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Myfreetaxes de com Publication 4492 - Main Contents Table of Contents DefinitionsHurricane Katrina Disaster Area Katrina Covered Disaster Area Gulf Opportunity (GO) Zone (Core Disaster Area) Hurricane Rita Disaster Area (Rita Covered Disaster Area) Rita GO Zone Hurricane Wilma Disaster Area Wilma Covered Disaster Area Wilma GO Zone Extended Tax Deadlines Charitable Giving IncentivesTemporary Suspension of Limits on Charitable Contributions Standard Mileage Rate for Charitable Use of Vehicles Mileage Reimbursements to Charitable Volunteers Charitable Deduction for Contributions of Food Inventory Charitable Deduction for Contributions of Book Inventories to Public Schools Casualty and Theft LossesTime limit for making election. Myfreetaxes de com Replacement Period for Nonrecognition of Gain Net Operating Losses IRAs and Other Retirement PlansDefinitions Taxation of Qualified Hurricane Distributions Repayment of Qualified Hurricane Distributions Repayment of Qualified Distributions for the Purchase or Construction of a Main Home Loans From Qualified Plans Additional Tax Relief for IndividualsEarned Income Credit and Child Tax Credit Additional Exemption for Housing Individuals Displaced by Hurricane Katrina Education Credits Recapture of Federal Mortgage Subsidy Exclusion of Certain Cancellations of Indebtedness by Reason of Hurricane Katrina Tax Relief for Temporary Relocation Additional Tax Relief for BusinessesSpecial Depreciation Allowance Increased Section 179 Deduction Work Opportunity Credit Employee Retention Credit Hurricane Katrina Housing Credit Reforestation Costs Demolition and Clean-up Costs Increase in Rehabilitation Tax Credit Request for Copy or Transcript of Tax Return How To Get Tax Help Definitions The following definitions are used throughout this publication. Myfreetaxes de com Hurricane Katrina Disaster Area The Hurricane Katrina disaster area covers the area for which the President declared a major disaster before September 14, 2005, because of Hurricane Katrina. Myfreetaxes de com The Hurricane Katrina disaster area covers the entire states of Alabama, Florida, Louisiana, and Mississippi. Myfreetaxes de com Katrina Covered Disaster Area A portion of the Hurricane Katrina disaster area has been designated by the IRS as a covered disaster area. Myfreetaxes de com The Katrina covered disaster area covers the following areas in four states. Myfreetaxes de com Alabama. Myfreetaxes de com   The counties of Baldwin, Bibb, Choctaw, Clarke, Colbert, Cullman, Greene, Hale, Jefferson, Lamar, Lauderdale, Marengo, Marion, Mobile, Monroe, Perry, Pickens, Sumter, Tuscaloosa, Washington, Wilcox, and Winston. Myfreetaxes de com Florida. Myfreetaxes de com   The counties of Bay, Broward, Collier, Escambia, Franklin, Gulf, Miami-Dade, Monroe, Okaloosa, Santa Rosa, and Walton. Myfreetaxes de com Louisiana. Myfreetaxes de com   All parishes. Myfreetaxes de com Mississippi. Myfreetaxes de com   All counties. Myfreetaxes de com Gulf Opportunity (GO) Zone (Core Disaster Area) The GO Zone (also called the core disaster area) covers the portion of the Hurricane Katrina disaster area determined by the Federal Emergency Management Agency (FEMA) to be eligible for either individual only or both individual and public assistance from the Federal Government. Myfreetaxes de com The GO Zone covers the following areas in three states. Myfreetaxes de com Alabama. Myfreetaxes de com   The counties of Baldwin, Choctaw, Clarke, Greene, Hale, Marengo, Mobile, Pickens, Sumter, Tuscaloosa, and Washington. Myfreetaxes de com Louisiana. Myfreetaxes de com   The parishes of Acadia, Ascension, Assumption, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, St. Myfreetaxes de com Bernard, St. Myfreetaxes de com Charles, St. Myfreetaxes de com Helena, St. Myfreetaxes de com James, St. Myfreetaxes de com John the Baptist, St. Myfreetaxes de com Martin, St. Myfreetaxes de com Mary, St. Myfreetaxes de com Tammany, Tangipahoa, Terrebonne, Vermilion, Washington, West Baton Rouge, and West Feliciana. Myfreetaxes de com Mississippi. Myfreetaxes de com   The counties of Adams, Amite, Attala, Choctaw, Claiborne, Clarke, Copiah, Covington, Forrest, Franklin, George, Greene, Hancock, Harrison, Hinds, Holmes, Humphreys, Jackson, Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lamar, Lauderdale, Lawrence, Leake, Lincoln, Lowndes, Madison, Marion, Neshoba, Newton, Noxubee, Oktibbeha, Pearl River, Perry, Pike, Rankin, Scott, Simpson, Smith, Stone, Walthall, Warren, Wayne, Wilkinson, Winston, and Yazoo. Myfreetaxes de com Hurricane Rita Disaster Area (Rita Covered Disaster Area) The Hurricane Rita disaster area (also designated by the IRS as the Rita covered disaster area) covers the area for which the President declared a major disaster before October 6, 2005, because of Hurricane Rita. Myfreetaxes de com This area covers the entire states of Louisiana and Texas. Myfreetaxes de com Rita GO Zone The Rita GO Zone covers the portion of the Hurricane Rita disaster area determined by FEMA to be eligible for either individual only or both individual and public assistance from the Federal Government. Myfreetaxes de com The Rita GO Zone covers the following areas in two states. Myfreetaxes de com Louisiana. Myfreetaxes de com   The parishes of Acadia, Allen, Ascension, Beauregard, Calcasieu, Cameron, Evangeline, Iberia, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Plaquemines, Sabine, St. Myfreetaxes de com Landry, St. Myfreetaxes de com Martin, St. Myfreetaxes de com Mary, St. Myfreetaxes de com Tammany, Terrebonne, Vermilion, Vernon, and West Baton Rouge. Myfreetaxes de com Texas. Myfreetaxes de com   The counties of Angelina, Brazoria, Chambers, Fort Bend, Galveston, Hardin, Harris, Jasper, Jefferson, Liberty, Montgomery, Nacogdoches, Newton, Orange, Polk, Sabine, San Augustine, San Jacinto, Shelby, Trinity, Tyler, and Walker. Myfreetaxes de com Hurricane Wilma Disaster Area The Hurricane Wilma disaster area covers the area for which the President declared a major disaster before November 14, 2005, because of Hurricane Wilma. Myfreetaxes de com The Hurricane Wilma disaster area covers the entire state of Florida. Myfreetaxes de com Wilma Covered Disaster Area A portion of the Hurricane Wilma disaster area has been designated by the IRS as a covered disaster area. Myfreetaxes de com The Wilma covered disaster area covers the following counties. Myfreetaxes de com Florida. Myfreetaxes de com   Brevard, Broward, Charlotte, Collier, DeSoto, Glades, Hardee, Hendry, Highlands, Indian River, Lee, Martin, Miami-Dade, Monroe, Okeechobee, Osceola, Palm Beach, Polk, St. Myfreetaxes de com Lucie, and Sarasota. Myfreetaxes de com Wilma GO Zone The Wilma GO Zone covers the portion of the Hurricane Wilma disaster area determined by FEMA to be eligible for either individual only or both individual and public assistance from the Federal Government. Myfreetaxes de com The Wilma GO Zone covers the following counties. Myfreetaxes de com Florida. Myfreetaxes de com   Brevard, Broward, Collier, Glades, Hendry, Indian River, Lee, Martin, Miami-Dade, Monroe, Okeechobee, Palm Beach, and St. Myfreetaxes de com Lucie. Myfreetaxes de com Extended Tax Deadlines The IRS has extended deadlines that apply to filing returns, paying taxes, and performing certain other time-sensitive acts for certain taxpayers affected by Hurricane Katrina, Rita, or Wilma, until February 28, 2006. Myfreetaxes de com The extension applies to deadlines (either an original or extended due date) that occur during the following periods. Myfreetaxes de com After August 28, 2005 (August 23, 2005, for Florida affected taxpayers), and before February 28, 2006, for taxpayers affected by Hurricane Katrina. Myfreetaxes de com After September 22, 2005, and before February 28, 2006, for taxpayers affected by Hurricane Rita. Myfreetaxes de com After October 22, 2005, and before February 28, 2006, for taxpayers affected by Hurricane Wilma. Myfreetaxes de com Affected taxpayer. Myfreetaxes de com   The following taxpayers are eligible for the extension. Myfreetaxes de com Any individual whose main home is located in a covered disaster area. Myfreetaxes de com Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. Myfreetaxes de com Any individual, business entity, or sole proprietor whose records needed to meet a postponed deadline are maintained or whose tax professional's office is in a covered disaster area. Myfreetaxes de com The main home or principal place of business does not have to be located in the covered area. Myfreetaxes de com Any individual visiting a county or parish in the Hurricane Katrina or Hurricane Rita covered disaster area that was injured or killed (and the estate of an individual killed) as a result of the hurricane or its aftermath. Myfreetaxes de com Any estate or trust whose tax records needed to meet a filing or payment deadline are maintained in a covered disaster area. Myfreetaxes de com Generally, any individual who is a worker assisting in the relief activities in a covered disaster area. Myfreetaxes de com However, a relief worker assisting in the Wilma covered disaster area is not an affected taxpayer unless the worker is affiliated with a recognized government or philanthropic organization assisting in the relief activities. Myfreetaxes de com The spouse of an affected taxpayer, solely with regard to a joint income tax return with that taxpayer. Myfreetaxes de com   To ensure correct processing, affected taxpayers should write the assigned disaster designation (for example, “Hurricane Katrina”) in red ink at the top of any forms or documents filed with the IRS. Myfreetaxes de com Affected taxpayers can also identify themselves to the IRS or ask hurricane-related questions by calling the special IRS disaster hotline at 1-866-562-5227. Myfreetaxes de com Acts extended. Myfreetaxes de com   Deadlines for performing the following acts are extended. Myfreetaxes de com Filing any return of income, estate, gift, generation-skipping transfer, excise, or employment tax. Myfreetaxes de com Paying any income, estate, gift, generation-skipping transfer, excise, or employment tax. Myfreetaxes de com This includes making estimated tax payments. Myfreetaxes de com Making certain contributions, distributions, recharacterizing contributions, or making a rollover to or from a qualified retirement plan. Myfreetaxes de com Filing certain petitions with the Tax Court. Myfreetaxes de com Filing a claim for credit or refund of any tax. Myfreetaxes de com Bringing suit upon a claim for credit or refund. Myfreetaxes de com Certain other acts described in Revenue Procedure 2005-27. Myfreetaxes de com You can find Revenue Procedure 2005-27 on page 1050 of Internal Revenue Bulletin 2005-20 at www. Myfreetaxes de com irs. Myfreetaxes de com gov/pub/irs-irbs/irb05-20. Myfreetaxes de com pdf. Myfreetaxes de com Forgiveness of interest and penalties. Myfreetaxes de com   The IRS may forgive the interest and penalties on any underpaid income, estate, gift, employment, or excise tax for the length of any extension. Myfreetaxes de com Charitable Giving Incentives Temporary Suspension of Limits on Charitable Contributions Individuals. Myfreetaxes de com   Qualified contributions are not subject to the overall limit on itemized deductions or the 50% adjusted gross income (AGI) limit. Myfreetaxes de com A qualified contribution is a charitable contribution paid in cash or by check after August 27, 2005, and before January 1, 2006, to a 50% limit organization (other than certain private foundations described in section 509(a)(3)) if you make an election to have the 50% limit not apply to these contributions. Myfreetaxes de com   Your deduction for qualified contributions is limited to your AGI minus your deduction for all other charitable