irs 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Irs 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Irs 8       9 Tax on exempt income. Irs Subtract line 8 from line 7. Irs 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs 10       11 Add lines 9 and 10. Irs 11   12 Additional payment allowed. Irs If line 11 is $10,000 or more, enter -0- and stop here. Irs No additional amount is allowed as a tax payment. Irs Otherwise, subtract line 11 from line 1 and enter the result. Irs 12   Note. Irs The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs 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 If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs Write "Sec. Irs 692(d)(2) Payment" and the amount to the right of the entry space. Irs Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs Write “Sec. Irs 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs Worksheet C. Irs Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. Irs Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs 1 Minimum tax forgiveness. Irs Note. Irs Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs 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 3       4 Add lines 2 and 3. Irs 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Irs (See Income received after date of death on page 5. Irs ) 5       6 Add lines 4 and 5. Irs 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Irs 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Irs 8       9 Tax on exempt income. Irs Subtract line 8 from line 7. Irs 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs 10       11 Add lines 9 and 10. Irs 11   12 Additional payment allowed. Irs If line 11 is $10,000 or more, enter -0- and stop here. Irs No additional amount is allowed as a tax payment. Irs Otherwise, subtract line 11 from line 1 and enter the result. Irs 12   Note. Irs The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs 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 If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs Write "Sec. Irs 692(d)(2) Payment" and the amount to the right of the entry space. Irs Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs Write “Sec. Irs 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs How To Get Tax Help Special IRS assistance. Irs   The IRS is providing special help for those affected by the terrorist attacks, as well as survivors and personal representatives of the victims. Irs 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 Call 1–866–562–5227 Monday through Friday In English–7 a. Irs m. Irs to 10 p. Irs m. Irs local time In Spanish–8 a. Irs m. Irs to 9:30 p. Irs m. Irs local time   The IRS web site at www. Irs irs. Irs gov has notices and other tax relief information. Irs Check it periodically for any new guidance or to see if Congress has enacted new legislation. Irs   Business taxpayers affected by the attacks can e-mail their questions to corp. Irs disaster. Irs relief@irs. Irs gov. Irs   For current information on Presidentially declared disaster areas, check the Federal Emergency Management Agency Web site at www. Irs fema. Irs gov. Irs Other help from the IRS. Irs   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 By selecting the method that is best for you, you will have quick and easy access to tax help. Irs Contacting your Taxpayer Advocate. Irs   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. Irs   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 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   To contact your Taxpayer Advocate: Call the Taxpayer Advocate at 1–877–777–4778. Irs Call the IRS at 1–800–829–1040. Irs Call, write, or fax the Taxpayer Advocate office in your area. Irs Call 1–800–829–4059 if you are a TTY/TDD user. Irs   For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS. Irs Free tax services. Irs   To find out what services are available, get Publication 910, Guide to Free Tax Services. Irs It contains a list of free tax publications and an index of tax topics. Irs It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. Irs Personal computer. Irs With your personal computer and modem, you can access the IRS on the Internet at www. Irs irs. Irs gov. Irs While visiting our web site, you can: Find answers to questions you may have. Irs Download forms and publications or search for forms and pub
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Irs 4. Irs   Communications and Air Transportation Taxes Table of Contents Uncollected Tax Report Communications TaxLocal-only service. Irs Private communication service. Irs Exemptions Credits or Refunds Air Transportation TaxesTransportation of Persons by Air International Air Travel Facilities Transportation of Property by Air Special Rules on Transportation Taxes Excise taxes are imposed on amounts paid for certain facilities and services. Irs If you receive any payment on which tax is imposed, you are required to collect the tax, file returns, and pay the tax over to the government. Irs If you fail to collect and pay over the taxes, you may be liable for the trust fund recovery penalty. Irs See chapter 14, later. Irs Uncollected Tax Report A separate report is required to be filed by collecting agents of communications services and air transportation taxes if the person from whom the facilities or services tax (the tax) is required to be collected (the taxpayer) refuses to pay the tax, or it is impossible for the collecting agent to collect the tax. Irs The report must contain the name and address of the taxpayer, the type of facility provided or service rendered, the amount paid for the facility or service (the amount on which the tax is based), and the date paid. Irs Regular method taxpayers. Irs   For regular method taxpayers, the report must be filed by the due date of the Form 720 on which the tax would have been reported. Irs Alternative method taxpayers. Irs   For