Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Turbotax Military

How To File Taxes OnlineIrs Tax Return Forms 20111040ez Form2012Irs Tax Forms 20121040x 2009Printable 1040ez Tax FormH And R Block Free FilingTax Form 1040x More:label_tax_20form_201040x More:bizfinanceHow To File Taxes If You Are Self Employed1040x FormsTaxaideTurbotax Login OnlineAmending A State Tax ReturnFile For Extension 2011 Taxes Free1040 Ez Form 20111040nrE File Irs2011 1040 Ez FormForm 1040ez Instructions 2013Free Irs FilingFile Back Taxes For FreeFree Tax Forms 2011Free Tax Filing For Low IncomeH&r Block LoginTax Forms For 20091040ez.com1040ez Instruction ManualHow To File A 1040xAmend 2009 Tax ReturnWww Irs Gov Form 1040ezIrs Free Tax Filing2011 Tax Return Form 1040Ez 1040 Form 2014How Do I Amend My State Tax Return2011 Irs Forms 1040Online Tax Filing 2012How Do You File An Amended Federal Tax Return1040ez Form Free FileIrs Forms 1040 2011Aarp Tax Aide Locations

Turbotax Military

Turbotax military Publication 939 - Main Content Table of Contents General Information Taxation of Periodic PaymentsInvestment in the Contract Expected Return Computation Under the General Rule How To Use Actuarial TablesUnisex Annuity Tables Special Elections Worksheets for Determining Taxable Annuity Actuarial Tables Requesting a Ruling on Taxation of Annuity How To Get Tax HelpLow Income Taxpayer Clinics General Information Some of the terms used in this publication are defined in the following paragraphs. Turbotax military A pension is generally a series of payments made to you after you retire from work. Turbotax military Pension payments are made regularly and are for past services with an employer. Turbotax military An annuity is a series of payments under a contract. Turbotax military You can buy the contract alone or you can buy it with the help of your employer. Turbotax military Annuity payments are made regularly for more than one full year. Turbotax military Note. Turbotax military Distributions from pensions and annuities follow the same rules as outlined in this publication unless otherwise noted. Turbotax military Types of pensions and annuities. Turbotax military   Particular types of pensions and annuities include: Fixed period annuities. Turbotax military You receive definite amounts at regular intervals for a definite length of time. Turbotax military Annuities for a single life. Turbotax military You receive definite amounts at regular intervals for life. Turbotax military The payments end at death. Turbotax military Joint and survivor annuities. Turbotax military The first annuitant receives a definite amount at regular intervals for life. Turbotax military After he or she dies, a second annuitant receives a definite amount at regular intervals for life. Turbotax military The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. Turbotax military Variable annuities. Turbotax military You receive payments that may vary in amount for a definite length of time or for life. Turbotax military The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds or cost-of-living indexes. Turbotax military Disability pensions. Turbotax military You are under minimum retirement age and receive payments because you retired on disability. Turbotax military If, at the time of your retirement, you were permanently and totally disabled, you may be eligible for the credit for the elderly or the disabled discussed in Publication 524. Turbotax military If your annuity starting date is after November 18, 1996, the General Rule cannot be used for the following qualified plans. Turbotax military A qualified employee plan is an employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries. Turbotax military This plan must meet Internal Revenue Code requirements. Turbotax military It qualifies for special tax benefits, including tax deferral for employer contributions and rollover distributions. Turbotax military However, you must use the General Rule if you were 75 or over and the annuity payments are guaranteed for more than 5 years. Turbotax military A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. Turbotax military A tax-sheltered annuity is a special annuity plan or contract purchased for an employee of a public school or tax-exempt organization. Turbotax military   The General Rule is used to figure the tax treatment of various types of pensions and annuities, including nonqualified employee plans. Turbotax military A nonqualified employee plan is an employer's plan that does not meet Internal Revenue Code requirements. Turbotax military It does not qualify for most of the tax benefits of a qualified plan. Turbotax military Annuity worksheets. Turbotax military   The worksheets found near the end of the text of this publication may be useful to you in figuring the taxable part of your annuity. Turbotax military Request for a ruling. Turbotax military   If you are unable to determine the income tax treatment of your pension or annuity, you may ask the Internal Revenue Service to figure the taxable part of your annuity payments. Turbotax military This is treated as a request for a ruling. Turbotax military See Requesting a Ruling on Taxation of Annuity near the end of this publication. Turbotax military Withholding tax and estimated tax. Turbotax military   Your pension or annuity is subject to federal income tax withholding unless you choose not to have tax withheld. Turbotax military If you choose not to have tax withheld