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Taxact login tax return taxact login page taxact sign page 12. Taxact login tax return taxact login page taxact sign page   Other Income Table of Contents Introduction Useful Items - You may want to see: Bartering Canceled DebtsInterest included in canceled debt. Taxact login tax return taxact login page taxact sign page Exceptions Host or Hostess Life Insurance ProceedsSurviving spouse. Taxact login tax return taxact login page taxact sign page Endowment Contract Proceeds Accelerated Death Benefits Public Safety Officer Killed in the Line of Duty Partnership Income S Corporation Income RecoveriesItemized Deduction Recoveries Rents from Personal Property RepaymentsMethod 1. Taxact login tax return taxact login page taxact sign page Method 2. Taxact login tax return taxact login page taxact sign page RoyaltiesDepletion. Taxact login tax return taxact login page taxact sign page Coal and iron ore. Taxact login tax return taxact login page taxact sign page Sale of property interest. Taxact login tax return taxact login page taxact sign page Part of future production sold. Taxact login tax return taxact login page taxact sign page Unemployment BenefitsTypes of unemployment compensation. Taxact login tax return taxact login page taxact sign page Governmental program. Taxact login tax return taxact login page taxact sign page Repayment of unemployment compensation. Taxact login tax return taxact login page taxact sign page Tax withholding. Taxact login tax return taxact login page taxact sign page Repayment of benefits. Taxact login tax return taxact login page taxact sign page Welfare and Other Public Assistance Benefits Other IncomeEmotional distress. Taxact login tax return taxact login page taxact sign page Deduction for costs involved in unlawful discrimination suits. Taxact login tax return taxact login page taxact sign page Energy conservation measure. Taxact login tax return taxact login page taxact sign page Dwelling unit. Taxact login tax return taxact login page taxact sign page Current income required to be distributed. Taxact login tax return taxact login page taxact sign page Current income not required to be distributed. Taxact login tax return taxact login page taxact sign page How to report. Taxact login tax return taxact login page taxact sign page Losses. Taxact login tax return taxact login page taxact sign page Grantor trust. Taxact login tax return taxact login page taxact sign page Nonemployee compensation. Taxact login tax return taxact login page taxact sign page Corporate director. Taxact login tax return taxact login page taxact sign page Personal representatives. Taxact login tax return taxact login page taxact sign page Manager of trade or business for bankruptcy estate. Taxact login tax return taxact login page taxact sign page Notary public. Taxact login tax return taxact login page taxact sign page Election precinct official. Taxact login tax return taxact login page taxact sign page Difficulty-of-care payments. Taxact login tax return taxact login page taxact sign page Maintaining space in home. Taxact login tax return taxact login page taxact sign page Reporting taxable payments. Taxact login tax return taxact login page taxact sign page Lotteries and raffles. Taxact login tax return taxact login page taxact sign page Form W-2G. Taxact login tax return taxact login page taxact sign page Reporting winnings and recordkeeping. Taxact login tax return taxact login page taxact sign page Inherited pension or IRA. Taxact login tax return taxact login page taxact sign page Employee awards or bonuses. Taxact login tax return taxact login page taxact sign page Pulitzer, Nobel, and similar prizes. Taxact login tax return taxact login page taxact sign page Payment for services. Taxact login tax return taxact login page taxact sign page VA payments. Taxact login tax return taxact login page taxact sign page Prizes. Taxact login tax return taxact login page taxact sign page Strike and lockout benefits. Taxact login tax return taxact login page taxact sign page Introduction You must include on your return all items of income you receive in the form of money, property, and services unless the tax law states that you do not include them. Taxact login tax return taxact login page taxact sign page Some items, however, are only partly excluded from income. Taxact login tax return taxact login page taxact sign page This chapter discusses many kinds of income and explains whether they are taxable or nontaxable. Taxact login tax return taxact login page taxact sign page Income that is taxable must be reported on your tax return and is subject to tax. Taxact login tax return taxact login page taxact sign page Income that is nontaxable may have to be shown on your tax return but is not taxable. Taxact login tax return taxact login page taxact sign page This chapter begins with discussions of the following income items. Taxact login tax return taxact login page taxact sign page Bartering. Taxact login tax return taxact login page taxact sign page Canceled debts. Taxact login tax return taxact login page taxact sign page Sales parties at which you are the host or hostess. Taxact login tax return taxact login page taxact sign page Life insurance proceeds. Taxact login tax return taxact login page taxact sign page Partnership income. Taxact login tax return taxact login page taxact sign page S Corporation income. Taxact login tax return taxact login page taxact sign page Recoveries (including state income tax refunds). Taxact login tax return taxact login page taxact sign page Rents from personal property. Taxact login tax return taxact login page taxact sign page Repayments. Taxact login tax return taxact login page taxact sign page Royalties. Taxact login tax return taxact login page taxact sign page Unemployment benefits. Taxact login tax return taxact login page taxact sign page Welfare and other public assistance benefits. Taxact login tax return taxact login page taxact sign page These discussions are followed by brief discussions of other income items. Taxact login tax return taxact login page taxact sign page Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 544 Sales and Other Dispositions of Assets 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Bartering Bartering is an exchange of property or services. Taxact login tax return taxact login page taxact sign page You must include in your income, at the time received, the fair market value of property or services you receive in bartering. Taxact login tax return taxact login page taxact sign page If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise. Taxact login tax return taxact login page taxact sign page Generally, you report this income on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Taxact login tax return taxact login page taxact sign page However, if the barter involves an exchange of something other than services, such as in Example 3 below, you may have to use another form or schedule instead. Taxact login tax return taxact login page taxact sign page Example 1. Taxact login tax return taxact login page taxact sign page You are a self-employed attorney who performs legal services for a client, a small corporation. Taxact login tax return taxact login page taxact sign page The corporation gives you shares of its stock as payment for your services. Taxact login tax return taxact login page taxact sign page You must include the fair market value of the shares in your income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) in the year you receive them. Taxact login tax return taxact login page taxact sign page Example 2. Taxact login tax return taxact login page taxact sign page You are self-employed and a member of a barter club. Taxact login tax return taxact login page taxact sign page The club uses “credit units” as a means of exchange. Taxact login tax return taxact login page taxact sign page It adds credit units to your account for goods or services you provide to members, which you can use to purchase goods or services offered by other members of the barter club. Taxact login tax return taxact login page taxact sign page The club subtracts credit units from your account when you receive goods or services from other members. Taxact login tax return taxact login page taxact sign page You must include in your income the value of the credit units that are added to your account, even though you may not actually receive goods or services from other members until a later tax year. Taxact login tax return taxact login page taxact sign page Example 3. Taxact login tax return taxact login page taxact sign page You own a small apartment building. Taxact login tax return taxact login page taxact sign page In return for 6 months rent-free use of an apartment, an artist gives you a work of art she created. Taxact login tax return taxact login page taxact sign page You must report as rental income on Schedule E (Form 1040), Supplemental Income and Loss, the fair market value of the artwork, and the artist must report as income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) the fair rental value of the apartment. Taxact login tax return taxact login page taxact sign page Form 1099-B from barter exchange. Taxact login tax return taxact login page taxact sign page   If you exchanged property or services through a barter exchange, Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a similar statement from the barter exchange should be sent to you by February 18, 2014. Taxact login tax return taxact login page taxact sign page It should show the value of cash, property, services, credits, or scrip you received from exchanges during 2013. Taxact login tax return taxact login page taxact sign page The IRS also will receive a copy of Form 1099-B. Taxact login tax return taxact login page taxact sign page Canceled Debts In most cases, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income. Taxact login tax return taxact login page taxact sign page You have no income from the canceled debt if it is intended as a gift to you. Taxact login tax return taxact login page taxact sign page A debt includes any indebtedness for which you are liable or which attaches to property you hold. Taxact login tax return taxact login page taxact sign page If the debt is a nonbusiness debt, report the canceled amount on Form 1040, line 21. Taxact login tax return taxact login page taxact sign page If it is a business debt, report the amount on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) (or on Schedule F (Form 1040), Profit or Loss From Farming, if the debt is farm debt and you are a farmer). Taxact login tax return taxact login page taxact sign page Form 1099-C. Taxact login tax return taxact login page taxact sign page   If a Federal Government agency, financial institution, or credit union cancels or forgives a debt you owe of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. Taxact login tax return taxact login page taxact sign page The amount of the canceled debt is shown in box 2. Taxact login tax return taxact login page taxact sign page Interest included in canceled debt. Taxact login tax return taxact login page taxact sign page   If any interest is forgiven and included in the amount of canceled debt in box 2, the amount of interest also will be shown in box 3. Taxact login tax return taxact login page taxact sign page Whether or not you must include the interest portion of the canceled debt in your income depends on whether the interest would be deductible when you paid it. Taxact login tax return taxact login page taxact sign page See Deductible debt under Exceptions, later. Taxact login tax return taxact login page taxact sign page   If the interest would not be deductible (such as interest on a personal loan), include in your income the amount from Form 1099-C, box 2. Taxact login tax return taxact login page taxact sign page If the interest would be deductible (such as on a business loan), include in your income the net amount of the canceled debt (the amount shown in box 2 less the interest amount shown in box 3). Taxact login tax return taxact login page taxact sign page Discounted mortgage loan. Taxact login tax return taxact login page taxact sign page   If your financial institution offers a discount for the early payment of your mortgage loan, the amount of the discount is canceled debt. Taxact login tax return taxact login page taxact sign page You must include the canceled amount in your income. Taxact login tax return taxact login page taxact sign page Mortgage relief upon sale or other disposition. Taxact login tax return taxact login page taxact sign page   If you are personally liable for a mortgage (recourse debt), and you are relieved of the mortgage when you dispose of the property, you may realize gain or loss up to the fair market value of the property. Taxact login tax return taxact login page taxact sign page To the extent the mortgage discharge exceeds the fair market value of the property, it is income from discharge of indebtedness unless it qualifies for exclusion under