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Military Tax Service

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Military Tax Service

Military tax service Publication 529 - Main Content Table of Contents Deductions Subject to the 2% LimitUnreimbursed Employee Expenses Tax Preparation Fees Other Expenses Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses How To ReportWho can use Form 2106-EZ. Military tax service Computer used in a home office. Military tax service Example How To Get Tax HelpLow Income Taxpayer Clinics Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR). Military tax service You can claim the amount of expenses that is more than 2% of your adjusted gross income. Military tax service You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Military tax service Your adjusted gross income is the amount on Form 1040, line 38, or Form 1040NR, line 37. Military tax service Generally, you apply the 2% limit after you apply any other deduction limit. Military tax service For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed later under Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging ) before you apply the 2% limit. Military tax service Deductions subject to the 2% limit are discussed in the following three categories. Military tax service Unreimbursed employee expenses (Schedule A (Form 1040), line 21 or Schedule A (Form 1040NR), line 7). Military tax service Tax preparation fees (Schedule A (Form 1040), line 22 or Schedule A (Form 1040NR), line 8). Military tax service Other expenses (Schedule A (Form 1040), line 23 or Schedule A (Form 1040NR), line 9). Military tax service Unreimbursed Employee Expenses Generally, the following expenses are deducted on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. Military tax service You can deduct only unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. Military tax service An expense is ordinary if it is common and accepted in your trade, business, or profession. Military tax service An expense is necessary if it is appropriate and helpful to your business. Military tax service An expense does not have to be required to be considered necessary. Military tax service You may be able to deduct the following items as unreimbursed employee expenses. Military tax service Business bad debt of an employee. Military tax service Business liability insurance premiums. Military tax service Damages paid to a former employer for breach of an employment contract. Military tax service Depreciation on a computer your employer requires you to use in your work. Military tax service Dues to a chamber of commerce if membership helps you do your job. Military tax service Dues to professional societies. Military tax service Educator expenses. Military tax service Home office or part of your home used regularly and exclusively in your work. Military tax service Job search expenses in your present occupation. Military tax service Laboratory breakage fees. Military tax service Legal fees related to your job. Military tax service Licenses and regulatory fees. Military tax service Malpractice insurance premiums. Military tax service Medical examinations required by an employer. Military tax service Occupational taxes. Military tax service Passport for a business trip. Military tax service Repayment of an income aid payment received under an employer's plan. Military tax service Research expenses of a college professor. Military tax service Rural mail carriers' vehicle expenses. Military tax service Subscriptions to professional journals and trade magazines related to your work. Military tax service Tools and supplies used in your work. Military tax service Travel, transportation, meals, entertainment, gifts, and local lodging related to your work. Military tax service Union dues and expenses. Military tax service Work clothes and uniforms if required and not suitable for everyday use. Military tax service Work-related education. Military tax service Business Bad Debt A business bad debt is a loss from a debt created or acquired in your trade or business. Military tax service Any other worthless debt is a business bad debt only if there is a very close relationship between the debt and your trade or business when the debt becomes worthless. Military tax service A debt has a very close relationship to your trade or business of being an employee if your main motive for incurring the debt is a business reason. Military tax service Example. Military tax service You make a bona fide loan to the corporation you work for. Military tax service It fails to pay you back. Military tax service You had to make the loan in order to keep your job. Military tax service You have a business bad debt as an employee. Military tax service More information. Military tax service   For more information on business bad debts, see chapter 10 in Publication 535. Military tax service For information on nonbusiness bad debts, see chapter 4 in Publication 550, Investment Income and Expenses. Military tax service Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. Military tax service Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer if the damages are attributable to the pay you received from that employer. Military tax service Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. Military tax service For the convenience of your employer. Military tax service   This means that your use of the computer is for a substantial business reason of your employer. Military tax service You must consider all facts in making this determination. Military tax service Use of your computer during your regular working hours to carry on your employer's business is generally for the convenience of your employer. Military tax service Required as a condition of your employment. Military tax service   This means that you cannot properly perform your duties without the computer. Military tax service Whether you can properly perform your duties without it depends on all the facts and circumstances. Military tax service It is not necessary that your employer explicitly requires you to use your computer. Military tax service But neither is it enough that your employer merely states that your use of the item is a condition of your employment. Military tax service Example. Military tax service You are an engineer with an engineering firm. Military tax service You occasionally take work home at night rather than work late at the office. Military tax service You own and use a computer that is similar to the one you use at the office to complete your work at home. Military tax service Since your use of the computer is not for the convenience of your employer and is not required as a condition of your employment, you cannot claim a depreciation deduction for it. Military tax service Which depreciation method to use. Military tax service   The depreciation method you use depends on whether you meet the more-than-50%-use test. Military tax service More-than-50%-use test met. Military tax service   You meet this test if you use the computer more than 50% in your work. Military tax service If you meet this test, you can claim accelerated depreciation under the General Depreciation System (GDS). Military tax service In addition, you may be able to take the section 179 deduction for the year you place the item in service. Military tax service More-than-50%-use test not met. Military tax service   If you do not meet the more-than-50%-use test, you are limited to the straight line method of depreciation under the Alternative Depreciation System (ADS). Military tax service You also cannot claim the section 179 deduction. Military tax service (But if you use your computer in a home office, see the exception below. Military tax service ) Investment use. Military tax service   Your use of a computer in connection with investments (described later under Other Expenses ) does not count as use in your work. Military tax service However, you can combine your investment use with your work use in figuring your depreciation deduction. Military tax service Exception for computer used in a home office. Military tax service   The more-than-50%-use test does not apply to a computer used only in a part of your home that meets the requirements described later under Home Office . Military tax service You can claim accelerated depreciation using GDS for a computer used in a qualifying home office, even if you do not use it more than 50% in your work. Military tax service You also may be able to take a section 179 deduction for the year you place the computer in service. Military tax service See Computer used in a home office under How To Report, later. Military tax service More information. Military tax service   For more information on depreciation and the section 179 deduction for computers and other items used in a home office, see Business Furniture and Equipment in Publication 587. Military tax service Publication 946 has detailed information about the section 179 deduction and depreciation deductions using GDS and ADS. Military tax service Reporting your depreciation deduction. Military tax service    See How To Report, later, for information about reporting a deduction for depreciation. Military tax service You must keep records to prove your percentage of business and investment use. Military tax service Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. Military tax service Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. Military tax service Lobbying and political activities. Military tax service    You may not be able to deduct that part of your dues that is for certain lobbying and political activities. Military tax service See Lobbying Expenses under Nondeductible Expenses, later. Military tax service Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. Military tax service If you file Form 1040A, you can deduct these expenses on line 16. Military tax service If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. Military tax service However, neither spouse can deduct more than $250 of his or her qualified expenses. Military tax service Eligible educator. Military tax service   An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in school for at least 900 hours during a school year. Military tax service Qualified expenses. Military tax service   Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. Military tax service An ordinary expense is one that is common and accepted in your educational field. Military tax service A necessary expense is one that is helpful and appropriate for your profession as an educator. Military tax service An expense does not have to be required to be considered necessary. Military tax service   Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. Military tax service You must reduce your qualified expenses by the following amounts. Military tax service Excludable U. Military tax service S. Military tax service series EE and I savings bond interest from Form 8815. Military tax service Nontaxable qualified state tuition program earnings. Military tax service Nontaxable earnings from Coverdell education savings accounts. Military tax service Any reimbursements you received for those expenses that were not reported to you on your Form W-2, box 1. Military tax service Educator expenses over limit. Military tax service   If you were an educator in 2013 and you had qualified expenses that you cannot take as an adjustment to gross income, you can deduct the rest as an itemized deduction subject to the 2% limit. Military tax service Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. Military tax service You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. Military tax service The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. Military tax service Principal place of business. Military tax service   If you have more than one place of business, the business part of your home is your principal place of business if: You use it regularly and exclusively for administrative or management activities of your trade or business, and You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Military tax service   Otherwise, the location of your principal place of business generally depends on the relative importance of the activities performed at each location and the time spent at each location. Military tax service You should keep records that will give the information needed to figure the deduction according to these rules. Military tax service Also keep canceled checks, substitute checks, or account statements and receipts of the expenses paid to prove the deductions you claim. Military tax service More information. Military tax service   See Publication 587 for more detailed information and a worksheet for figuring the deduction. Military tax service Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. Military tax service You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. Military tax service Employment and outplacement agency fees. Military tax service    You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. Military tax service Employer pays you back. Military tax service   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. Military tax service See Recoveries in Publication 525. Military tax service Employer pays the employment agency. Military tax service   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. Military tax service Résumé. Military tax service   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. Military tax service Travel and transportation expenses. Military tax service   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. Military tax service You can deduct the travel expenses if the trip is primarily to look for a new job. Military tax service The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. Military tax service   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. Military tax service    You can choose to use the standard mileage rate to figure your car expenses. Military tax service The 2013 rate for business use of a vehicle is 56½ cents per mile. Military tax service See Publication 463 for more information on travel and car expenses. Military tax service Legal Fees You can deduct legal fees related to doing or keeping your job. Military tax service Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. Military tax service Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Military tax service If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. Military tax service Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. Military tax service If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. Military tax service Research Expenses of a College Professor If you are a college professor, you can deduct your research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. Military tax service You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. Military tax service However, you cannot deduct the cost of travel as a form of education. Military tax service Rural Mail Carriers' Vehicle Expenses If your expenses to use a vehicle in performing services as a rural mail carrier are more than the amount of your reimbursements, you can deduct the unreimbursed expenses. Military tax service See chapter 4 of Publication 463 for more information. Military tax service Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. Military tax service You can depreciate the cost of tools that have a useful life substantially beyond the tax year. Military tax service For more information about depreciation, see Publication 946. Military tax service Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging If you are an employee and have ordinary and necessary business-related expenses for travel away from home, local transportation, entertainment, and gifts, you may be able to deduct these expenses. Military tax service Generally, you must file Form 2106 or Form 2106-EZ to claim these expenses. Military tax service Travel expenses. Military tax service   Travel expenses are those incurred while traveling away from home for your employer. Military tax service You can deduct travel expenses paid or incurred in connection with a temporary work assignment. Military tax service Generally, you cannot deduct travel expenses paid or incurred in connection with an indefinite work assignment. Military tax service   Travel expenses may include: The cost of getting to and from your business destination (air, rail, bus, car, etc. Military tax service ), Meals and lodging while away from home, Taxi fares, Baggage charges, and Cleaning and laundry expenses. Military tax service   Travel expenses are discussed more fully in chapter 1 of Publication 463. Military tax service Temporary work assignment. Military tax service    If your assignment or job away from home in a single location is realistically expected to last (and does in fact last) for 1 year or less, it is temporary, unless there are facts and circumstances that indicate it is not. Military tax service Indefinite work assignment. Military tax service   If your assignment or job away from home in a single location is realistically expected to last for more than 1 year, it is indefinite, whether or not it actually lasts for more than 1 year. Military tax service If your assignment or job away from home in a single location is realistically expected to last for 1 year or less, but at some later date it is realistically expected to exceed 1 year, it will be treated as temporary (in the absence of facts and circumstances indicating otherwise) until the date that your realistic expectation changes, and it will be treated as indefinite after that date. Military tax service Federal crime investigation and prosecution. Military tax service   If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule for deducting temporary travel expenses. Military tax service This means that you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year. Military tax service   To qualify, the Attorney General must certify that you are traveling: For the Federal Government, In a temporary duty status, and To investigate, prosecute, or provide support services for the investigation or prosecution of a federal crime. Military tax service Armed Forces reservists traveling more than 100 miles from home. Military tax service   If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct some of your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. Military tax service The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. Military tax service The balance, if any, is reported on Schedule A. Military tax service   You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Naval, Marine Corps, Air Force, Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service. Military tax service   For more information on travel expenses, see Publication 463. Military tax service Local transportation expenses. Military tax service   Local transportation expenses are the expenses of getting from one workplace to another when you are not traveling away from home. Military tax service They include the cost of transportation by air, rail, bus, taxi, and the cost of using your car. Military tax service   You can choose to use the standard mileage rate to figure your car expenses. Military tax service The 2013 rate for business use of a vehicle is 56½ cents per mile. Military tax service    In general, the costs of commuting between your residence and your place of business are nondeductible. Military tax service Work at two places in a day. Military tax service   If you work at two places in a day, whether or not for the same employer, you can generally deduct the expenses of getting from one workplace to the other. Military tax service Temporary work location. Military tax service   You can deduct expenses incurred in going between your home and a temporary work location if at least one of the following applies. Military tax service The work location is outside the metropolitan area where you live and normally work. Military tax service You have at least one regular work location (other than your home) for the same trade or business. Military tax service (If this applies, the distance between your home and the temporary work location does not matter. Military tax service )   For this purpose, a work location is generally considered temporary if your work there is realistically expected to last (and does in fact