from your pension or annuity, or if you do not have enough income tax withheld, you may have to make estimated tax payments. Turbotax military Taxation of Periodic Payments This section explains how the periodic payments you receive under a pension or annuity plan are taxed under the General Rule. Turbotax military Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). Turbotax military These payments are also known as amounts received as an annuity. Turbotax military If you receive an amount from your plan that is a nonperiodic payment (amount not received as an annuity), see Taxation of Nonperiodic Payments in Publication 575. Turbotax military In general, you can recover your net cost of the pension or annuity tax free over the period you are to receive the payments. Turbotax military The amount of each payment that is more than the part that represents your net cost is taxable. Turbotax military Under the General Rule, the part of each annuity payment that represents your net cost is in the same proportion that your investment in the contract is to your expected return. Turbotax military These terms are explained in the following discussions. Turbotax military Investment in the Contract In figuring how much of your pension or annuity is taxable under the General Rule, you must figure your investment in the contract. Turbotax military First, find your net cost of the contract as of the annuity starting date (defined later). Turbotax military To find this amount, you must first figure the total premiums, contributions, or other amounts paid. Turbotax military This includes the amounts your employer contributed if you were required to include these amounts in income. Turbotax military It also includes amounts you actually contributed (except amounts for health and accident benefits and deductible voluntary employee contributions). Turbotax military From this total cost you subtract: Any refunded premiums, rebates, dividends, or unrepaid loans (any of which were not included in your income) that you received by the later of the annuity starting date or the date on which you received your first payment. Turbotax military Any additional premiums paid for double indemnity or disability benefits. Turbotax military Any other tax-free amounts you received under the contract or plan before the later of the dates in (1). Turbotax military The annuity starting date   is the later of the first day of the first period for which you receive payment under the contract or the date on which the obligation under the contract becomes fixed. Turbotax military Example. Turbotax military On January 1 you completed all your payments required under an annuity contract providing for monthly payments starting on August 1, for the period beginning July 1. Turbotax military The annuity starting date is July 1. Turbotax military This is the date you use in figuring your investment in the contract and your expected return (discussed later). Turbotax military Adjustments If any of the following items apply, adjust (add or subtract) your total cost to find your net cost. Turbotax military Foreign employment. Turbotax military   If you worked abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludible from your gross income had they been paid directly to you as compensation. Turbotax military The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (without regard to the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer on your behalf if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) if the contributions would be excludible from your gross income had they been paid directly to you. Turbotax military Foreign employment contributions while a nonresident alien. Turbotax military   In determining your cost, special rules apply if you are a U. Turbotax military S. Turbotax military citizen or resident alien who received distributions from a plan to which contributions were made while you were a nonresident alien. Turbotax military Your contributions and your employer's contributions are not included in your cost if the contributions: Were made based on compensation which was for services performed outside the United States which you were a nonresident alien, and Were not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if they had been paid as cash compensation when the services were performed. Turbotax military Death benefit exclusion. Turbotax military   If you are the beneficiary of a deceased employee (or former employee), who died before August 21, 1996, you may qualify for a death benefit exclusion of up to $5,000. Turbotax military The beneficiary of a deceased employee who died after August 20, 1996, will not qualify for the death benefit exclusion. Turbotax military How to adjust your total cost. Turbotax military   If you are eligible, treat the amount of any allowable death benefit exclusion as additional cost paid by the employee. Turbotax military Add it to the cost or unrecovered cost of the annuity at the annuity starting date. Turbotax military See Example 3 under Computation Under General Rule for an illustration of the adjustment to the cost of the contract. Turbotax military Net cost. Turbotax military   Your total cost plus certain adjustments and minus other amounts already recovered before the annuity starting date is your net cost. Turbotax military This is the unrecovered investment in the contract as of the annuity starting date. Turbotax military If your annuity starting date is