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Tax Forms 1040

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Tax Forms 1040

Tax forms 1040 Publication 971 - Main Content Table of Contents How To Request ReliefException for agreements relating to TEFRA partnership proceedings. Tax forms 1040 The IRS Must Contact Your Spouse or Former Spouse Tax Court Review of Request Community Property LawsRelief for Married Persons Who Did Not File Joint Returns Innocent Spouse ReliefUnderstated Tax Erroneous Items Actual Knowledge or Reason To Know Indications of Unfairness for Innocent Spouse Relief Separation of Liability ReliefLimitations on Relief Equitable ReliefConditions for Getting Equitable Relief Factors for Determining Whether To Grant Equitable Relief RefundsProof Required Refunds Under Equitable Relief Limit on Amount of Refund Filled-in Form 8857 Flowcharts How To Request Relief File Form 8857 to ask the IRS for the types of relief discussed in this publication. Tax forms 1040 If you are requesting relief for more than three tax years, you must file an additional Form 8857. Tax forms 1040 The IRS will review your Form 8857 and let you know if you qualify. Tax forms 1040 A completed Form 8857 is shown later. Tax forms 1040 When to file Form 8857. Tax forms 1040   You should file Form 8857 as soon as you become aware of a tax liability for which you believe only your spouse or former spouse should be held responsible. Tax forms 1040 The following are some of the ways you may become aware of such a liability. Tax forms 1040 The IRS is examining your tax return and proposing to increase your tax liability. Tax forms 1040 The IRS sends you a notice. Tax forms 1040   You must file Form 8857 no later than two years after the date on which the IRS first attempted to collect the tax from you that occurs after July 22, 1998. Tax forms 1040 (But see the exceptions below for different filing deadlines that apply. Tax forms 1040 ) For this reason, do not delay filing because you do not have all the documentation. Tax forms 1040   Collection activities that may start the 2-year period are: The IRS offset your income tax refund against an amount you owed on a joint return for another year and the IRS informed you about your right to file Form 8857. Tax forms 1040 The filing of a claim by the IRS in a court proceeding in which you were a party or the filing of a claim in a proceeding that involves your property. Tax forms 1040 This includes the filing of a proof of claim in a bankruptcy proceeding. Tax forms 1040 The filing of a suit by the United States against you to collect the joint liability. Tax forms 1040 The issuance of a section 6330 notice, which notifies you of the IRS' intent to levy and your right to a collection due process (CDP) hearing. Tax forms 1040 The collection-related notices include, but are not limited to, Letter 11 and Letter 1058. Tax forms 1040 Exception for equitable relief. Tax forms 1040   On July 25, 2011, the IRS issued Notice 2011-70 (available at www. Tax forms 1040 irs. Tax forms 1040 gov/irb/2011-32_IRB/ar11. Tax forms 1040 html) expanding the amount of time to request equitable relief. Tax forms 1040 The amount of time to request equitable relief depends on whether you are seeking relief from a balance due, seeking a credit or refund, or both: Balance Due – Generally, you must file your request within the time period the IRS has to collect the tax. Tax forms 1040 Generally, the IRS has 10 years from the date the tax liability was assessed to collect the tax. Tax forms 1040 In certain cases, the 10-year period is suspended. Tax forms 1040 The amount of time the suspension is in effect will extend the time the IRS has to collect the tax. Tax forms 1040 See Pub. Tax forms 1040 594, The IRS Collection Process, for details. Tax forms 1040 Credit or Refund – Generally, you must file your request within 3 years after the date the original return was filed or within 2 years after the date the tax was paid, whichever is later. Tax forms 1040 But you may have more time to file if you live in a federally declared disaster area or you are physically or mentally unable to manage your financial affairs. Tax forms 1040 See Pub. Tax forms 1040 556, Examination of Returns, Appeal Rights, and Claims for Refund, for details. Tax forms 1040 Both a Balance Due and a Credit or Refund – If you are seeking a refund of amounts you paid and relief from a balance due over and above what you have paid, the time period for credit or refund will apply to any payments you have made, and the time period for collection of a balance due amount will apply to any unpaid liability. Tax forms 1040 Exception for relief based on community property laws. Tax forms 1040   If you are requesting relief based on community property laws, a different filing deadline applies. Tax forms 1040 See Relief from liability arising from community property law discussed later under Community Property Laws . Tax forms 1040 Form 8857 filed by or on behalf of a decedent. Tax forms 1040   An executor (including any other duly appointed representative) may pursue a Form 8857 filed during the decedent's lifetime. Tax forms 1040 An executor (including any other duly appointed representative) may also file Form 8857 as long as the decedent satisfied the eligibility requirements while alive. Tax forms 1040 For purposes of separation of liability relief (discussed later), the decedent's marital status is determined on the earlier of the date relief was requested or the date of death. Tax forms 1040 Situations in which you are not entitled to relief. Tax forms 1040   You are not entitled to innocent spouse relief for any tax year to which the following situations apply. Tax forms 1040 In a final decision dated after July 22, 1998, a court considered whether to grant you relief from joint liability and decided not to do so. Tax forms 1040 In a final decision dated after July 22, 1998, a court did not consider whether to grant you relief from joint liability, but you meaningfully participated in the proceeding and could have asked for relief. Tax forms 1040 You entered into an offer in compromise with the IRS. Tax forms 1040 You entered into a closing agreement with the IRS that disposed of the same liability for which you want to seek relief. Tax forms 1040 Exception for agreements relating to TEFRA partnership proceedings. Tax forms 1040   You may be entitled to relief, discussed in (4) earlier, if you entered into a closing agreement for both partnership items and nonpartnership items, while you were a party to a pending TEFRA partnership proceeding. Tax forms 1040 (TEFRA is an acronym that refers to the “Tax Equity and Fiscal Responsibility Act of 1982” that prescribed the tax treatment of partnership items. Tax forms 1040 ) You are not entitled to relief for the nonpartnership items, but you will be entitled to relief for the partnership items (if you otherwise qualify). Tax forms 1040 Transferee liability not affected by innocent spouse relief provisions. Tax forms 1040   The innocent spouse relief provisions do not affect tax liabilities that arise under federal or state transferee liability or property laws. Tax forms 1040 Therefore, even if you are relieved of the tax liability under the innocent spouse relief provisions, you may remain liable for the unpaid tax, interest, and penalties to the extent provided by these laws. Tax forms 1040 Example. Tax forms 1040 Herb and Wanda timely filed their 2008 joint income tax return on April 15, 2009. Tax forms 1040 Herb died in March 2010, and the executor of Herb's will transferred all of the estate's assets to Wanda. Tax forms 1040 In August 2010, the IRS assessed a deficiency for the 2008 return. Tax forms 1040 The items causing the deficiency belong to Herb. Tax forms 1040 Wanda is relieved of the deficiency under the innocent spouse relief provisions, and Herb's estate remains solely liable for it. Tax forms 1040 However, the IRS may collect the deficiency from Wanda to the extent permitted under federal or state transferee liability or property laws. Tax forms 1040 The IRS Must Contact Your Spouse or Former Spouse By law, the IRS must contact your spouse or former spouse. Tax forms 1040 There are no exceptions, even for victims of spousal abuse or domestic violence. Tax forms 1040 We will inform your spouse or former spouse that you filed Form 8857 and will allow him or her to participate in the process. Tax forms 1040 If you are requesting relief from joint and several liability on a joint return, the IRS must also inform him or her of its preliminary and final determinations regarding your request for relief. Tax forms 1040 However, to protect your privacy, the IRS will not disclose your personal information (for example, your current name, address, phone number(s), information about your employer, your income or assets) or any other information that does not relate to making a determination about your request for relief from liability. Tax forms 1040 If you petition the Tax Court (explained below), your spouse or former spouse may see your personal information. Tax forms 1040 Tax Court Review of Request After you file Form 8857, you may be able to petition (ask) the United States Tax Court to review your request for relief in the following two situations. Tax forms 1040 The IRS sends you a final determination letter regarding your request for relief. Tax forms 1040 You do not receive a final determination letter from the IRS within six months from the date you filed Form 8857. Tax forms 1040 If you seek equitable relief for an underpaid tax, you will be able to get a Tax Court review of your request only if the tax arose or remained unpaid on or after December 20, 2006. Tax forms 1040 The United States Tax Court is an independent judicial body and is not part of the IRS. Tax forms 1040 You