alternative method taxpayers, the report must be filed by the due date of the Form 720 that includes an adjustment to the separate account for the uncollected tax. Irs See Alternative method in  chapter 11. Irs Where to file. Irs    Do not file the uncollected tax report with Form 720. Irs Instead, mail the report to: Internal Revenue Service Excise Tax Program SE:S:SP:EX MS C9-109 5000 Ellin Rd. Irs  Lanham, MD 20706 Communications Tax A 3% tax is imposed on amounts paid for local telephone service and teletypewriter exchange service. Irs Local telephone service. Irs   This includes access to a local telephone system and the privilege of telephonic quality communication with most people who are part of the system. Irs Local telephone service also includes any facility or services provided in connection with this service. Irs The tax applies to lease payments for certain customer premises equipment (CPE) even though the lessor does not also provide access to a local telecommunications system. Irs Local-only service. Irs   Local-only service is local telephone service as described above, provided under a plan that does not include long distance telephone service or that separately states the charge for local service on the bill to customers. Irs Local-only service also includes any facility or services provided in connection with this service, even though these services and facilities may also be used with long-distance service. Irs Private communication service. Irs   Private communication service is not local telephone service. Irs Private communication service includes accessory-type services provided in connection with a Centrex, PBX, or other similar system for dual use accessory equipment. Irs However, the charge for the service must be stated separately from the charge for the basic system, and the accessory must function, in whole or in part, in connection with intercommunication among the subscriber's stations. Irs Teletypewriter exchange service. Irs   This includes access from a teletypewriter or other data station to a teletypewriter exchange system and the privilege of intercommunication by that station with most persons having teletypewriter or other data stations in the same exchange system. Irs Figuring the tax. Irs   The tax is based on the sum of all charges for local telephone service included in the bill. Irs However, if the bill groups individual items for billing and tax purposes, the tax is based on the sum of the individual items within that group. Irs The tax on the remaining items not included in any group is based on the charge for each item separately. Irs Do not include in the tax base state or local sales or use taxes that are separately stated on the taxpayer's bill. Irs Exemptions Payments for certain services or payments from certain users are exempt from the communications tax. Irs Nontaxable service. Irs   Nontaxable service means bundled service and long distance service. Irs Nontaxable service also includes pre-paid telephone cards and pre-paid cellular service. Irs Bundled service. Irs   Bundled service is local and long distance service provided under a plan that does not separately state the charge for the local telephone service. Irs Bundled service includes plans that provide both local and long distance service for either a flat monthly fee or a charge that varies with the elapsed transmission time for which the service is used. Irs Telecommunications companies provide bundled service for both landlines and wireless (cellular) service. Irs If Voice over Internet Protocol service provides both local and long distance service and the charges are not separately stated, such service is bundled service. Irs   The method for sending or receiving a call, such as on a landline telephone, wireless (cellular), or some other method, does not affect whether a service is local-only or bundled. Irs Long distance service. Irs   Long distance service is telephonic quality communication with persons whose telephones are outside the local telephone system of the caller. Irs Pre-paid telephone cards (PTC). Irs   A PTC will be treated as bundled service unless a PTC expressly states it is for local-only service. Irs Generally, the person responsible for collecting the tax is the carrier who transfers the PTC to the transferee. Irs The transferee is the first person that is not a carrier to whom a PTC is transferred by the carrier. Irs The transferee is the person liable for the tax and is eligible to request a credit or refund. Irs For more information, see Regulations section 49. Irs 4251-4. Irs   The holder is the person that purchases a PTC to use and not to resell. Irs Holders are not liable for the tax and cannot request a credit or refund. Irs Pre-paid cellular telephones. Irs   Rules similar to the PTC rules described above apply to pre-paid cellular telephones. Irs The transferee is the person eligible to request the credit or refund. Irs Installation charges. Irs   The tax does not apply to payments received for the installation of any instrument, wire, pole, switchboard, apparatus, or equipment. Irs However, the tax does apply to payments for the repair or replacement of those items incidental to ordinary maintenance. Irs Answering services. Irs   The tax does not apply to amounts paid for a private line, an answering service, and a one-way paging or message service if they do not provide access to a local telephone system and the privilege of telephonic communication as part of the local telephone system. Irs Mobile radio telephone service. Irs   The tax does not apply to payments for a two-way radio service that does not provide access to a local telephone system. Irs Coin-operated telephones. Irs   The tax for local telephone service does not apply to payments made for services by inserting coins in public coin-operated telephones. Irs But the tax applies if the