after 1986, this is the maximum amount that you may recover tax free under the contract. Turbotax military Refund feature. Turbotax military   Adjustment for the value of the refund feature is only applicable when you report your pension or annuity under the General Rule. Turbotax military Your annuity contract has a refund feature if: The expected return ( discussed later) of an annuity depends entirely or partly on the life of one or more individuals, The contract provides that payments will be made to a beneficiary or the estate of an annuitant on or after the death of the annuitant if a stated amount or a stated number of payments has not been paid to the annuitant or annuitants before death, and The payments are a refund of the amount you paid for the annuity contract. Turbotax military   If your annuity has a refund feature, you must reduce your net cost of the contract by the value of the refund feature (figured using Table III or VII at the end of this publication, also see How To Use Actuarial Tables , later) to find the investment in the contract. Turbotax military Zero value of refund feature. Turbotax military   For a joint and survivor annuity, the value of the refund feature is zero if: Both annuitants are age 74 or younger, The payments are guaranteed for less than 2½ years, and The survivor's annuity is at least 50% of the first annuitant's annuity. Turbotax military   For a single-life annuity without survivor benefit, the value of the refund feature is zero if: The payments are guaranteed for less than 2½ years, and The annuitant is: Age 57 or younger (if using the new (unisex) annuity tables), Age 42 or younger (if male and using the old annuity tables), or Age 47 or younger (if female and using the old annuity tables). Turbotax military   If you do not meet these requirements, you will have to figure the value of the refund feature, as explained in the following discussion. Turbotax military Examples. Turbotax military The first example shows how to figure the value of the refund feature when there is only one beneficiary. Turbotax military Example 2 shows how to figure the value of the refund feature when the contract provides, in addition to a whole life annuity, one or more temporary life annuities for the lives of children. Turbotax military In both examples, the taxpayer elects to use Tables V through VIII. Turbotax military If you need the value of the refund feature for a joint and survivor annuity, write to the Internal Revenue Service as explained under Requesting a Ruling on Taxation of Annuity near the end of this publication. Turbotax military Example 1. Turbotax military At age 65, Barbara bought for $21,053 an annuity with a refund feature. Turbotax military She will get $100 a month for life. Turbotax military Barbara's contract provides that if she does not live long enough to recover the full $21,053, similar payments will be made to her surviving beneficiary until a total of $21,053 has been paid under the contract. Turbotax military In this case, the contract cost and the total guaranteed return are the same ($21,053). Turbotax military Barbara's investment in the contract is figured as follows: Net cost $21,053 Amount to be received annually $1,200   Number of years for which payment is guaranteed ($21,053 divided by $1,200) 17. Turbotax military 54   Rounded to nearest whole number of years 18   Percentage from Actuarial Table VII for age 65 with 18 years of guaranteed payments 15%   Value of the refund feature (rounded to the nearest dollar)—15% of $21,053 3,158 Investment in the contract, adjusted for value of refund feature $17,895       If the total guaranteed return were less than the $21,053 net cost of the contract, Barbara would apply the appropriate percentage from the tables to the lesser amount. Turbotax military For example, if the contract guaranteed the $100 monthly payments for 17 years to Barbara's estate or beneficiary if she were to die before receiving all the payments for that period, the total guaranteed return would be $20,400 ($100 × 12 × 17 years). Turbotax military In this case, the value of the refund feature would be $2,856 (14% of $20,400) and Barbara's investment in the contract would be $18,197 ($21,053 minus $2,856) instead of $17,895. Turbotax military Example 2. Turbotax military John died while still employed. Turbotax military His widow, Eleanor, age 48, receives $171 a month for the rest of her life. Turbotax military John's son, Elmer, age 9, receives $50 a month until he reaches age 18. Turbotax military John's contributions to the retirement fund totaled $7,559. Turbotax military 45, with interest on those contributions of $1,602. Turbotax military 53. Turbotax military The guarantee or total refund feature of the contract is $9,161. Turbotax military 98 ($7,559. Turbotax military 45 plus $1,602. Turbotax military 53). Turbotax military The adjustment in the investment in the contract is figured as follows: A) Expected return:*       1) Widow's expected return:         Annual annuity ($171 × 12) $2,052       Multiplied by factor from Table V         (nearest age 48) 34. Turbotax military 9 $71,614. Turbotax military 80   2) Child's expected return:         Annual annuity ($50 × 12) $600       Multiplied by factor from         Table VIII (nearest age 9         for term of 9 years) 9. Turbotax military 0 5,400. Turbotax military 00   3) Total expected return   $77,014. Turbotax military 80 B) Adjustment for