last) for 1 year or less. Military tax service It is not temporary if your work there is realistically expected to last for more than 1 year, even if it actually lasts for 1 year or less. Military tax service If your work there initially is realistically expected to last for 1 year or less, but later is realistically expected to last for more than 1 year, the work location is generally considered temporary until the date your realistic expectation changes and not temporary after that date. Military tax service For more information, see chapter 1 of Publication 463. Military tax service Home office. Military tax service   You can deduct expenses incurred in going between your home and a workplace if your home is your principal place of business for the same trade or business. Military tax service (In this situation, whether the other workplace is temporary or regular and its distance from your home do not matter. Military tax service ) See Home Office , earlier, for a discussion on the use of your home as your principal place of business. Military tax service Meals and entertainment. Military tax service   Generally, you can deduct entertainment expenses (including entertainment-related meals) only if they are directly related to the active conduct of your trade or business. Military tax service However, the expense only needs to be associated with the active conduct of your trade or business if it directly precedes or follows a substantial and bona fide business-related discussion. Military tax service   You can deduct only 50% of your business-related meal and entertainment expenses unless the expenses meet certain exceptions. Military tax service You apply this 50% limit before you apply the 2%-of-adjusted-gross-income limit. Military tax service Meals when subject to “hours of service” limits. Military tax service   You can deduct 80% of your business-related meal expenses if you consume the meals during or incident to any period subject to the Department of Transportation's “hours of service” limits. Military tax service You apply this 80% limit before you apply the 2%-of-adjusted-gross-income limit. Military tax service Gift expenses. Military tax service   You can generally deduct up to $25 of business gifts you give to any one individual during the year. Military tax service The following items do not count toward the $25 limit. Military tax service Identical, widely distributed items costing $4 or less that have your name clearly and permanently imprinted. Military tax service Signs, racks, and promotional materials to be displayed on the business premises of the recipient. Military tax service Local lodging. Military tax service   If your employer provides or requires you to obtain lodging while you are not traveling away from home, you can deduct the cost of the lodging if it is: on a temporary basis, necessary for you to participate in or be available for a business meeting or employer function, and the costs are ordinary and necessary, but not lavish or extravagant. Military tax service   If your employer provides the lodging or reimburses you for the cost of the lodging, you can deduct the cost only if the value or the reimbursement is included in your gross income because it is reported as wages on your Form W-2. Military tax service Additional information. Military tax service    See Publication 463 for more information on travel, transportation, meal, entertainment, and gift expenses, and reimbursements for these expenses. Military tax service Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. Military tax service You can also deduct assessments for benefit payments to unemployed union members. Military tax service However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Military tax service Also, you cannot deduct contributions to a pension fund even if the union requires you to make the contributions. Military tax service You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. Military tax service See Lobbying Expenses under Nondeductible Expenses, later. Military tax service Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. Military tax service You must wear them as a condition of your employment. Military tax service The clothes are not suitable for everyday wear. Military tax service It is not enough that you wear distinctive clothing. Military tax service The clothing must be specifically required by your employer. Military tax service Nor is it enough that you do not, in fact, wear your work clothes away from work. Military tax service The clothing must not be suitable for taking the place of your regular clothing. Military tax service Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. Military tax service ). Military tax service Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. Military tax service However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. Military tax service Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. Military tax service Protective clothing. Military tax service   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. Military tax service   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. Military tax service Military uniforms. Military tax service   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. Military tax service However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. Military tax service In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. Military tax service   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. Military tax service   If you are a student at an armed forces academy, you cannot deduct the cost of your uniforms if they replace regular clothing. Military tax service However, you can deduct the cost of insignia, shoulder boards, and related items. Military tax service    You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. Military tax service Work-Related Education You can deduct expenses you have for education, even if the education may lead to a degree, if the education meets at least one of the following two tests. Military tax service It maintains or improves skills required in your present work. Military tax service It is required by your employer or the law to keep your salary, status, or job, and the requirement serves a business purpose of your employer. Military tax service You cannot deduct expenses you have for education, even though one or both of the preceding tests are met, if the education: Is needed to meet the minimum educational requirements to qualify you in your trade or business, or Is part of a program of study that will lead to qualifying you in a new trade or business. Military tax service If your education qualifies, you can deduct expenses for tuition, books, supplies, laboratory fees, and similar items, and certain transportation costs. Military tax service If the education qualifies you for a new trade or business, you cannot deduct the educational expenses even if you do not intend to enter that trade or business. Military tax service Travel as education. Military tax service   You cannot deduct the cost of travel that in itself constitutes a form of education. Military tax service For example, a French teacher who travels to France to maintain general familiarity with the French language and culture cannot deduct the cost of the trip as an educational expense. Military tax service More information. Military tax service    See Publication 970, Tax Benefits for Education, for a complete discussion of the deduction for work-related education expenses. Military tax service Education Expenses During Unemployment If you stop working for a year or less in order to get education in order to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. Military tax service Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. Military tax service Tax Preparation Fees You can usually deduct tax preparation fees on the return for the year in which you pay them. Military tax service Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. Military tax service These fees include the cost of tax preparation software programs and tax publications. Military tax service They also include any fee you paid for electronic filing of your return. Military tax service See Tax preparation fees under How To Report, later. Military tax service Other Expenses You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2%-of-adjusted-gross-income limit. Military tax service On Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9, you can deduct the ordinary and necessary expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. Military tax service You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonable and closely related to these purposes. Military tax service These other expenses include the following items. Military tax service Appraisal fees for a casualty loss or charitable contribution. Military tax service Casualty and theft losses from property used in performing services as an employee. Military tax service Clerical help and office rent in caring for investments. Military tax service Depreciation on home computers used for investments. Military tax service Excess deductions (including administrative expenses) allowed a beneficiary on termination of an estate or trust. Military tax service Fees to collect interest and dividends. Military tax service Hobby expenses, but generally not more than hobby income. Military tax service Indirect miscellaneous deductions from pass-through entities. Military tax service Investment fees and expenses. Military tax service Legal fees related to producing or collecting taxable income or getting tax advice. Military tax service Loss on deposits in an insolvent or bankrupt financial institution. Military tax service Loss on traditional IRAs or Roth IRAs, when all amounts have been distributed to you. Military tax service Repayments of income. Military tax service Repayments of social security benefits. Military tax service Safe deposit box rental, except for storing jewelry and other personal effects. Military tax service Service charges on dividend reinvestment plans. Military tax service Tax advice fees. Military tax service Trustee's fees for your IRA, if separately billed and paid. Military tax service If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses, later, under Nondeductible Expenses. Military tax service Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. Military tax service Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. Military tax service First report the loss in Section B of Form 4684, Casualties and Thefts. Military tax service You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Military tax service To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Military tax service For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts. Military tax service Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. Military tax service Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. Military tax service The fees are deductible on the return for the year in which you paid them. Military tax service For example, fees charged to payments made in 2013 can be claimed on the 2013 tax return. Military tax service Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). Military tax service You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. Military tax service But if you work as an employee and also use the computer in that work, see Depreciation on Computers under Unreimbursed Employee Expenses, earlier. Military tax service For more information on depreciation, see Publication 946. Military tax service Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. Military tax service Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. Military tax service The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. Military tax service For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. Military tax service Fees To Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. Military tax service But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. Military tax service You must add the fee to the cost of the property. Military tax service You cannot deduct the fee you pay to a broker to sell securities. Military tax service You can use the fee only to figure gain or loss from the sale. Military tax service See the instructions for Schedule D (Form 1040) for information on how to report the fee. Military tax service Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. Military tax service A hobby is not a business because it is not carried on to make a profit. Military tax service See Not-for-Profit Activities in chapter 1 of Publication 535. Military tax service Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. Military tax service Deductions of pass-through entities are passed through to the partners or shareholders. Military tax service The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. Military tax service Example. Military tax service You are a member of an investment club that is formed solely to invest in securities. Military tax service The club is treated as a partnership. Military tax service The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. Military tax service In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. Military tax service However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. Military tax service Publicly offered mutual funds. Military tax service   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. Military tax service A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. Military tax service   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). Military tax service This net figure is the amount you report on your return as income. Military tax service You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. Military tax service Information returns. Military tax service   You should receive information returns from pass-through entities. Military tax service Partnerships and S corporations. Military tax service   These entities issue Schedule K-1, which lists the items and amounts you must report, and identifies the tax return schedules and lines to use. Military tax service Nonpublicly offered mutual funds. Military tax service   These funds will send you a Form 1099-DIV, or a substitute form, showing your share of gross income and investment expenses. Military tax service You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. Military tax service Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. Military tax service Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. Military tax service You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. Military tax service You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F) on the appropriate schedule. Military tax service You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040 or Form 1040NR). Military tax service See Tax Preparation Fees, earlier. Military tax service Unlawful discrimination claims. Military tax service   You may be able to deduct, as an adjustment to income on Form 1040, line 36, or Form 1040NR, line 35, rather than as a miscellaneous itemized deduction, attorney fees and court costs for actions settled or decided after October 22, 2004, involving a claim of unlawful discrimination, a claim against the U. Military tax service S. Military tax service Government, or a claim made under section 1862(b)(3)(A) of the Social Security Act. Military tax service However, the amount you can deduct on Form 1040, line 36, or Form 1040NR, line 35, is limited to the amount of the judgment or settlement you are including in income for the tax year. Military tax service See Publication 525 for more information. Military tax service Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. Military tax service If you can reasonably estimate the amount of your loss on money you have on deposit in a financial institution that becomes insolvent or bankrupt, you can generally choose to deduct it in the current year even though its exact amount has not been finally determined. Military tax service If elected, the casualty loss is subject to certain deduction limitations. Military tax service The election is made on Form 4684. Military tax service Once you make this choice, you cannot change it without IRS approval. Military tax service If none of the deposit is federally insured, you can deduct the loss in either of the following ways. Military tax service As an ordinary loss (as a miscellaneous itemized deduction subject to the 2% limit). Military tax service Write the name of the financial institution and “Insolvent Financial Institution” beside the amount on Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9. Military tax service This deduction is limited to $20,000 ($10,000 if you are married filing separately) for each financial institution, reduced by any expected state insurance proceeds. Military tax service As a casualty loss. Military tax service Report it on Form 4684 first and then on Schedule A (Form 1040). Military tax service See Publication 547 for details. Military tax service As a nonbusiness bad debt. Military tax service Report it on Schedule D (Form 1040). Military tax service If any part of the deposit is federally insured, you can deduct the loss only as a casualty loss. Military tax service Exception. Military tax service   You cannot make this choice if you are a 1%-or-more-owner or an officer of the financial institution, or are related to such owner or officer. Military tax service For a definition of “related,” see Deposit in Insolvent or Bankrupt Financial Institution in chapter 4 of Publication 550. Military tax service Actual loss different from estimated loss. Military tax service   If you make this choice and your actual loss is less than your estimated loss, you must include the excess in income. Military tax service See Recoveries in Publication 525. Military tax service If your actual loss is more than your estimated loss, treat the excess loss as explained under Choice not made, next. Military tax service Choice not made. Military tax service   If you do not make this choice (or if you have an excess actual loss after choosing to deduct your estimated loss), treat your loss (or excess loss) as a nonbusiness bad debt (deductible as a short-term capital loss) in the year its amount is finally determined. Military tax service See Nonbusiness Bad Debts in chapter 4 of Publication 550. Military tax service Loss on IRA If you have a loss on your traditional IRA (or Roth IRA) investment, you can deduct the loss as a miscellaneous itemized deduction subject to the 2% limit, but only when all the amounts in all your traditional IRA (or Roth IRA) accounts have been distributed to you and the total distributions are less than your unrecovered basis. Military tax service For more information, see Publication 590, Individual Retirement Arrangements (IRAs). Military tax service Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. Military tax service If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. Military tax service If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. Military tax service Repayments of Social Security Benefits If the total of the amounts in box 5 (net benefits for 2013) of all your Forms SSA-1099, Social Security Benefit Statement, and Forms RRB-1099, Payments By the Railroad Retirement Board, is a negative figure (a figure in parentheses), you may be able to take a miscellaneous itemized deduction subject to the 2% limit. Military tax service The amount you can deduct is the part of the negative figure that represents an amount you included in gross income in an earlier year. Military tax service The amount in box 5 of Form SSA-1099 or RRB-1099 is the net amount of your benefits for the year. Military tax service It will be a negative figure if the amount of benefits you repaid in 2013 (box 4) is more than the gross amount of benefits paid to you in 2013 (box 3). Military tax service If the deduction is more than $3,000, you will have to use a special computation to figure your tax. Military tax service See Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for additional information. Military tax service Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. Military tax service You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. Military tax service Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. Military tax