coin-operated telephone service is furnished for a guaranteed amount. Irs Figure the tax on the amount paid under the guarantee plus any fixed monthly or other periodic charge. Irs Telephone-operated security systems. Irs   The tax does not apply to amounts paid for telephones used only to originate calls to a limited number of telephone stations for security entry into a building. Irs In addition, the tax does not apply to any amounts paid for rented communication equipment used in the security system. Irs News services. Irs   The tax on teletypewriter exchange service does not apply to charges for the following news services. Irs Services dealing exclusively with the collection or dissemination of news for or through the public press or radio or television broadcasting. Irs Services used exclusively in the collection or dissemination of news by a news ticker service furnishing a general news service similar to that of the public press. Irs This exemption applies to payments received for messages from one member of the news media to another member (or to or from their bona fide correspondents). Irs For the exemption to apply, the charge for these services must be billed in writing to the person paying for the service and that person must certify in writing that the services are used for an exempt purpose. Irs Services not exempted. Irs   The tax applies to amounts paid by members of the news media for local telephone service. Irs International organizations and the American Red Cross. Irs   The tax does not apply to communication services furnished to an international organization or to the American National Red Cross. Irs Nonprofit hospitals. Irs   The tax does not apply to telephone services furnished to income tax-exempt nonprofit hospitals for their use. Irs Also, the tax does not apply to amounts paid by these hospitals to provide local telephone service in the homes of their personnel who must be reached during their off-duty hours. Irs Nonprofit educational organizations. Irs   The tax does not apply to payments received for services and facilities furnished to a nonprofit educational organization for its use. Irs A nonprofit educational organization is one that satisfies all the following requirements. Irs It normally maintains a regular faculty and curriculum. Irs It normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. Irs It is exempt from income tax under section 501(a). Irs This includes a school operated by an organization exempt under section 501(c)(3) if the school meets the above qualifications. Irs Qualified blood collector organizations. Irs   The tax does not apply to telephone services furnished to qualified blood collector organizations for their use. Irs A qualified blood collector organization is one that is: Described in section 501(c)(3) and exempt from tax under section 501(a), Primarily engaged in the activity of collecting human blood, Registered with the IRS, and Registered by the Food and Drug Administration to collect blood. Irs Federal, state, and local government. Irs   The tax does not apply to communication services provided to the government of the United States, the government of any state or its political subdivisions, the District of Columbia, or the United Nations. Irs Treat an Indian tribal government as a state for the exemption from the communications tax only if the services involve the exercise of an essential tribal government function. Irs Exemption certificate. Irs   Any form of exemption certificate will be acceptable if it includes all the information required by the Internal Revenue Code and Regulations. Irs See Regulations section 49. Irs 4253-11. Irs File the certificate with the provider of the communication services. Irs An exemption certificate is not required for nontaxable services. Irs   The following users that are exempt from the communications tax do not have to file an annual exemption certificate after they have filed the initial certificate to claim an exemption from the communications tax. Irs The American National Red Cross and other international organizations. Irs Nonprofit hospitals. Irs Nonprofit educational organizations. Irs Qualified blood collector organizations. Irs State and local governments. Irs   The federal government does not have to file any exemption certificate. Irs   All other organizations must furnish exemption certificates when required. Irs Credits or Refunds If tax is collected and paid over for nontaxable services, or for certain services or users exempt from the communications tax, the collector or taxpayer may claim a credit or refund if it has repaid the tax to the person from whom the tax was collected or obtained the consent of that person to the allowance of the credit or refund. Irs Alternatively, the person who paid the tax may claim a refund. Irs For more information on how to file for credits or refunds, see the Instructions for Form 720 or Form 8849. Irs Collectors. Irs   The collector may request a credit or refund if it has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. Irs These requirements also apply to nontaxable service refunds. Irs Collectors using the regular method for deposits. Irs   Collectors using the regular method for deposits must use Form 720X to request a credit or refund if the collector has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. Irs Collectors using the alternative method for deposits. Irs   Collectors using the alternative method for deposits must adjust their separate accounts for the credit or refund if it has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. Irs For more information, see the Instructions for Form 720. Irs Air Transportation Taxes Taxes are imposed on amounts paid for: Transportation of persons by air, Use of international air travel facilities, and Transportation of property by air. Irs Transportation of Persons by Air The