must file a petition with the United States Tax Court in order for it to review your request for relief. Tax forms 1040 You must file the petition no later than the 90th day after the date the IRS mails its final determination notice to you. Tax forms 1040 If you do not file a petition, or you file it late, the Tax Court cannot review your request for relief. Tax forms 1040 You can get a copy of the rules for filing a petition by writing to the Tax Court at the following address:    United States Tax Court 400 Second Street, NW Washington, DC 20217 Or you can visit the Tax Court's website at www. Tax forms 1040 ustaxcourt. Tax forms 1040 gov Community Property Laws You must generally follow community property laws when filing a tax return if you are married and live in a community property state. Tax forms 1040 Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Tax forms 1040 Generally, community property laws require you to allocate community income and expenses equally between both spouses. Tax forms 1040 However, community property laws are not taken into account in determining whether an item belongs to you or to your spouse (or former spouse) for purposes of requesting any relief from liability. Tax forms 1040 Relief for Married Persons Who Did Not File Joint Returns Married persons who live in community property states, but who did not file joint returns, have two ways to get relief. Tax forms 1040 Relief From Liability Arising From Community Property Law You are not responsible for the tax relating to an item of community income if all the following conditions exist. Tax forms 1040 You did not file a joint return for the tax year. Tax forms 1040 You did not include the item of community income in gross income. Tax forms 1040 The item of community income you did not include is one of the following: Wages, salaries, and other compensation your spouse (or former spouse) received for services he or she performed as an employee. Tax forms 1040 Income your spouse (or former spouse) derived from a trade or business he or she operated as a sole proprietor. Tax forms 1040 Your spouse's (or former spouse's) distributive share of partnership income. Tax forms 1040 Income from your spouse's (or former spouse's) separate property (other than income described in (a), (b), or (c)). Tax forms 1040 Use the appropriate community property law to determine what is separate property. Tax forms 1040 Any other income that belongs to your spouse (or former spouse) under community property law. Tax forms 1040 You establish that you did not know of, and had no reason to know of, that community income. Tax forms 1040 See  Actual Knowledge or Reason To Know , below. Tax forms 1040 Under all facts and circumstances, it would not be fair to include the item of community income in your gross income. Tax forms 1040 See Indications of unfairness for liability arising from community property law, later. Tax forms 1040 Actual knowledge or reason to know. Tax forms 1040   You knew or had reason to know of an item of community income if: You actually knew of the item of community income, or A reasonable person in similar circumstances would have known of the item of community income. Tax forms 1040 Amount of community income unknown. Tax forms 1040   If you are aware of the source of the item of community income or the income-producing activity, but are unaware of the specific amount, you are considered to know or have reason to know of the item of community income. Tax forms 1040 Not knowing the specific amount is not a basis for relief. Tax forms 1040 Reason to know. Tax forms 1040   The IRS will consider all facts and circumstances in determining whether you had reason to know of an item of community income. Tax forms 1040 The facts and circumstances include: The nature of the item of community income and the amount of the item relative to other income items. Tax forms 1040 The financial situation of you and your spouse (or former spouse). Tax forms 1040 Your educational background and business experience. Tax forms 1040 Whether the item of community income represented a departure from a recurring pattern reflected in prior years' returns (for example, omitted income from an investment regularly reported on prior years' returns). Tax forms 1040 Indications of unfairness for liability arising from community property law. Tax forms 1040   The IRS will consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold you responsible for the understated tax due to the item of community income. Tax forms 1040   The following are examples of factors the IRS will consider. Tax forms 1040 Whether you received a benefit, either directly or indirectly, from the omitted item of community income (defined below). Tax forms 1040 Whether your spouse (or former spouse) deserted you. Tax forms 1040 Whether you and your spouse have been divorced or separated. Tax forms 1040  For other factors see Factors for Determining Whether To Grant Equitable Relief later. Tax forms 1040 Benefit from omitted item of community income. Tax forms 1040   A benefit includes normal support, but does not include de minimis (small) amounts. Tax forms 1040 Evidence of a direct or indirect benefit may consist of transfers of property or rights to property, including transfers received several years after the filing of the return. Tax forms 1040   For example, if you receive property, including life insurance proceeds, from your spouse (or former spouse) and the property is traceable to omitted items of community income attributable to your spouse (or former spouse), you are considered to have benefitted from those omitted items of community income. Tax forms 1040 Equitable Relief If you do not qualify for the relief described above and are now liable for an underpaid or understated tax you believe should be paid only by your spouse (or former spouse), you may request equitable relief (discussed later). Tax forms 1040 How and When To Request Relief You request relief by filing Form 8857, as discussed earlier. Tax forms 1040 Fill in Form 8857 according to the instructions. Tax forms 1040 For relief from liability arising from community property law, you must file Form 8857 no later than 6 months before the expiration of the period of limitations on assessment (including extensions) against your spouse for the tax year for which you are requesting relief. Tax forms 1040 However, if the IRS begins an examination of your return during that 6-month period, the latest time for requesting relief is 30 days after the date the IRS' initial contact letter to you. Tax forms 1040 The period of limitation on assessment is the amount of time, generally three years, that the IRS has from the date you filed the return to assess taxes that you owe. Tax forms 1040 Innocent Spouse Relief By requesting innocent spouse relief, you can be relieved of responsibility for paying tax, interest, and penalties if your spouse (or former spouse) improperly reported items or omitted items on your tax return. Tax forms 1040 Generally, the tax, interest, and penalties that qualify for relief can only be collected from your spouse (or former spouse). Tax forms 1040 However, you are jointly and individually responsible for any tax, interest, and penalties that do not qualify for relief. Tax forms 1040 The IRS can collect these amounts from either you or your spouse (or former spouse). Tax forms 1040 You must meet all of the following conditions to qualify for innocent spouse relief. Tax forms 1040 You filed a joint return. Tax forms 1040 There is an understated tax on the return that is due to erroneous items (defined later) of your spouse (or former spouse). Tax forms 1040 You can show that when you signed the joint return you did not know, and had no reason to know, that the understated tax existed (or the extent to which the understated tax existed). Tax forms 1040 See Actual Knowledge or Reason To Know, later. Tax forms 1040 Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated tax. Tax forms 1040 See Indications of Unfairness for Innocent Spouse Relief , later. Tax forms 1040 Innocent spouse relief will not be granted if the IRS proves that you and your spouse (or former spouse) transferred property to one another as part of a fraudulent scheme. Tax forms 1040 A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. Tax forms 1040 Understated Tax You have an understated tax if the IRS determined that your total tax should be more than the amount that was actually shown on your return. Tax forms 1040 Erroneous Items Erroneous items are either of the following. Tax forms 1040 Unreported income. Tax forms 1040 This is any gross income item received by your spouse (or former spouse) that is not reported. Tax forms 1040 Incorrect deduction, credit, or basis. Tax forms 1040 This is any improper deduction, credit, or property basis claimed by your spouse (or former spouse). Tax forms 1040 The following are examples of erroneous items. Tax forms 1040 The expense for which the deduction is taken was never paid or incurred. Tax forms 1040 For example, your spouse, a cash-basis taxpayer, deducted $10,000 of advertising expenses on Schedule C of your joint Form 1040, but never paid for any advertising. Tax forms 1040 The expense does not qualify as a deductible expense. Tax forms 1040 For example, your spouse claimed a business fee deduction of $10,000 that was for the payment of state fines. Tax forms 1040 Fines are not deductible. Tax forms 1040 No factual argument can be made to support the deductibility of the expense. Tax forms 1040 For example, your spouse claimed $4,000 for security costs related to a home office, which were actually veterinary and food costs for your family's two dogs. Tax forms 1040 Actual Knowledge or Reason To Know You knew or had reason to know of an understated tax if: You actually knew of the