Excluded debt , later. Taxact login tax return taxact login page taxact sign page Report any income from discharge of indebtedness on nonbusiness debt that does not qualify for exclusion as other income on Form 1040, line 21. Taxact login tax return taxact login page taxact sign page    You may be able to exclude part of the mortgage relief on your principal residence. Taxact login tax return taxact login page taxact sign page See Excluded debt, later. Taxact login tax return taxact login page taxact sign page   If you are not personally liable for a mortgage (nonrecourse debt), and you are relieved of the mortgage when you dispose of the property (such as through foreclosure), that relief is included in the amount you realize. Taxact login tax return taxact login page taxact sign page You may have a taxable gain if the amount you realize exceeds your adjusted basis in the property. Taxact login tax return taxact login page taxact sign page Report any gain on nonbusiness property as a capital gain. Taxact login tax return taxact login page taxact sign page   See Publication 4681 for more information. Taxact login tax return taxact login page taxact sign page Stockholder debt. Taxact login tax return taxact login page taxact sign page   If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution that is generally dividend income to you. Taxact login tax return taxact login page taxact sign page For more information, see Publication 542, Corporations. Taxact login tax return taxact login page taxact sign page   If you are a stockholder in a corporation and you cancel a debt owed to you by the corporation, you generally do not realize income. Taxact login tax return taxact login page taxact sign page This is because the canceled debt is considered as a contribution to the capital of the corporation equal to the amount of debt principal that you canceled. Taxact login tax return taxact login page taxact sign page Repayment of canceled debt. Taxact login tax return taxact login page taxact sign page   If you included a canceled amount in your income and later pay the debt, you may be able to file a claim for refund for the year the amount was included in income. Taxact login tax return taxact login page taxact sign page You can file a claim on Form 1040X if the statute of limitations for filing a claim is still open. Taxact login tax return taxact login page taxact sign page The statute of limitations generally does not end until 3 years after the due date of your original return. Taxact login tax return taxact login page taxact sign page Exceptions There are several exceptions to the inclusion of canceled debt in income. Taxact login tax return taxact login page taxact sign page These are explained next. Taxact login tax return taxact login page taxact sign page Student loans. Taxact login tax return taxact login page taxact sign page   Certain student loans contain a provision that all or part of the debt incurred to attend the qualified educational institution will be canceled if you work for a certain period of time in certain professions for any of a broad class of employers. Taxact login tax return taxact login page taxact sign page   You do not have income if your student loan is canceled after you agreed to this provision and then performed the services required. Taxact login tax return taxact login page taxact sign page To qualify, the loan must have been made by: The Federal Government, a state or local government, or an instrumentality, agency, or subdivision thereof, A tax-exempt public benefit corporation that has assumed control of a state, county, or municipal hospital, and whose employees are considered public employees under state law, or An educational institution: Under an agreement with an entity described in (1) or (2) that provided the funds to the institution to make the loan, or As part of a program of the institution designed to encourage its students to serve in occupations with unmet needs or in areas with unmet needs and under which the services provided by the students (or former students) are for or under the direction of a governmental unit or a tax-exempt organization described in section 501(c)(3). Taxact login tax return taxact login page taxact sign page   A loan to refinance a qualified student loan also will qualify if it was made by an educational institution or a qualified tax-exempt organization under its program designed as described in (3)(b) above. Taxact login tax return taxact login page taxact sign page Education loan repayment assistance. Taxact login tax return taxact login page taxact sign page   Education loan repayments made to you by the National Health Service Corps Loan Repayment Program (NHSC Loan Repayment Program), a state education loan repayment program eligible for funds under the Public Health Service Act, or any other state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health services in underserved or health professional shortage areas are not taxable. Taxact login tax return taxact login page taxact sign page    The provision relating to the “other state loan repayment or loan forgiveness program” was added to this exclusion for amounts received in tax years beginning after December 31, 2008. Taxact login tax return taxact login page taxact sign page If you included these amounts in income in 2010, 2011, or 2012, you should file an amended tax return to exclude this income. Taxact login tax return taxact login page taxact sign page See Form 1040X and its instructions for details on filing. Taxact login tax return taxact login page taxact sign page Deductible debt. Taxact login tax return taxact login page taxact sign page   You do not have income from the cancellation of a debt if your payment of the debt would be deductible. Taxact login tax return taxact login page taxact sign page This exception applies only if you use the cash method of accounting. Taxact login tax return taxact login page taxact sign page For more information, see chapter 5 of Publication 334, Tax Guide for Small Business. Taxact login tax return taxact login page taxact sign page Price reduced after purchase. Taxact login tax return taxact login page taxact sign page   In most cases, if the seller reduces the amount of debt you owe for property you purchased, you do not have income from the reduction. Taxact login tax return taxact login page taxact sign page The reduction of the debt is treated as a purchase price adjustment and reduces your basis in the property. Taxact login tax return taxact login page taxact sign page Excluded debt. Taxact login tax return taxact login page taxact sign page   Do not include a canceled debt in your gross income in the following situations. Taxact login tax return taxact login page taxact sign page The debt is canceled in a bankruptcy case under title 11 of the U. Taxact login tax return taxact login page taxact sign page S. Taxact login tax return taxact login page taxact sign page Code. Taxact login tax return taxact login page taxact sign page See Publication 908, Bankruptcy Tax Guide. Taxact login tax return taxact login page taxact sign page The debt is canceled when you are insolvent. Taxact login tax return taxact login page taxact sign page However, you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent. Taxact login tax return taxact login page taxact sign page See Publication 908. Taxact login tax return taxact login page taxact sign page The debt is qualified farm debt and is canceled by a qualified person. Taxact login tax return taxact login page taxact sign page See chapter 3 of Publication 225, Farmer's Tax Guide. Taxact login tax return taxact login page taxact sign page The debt is qualified real property business debt. Taxact login tax return taxact login page taxact sign page See chapter 5 of Publication 334. Taxact login tax return taxact login page taxact sign page The cancellation is intended as a gift. Taxact login tax return taxact login page taxact sign page The debt is qualified principal residence indebtedness. Taxact login tax return taxact login page taxact sign page See Publication 525 for additional information. Taxact login tax return taxact login page taxact sign page Host or Hostess If you host a party or event at which sales are made, any gift or gratuity you receive for giving the event is a payment for helping a direct seller make sales. Taxact login tax return taxact login page taxact sign page You must report this item as income at its fair market value. Taxact login tax return taxact login page taxact sign page Your out-of-pocket party expenses are subject to the 50% limit for meal and entertainment expenses. Taxact login tax return taxact login page taxact sign page These expenses are deductible as miscellaneous itemized deductions subject to the 2%-of-AGI limit on Schedule A (Form 1040), but only up to the amount of income you receive for giving the party. Taxact login tax return taxact login page taxact sign page For more information about the 50% limit for meal and entertainment expenses, see chapter 26. Taxact login tax return taxact login page taxact sign page Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. Taxact login tax return taxact login page taxact sign page This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. Taxact login tax return taxact login page taxact sign page However, interest income received as a result of life insurance proceeds may be taxable. Taxact login tax return taxact login page taxact sign page Proceeds not received in installments. Taxact login tax return taxact login page taxact sign page   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. Taxact login tax return taxact login page taxact sign page If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. Taxact login tax return taxact login page taxact sign page Proceeds received in installments. Taxact login tax return taxact login page taxact sign page   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. Taxact login tax return taxact login page taxact sign page   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. Taxact login tax return taxact login page taxact sign page Include anything over this excluded part in your income as interest. Taxact login tax return taxact login page taxact sign page Surviving spouse. Taxact login tax return taxact login page taxact sign page   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude up to $1,000 a year of the interest included in the installments. Taxact login tax return taxact login page taxact sign page If you remarry, you can continue to take the exclusion. Taxact login tax return taxact login page taxact sign page Surrender of policy for cash. Taxact login tax return taxact login page taxact sign page   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Taxact login tax return taxact login page taxact sign page In most cases, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. Taxact login tax return taxact login page taxact sign page    You should receive a Form 1099-R showing the total proceeds and the taxable part. Taxact login tax return taxact login page taxact sign page Report these amounts on lines 16a and 16b of Form 1040 or lines 12a and 12b of Form 1040A. Taxact login tax return taxact login page taxact sign page More information. Taxact login tax return taxact login page taxact sign page   For more information, see Life Insurance Proceeds in Publication 525. Taxact login tax return taxact login page taxact sign page Endowment Contract Proceeds An endowment contract is a policy under which you are paid a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. Taxact login tax return taxact login page taxact sign page Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. Taxact login tax return taxact login page taxact sign page To determine your cost, subtract any amount that you previously received under the contract and excluded from your income from the total premiums (or other consideration) paid for the contract. Taxact login tax return taxact login page taxact sign page Include the part of the lump sum payment that is more than your cost in your income. Taxact login tax return taxact login page taxact sign page Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are excluded from income if the insured is terminally or chronically ill. Taxact login tax return taxact login page taxact sign page Viatical settlement. Taxact login tax return taxact login page taxact sign page   This is the sale or assignment of any part of the death benefit under a life insurance contract to a viatical settlement provider. Taxact login tax return taxact login page taxact sign page A viatical settlement provider is a person who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill and who meets the requirements of section 101(g)(2)(B) of the Internal Revenue Code. Taxact login tax return taxact login page taxact sign page Exclusion for terminal illness. Taxact login tax return taxact login page taxact sign page    Accelerated death benefits are fully excludable if the insured is a terminally ill individual. Taxact login tax return taxact login page taxact sign