tax on transportation of persons by air is made up of the: Percentage tax, and Domestic-segment tax. Irs Percentage tax. Irs   A tax of 7. Irs 5% applies to amounts paid for taxable transportation of persons by air. Irs Amounts paid for transportation include charges for layover or waiting time and movement of aircraft in deadhead service. Irs Mileage awards. Irs   The percentage tax may apply to an amount paid (in cash or in kind) to an air carrier (or any related person) for the right to provide mileage awards for, or other reductions in the cost of, any transportation of persons by air. Irs For example, this applies to mileage awards purchased by credit card companies, telephone companies, restaurants, hotels, and other businesses. Irs   Generally, the percentage tax does not apply to amounts paid for mileage awards where the mileage awards cannot, under any circumstances, be redeemed for air transportation that is subject to the tax. Irs Until regulations are issued, the following rules apply to mileage awards. Irs Amounts paid for mileage awards that cannot be redeemed for taxable transportation beginning and ending in the United States are not subject to the tax. Irs For this rule, mileage awards issued by a foreign air carrier are considered to be usable only on that foreign air carrier and thus not redeemable for taxable transportation beginning and ending in the United States. Irs Therefore, amounts paid to a foreign air carrier for mileage awards are not subject to the tax. Irs Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are not subject to the tax to the extent those miles will be awarded in connection with the purchase of taxable transportation. Irs Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are subject to the tax to the extent those miles will not be awarded in connection with the purchase of taxable transportation. Irs Domestic-segment tax. Irs   The domestic-segment tax is a flat dollar amount for each segment of taxable transportation for which an amount is paid. Irs However, see Rural airports, later. Irs A segment is a single takeoff and a single landing. Irs The amount of the domestic-segment tax is in the Instructions for Form 720. Irs Charter flights. Irs    If an aircraft is chartered, the domestic-segment tax for each segment of taxable transportation is figured by multiplying the tax by the number of passengers transported on the aircraft. Irs Rural airports. Irs   The domestic-segment tax does not apply to a segment to or from a rural airport. Irs An airport is a rural airport for a calendar year if fewer than 100,000 commercial passengers departed from the airport by air during the second preceding calendar year (the 100,000 passenger rule), and one of the following is true: The airport is not located within 75 miles of another airport from which 100,000 or more commercial passengers departed during the second preceding calendar year, The airport was receiving essential air service subsidies as of August 5, 1997, or The airport is not connected by paved roads to another airport. Irs   To apply the 100,000 passenger rule to any airport described in (3) above, only count commercial passengers departing from the airport by air on flight segments of at least 100 miles. Irs   An updated list of rural airports can be found on the Department of Transportation website at www. Irs dot. Irs gov and enter the phrase “Essential Air Service” in the search box. Irs Taxable transportation. Irs   Taxable transportation is transportation by air that meets either of the following tests. Irs It begins and ends either in the United States or at any place in Canada or Mexico not more than 225 miles from the nearest point on the continental United States boundary (this is the 225-mile zone). Irs It is directly or indirectly from one port or station in the United States to another port or station in the United States, but only if it is not a part of uninterrupted international air transportation, discussed later. Irs Round trip. Irs   A round trip is considered two separate trips. Irs The first trip is from the point of departure to the destination. Irs The second trip is the return trip from that destination. Irs Uninterrupted international air transportation. Irs   This means transportation entirely by air that does not begin and end in the United States or in the 225-mile zone if there is not more than a 12-hour scheduled interval between arrival and departure at any station in the United States. Irs For a special rule that applies to military personnel, see Exemptions, later. Irs Transportation between the continental U. Irs S. Irs and Alaska or Hawaii. Irs   This transportation is partially exempt from the tax on transportation of persons by air. Irs The tax does not apply to the part of the trip between the point at which the route of transportation leaves or enters the continental United States (or a port or station in the 225-mile zone) and the point at which it enters or leaves Hawaii or Alaska. Irs Leaving or entering occurs when the route of the transportation passes over either the United States border or a point 3 nautical miles (3. Irs 45 statute miles) from low tide on the coast line, or when it leaves a port or station in the 225-mile zone. Irs Therefore, this transportation is subject to the percentage tax on the part of the trip in U. Irs S. Irs airspace, the domestic-segment tax for each domestic segment, and the tax on the use of international air travel facilities, discussed later. Irs Transportation within Alaska or Hawaii. Irs   The tax on transportation of persons by air applies to the entire fare paid in the case of flights between any of the Hawaiian Islands, and between any ports or stations in the Aleutian Islands or other ports or stations elsewhere in Alaska. Irs The tax applies even though parts of the flights may be over international waters or