understated tax, or A reasonable person in similar circumstances would have known of the understated tax. Tax forms 1040 Actual knowledge. Tax forms 1040   If you actually knew about an erroneous item that belongs to your spouse (or former spouse), the relief discussed here does not apply to any part of the understated tax due to that item. Tax forms 1040 You and your spouse (or former spouse) remain jointly liable for that part of the understated tax. Tax forms 1040 For information about the criteria for determining whether you actually knew about an erroneous item, see Actual Knowledge later under Separation of Liability Relief. Tax forms 1040 Reason to know. Tax forms 1040   If you had reason to know about an erroneous item that belongs to your spouse (or former spouse), the relief discussed here does not apply to any part of the understated tax due to that item. Tax forms 1040 You and your spouse (or former spouse) remain jointly liable for that part of the understated tax. Tax forms 1040   The IRS will consider all facts and circumstances in determining whether you had reason to know of an understated tax due to an erroneous item. Tax forms 1040 The facts and circumstances include: The nature of the erroneous item and the amount of the erroneous item relative to other items. Tax forms 1040 The financial situation of you and your spouse (or former spouse). Tax forms 1040 Your educational background and business experience. Tax forms 1040 The extent of your participation in the activity that resulted in the erroneous item. Tax forms 1040 Whether you failed to ask, at or before the time the return was signed, about items on the return or omitted from the return that a reasonable person would question. Tax forms 1040 Whether the erroneous item represented a departure from a recurring pattern reflected in prior years' returns (for example, omitted income from an investment regularly reported on prior years' returns). Tax forms 1040 Partial relief when a portion of erroneous item is unknown. Tax forms 1040   You may qualify for partial relief if, at the time you filed your return, you had no knowledge or reason to know of only a portion of an erroneous item. Tax forms 1040 You will be relieved of the understated tax due to that portion of the item if all other requirements are met for that portion. Tax forms 1040 Example. Tax forms 1040 At the time you signed your joint return, you knew that your spouse did not report $5,000 of gambling winnings. Tax forms 1040 The IRS examined your tax return several months after you filed it and determined that your spouse's unreported gambling winnings were actually $25,000. Tax forms 1040 You established that you did not know about, and had no reason to know about, the additional $20,000 because of the way your spouse handled gambling winnings. Tax forms 1040 The understated tax due to the $20,000 will qualify for innocent spouse relief if you meet the other requirements. Tax forms 1040 The understated tax due to the $5,000 of gambling winnings you knew about will not qualify for relief. Tax forms 1040 Indications of Unfairness for Innocent Spouse Relief The IRS will consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold you responsible for the understated tax. Tax forms 1040 The following are examples of factors the IRS will consider. Tax forms 1040 Whether you received a significant benefit (defined below), either directly or indirectly, from the understated tax. Tax forms 1040 Whether your spouse (or former spouse) deserted you. Tax forms 1040 Whether you and your spouse have been divorced or separated. Tax forms 1040 Whether you received a benefit on the return from the understated tax. Tax forms 1040 For other factors, see Factors for Determining Whether To Grant Equitable Relief later under Equitable Relief. Tax forms 1040 Significant benefit. Tax forms 1040   A significant benefit is any benefit in excess of normal support. Tax forms 1040 Normal support depends on your particular circumstances. Tax forms 1040 Evidence of a direct or indirect benefit may consist of transfers of property or rights to property, including transfers that may be received several years after the year of the understated tax. Tax forms 1040 Example. Tax forms 1040 You receive money from your spouse that is beyond normal support. Tax forms 1040 The money can be traced to your spouse's lottery winnings that were not reported on your joint return. Tax forms 1040 You will be considered to have received a significant benefit from that income. Tax forms 1040 This is true even if your spouse gives you the money several years after he or she received it. Tax forms 1040 Separation of Liability Relief Under this type of relief, the understated tax (plus interest and penalties) on your joint return is allocated between you and your spouse (or former spouse). Tax forms 1040 The understated tax allocated to you is generally the amount you are responsible for. Tax forms 1040 This type of relief is available only for unpaid liabilities resulting from the understated tax. Tax forms 1040 Refunds are not allowed. Tax forms 1040 To request separation of liability relief, you must have filed a joint return and meet either of the following requirements at the time you file Form 8857. Tax forms 1040 You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. Tax forms 1040 (Under this rule, you are no longer married if you are widowed. Tax forms 1040 ) You were not a member of the same household (explained below) as the spouse with whom you filed the joint return at any time during the 12-month per- iod ending on the date you file Form 8857. Tax forms 1040 Members of the same household. Tax forms 1040   You and your spouse are not members of the same household if you are living apart and are estranged. Tax forms 1040 However, you and your spouse are considered members of the same household if any of the following conditions are met. Tax forms 1040 You and your spouse reside in the same dwelling. Tax forms 1040 You and your spouse reside in separate dwellings but are not estranged, and one of you is temporarily absent from the other's household as explained in (3) below. Tax forms 1040 Either spouse is temporarily absent from the household and it is reasonable to assume that the absent spouse will return to the household, and the household or a substantially equivalent household is maintained in anticipation of the absent spouse's return. Tax forms 1040 Examples of temporary absences include absence due to imprisonment, illness, business, vacation, military service, or education. Tax forms 1040 Burden of proof. Tax forms 1040   You must be able to prove that you meet all of the requirements for separation of liability relief (except actual knowledge) and that you did not transfer property to avoid tax (discussed later). Tax forms 1040 You must also establish the basis for allocating the erroneous items. Tax forms 1040 Limitations on Relief Even if you meet the requirements discussed previously, separation of liability relief will not be granted in the following situations. Tax forms 1040 The IRS proves that you and your spouse (or former spouse) transferred assets to one another as part of a fraudulent scheme. Tax forms 1040 A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. Tax forms 1040 The IRS proves that at the time you signed your joint return, you had actual knowledge (explained below) of any erroneous items giving rise to the deficiency that were allocable to your spouse (or former spouse). Tax forms 1040 For the definition of erroneous items, see Erroneous Items earlier under Innocent Spouse Relief. Tax forms 1040 Your spouse (or former spouse) transferred property to you to avoid tax or the payment of tax. Tax forms 1040 See Transfers of Property To Avoid Tax , later. Tax forms 1040 Actual Knowledge The relief discussed here does not apply to any part of the understated tax due to your spouse's (or former spouse's) erroneous items of which you had actual knowledge. Tax forms 1040 You and your spouse (or former spouse) remain jointly and severally liable for this part of the understated tax. Tax forms 1040 If you had actual knowledge of only a portion of an erroneous item, the IRS will not grant relief for that portion of the item. Tax forms 1040 You had actual knowledge of an erroneous item if: You knew that an item of unreported income was received. Tax forms 1040 (This rule applies whether or not there was a receipt of cash. Tax forms 1040 ) You knew of the facts that made an incorrect deduction or credit unallowable. Tax forms 1040 For a false or inflated deduction, you knew that the expense was not incurred, or not incurred to the extent shown on the tax return. Tax forms 1040 Knowledge of the source of an erroneous item is not sufficient to establish actual knowledge. Tax forms 1040 Also, your actual knowledge may not be inferred when you merely had a reason to know of the erroneous item. Tax forms 1040 Similarly, the IRS does not have to establish that you knew of the source of an erroneous item in order to establish that you had actual knowledge of the item itself. Tax forms 1040 Your actual knowledge of the proper tax treatment of an erroneous item is not relevant for purposes of demonstrating that you had actual knowledge of that item. Tax forms 1040 Neither is your actual knowledge of how the erroneous item was treated on the tax return. Tax forms 1040 For example, if you knew that your spouse received dividend income, relief is not available for that income even if you did not know it was taxable. Tax forms 1040 Example. Tax forms 1040 Bill and Karen Green filed a joint return showing Karen's wages of $50,000 and Bill's self-employment income of $10,000. Tax forms 1040 The IRS audited their return and found that Bill did not report $20,000 of self-employment income. Tax forms 1040 The additional