contributions. Myfreetaxes de com You can carry over any contributions you are not able to deduct for 2005 because of this limit. Myfreetaxes de com In 2006, treat the carryover of your unused qualified contributions as a carryover of contributions subject to the 50% limit. Myfreetaxes de com Exception. Myfreetaxes de com   Qualified contributions do not include a contribution to a segregated fund or account for which you (or any person you appoint or designate) have or expect to have advisory privileges with respect to distributions or investments based on your contribution. Myfreetaxes de com Corporations. Myfreetaxes de com   A corporation may elect to deduct qualified cash contributions without regard to the 10% taxable income limit if the contributions were made after August 27, 2005, and before January 1, 2006, to a qualified charitable organization (other than certain private foundations described in section 509(a)(3)), for Hurricane Katrina, Rita, or Wilma relief efforts. Myfreetaxes de com The corporation's deduction for these qualified contributions is limited to 100% of taxable income (as modified for the 10% limit) minus the corporation's deduction for all other charitable contributions. Myfreetaxes de com Any qualified contributions over this limit can be carried over to the next 5 years, subject to the 10% limit. Myfreetaxes de com Partners and shareholders. Myfreetaxes de com   Each partner in a partnership and each shareholder in an S corporation makes a separate election to have the appropriate limit not apply. Myfreetaxes de com More information. Myfreetaxes de com   For more information, see Publication 526 or Publication 542, Corporations. Myfreetaxes de com Publication 526 includes a worksheet you can use to figure your deduction if any limits apply to your charitable contributions. Myfreetaxes de com Standard Mileage Rate for Charitable Use of Vehicles The following are special standard mileage rates in effect in 2005 and 2006 for the cost of operating your automobile for providing charitable services solely related to Hurricane Katrina. Myfreetaxes de com 29 cents per mile for the period August 25 through August 31, 2005. Myfreetaxes de com 34 cents per mile for the period September 1 through December 31, 2005. Myfreetaxes de com 32 cents per mile for the period January 1 through December 31, 2006. Myfreetaxes de com Mileage Reimbursements to Charitable Volunteers You can exclude from income amounts you receive as mileage reimbursements for the use of a private passenger automobile for the benefit of a qualified charitable organization in providing relief related to Hurricane Katrina during the period beginning on August 25, 2005, and ending on December 31, 2006. Myfreetaxes de com You cannot claim a deduction or credit for amounts you receive as a mileage reimbursement. Myfreetaxes de com You must keep records of miles driven, time, place (or use), and purpose of the mileage. Myfreetaxes de com The amount you can exclude from income cannot exceed the standard business mileage rate (shown below) for expenses incurred during the following periods. Myfreetaxes de com 40. Myfreetaxes de com 5 cents per mile for the period August 25 through August 31, 2005. Myfreetaxes de com 48. Myfreetaxes de com 5 cents per mile for the period September 1 through December 31, 2005. Myfreetaxes de com 44. Myfreetaxes de com 5 cents per mile for the period January 1 through December 31, 2006. Myfreetaxes de com Charitable Deduction for Contributions of Food Inventory Any taxpayer engaged in a trade or business is eligible to claim a deduction for a contribution of “apparently wholesome food” inventory to a qualified charitable organization described in section 501(c)(3) (except for private nonoperating foundations) after August 27, 2005, and before January 1, 2006. Myfreetaxes de com “Apparently wholesome food” is food that meets all quality and labeling standards imposed by federal, state, and local laws and regulations even though the food may not be readily marketable due to appearance, age, freshness, grade, size, surplus, or other conditions. Myfreetaxes de com The deduction is equal to the lesser of: The basis of the donated food plus one-half of the gain that would have been realized if the donated food had been sold at fair market value on the date of the donation, or Two times the basis of the donated food. Myfreetaxes de com The taxpayer must receive written certification from the donee stating: The donated food is related to the purpose or function of the donee's basis for exemption under section 501(c)(3) and is to be used solely for the care of the ill, the needy, or infants; and The food was not given in exchange for money, other property, or services. Myfreetaxes de com For a taxpayer other than a C corporation, the deduction is limited to 10% of the taxpayer's total net income from all trades or businesses from which the food contributions were made (figured without regard to the deduction for charitable contributions). Myfreetaxes de com For example, if a taxpayer is a sole proprietor, a shareholder in an S corporation, and a partner in a partnership, and each made a contribution of apparently wholesome food inventory, the taxpayer's deduction is limited to 10% of the taxpayer's total net income from the sole proprietorship, S corporation, and partnership (figured without regard to the deduction for charitable contributions). Myfreetaxes de com Charitable Deduction for Contributions of Book Inventories to Public Schools A corporation (other than an S corporation) may be allowed a charitable deduction for a qualified book contribution made after August 27, 2005, and before January 1, 2006, to a public school that: Provides elementary or secondary education (kindergarten through grade 12), and Normally maintains a regular faculty and curriculum and has a regular enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. Myfreetaxes de com . Myfreetaxes de com The deduction is equal to the lesser of: The basis of the donated books plus one-half of the gain that would have been realized if the donated books had been sold at fair market value on the date of the donation, or Two times the basis of the donated books. Myfreetaxes de com The corporation must receive written certification from the school stating that the donated books are suitable for the organization's educational programs and will be used for such programs. Myfreetaxes de com Casualty and Theft Losses The following paragraphs explain changes to casualty and theft losses that were caused by Hurricane Katrina, Rita, or Wilma. Myfreetaxes de com For more information, see Publication 547. Myfreetaxes de com Limits on personal casualty or theft losses caused by Hurricane Katrina, Rita, or Wilma. Myfreetaxes de com   The following losses to personal use property are not subject to the $100 or 10% of adjusted gross income limits. Myfreetaxes de com Losses that arose in the Hurricane Katrina disaster area after August 24, 2005, and that were caused by Hurricane Katrina. Myfreetaxes de com Losses that arose in the Hurricane Rita disaster area after September 22, 2005, and that were caused by Hurricane Rita. Myfreetaxes de com Losses that arose in the Hurricane Wilma disaster area after October 22, 2005, and that were caused by Hurricane Wilma. Myfreetaxes de com Qualifying losses include losses from flooding or other casualty, and from theft, that arose in the hurricane disaster area and that were caused by the hurricane. Myfreetaxes de com Special instructions for individuals who elect to claim a Hurricane Katrina, Rita, or Wilma casualty or theft loss for 2004. Myfreetaxes de com   Casualty and theft losses are generally deductible only in the year the casualty occurred or theft was discovered. Myfreetaxes de com However, Hurricane Katrina, Rita, and Wilma are Presidentially declared disasters. Myfreetaxes de com Therefore, you can elect to deduct losses from these hurricanes on your tax return for the previous year. Myfreetaxes de com If you make this election, use the following additional instructions to complete your forms. Myfreetaxes de com   Individuals filing or amending their 2004 tax return whose only casualty or theft losses to personal use property claimed on that return were caused by Hurricane Katrina, Rita, or Wilma should write “Hurricane Katrina,” “Hurricane Rita,” or “Hurricane Wilma” at the top of Form 1040 or 1040X. Myfreetaxes de com They must also complete and attach the 2004 Form 4684 and write “Hurricane Katrina,”“Hurricane Rita,” or “Hurricane Wilma” on the dotted line next to line 11 and enter -0- on lines 11 and 17. Myfreetaxes de com   Individuals filing or amending their 2004 tax return who also have casualty or theft losses to personal use property not related to Hurricane Katrina, Rita, or Wilma should disregard the caution directing taxpayers to use only one Form 4684, located above line 13, and complete lines 13 through 18 on two Forms 4684. Myfreetaxes de com The Form 1040 or 1040X and the first Form 4684 should be prepared as explained above for Hurricane Katrina, Rita, or Wilma losses only. Myfreetaxes de com The second Form 4684 should be prepared in the normal manner for all gains and non-Hurricane Katrina, Rita or Wilma losses. Myfreetaxes de com If both Forms 4684 have a loss on line 18, they should carry the combined losses from that line to Schedule A (Form 1040), line 19. Myfreetaxes de com If there is a gain on line 15 of the second Form 4684, disregard the instruction to enter it on Schedule D (Form 1040), and instead enter on Schedule A (Form 1040), line 19, the excess of the loss from the first Form 4684 over the gain on line 15 of the second Form 4684. Myfreetaxes de com , Time limit for making election. Myfreetaxes de com   You must make this election to claim your casualty or theft loss in 2004 by the later of the following dates. Myfreetaxes de com The due date (without extensions) for filing your 2005 income tax return. Myfreetaxes de com The due date (with extensions) for filing your 2004 income tax return. Myfreetaxes de com Example. Myfreetaxes de com If you are a calendar year individual taxpayer, you have until April 17, 2006, to amend your 2004 tax return to claim a casualty or theft loss that occurred during 2005. Myfreetaxes de com Replacement Period for Nonrecognition of Gain Generally, an involuntary conversion occurs when property is damaged, destroyed, stolen, seized, requisitioned, or condemned, and you receive other property or money in payment, such as insurance or a condemnation award. Myfreetaxes de com Generally, you do not have to report a gain (if any) if you replace the property within 2 years (4 years for a main home in a Presidentially declared disaster area). Myfreetaxes de com However, for property that was involuntarily converted after August 24, 2005, as a result of Hurricane Katrina, a 5-year replacement period applies if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. Myfreetaxes de com For more information, see the Instructions for Form 4684. Myfreetaxes de com Net Operating Losses Qualified GO Zone loss. Myfreetaxes de com   Generally, you can carry a net operating loss (NOL) back to the 2 tax years before the NOL year. Myfreetaxes de com However, the portion of an NOL that is a qualified GO Zone loss can be carried back to the 5 tax years before the NOL year. Myfreetaxes de com In addition, the 90% limit on the alternative tax NOL deduction (ATNOLD) does not apply to such portion of the ATNOLD. Myfreetaxes de com   A qualified GO Zone loss is the smaller of: The excess of the NOL for the year over the specified liability loss for the year to which a 10-year carryback applies, or The total of the following deductions (to the extent they are taken into account in computing the NOL for the tax year): Qualified GO Zone casualty loss (as defined below), Moving