page This is a person who has been certified by a physician as having an illness or physical condition that can reasonably be expected to result in death within 24 months from the date of the certification. Taxact login tax return taxact login page taxact sign page Exclusion for chronic illness. Taxact login tax return taxact login page taxact sign page    If the insured is a chronically ill individual who is not terminally ill, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. Taxact login tax return taxact login page taxact sign page Accelerated death benefits paid on a per diem or other periodic basis are excludable up to a limit. Taxact login tax return taxact login page taxact sign page This limit applies to the total of the accelerated death benefits and any periodic payments received from long-term care insurance contracts. Taxact login tax return taxact login page taxact sign page For information on the limit and the definitions of chronically ill individual, qualified long-term care services, and long-term care insurance contracts, see Long-Term Care Insurance Contracts under Sickness and Injury Benefits in Publication 525. Taxact login tax return taxact login page taxact sign page Exception. Taxact login tax return taxact login page taxact sign page   The exclusion does not apply to any amount paid to a person (other than the insured) who has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the person, or Has a financial interest in the person's business. Taxact login tax return taxact login page taxact sign page Form 8853. Taxact login tax return taxact login page taxact sign page   To claim an exclusion for accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. Taxact login tax return taxact login page taxact sign page You do not have to file Form 8853 to exclude accelerated death benefits paid on the basis of actual expenses incurred. Taxact login tax return taxact login page taxact sign page Public Safety Officer Killed in the Line of Duty If you are a survivor of a public safety officer who was killed in the line of duty, you may be able to exclude from income certain amounts you receive. Taxact login tax return taxact login page taxact sign page For this purpose, the term public safety officer includes law enforcement officers, firefighters, chaplains, and rescue squad and ambulance crew members. Taxact login tax return taxact login page taxact sign page For more information, see Publication 559, Survivors, Executors, and Administrators. Taxact login tax return taxact login page taxact sign page Partnership Income A partnership generally is not a taxable entity. Taxact login tax return taxact login page taxact sign page The income, gains, losses, deductions, and credits of a partnership are passed through to the partners based on each partner's distributive share of these items. Taxact login tax return taxact login page taxact sign page Schedule K-1 (Form 1065). Taxact login tax return taxact login page taxact sign page    Although a partnership generally pays no tax, it must file an information return on Form 1065, U. Taxact login tax return taxact login page taxact sign page S. Taxact login tax return taxact login page taxact sign page Return of Partnership Income, and send Schedule K-1 (Form 1065) to each partner. Taxact login tax return taxact login page taxact sign page In addition, the partnership will send each partner a copy of the Partner's Instructions for Schedule K-1 (Form 1065) to help each partner report his or her share of the partnership's income, deductions, credits, and tax preference items. Taxact login tax return taxact login page taxact sign page Keep Schedule K-1 (Form 1065) for your records. Taxact login tax return taxact login page taxact sign page Do not attach it to your Form 1040, unless you are specifically required to do so. Taxact login tax return taxact login page taxact sign page For more information on partnerships, see Publication 541, Partnerships. Taxact login tax return taxact login page taxact sign page Qualified joint venture. Taxact login tax return taxact login page taxact sign page   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Taxact login tax return taxact login page taxact sign page To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Taxact login tax return taxact login page taxact sign page For further information on how to make the election and which schedule(s) to file, see the instructions for your individual tax return. Taxact login tax return taxact login page taxact sign page S Corporation Income In most cases, an S corporation does not pay tax on its income. Taxact login tax return taxact login page taxact sign page Instead, the income, losses, deductions, and credits of the corporation are passed through to the shareholders based on each shareholder's pro rata share. Taxact login tax return taxact login page taxact sign page Schedule K-1 (Form 1120S). Taxact login tax return taxact login page taxact sign page   An S corporation must file a return on Form 1120S, U. Taxact login tax return taxact login page taxact sign page S. Taxact login tax return taxact login page taxact sign page Income Tax Return for an S Corporation, and send Schedule K-1 (Form 1120S) to each shareholder. Taxact login tax return taxact login page taxact sign page In addition, the S corporation will send each shareholder a copy of the Shareholder's Instructions for Schedule K-1 (Form 1120S) to help each shareholder report his or her share of the S corporation's income, losses, credits, and deductions. Taxact login tax return taxact login page taxact sign page Keep Schedule K-1 (Form 1120S) for your records. Taxact login tax return taxact login page taxact sign page Do not attach it to your Form 1040, unless you are specifically required to do so. Taxact login tax return taxact login page taxact sign page For more information on S corporations and their shareholders, see the Instructions for Form 1120S. Taxact login tax return taxact login page taxact sign page Recoveries A recovery is a return of an amount you deducted or took a credit for in an earlier year. Taxact login tax return taxact login page taxact sign page The most common recoveries are refunds, reimbursements, and rebates of deductions itemized on Schedule A (Form 1040). Taxact login tax return taxact login page taxact sign page You also may have recoveries of non-itemized deductions (such as payments on previously deducted bad debts) and recoveries of items for which you previously claimed a tax credit. Taxact login tax return taxact login page taxact sign page Tax benefit rule. Taxact login tax return taxact login page taxact sign page   You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. Taxact login tax return taxact login page taxact sign page For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year. Taxact login tax return taxact login page taxact sign page For more information, see Publication 525. Taxact login tax return taxact login page taxact sign page Federal income tax refund. Taxact login tax return taxact login page taxact sign page   Refunds of federal income taxes are not included in your income because they are never allowed as a deduction from income. Taxact login tax return taxact login page taxact sign page State tax refund. Taxact login tax return taxact login page taxact sign page   If you received a state or local income tax refund (or credit or offset) in 2013, you generally must include it in income if you deducted the tax in an earlier year. Taxact login tax return taxact login page taxact sign page The payer should send Form 1099-G, Certain Government Payments, to you by January 31, 2014. Taxact login tax return taxact login page taxact sign page The IRS also will receive a copy of the Form 1099-G. Taxact login tax return taxact login page taxact sign page If you file Form 1040, use the State and Local Income Tax Refund Worksheet in the 2013 Form 1040 instructions for line 10 to figure the amount (if any) to include in your income. Taxact login tax return taxact login page taxact sign page See Publication 525 for when you must use another worksheet. Taxact login tax return taxact login page taxact sign page   If you could choose to deduct for a tax year either: State and local income taxes, or State and local general sales taxes, then the maximum refund that you may have to include in income is limited to the excess of the tax you chose to deduct for that year over the tax you did not choose to deduct for that year. Taxact login tax return taxact login page taxact sign page For examples, see Publication 525. Taxact login tax return taxact login page taxact sign page Mortgage interest refund. Taxact login tax return taxact login page taxact sign page    If you received a refund or credit in 2013 of mortgage interest paid in an earlier year, the amount should be shown in box 3 of your Form 1098, Mortgage Interest Statement. Taxact login tax return taxact login page taxact sign page Do not subtract the refund amount from the interest you paid in 2013. Taxact login tax return taxact login page taxact sign page You may have to include it in your income under the rules explained in the following discussions. Taxact login tax return taxact login page taxact sign page Interest on recovery. Taxact login tax return taxact login page taxact sign page   Interest on any of the amounts you recover must be reported as interest income in the year received. Taxact login tax return taxact login page taxact sign page For example, report any interest you received on state or local income tax refunds on Form 1040, line 8a. Taxact login tax return taxact login page taxact sign page Recovery and expense in same year. Taxact login tax return taxact login page taxact sign page   If the refund or other recovery and the expense occur in the same year, the recovery reduces the deduction or credit and is not reported as income. Taxact login tax return taxact login page taxact sign page Recovery for 2 or more years. Taxact login tax return taxact login page taxact sign page   If you receive a refund or other recovery that is for amounts you paid in 2 or more separate years, you must allocate, on a pro rata basis, the recovered amount between the years in which you paid it. Taxact login tax return taxact login page taxact sign page This allocation is necessary to determine the amount of recovery from any earlier years and to determine the amount, if any, of your allowable deduction for this item for the current year. Taxact login tax return taxact login page taxact sign page For information on how to compute the allocation, see Recoveries in Publication 525. Taxact login tax return taxact login page taxact sign page Itemized Deduction Recoveries If you recover any amount that you deducted in an earlier year on Schedule A (Form 1040), you generally must include the full amount of the recovery in your income in the year you receive it. Taxact login tax return taxact login page taxact sign page Where to report. Taxact login tax return taxact login page taxact sign page   Enter your state or local income tax refund on Form 1040, line 10, and the total of all other recoveries as other income on Form 1040, line 21. Taxact login tax return taxact login page taxact sign page You cannot use Form 1040A or Form 1040EZ. Taxact login tax return taxact login page taxact sign page Standard deduction limit. Taxact login tax return taxact login page taxact sign page   You generally are allowed to claim the standard deduction if you do not itemize your deductions. Taxact login tax return taxact login page taxact sign page Only your itemized deductions that are more than your standard deduction are subject to the recovery rule (unless you are required to itemize your deductions). Taxact login tax return taxact login page taxact sign page If your total deductions on the earlier year return were not more than your income for that year, include in your income this year the lesser of: Your recoveries, or The amount by which your itemized deductions exceeded the standard deduction. Taxact login tax return taxact login page taxact sign page Example. Taxact login tax return taxact login page taxact sign page For 2012, you filed a joint return. Taxact login tax return taxact login page taxact sign page Your taxable income was $60,000 and you were not entitled to any tax credits. Taxact login tax return taxact login page taxact sign page Your standard deduction was $11,900, and you had itemized deductions of $14,000. Taxact login tax return taxact login page taxact sign page In 2013, you received the following recoveries for amounts deducted on your 2012 return: Medical expenses $200 State and local income tax refund 400 Refund of mortgage interest 325 Total recoveries $925 None of the recoveries were more than the deductions taken for 2012. Taxact login tax return taxact login page taxact sign page The difference between the state and local income tax you deducted and your local general sales tax was more than $400. Taxact login tax return taxact login page taxact sign page Your total recoveries are less than the amount by which your