income resulted in a $6,000 understated tax, plus interest and penalties. Tax forms 1040 After obtaining a legal separation from Bill, Karen filed Form 8857 to request separation of liability relief. Tax forms 1040 The IRS proved that Karen actually knew about the $20,000 of additional income at the time she signed the joint return. Tax forms 1040 Bill is liable for all of the understated tax, interest, and penalties because all of it was due to his unreported income. Tax forms 1040 Karen is also liable for the understated tax, interest, and penalties due to the $20,000 of unreported income because she actually knew of the item. Tax forms 1040 The IRS can collect the entire $6,000 plus interest and penalties from either Karen or Bill because they are jointly and individually liable for it. Tax forms 1040 Factors supporting actual knowledge. Tax forms 1040   The IRS may rely on all facts and circumstances in determining whether you actually knew of an erroneous item at the time you signed the return. Tax forms 1040 The following are examples of factors the IRS may use. Tax forms 1040 Whether you made a deliberate effort to avoid learning about the item in order to be shielded from liability. Tax forms 1040 Whether you and your spouse (or former spouse) jointly owned the property that resulted in the erroneous item. Tax forms 1040 Exception for spousal abuse or domestic violence. Tax forms 1040   Even if you had actual knowledge, you may still qualify for relief if you establish that: You were the victim of spousal abuse or domestic violence before signing the return, and Because of that abuse, you did not challenge the treatment of any items on the return because you were afraid your spouse (or former spouse) would retaliate against you. Tax forms 1040   If you establish that you signed your joint return under duress (threat of harm or other form of coercion), then it is not a joint return, and you are not liable for any tax shown on that return or any tax deficiency for that return. Tax forms 1040 However, you may be required to file a separate return for that tax year. Tax forms 1040 For more information about duress, see the instructions for Form 8857. Tax forms 1040 Transfers of Property To Avoid Tax If your spouse (or former spouse) transfers property (or the right to property) to you for the main purpose of avoiding tax or payment of tax, the tax liability allocated to you will be increased by the fair market value of the property on the date of the transfer. Tax forms 1040 The increase may not be more than the entire amount of the liability. Tax forms 1040 A transfer will be presumed to have as its main purpose the avoidance of tax or payment of tax if the transfer is made after the date that is 1 year before the date on which the IRS sent its first letter of proposed deficiency. Tax forms 1040 This presumption will not apply if: The transfer was made under a divorce decree, separate maintenance agreement, or a written instrument incident to such an agreement, or You establish that the transfer did not have as its main purpose the avoidance of tax or payment of tax. Tax forms 1040 If the presumption does not apply, but the IRS can establish that the purpose of the transfer was the avoidance of tax or payment of tax, the tax liability allocated to you will be increased as explained above. Tax forms 1040 Equitable Relief If you do not qualify for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law, you may still be relieved of responsibility for tax, interest, and penalties through equitable relief. Tax forms 1040 Unlike innocent spouse relief or separation of liability relief, you can get equitable relief from an understated tax (defined earlier under Innocent Spouse Relief ) or an underpaid tax. Tax forms 1040 An underpaid tax is an amount of tax you properly reported on your return but you have not paid. Tax forms 1040 For example, your joint 2009 return shows that you and your spouse owed $5,000. Tax forms 1040 You paid $2,000 with the return. Tax forms 1040 You have an underpaid tax of $3,000. Tax forms 1040 Conditions for Getting Equitable Relief You may qualify for equitable relief if you meet all of the following conditions. Tax forms 1040 You are not eligible for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law. Tax forms 1040 You have an understated tax or an underpaid tax. Tax forms 1040 You did not pay the tax. Tax forms 1040 However, see Refunds , later, for situations in which you are entitled to a refund of payments you made. Tax forms 1040 You establish that, taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated or underpaid tax. Tax forms 1040 See Factors for Determining Whether To Grant Equitable Relief, later. Tax forms 1040 You and your spouse (or former spouse) did not transfer assets to one another as a part of a fraudulent scheme. Tax forms 1040 A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. Tax forms 1040 Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax. Tax forms 1040 See Transfers of Property To Avoid Tax, earlier, under Separation of Liability Relief. Tax forms 1040 You did not file or fail to file your return with the intent to commit fraud. Tax forms 1040 The income tax liability from which you seek relief must be attributable to an item of the spouse (or former spouse) with whom you filed the joint return, unless one of the following exceptions applies: The item is attributable or partially attributable to you solely due to the operation of community property law. Tax forms 1040 If you meet this exception, that item will be considered attributable to your spouse (or former spouse) for purposes of equitable relief. Tax forms 1040 If the item is titled in your name, the item is presumed to be attributable to you. Tax forms 1040 However, you can rebut this presumption based on the facts and circumstances. Tax forms 1040 You did not know, and had no reason to know, that funds intended for the payment of tax were misappropriated by your spouse (or former spouse) for his or her benefit. Tax forms 1040 If you meet this exception, the IRS will consider granting equitable relief although the underpaid tax may be attributable in part or in full to your item, and only to the extent the funds intended for payment were taken by your spouse (or former spouse). Tax forms 1040 You establish that you were the victim of spousal abuse or domestic violence before signing the return, and that, as a result of the prior abuse, you did not challenge the treatment of any items on the return for fear of your spouse's (or former spouse's) retaliation. Tax forms 1040 If you meet this exception, relief will be considered although the understated tax or underpaid tax may be attributable in part or in full to your item. Tax forms 1040 Factors for Determining Whether To Grant Equitable Relief The IRS will consider all of the facts and circumstances in order to determine whether it is unfair to hold you responsible for the understated or underpaid tax. Tax forms 1040 The following are examples of factors that the IRS will consider to determine whether to grant equitable relief. Tax forms 1040 The IRS will consider all factors and weigh them appropriately. Tax forms 1040 Relevant Factors The following are examples of factors that may be relevant to whether the IRS will grant equitable relief. Tax forms 1040 Whether you are separated (whether legally or not) or divorced from your spouse. Tax forms 1040 A temporary absence, such as an absence due to imprisonment, illness, business, vacation, military service, or education, is not considered separation for this purpose. Tax forms 1040 A temporary absence is one where it is reasonable to assume that the absent spouse will return to the household, and the household or a substantially equivalent household is maintained in anticipation of the absent spouse's return. Tax forms 1040 Whether you would suffer a significant economic hardship if relief is not granted. Tax forms 1040 (In other words, you would not be able to pay your reasonable basic living expenses. Tax forms 1040 ) Whether you have a legal obligation under a divorce decree or agreement to pay the tax. Tax forms 1040 This factor will not weigh in favor of relief if you knew or had reason to know, when entering into the divorce decree or agreement, that your former spouse would not pay the income tax liability. Tax forms 1040 Whether you received a significant benefit (beyond normal support) from the underpaid tax or item causing the understated tax. Tax forms 1040 (For a definition of significant benefit, see Indications of Unfairness for Innocent Spouse Relief earlier. Tax forms 1040 ) Whether you have made a good faith effort to comply with federal income tax laws for the tax year for which you are requesting relief or the following years. Tax forms 1040 Whether you knew or had reason to know about the items causing the understated tax or that the tax would not be paid, as explained next. Tax forms 1040 Knowledge or reason to know. Tax forms 1040   In the case of an underpaid tax, the IRS will consider whether you did not know and had no reason to know that your spouse (or former spouse) would not pay the income tax liability. Tax forms 1040   In the case of an income tax liability that arose from an understated tax, the IRS will consider whether you did not know and had no reason to know of the item causing the understated tax. Tax forms 1040 Reason to know of the item giving rise to the understated tax will not be weighed more heavily than other factors. Tax forms 1040 Actual knowledge of the item giving rise to the understated tax, however, is a strong factor weighing against relief. Tax forms 1040 This strong factor may be overcome if the factors in favor of equitable relief are particularly compelling. Tax forms 1040 Reason to know. Tax forms 1040   In determining