over Canada, if no point on the direct line of transportation between the ports or stations is more than 225 miles from the United States (Hawaii or Alaska). Irs Package tours. Irs   The air transportation taxes apply to “complimentary” air transportation furnished solely to participants in package holiday tours. Irs The amount paid for these package tours includes a charge for air transportation even though it may be advertised as “free. Irs ” This rule also applies to the tax on the use of international air travel facilities, discussed later. Irs Liability for tax. Irs   The person paying for taxable transportation is liable for the tax and, ordinarily, the person receiving the payment collects the tax, files the returns, and pays the tax over to the government. Irs However, if payment is made outside the United States for a prepaid order, exchange order, or similar order, the person furnishing the initial transportation provided for under that order must collect the tax. Irs    A travel agency that is an independent broker and sells tours on aircraft that it charters must collect the transportation tax, file the returns, and pay the tax over to the government. Irs However, a travel agency that sells tours as the agent of an airline must collect the tax and remit it to the airline for the filing of returns and for the payment of the tax over to the government. Irs An independent third party that is not under the airline's supervision or control, but is acting on behalf of, and receiving compensation from, a passenger, is not required to collect the tax and pay it to the government. Irs For more information on resellers of air transportation, see Revenue Ruling 2006-52. Irs You can find Revenue Ruling 2006-52 on page 761 of I. Irs R. Irs B. Irs 2006-43 at www. Irs irs. Irs gov/pub/irs-irbs/irb06-43. Irs pdf. Irs   The fact that the aircraft does not use public or commercial airports in taking off and landing has no effect on the tax. Irs But see Certain helicopter uses, later. Irs   For taxable transportation that begins and ends in the United States, the tax applies regardless of whether the payment is made in or outside the United States. Irs   If the tax is not paid when payment for the transportation is made, the air carrier providing the initial segment of the transportation that begins or ends in the United States becomes liable for the tax. Irs Exemptions. Irs   The tax on transportation of persons by air does not apply in the following situations. Irs See also Special Rules on Transportation Taxes, later. Irs Military personnel on international trips. Irs   When traveling in uniform at their own expense, United States military personnel on authorized leave are deemed to be traveling in uninterrupted international air transportation (defined earlier) even if the scheduled interval between arrival and departure at any station in the United States is actually more than 12 hours. Irs However, such personnel must buy their tickets within 12 hours after landing at the first domestic airport and accept the first available accommodation of the type called for by their tickets. Irs The trip must begin or end outside the United States and the 225-mile zone. Irs Certain helicopter uses. Irs   The tax does not apply to air transportation by helicopter if the helicopter is used for any of the following purposes. Irs Transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals, oil, or gas. Irs Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). Irs Providing emergency medical transportation. Irs   However, during a use described in items (1) or (2), the tax applies if the helicopter takes off from, or lands at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. Irs For item (1), treat each flight segment as a separate flight. Irs Fixed-wing aircraft uses. Irs   The tax does not apply to air transportation by fixed-wing aircraft if the fixed-wing aircraft is used for any of the following purposes. Irs Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). Irs Providing emergency medical transportation. Irs The aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services. Irs   However, during a use described in item (1), the tax applies if the fixed-wing aircraft takes off from, or lands at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. Irs Skydiving. Irs   The tax does not apply to any air transportation exclusively for the purpose of skydiving. Irs Seaplanes. Irs   The tax does not apply to any air transportation by seaplane for any segment consisting of a takeoff from, and a landing on, water if the places where the takeoff and landing occur are not receiving financial assistance from the Airport and Airways Trust Fund. Irs Bonus tickets. Irs   The tax does not apply to free bonus tickets issued by an airline company to its customers who have satisfied all requirements to qualify for the bonus tickets. Irs However, the tax applies to amounts paid by customers for advance bonus tickets when customers have traveled insufficient mileage to fully qualify for the free advance bonus tickets. Irs International Air Travel Facilities A tax per person is imposed (whether in or outside the United States) for international flights that begin or end in the United States. Irs However, for a domestic segment that begins or ends in Alaska or Hawaii, a reduced tax per person applies only to departures. Irs This tax does not apply if all the transportation is subject to the percentage tax, discussed earlier. Irs It also doesn't apply if the surtax on fuel used in a fractional ownership program aircraft (discussed earlier) is imposed. Irs See the Instructions for Form 720 for the tax rates. Irs Transportation of Property by Air A tax of 6. Irs 25% is imposed on amounts paid (whether in or outside the United States) for transportation of property by air. Irs The fact that the aircraft may not use public or