itemized deductions exceeded the standard deduction ($14,000 − 11,900 = $2,100), so you must include your total recoveries in your income for 2013. Taxact login tax return taxact login page taxact sign page Report the state and local income tax refund of $400 on Form 1040, line 10, and the balance of your recoveries, $525, on Form 1040, line 21. Taxact login tax return taxact login page taxact sign page Standard deduction for earlier years. Taxact login tax return taxact login page taxact sign page   To determine if amounts recovered in 2013 must be included in your income, you must know the standard deduction for your filing status for the year the deduction was claimed. Taxact login tax return taxact login page taxact sign page Look in the instructions for your tax return from prior years to locate the standard deduction for the filing status for that prior year. Taxact login tax return taxact login page taxact sign page Example. Taxact login tax return taxact login page taxact sign page You filed a joint return on Form 1040 for 2012 with taxable income of $45,000. Taxact login tax return taxact login page taxact sign page Your itemized deductions were $12,350. Taxact login tax return taxact login page taxact sign page The standard deduction that you could have claimed was $11,900. Taxact login tax return taxact login page taxact sign page In 2013, you recovered $2,100 of your 2012 itemized deductions. Taxact login tax return taxact login page taxact sign page None of the recoveries were more than the actual deductions for 2012. Taxact login tax return taxact login page taxact sign page Include $450 of the recoveries in your 2013 income. Taxact login tax return taxact login page taxact sign page This is the smaller of your recoveries ($2,100) or the amount by which your itemized deductions were more than the standard deduction ($12,350 − $11,900 = $450). Taxact login tax return taxact login page taxact sign page Recovery limited to deduction. Taxact login tax return taxact login page taxact sign page   You do not include in your income any amount of your recovery that is more than the amount you deducted in the earlier year. Taxact login tax return taxact login page taxact sign page The amount you include in your income is limited to the smaller of: The amount deducted on Schedule A (Form 1040), or The amount recovered. Taxact login tax return taxact login page taxact sign page Example. Taxact login tax return taxact login page taxact sign page During 2012 you paid $1,700 for medical expenses. Taxact login tax return taxact login page taxact sign page From this amount you subtracted $1,500, which was 7. Taxact login tax return taxact login page taxact sign page 5% of your adjusted gross income. Taxact login tax return taxact login page taxact sign page Your actual medical expense deduction was $200. Taxact login tax return taxact login page taxact sign page In 2013, you received a $500 reimbursement from your medical insurance for your 2012 expenses. Taxact login tax return taxact login page taxact sign page The only amount of the $500 reimbursement that must be included in your income for 2013 is $200—the amount actually deducted. Taxact login tax return taxact login page taxact sign page Other recoveries. Taxact login tax return taxact login page taxact sign page   See Recoveries in Publication 525 if: You have recoveries of items other than itemized deductions, or You received a recovery for an item for which you claimed a tax credit (other than investment credit or foreign tax credit) in a prior year. Taxact login tax return taxact login page taxact sign page Rents from Personal Property If you rent out personal property, such as equipment or vehicles, how you report your income and expenses is in most cases determined by: Whether or not the rental activity is a business, and Whether or not the rental activity is conducted for profit. Taxact login tax return taxact login page taxact sign page In most cases, if your primary purpose is income or profit and you are involved in the rental activity with continuity and regularity, your rental activity is a business. Taxact login tax return taxact login page taxact sign page See Publication 535, Business Expenses, for details on deducting expenses for both business and not-for-profit activities. Taxact login tax return taxact login page taxact sign page Reporting business income and expenses. Taxact login tax return taxact login page taxact sign page    If you are in the business of renting personal property, report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Taxact login tax return taxact login page taxact sign page The form instructions have information on how to complete them. Taxact login tax return taxact login page taxact sign page Reporting nonbusiness income. Taxact login tax return taxact login page taxact sign page   If you are not in the business of renting personal property, report your rental income on Form 1040, line 21. Taxact login tax return taxact login page taxact sign page List the type and amount of the income on the dotted line next to line 21. Taxact login tax return taxact login page taxact sign page Reporting nonbusiness expenses. Taxact login tax return taxact login page taxact sign page   If you rent personal property for profit, include your rental expenses in the total amount you enter on Form 1040, line 36. Taxact login tax return taxact login page taxact sign page Also enter the amount and “PPR” on the dotted line next to line 36. Taxact login tax return taxact login page taxact sign page   If you do not rent personal property for profit, your deductions are limited and you cannot report a loss to offset other income. Taxact login tax return taxact login page taxact sign page See Activity not for profit , under Other Income, later. Taxact login tax return taxact login page taxact sign page Repayments If you had to repay an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income for the year in which you repaid it. Taxact login tax return taxact login page taxact sign page Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. Taxact login tax return taxact login page taxact sign page Generally, you can claim a deduction or credit only if the repayment qualifies as an expense or loss incurred in your trade or business or in a for-profit transaction. Taxact login tax return taxact login page taxact sign page Type of deduction. Taxact login tax return taxact login page taxact sign page   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. Taxact login tax return taxact login page taxact sign page You generally deduct the repayment on the same form or schedule on which you previously reported it as income. Taxact login tax return taxact login page taxact sign page For example, if you reported it as self-employment income, deduct it as a business expense on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). Taxact login tax return taxact login page taxact sign page If you reported it as a capital gain, deduct it as a capital loss as explained in the Instructions for Schedule D (Form 1040). Taxact login tax return taxact login page taxact sign page If you reported it as wages, unemployment compensation, or other nonbusiness income, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040). Taxact login tax return taxact login page taxact sign page Repaid social security benefits. Taxact login tax return taxact login page taxact sign page   If you repaid social security benefits or equivalent railroad retirement benefits, see Repayment of benefits in chapter 11. Taxact login tax return taxact login page taxact sign page Repayment of $3,000 or less. Taxact login tax return taxact login page taxact sign page   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Taxact login tax return taxact login page taxact sign page If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 23. Taxact login tax return taxact login page taxact sign page Repayment over $3,000. Taxact login tax return taxact login page taxact sign page   If the amount you repaid was more than $3,000, you can deduct the repayment (as explained under Type of deduction , earlier). Taxact login tax return taxact login page taxact sign page However, you can choose instead to take a tax credit for the year of repayment if you included the income under a claim of right. Taxact login tax return taxact login page taxact sign page This means that at the time you included the income, it appeared that you had an unrestricted right to it. Taxact login tax return taxact login page taxact sign page If you qualify for this choice, figure your tax under both methods and compare the results. Taxact login tax return taxact login page taxact sign page Use the method (deduction or credit) that results in less tax. Taxact login tax return taxact login page taxact sign page When determining whether the amount you repaid was more or less than $3,000, consider the total amount being repaid on the return. Taxact login tax return taxact login page taxact sign page Each instance of repayment is not considered separately. Taxact login tax return taxact login page taxact sign page Method 1. Taxact login tax return taxact login page taxact sign page   Figure your tax for 2013 claiming a deduction for the repaid amount. Taxact login tax return taxact login page taxact sign page If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 28. Taxact login tax return taxact login page taxact sign page Method 2. Taxact login tax return taxact login page taxact sign page   Figure your tax for 2013 claiming a credit for the repaid amount. Taxact login tax return taxact login page taxact sign page Follow these steps. Taxact login tax return taxact login page taxact sign page Figure your tax for 2013 without deducting the repaid amount. Taxact login tax return taxact login page taxact sign page Refigure your tax from the earlier year without including in income the amount you repaid in 2013. Taxact login tax return taxact login page taxact sign page Subtract the tax in (2) from the tax shown on your return for the earlier year. Taxact login tax return taxact login page taxact sign page This is the credit. Taxact login tax return taxact login page taxact sign page Subtract the answer in (3) from the tax for 2013 figured without the deduction (Step 1). Taxact login tax return taxact login page taxact sign page   If method 1 results in less tax, deduct the amount repaid. Taxact login tax return taxact login page taxact sign page If method 2 results in less tax, claim the credit figured in (3) above on Form 1040, line 71, by adding the amount of the credit to any other credits on this line, and entering “I. Taxact login tax return taxact login page taxact sign page R. Taxact login tax return taxact login page taxact sign page C. Taxact login tax return taxact login page taxact sign page 1341” in the column to the right of line 71. Taxact login tax return taxact login page taxact sign page   An example of this computation can be found in Publication 525. Taxact login tax return taxact login page taxact sign page Repaid wages subject to social security and Medicare taxes. Taxact login tax return taxact login page taxact sign page   If you had to repay an amount that you included in your wages or compensation in an earlier year on which social security, Medicare, or tier 1 RRTA taxes were paid, ask your employer to refund the excess amount to you. Taxact login tax return taxact login page taxact sign page If the employer refuses to refund the taxes, ask for a statement indicating the amount of the overcollection to support your claim. Taxact login tax return taxact login page taxact sign page File a claim for refund using Form 843, Claim for Refund and Request for Abatement. Taxact login tax return taxact login page taxact sign page Repaid wages subject to Additional Medicare Tax. Taxact login tax return taxact login page taxact sign page   Employers cannot make an adjustment or file a claim for refund for Additional Medicare Tax withholding when there is a repayment of wages received by an employee in a prior year because the employee determines liability for Additional Medicare Tax on the employee's income tax return for the prior year. Taxact login tax return taxact login page taxact sign page If you had to repay an amount that you included in your wages or compensation in an earlier year, and on which Additional Medicare Tax was paid, you may be able to recover the Additional Medicare Tax paid on the amount. Taxact login tax return taxact login page taxact sign page To recover Additional Medicare Tax on the repaid wages or compensation, you must file Form 1040X, Amended U. Taxact login tax return taxact login page taxact sign page S. Taxact login tax return taxact login page taxact sign page Individual Income Tax Return, for the prior year in which the wages or compensation were originally received. Taxact login tax return taxact login page taxact sign page See the Instructions for Form 1040X. Taxact login tax return taxact login page taxact sign page Royalties Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income. Taxact login