whether you had reason to know, the IRS will consider your level of education, any deceit or evasiveness of your spouse (or former spouse), your degree of involvement in the activity generating the income tax liability, your involvement in business and household financial matters, your business or financial expertise, and any lavish or unusual expenditures compared with past spending levels. Tax forms 1040 Example. Tax forms 1040 You and your spouse filed a joint 2009 return. Tax forms 1040 That return showed you owed $10,000. Tax forms 1040 You had $5,000 of your own money and you took out a loan to pay the other $5,000. Tax forms 1040 You gave 2 checks for $5,000 each to your spouse to pay the $10,000 liability. Tax forms 1040 Without telling you, your spouse took the $5,000 loan and spent it on himself. Tax forms 1040 You and your spouse were divorced in 2010. Tax forms 1040 In addition, you had no knowledge or reason to know at the time you signed the return that the tax would not be paid. Tax forms 1040 These facts indicate to the IRS that it may be unfair to hold you liable for the $5,000 underpaid tax. Tax forms 1040 The IRS will consider these facts, together with all of the other facts and circumstances, to determine whether to grant you equitable relief from the $5,000 underpaid tax. Tax forms 1040 Factors Weighing in Favor of Equitable Relief The following are examples of factors that will weigh in favor of equitable relief, but will not weigh against equitable relief. Tax forms 1040 Whether your spouse (or former spouse) abused you. Tax forms 1040 Whether you were in poor mental or physical health on the date you signed the return or at the time you requested relief. Tax forms 1040 Refunds If you are granted relief, refunds are: Permitted under innocent spouse relief as explained later under Limit on Amount of Refund . Tax forms 1040 Not permitted under separation of liability relief. Tax forms 1040 Permitted in limited circumstances under equitable relief, as explained under Refunds Under Equitable Relief. Tax forms 1040 Proof Required The IRS will only refund payments you made with your own money. Tax forms 1040 However, you must provide proof that you made the payments with your own money. Tax forms 1040 Examples of proof are a copy of your bank statement or a canceled check. Tax forms 1040 No proof is required if your individual refund was used by the IRS to pay a tax you owed on a joint tax return for another year. Tax forms 1040 Refunds Under Equitable Relief In the following situations, you are eligible to receive a refund of certain payments you made. Tax forms 1040 Underpaid tax. Tax forms 1040   If you are granted relief for an underpaid tax, you are eligible for a refund of separate payments that you made after July 22, 1998. Tax forms 1040 However, you are not eligible for refunds of payments made with the joint return, joint payments, or payments that your spouse (or former spouse) made. Tax forms 1040 For example, withholding tax and estimated tax payments cannot be refunded because they are considered made with the joint return. Tax forms 1040   The amount of the refund is subject to the limit discussed later under Limit on Amount of Refund. Tax forms 1040 Understated tax. Tax forms 1040   If you are granted relief for an understated tax, you are eligible for a refund of certain payments made under an installment agreement that you entered into with the IRS, if you have not defaulted on the installment agreement. Tax forms 1040 You are not in default if the IRS did not issue you a notice of default or take any action to end the installment agreement. Tax forms 1040 Only installment payments made after the date you filed Form 8857 are eligible for a refund. Tax forms 1040   The amount of the refund is subject to the limit discussed next. Tax forms 1040 Limit on Amount of Refund The amount of your refund is limited. Tax forms 1040 Read the following chart to find out the limit. Tax forms 1040 IF you file Form 8857. Tax forms 1040 . Tax forms 1040 . Tax forms 1040 THEN the refund cannot be more than. Tax forms 1040 . Tax forms 1040 . Tax forms 1040 Within 3 years after filing your return The part of the tax paid within 3 years (plus any extension of time for filing your return) before you filed Form 8857. Tax forms 1040 After the 3-year period, but within 2 years from the time you paid the tax The tax you paid within 2 years immediately before you filed Form 8857. Tax forms 1040 Filled-in Form 8857 This part explains how Janie Boulder fills out Form 8857 to request innocent spouse relief. Tax forms 1040 Janie and Joe Boulder filed a joint tax return for 2007. Tax forms 1040 They claimed one dependency exemption for their son Michael. Tax forms 1040 Their return was adjusted by the IRS because Joe did not report a $5,000 award he won that year. Tax forms 1040 Janie did not know about the award when the return was filed. Tax forms 1040 They agreed to the adjustment but could not pay the additional amount due of $815 ($650 tax + $165 penalty and interest). Tax forms 1040 Janie and Joe were divorced on May 13, 2009. Tax forms 1040 In February 2010, Janie filed her 2009 federal income tax return as head of household. Tax forms 1040 She expected a refund of $1,203. Tax forms 1040 In May 2010, she received a notice informing her that the IRS had offset her refund against the $815 owed on her joint 2007 income tax return and that she had a right to file Form 8857. Tax forms 1040 Janie applies the conditions listed earlier under Innocent Spouse Relief to see if she qualifies for relief. Tax forms 1040 Janie meets the first and second conditions because the joint tax return they filed has an understated tax due to Joe's erroneous item. Tax forms 1040 Janie believes she meets the third condition. Tax forms 1040 She did not know about the award and had no reason to know about it because of the secretive way Joe conducted his financial affairs. Tax forms 1040 Janie believes she meets the fourth condition. Tax forms 1040 She believes it would be unfair to be held liable for the tax because she did not benefit from the award. Tax forms 1040 Joe spent it on personal items for his use only. Tax forms 1040 Because Janie believes she qualifies for innocent spouse relief, she first completes Part I of Form 8857 to determine if she should file the form. Tax forms 1040 In Part I, she makes all entries under the Tax Year 1 column because she is requesting relief for only one year. Tax forms 1040 Part I Line 1. Tax forms 1040   She enters “2007” on line 1 because this is the tax year for which she is requesting relief. Tax forms 1040 Line 2. Tax forms 1040   She checks the box because she wants a refund. Tax forms 1040 Note. Tax forms 1040 Because the IRS used her individual refund to pay the tax owed on the joint tax return, she does not need to provide proof of payment. Tax forms 1040 Line 3. Tax forms 1040   She checks the “No” box because the IRS did not use her share of a joint refund to pay Joe's past-due debts. Tax forms 1040 Line 4. Tax forms 1040   She checks the “Yes” box because she filed a joint tax return for tax year 2007. Tax forms 1040 Line 5. Tax forms 1040   She skips this line because she checked the “Yes” box on line 4. Tax forms 1040 Part II Line 6. Tax forms 1040   She enters her name, address, social security number, county, and best daytime phone number. Tax forms 1040 Part III Line 7. Tax forms 1040   She enters Joe's name, address, social security number, and best daytime phone number. Tax forms 1040 Line 8. Tax forms 1040   She checks the “divorced since” box and enters the date she was divorced as “05/13/2009. Tax forms 1040 ” She attaches a copy of her entire divorce decree (not Illustrated) to the form. Tax forms 1040 Line 9. Tax forms 1040   She checks the box for “High school diploma, equivalent, or less,” because she had completed high school when her 2007 joint tax return was filed. Tax forms 1040 Line 10. Tax forms 1040   She checks the “No” box because she was not a victim of spousal abuse or domestic violence. Tax forms 1040 Line 11. Tax forms 1040   She checks the “No” box because neither she nor Joe incurred any large expenses during the year for which she wants relief. Tax forms 1040 Line 12. Tax forms 1040   She checks the “Yes” box because she signed the 2007 joint tax return. Tax forms 1040 Line 13. Tax forms 1040   She checks the “No” box because she did not have a mental or physical condition when the return was filed and does not have one now. Tax forms 1040 Part IV Line 14. Tax forms 1040   Because she was not involved in preparing the return, she checks the box, “You were not involved in preparing the returns. Tax forms 1040 ” Line 15. Tax forms 1040   She checks the box, “You did not know anything was incorrect or missing” because she did not know that Joe had received a $5,000 award. Tax forms 1040 She explains this in the space provided. Tax forms 1040 Line 16. Tax forms 1040   She checks the box, “You knew that person had income” because she knew Joe had income from wages. Tax forms 1040 She also lists Joe's income. Tax forms 1040 Under “Type of Income” she enters “wages. Tax forms 1040 ” Under “Who paid it to that person,” she enters the name of Joe's employer, “Allied. Tax forms 1040 ” Under “Tax Year 1” she enters the amount of Joe's wages, “$40,000. Tax forms 1040 ” Because she is only requesting relief for one tax year, she leaves the entry spaces for “Tax Year 2” and “Tax Year 3” blank. Tax forms 1040 Line 17. Tax forms 1040   She checks the “No” box because she did not know any amount was owed to the IRS when the 2007 return was signed. Tax forms 1040 Line 18. Tax forms 1040   She checks the “No” box because, when the return was signed, she was not having financial problems. Tax forms 1040 Line 19. Tax forms 1040   She checks the box, “You were not involved in