commercial airports in taking off and landing has no effect on the tax. Irs The tax applies only to amounts paid to a person engaged in the business of transporting property by air for hire. Irs The tax applies only to transportation (including layover time and movement of aircraft in deadhead service) that begins and ends in the United States. Irs Thus, the tax does not apply to transportation of property by air that begins or ends outside the United States. Irs Exemptions. Irs   The tax on transportation of property by air does not apply in the following situations. Irs See also Special Rules on Transportation Taxes, later. Irs Cropdusting and firefighting service. Irs   The tax does not apply to amounts paid for cropdusting or aerial firefighting service. Irs Exportation. Irs    The tax does not apply to payments for transportation of property by air in the course of exportation (including to United States possessions) by continuous movement, as evidenced by the execution of Form 1363, Export Exemption Certificate. Irs See Form 1363 for more information. Irs Certain helicopter and fixed-wing air ambulance uses. Irs   The tax does not apply to amounts paid for the use of helicopters in construction to set heating and air conditioning units on roofs of buildings, to dismantle tower cranes, and to aid in construction of power lines and ski lifts. Irs   The tax also does not apply to air transportation by helicopter or fixed-wing aircraft for the purpose of providing emergency medical services. Irs The fixed-wing aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services. Irs Skydiving. Irs   The tax does not apply to any air transportation exclusively for the purpose of skydiving. Irs Excess baggage. Irs    The tax does not apply to excess baggage accompanying a passenger on an aircraft operated on an established line. Irs Surtax on fuel used in a fractional ownership program aircraft. Irs   The tax does not apply if the surtax on fuel used in a fractional ownership program aircraft (discussed earlier) is imposed. Irs Alaska and Hawaii. Irs   For transportation of property to and from Alaska and Hawaii, the tax in general does not apply to the portion of the transportation that is entirely outside the continental United States (or the 225-mile zone if the aircraft departs from or arrives at an airport in the 225-mile zone). Irs But the tax applies to flights between ports or stations in Alaska and the Aleutian Islands, as well as between ports or stations in Hawaii. Irs The tax applies even though parts of the flights may be over international waters or over Canada, if no point on a line drawn from where the route of transportation leaves the United States (Alaska) to where it reenters the United States (Alaska) is more than 225 miles from the United States. Irs Liability for tax. Irs   The person paying for taxable transportation is liable for the tax and, ordinarily, the person engaged in the business of transporting property by air for hire receives the payment, collects the tax, files the returns, and pays the tax over to the government. Irs   If tax is not paid when a payment is made outside the United States, the person furnishing the last segment of taxable transportation collects the tax from the person to whom the property is delivered in the United States. Irs Special Rules on Transportation Taxes In certain circumstances, special rules apply to the taxes on transportation of persons and property by air. Irs Aircraft used by affiliated corporations. Irs   The taxes do not apply to payments received by one member of an affiliated group of corporations from another member for services furnished in connection with the use of an aircraft. Irs However, the aircraft must be owned or leased by a member of the affiliated group and cannot be available for hire by a nonmember of the affiliated group. Irs Determine whether an aircraft is available for hire by a nonmember of an affiliated group on a flight-by-flight basis. Irs   For this rule, an affiliated group of corporations is any group of corporations connected with a common parent corporation through 80% or more of stock ownership. Irs Small aircraft. Irs   The taxes do not apply to transportation furnished by an aircraft having a maximum certificated takeoff weight of 6,000 pounds or less. Irs However, the taxes do apply if the aircraft is operated on an established line. Irs “Operated on an established line” means the aircraft operates with some degree of regularity between definite points. Irs However, it does not include any time an aircraft is being operated on a flight that is solely for sightseeing. Irs   Consider an aircraft to be operated on an established line if it is operated on a charter basis between two cities also served by that carrier on a regularly scheduled basis. Irs   Also, the taxes apply if the aircraft is jet-powered, regardless of its maximum certificated takeoff weight or whether or not it is operated on an established line. Irs Mixed load of persons and property. Irs   If a single amount is paid for air transportation of persons and property, the payment must be allocated between the amount subject to the tax on transportation of persons and the amount subject to the tax on transportation of property. Irs The allocation must be reasonable and supported by adequate records. Irs Credits or refunds. Irs   If tax is collected and paid over for air transportation that is not taxable air transportation, the collector may claim a credit or refund if it has repaid the tax to the person from whom the tax was collected or obtained the consent of that person to the allowance of the credit or refund. Irs Alternatively, the person who paid the tax may claim a refund. Irs For information on how to file for credits or refunds, see the Instructions for Form 720 or Form 8849. Irs Prev  Up  Next   Home   More Online Publications