service These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. Military tax service Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your IRA are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. Military tax service Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. Military tax service They are not subject to the 2% limit. Military tax service Report these items on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14. Military tax service List of Deductions Amortizable premium on taxable bonds. Military tax service Casualty and theft losses from income-producing property. Military tax service Federal estate tax on income in respect of a decedent. Military tax service Gambling losses up to the amount of gambling winnings. Military tax service Impairment-related work expenses of persons with disabilities. Military tax service Loss from other activities from Schedule K-1 (Form 1065-B), box 2. Military tax service Losses from Ponzi-type investment schemes. Military tax service Repayments of more than $3,000 under a claim of right. Military tax service Unrecovered investment in an annuity. Military tax service Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. Military tax service You can elect to amortize the premium on taxable bonds. Military tax service The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. Military tax service Pre-1998 election to amortize bond premium. Military tax service   Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988. Military tax service Bonds acquired after October 22, 1986, and before 1988. Military tax service   The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you chose to treat it as an offset to interest income on the bond. Military tax service Bonds acquired before October 23, 1986. Military tax service   The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2% limit. Military tax service Deduction for excess premium. Military tax service   On certain bonds (such as bonds that pay a variable rate of interest or that provide for an interest-free period), the amount of bond premium allocable to a period may exceed the amount of stated interest allocable to the period. Military tax service If this occurs, treat the excess as a miscellaneous itemized deduction that is not subject to the 2% limit. Military tax service However, the amount deductible is limited to the amount by which your total interest inclusions on the bond in prior periods exceed the total amount you treated as a bond premium deduction on the bond in prior periods. Military tax service If any of the excess bond premium cannot be deducted because of the limit, this amount is carried forward to the next period and is treated as bond premium allocable to that period. Military tax service    Pre-1998 choice to amortize bond premium. Military tax service If you made the choice to amortize the premium on taxable bonds before 1998, you can deduct the bond premium amortization that is more than your interest income only for bonds acquired during 1998 and later years. Military tax service More information. Military tax service    For more information on bond premium, see Bond Premium Amortization in chapter 3 of Publication 550. Military tax service Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). Military tax service First report the loss in Section B of Form 4684. Military tax service You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Military tax service To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Military tax service For more information on casualty and theft losses, see Publication 547. Military tax service Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. Military tax service Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. Military tax service See Publication 559 for information about figuring the amount of this deduction. Military tax service Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. Military tax service You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. Military tax service You cannot deduct gambling losses that are more than your winnings. Military tax service Generally, nonresident aliens cannot deduct gambling losses on Schedule A (Form 1040NR). Military tax service You cannot reduce your gambling winnings by your gambling losses and report the difference. Military tax service You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Military tax service Therefore, your records should show your winnings separately from your losses. Military tax service Diary of winnings and losses. Military tax service You must keep an accurate diary or similar record of your losses and winnings. Military tax service Your diary should contain at least the following information. Military tax service The date and type of your specific wager or wagering activity. Military tax service The name and address or location of the gambling establishment. Military tax service The names of other persons present with you at the gambling establishment. Military tax service The amount(s) you won or lost. Military tax service Proof of winnings and losses. Military tax service   In addition to your diary, you should also have other documentation. Military tax service You can generally prove your winnings and losses through Form W-2G, Certain Gambling Winnings, Form 5754, Statement by Person(s) Receiving Gambling Winnings, wagering tickets, canceled checks, substitute checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment. Military tax service   For specific wagering transactions, you can use the following items to support your winnings and losses. Military tax service    These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. Military tax service They are not all-inclusive. Military tax service Your tax liability depends on your particular facts and circumstances. Military tax service Keno. Military tax service   Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records. Military tax service Slot machines. Military tax service   A record of the machine number and all winnings by date and time the machine was played. Military tax service Table games (twenty-one (blackjack), craps, poker, baccarat, roulette, wheel of fortune, etc. Military tax service ). Military tax service   The number of the table at which you were playing. Military tax service Casino credit card data indicating whether the credit was issued in the pit or at the cashier's cage. Military tax service Bingo. Military tax service   A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Military tax service Supplemental records include any receipts from the casino, parlor, etc. Military tax service Racing (horse, harness, dog, etc. Military tax service ). Military tax service   A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Military tax service Supplemental records include unredeemed tickets and payment records from the racetrack. Military tax service Lotteries. Military tax service   A record of ticket purchases, dates, winnings, and losses. Military tax service Supplemental records include unredeemed tickets, payment slips, and winnings statements. Military tax service Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. Military tax service Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and other expenses in connection with your place of work that are necessary for you to be able to work. Military tax service Example. Military tax service You are blind. Military tax service You must use a reader to do your work. Military tax service You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. Military tax service The reader's services are only for your work. Military tax service You can deduct your expenses for the reader as impairment-related work expenses. Military tax service Self-employed. Military tax service   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. Military tax service See Impairment-related work expenses. Military tax service , later under How To Report. Military tax service Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14 (only if effectively connected with a U. Military tax service S. Military tax service trade or business). Military tax service It is not subject to the passive activity limitations. Military tax service Officials Paid on a Fee Basis If you are a fee-basis official, you can claim your expenses in performing services in that job as an adjustment to income rather than as a miscellaneous itemized deduction. Military tax service See Publication 463 for more information. Military tax service Performing Artists If you are a qualified performing artist, you can deduct your employee business expenses as an adjustment to income rather than as a miscellaneous itemized deduction. Military tax service If you are an employee, complete Form 2106 or Form 2106-EZ. Military tax service See Publication 463 for more information. Military tax service Losses From Ponzi-type Investment Schemes These losses are deductible as theft losses of income-producing property on your tax return for the year the loss was discovered. Military tax service You figure the deductible loss in Section B of Form 4684. Military tax service However, if you qualify to use Revenue Procedure 2009-20 (as modified by Revenue Procedure 2011-58) and you choose to follow the procedures in the guidance, complete Section C of Form 4684 before completing Section B. Military tax service Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Military tax service You do not need to complete Appendix A. Military tax service See the Form 4684 instructions and Publication 547, Casualties, Disasters, and Thefts, for more information. Military tax service Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid, or take a credit against your tax. Military tax service See Repayments in Publication 525 for more information. Military tax service Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. Military tax service If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. Military tax service See Publication 575, Pension and Annuity Income, for more information about the tax treatment of pensions and annuities. Military tax service Nondeductible Expenses You cannot deduct the following expenses. Military tax service List of Nondeductible Expenses Adoption expenses. Military tax service Broker's commissions. Military tax service Burial or funeral expenses, including the cost of a cemetery lot. Military tax service Campaign expenses. Military tax service Capital expenses. Military tax service Check-writing fees. Military tax service Club dues. Military tax service Commuting expenses. Military tax service Fees and licenses, such as car licenses, marriage licenses, and dog tags. Military tax service Fines and penalties, such as parking tickets. Military tax service Health spa expenses. Military tax service Hobby losses—but see Hobby Expenses, earlier. Military tax service Home repairs, insurance, and rent. Military tax service Home security system. Military tax service Illegal bribes and kickbacks—see Bribes and kickbacks in chapter 11 of Publication 535. Military tax service Investment-related seminars. Military tax service Life insurance premiums paid by the insured. Military tax service Lobbying expenses. Military tax service Losses from the sale of your home, furniture, personal car, etc. Military tax service Lost or misplaced cash or property. Military tax service Lunches with co-workers. Military tax service Meals while working late. Military tax service Medical expenses as business expenses other than medical examinations required by your employer. Military tax service Personal disability insurance premiums. Military tax service Personal legal expenses. Military tax service Personal, living, or family expenses. Military tax service Political contributions. Military tax service Professional accreditation fees. Military tax service Professional reputation, expenses to improve. Military tax service Relief fund contributions. Military tax service Residential telephone line. Military tax service Stockholders' meeting, expenses of attending. Military tax service Tax-exempt income, expenses of earning or collecting. Military tax service The value of wages never received or lost vacation time. Military tax service Travel expenses for another individual. Military tax service Voluntary unemployment benefit fund contributions. Military tax service Wristwatches. Military tax service Adoption Expenses You cannot deduct the expenses of adopting a child but you may be able to take a credit for those expenses. Military tax service For details, see Form 8839, Qualified Adoption Expenses. Military tax service Commissions Commissions paid on the purchase of securities are not deductible, either as business or nonbusiness expenses. Military tax service Instead, these fees must be added to the taxpayer's cost of the securities. Military tax service Commissions paid on the sale are deductible as business expenses only by dealers. Military tax service Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. Military tax service These include qualification and registration fees for primary elections. Military tax service Legal fees. Military tax service   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. Military tax service Capital Expenses You cannot currently deduct amounts paid to buy property that has a useful life substantially beyond the tax year or amounts paid to increase the value or prolong the life of property. Military tax service If you use such property in your work, you may be able to take a depreciation deduction. Military tax service See Publication 946. Military tax service If the property is a car used in your work, also see Publication 463. Military tax service Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. Military tax service Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. Military tax service This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. Military tax service You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. Military tax service Dues paid to airline, hotel, and luncheon clubs are not deductible. Military tax service Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). Military tax service If you haul tools, instruments, or other items in your car to and from work, you can deduct only the additional cost of hauling the items, such as the rent on a trailer to carry the items. Military tax service Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. Military tax service This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Military tax service Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. Military tax service Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. Military tax service Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. Military tax service However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. Military tax service See Home Office under Unreimbursed Employee Expenses, earlier, and Publication 587. Military tax service Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. Military tax service Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. Military tax service You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. Military tax service See Publication 504, Divorced or Separated Individuals, for information on alimony. Military tax service Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. Military tax service These include expenses to: Influence legislation, Participate, or intervene, in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. Military tax service Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. Military tax service Covered executive branch official. Military tax service   A covered executive branch official, for the purpose of (4) above, is any of the following officials. Military tax service The President. Military tax service The Vice President. Military tax service Any officer or employee of the White House Office of the Executive Office of the President, and the two most senior level officers of each of the other agencies in the Executive Office. Military tax service Any individual serving in a position in Level I of the Executive Schedule under section 5312 of Title 5, United States Code, any other individual designated by the President as having Cabinet-level status, and any immediate deputy of one of these individuals. Military tax service Dues used for lobbying. Military tax service   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. Military tax service Exceptions. Military tax service   You can deduct certain lobbying expenses if they are ordinary and necessary expenses of carrying on your trade or business. Military tax service You can deduct expenses for attempting to influence the legislation of any local council or similar governing body (local legislation). Military tax service An Indian tribal government is considered a local council or similar governing body. Military tax service You can deduct in-house expenses for influencing legislation or communicating directly with a covered executive branch official if the expenses for the tax year are not more than $2,000 (not counting overhead expenses). Military tax service If you are a professional lobbyist, you can deduct the expenses you incur in the trade or business of lobbying on behalf of another person. Military tax service Payments by the other person to you for lobbying activities cannot be deducted. Military tax service Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. Military tax service However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Military tax service See Publication 547. Military tax service Example. Military tax service A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Military tax service The diamond falls from the ring and is never found. Military tax service The loss of the diamond is a casualty. Military tax service Lunches With Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. Military tax service See Publication 463 for information on deductible expenses while traveling away from home. Military tax service Meals While Working Late You cannot deduct the cost of meals while working late. Military tax service However, you may be able to claim a deduction if the cost of the meals is a deductible entertainment expense, or if you are traveling away from home. Military tax service See Publication 463 for information on deductible entertainment expenses and expenses while traveling away from home. Military tax service Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. Military tax service Custody of children. Military tax service Breach of promise to marry suit. Military tax service Civil or criminal charges resulting from a personal relationship. Military tax service Damages for personal injury (except certain whistleblower claims and unlawful discrimination claims). Military tax service For more information about unlawful discrimination claims, see Deductions Subject to the 2% Limit, earlier. Military tax service Preparation of a title (or defense or perfection of a title). Military tax service Preparation of a will. Military tax service Property claims or property settlement in a divorce. Military tax service You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. Military tax service Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Military tax service Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. Military tax service Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. Military tax service Accounting certificate fees paid for the initial right to practice accounting. Military tax service Bar exam fees and incidental expenses in securing initial admission to the bar. Military tax service Medical and dental license fees paid to get initial licensing. Military tax service Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. Military tax service Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. Military tax service Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. Military tax service Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. Military tax service You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. Military tax service Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. Military tax service You cannot deduct interest on a debt incurred or continued to buy or carry tax-exempt securities. Military tax service If you have expenses to p
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Tax Information for Indian Tribal Governments