tax return taxact login page taxact sign page In most cases you report royalties in Part I of Schedule E (Form 1040). Taxact login tax return taxact login page taxact sign page However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc. Taxact login tax return taxact login page taxact sign page , report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Taxact login tax return taxact login page taxact sign page Copyrights and patents. Taxact login tax return taxact login page taxact sign page   Royalties from copyrights on literary, musical, or artistic works, and similar property, or from patents on inventions, are amounts paid to you for the right to use your work over a specified period of time. Taxact login tax return taxact login page taxact sign page Royalties generally are based on the number of units sold, such as the number of books, tickets to a performance, or machines sold. Taxact login tax return taxact login page taxact sign page Oil, gas, and minerals. Taxact login tax return taxact login page taxact sign page   Royalty income from oil, gas, and mineral properties is the amount you receive when natural resources are extracted from your property. Taxact login tax return taxact login page taxact sign page The royalties are based on units, such as barrels, tons, etc. Taxact login tax return taxact login page taxact sign page , and are paid to you by a person or company who leases the property from you. Taxact login tax return taxact login page taxact sign page Depletion. Taxact login tax return taxact login page taxact sign page   If you are the owner of an economic interest in mineral deposits or oil and gas wells, you can recover your investment through the depletion allowance. Taxact login tax return taxact login page taxact sign page For information on this subject, see chapter 9 of Publication 535. Taxact login tax return taxact login page taxact sign page Coal and iron ore. Taxact login tax return taxact login page taxact sign page   Under certain circumstances, you can treat amounts you receive from the disposal of coal and iron ore as payments from the sale of a capital asset, rather than as royalty income. Taxact login tax return taxact login page taxact sign page For information about gain or loss from the sale of coal and iron ore, see Publication 544. Taxact login tax return taxact login page taxact sign page Sale of property interest. Taxact login tax return taxact login page taxact sign page   If you sell your complete interest in oil, gas, or mineral rights, the amount you receive is considered payment for the sale of property used in a trade or business under section 1231, not royalty income. Taxact login tax return taxact login page taxact sign page Under certain circumstances, the sale is subject to capital gain or loss treatment as explained in the Instructions for Schedule D (Form 1040). Taxact login tax return taxact login page taxact sign page For more information on selling section 1231 property, see chapter 3 of Publication 544. Taxact login tax return taxact login page taxact sign page   If you retain a royalty, an overriding royalty, or a net profit interest in a mineral property for the life of the property, you have made a lease or a sublease, and any cash you receive for the assignment of other interests in the property is ordinary income subject to a depletion allowance. Taxact login tax return taxact login page taxact sign page Part of future production sold. Taxact login tax return taxact login page taxact sign page   If you own mineral property but sell part of the future production, in most cases you treat the money you receive from the buyer at the time of the sale as a loan from the buyer. Taxact login tax return taxact login page taxact sign page Do not include it in your income or take depletion based on it. Taxact login tax return taxact login page taxact sign page   When production begins, you include all the proceeds in your income, deduct all the production expenses, and deduct depletion from that amount to arrive at your taxable income from the property. Taxact login tax return taxact login page taxact sign page Unemployment Benefits The tax treatment of unemployment benefits you receive depends on the type of program paying the benefits. Taxact login tax return taxact login page taxact sign page Unemployment compensation. Taxact login tax return taxact login page taxact sign page   You must include in income all unemployment compensation you receive. Taxact login tax return taxact login page taxact sign page You should receive a Form 1099-G showing in box 1 the total unemployment compensation paid to you. Taxact login tax return taxact login page taxact sign page In most cases, you enter unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Taxact login tax return taxact login page taxact sign page Types of unemployment compensation. Taxact login tax return taxact login page taxact sign page   Unemployment compensation generally includes any amount received under an unemployment compensation law of the United States or of a state. Taxact login tax return taxact login page taxact sign page It includes the following benefits. Taxact login tax return taxact login page taxact sign page Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund. Taxact login tax return taxact login page taxact sign page State unemployment insurance benefits. Taxact login tax return taxact login page taxact sign page Railroad unemployment compensation benefits. Taxact login tax return taxact login page taxact sign page Disability payments from a government program paid as a substitute for unemployment compensation. Taxact login tax return taxact login page taxact sign page (Amounts received as workers' compensation for injuries or illness are not unemployment compensation. Taxact login tax return taxact login page taxact sign page See chapter 5 for more information. Taxact login tax return taxact login page taxact sign page ) Trade readjustment allowances under the Trade Act of 1974. Taxact login tax return taxact login page taxact sign page Unemployment assistance under the Disaster Relief and Emergency Assistance Act. Taxact login tax return taxact login page taxact sign page Unemployment assistance under the Airline Deregulation Act of 1974 Program. Taxact login tax return taxact login page taxact sign page Governmental program. Taxact login tax return taxact login page taxact sign page   If you contribute to a governmental unemployment compensation program and your contributions are not deductible, amounts you receive under the program are not included as unemployment compensation until you recover your contributions. Taxact login tax return taxact login page taxact sign page If you deducted all of your contributions to the program, the entire amount you receive under the program is included in your income. Taxact login tax return taxact login page taxact sign page Repayment of unemployment compensation. Taxact login tax return taxact login page taxact sign page   If you repaid in 2013 unemployment compensation you received in 2013, subtract the amount you repaid from the total amount you received and enter the difference on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Taxact login tax return taxact login page taxact sign page On the dotted line next to your entry enter “Repaid” and the amount you repaid. Taxact login tax return taxact login page taxact sign page If you repaid unemployment compensation in 2013 that you included in income in an earlier year, you can deduct the amount repaid on Schedule A (Form 1040), line 23, if you itemize deductions. Taxact login tax return taxact login page taxact sign page If the amount is more than $3,000, see Repayments , earlier. Taxact login tax return taxact login page taxact sign page Tax withholding. Taxact login tax return taxact login page taxact sign page   You can choose to have federal income tax withheld from your unemployment compensation. Taxact login tax return taxact login page taxact sign page To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. Taxact login tax return taxact login page taxact sign page Tax will be withheld at 10% of your payment. Taxact login tax return taxact login page taxact sign page    If you do not choose to have tax withheld from your unemployment compensation, you may be liable for estimated tax. Taxact login tax return taxact login page taxact sign page If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. Taxact login tax return taxact login page taxact sign page For more information on estimated tax, see chapter 4. Taxact login tax return taxact login page taxact sign page Supplemental unemployment benefits. Taxact login tax return taxact login page taxact sign page   Benefits received from an employer-financed fund (to which the employees did not contribute) are not unemployment compensation. Taxact login tax return taxact login page taxact sign page They are taxable as wages and are subject to withholding for income tax. Taxact login tax return taxact login page taxact sign page They may be subject to social security and Medicare taxes. Taxact login tax return taxact login page taxact sign page For more information, see Supplemental Unemployment Benefits in section 5 of Publication 15-A, Employer's Supplemental Tax Guide. Taxact login tax return taxact login page taxact sign page Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Taxact login tax return taxact login page taxact sign page Repayment of benefits. Taxact login tax return taxact login page taxact sign page   You may have to repay some of your supplemental unemployment benefits to qualify for trade readjustment allowances under the Trade Act of 1974. Taxact login tax return taxact login page taxact sign page If you repay supplemental unemployment benefits in the same year you receive them, reduce the total benefits by the amount you repay. Taxact login tax return taxact login page taxact sign page If you repay the benefits in a later year, you must include the full amount of the benefits received in your income for the year you received them. Taxact login tax return taxact login page taxact sign page   Deduct the repayment in the later year as an adjustment to gross income on Form 1040. Taxact login tax return taxact login page taxact sign page (You cannot use Form 1040A or Form 1040EZ. Taxact login tax return taxact login page taxact sign page ) Include the repayment on Form 1040, line 36, and enter “Sub-Pay TRA” and the amount on the dotted line next to line 36. Taxact login tax return taxact login page taxact sign page If the amount you repay in a later year is more than $3,000, you may be able to take a credit against your tax for the later year instead of deducting the amount repaid. Taxact login tax return taxact login page taxact sign page For more information on this, see Repayments , earlier. Taxact login tax return taxact login page taxact sign page Private unemployment fund. Taxact login tax return taxact login page taxact sign page   Unemployment benefit payments from a private (nonunion) fund to which you voluntarily contribute are taxable only if the amounts you receive are more than your total payments into the fund. Taxact login tax return taxact login page taxact sign page Report the taxable amount on Form 1040, line 21. Taxact login tax return taxact login page taxact sign page Payments by a union. Taxact login tax return taxact login page taxact sign page   Benefits paid to you as an unemployed member of a union from regular union dues are included in your income on Form 1040, line 21. Taxact login tax return taxact login page taxact sign page However, if you contribute to a special union fund and your payments to the fund are not deductible, the unemployment benefits you receive from the fund are includible in your income only to the extent they are more than your contributions. Taxact login tax return taxact login page taxact sign page Guaranteed annual wage. Taxact login tax return taxact login page taxact sign page   Payments you receive from your employer during periods of unemployment, under a union agreement that guarantees you full pay during the year, are taxable as wages. Taxact login tax return taxact login page taxact sign page Include them on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Taxact login tax return taxact login page taxact sign page State employees. Taxact login tax return taxact login page taxact sign page   Payments similar to a state's unemployment compensation may be made by the state to its employees who are not covered by the state's unemployment compensation law. Taxact login tax return taxact login page taxact sign page Although the payments are fully taxable, do not report them as unemployment compensation. Taxact login tax return taxact login page taxact sign page Report these payments on Form 1040, line 21. Taxact login tax return taxact login page taxact sign page Welfare and Other Public Assistance Benefits Do not include in your income governmental benefit payments from a public welfare fund based upon need, such as payments to blind individuals under a state public assistance