expenses paid or incurred after August 27, 2005, and before January 1, 2008, for the employment of an individual whose main home was in the GO Zone before August 28, 2005, who was unable to remain in that home because of Hurricane Katrina, and whose main job location (after the move) is in the GO Zone, Temporary housing expenses paid or incurred after August 27, 2005, and before January 1, 2008, to house employees of the taxpayer whose main job location is in the GO Zone, Depreciation or amortization allowable for any qualified GO Zone property (even if you elected not to claim the special GO Zone depreciation allowance for such property) for the year placed in service, and Repair expenses (including expenses for the removal of debris) paid or incurred after August 27, 2005, and before January 1, 2008, for any damage from Hurricane Katrina to property located in the GO Zone. Myfreetaxes de com Qualified GO Zone casualty loss. Myfreetaxes de com   A qualified GO Zone casualty loss is any deductible section 1231 loss of property located in the GO Zone if the loss was caused by Hurricane Katrina. Myfreetaxes de com For this purpose, the amount of the loss is reduced by any recognized gain from an involuntary conversion caused by Hurricane Katrina of property located in the GO Zone. Myfreetaxes de com Any such loss taken into account in figuring your qualified GO Zone loss is not eligible for the election to be treated as having occurred in the previous tax year. Myfreetaxes de com 5-year NOL carryback of certain timber losses. Myfreetaxes de com   Generally, you can carry the portion of an NOL due to income and deductions attributable to a farming business back to the 5 tax years before the NOL year. Myfreetaxes de com You can treat income and deductions attributable to qualified timber property as attributable to a farming business if any portion of the property is located in the GO Zone, Rita GO Zone, or Wilma GO Zone, and the income and deductions are allocable to the part of your tax year which is after the applicable date below. Myfreetaxes de com August 27, 2005, if any portion of the property is located in the GO Zone. Myfreetaxes de com September 22, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone). Myfreetaxes de com October 22, 2005, if any portion of the property is located in the Wilma GO Zone (but not in the GO Zone or the RITA GO Zone). Myfreetaxes de com   These rules will not apply after 2006. Myfreetaxes de com   However, these rules apply only to a timber producer who: Held qualified timber property (defined in Publication 535, Business Expenses) on the applicable date below: August 28, 2005, if any portion of the property is located in the GO Zone, September 23, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone), or October 23, 2005, if any portion of the property is located in the Wilma GO Zone (but not in the GO Zone or the Rita GO Zone); Is not a corporation with stock publicly traded on an established securities market; Is not a real estate investment trust; and Did not hold more than 500 acres of qualified timber property on the applicable date above. Myfreetaxes de com More information. Myfreetaxes de com   For more information on NOLs, see Publication 536 or Publication 542, Corporations. Myfreetaxes de com IRAs and Other Retirement Plans New rules provide for tax-favored withdrawals, repayments, and loans from certain retirement plans for taxpayers who suffered economic losses as a result of Hurricane Katrina, Rita, or Wilma. Myfreetaxes de com Definitions Qualified hurricane distribution. Myfreetaxes de com   A qualified hurricane distribution is any distribution you received from an eligible retirement plan if all of the following apply. Myfreetaxes de com The distribution was made: After August 24, 2005, and before January 1, 2007, for Hurricane Katrina; After September 22, 2005, and before January 1, 2007, for Hurricane Rita; or After October 22, 2005, and before January 1, 2007, for Hurricane Wilma. Myfreetaxes de com Your main home was located in a hurricane disaster area listed below on the date shown for that area. Myfreetaxes de com August 28, 2005, for the Hurricane Katrina disaster area. Myfreetaxes de com September 23, 2005, for the Hurricane Rita disaster area. Myfreetaxes de com October 23, 2005, for the Hurricane Wilma disaster area. Myfreetaxes de com You sustained an economic loss because of Hurricane Katrina, Rita, or Wilma and your main home was in that hurricane disaster area on the date shown in (2) above for that hurricane. Myfreetaxes de com Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. Myfreetaxes de com   If (1) through (3) above apply, you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a qualified hurricane distribution, regardless of whether the distribution was made on account of Hurricane Katrina, Rita, or Wilma. Myfreetaxes de com Qualified hurricane distributions are permitted without regard to your need or the actual amount of your economic loss. Myfreetaxes de com   The total of your qualified hurricane distributions from all plans is limited to $100,000. Myfreetaxes de com If you have distributions in excess of $100,000 from more than one type of plan, such as a 401(k) plan and an IRA, you may allocate the $100,000 limit among the plans any way you choose. Myfreetaxes de com   A reduction or offset (after August 24, 2005, for Katrina; after September 22, 2005, for Rita; or after October 22, 2005, for Wilma) of your account balance in an eligible retirement plan in order to repay a loan can also be designated as a qualified hurricane distribution. Myfreetaxes de com Eligible retirement plan. Myfreetaxes de com   An eligible retirement plan can be any of the following. Myfreetaxes de com A qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan). Myfreetaxes de com A qualified annuity plan. Myfreetaxes de com A tax-sheltered annuity contract. Myfreetaxes de com A governmental section 457 deferred compensation plan. Myfreetaxes de com A traditional, SEP, SIMPLE, or Roth IRA. Myfreetaxes de com Main home. Myfreetaxes de com   Generally, your main home is the home where you live most of the time. Myfreetaxes de com A temporary absence due to special circumstances, such as illness, education, business, military service, evacuation, or vacation, will not change your main home. Myfreetaxes de com Taxation of Qualified Hurricane Distributions Qualified hurricane distributions are included in income in equal amounts over three years. Myfreetaxes de com However, if you elect, you can include the entire distribution in your income in the year it was received. Myfreetaxes de com Qualified hurricane distributions are not subject to the additional 10% tax (or the additional 25% tax for certain distributions from SIMPLE IRAs) on early distributions from qualified retirement plans (including IRAs). Myfreetaxes de com However, any distributions you receive in excess of the $100,000 qualified hurricane distribution limit may be subject to the additional tax on early distributions. Myfreetaxes de com For more information, see Form 8915. Myfreetaxes de com Repayment of Qualified Hurricane Distributions If you choose, you generally can repay any portion of a qualified hurricane distribution that is eligible for tax-free rollover treatment to an eligible retirement plan. Myfreetaxes de com Also, you can repay a qualified hurricane distribution made on account of a hardship from a retirement plan. Myfreetaxes de com However, see Exceptions below for qualified hurricane distributions you cannot repay. Myfreetaxes de com You have three years from the day after the date you received the distribution to make a repayment. Myfreetaxes de com Amounts that are repaid are treated as a qualified rollover and are not included in income. Myfreetaxes de com Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. Myfreetaxes de com See Form 8915 for more information on how to report repayments. Myfreetaxes de com Exceptions. Myfreetaxes de com   You cannot repay the following types of distributions. Myfreetaxes de com Qualified hurricane distributions received as a beneficiary (other than a surviving spouse). Myfreetaxes de com Required minimum distributions. Myfreetaxes de com Periodic payments (other than from an IRA) that are for: A period of 10 years or more, Your life or life expectancy, or The joint lives or joint life expectancies of you and your beneficiary. Myfreetaxes de com Repayment of Qualified Distributions for the Purchase or Construction of a Main Home If you received a qualified distribution to purchase or construct a main home in the Hurricane Katrina, Rita, or Wilma disaster area, you can repay that distribution before March 1, 2006, to an eligible retirement plan after August 24, 2005 (Katrina); after September 22, 2005 (Rita); or after October 22, 2005 (Wilma). Myfreetaxes de com For this purpose, an eligible retirement plan is any plan, annuity, or IRA to which a qualified rollover can be made. Myfreetaxes de com To be a qualified distribution, the distribution must meet all of the following requirements. Myfreetaxes de com The distribution is a hardship distribution from a 401(k) plan, a hardship distribution from a tax-sheltered annuity contract, or a qualified first-time homebuyer distribution from an IRA. Myfreetaxes de com The distribution was received in 2005 after February 28 and before: August 29 for Hurricane Katrina; September 24 for Hurricane Rita; or October 24 for Hurricane Wilma. Myfreetaxes de com The distribution was to be used to purchase or construct a main home in the Hurricane Katrina, Rita, or Wilma disaster area that was not purchased or constructed because of Hurricane Katrina, Rita, or Wilma. Myfreetaxes de com Amounts that are repaid before March 1, 2006, are treated as a qualified rollover and are not included in income. Myfreetaxes de com Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. Myfreetaxes de com A qualified distribution not repaid before March 1, 2006, may be taxable for 2005 and subject to the additional 10% tax (or the additional 25% tax for certain SIMPLE IRAs) on early distributions. Myfreetaxes de com You must file Form 8915 if you received a qualified distribution that you repaid, in whole or in part, before March 1, 2006. Myfreetaxes de com Loans From Qualified Plans The following benefits are available to qualified individuals. Myfreetaxes de com Increases to the limits for distributions treated as loans from employer plans. Myfreetaxes de com A 1-year suspension for payments due on plan loans. Myfreetaxes de com Qualified individual. Myfreetaxes de com   You are a qualified individual if any of the following apply. Myfreetaxes de com Your main home on August 28, 2005, was located in the Hurricane Katrina disaster area and you had an economic loss because of Hurricane Katrina. Myfreetaxes de com Your main home on September 23, 2005, was located in the Hurricane Rita disaster area and you had an economic loss because of Hurricane Rita. Myfreetaxes de com Your main home on October 23, 2005, was located in the Hurricane Wilma disaster area and you had an economic loss because of Hurricane Wilma. Myfreetaxes de com Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. Myfreetaxes de com Limits on plan loans. Myfreetaxes de com   The $50,000 limit for distributions treated as plan loans is increased to $100,000. Myfreetaxes de com In addition, the limit based on 50% of your vested accrued benefit is increased to 100% of that benefit. Myfreetaxes de com The higher limits apply only to loans received during the following period. Myfreetaxes de com If your main home was located in the Hurricane Katrina disaster area, the period began on September 24, 2005, and ends on December 31, 2006. Myfreetaxes de com If your main home was located in the Hurricane Rita or Wilma disaster area, the period began