Per capita payments from trust funds held by the Department of the Interior
The Department of the Treasury and IRS issued interim guidance regarding per capita distributions made to members of Indian tribes from funds held in trust by the Secretary of the Interior.

Voluntary Withholding on Dividends and Other Distributions by Alaska Native Corporations
Shareholders who receive dividends or other distributions from an Alaska Native Corporation (ANC) can now request voluntary withholding.

Indian fishing rights-related activities income eligible for qualified retirement plan contributions
Amendments to the Treasury Regulations clarify that Indian tribal members who earn compensation for services performed in a fishing rights-related activity can contribute those amounts to a qualified retirement plan.

ITG Voluntary Closing Agreement Process
Information for Indian Tribes that are interested in an effective way of correcting a past error, mistake or misinterpretation of tax law or filing requirement.

Treasury and the IRS Release Tribal General Welfare Guidance
The Department of the Treasury announced key economic development initiatives that address the unique set of challenges faced by the Native American community.

Per Capita Payments from Certain Tribal Trust Settlement Proceeds Excluded from Income
Updated information regarding per capita payments from Tribal trust settlements

Reallocation Process Announced for Tribal Economic Development Bonds
The IRS has announced a process for reallocation of available amounts of volume cap for Tribal Economic Development Bonds.

Casino Issues
Information into the intent of Title 31 (anti-money laundering), non-Title 31 and other casino issues.

Indian Health Care Benefits and Section 139D
Frequently asked questions concerning Indian Health Care Benefits and Section 139D.

Recent Developments
Newsworthy items which may affect Indian tribal governments.

ITG News
News information of interest to Indian tribal governments.