law. Taxact login tax return taxact login page taxact sign page Payments from a state fund for the victims of crime should not be included in the victims' incomes if they are in the nature of welfare payments. Taxact login tax return taxact login page taxact sign page Do not deduct medical expenses that are reimbursed by such a fund. Taxact login tax return taxact login page taxact sign page You must include in your income any welfare payments that are compensation for services or that are obtained fraudulently. Taxact login tax return taxact login page taxact sign page Reemployment Trade Adjustment Assistance (RTAA) payments. Taxact login tax return taxact login page taxact sign page   RTAA payments received from a state must be included in your income. Taxact login tax return taxact login page taxact sign page The state must send you Form 1099-G to advise you of the amount you should include in income. Taxact login tax return taxact login page taxact sign page The amount should be reported on Form 1040, line 21. Taxact login tax return taxact login page taxact sign page Persons with disabilities. Taxact login tax return taxact login page taxact sign page   If you have a disability, you must include in income compensation you receive for services you perform unless the compensation is otherwise excluded. Taxact login tax return taxact login page taxact sign page However, you do not include in income the value of goods, services, and cash that you receive, not in return for your services, but for your training and rehabilitation because you have a disability. Taxact login tax return taxact login page taxact sign page Excludable amounts include payments for transportation and attendant care, such as interpreter services for the deaf, reader services for the blind, and services to help individuals with an intellectual disability do their work. Taxact login tax return taxact login page taxact sign page Disaster relief grants. Taxact login tax return taxact login page taxact sign page    Do not include post-disaster grants received under the Robert T. Taxact login tax return taxact login page taxact sign page Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, child care, or funeral expenses. Taxact login tax return taxact login page taxact sign page Do not deduct casualty losses or medical expenses that are specifically reimbursed by these disaster relief grants. Taxact login tax return taxact login page taxact sign page If you have deducted a casualty loss for the loss of your personal residence and you later receive a disaster relief grant for the loss of the same residence, you may have to include part or all of the grant in your taxable income. Taxact login tax return taxact login page taxact sign page See Recoveries , earlier. Taxact login tax return taxact login page taxact sign page Unemployment assistance payments under the Act are taxable unemployment compensation. Taxact login tax return taxact login page taxact sign page See Unemployment compensation under Unemployment Benefits, earlier. Taxact login tax return taxact login page taxact sign page Disaster relief payments. Taxact login tax return taxact login page taxact sign page   You can exclude from income any amount you receive that is a qualified disaster relief payment. Taxact login tax return taxact login page taxact sign page A qualified disaster relief payment is an amount paid to you: To reimburse or pay reasonable and necessary personal, family, living, or funeral expenses that result from a qualified disaster; To reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of your home or repair or replacement of its contents to the extent it is due to a qualified disaster; By a person engaged in the furnishing or sale of transportation as a common carrier because of the death or personal physical injuries incurred as a result of a qualified disaster; or By a federal, state, or local government, or agency, or instrumentality in connection with a qualified disaster in order to promote the general welfare. Taxact login tax return taxact login page taxact sign page You can exclude this amount only to the extent any expense it pays for is not paid for by insurance or otherwise. Taxact login tax return taxact login page taxact sign page The exclusion does not apply if you were a participant or conspirator in a terrorist action or a representative of one. Taxact login tax return taxact login page taxact sign page   A qualified disaster is: A disaster which results from a terrorist or military action; A federally declared disaster; or A disaster which results from an accident involving a common carrier, or from any other event, which is determined to be catastrophic by the Secretary of the Treasury or his or her delegate. Taxact login tax return taxact login page taxact sign page   For amounts paid under item (4), a disaster is qualified if it is determined by an applicable federal, state, or local authority to warrant assistance from the federal, state, or local government, agency, or instrumentality. Taxact login tax return taxact login page taxact sign page Disaster mitigation payments. Taxact login tax return taxact login page taxact sign page   You also can exclude from income any amount you receive that is a qualified disaster mitigation payment. Taxact login tax return taxact login page taxact sign page Qualified disaster mitigation payments are also most commonly paid to you in the period immediately following damage to property as a result of a natural disaster. Taxact login tax return taxact login page taxact sign page However, disaster mitigation payments are used to mitigate (reduce the severity of) potential damage from future natural disasters. Taxact login tax return taxact login page taxact sign page They are paid to you through state and local governments based on the provisions of the Robert T. Taxact login tax return taxact login page taxact sign page Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act. Taxact login tax return taxact login page taxact sign page   You cannot increase the basis or adjusted basis of your property for improvements made with nontaxable disaster mitigation payments. Taxact login tax return taxact login page taxact sign page Home Affordable Modification Program (HAMP). Taxact login tax return taxact login page taxact sign page   If you benefit from Pay-for-Performance Success Payments under HAMP, the payments are not taxable. Taxact login tax return taxact login page taxact sign page Mortgage assistance payments under section 235 of the National Housing Act. Taxact login tax return taxact login page taxact sign page   Payments made under section 235 of the National Housing Act for mortgage assistance are not included in the homeowner's income. Taxact login tax return taxact login page taxact sign page Interest paid for the homeowner under the mortgage assistance program cannot be deducted. Taxact login tax return taxact login page taxact sign page Medicare. Taxact login tax return taxact login page taxact sign page   Medicare benefits received under title XVIII of the Social Security Act are not includible in the gross income of the individuals for whom they are paid. Taxact login tax return taxact login page taxact sign page This includes basic (part A (Hospital Insurance Benefits for the Aged)) and supplementary (part B (Supplementary Medical Insurance Benefits for the Aged)). Taxact login tax return taxact login page taxact sign page Old-age, survivors, and disability insurance benefits (OASDI). Taxact login tax return taxact login page taxact sign page   Generally, OASDI payments under section 202 of title II of the Social Security Act are not includible in the gross income of the individuals to whom they are paid. Taxact login tax return taxact login page taxact sign page This applies to old-age insurance benefits, and insurance benefits for wives, husbands, children, widows, widowers, mothers and fathers, and parents, as well as the lump-sum death payment. Taxact login tax return taxact login page taxact sign page Nutrition Program for the Elderly. Taxact login tax return taxact login page taxact sign page    Food benefits you receive under the Nutrition Program for the Elderly are not taxable. Taxact login tax return taxact login page taxact sign page If you prepare and serve free meals for the program, include in your income as wages the cash pay you receive, even if you are also eligible for food benefits. Taxact login tax return taxact login page taxact sign page Payments to reduce cost of winter energy. Taxact login tax return taxact login page taxact sign page   Payments made by a state to qualified people to reduce their cost of winter energy use are not taxable. Taxact login tax return taxact login page taxact sign page Other Income The following brief discussions are arranged in alphabetical order. Taxact login tax return taxact login page taxact sign page Other income items briefly discussed below are referenced to publications which provide more topical information. Taxact login tax return taxact login page taxact sign page Activity not for profit. Taxact login tax return taxact login page taxact sign page   You must include on your return income from an activity from which you do not expect to make a profit. Taxact login tax return taxact login page taxact sign page An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. Taxact login tax return taxact login page taxact sign page Enter this income on Form 1040, line 21. Taxact login tax return taxact login page taxact sign page Deductions for expenses related to the activity are limited. Taxact login tax return taxact login page taxact sign page They cannot total more than the income you report and can be taken only if you itemize deductions on Schedule A (Form 1040). Taxact login tax return taxact login page taxact sign page See Not-for-Profit Activities in chapter 1 of Publication 535 for information on whether an activity is considered carried on for a profit. Taxact login tax return taxact login page taxact sign page Alaska Permanent Fund dividend. Taxact login tax return taxact login page taxact sign page   If you received a payment from Alaska's mineral income fund (Alaska Permanent Fund dividend), report it as income on line 21 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Taxact login tax return taxact login page taxact sign page The state of Alaska sends each recipient a document that shows the amount of the payment with the check. Taxact login tax return taxact login page taxact sign page The amount also is reported to IRS. Taxact login tax return taxact login page taxact sign page Alimony. Taxact login tax return taxact login page taxact sign page   Include in your income on Form 1040, line 11, any alimony payments you receive. Taxact login tax return taxact login page taxact sign page Amounts you receive for child support are not income to you. Taxact login tax return taxact login page taxact sign page Alimony and child support payments are discussed in chapter 18. Taxact login tax return taxact login page taxact sign page Bribes. Taxact login tax return taxact login page taxact sign page   If you receive a bribe, include it in your income. Taxact login tax return taxact login page taxact sign page Campaign contributions. Taxact login tax return taxact login page taxact sign page   These contributions are not income to a candidate unless they are diverted to his or her personal use. Taxact login tax return taxact login page taxact sign page To be exempt from tax, the contributions must be spent for campaign purposes or kept in a fund for use in future campaigns. Taxact login tax return taxact login page taxact sign page However, interest earned on bank deposits, dividends received on contributed securities, and net gains realized on sales of contributed securities are taxable and must be reported on Form 1120-POL, U. Taxact login tax return taxact login page taxact sign page S. Taxact login tax return taxact login page taxact sign page Income Tax Return for Certain Political Organizations. Taxact login tax return taxact login page taxact sign page Excess campaign funds transferred to an office account must be included in the officeholder's income on Form 1040, line 21, in the year transferred. Taxact login tax return taxact login page taxact sign page Car pools. Taxact login tax return taxact login page taxact sign page   Do not include in your income amounts you receive from the passengers for driving a car in a car pool to and from work. Taxact login tax return taxact login page taxact sign page These amounts are considered reimbursement for your expenses. Taxact login tax return taxact login page taxact sign page However, this rule does not apply if you have developed car pool arrangements into a profit-making business of transporting workers for hire. Taxact login tax return taxact login page taxact sign page Cash rebates. Taxact login tax return taxact login page taxact sign page   A cash rebate you receive from a dealer or manufacturer of an item you buy is not income, but you must reduce your basis by the amount of the rebate. Taxact