on December 21, 2005, and ends on December 31, 2006. Myfreetaxes de com If you are a qualified individual based on Hurricane Katrina and another hurricane, use the period based on Hurricane Katrina. Myfreetaxes de com One-year suspension of loan payments. Myfreetaxes de com   Payments on plan loans due before 2007 may be suspended for 1 year by the plan administrator. Myfreetaxes de com To qualify for the suspension, the due date for any loan payment must occur during the period beginning on: August 28, 2005, if your main home was located in the Hurricane Katrina disaster area. Myfreetaxes de com September 23, 2005, if your main home was located in the Hurricane Rita disaster area. Myfreetaxes de com October 23, 2005, if your main home was located in the Hurricane Wilma disaster area. Myfreetaxes de com If you are a qualified individual based on more than one hurricane, use the period with the earliest beginning date. Myfreetaxes de com Additional Tax Relief for Individuals Earned Income Credit and Child Tax Credit You can elect to use your 2004 earned income to figure your earned income credit (EIC) and additional child tax credit for 2005 if: Your 2005 earned income is less than your 2004 earned income, and At least one of the following statements is true. Myfreetaxes de com Your main home on August 25, 2005, was in the Gulf Opportunity (GO) Zone. Myfreetaxes de com Your main home on August 25, 2005, was in the Hurricane Katrina disaster area and you were displaced from that home because of Hurricane Katrina. Myfreetaxes de com Your main home on September 23, 2005, was in the Rita GO Zone. Myfreetaxes de com Your main home on September 23, 2005, was in the Hurricane Rita disaster area and you were displaced from that home because of Hurricane Rita. Myfreetaxes de com Your main home on October 23, 2005, was in the Wilma GO Zone. Myfreetaxes de com Your main home on October 23, 2005, was in the Hurricane Wilma disaster area and you were displaced from that home because of Hurricane Wilma. Myfreetaxes de com Earned income. Myfreetaxes de com    For the purpose of this election, your earned income for both the EIC and the additional child tax credit is the amount of earned income used to figure your EIC, even if you did not take the EIC and even if that amount is different than your earned income for the additional child tax credit. Myfreetaxes de com If you are claiming only the additional child tax credit, you must figure the amount of your earned income for EIC purposes to determine your eligibility to make the election and the amount of the credit. Myfreetaxes de com Joint returns. Myfreetaxes de com   If you file a joint return, you qualify to make this election even if only one spouse meets the requirements. Myfreetaxes de com If you make the election, your 2004 earned income is the sum of your 2004 earned income and your spouse's 2004 earned income. Myfreetaxes de com Making the election. Myfreetaxes de com   If you make the election to use your 2004 earned income, the election applies for figuring both the EIC and the additional child tax credit. Myfreetaxes de com However, you can make the election for the additional child tax credit even if you do not take the EIC. Myfreetaxes de com   Electing to use your 2004 earned income may increase or decrease your EIC. Myfreetaxes de com Take the following steps to decide whether to make the election. Myfreetaxes de com Figure your 2005 EIC using your 2004 earned income. Myfreetaxes de com Figure your 2005 additional child tax credit using your 2004 earned income for EIC purposes. Myfreetaxes de com Add the results of (1) and (2). Myfreetaxes de com Figure your 2005 EIC using your 2005 earned income. Myfreetaxes de com Figure your 2005 additional child tax credit using your 2005 earned income for additional child tax credit purposes. Myfreetaxes de com Add the results of (4) and (5). Myfreetaxes de com Compare the results of (3) and (6). Myfreetaxes de com If (3) is larger than (6), it is to your benefit to make the election. Myfreetaxes de com If (3) is equal to or smaller than (6), making the election will not help you. Myfreetaxes de com   If you elect to use your 2004 earned income and you are claiming the EIC, enter “PYEI” and the amount of your 2004 earned income on the dotted line next to line 66a of Form 1040, on the line next to line 41a of Form 1040A, or in the space to the left of line 8a of Form 1040EZ. Myfreetaxes de com   If you elect to use your 2004 earned income and you are claiming the additional child tax credit, enter your 2004 earned income for EIC purposes (even if you did not claim the EIC) on Form 8812, Additional Child Tax Credit, line 4a, and check the box on that line. Myfreetaxes de com   Because Form 8812 was released before the GO Zone legislation was enacted, the instructions refer only to individuals whose main home was in the Hurricane Katrina disaster area. Myfreetaxes de com When completing Form 8812, line 4a, use the above rules to determine your eligibility to make the election (instead of the Form 8812 instructions). Myfreetaxes de com Getting your 2004 tax return information. Myfreetaxes de com   If you do not have your 2004 tax records, you can get the amount of earned income used to figure your 2004 EIC by calling 1-866-562-5227. Myfreetaxes de com You can also get this information by visiting the IRS website at www. Myfreetaxes de com irs. Myfreetaxes de com gov. Myfreetaxes de com   If you prefer to figure your 2004 earned income yourself, copies or transcripts of your filed and processed tax returns can help you reconstruct your tax records. Myfreetaxes de com See Request for Copy or Transcript of Tax Return on page 16. Myfreetaxes de com Additional Exemption for Housing Individuals Displaced by Hurricane Katrina You may be able to claim an additional exemption amount of $500 for providing housing in your main home for each individual displaced by Hurricane Katrina. Myfreetaxes de com The additional exemption amount is claimed on new Form 8914. Myfreetaxes de com The additional exemption amount is allowable once per taxpayer for a specific individual in 2005 or 2006, but not in both years. Myfreetaxes de com The maximum additional exemption amount you can claim for all displaced individuals is $2,000 ($1,000 if married filing separately). Myfreetaxes de com The additional exemption amount you claim for displaced individuals in 2005 will reduce the $2,000 maximum for 2006. Myfreetaxes de com If two or more taxpayers share the same main home, only one taxpayer in that main home can claim the additional exemption amount for a specific displaced individual. Myfreetaxes de com If married filing separately, only one spouse may claim the additional exemption amount for a specific displaced individual. Myfreetaxes de com In order for you to be considered to have provided housing, you must have a legal interest in the main home (that is, own or rent the home). Myfreetaxes de com To qualify as a displaced individual, the individual: Must have had his or her main home in the Hurricane Katrina disaster area on August 28, 2005, and he or she must have been displaced from that home. Myfreetaxes de com If the individual's main home was located outside the core disaster area, that home must have been damaged by Hurricane Katrina or the individual must have been evacuated from that home because of Hurricane Katrina, Must have been provided housing in your main home for a period of at least 60 consecutive days ending in the tax year in which the exemption is claimed, and Cannot be your spouse or dependent. Myfreetaxes de com You cannot claim the additional exemption amount if you received rent (or any other amount) from any source for providing the housing. Myfreetaxes de com You are permitted to receive payments or reimbursements that do not relate to normal housing costs, including the following. Myfreetaxes de com Food, clothing, or personal items consumed or used by the displaced individual. Myfreetaxes de com Reimbursement for the cost of any long distance telephone calls made by the displaced individual. Myfreetaxes de com Reimbursement for the cost of gasoline for the displaced individual's use of your vehicle. Myfreetaxes de com However, you cannot claim the additional exemption amount if you received any reimbursement for the extra costs of heat, electricity, or water used by the displaced individual. Myfreetaxes de com Also, you must report on Form 8914 the displaced individual's social security number or individual taxpayer identification number to claim an additional exemption amount. Myfreetaxes de com For more information, see Form 8914. Myfreetaxes de com Education Credits The education credits have been expanded for students attending an eligible educational institution located in the Gulf Opportunity Zone (GOZ students) for any tax year beginning in 2005 or 2006. Myfreetaxes de com The Hope credit for a GOZ student is increased to 100% of the first $2,000 in qualified education expenses and 50% of the next $2,000 of qualified education expenses for a maximum credit of $3,000 per student. Myfreetaxes de com The lifetime learning credit rate for a GOZ student is increased from 20% to 40%. Myfreetaxes de com The definition of qualified education expenses for a GOZ student also has been expanded. Myfreetaxes de com In addition to tuition and fees required for the student's enrollment or attendance at an eligible educational institution, qualified education expenses for a GOZ student include the following. Myfreetaxes de com Books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. Myfreetaxes de com For a special needs student, expenses that are necessary for that person's enrollment or attendance at an eligible educational institution. Myfreetaxes de com For a student who is at least a half-time student, the reasonable costs of room and board, but only to the extent that the costs are not more than the greater of the following two amounts. Myfreetaxes de com The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Myfreetaxes de com The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Myfreetaxes de com You will need to contact the eligible educational institution for qualified room and board costs. Myfreetaxes de com For more information, see Form 8863. Myfreetaxes de com Recapture of Federal Mortgage Subsidy Generally, if you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. Myfreetaxes de com However, you do not have to recapture any benefit if your mortgage loan was a qualified home improvement loan of not more than $15,000. Myfreetaxes de com This amount is increased to $150,000 if the loan was provided before 2011 and was used to: Repair damage caused by Hurricane Katrina to a residence in the Hurricane Katrina disaster area, or Alter, repair, or improve an existing owner-occupied residence in the GO Zone, Rita GO Zone, or Wilma GO Zone. Myfreetaxes de com Exclusion of Certain Cancellations of Indebtedness by Reason of Hurricane Katrina Generally, discharges of nonbusiness debts (such as mortgages) made after August 24, 2005, and before January 1, 2007, are excluded from income for individuals whose main home was in the Hurricane Katrina disaster area on August 25, 2005. Myfreetaxes de com If the individual's main home was located outside the core disaster area, the individual also must have had an economic loss because of Hurricane Katrina. Myfreetaxes de com Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. Myfreetaxes de com This relief does not apply to any debt secured by real property located outside the Hurricane Katrina disaster area. Myfreetaxes de com You may also have to reduce certain tax attributes by the amount excluded. Myfreetaxes de com For more information, see Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment). Myfreetaxes de com Tax Relief for Temporary Relocation Under