IRS Requests Consultation on General Welfare and Issues Important New Guidance that will affect Indian Tribal Governments
The IRS has issued several important items of guidance that affect Indian Tribal Governments. Items include a Retirement Plan phone forum, reallocation of Tribal Economic Development Bonds, the Pension Protection Act and governmental plans, IGRA trust guidance, and a request for consultation on the general welfare doctrine.

ACT Public Meeting, Agenda, New Member
One new member joined ITG project team; report on recommendations to be released in June.

Voluntary Classification Settlement Program
Employers may reclassify workers as employees for future periods with partial employment tax relief.

Indian Tribal Governments Webinars and Phone Forums
Educational recordings covering topics for Indian Tribal governments

ITG Published Guidance
Links to guidance published by the Service regarding federal tax administration as it relates to tribal governments.

New Annual Electronic Filing Requirement for Small Tax-Exempt Organizations
Beginning in 2008, small tax-exempt organizations that previously were not required to file returns risk losing their tax-exempt status if they do not file an annual electronic notice (e-Postcard Form 990-N). This will include small tax-exempt organizations operated by, or on behalf of Indian tribal governments.

Tax Status of Tribes
Different ways tribal entities can be structured and the tax implications of each; what constitutes a federally recognized tribe and the benefits of such; and the taxability of certain types of income to tribal members.

Natural Resources
Information regarding tribal governments federal tax obligations and responsibilities regarding income from natural resources, IRC Section 7873, etc.

Excise Taxes
Information regarding excise taxes, who is liable, and definitions.

Tax Information for Charities and Other Non-Profits - ITG
Information for Tribal governments as well as other organizations on charitable organizations and deductions.

Tax Exempt Bonds
Insights into tribal governments' economic benefits of issuing tax exempt bonds; their ability to issue tax exempt bonds; what requirements must be met; and other applicable general rules.

FAQs for Indian Tribal Governments regarding Targeted Tax Benefits
Insights into the employment tax credits (Indian Employment, Work Opportunity, Welfare-to-Work, and Empowerment Zone Employment) available to those doing business with or employing Native Americans, and special depreciation rules for qualified property used on reservations.

Links to Helpful Resources
A repository of resources for specific research and/or general knowledge.

IRS’ Electronic Filing and E-Services
The IRS continues to expand its electronic filing and e-Services to allow tax professionals and payers to do business with the IRS electronically.

IRS Privacy Policy
The Internal Revenue Service's Office of Privacy ensures your personal information is protected whenever you visit the IRS website.

Helpful Tip
Want to visit us again? Just remember www.irs.gov/tribes. It's that easy!

ITG P.R.E.P.A.R.E
Instructions for ITG customers when they experience an interruption in tax preparation for whatever reason.

ITG 2011 Customer Satisfaction Survey
ITG 2011 Customer Satisfaction Survey

Treasury Department Tribal Consultation and Coordination
The Treasury Department now has a web page for Tribal Consultation.

ITG Employment Taxes
Information for Indian Tribal Governments with regard to the withholding, filing, and paying of employment taxes.

Frequently Asked Questions and Answers for Indian Tribal Governments
General information about subjects of interest to tribal governments.

Tip Income
Information regarding the taxability of tip income, employee and employer reporting responsibilities, and the Tip Rate Determination Agreement (TRDA) program.

Information Reporting
Information into what types of forms need to be filed based on the types of income being reported, and the rules on backup withholding - when it's applicable and how it's reported.

Fraud and Abusive Schemes Information for Indian Tribal Governments
Information on abusive schemes for Indian Tribal Governments.

Voluntary Classification Settlement Program (VCSP)
This page describes the new Voluntary Classification Settlement Program for employers.