handling money for the household” because Joe handled all the money for the household. Tax forms 1040 She provides additional information in the space provided. Tax forms 1040 Line 20. Tax forms 1040   She checks the “No” box because Joe has never transferred money or property to her. Tax forms 1040 Part V Line 21. Tax forms 1040   She enters the number “1” on both the line for “Adults” and the line for “Children” because her current household consists of herself and her son. Tax forms 1040 Line 22. Tax forms 1040   She enters her average monthly income for her entire household. Tax forms 1040 Line 23. Tax forms 1040   She lists her assets, which are $500 for the fair market value of a car, $450 in her checking account, and $100 in her savings account. Tax forms 1040 Signing and mailing Form 8857. Tax forms 1040    Janie signs and dates the form. Tax forms 1040 She attaches the copy of her divorce decree (not illustrated) required by line 8. Tax forms 1040 Finally, she sends the form to the IRS address or fax number shown in the instructions for Form 8857. Tax forms 1040 This image is too large to be displayed in the current screen. Tax forms 1040 Please click the link to view the image. Tax forms 1040 Boulder's filled-in Form 8857 page 1 This image is too large to be displayed in the current screen. Tax forms 1040 Please click the link to view the image. Tax forms 1040 Boulder's filled-in Form 8857 page 2 This image is too large to be displayed in the current screen. Tax forms 1040 Please click the link to view the image. Tax forms 1040 Boulder's filled-in Form 8857 page 3 This image is too large to be displayed in the current screen. Tax forms 1040 Please click the link to view the image. Tax forms 1040 Boulder's filled-in Form 8857 page 4 Flowcharts The following flowcharts provide a quick way for determining whether you may qualify for relief. Tax forms 1040 But do not rely on these flowcharts alone. Tax forms 1040 Also read the earlier discussions. Tax forms 1040 Figure A. Tax forms 1040 Do You Qualify for Innocent Spouse Relief? Please click here for the text description of the image. Tax forms 1040 "Do You Qualify for Innocent Spouse Relief?" Figure B. Tax forms 1040 Do You Qualify for Separation of Liability Relief? Please click here for the text description of the image. Tax forms 1040 "Do You Qualify for Separation of Liability Relief?" Figure C. Tax forms 1040 Do You Qualify for Equitable Relief? This image is too large to be displayed in the current screen. Tax forms 1040 Please click the link to view the image. Tax forms 1040 "Do You Qualify for Equitable Relief?" Prev  Up  Next   Home   More Online Publications
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The Tax Forms 1040

Tax forms 1040 28. Tax forms 1040   Miscellaneous Deductions Table of Contents What's New Introduction Useful Items - You may want to see: Deductions Subject to the 2% LimitUnreimbursed Employee Expenses (Line 21) Tax Preparation Fees (Line 22) Other Expenses (Line 23) Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses What's New Standard mileage rate. Tax forms 1040  The 2013 rate for business use of a vehicle is 56½ cents per mile. Tax forms 1040 Introduction This chapter explains which expenses you can claim as miscellaneous itemized deductions on Schedule A (Form 1040). Tax forms 1040 You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. Tax forms 1040 This chapter covers the following topics. Tax forms 1040 Deductions subject to the 2% limit. Tax forms 1040 Deductions not subject to the 2% limit. Tax forms 1040 Expenses you cannot deduct. Tax forms 1040 You must keep records to verify your deductions. Tax forms 1040 You should keep receipts, canceled checks, substitute checks, financial account statements, and other documentary evidence. Tax forms 1040 For more information on recordkeeping, get Publication 552, Record- keeping for Individuals. Tax forms 1040 Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) 946 How To Depreciate Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040). Tax forms 1040 You can claim the amount of expenses that is more than 2% of your adjusted gross income. Tax forms 1040 You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Tax forms 1040 Your adjusted gross income is the amount on Form 1040, line 38. Tax forms 1040 Generally, you apply the 2% limit after you apply any other deduction limit. Tax forms 1040 For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed in chapter 26) before you apply the 2% limit. Tax forms 1040 Deductions subject to the 2% limit are discussed in the three categories in which you report them on Schedule A (Form 1040). Tax forms 1040 Unreimbursed employee expenses (line 21). Tax forms 1040 Tax preparation fees (line 22). Tax forms 1040 Other expenses (line 23). Tax forms 1040 Unreimbursed Employee Expenses (Line 21) Generally, you can deduct on Schedule A (Form 1040), line 21, unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. Tax forms 1040 An expense is ordinary if it is common and accepted in your trade, business, or profession. Tax forms 1040 An expense is necessary if it is appropriate and helpful to your business. Tax forms 1040 An expense does not have to be required to be considered necessary. Tax forms 1040 Examples of unreimbursed employee expenses are listed next. Tax forms 1040 The list is followed by discussions of additional unreimbursed employee expenses. Tax forms 1040 Business bad debt of an employee. Tax forms 1040 Education that is work related. Tax forms 1040 (See chapter 27. Tax forms 1040 ) Legal fees related to your job. Tax forms 1040 Licenses and regulatory fees. Tax forms 1040 Malpractice insurance premiums. Tax forms 1040 Medical examinations required by an employer. Tax forms 1040 Occupational taxes. Tax forms 1040 Passport for a business trip. Tax forms 1040 Subscriptions to professional journals and trade magazines related to your work. Tax forms 1040 Travel, transportation, entertainment, and gifts related to your work. Tax forms 1040 (See chapter 26. Tax forms 1040 ) Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. Tax forms 1040 Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer that are attributable to the pay you received from that employer. Tax forms 1040 Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. Tax forms 1040 For more information about the rules and exceptions to the rules affecting the allowable deductions for a home computer, see Publication 529. Tax forms 1040 Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. Tax forms 1040 Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. Tax forms 1040 Lobbying and political activities. Tax forms 1040   You may not be able to deduct that part of your dues that is for certain lobbying and political activities. Tax forms 1040 See Dues used for lobbying under Nondeductible Expenses, later. Tax forms 1040 Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. Tax forms 1040 If you file Form 1040A, you can deduct these expenses on line 16. Tax forms 1040 If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. Tax forms 1040 However, neither spouse can deduct more than $250 of his or her qualified expenses. Tax forms 1040 Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. Tax forms 1040 You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. Tax forms 1040 The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. Tax forms 1040 See Publication 587 for more detailed information and a worksheet. Tax forms 1040 Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. Tax forms 1040 You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. Tax forms 1040 Employment and outplacement agency fees. Tax forms 1040   You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. Tax forms 1040 Employer pays you back. Tax forms 1040   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. Tax forms 1040 (See Recoveries in chapter 12. Tax forms 1040 ) Employer pays the employment agency. Tax forms 1040   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. Tax forms 1040 Résumé. Tax forms 1040   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. Tax forms 1040 Travel and transportation expenses. Tax forms 1040   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. Tax forms 1040 You can deduct the travel expenses if the trip is primarily to look for a new job. Tax forms 1040 The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. Tax forms 1040   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. Tax forms 1040   You can choose to use the standard mileage rate to figure your car expenses. Tax forms 1040 The 2013 rate for business use of a vehicle is 56½ cents per mile. Tax forms 1040 See chapter 26 for more information. Tax forms 1040 Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. Tax forms 1040 Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Tax forms 1040 If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. Tax forms 1040 Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. Tax forms 1040 If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. Tax forms 1040 Research Expenses of a College Professor If you are a college professor, you can deduct research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. Tax forms 1040 You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. Tax forms 1040 However, you cannot deduct the cost of travel as a form of education. Tax forms 1040 Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. Tax forms 1040 You can depreciate the cost of tools that have a useful life substantially beyond the tax year. Tax forms 1040 For more information about depreciation, see Publication 946. Tax forms 1040 Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. Tax forms 1040 You can also deduct assessments for benefit payments to unemployed union members. Tax forms 1040 