the Gulf Opportunity Zone Act of 2005, the IRS may adjust the internal revenue laws to ensure that taxpayers do not lose a deduction or credit or experience a change of filing status in 2005 or 2006 as a result of a temporary relocation caused by Hurricane Katrina, Rita, or Wilma. Myfreetaxes de com However, any such adjustment must ensure that an individual is not taken into account by more than one taxpayer for the same tax benefit. Myfreetaxes de com The IRS has exercised this authority as follows. Myfreetaxes de com In determining whether you furnished over one-half of the cost of maintaining a household, you can exclude from total household costs any assistance received from the government or charitable organizations because you were temporarily relocated as a result of Hurricane Katrina, Rita, or Wilma. Myfreetaxes de com In determining whether you provided more than one-half of an individual's support, you can disregard any assistance received from the government or charitable organizations because you were temporarily relocated as a result of Hurricane Katrina, Rita, or Wilma. Myfreetaxes de com You can treat as a student an individual who enrolled in school before August 25, 2005, and who is unable to attend classes because of Hurricane Katrina, for each month of the enrollment period that individual is prevented by Hurricane Katrina from attending school as planned. Myfreetaxes de com You can treat as a student an individual who enrolled in school before September 23, 2005, and who is unable to attend classes because of Hurricane Rita, for each month of the enrollment period that individual is prevented by Hurricane Rita from attending school as planned. Myfreetaxes de com You can treat as a student an individual who enrolled in school before October 23, 2005, and who is unable to attend classes because of Hurricane Wilma, for each month of the enrollment period that individual is prevented by Hurricane Wilma from attending school as planned. Myfreetaxes de com Additional Tax Relief for Businesses Special Depreciation Allowance You can take a special depreciation allowance for qualified Gulf Opportunity (GO) Zone property (as defined below) you place in service after August 27, 2005. Myfreetaxes de com The allowance is an additional deduction of 50% of the property's depreciable basis (after any section 179 deduction and before figuring your regular depreciation deduction). Myfreetaxes de com The special allowance applies only for the first year the property is placed in service. Myfreetaxes de com The allowance is deductible for both the regular tax and the alternative minimum tax (AMT). Myfreetaxes de com There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. Myfreetaxes de com You can elect not to deduct the special GO Zone depreciation allowance for qualified property. Myfreetaxes de com If you make this election for any property, it applies to all property in the same class placed in service during the year. Myfreetaxes de com Qualified GO Zone property. Myfreetaxes de com   Property that qualifies for the special GO Zone depreciation allowance includes the following. Myfreetaxes de com Tangible property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. Myfreetaxes de com Water utility property. Myfreetaxes de com Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. Myfreetaxes de com (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. Myfreetaxes de com ) Qualified leasehold improvement property. Myfreetaxes de com Nonresidential real property and residential rental property. Myfreetaxes de com   For more information on this property, see Publication 946. Myfreetaxes de com Other tests to be met. Myfreetaxes de com   To be qualified GO Zone property, the property must also meet all of the following tests. Myfreetaxes de com You must have acquired the property, by purchase, after August 27, 2005, but only if no binding written contract for the acquisition was in effect before August 28, 2005. Myfreetaxes de com The property must be placed in service before 2008 (2009 in the case of nonresidential real property and residential rental property). Myfreetaxes de com Substantially all of the use of the property must be in the GO Zone and in the active conduct of your trade or business in the GO Zone. Myfreetaxes de com The original use of the property in the GO Zone must begin with you after August 27, 2005. Myfreetaxes de com Used property can be qualified GO Zone property if it has not previously been used within the GO Zone. Myfreetaxes de com Also, additional capital expenditures you incurred after August 27, 2005, to recondition or rebuild your property meet the original use test if the original use of the property in the GO Zone began with you. Myfreetaxes de com Excepted property. Myfreetaxes de com   Qualified GO Zone property does not include any of the following. Myfreetaxes de com Property required to be depreciated using the Alternative Depreciation System (ADS). Myfreetaxes de com Property any portion of which is financed with the proceeds of a tax-exempt obligation under section 103. Myfreetaxes de com Property for which you are claiming a commercial revitalization deduction. Myfreetaxes de com Any property used in connection with any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store, the principal business of which is the sale of alcoholic beverages for consumption off premises. Myfreetaxes de com Any gambling or animal racing property (as defined below). Myfreetaxes de com Property in the same class as that for which you elected not to claim the special GO Zone depreciation allowance. Myfreetaxes de com   Gambling or animal racing property is: Any equipment, furniture, software, or other property used directly in connection with gambling, the racing of animals, or the on-site viewing of such racing, and The portion of any real property (determined by square footage) that is dedicated to gambling, the racing of animals, or the on-site viewing of such racing, unless this portion is less than 100 square feet. Myfreetaxes de com Recapture of special allowance. Myfreetaxes de com   If, in any year after the year you claim the special allowance, the property ceases to be qualified GO Zone property, you may have to recapture as ordinary income any excess benefit you received from claiming the special allowance. Myfreetaxes de com Increased Section 179 Deduction An increased section 179 deduction is allowable for qualified section 179 Gulf Opportunity (GO) Zone property (as defined later) placed in service in the GO Zone. Myfreetaxes de com Increased dollar limit. Myfreetaxes de com   The limit on the section 179 deduction ($105,000 for 2005, $108,000 for 2006) for qualified section 179 GO Zone property acquired after August 27, 2005, is increased by the smaller of: $100,000, or The cost of qualified section 179 GO Zone property placed in service during the year (including such property placed in service by your spouse, even if you are filing a separate return). Myfreetaxes de com   The amount for which you can make the election is reduced if the cost of all qualified section 179 GO Zone property you placed in service during the year exceeds $420,000 for 2005 ($430,000 for 2006) increased by the smaller of: $600,000, or The cost of qualified section 179 GO Zone property placed in service during the year. Myfreetaxes de com Qualified section 179 GO Zone property. Myfreetaxes de com   Qualified section 179 GO Zone property is section 179 property that is qualified GO Zone property (explained earlier under Special Depreciation Allowance). Myfreetaxes de com Section 179 property does not include nonresidential real property or residential rental property. Myfreetaxes de com For more information, including the requirements that must be met for property to qualify for the section 179 deduction, see chapter 2 of Publication 946. Myfreetaxes de com Work Opportunity Credit For the work opportunity credit, the definition of “targeted group employee” has been expanded to include a Hurricane Katrina employee. Myfreetaxes de com Hurricane Katrina employee. Myfreetaxes de com   A Hurricane Katrina employee is: A person who, on August 28, 2005, had a main home in the core disaster area and, within a two-year period beginning on that date, is hired to perform services principally in the core disaster area; or A person who, on August 28, 2005, had a main home in the core disaster area, was displaced from that main home as a result of Hurricane Katrina, and was hired during the period beginning on August 28, 2005, and ending on December 31, 2005. Myfreetaxes de com Qualified wages. Myfreetaxes de com   Generally, qualified wages do not include wages you paid to a targeted group employee who worked for you previously. Myfreetaxes de com However, wages will qualify if: You paid them to an employee who is a Hurricane Katrina employee, The employee was not in your employment on August 28, 2005, and This is your first hire of the employee as a Hurricane Katrina employee after August 28, 2005. Myfreetaxes de com   For more information, see Form 5884. Myfreetaxes de com Certification requirements. Myfreetaxes de com   An employee must provide to the employer reasonable evidence that he or she is a Hurricane Katrina employee. Myfreetaxes de com An employer may accept a completed Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity and Welfare-to-Work Credits, as such evidence. Myfreetaxes de com The certification requirements described in Form 8850 do not apply to a Hurricane Katrina employee. Myfreetaxes de com Do not send any Forms 8850 that have only box 1 checked to the state employment security agency. Myfreetaxes de com Instead, the employer should keep these Forms 8850 with the employer's other records. Myfreetaxes de com For more information, see Form 8850 and its instructions. Myfreetaxes de com Employee Retention Credit An eligible employer who conducted an active trade or business in the Gulf Opportunity (GO) Zone, the Rita GO Zone, or the Wilma GO Zone can claim the employee retention credit. Myfreetaxes de com The credit is 40% of qualified wages for each eligible employee (up to a maximum of $6,000 in qualified wages per employee). Myfreetaxes de com Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). Myfreetaxes de com Use Form 5884-A to claim the credit. Myfreetaxes de com See the following rules and definitions for each hurricane. Myfreetaxes de com Employers affected by Hurricane Katrina. Myfreetaxes de com   The following definitions apply to employers affected by Hurricane Katrina. Myfreetaxes de com Eligible employer. Myfreetaxes de com   For this purpose, an eligible employer is any employer who conducted an active trade or business on August 28, 2005, in the GO Zone and whose trade or business was inoperable on any day after August 28, 2005, and before January 1, 2006, because of damage caused by Hurricane Katrina. Myfreetaxes de com Eligible employee. Myfreetaxes de com   For this purpose, an eligible employee is an employee whose principal place of employment on August 28, 2005, with such eligible employer was in the GO Zone. Myfreetaxes de com An employee is not an eligible employee for purposes of Hurricane Katrina if the employee is treated as an eligible employee for the work opportunity credit. Myfreetaxes de com Employers affected by Hurricane Rita. Myfreetaxes de com   The following definitions apply to employers affected by Hurricane Rita. Myfreetaxes de com Eligible employer. Myfreetaxes de com   For this purpose, an eligible employer is any employer who conducted an active trade or business on September 23, 2005, in the Rita GO Zone and whose trade or business was inoperable on any day after September 23, 2005, and before January 1, 2006, because of damage caused by Hurricane Rita. Myfreetaxes de com Eligible employee. Myfreetaxes de com   For this