Page Last Reviewed or Updated: 28-Mar-2014

The Military Tax Service

Military tax service 4. Military tax service   Underpayment Penalty for 2013 Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: General RuleFarmers and fishermen. Military tax service Higher income taxpayers. Military tax service Minimum required for higher income taxpayers. Military tax service Estate or trust payments of estimated tax. Military tax service Lowering or eliminating the penalty. Military tax service ExceptionsLess Than $1,000 Due No Tax Liability Last Year Figuring Your Required Annual Payment (Part I) Short Method for Figuring the Penalty (Part III) Regular Method for Figuring the Penalty (Part IV)Figuring Your Underpayment (Part IV, Section A) Worksheet for Form 2210, Part IV, Section B—Figuring the Penalty Annualized Income Installment Method (Schedule AI) Farmers and Fishermen Waiver of PenaltyFarmers and fishermen. Military tax service Introduction If you did not pay enough tax, either through withholding or by making timely estimated tax payments, you will have underpaid your estimated tax and may have to pay a penalty. Military tax service You may understand this chapter better if you can refer to a copy of your latest federal income tax return. Military tax service No penalty. Military tax service   Generally, you will not have to pay a penalty for 2013 if any of the following apply. Military tax service The total of your withholding and timely estimated tax payments was at least as much as your 2012 tax. Military tax service (See Special rules for certain individuals for higher income taxpayers and farmers and fishermen. Military tax service ) The tax balance due on your 2013 return is no more than 10% of your total 2013 tax, and you paid all required estimated tax payments on time. Military tax service Your total tax for 2013 (defined later) minus your withholding is less than $1,000. Military tax service You did not have a tax liability for 2012. Military tax service You did not have any withholding taxes and your current year tax (less any household employment taxes) is less than $1,000. Military tax service IRS can figure the penalty for you. Military tax service   If you think you owe the penalty, but you do not want to figure it yourself when you file your tax return, you may not have to. Military tax service Generally, the IRS will figure the penalty for you and send you a bill. Military tax service   You only need to figure your penalty in the following three situations. Military tax service You are requesting a waiver of part, but not all, of the penalty. Military tax service You are using the annualized income installment method to figure the penalty. Military tax service You are treating the federal income tax withheld from your income as paid on the dates actually withheld. Military tax service However, if these situations do not apply to you, and you think you can lower or eliminate your penalty, complete Form 2210 or Form 2210-F and attach it to your return. Military tax service See Form 2210 , later. Military tax service Topics - This chapter discusses: The general rule for the underpayment penalty, Special rules for certain individuals, Exceptions to the underpayment penalty, How to figure your underpayment and the amount of your penalty on Form 2210, and How to ask the IRS to waive the penalty. Military tax service Useful Items - You may want to see: Form (and Instructions) 2210 Underpayment of Estimated Tax by Individuals, Estates, and Trusts 2210-F Underpayment of Estimated Tax by Farmers and Fishermen See chapter 5 for information about getting these forms. Military tax service General Rule In general, you may owe a penalty for 2013 if the total of your withholding and timely estimated tax payments did not equal at least the smaller of: 90% of your 2013 tax, or 100% of your 2012 tax. Military tax service (Your 2012 tax return must cover a 12-month period. Military tax service ) Your 2013 tax, for this purpose, is defined under Total tax for 2013 , later. Military tax service Special rules for certain individuals. Military tax service   There are special rules for farmers and fishermen and certain higher income taxpayers. Military tax service Farmers and fishermen. Military tax service   If at least two-thirds of your gross income for 2012 or 2013 is from farming or fishing, substitute  662/3% for 90% in (1) above. Military tax service   See Farmers and Fishermen , later. Military tax service Higher income taxpayers. Military tax service   If your AGI for 2012 was more than $150,000 ($75,000 if your 2013 filing status is married filing a separate return), substitute 110% for 100% in (2) under General Rule . Military tax service This rule does not apply to farmers or fishermen. Military tax service   For 2012, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4. Military tax service Penalty figured separately for each period. Military tax service   Because the penalty is figured separately for each payment period, you may owe a penalty for an earlier payment period even if you later paid enough to make up the underpayment. Military tax service This is true even if you are due a refund when you file your income tax return. Military tax service Example. Military tax service You did not make estimated tax payments for 2013 because you thought you had enough tax withheld from your wages. Military tax service Early in January 2014, you made an estimate of your total 2013 tax. Military tax service Then you realized that your withholding was $2,000 less than the amount needed to avoid a penalty for underpayment of estimated tax. Military tax service On January 10, you made an estimated tax payment of $3,000, which is the difference between your withholding and your estimate of your total tax. Military tax service Your final return shows your total tax to be $50 less than your estimate, so you are due a refund. Military tax service You do not owe a penalty for your payment due January 15, 2014. Military tax service However, you may owe a penalty through January 10, 2014, the day you made the $3,000 payment, for your underpayments for the earlier payment periods. Military tax service Minimum required each period. Military tax service   You will owe a penalty for any 2013 payment period for which your estimated tax payment plus your withholding for the period and overpayments applied from previous periods was less than the smaller of: 22. Military tax service 5% of your 2013 tax, or 25% of your 2012 tax. Military tax service (Your 2012 tax return must cover a 12-month period. Military tax service ) Minimum required for higher income taxpayers. Military tax service   If you are subject to the rule for higher income taxpayers, discussed above, substitute 27. Military tax service 5% for 25% in (2) under General Rule . Military tax service When penalty is charged. Military tax service   If you miss a payment or you paid less than the minimum required in a period, you may be charged an underpayment penalty from the date the amount was due to the date the payment is made. Military tax service If a payment is mailed, the date of the U. Military tax service S. Military tax service postmark is considered the date of payment. Military tax service   If a payment is made electronically, the date the payment is shown on your payment account (checking, savings, etc. Military tax service ) is considered to be the date of payment. Military tax service Estate or trust payments of estimated tax. Military tax service   If you have estimated taxes credited to you from an estate or trust (Schedule K-1 (Form 1041)), treat the payment as made by you on January 15, 2014. Military tax service Amended returns. Military tax service    If you file an amended return by the due date of your original return, use the tax shown on your amended return to figure your required estimated tax payments. Military tax service If you file an amended return after the due date of the original return, use the tax shown on the original return. Military tax service   However, if you and your spouse file a joint return after the due date to replace separate returns you originally filed by the due date, use the tax shown on the joint return to figure your required estimated tax payments. Military tax service This rule applies only if both original separate returns were filed on time. Military tax service 2012 separate returns and 2013 joint return. Military tax service    If you file a joint return with your spouse for 2013, but you filed separate returns for 2012, your 2012 tax is the total of the tax shown on your separate returns. Military tax service You filed a separate return if you filed as single, head of household, or married filing separately. Military tax service 2012 joint return and 2013 separate returns. Military tax service    If you file a separate return for 2013, but you filed a joint return with your spouse for 2012, your 2012 tax is your share of the tax on the joint return. Military tax service You are filing a separate return if you file as single, head of household, or married filing separately. Military tax service   To figure your share of the taxes on a joint return, first figure the tax both you and your spouse would have paid had you filed separate returns for 2012 using the same filing status as for 2013. Military tax service Then multiply the tax on the joint return by the following fraction. Military tax service   The tax you would have paid had you filed a separate return   The total tax you and your spouse would have paid had you filed separate returns Example. Military tax service Lisa and Paul filed a joint return for 2012 showing taxable income of $49,000 and a tax of $6,484. Military tax service Of the $49,000 taxable income, $41,000 was Lisa's and the rest was Paul's. Military tax service For 2013, they file married filing separately. Military tax service Lisa figures her share of the tax on the 2012 joint return as follows. Military tax service 2012 tax on $41,000 based on a separate return $ 6,286 2012 tax on $8,000 based on a  separate return 803 Total $ 7,089 Lisa's percentage of total tax  ($6,286 ÷ $ 7,089) 88. Military tax service 67% Lisa's part of tax on joint return ($6,484 × 88. Military tax service 67%) $ 5,749 Form 2210. Military tax service   In most cases, you do not need to file Form 2210. Military tax service The IRS will figure the penalty for you and send you a bill. Military tax service If you want us to figure the penalty for you, leave the penalty line on your return blank. Military tax service Do not file Form 2210. Military tax service   To determine if you should file Form 2210, see Part II of Form 2210. Military tax service If you decide to figure your penalty, complete Part I, Part II, and either Part III or Part IV of the form and the Penalty Worksheet in the Instructions for Form 2210. Military tax service If you use Form 2210, you cannot file Form 1040EZ. Military tax service   On Form 1040, enter the amount of your penalty on line 77. Military tax service If you owe tax on line 76, add the penalty to your tax due and show your total payment on line 76. Military tax service If you are due a refund, subtract the penalty from the overpayment and enter the result on line 73. Military tax service   On Form 1040A, enter the amount of your penalty on line 46. Military tax service If you owe tax on line 45, add the penalty to your tax due and show your total payment on line 45. Military tax service If you are due a refund, subtract the penalty from the overpayment and enter the result on line 42. Military tax service Lowering or eliminating the penalty. Military tax service    You may be able to lower or eliminate your penalty if you file Form 2210. Military tax service You must file Form 2210 with your return if any of the following applies. Military tax service You request a waiver. Military tax service See Waiver of Penalty , later. Military tax service You use the annualized income installment method. Military tax service See the explanation of this method under Annualized Income Installment Method (Schedule AI) . Military tax service You use your actual withholding for each payment period for estimated tax purposes. Military tax service See Actual withholding method under Figuring Your Underpayment (Part IV, Section A). Military tax service You base any of your required installments on the tax shown on your 2012 return and you filed or are filing a joint return for either 2012 or 2013, but not for both years. Military tax service Exceptions Generally, you do not have to pay an underpayment penalty if either: Your total tax is less than $1,000, or You had no tax liability last year. Military tax service Less Than $1,000 Due You do not owe a penalty if the total tax shown on your return minus the amount you paid through withholding (including excess social security and tier 1 railroad retirement (RRTA) tax withholding) is less than $1,000. Military tax service Total tax for 2013. Military tax service   For 2013, your total tax on Form 1040 is the amount on line 61 reduced by the following. Military tax service    Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). Military tax service Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans. Military tax service The following write-ins on line 60: Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance, Tax on excess golden parachute payments, Excise tax on insider stock compensation from an expatriated corporation, Look-back interest due under section 167(g), Look-back interest due under section 460(b), Recapture of federal mortgage subsidy, and Additional tax on advance payments of health coverage tax credit when not eligible. Military tax service Any refundable credit amounts listed on lines 64a, 65, 66, 70, and any credit from Form 8885 included on line 71. Military tax service   If you filed Form 1040A, your 2013 total tax is the amount on line 35 reduced by any refundable credits on lines 38a, 39, and 40. Military tax service   If you filed Form 1040EZ, your 2013 total tax is the amount on line 10 reduced by the amount on line 8a. Military tax service Note. Military tax service When figuring the amount on line 60, include household employment taxes only if you had federal income tax withheld from your income or you would owe the penalty even if you did not include those taxes. Military tax service Paid through withholding. Military tax service    For 2013, the amount you paid through withholding on Form 1040 is the amount on line 62 plus any excess social security or tier 1 RRTA tax withholding on line 69. Military tax service Add to that any write-in amount on line 72 identified as “Form 8689. Military tax service ” On Form 1040A, the amount you paid through withholding is the amount on line 36 plus any excess social security or tier 1 RRTA tax withholding included on line 41. Military tax service On Form 1040EZ, it is the amount on line 7. Military tax service No Tax Liability Last Year You do not owe a penalty if you had no tax liability last year and you were a U. Military tax service S. Military tax service citizen or resident for the whole year. Military tax service For this rule to apply, your tax year