login tax return taxact login page taxact sign page Example. Taxact login tax return taxact login page taxact sign page You buy a new car for $24,000 cash and receive a $2,000 rebate check from the manufacturer. Taxact login tax return taxact login page taxact sign page The $2,000 is not income to you. Taxact login tax return taxact login page taxact sign page Your basis in the car is $22,000. Taxact login tax return taxact login page taxact sign page This is the basis on which you figure gain or loss if you sell the car and depreciation if you use it for business. Taxact login tax return taxact login page taxact sign page Casualty insurance and other reimbursements. Taxact login tax return taxact login page taxact sign page   You generally should not report these reimbursements on your return unless you are figuring gain or loss from the casualty or theft. Taxact login tax return taxact login page taxact sign page See chapter 25 for more information. Taxact login tax return taxact login page taxact sign page Child support payments. Taxact login tax return taxact login page taxact sign page   You should not report these payments on your return. Taxact login tax return taxact login page taxact sign page See chapter 18 for more information. Taxact login tax return taxact login page taxact sign page Court awards and damages. Taxact login tax return taxact login page taxact sign page   To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. Taxact login tax return taxact login page taxact sign page The character of the income as ordinary income or capital gain depends on the nature of the underlying claim. Taxact login tax return taxact login page taxact sign page Include the following as ordinary income. Taxact login tax return taxact login page taxact sign page Interest on any award. Taxact login tax return taxact login page taxact sign page Compensation for lost wages or lost profits in most cases. Taxact login tax return taxact login page taxact sign page Punitive damages, in most cases. Taxact login tax return taxact login page taxact sign page It does not matter if they relate to a physical injury or physical sickness. Taxact login tax return taxact login page taxact sign page Amounts received in settlement of pension rights (if you did not contribute to the plan). Taxact login tax return taxact login page taxact sign page Damages for: Patent or copyright infringement, Breach of contract, or Interference with business operations. Taxact login tax return taxact login page taxact sign page Back pay and damages for emotional distress received to satisfy a claim under title VII of the Civil Rights Act of 1964. Taxact login tax return taxact login page taxact sign page Attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income. Taxact login tax return taxact login page taxact sign page   Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments). Taxact login tax return taxact login page taxact sign page Emotional distress. Taxact login tax return taxact login page taxact sign page   Emotional distress itself is not a physical injury or physical sickness, but damages you receive for emotional distress due to a physical injury or sickness are treated as received for the physical injury or sickness. Taxact login tax return taxact login page taxact sign page Do not include them in your income. Taxact login tax return taxact login page taxact sign page   If the emotional distress is due to a personal injury that is not due to a physical injury or sickness (for example, employment discrimination or injury to reputation), you must include the damages in your income, except for any damages you receive for medical care due to that emotional distress. Taxact login tax return taxact login page taxact sign page Emotional distress includes physical symptoms that result from emotional distress, such as headaches, insomnia, and stomach disorders. Taxact login tax return taxact login page taxact sign page Deduction for costs involved in unlawful discrimination suits. Taxact login tax return taxact login page taxact sign page   You may be able to deduct attorney fees and court costs paid to recover a judgment or settlement for a claim of unlawful discrimination under various provisions of federal, state, and local law listed in Internal Revenue Code section 62(e), a claim against the United States government, or a claim under section 1862(b)(3)(A) of the Social Security Act. Taxact login tax return taxact login page taxact sign page For more information, see Publication 525. Taxact login tax return taxact login page taxact sign page Credit card insurance. Taxact login tax return taxact login page taxact sign page   In most cases, if you receive benefits under a credit card disability or unemployment insurance plan, the benefits are taxable to you. Taxact login tax return taxact login page taxact sign page These plans make the minimum monthly payment on your credit card account if you cannot make the payment due to injury, illness, disability, or unemployment. Taxact login tax return taxact login page taxact sign page Report on Form 1040, line 21, the amount of benefits you received during the year that is more than the amount of the premiums you paid during the year. Taxact login tax return taxact login page taxact sign page Down payment assistance. Taxact login tax return taxact login page taxact sign page   If you purchase a home and receive assistance from a nonprofit corporation to make the down payment, that assistance is not included in your income. Taxact login tax return taxact login page taxact sign page If the corporation qualifies as a tax-exempt charitable organization, the assistance is treated as a gift and is included in your basis of the house. Taxact login tax return taxact login page taxact sign page If the corporation does not qualify, the assistance is treated as a rebate or reduction of the purchase price and is not included in your basis. Taxact login tax return taxact login page taxact sign page Employment agency fees. Taxact login tax return taxact login page taxact sign page   If you get a job through an employment agency, and the fee is paid by your employer, the fee is not includible in your income if you are not liable for it. Taxact login tax return taxact login page taxact sign page However, if you pay it and your employer reimburses you for it, it is includible in your income. Taxact login tax return taxact login page taxact sign page Energy conservation subsidies. Taxact login tax return taxact login page taxact sign page   You can exclude from gross income any subsidy provided, either directly or indirectly, by public utilities for the purchase or installation of an energy conservation measure for a dwelling unit. Taxact login tax return taxact login page taxact sign page Energy conservation measure. Taxact login tax return taxact login page taxact sign page   This includes installations or modifications that are primarily designed to reduce consumption of electricity or natural gas, or improve the management of energy demand. Taxact login tax return taxact login page taxact sign page Dwelling unit. Taxact login tax return taxact login page taxact sign page   This includes a house, apartment, condominium, mobile home, boat, or similar property. Taxact login tax return taxact login page taxact sign page If a building or structure contains both dwelling and other units, any subsidy must be properly allocated. Taxact login tax return taxact login page taxact sign page Estate and trust income. Taxact login tax return taxact login page taxact sign page    An estate or trust, unlike a partnership, may have to pay federal income tax. Taxact login tax return taxact login page taxact sign page If you are a beneficiary of an estate or trust, you may be taxed on your share of its income distributed or required to be distributed to you. Taxact login tax return taxact login page taxact sign page However, there is never a double tax. Taxact login tax return taxact login page taxact sign page Estates and trusts file their returns on Form 1041, U. Taxact login tax return taxact login page taxact sign page S. Taxact login tax return taxact login page taxact sign page Income Tax Return for Estates and Trusts, and your share of the income is reported to you on Schedule K-1 (Form 1041). Taxact login tax return taxact login page taxact sign page Current income required to be distributed. Taxact login tax return taxact login page taxact sign page   If you are the beneficiary of an estate or trust that must distribute all of its current income, you must report your share of the distributable net income, whether or not you actually received it. Taxact login tax return taxact login page taxact sign page Current income not required to be distributed. Taxact login tax return taxact login page taxact sign page    If you are the beneficiary of an estate or trust and the fiduciary has the choice of whether to distribute all or part of the current income, you must report: All income that is required to be distributed to you, whether or not it is actually distributed, plus All other amounts actually paid or credited to you, up to the amount of your share of distributable net income. Taxact login tax return taxact login page taxact sign page How to report. Taxact login tax return taxact login page taxact sign page   Treat each item of income the same way that the estate or trust would treat it. Taxact login tax return taxact login page taxact sign page For example, if a trust's dividend income is distributed to you, you report the distribution as dividend income on your return. Taxact login tax return taxact login page taxact sign page The same rule applies to distributions of tax-exempt interest and capital gains. Taxact login tax return taxact login page taxact sign page   The fiduciary of the estate or trust must tell you the type of items making up your share of the estate or trust income and any credits you are allowed on your individual income tax return. Taxact login tax return taxact login page taxact sign page Losses. Taxact login tax return taxact login page taxact sign page   Losses of estates and trusts generally are not deductible by the beneficiaries. Taxact login tax return taxact login page taxact sign page Grantor trust. Taxact login tax return taxact login page taxact sign page   Income earned by a grantor trust is taxable to the grantor, not the beneficiary, if the grantor keeps certain control over the trust. Taxact login tax return taxact login page taxact sign page (The grantor is the one who transferred property to the trust. Taxact login tax return taxact login page taxact sign page ) This rule applies if the property (or income from the property) put into the trust will or may revert (be returned) to the grantor or the grantor's spouse. Taxact login tax return taxact login page taxact sign page   Generally, a trust is a grantor trust if the grantor has a reversionary interest valued (at the date of transfer) at more than 5% of the value of the transferred property. Taxact login tax return taxact login page taxact sign page Expenses paid by another. Taxact login tax return taxact login page taxact sign page   If your personal expenses are paid for by another person, such as a corporation, the payment may be taxable to you depending upon your relationship with that person and the nature of the payment. Taxact login tax return taxact login page taxact sign page But if the payment makes up for a loss caused by that person, and only restores you to the position you were in before the loss, the payment is not includible in your income. Taxact login tax return taxact login page taxact sign page Fees for services. Taxact login tax return taxact login page taxact sign page   Include all fees for your services in your income. Taxact login tax return taxact login page taxact sign page Examples of these fees are amounts you receive for services you perform as: A corporate director, An executor, administrator, or personal representative of an estate, A manager of a trade or business you operated before declaring Chapter 11 bankruptcy, A notary public, or An election precinct official. Taxact login tax return taxact login page taxact sign page Nonemployee compensation. Taxact login tax return taxact login page taxact sign page   If you are not an employee and the fees for your services from the same payer total $600 or more for the year, you may receive a Form 1099-MISC. Taxact login tax return taxact login page taxact sign page You may need to report your fees as self-employment income. Taxact login tax return taxact login page taxact sign page See Self-Employed Persons , in chapter 1, for a discussion of when you are considered self-employed. Taxact login tax return taxact login page taxact sign page Corporate director. Taxact login tax return taxact login page taxact sign page   Corporate director fees are self-employment income. Taxact login tax return taxact login page taxact sign page Report these payments on Schedule C or Schedule C-EZ (Form 1040). Taxact login tax return taxact login page taxact sign page Personal representatives. Taxact