purpose, an eligible employee is an employee whose principal place of employment on September 23, 2005, with such eligible employer was in the Rita GO Zone. Myfreetaxes de com An employee is not an eligible employee for purposes of Hurricane Rita if the employee is treated as an eligible employee for the work opportunity credit or the Hurricane Katrina employee retention credit. Myfreetaxes de com Employers affected by Hurricane Wilma. Myfreetaxes de com   The following definitions apply to employers affected by Hurricane Wilma. Myfreetaxes de com Eligible employer. Myfreetaxes de com   For this purpose, an eligible employer is any employer who conducted an active trade or business on October 23, 2005, in the Wilma GO Zone and whose trade or business was inoperable on any day after October 23, 2005, and before January 1, 2006, because of damage caused by Hurricane Wilma. Myfreetaxes de com Eligible employee. Myfreetaxes de com   For this purpose, an eligible employee is an employee whose principal place of employment on October 23, 2005, with such eligible employer was in the Wilma GO Zone. Myfreetaxes de com An employee is not an eligible employee for purposes of Hurricane Wilma if the employee is treated as an eligible employee for the work opportunity credit or the Hurricane Katrina or Rita employee retention credit. Myfreetaxes de com Qualified wages. Myfreetaxes de com   Qualified wages are wages you paid or incurred before January 1, 2006, (up to $6,000 per employee) for an eligible employee beginning on the date your trade or business first became inoperable at the employee's principal place of employment immediately before the applicable hurricane, and ending on the date your trade or business resumed significant operations at that place. Myfreetaxes de com In addition, the wages must have been paid or incurred after the following date. Myfreetaxes de com August 28, 2005, for Hurricane Katrina. Myfreetaxes de com September 23, 2005, for Hurricane Rita. Myfreetaxes de com October 23, 2005, for Hurricane Wilma. Myfreetaxes de com    This includes wages paid even if the employee performed no services, performed services at a place of employment other than the principal place of employment, or performed services at the principal place of employment before significant operations resumed. Myfreetaxes de com    Wages qualifying for the credit generally have the same meaning as wages subject to the Federal Unemployment Tax Act (FUTA). Myfreetaxes de com Qualified wages also include amounts you paid for medical or hospitalization expenses in connection with sickness or accident disability. Myfreetaxes de com Qualified wages for any employee must be reduced by the amount of any work supplementation payment you received under the Social Security Act. Myfreetaxes de com   For agricultural employees, if the work performed by any employee during more than half of any pay period qualified under FUTA as agricultural labor, that employee's wages subject to social security and Medicare taxes are qualified wages. Myfreetaxes de com For a special rule that applies to railroad employees, see section 51(h)(1)(B). Myfreetaxes de com   Qualified wages do not include the following. Myfreetaxes de com Wages paid to your dependent or a related individual. Myfreetaxes de com See section 51(i)(1). Myfreetaxes de com Wages paid to any employee during the period for which you received payment for the employee from a federally funded on-the-job training program. Myfreetaxes de com Wages for services of replacement workers during a strike or lockout. Myfreetaxes de com   For more information, see Form 5884-A. Myfreetaxes de com Hurricane Katrina Housing Credit An employer who conducted an active trade or business in the Gulf Opportunity (GO) Zone can claim the Hurricane Katrina housing credit. Myfreetaxes de com The credit is equal to 30% of the value (up to $600 per month per employee) of in-kind lodging furnished to a qualified employee (and the employee's spouse or dependents) from January 1, 2006, through July 1, 2006. Myfreetaxes de com The value of the lodging is excluded from the income of the qualified employee but is treated as wages for purposes of taxes imposed under the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA). Myfreetaxes de com Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). Myfreetaxes de com The employer must use Form 5884-A to claim the credit. Myfreetaxes de com A qualified employee is an individual who had a main home in the GO Zone on August 28, 2005, and who performs substantially all employment services in the GO Zone for the employer furnishing the lodging. Myfreetaxes de com The employee cannot be your dependent or a related individual. Myfreetaxes de com See section 51(i)(1). Myfreetaxes de com For more information, see Form 5884-A. Myfreetaxes de com Reforestation Costs You may be able to elect to deduct a limited amount of reforestation costs for each qualified timber property. Myfreetaxes de com The deduction for any tax year generally is limited to $10,000 ($5,000 if married filing separately, $0 for a trust). Myfreetaxes de com However, this limit is increased if you paid or incurred reforestation costs after the applicable date below and any portion of the qualified timber property is located in one of the following areas. Myfreetaxes de com August 27, 2005, if any portion of the property is located in the GO Zone. Myfreetaxes de com September 22, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone). Myfreetaxes de com October 22, 2005, if any portion of the property is located in the Wilma GO Zone. Myfreetaxes de com The limit for each qualified timber property is increased by the smaller of: $10,000 ($5,000 if married filing separately, $0 for a trust), or The amount of reforestation costs you paid or incurred after the applicable date for the qualified timber property, any portion of which is located in the zone described above. Myfreetaxes de com The increase in the limit applies only to costs paid or incurred before 2008. Myfreetaxes de com However, these rules do not apply to any timber producer who: Held more than 500 acres of qualified timber property at any time during the tax year, Is a corporation with stock publicly traded on an established securities market, or Is a real estate investment trust. Myfreetaxes de com For more information about the election to deduct reforestation costs, see chapter 8 in Publication 535, Business Expenses. Myfreetaxes de com Demolition and Clean-up Costs You can elect to deduct 50% of any qualified GO Zone clean-up costs for the tax year in which the costs are paid or incurred, instead of capitalizing them. Myfreetaxes de com Qualified GO Zone clean-up costs are any amounts paid or incurred after August 27, 2005, and before January 1, 2008, for the removal of debris from, or the demolition of structures on, real property located in the GO Zone that is: Held by you for use in a trade or business or for the production of income, or Inventory or other property held primarily for sale to customers in the ordinary course of your trade or business. Myfreetaxes de com Increase in Rehabilitation Tax Credit The rehabilitation credit is increased for qualified rehabilitation expenditures paid or incurred after August 27, 2005, and before January 1, 2009, on buildings located in the GO Zone as follows. Myfreetaxes de com For pre-1936 buildings (other than certified historic structures), the credit percentage is increased from 10% to 13%. Myfreetaxes de com For certified historic structures, the credit percentage is increased from 20% to 26%. Myfreetaxes de com For more information, see Form 3468, Investment Credit. Myfreetaxes de com Request for Copy or Transcript of Tax Return Request for copy of tax return. Myfreetaxes de com   You can use Form 4506 to order a copy of your tax return. Myfreetaxes de com Generally, there is a $39. Myfreetaxes de com 00 fee for requesting each copy of a tax return. Myfreetaxes de com If your main home, principal place of business, or tax records are located in a Presidentially declared disaster area, the fee will be waived if the assigned disaster designation (for example, “Hurricane Katrina”) is written in red across the top of the form when filed. Myfreetaxes de com Request for transcript of tax return. Myfreetaxes de com   You can use Form 4506-T to order a free transcript of your tax return. Myfreetaxes de com A transcript provides most of the line entries from a tax return and usually contains the information that a third party requires. Myfreetaxes de com You can also call 1-800-829-1040 to order a transcript. Myfreetaxes de com How To Get Tax Help Special IRS assistance. Myfreetaxes de com   The IRS is providing special help for those affected by Hurricane Katrina, Rita, or Wilma, as well as survivors and personal representatives of the victims. Myfreetaxes de com We have set up a special toll-free number for people who may have trouble filing or paying their taxes because they were affected by Hurricane Katrina, Rita, or Wilma, or who have other tax issues related to the hurricanes. Myfreetaxes de com Call 1-866-562-5227 Monday through Friday In English-7 a. Myfreetaxes de com m. Myfreetaxes de com to 10 p. Myfreetaxes de com m. Myfreetaxes de com local time In Spanish-8 a. Myfreetaxes de com m. Myfreetaxes de com to 9:30 p. Myfreetaxes de com m. Myfreetaxes de com local time   The IRS website at www. Myfreetaxes de com irs. Myfreetaxes de com gov has notices and other tax relief information. Myfreetaxes de com Check it periodically for any new guidance. Myfreetaxes de com Other help from the IRS. Myfreetaxes de com   You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. Myfreetaxes de com By selecting the method that is best for you, you will have quick and easy access to tax help. Myfreetaxes de com Contacting your Taxpayer Advocate. Myfreetaxes de com   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. Myfreetaxes de com   The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. Myfreetaxes de com While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review. Myfreetaxes de com   To contact your Taxpayer Advocate: Call the Taxpayer Advocate toll free at 1-877-777-4778. Myfreetaxes de com Call, write, or fax the Taxpayer Advocate office in your area. Myfreetaxes de com Call 1-800-829-4059 if you are a TTY/TDD user. Myfreetaxes de com Visit www. Myfreetaxes de com irs. Myfreetaxes de com gov/advocate. Myfreetaxes de com   For more information, see Publication 1546, How To Get Help With Unresolved Tax Problems (now available in Chinese, Korean, Russian, and Vietnamese, in addition to English and Spanish). Myfreetaxes de com Free tax services. Myfreetaxes de com   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. Myfreetaxes de com It contains a list of free tax publications and an index of tax topics. Myfreetaxes de com It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. Myfreetaxes de com Internet. Myfreetaxes de com You can access the IRS website 24 hours a day, 7 days a week, at www. Myfreetaxes de com irs. Myfreetaxes de com gov to: E-file your return. Myfreetaxes de com Find out about commercial tax preparation and e-file services available free to eligible taxpayers. Myfreetaxes de com Check the status of your refund. Myfreetaxes de com Click on Where's My Refund. Myfreetaxes de com Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). Myfreetaxes de com Have your tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund. Myfreetaxes de com Download forms, instructions, and publications. Myfreetaxes de com Order IRS products online. Myfreetaxes de com Research your tax questions online. Myfreetaxes de com Search publications online by topic or keyword. Myfreetaxes de com View Internal Revenue Bulletins (IRBs) published in the last few years. Myfreetaxes de com Figure your withholdin