must have included all 12 months of the year. Military tax service You had no tax liability for 2012 if your total tax was zero or you were not required to file an income tax return. Military tax service Example. Military tax service Ray, who is single and 22 years old, was unemployed for a few months during 2012. Military tax service He earned $6,700 in wages before he was laid off, and he received $1,400 in unemployment compensation afterwards. Military tax service He had no other income. Military tax service Even though he had gross income of $8,100, he did not have to pay income tax because his gross income was less than the filing requirement for a single person under age 65 ($9,750 for 2012). Military tax service He filed a return only to have his withheld income tax refunded to him. Military tax service In 2013, Ray began regular work as an independent contractor. Military tax service Ray made no estimated tax payments in 2013. Military tax service Even though he did owe tax at the end of the year, Ray does not owe the underpayment penalty for 2013 because he had no tax liability in 2012. Military tax service Total tax for 2012. Military tax service   For 2012, your total tax on Form 1040 is the amount on line 61 reduced by the following. Military tax service    Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). Military tax service Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans. Military tax service The following write-ins on line 60: Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance, Tax on excess golden parachute payments, Excise tax on insider stock compensation from an expatriated corporation, Look-back interest due under section 167(g), Look-back interest due under section 460(b), Recapture of federal mortgage subsidy, and Additional tax on advance payments of health coverage tax credit when not eligible. Military tax service Any refundable credit amounts listed on lines 64a, 65, 66, 70, and credits from Forms 8801 (line 27 only), and 8885 included on line 71. Military tax service   If you filed Form 1040A, your 2012 total tax is the amount on line 35 reduced by any refundable credits on lines 38a, 39, and 40. Military tax service   If you filed Form 1040EZ, your 2012 total tax is the amount on line 11 reduced by the amount on line 8a. Military tax service Figuring Your Required Annual Payment (Part I) Figure your required annual payment in Part I of Form 2210, following the line-by-line instructions. Military tax service If you rounded the entries on your tax return to whole dollars, you can round on Form 2210. Military tax service Example. Military tax service The tax on Lori Lane's 2012 return was $12,400. Military tax service Her AGI was not more than $150,000 for either 2012 or 2013. Military tax service The tax on her 2013 return (Form 1040, line 55) is $13,044. Military tax service Line 56 (self-employment tax) is $8,902. Military tax service Her 2013 total tax is $21,946. Military tax service For 2013, Lori had $1,600 income tax withheld and made four equal estimated tax payments ($1,000 each). Military tax service 90% of her 2013 tax is $19,751. Military tax service Because she paid less than her 2012 tax ($12,400) and less than 90% of her 2013 tax ($19,751), and does not meet an exception, Lori knows that she owes a penalty for underpayment of estimated tax. Military tax service The IRS will figure the penalty for Lori, but she decides to figure it herself on Form 2210 and pay it with her taxes when she files her tax return. Military tax service Lori's required annual payment is $12,400 (100% of 2012 tax) because that is smaller than 90% of her 2013 tax. Military tax service Different 2012 filing status. Military tax service    If you file a separate return for 2013, but you filed a joint return with your spouse for 2012, see 2012 joint return and 2013 separate returns , earlier, to figure the amount to enter as your 2012 tax on line 8 of Form 2210. Military tax service Short Method for Figuring the Penalty (Part III) You may be able to use the short method in Part III of Form 2210 to figure your penalty for underpayment of estimated tax. Military tax service If you qualify to use this method, it will result in the same penalty amount as the regular method. Military tax service However, either the annualized income installment method or the actual withholding method, explained later, may result in a smaller penalty. Military tax service You can use the short method only if you meet one of the following requirements. Military tax service You made no estimated tax payments for 2013 (it does not matter whether you had income tax withholding). Military tax service You paid the same amount of estimated tax on each of the four payment due dates. Military tax service If you do not meet either requirement, figure your penalty using the regular method in Part IV of Form 2210 and the Penalty Worksheet in the instructions. Military tax service Note. Military tax service If any payment was made before the due date, you can use the short method, but the penalty may be less if you use the regular method. Military tax service However, if the payment was only a few days early, the difference is likely to be small. Military tax service You cannot use the short method if any of the following apply. Military tax service You made any estimated tax payments late. Military tax service You checked box C or D in Part II of Form 2210. Military tax service You are filing Form 1040NR or 1040NR-EZ and you did not receive wages as an employee subject to U. Military tax service S. Military tax service income tax withholding. Military tax service If you use the short method, you cannot use the annualized income installment method to figure your underpayment for each payment period. Military tax service Also, you cannot use your actual withholding during each period to figure your payments for each period. Military tax service These methods, which may give you a smaller penalty amount, are explained under Figuring Your Underpayment (Part IV, Section A). Military tax service Complete Part III of Form 2210 following the line-by-line instructions in the Instructions for Form 2210. Military tax service Regular Method for Figuring the Penalty (Part IV) You can use the regular method in Part IV of Form 2210 to figure your penalty for underpayment of estimated tax if you paid one or more estimated tax payments earlier than the due date. Military tax service You must use the regular method in Part IV of Form 2210 to figure your penalty for underpayment of estimated tax if any of the following apply to you. Military tax service You paid one or more estimated tax payments on a date after the due date. Military tax service You paid at least one, but less than four, installments of estimated tax. Military tax service You paid estimated tax payments in un- equal amounts. Military tax service You use the annualized income installment method to figure your underpayment for each payment period. Military tax service You use your actual withholding during each payment period to figure your payments. Military tax service Under the regular method, figure your underpayment for each payment period in Section A, then figure your penalty using the Penalty Worksheet in the Instructions for Form 2210. Military tax service Enter the results on line 27 of Section B. Military tax service Figuring Your Underpayment (Part IV, Section A) Figure your underpayment of estimated tax for each payment period in Section A following the line-by-line instructions in the Instructions for Form 2210. Military tax service Complete lines 20 through 26 of the first column before going to line 20 of the next column. Military tax service Required installments—line 18. Military tax service   Your required payment for each payment period (line 18) is usually one-fourth of your required annual payment (Part I, line 9). Military tax service This method—the regular method—is the one to use if you received your income evenly throughout the year. Military tax service   However, if you did not receive your income evenly throughout the year, you may be able to lower or eliminate your penalty by figuring your underpayment using the annualized income installment method. Military tax service First complete Schedule AI (Form 2210), then enter the amounts from line 25 of that schedule on line 18 of Form 2210, Part IV. Military tax service See Annualized Income Installment Method (Schedule AI), later. Military tax service Payments made—line 19. Military tax service   Enter in each column the total of: Your estimated tax paid after the due date for the previous column and by the due date shown at the top of the column, and One-fourth of your withholding. Military tax service For special rules for figuring your payments, see Form 2210 instructions for line 19. Military tax service   If you file Form 1040, your withholding is the amount on line 62, plus any excess social security or tier 1 RRTA tax withholding on line 69. Military tax service If you file Form 1040A, your withholding is the amount on line 36 plus any excess social security or tier 1 RRTA tax withholding included in line 41. Military tax service Actual withholding method. Military tax service    Instead of using one-fourth of your withholding for each quarter, you can choose to use the amounts actually withheld by each due date. Military tax service You can make this choice separately for the tax withheld from your wages and for all other withholding. Military tax service This includes any excess social security and tier 1 RRTA tax withheld. Military tax service   Using your actual withholding may result in a smaller penalty if most of your withholding occurred early in the year. Military tax service   If you use your actual withholding, you must check box D in Form 2210, Part II. Military tax service Then complete Form 2210 using the regular method (Part IV) and file it with your return. Military tax service Worksheet for Form 2210, Part IV, Section B—Figuring the Penalty Figure the amount of your penalty for Section B using the Penalty Worksheet in the Form 2210 instructions. Military tax service The penalty is imposed on each underpayment amount shown on Form 2210, Section A, line 25, for the number of days that it remained unpaid. Military tax service For 2013, there are four rate periods—April 16 through June 30, July 1 through September 30, October 1 through December 31, and January 1, 2014 through April 15, 2014. Military tax service A 3% rate applies to all four periods. Military tax service Payments. Military tax service    Before completing the Penalty Worksheet, it may be helpful to make a list of the payments you made and income tax withheld after the due date (or the last day payments could be made on time) for the earliest payment period an underpayment occurred. Military tax service For example, if you had an underpayment for the first payment period, list your payments after April 15, 2013. Military tax service You can use the table in the Form 2210 instructions to make your list. Military tax service Follow those instructions for listing income tax withheld and payments made with your return. Military tax service Use the list to determine when each underpayment was paid. Military tax service   If you mail your estimated tax payments, use the date of the U. Military tax service S. Military tax service postmark as the date of payment. Military tax service Line 1b. Military tax service   Apply the payments listed to underpayment balance in the first column until it is fully paid. Military tax service Apply payments in the order made. Military tax service Figuring the penalty. Military tax service   If an underpayment was paid in two or more payments on different dates, you must figure the penalty separately for each payment. Military tax service On line 3 of the Penalty Worksheet enter the number of days between the due date (line 2) and the date of each payment on line 1b. Military tax service On line 4 figure the penalty for the amount of each payment applied on line 1b or the amount remaining unpaid. Military tax service If no payments are applied, figure the penalty on the amount on line 1a. Military tax service Aid for counting days. Military tax service    Table 4-1 provides a simple method for counting the number of days between a due date and a payment date. Military tax service Find the number for the date the payment was due by going across to the column of the month the payment was due and moving down the column to the due date. Military tax service In the same manner, find the number for the date the payment was made. Military tax service Subtract the due date “number” from the payment date “number. Military tax service ”   For example, if a payment was due on June 15 (61), but was not paid until September 1 (139), the payment was 78 (139 – 61) days late. Military tax service Table 4-1. Military tax service Calendar To Determine the Number of Days a Payment Is Late Instructions. Military tax service Use this table with Form 2210 if you are completing Part IV, Section B. Military tax service First, find the number for the payment due date by going across to the column of the month the payment was due and moving down the column to the due date. Military tax service Then, in the same manner, find the number for the date the payment was made. Military tax service Finally, subtract the due date number from the payment date number. Military tax service The result is the number of days the payment is late. Military tax service Example. Military tax service The payment due date is June 15 (61). Military tax service The payment was made on November 4 (203). Military tax service The payment is 142 days late (203 – 61). Military tax service Tax Year 2013 Day of 2013 2013 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 Month April May June July Aug. Military tax service Sept. Military tax service Oct. Military tax service Nov. Military tax service Dec. Military tax service Jan. Military tax service Feb. Military tax service Mar. Military tax service Apr. Military tax service 1   16 47 77 108 139 169 200 230 261 292 320 351 2   17 48 78 109 140 170 201 231 262 293 321 352 3   18 49 79 110 141 171 202 232 263 294 322 353 4   19 50 80 111 142 172 203 233 264 295 323 354 5   20 51 81 112 143 173 204 234 265 296 324 355 6   21 52 82 113 144 174 205 235 266 297 325 356 7   22 53 83 114 145 175 206 236 267 298 326 357 8   23 54 84 115 146 176 207 237 268 299 327 358 9   24 55 85 116 147 177 208 238 269 300 328 359 10   25 56 86 117 148 178 209 239 270 301 329 360 11   26 57 87 118 149 179 210 240 271 302 330 361 12   27 58 88 119 150 180 211 241 272 303 331 362 13   28 59 89 120 151 181 212 242 273 304 332 363 14   29 60 90 121 152 182 213 243 274 305 333 364 15 0 30 61 91 122 153 183 214 244 275 306 334 365 16 1 31 62 92 123 154 184 215 245 276 307 335   17 2 32 63 93 124 155 185 216 246 277 308 336   18 3 33 64 94 125 156 186 217 247 278 309 337   19 4 34 65 95 126 157 187 218 248 279 310 338   20 5 35 66 96 127 158 188 219 249 280 311 339   21 6 36 67 97 128 159 189 220 250 281 312 340   22 7 37 68 98 129 160 190 221 251 282 313 341   23 8 38 69 99 130 161 191 222 252 