login tax return taxact login page taxact sign page   All personal representatives must include in their gross income fees paid to them from an estate. Taxact login tax return taxact login page taxact sign page If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on Form 1040, line 21. Taxact login tax return taxact login page taxact sign page If you are in the trade or business of being an executor, report these fees as self-employment income on Schedule C or Schedule C-EZ (Form 1040). Taxact login tax return taxact login page taxact sign page The fee is not includible in income if it is waived. Taxact login tax return taxact login page taxact sign page Manager of trade or business for bankruptcy estate. Taxact login tax return taxact login page taxact sign page   Include in your income all payments received from your bankruptcy estate for managing or operating a trade or business that you operated before you filed for bankruptcy. Taxact login tax return taxact login page taxact sign page Report this income on Form 1040, line 21. Taxact login tax return taxact login page taxact sign page Notary public. Taxact login tax return taxact login page taxact sign page    Report payments for these services on Schedule C or Schedule C-EZ (Form 1040). Taxact login tax return taxact login page taxact sign page These payments are not subject to self-employment tax. Taxact login tax return taxact login page taxact sign page See the separate instructions for Schedule SE (Form 1040) for details. Taxact login tax return taxact login page taxact sign page Election precinct official. Taxact login tax return taxact login page taxact sign page    You should receive a Form W-2 showing payments for services performed as an election official or election worker. Taxact login tax return taxact login page taxact sign page Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Taxact login tax return taxact login page taxact sign page Foster care providers. Taxact login tax return taxact login page taxact sign page   Payments you receive from a state, political subdivision, or a qualified foster care placement agency for providing care to qualified foster individuals in your home generally are not included in your income. Taxact login tax return taxact login page taxact sign page However, you must include in your income payments received for the care of more than 5 individuals age 19 or older and certain difficulty-of-care payments. Taxact login tax return taxact login page taxact sign page   A qualified foster individual is a person who: Is living in a foster family home, and Was placed there by: An agency of a state or one of its political subdivisions, or A qualified foster care placement agency. Taxact login tax return taxact login page taxact sign page Difficulty-of-care payments. Taxact login tax return taxact login page taxact sign page   These are additional payments that are designated by the payer as compensation for providing the additional care that is required for physically, mentally, or emotionally handicapped qualified foster individuals. Taxact login tax return taxact login page taxact sign page A state must determine that the additional compensation is needed, and the care for which the payments are made must be provided in your home. Taxact login tax return taxact login page taxact sign page   You must include in your income difficulty-of-care payments received for more than: 10 qualified foster individuals under age 19, or 5 qualified foster individuals age 19 or older. Taxact login tax return taxact login page taxact sign page Maintaining space in home. Taxact login tax return taxact login page taxact sign page   If you are paid to maintain space in your home for emergency foster care, you must include the payment in your income. Taxact login tax return taxact login page taxact sign page Reporting taxable payments. Taxact login tax return taxact login page taxact sign page    If you receive payments that you must include in your income, you are in business as a foster care provider and you are self-employed. Taxact login tax return taxact login page taxact sign page Report the payments on Schedule C or Schedule C-EZ (Form 1040). Taxact login tax return taxact login page taxact sign page See Publication 587, Business Use of Your Home, to help you determine the amount you can deduct for the use of your home. Taxact login tax return taxact login page taxact sign page Found property. Taxact login tax return taxact login page taxact sign page   If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession. Taxact login tax return taxact login page taxact sign page Free tour. Taxact login tax return taxact login page taxact sign page   If you received a free tour from a travel agency for organizing a group of tourists, you must include its value in your income. Taxact login tax return taxact login page taxact sign page Report the fair market value of the tour on Form 1040, line 21, if you are not in the trade or business of organizing tours. Taxact login tax return taxact login page taxact sign page You cannot deduct your expenses in serving as the voluntary leader of the group at the group's request. Taxact login tax return taxact login page taxact sign page If you organize tours as a trade or business, report the tour's value on Schedule C or Schedule C-EZ (Form 1040). Taxact login tax return taxact login page taxact sign page Gambling winnings. Taxact login tax return taxact login page taxact sign page   You must include your gambling winnings in income on Form 1040, line 21. Taxact login tax return taxact login page taxact sign page If you itemize your deductions on Schedule A (Form 1040), you can deduct gambling losses you had during the year, but only up to the amount of your winnings. Taxact login tax return taxact login page taxact sign page Lotteries and raffles. Taxact login tax return taxact login page taxact sign page   Winnings from lotteries and raffles are gambling winnings. Taxact login tax return taxact login page taxact sign page In addition to cash winnings, you must include in your income the fair market value of bonds, cars, houses, and other noncash prizes. Taxact login tax return taxact login page taxact sign page    If you win a state lottery prize payable in installments, see Publication 525 for more information. Taxact login tax return taxact login page taxact sign page Form W-2G. Taxact login tax return taxact login page taxact sign page   You may have received a Form W-2G, Certain Gambling Winnings, showing the amount of your gambling winnings and any tax taken out of them. Taxact login tax return taxact login page taxact sign page Include the amount from box 1 on Form 1040, line 21. Taxact login tax return taxact login page taxact sign page Include the amount shown in box 4 on Form 1040, line 62, as federal income tax withheld. Taxact login tax return taxact login page taxact sign page Reporting winnings and recordkeeping. Taxact login tax return taxact login page taxact sign page   For more information on reporting gam
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The Chemical Safety and Hazard Investigation Board investigates industrial chemical accidents.

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Taxact login tax return taxact login page taxact sign page 3. Taxact login tax return taxact login page taxact sign page   Gifts Table of Contents If you give gifts in the course of your trade or business, you can deduct all or part of the cost. Taxact login tax return taxact login page taxact sign page This chapter explains the limits and rules for deducting the costs of gifts. Taxact login tax return taxact login page taxact sign page $25 limit. Taxact login tax return taxact login page taxact sign page   You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. Taxact login tax return taxact login page taxact sign page A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift. Taxact login tax return taxact login page taxact sign page   If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. Taxact login tax return taxact login page taxact sign page This rule does not apply if you have a bona fide, independent business connection with that family member and the gift is not intended for the customer's eventual use. Taxact login tax return taxact login page taxact sign page   If you and your spouse both give gifts, both of you are treated as one taxpayer. Taxact login tax return taxact login page taxact sign page It does not matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. Taxact login tax return taxact login page taxact sign page If a partnership gives gifts, the partnership and the partners are treated as one taxpayer. Taxact login tax return taxact login page taxact sign page Example. Taxact login tax return taxact login page taxact sign page Bob Jones sells products to Local Company. Taxact login tax return taxact login page taxact sign page He and his wife, Jan, gave Local Company three gourmet gift baskets to thank them for their business. Taxact login tax return taxact login page taxact sign page They paid $80 for each gift basket, or $240 total. Taxact login tax return taxact login page taxact sign page Three of Local Company's executives took the gift baskets home for their families' use. Taxact login tax return taxact login page taxact sign page Bob and Jan have no independent business relationship with any of the executives' other family members. Taxact login tax return taxact login page taxact sign page They can deduct a total of $75 ($25 limit × 3) for the gift baskets. Taxact login tax return taxact login page taxact sign page Incidental costs. Taxact login tax return taxact login page taxact sign page   Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit. Taxact login tax return taxact login page taxact sign page   A cost is incidental only if it does not add substantial value to the gift. Taxact login tax return taxact login page taxact sign page For example, the cost of gift wrapping is an incidental cost. Taxact login tax return taxact login page taxact sign page However, the purchase of an ornamental basket for packaging fruit is not an incidental cost if the value of the basket is substantial compared to the value of the fruit. Taxact login tax return taxact login page taxact sign page Exceptions. Taxact login tax return taxact login page taxact sign page   The following items are not considered gifts for purposes of the $25 limit. Taxact login tax return taxact login page taxact sign page An item that costs $4 or less and: Has your name clearly and permanently imprinted on the gift, and Is one of a number of identical items you widely distribute. Taxact login tax return taxact login page taxact sign page Examples include pens, desk sets, and plastic bags and cases. Taxact login tax return taxact login page taxact sign page Signs, display racks, or other promotional material to be used on the business premises of the recipient. Taxact login tax return taxact login page taxact sign page    Figure B. Taxact login tax return taxact login page taxact sign page When Are Transportation Expenses Deductible? Most employees and self-employed persons can use this chart. Taxact login tax return taxact login page taxact sign page (Do not use this chart if your home is your principal place of business. Taxact login tax return taxact login page taxact sign page See Office in the home . Taxact login tax return taxact login page taxact sign page ) Please click here for the text description of the image. Taxact login tax return taxact login page taxact sign page Figure B. Taxact login tax return taxact login page taxact sign page When Are Local Transportation Expenses Deductible?TAs for Figure B are: Reg 1. Taxact login tax return taxact login page taxact sign page 162-1(a); RR 55–109; RR 94–47 Gift or entertainment. Taxact login tax return taxact login page taxact sign page   Any item that might be considered either a gift or entertainment generally will be considered entertainment. Taxact login tax return taxact login page taxact sign page However, if you give a customer packaged food or beverages you intend the customer to use at a later date, treat it as a gift. Taxact login tax return taxact login page taxact sign page    If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. Taxact login tax return taxact login page taxact sign page You can treat the cost of the tickets as either a gift expense or an entertainment expense, whichever is to your advantage. Taxact login tax return taxact login page taxact sign page   You can change your treatment of the tickets at a later date by filing an amended return. Taxact login tax return taxact login page taxact sign page Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. Taxact login tax return taxact login page taxact sign page    If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. Taxact login tax return taxact login page taxact sign page You cannot choose, in this case, to treat the cost of the tickets as a gift expense. Taxact login tax return taxact login page taxact sign page Prev  Up  Next   Home   More Online Publications