However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Tax forms 1040 Also, you cannot deduct contributions to a pension fund, even if the union requires you to make the contributions. Tax forms 1040 You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. Tax forms 1040 See Lobbying Expenses under Nondeductible Expenses, later. Tax forms 1040 Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. Tax forms 1040 You must wear them as a condition of your employment. Tax forms 1040 The clothes are not suitable for everyday wear. Tax forms 1040 It is not enough that you wear distinctive clothing. Tax forms 1040 The clothing must be specifically required by your employer. Tax forms 1040 Nor is it enough that you do not, in fact, wear your work clothes away from work. Tax forms 1040 The clothing must not be suitable for taking the place of your regular clothing. Tax forms 1040 Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. Tax forms 1040 ). Tax forms 1040 Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. Tax forms 1040 However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. Tax forms 1040 Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. Tax forms 1040 Protective clothing. Tax forms 1040   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. Tax forms 1040   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. Tax forms 1040 Military uniforms. Tax forms 1040   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. Tax forms 1040 However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. Tax forms 1040 In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. Tax forms 1040   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. Tax forms 1040   You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. Tax forms 1040 Tax Preparation Fees (Line 22) You can usually deduct tax preparation fees in the year you pay them. Tax forms 1040 Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. Tax forms 1040 These fees include the cost of tax preparation software programs and tax publications. Tax forms 1040 They also include any fee you paid for electronic filing of your return. Tax forms 1040 Other Expenses (Line 23) You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2% limit. Tax forms 1040 On Schedule A (Form 1040), line 23, you can deduct expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. Tax forms 1040 You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonably and closely related to these purposes. Tax forms 1040 Some of these other expenses are explained in the following discussions. Tax forms 1040 If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses , later, under Nondeductible Expenses. Tax forms 1040 Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. Tax forms 1040 Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. Tax forms 1040 First report the loss in Section B of Form 4684, Casualties and Thefts. Tax forms 1040 You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Tax forms 1040 To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Tax forms 1040 For other casualty and theft losses, see chapter 25. Tax forms 1040 Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. Tax forms 1040 Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. Tax forms 1040 The fees are deductible in the year paid. Tax forms 1040 Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). Tax forms 1040 You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. Tax forms 1040 But if you work as an employee and also use the computer in that work, see Publication 946. Tax forms 1040 Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. Tax forms 1040 Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. Tax forms 1040 The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. Tax forms 1040 For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. Tax forms 1040 Fees to Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. Tax forms 1040 But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. Tax forms 1040 You must add the fee to the cost of the property. Tax forms 1040 You cannot deduct the fee you pay to a broker to sell securities. Tax forms 1040 You can use the fee only to figure gain or loss from the sale. Tax forms 1040 See the Instructions for Form 8949 for information on how to report the fee. Tax forms 1040 Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. Tax forms 1040 A hobby is not a business because it is not carried on to make a profit. Tax forms 1040 See Activity not for profit in chapter 12 under Other Income. Tax forms 1040 Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. Tax forms 1040 Deductions of pass-through entities are passed through to the partners or shareholders. Tax forms 1040 The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. Tax forms 1040 Example. Tax forms 1040 You are a member of an investment club that is formed solely to invest in securities. Tax forms 1040 The club is treated as a partnership. Tax forms 1040 The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. Tax forms 1040 In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. Tax forms 1040 However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. Tax forms 1040 Publicly offered mutual funds. Tax forms 1040   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. Tax forms 1040 A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. Tax forms 1040   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). Tax forms 1040 This net figure is the amount you report on your return as income. Tax forms 1040 You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. Tax forms 1040 Information returns. Tax forms 1040   You should receive information returns from pass-through entities. Tax forms 1040 Partnerships and S corporations. Tax forms 1040   These entities issue Schedule K-1, which lists the items and amounts you must report and identifies the tax return schedules and lines to use. Tax forms 1040 Nonpublicly offered mutual funds. Tax forms 1040   These funds will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing your share of gross income and investment expenses. Tax forms 1040 You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. Tax forms 1040 Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. Tax forms 1040 Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. Tax forms 1040 You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce, if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. Tax forms 1040 You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F), on the appropriate schedule. Tax forms 1040 You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040). Tax forms 1040 See Tax Preparation Fees , earlier. Tax forms 1040 Loss on Deposits For information on whether, and if so, how, you may deduct a loss on your deposit in a qualified financial institution, see Loss on Deposits in chapter 25. Tax forms 1040 Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. Tax forms 1040 If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. Tax forms 1040 If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. Tax forms 1040 Repayments of Social Security Benefits For information on how to deduct your repayments of certain social security benefits, see Repayments More Than Gross Benefits in chapter 11. Tax forms 1040 Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. Tax forms 1040 You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. Tax forms 1040 Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. Tax forms 1040 These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. Tax forms 1040 Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your individual retirement arrangement (IRA) are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. Tax forms 1040 For more information about IRAs, see chapter 17. Tax forms 1040 Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. Tax forms 1040 They are not subject to the 2% limit. Tax forms 1040 Report these items on Schedule A (Form 1040), line 28. Tax forms 1040 List of Deductions Each of the following items is discussed in detail after the list (except where indicated). Tax forms 1040 Amortizable premium on taxable bonds. Tax forms 1040 Casualty and theft losses from income- producing property. Tax forms 1040 Federal estate tax on income in respect of a decedent. Tax forms 1040 Gambling losses up to the amount of gambling winnings. Tax forms 1040 Impairment-related work expenses of persons with disabilities. Tax forms 1040 Loss from other activities from Schedule K-1 (Form 1065-B), box 2. Tax forms 1040 Losses from Ponzi-type investment schemes. Tax forms 1040 See Losses from Ponzi-type investment schemes under Theft in chapter 25. Tax forms 1040 Repayments of more than $3,000 under a claim of right. Tax forms 1040 Unrecovered investment in an annuity. Tax forms 1040 Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. Tax forms 1040 You can elect to amortize the premium on taxable bonds. Tax forms 1040 The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. Tax forms 1040 Part of the premium on some bonds may be a miscellaneous deduction not subject to the 2% limit. Tax forms 1040 For more information, see Amortizable Premium on Taxable Bonds in Publication 529, and Bond Premium Amortization in chapter 3 of Publication 550, Investment Income and Expenses. Tax forms 1040 Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). Tax forms 1040 First, report the loss in Form 4684, Section B. Tax forms 1040 You may also have to include the loss on Form 4797, Sales of Business Property if you are otherwise required to file that form. Tax forms 1040 To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Tax forms 1040 For more information on casualty and theft losses, see chapter 25. Tax forms 1040 Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. Tax forms 1040 Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. Tax