refund feature:       1) Contributions (net cost) $7,559. Turbotax military 45   2) Guaranteed amount (contributions of $7,559. Turbotax military 45 plus interest of $1,602. Turbotax military 53) $9,161. Turbotax military 98   3) Minus: Expected return under child's (temporary life) annuity (A(2)) 5,400. Turbotax military 00   4) Net guaranteed amount $3,761. Turbotax military 98   5) Multiple from Table VII (nearest age 48 for 2 years duration (recovery of $3,761. Turbotax military 98 at $171 a month to nearest whole year)) 0%   6) Adjustment required for value of refund feature rounded to the nearest whole dollar  (0% × $3,761. Turbotax military 98, the smaller of B(3) or B(6)) 0 *Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Turbotax military See the discussion of expected return, later in this publication. Turbotax military Free IRS help. Turbotax military   If you need to request assistance to figure the value of the refund feature, see Requesting a Ruling on Taxation of Annuity near the end of this publication. Turbotax military Expected Return Your expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Turbotax military The following discussions explain how to figure the expected return with each type of annuity. Turbotax military A person's age, for purposes of figuring the expected return, is the age at the birthday nearest to the annuity starting date. Turbotax military Fixed period annuity. Turbotax military   If you will get annuity payments for a fixed number of years, without regard to your life expectancy, you must figure your expected return based on that fixed number of years. Turbotax military It is the total amount you will get beginning at the annuity starting date. Turbotax military You will receive specific periodic payments for a definite period of time, such as a fixed number of months (but not less than 13). Turbotax military To figure your expected return, multiply the fixed number of months for which payments are to be made by the amount of the payment specified for each period. Turbotax military Single life annuity. Turbotax military   If you are to get annuity payments for the rest of your life, find your expected return as follows. Turbotax military You must multiply the amount of the annual payment by a multiple based on your life expectancy as of the annuity starting date. Turbotax military These multiples are set out in actuarial Tables I and V near the end of this publication (see How To Use Actuarial Tables , later). Turbotax military   You may need to adjust these multiples if the payments are made quarterly, semiannually, or annually. Turbotax military See Adjustments to Tables I, II, V, VI, and VIA following Table I. Turbotax military Example. Turbotax military Henry bought an annuity contract that will give him an annuity of $500 a month for his life. Turbotax military If at the annuity starting date Henry's nearest birthday is 66, the expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table V, age 66 × 19. Turbotax military 2 Expected return $115,200 If the payments were to be made to Henry quarterly and the first payment was made one full month after the annuity starting date, Henry would adjust the 19. Turbotax military 2 multiple by +. Turbotax military 1. Turbotax military His expected return would then be $115,800 ($6,000 × 19. Turbotax military 3). Turbotax military Annuity for shorter of life or specified period. Turbotax military   With this type of annuity, you are to get annuity payments either for the rest of your life or until the end of a specified period, whichever period is shorter. Turbotax military To figure your expected return, multiply the amount of your annual payment by a multiple in Table IV or VIII for temporary life annuities. Turbotax military Find the proper multiple based on your sex (if using Table IV), your age at the annuity starting date, and the nearest whole number of years in the specified period. Turbotax military Example. Turbotax military Harriet purchased an annuity this year that will pay her $200 each month for five years or until she dies, whichever period is shorter. Turbotax military She was age 65 at her birthday nearest the annuity starting date. Turbotax military She figures the expected return as follows: Annual payment ($200 × 12 months) $2,400 Multiple shown in Table VIII, age 65, 5-year term × 4. Turbotax military 9 Expected return $11,760 She uses Table VIII (not Table IV) because all her contributions were made after June 30, 1986. Turbotax military See Special Elections, later. Turbotax military Joint and survivor annuities. Turbotax military   If you have an annuity that pays you a periodic income for life and after your death provides an identical lifetime periodic income to your spouse (or some other person), you figure the expected return based on your combined life expectancies. Turbotax military To figure the expected return, multiply the annual payment by a multiple in Table II or VI based on your joint life expectancies. Turbotax military If your payments are made quarterly, semiannually, or annually, you may need to adjust these multiples. Turbotax military See Adjustments to Tables I, II, V, VI, and VIA following Table I near the end of this publication. Turbotax military Example. Turbotax military John bought a joint and survivor annuity providing payments of $500 a month for his life, and, after his death, $500 a month for the remainder of his wife's life. Turbotax military