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Myfreetaxes de com 3. Myfreetaxes de com   Limit on Annual Additions Table of Contents Ministers and church employees. Myfreetaxes de com Includible Compensation for Your Most Recent Year of ServiceMost Recent Year of Service Includible Compensation The first component of MAC is the limit on annual additions. Myfreetaxes de com This is a limit on the total contributions (elective deferrals, nonelective contributions, and after-tax contributions) that can be made to your 403(b) account. Myfreetaxes de com The limit on annual additions generally is the lesser of: $51,000 for 2013 and $52,000 for 2014, or 100% of your includible compensation for your most recent year of service. Myfreetaxes de com More than one 403(b) account. Myfreetaxes de com If you contributed to more than one 403(b) account, you must combine the contributions made to all 403(b) accounts on your behalf by your employer. Myfreetaxes de com Ministers and church employees. Myfreetaxes de com   If you are a minister or a church employee, you may be able to increase your limit on annual additions or use different rules when figuring your limit on annual additions. Myfreetaxes de com For more information, see chapter 5. Myfreetaxes de com Participation in a qualified plan. Myfreetaxes de com If you participated in a 403(b) plan and a qualified plan, you must combine contributions made to your 403(b) account with contributions to a qualified plan and simplified employee pensions of all corporations, partnerships, and sole proprietorships in which you have more than 50% control. Myfreetaxes de com You can use Part I of Worksheet 1 in chapter 9 to figure your limit on annual additions. Myfreetaxes de com Includible Compensation for Your Most Recent Year of Service Definition. Myfreetaxes de com   Generally, includible compensation for your most recent year of service is the amount of taxable wages and benefits you received from the employer that maintained a 403(b) account for your benefit during your most recent year of service. Myfreetaxes de com When figuring your includible compensation for your most recent year of service, keep in mind that your most recent year of service may not be the same as your employer's most recent annual work period. Myfreetaxes de com This can happen if your tax year is not the same as your employer's annual work period. Myfreetaxes de com When figuring includible compensation for your most recent year of service, do not mix compensation or service of one employer with compensation or service of another employer. Myfreetaxes de com Most Recent Year of Service Your most recent year of service is your last full year of service, ending on the last day of your tax year that you worked for the employer that maintained a 403(b) account on your behalf. Myfreetaxes de com Tax year different from employer's annual work period. Myfreetaxes de com   If your tax year is not the same as your employer's annual work period, your most recent year of service is made up of parts of at least two of your employer's annual work periods. Myfreetaxes de com Example. Myfreetaxes de com A professor who reports her income on a calendar-year basis is employed on a full-time basis by a university that operates on an academic year (October through May). Myfreetaxes de com To figure her includible compensation for 2013, the professor's most recent year of service is her service from January through May 2013 and from October through December 2013. Myfreetaxes de com Figuring Your Most Recent Year of Service To figure your most recent year of service, begin by determining what is a full year of service for your position. Myfreetaxes de com A full year of service is equal to full-time employment for your employer's annual work period. Myfreetaxes de com After identifying a full year of service, begin counting the service you have provided for your employer starting with the service provided in the current year. Myfreetaxes de com Part-time or employed only part of the year. Myfreetaxes de com   If you are a part-time or a full-time employee who is employed for only part of the year, your most recent year of service is your service this year and your service for as many previous years as is necessary to total 1 full year of service. Myfreetaxes de com To determine your most recent year of service, add the following periods of service: Your service during the year for which you are figuring the limit on annual additions, and Your service during your preceding tax years until the total service equals 1 year of service or you have figured all of your service with the employer. Myfreetaxes de com Example. Myfreetaxes de com You were employed on a full-time basis from July through December 2011 (1/2 year of service), July through December 2012 (1/2 year of service), and October through December 2013 (1/4 year of service). Myfreetaxes de com Your most recent year of service for computing your limit on annual additions for 2013 is the total of your service during 2013 (1/4 year of service), your service during 2012 (1/2 year of service), and your service during the months October through December 2011 (1/4 year of service). Myfreetaxes de com Not yet employed for 1 year. Myfreetaxes de com   If, at the close of the year, you have not yet worked for your employer for 1 year (including time you worked for the same employer in all earlier years), use the period of time you have worked for the employer as your most recent year of service. Myfreetaxes de com Includible Compensation After identifying your most recent year of service, the next step is to identify the includible compensation associated with that full year of service. Myfreetaxes de com Includible compensation is not the same as income included on your tax return. Myfreetaxes de com Compensation is a combination of income and benefits received in exchange for services provided to your employer. Myfreetaxes de com Generally, includible compensation is the amount of income and benefits: Received from the employer who maintains your 403(b) account, and Must be included in your income. Myfreetaxes de com Includible compensation includes the following amounts. Myfreetaxes de com Elective deferrals (employer's contributions made on your behalf under a salary reduction agreement). Myfreetaxes de com Amounts contributed or deferred by your employer under a section 125 cafeteria plan. Myfreetaxes de com Amounts contributed or deferred, at the election of the employee, under an eligible section 457 nonqualified deferred compensation plan (state or local government or tax-exempt organization plan). Myfreetaxes de com  Note. Myfreetaxes de com For information about treating elective deferrals under section 457 plans as Roth contributions, see Publication 575. Myfreetaxes de com Wages, salaries, and fees for personal services earned with the employer maintaining your 403(b) account. Myfreetaxes de com Income otherwise excluded under the foreign earned income exclusion. Myfreetaxes de com Pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan. Myfreetaxes de com Includible compensation does not include the following items. Myfreetaxes de com Your employer's contributions to your 403(b) account. Myfreetaxes de com Compensation earned while your employer was not an eligible employer. Myfreetaxes de com Your employer's contributions to a qualified plan that: Are on your behalf, and Are excludable from income. Myfreetaxes de com The cost of incidental life insurance. Myfreetaxes de com See Cost of Incidental Life Insurance, later. Myfreetaxes de com If you are a church employee or a foreign missionary, figure includible compensation using the rules explained in chapter 5. Myfreetaxes de com Contributions after retirement. Myfreetaxes de com   Nonelective contributions may be made for an employee for up to 5 years after retirement. Myfreetaxes de com These contributions would be based on includible compensation for the last year of service before retirement. Myfreetaxes de com Cost of Incidental Life Insurance Includible compensation does not include the cost of incidental life insurance. Myfreetaxes de com If all of your 403(b) accounts invest only in mutual funds, then you have no incidental life insurance. Myfreetaxes de com If you have an annuity contract, a portion of the cost of that contract may be for incidental life insurance. Myfreetaxes de com If so, the cost of the insurance is taxable to you in the year contributed and is considered part of your basis when distributed. Myfreetaxes de com Your employer will include the cost of your insurance as taxable wages in box 1 of Form W-2. Myfreetaxes de com Not all annuity contracts include life insurance. Myfreetaxes de com Contact your plan administrator to determine if your contract includes incidental life insurance. Myfreetaxes de com If it does, you will need to figure the cost of life insurance each year the policy is in effect. Myfreetaxes de com Figuring the cost of incidental life insurance. Myfreetaxes de com If you have determined that part of the cost of your annuity contract is for an incidental life insurance premium, you will need to determine the amount of the premium and subtract it from your includible compensation. Myfreetaxes de com To determine the amount of the life insurance premiums, you will need to know the following information. Myfreetaxes de com The value of your life insurance contract, which is the amount payable upon your death. Myfreetaxes de com The cash value of your life insurance contract at the end of the tax year. Myfreetaxes de com Your age on your birthday nearest the beginning of the policy year. Myfreetaxes de com Your current life insurance protection under an ordinary retirement income life insurance policy, which is the amount payable upon your death minus the cash value of the contract at the end of the year. Myfreetaxes de com You can use Worksheet A, in chapter 9, to determine the cost of your incidental life insurance. Myfreetaxes de com Example. Myfreetaxes de com Your new contract provides that your beneficiary will receive $10,000 if you should die before retirement. Myfreetaxes de com Your cash value in the contract at the end of the first year is zero. Myfreetaxes de com Your current life insurance protection for the first year is $10,000 ($10,000 − 0). Myfreetaxes de com The cash value in the contract at the end of year two is $1,000, and the current life insurance protection for the second year is $9,000 ($10,000 – $1,000). Myfreetaxes de com The 1-year cost of the protection can be calculated by using Figure 3-1, Table of One-Year Term Premiums for $1,000 Life Insurance Protection . Myfreetaxes de com The premium rate is determined based on your age on your birthday nearest the beginning of the policy year. Myfreetaxes de com Figure 3-1. Myfreetaxes de com Table of One-Year Term Premiums for $1,000 Life Insurance Protection Age Cost   Age Cost   Age Cost 0 $0. Myfreetaxes de com 70   35 $0. Myfreetaxes de com 99   70 $20. Myfreetaxes de com 62 1 0. Myfreetaxes de com 41   36 1. Myfreetaxes de com 01   71 22. Myfreetaxes de com 72 2 0. Myfreetaxes de com 27   37 1. Myfreetaxes de com 04   72 25. Myfreetaxes de com 07 3 0. Myfreetaxes de com 19   38 1. Myfreetaxes de com 06   73 27. Myfreetaxes de com 57 4 0. Myfreetaxes de com 13   39 1. Myfreetaxes de com 07   74 30. Myfreetaxes de com 18 5 0. Myfreetaxes de com 13   40 1. Myfreetaxes de com 10   75 33. Myfreetaxes de com 05 6 0. Myfreetaxes de com 14   41 1. Myfreetaxes de com 13   76 36. Myfreetaxes de com 33 7 0. Myfreetaxes de com 15   42 1. Myfreetaxes de com 20   77 40. Myfreetaxes de com 17 8 0. Myfreetaxes de com 16   43 1. Myfreetaxes de com 29   78 44. Myfreetaxes de com 33 9 0. Myfreetaxes de com 16   44 1. Myfreetaxes de com 40   79 49. Myfreetaxes de com 23 10 0. Myfreetaxes