forms 1040 See Publication 559 for more information. Tax forms 1040 Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. Tax forms 1040 You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. Tax forms 1040 You cannot deduct gambling losses that are more than your winnings. Tax forms 1040 You cannot reduce your gambling winnings by your gambling losses and report the difference. Tax forms 1040 You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Tax forms 1040 Therefore, your records should show your winnings separately from your losses. Tax forms 1040 Diary of winnings and losses. Tax forms 1040 You must keep an accurate diary or similar record of your losses and winnings. Tax forms 1040 Your diary should contain at least the following information. Tax forms 1040 The date and type of your specific wager or wagering activity. Tax forms 1040 The name and address or location of the gambling establishment. Tax forms 1040 The names of other persons present with you at the gambling establishment. Tax forms 1040 The amount(s) you won or lost. Tax forms 1040 See Publication 529 for more information. Tax forms 1040 Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. Tax forms 1040 Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and for other expenses in connection with your place of work that are necessary for you to be able to work. Tax forms 1040 Self-employed. Tax forms 1040   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. Tax forms 1040 Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28. Tax forms 1040 It is not subject to the passive activity limitations. Tax forms 1040 Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid or take a credit against your tax. Tax forms 1040 See Repayments in chapter 12 for more information. Tax forms 1040 Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. Tax forms 1040 If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. Tax forms 1040 See chapter 10 for more information about the tax treatment of pensions and annuities. Tax forms 1040 Nondeductible Expenses Examples of nondeductible expenses are listed next. Tax forms 1040 The list is followed by discussions of additional nondeductible expenses. Tax forms 1040 List of Nondeductible Expenses Broker's commissions that you paid in connection with your IRA or other investment property. Tax forms 1040 Burial or funeral expenses, including the cost of a cemetery lot. Tax forms 1040 Capital expenses. Tax forms 1040 Fees and licenses, such as car licenses, marriage licenses, and dog tags. Tax forms 1040 Hobby losses, but see Hobby Expenses , earlier. Tax forms 1040 Home repairs, insurance, and rent. Tax forms 1040 Illegal bribes and kickbacks. Tax forms 1040 See Bribes and kickbacks in chapter 11 of Publication 535. Tax forms 1040 Losses from the sale of your home, furniture, personal car, etc. Tax forms 1040 Personal disability insurance premiums. Tax forms 1040 Personal, living, or family expenses. Tax forms 1040 The value of wages never received or lost vacation time. Tax forms 1040 Adoption Expenses You cannot deduct the expenses of adopting a child, but you may be able to take a credit for those expenses. Tax forms 1040 See chapter 37. Tax forms 1040 Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. Tax forms 1040 These include qualification and registration fees for primary elections. Tax forms 1040 Legal fees. Tax forms 1040   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. Tax forms 1040 Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. Tax forms 1040 Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. Tax forms 1040 This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. Tax forms 1040 You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. Tax forms 1040 Dues paid to airline, hotel, and luncheon clubs are not deductible. Tax forms 1040 Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). Tax forms 1040 If you haul tools, instruments, or other items, in your car to and from work, you can deduct only the additional cost of hauling the items such as the rent on a trailer to carry the items. Tax forms 1040 Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. Tax forms 1040 This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Tax forms 1040 Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. Tax forms 1040 Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. Tax forms 1040 Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. Tax forms 1040 However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. Tax forms 1040 See Home Office under Unreimbursed Employee Expenses, earlier, and Security System under Deducting Expenses in Publication 587. Tax forms 1040 Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. Tax forms 1040 Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. Tax forms 1040 You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. Tax forms 1040 See chapter 18 for information on alimony. Tax forms 1040 Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. Tax forms 1040 These include expenses to: Influence legislation, Participate or intervene in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. Tax forms 1040 Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. Tax forms 1040 Dues used for lobbying. Tax forms 1040   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. Tax forms 1040 See Lobbying Expenses in Publication 529 for information on exceptions. Tax forms 1040 Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. Tax forms 1040 However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Tax forms 1040 See chapter 25. Tax forms 1040 Example. Tax forms 1040 A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Tax forms 1040 The diamond falls from the ring and is never found. Tax forms 1040 The loss of the diamond is a casualty. Tax forms 1040 Lunches with Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. Tax forms 1040 See chapter 26 for information on deductible expenses while traveling away from home. Tax forms 1040 Meals While Working Late You cannot deduct the cost of meals while working late. Tax forms 1040 However, you may be able to claim a deduction if the cost of meals is a deductible entertainment expense, or if you are traveling away from home. Tax forms 1040 See chapter 26 for information on deductible entertainment expenses and expenses while traveling away from home. Tax forms 1040 Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. Tax forms 1040 Custody of children. Tax forms 1040 Breach of promise to marry suit. Tax forms 1040 Civil or criminal charges resulting from a personal relationship. Tax forms 1040 Damages for personal injury, except for certain unlawful discrimination and whistleblower claims. Tax forms 1040 Preparation of a title (or defense or perfection of a title). Tax forms 1040 Preparation of a will. Tax forms 1040 Property claims or property settlement in a divorce. Tax forms 1040 You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. Tax forms 1040 Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Tax forms 1040 Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. Tax forms 1040 Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. Tax forms 1040 Accounting certificate fees paid for the initial right to practice accounting. Tax forms 1040 Bar exam fees and incidental expenses in securing initial admission to the bar. Tax forms 1040 Medical and dental license fees paid to get initial licensing. Tax forms 1040 Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. Tax forms 1040 Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. Tax forms 1040 Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. Tax forms 1040 Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. Tax forms 1040 You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. Tax forms 1040 Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. Tax forms 1040 You cannot deduct interest on a debt incurred or continued to buy or carry  tax-exempt securities. Tax forms 1040 If you have expenses to produce both taxable and tax-exempt income, but you cannot identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct. Tax forms 1040 Example. Tax forms 1040 During the year, you received taxable interest of $4,800 and tax-exempt interest of $1,200. Tax forms 1040 In earning this income, you had total expenses of $500 during the year. Tax forms 1040 You cannot identify the amount of each expense item that is for each income item. Tax forms 1040 Therefore, 80% ($4,800/$6,000) of the expense is for the taxable interest and 20% ($1,200/$6,000) is for the tax-exempt interest. Tax forms 1040 You can deduct, subject to the 2% limit, expenses of $400 (80% of $500). Tax forms 1040 Travel Expenses for Another Individual You generally cannot deduct travel expenses you pay or incur for a spouse, dependent, or other individual who accompanies you (or your employee) on business or personal travel unless the spouse, dependent, or other individual is an employee of the taxpayer, the travel is for a bona fide business purpose, and such expenses would otherwise be deductible by the spouse, dependent, or other individual. Tax forms 1040 See chapter 26 for more information on deductible travel expenses. Tax forms 1040 Voluntary Unemployment Benefit Fund Contributions You cannot deduct voluntary unemployment benefit fund contributions you make to a union fund or a private fund. Tax forms 1040 However, you can deduct contributions as taxes if state law requires you to make them to a state unemployment fund that covers you for the loss of wages from unemployment caused by business conditions. Tax forms 1040 Wristwatches You cannot deduct the cost of a wristwatch, even if there is a job requirement that you know the correct time to properly perform your duties. Tax forms 1040 Prev  Up  Next   Home   More Online Publications