283 314 342   24 9 39 70 100 131 162 192 223 253 284 315 343   25 10 40 71 101 132 163 193 224 254 285 316 344   26 11 41 72 102 133 164 194 225 255 286 317 345   27 12 42 73 103 134 165 195 226 256 287 318 346   28 13 43 74 104 135 166 196 227 257 288 319 347   29 14 44 75 105 136 167 197 228 258 289   348   30 15 45 76 106 137 168 198 229 259 290   349   31   46   107 138   199   260 291   350   Annualized Income Installment Method (Schedule AI) If you did not receive your income evenly throughout the year (for example, your income from a shop you operated at a marina was much larger in the summer than it was during the rest of the year), you may be able to lower or eliminate your penalty by figuring your underpayment using the annualized income installment method. Military tax service Under this method, your required installment (Part IV, line 18) for one or more payment periods may be less than one-fourth of your required annual payment. Military tax service To figure your underpayment using this method, complete Form 2210, Schedule AI. Military tax service Schedule AI annualizes your tax at the end of each payment period based on your income, deductions, and other items relating to events that occurred from the beginning of the tax year through the end of the period. Military tax service If you use the annualized income installment method, you must check box C in Part II of Form 2210. Military tax service Also, you must attach Form 2210 and Schedule AI to your return. Military tax service If you use Schedule AI for any payment due date, you must use it for all payment due dates. Military tax service Completing Schedule AI. Military tax service   Follow the Form 2210 instructions to complete Schedule AI. Military tax service For each period shown on Schedule AI, figure your income and deductions based on your method of accounting. Military tax service If you use the cash method of accounting (used by most people), include all income actually or constructively received during the period and all deductions actually paid during the period. Military tax service Note. Military tax service Each period includes amounts from the previous period(s). Military tax service Period (a) includes items for January 1 through March 31. Military tax service Period (b) includes items for January 1 through May 31. Military tax service Period (c) includes items for January 1 through August 31. Military tax service Period (d) includes items for the entire year. Military tax service Farmers and Fishermen If you are a farmer or fisherman, the following special rules for underpayment of estimated tax apply to you. Military tax service The penalty for underpaying your 2013 estimated tax will not apply if you file your return and pay all the tax due by March 3, 2014. Military tax service If you are a fiscal year taxpayer, the penalty will not apply if you file your return and pay the tax due by the first day of the third month after the end of your tax year. Military tax service Any penalty you owe for underpaying your 2013 estimated tax will be figured from one payment due date, January 15, 2014. Military tax service The underpayment penalty for 2013 is figured on the difference between the amount of 2013 withholding plus estimated tax paid by the due date and the smaller of: 662/3% (rather than 90%) of your 2013 tax, or 100% of the tax shown on your 2012 return. Military tax service Even if these special rules apply to you, you will not owe the penalty if you meet either of the two conditions discussed under Exceptions . Military tax service See Who Must Pay Estimated Tax in chapter 2 for the definition of a farmer or fisherman who is eligible for these special rules. Military tax service Form 2210-F. Military tax service   Use Form 2210-F to figure any underpayment penalty. Military tax service Do not attach it to your return unless you check a box in Part I. Military tax service However, if none of the boxes apply to you and you owe a penalty, you do not need to attach Form 2210-F. Military tax service Enter the amount from line 16 on Form 1040, line 77 and add the penalty to any balance due on your return or subtract it from your refund. Military tax service Keep your filled-in Form 2210-F for your records. Military tax service    If none of the boxes on Form 2210-F apply to you and you owe a penalty, the IRS can figure your penalty and send you a bill. Military tax service Waiver of Penalty The IRS can waive the penalty for underpayment if either of the following applies. Military tax service You did not make a payment because of a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty. Military tax service You retired (after reaching age 62) or became disabled in 2012 or 2013 and both the following requirements are met. Military tax service You had a reasonable cause for not making the payment. Military tax service Your underpayment was not due to willful neglect. Military tax service How to request a waiver. Military tax service   To request a waiver, see the Instructions for Form 2210. Military tax service Farmers and fishermen. Military tax service   To request a waiver, see the Instructions for Form 2210-F. Military tax service Federally declared disaster. Military tax service   Certain estimated tax payment deadlines for taxpayers who reside or have a business in a federally declared disaster area are postponed for a period during and after the disaster. Military tax service During the processing of your tax return, the IRS automatically identifies taxpayers located in a covered disaster area (by county or parish) and applies the appropriate penalty relief. Military tax service Do not file Form 2210 or 2210-F if your underpayment was due to a federally declared disaster. Military tax service If you still owe a penalty after the automatic waiver is applied, we will send you a bill. Military tax service   Individuals, estates, and trusts not in a covered disaster area but whose books, records, or tax professionals' offices are in a covered area are also entitled to relief. Military tax service Also eligible are relief workers affiliated with a recognized government or charitable organization assisting in the relief activities in a covered disaster area. Military tax service If you meet either of these eligibility requirements, you must call the IRS disaster hotline at 1-866-562-5227 and identify yourself as eligible for this relief. Military tax service   Details on the applicable disaster postponement period can be found at IRS. Military tax service gov. Military tax service Enter Tax Relief in Disaster Situations. Military tax service Select the federally declared disaster that affected you. Military tax service    Worksheet 4-1. Military tax service 2013 Form 2210, Schedule AI—Line 12 Qualified Dividends and Capital Gain Tax Worksheet Note. Military tax service To figure the annualized entries for lines 2, 3, and 5 below, multiply the expected amount for the period by the  annualization amount on line 2 of Schedule AI for the same period. Military tax service                   1. Military tax service Enter line 11 of your Schedule AI, or line 3 from Worksheet 4-2 1. Military tax service       2. Military tax service Enter your annualized qualified dividends for the period 2. Military tax service           3. Military tax service Are you filing Schedule D?               □ Yes. Military tax service Enter the smaller of your annualized amount from line 15 or line 16 of Schedule D. Military tax service If either line 15 or line 16 is blank or a loss, enter -0-. Military tax service 3. Military tax service             □ No. Military tax service Enter your annualized capital gain distributions from Form 1040, line 13             4. Military tax service Add lines 2 and 3   4. Military tax service           5. Military tax service If you are claiming investment interest expense on Form 4952, enter your annualized amount from line 4g of that form. Military tax service Otherwise, enter -0-   5. Military tax service           6. Military tax service Subtract line 5 from line 4. Military tax service If zero or less, enter -0- 6. Military tax service       7. Military tax service Subtract line 6 from line 1. Military tax service If zero or less, enter -0- 7. Military tax service       8. Military tax service Enter: $36,900 if single or married filing separately, $73,800 if married filing jointly or qualifying widow(er), $49,400 if head of household. Military tax service 8. Military tax service       9. Military tax service Enter the smaller of line 1 or line 8 9. Military tax service       10. Military tax service Enter the smaller of line 7 or line 9 10. Military tax service       11. Military tax service Subtract line 10 from line 9. Military tax service This amount is taxed at 0% 11. Military tax service       12. Military tax service Enter the smaller of line 1 or line 6 12. Military tax service       13. Military tax service Enter the amount from line 11 13. Military tax service       14. Military tax service Subtract line 13 from line 12 14. Military tax service       15. Military tax service Multiply line 14 by 15% (. Military tax service 15) 15. Military tax service   16. Military tax service Figure the tax on the amount on line 7. Military tax service If the amount on line 7 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. Military tax service If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 16. Military tax service   17. Military tax service Add lines 15 and 16 17. Military tax service   18. Military tax service Figure the tax on the amount on line 1. Military tax service If the amount on line 1 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. Military tax service If the amount on line 1 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 18. Military tax service   19. Military tax service Tax on all taxable income. Military tax service Enter the smaller of line 17 or line 18. Military tax service Also enter this amount on line 12 of Schedule AI in the appropriate column. Military tax service However, if you are using this worksheet to figure the tax on the amount on line 3 of Worksheet 4-2, enter the amount from line 19 on Worksheet 4-2, line 4 19. Military tax service   Worksheet 4-2. Military tax service 2013 Form 2210, Schedule AI—Line 12 Foreign Earned Income Tax Worksheet Before you begin:If Schedule AI, line 11, is zero for the period, do not complete this worksheet. Military tax service             1. Military tax service Enter the amount from line 11 of Schedule AI for the period 1. Military tax service   2. Military tax service Enter the annualized amount* of foreign earned income and housing amount excluded or deducted (from  Form 2555, lines 45 and 50, or Form 2555-EZ, line 18) in figuring the amount entered for the period on line 1  of Schedule AI 2. Military tax service   3. Military tax service Add lines 1 and 2 3. Military tax service   4. Military tax service Tax on the amount on line 3. Military tax service Use the Tax Table, Tax Computation Worksheet, Form 8615**, Qualified Dividends and Capital Gain Tax Worksheet***, or Schedule D Tax Worksheet***, whichever applies. Military tax service See the 2013 Instructions for Form 1040, line 44, to find out which tax computation method to use. Military tax service (Note. Military tax service You do not have to use the same method for each period on Schedule AI. Military tax service ) 4. Military tax service   5. Military tax service Tax on the amount on line 2. Military tax service If the amount on line 2 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. Military tax service If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 5. Military tax service   6. Military tax service Subtract line 5 from line 4. Military tax service Enter the result here and on line 12 of Schedule AI. Military tax service If zero or less,  enter -0- 6. Military tax service             * To figure the annualized amount for line 2, multiply the exclusion or deduction for the period by the annualization amount on line 2 of Schedule AI for the same period. Military tax service     ** If you use Form 8615 to figure the tax on line 4 above, enter the amount from line 3 above on line 4 of Form 8615. Military tax service If the child's parent files Form 2555 or 2555-EZ, enter the amounts from lines 3 and 4 of the parent's Foreign Earned Income Tax Worksheet on lines 6 and 10, respectively, of Form 8615. Military tax service Complete the rest of Form 8615 according to its instructions. Military tax service Then complete lines 5 and 6 above. Military tax service     *** Enter the amount from line 3 above on line 1 of the Qualified Dividends and Capital Gain Tax Worksheet (or Worksheet 4-1 in this chapter) or the Schedule D Tax Worksheet, whichever worksheet you use to figure the tax on line 4 above. Military tax service Complete that worksheet through line 6 (line 10 if you use the Schedule D Tax Worksheet). Military tax service Next, determine if you have a capital gain excess. Military tax service     Figuring capital gain excess. Military tax service To find out if you have a capital gain excess for the appropriate period, subtract line 11 of Schedule AI from line 6 of Worksheet 4-1 or your Qualified Dividends and Capital Gain Tax Worksheet (line 10 of your Schedule D Tax Worksheet). Military tax service If the result is more than zero, that amount is your capital gain excess. Military tax service     No capital gain excess. Military tax service If you do not have a capital gain excess, complete the rest of Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or the Schedule D Tax Worksheet according to the worksheet's instructions. Military tax service Then complete lines 5 and 6 above. Military tax service     Capital gain excess. Military tax service If you have a capital gain excess, complete a second Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or Schedule D Tax Worksheet (whichever applies) as instructed above but in its entirety and with the following additional modifications. Military tax service Then complete lines 5 and 6 above. Military tax service     Make the modifications below only for purposes of filling out Worksheet 4-2 above. Military tax service     a. Military tax service Reduce (but not below zero) the amount you otherwise would enter on line 3 of your Worksheet 4-1, line 3 of your Qualified Dividends and Capital Gain Tax Worksheet, or line 9 of your Schedule D Tax Worksheet by your capital gain excess. Military tax service     b. Military tax service Reduce (but not below zero) the amount you otherwise would enter on line 2 of your Worksheet 4-1, line 2 of your Qualified Dividends and Capital Gain Tax Worksheet, or line 6 of your Schedule D Tax Worksheet by any of your capital gain excess not used in (a) above. Military tax service     c. Military tax service Reduce (but not below zero) the amount on your Schedule D (Form 1040), line 18, by your capital gain excess. Military tax service     d. Military tax service Include your capital gain excess as a loss on line 16 of your Unrecaptured Section 1250 Gain Worksheet in the 2013 Instructions for Schedule D (Form 1040). 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