de com 16   45 1. Myfreetaxes de com 53   80 54. Myfreetaxes de com 56 11 0. Myfreetaxes de com 19   46 1. Myfreetaxes de com 67   81 60. Myfreetaxes de com 51 12 0. Myfreetaxes de com 24   47 1. Myfreetaxes de com 83   82 66. Myfreetaxes de com 74 13 0. Myfreetaxes de com 28   48 1. Myfreetaxes de com 98   83 73. Myfreetaxes de com 07 14 0. Myfreetaxes de com 33   49 2. Myfreetaxes de com 13   84 80. Myfreetaxes de com 35 15 0. Myfreetaxes de com 38   50 2. Myfreetaxes de com 30   85 88. Myfreetaxes de com 76 16 0. Myfreetaxes de com 52   51 2. Myfreetaxes de com 52   86 99. Myfreetaxes de com 16 17 0. Myfreetaxes de com 57   52 2. Myfreetaxes de com 81   87 110. Myfreetaxes de com 40 18 0. Myfreetaxes de com 59   53 3. Myfreetaxes de com 20   88 121. Myfreetaxes de com 85 19 0. Myfreetaxes de com 61   54 3. Myfreetaxes de com 65   89 133. Myfreetaxes de com 40 20 0. Myfreetaxes de com 62   55 4. Myfreetaxes de com 15   90 144. Myfreetaxes de com 30 21 0. Myfreetaxes de com 62   56 4. Myfreetaxes de com 68   91 155. Myfreetaxes de com 80 22 0. Myfreetaxes de com 64   57 5. Myfreetaxes de com 20   92 168. Myfreetaxes de com 75 23 0. Myfreetaxes de com 66   58 5. Myfreetaxes de com 66   93 186. Myfreetaxes de com 44 24 0. Myfreetaxes de com 68   59 6. Myfreetaxes de com 06   94 206. Myfreetaxes de com 70 25 0. Myfreetaxes de com 71   60 6. Myfreetaxes de com 51   95 228. Myfreetaxes de com 35 26 0. Myfreetaxes de com 73   61 7. Myfreetaxes de com 11   96 250. Myfreetaxes de com 01 27 0. Myfreetaxes de com 76   62 7. Myfreetaxes de com 96   97 265. Myfreetaxes de com 09 28 0. Myfreetaxes de com 80   63 9. Myfreetaxes de com 08   98 270. Myfreetaxes de com 11 29 0. Myfreetaxes de com 83   64 10. Myfreetaxes de com 41   99 281. Myfreetaxes de com 05 30 0. Myfreetaxes de com 87   65 11. Myfreetaxes de com 90       31 0. Myfreetaxes de com 90   66 13. Myfreetaxes de com 51       32 0. Myfreetaxes de com 93   67 15. Myfreetaxes de com 20       33 0. Myfreetaxes de com 96   68 16. Myfreetaxes de com 92       34 0. Myfreetaxes de com 98   69 18. Myfreetaxes de com 70                       If the current published premium rates per $1,000 of insurance protection charged by an insurer for individual 1-year term life insurance premiums available to all standard risks are lower than those in the preceding table, you can use the lower rates for figuring the cost of insurance in connection with individual policies issued by the same insurer. Myfreetaxes de com Example 1. Myfreetaxes de com Lynne Green, age 44, and her employer enter into a 403(b) plan that will provide her with a $500 a month annuity upon retirement at age 65. Myfreetaxes de com The agreement also provides that if she should die before retirement, her beneficiary will receive the greater of $20,000 or the cash surrender value in the life insurance contract. Myfreetaxes de com Using the facts presented we can determine the cost of Lynne's life insurance protection as shown in Table 3-1. Myfreetaxes de com Lynne's employer has included $28 for the cost of the life insurance protection in her current year's income. Myfreetaxes de com When figuring her includible compensation for this year, Lynne will subtract $28. Myfreetaxes de com Table 3-1. Myfreetaxes de com Worksheet A. Myfreetaxes de com Cost of Incidental Life Insurance Note. Myfreetaxes de com Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. Myfreetaxes de com This amount will be used to figure includible compensation for your most recent year of service. Myfreetaxes de com 1. Myfreetaxes de com Enter the value of the contract (amount payable upon your death) 1. Myfreetaxes de com $20,000. Myfreetaxes de com 00 2. Myfreetaxes de com Enter the cash value in the contract at the end of the year 2. Myfreetaxes de com 0. Myfreetaxes de com 00 3. Myfreetaxes de com Subtract line 2 from line 1. Myfreetaxes de com This is the value of your current life insurance protection 3. Myfreetaxes de com $20,000. Myfreetaxes de com 00 4. Myfreetaxes de com Enter your age on your birthday nearest the beginning of the policy year 4. Myfreetaxes de com 44 5. Myfreetaxes de com Enter the 1-year term premium for $1,000 of life insurance based on your age. Myfreetaxes de com (From Figure 3-1) 5. Myfreetaxes de com $1. Myfreetaxes de com 40 6. Myfreetaxes de com Divide line 3 by $1,000 6. Myfreetaxes de com 20 7. Myfreetaxes de com Multiply line 6 by line 5. Myfreetaxes de com This is the cost of your incidental life insurance 7. Myfreetaxes de com $28. Myfreetaxes de com 00 Example 2. Myfreetaxes de com Lynne's cash value in the contract at the end of the second year is $1,000. Myfreetaxes de com In year two, the cost of Lynne's life insurance is calculated as shown in Table 3-2. Myfreetaxes de com In year two, Lynne's employer will include $29. Myfreetaxes de com 07 in her current year's income. Myfreetaxes de com Lynne will subtract this amount when figuring her includible compensation. Myfreetaxes de com Table 3-2. Myfreetaxes de com Worksheet A. Myfreetaxes de com Cost of Incidental Life Insurance Note. Myfreetaxes de com Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. Myfreetaxes de com This amount will be used to figure includible compensation for your most recent year of service. Myfreetaxes de com 1. Myfreetaxes de com Enter the value of the contract (amount payable upon your death) 1. Myfreetaxes de com $20,000. Myfreetaxes de com 00 2. Myfreetaxes de com Enter the cash value in the contract at the end of the year 2. Myfreetaxes de com $1,000. Myfreetaxes de com 00 3. Myfreetaxes de com Subtract line 2 from line 1. Myfreetaxes de com This is the value of your current life insurance protection 3. Myfreetaxes de com $19,000. Myfreetaxes de com 00 4. Myfreetaxes de com Enter your age on your birthday nearest the beginning of the policy year 4. Myfreetaxes de com 45 5. Myfreetaxes de com Enter the 1-year term premium for $1,000 of life insurance based on your age. Myfreetaxes de com (From Figure 3-1) 5. Myfreetaxes de com $1. Myfreetaxes de com 53 6. Myfreetaxes de com Divide line 3 by $1,000 6. Myfreetaxes de com 19 7. Myfreetaxes de com Multiply line 6 by line 5. Myfreetaxes de com This is the cost of your incidental life insurance 7. Myfreetaxes de com $29. Myfreetaxes de com 07 Figuring Includible Compensation for Your Most Recent Year of Service You can use Worksheet B in chapter 9 to determine your includible compensation for your most recent year of service. Myfreetaxes de com Example. Myfreetaxes de com Floyd has been periodically working full-time for a local hospital since September 2011. Myfreetaxes de com He needs to figure his limit on annual additions for 2014. Myfreetaxes de com The hospital's normal annual work period for employees in Floyd's general type of work runs from January to December. Myfreetaxes de com During the periods that Floyd was employed with the hospital, the hospital has always been eligible to provide a 403(b) plan to employees. Myfreetaxes de com Additionally, the hospital has never provided the employees with a 457 deferred compensation plan, a transportation fringe benefit plan, or a cafeteria plan. Myfreetaxes de com Floyd has never worked abroad and there is no life insurance provided under the plan. Myfreetaxes de com Table 3-3 shows the service Floyd provided to his employer, his compensation for the periods worked, his elective deferrals, and his taxable wages. Myfreetaxes de com Table 3-3. Myfreetaxes de com Floyd's Compensation Note. Myfreetaxes de com This table shows information Floyd will use to figure includible compensation for his most recent year of service. Myfreetaxes de com   Year Years of Service Taxable Wages Elective Deferrals 2014 6/12 of  a year $42,000 $2,000 2013 4/12 of  a year $16,000 $1,650 2012 4/12 of  a year $16,000 $1,650 Before Floyd can figure his limit on annual additions, he must figure includible compensation for his most recent year of service. Myfreetaxes de com Because Floyd is not planning to work the entire 2014 year, his most recent year of service will include the time he is planning to work in 2014 plus time he worked in the preceding 3 years until the time he worked for the hospital totals 1 year. Myfreetaxes de com If the total time he worked is less than 1 year, Floyd will treat it as if it were 1 year. Myfreetaxes de com He figures his most recent year of service shown in the following list. Myfreetaxes de com Time he will work in 2014 is 6/12 of a year. Myfreetaxes de com Time worked in 2013 is 4/12 of a year. Myfreetaxes de com All of this time will be used to determine Floyd's most recent year of service. Myfreetaxes de com Time worked in 2012 is 4/12 of a year. Myfreetaxes de com Floyd only needs 2 months of the 4 months he worked in 2012 to have enough time to total 1 full year. Myfreetaxes de com Because he needs only one-half of the actual time he worked, Floyd will use only one-half of his income earned during that period to calculate wages that will be used in figuring his includible compensation. Myfreetaxes de com Using the information provided in Table 3-3, wages for Floyd's most recent year of service are $66,000 ($42,000 + $16,000 + $8,000). Myfreetaxes de com His includible compensation for his most recent year of service is figured as shown in Table 3-4. Myfreetaxes de com After figuring his includible compensation, Floyd determines his limit on annual additions for 2014 to be $52,000, the lesser of his includible compensation, $70,475 (Table 3-4), and the maximum amount of $52,000. Myfreetaxes de com Table 3-4. Myfreetaxes de com Worksheet B. Myfreetaxes de com Includible Compensation for Your Most Recent Year of Service1 Note. Myfreetaxes de com Use this worksheet to figure includible compensation for your most recent year of service. Myfreetaxes de com 1. Myfreetaxes de com Enter your includible wages from the employer maintaining your 403(b) account for your most recent year of service 1. Myfreetaxes de com $66,000 2. Myfreetaxes de com Enter elective deferrals excluded from your gross income for your most recent year of service2 2. Myfreetaxes de com 4,4753 3. Myfreetaxes de com Enter amounts contributed or deferred by your employer under a cafeteria plan for your most recent year of service 3. Myfreetaxes de com -0- 4. Myfreetaxes de com Enter amounts contributed or deferred by your employer according to your election to your 457 account (a nonqualified plan of a state or local government, or of a tax-exempt organization) for your most recent year of service 4. Myfreetaxes de com -0- 5. Myfreetaxes de com Enter pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan for your most recent year of service 5. Myfreetaxes de com -0- 6. Myfreetaxes de com Enter your foreign earned income exclusion for your most recent year of service 6. Myfreetaxes de com -0- 7. Myfreetaxes de com Add lines 1, 2, 3, 4, 5, and 6 7. Myfreetaxes de com 70,475 8. Myfreetaxes de com Enter the cost of incidental life insurance that is part of your annuity contract for your most recent year of service 8. Myfreetaxes de com -0- 9. Myfreetaxes de com Enter compensation that was both: Earned during your most recent year of service, and Earned while your employer was not qualified to maintain a 403(b) plan 9. Myfreetaxes de com -0- 10. Myfreetaxes de com Add lines 8 and 9 10. Myfreetaxes de com -0- 11. Myfreetaxes de com Subtract line 10 from line 7. Myfreetaxes de com This is your includible compensation for your most recent year of service 11. Myfreetaxes de com 70,475 1Use estimated amounts if figuring includible compensation before the end of the year. Myfreetaxes de com 2Elective deferrals made to a designated Roth account are not excluded from your gross income and should not be included on this line. Myfreetaxes de com  3$4,475 ($2,000 + $1,650 + $825). Myfreetaxes de com Prev  Up  Next   Home   More Online Publications