At John's annuity starting date, his age at his nearest birthday is 70 and his wife's at her nearest birthday is 67. Turbotax military The expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table VI, ages 67 and 70 × 22. Turbotax military 0 Expected return $132,000 Different payments to survivor. Turbotax military   If your contract provides that payments to a survivor annuitant will be different from the amount you receive, you must use a computation which accounts for both the joint lives of the annuitants and the life of the survivor. Turbotax military Example 1. Turbotax military Gerald bought a contract providing for payments to him of $500 a month for life and, after his death, payments to his wife, Mary, of $350 a month for life. Turbotax military If, at the annuity starting date, Gerald's nearest birthday is 70 and Mary's is 67, the expected return under the contract is figured as follows: Combined multiple for Gerald and Mary, ages 70 and 67 (from Table VI)   22. Turbotax military 0 Multiple for Gerald, age 70 (from Table V)   16. Turbotax military 0 Difference: Multiple applicable to Mary   6. Turbotax military 0 Gerald's annual payment ($500 × 12) $6,000   Gerald's multiple 16. Turbotax military 0   Gerald's expected return   $96,000 Mary's annual payment ($350 × 12) $4,200   Mary's multiple 6. Turbotax military 0   Mary's expected return   25,200 Total expected return under the contract   $121,200 Example 2. Turbotax military Your husband died while still employed. Turbotax military Under the terms of his employer's retirement plan, you are entitled to get an immediate annuity of $400 a month for the rest of your life or until you remarry. Turbotax military Your daughters, Marie and Jean, are each entitled to immediate temporary life annuities of $150 a month until they reach age 18. Turbotax military You were 50 years old at the annuity starting date. Turbotax military Marie was 16 and Jean was 14. Turbotax military Using the multiples shown in Tables V and VIII at the end of this publication, the total expected return on the annuity starting date is $169,680, figured as follows: Widow, age 50 (multiple from Table V—33. Turbotax military 1 × $4,800 annual payment) $158,880 Marie, age 16 for 2 years duration (multiple from Table VIII—2. Turbotax military 0 × $1,800 annual payment) 3,600 Jean, age 14 for 4 years duration (multiple from Table VIII—4. Turbotax military 0 × $1,800 annual payment) 7,200 Total expected return $169,680 No computation of expected return is made based on your husband's age at the date of death because he died before the annuity starting date. Turbotax military Computation Under the General Rule Note. Turbotax military Variable annuities use a different computation for determining the exclusion amounts. Turbotax military See Variable annuities later. Turbotax military Under the General Rule, you figure the taxable part of your annuity by using the following steps: Step 1. Turbotax military   Figure the amount of your investment in the contract, including any adjustments for the refund feature and the death benefit exclusion, if applicable. Turbotax military See Death benefit exclusion , earlier. Turbotax military Step 2. Turbotax military   Figure your expected return. Turbotax military Step 3. Turbotax military   Divide Step 1 by Step 2 and round to three decimal places. Turbotax military This will give you the exclusion percentage. Turbotax military Step 4. Turbotax military   Multiply the exclusion percentage by the first regular periodic payment. Turbotax military The result is the tax-free part of each pension or annuity payment. Turbotax military   The tax-free part remains the same even if the total payment increases due to variation in the annuity amount such as cost of living increases, or you outlive the life expectancy factor used. Turbotax military However, if your annuity starting date is after 1986, the total amount of annuity income that is tax free over the years cannot exceed your net cost. Turbotax military   Each annuitant applies the same exclusion percentage to his or her initial payment called for in the contract. Turbotax military Step 5. Turbotax military   Multiply the tax-free part of each payment (step 4) by the number of payments received during the year. Turbotax military This will give you the tax-free part of the total payment for the year. Turbotax military    In the first year of your annuity, your first payment or part of your first payment may be for a fraction of the payment period. Turbotax military This fractional amount is multiplied by your exclusion percentage to get the tax-free part. Turbotax military Step 6. Turbotax military   Subtract the tax-free part from the total payment you received. Turbotax military The rest is the taxable part of your pension or annuity. Turbotax military Example 1. Turbotax military You purchased an annuity with an investment in the contract of $10,800. Turbotax military Under its terms, the annuity will pay you $100 a month for life. Turbotax military The multiple for your age (age 65) is 20. Turbotax military 0 as shown in Table V. Turbotax military Your expected return is $24,000 (20 × 12 × $100). Turbotax military Your cost of $10,800, divided by your expected return of $24,000, equals 45. Turbotax military 0%. Turbotax military This is the percentage you will not have to include in income. Turbotax military Each year, until your net cost is recovered, $540 (45% of $1,200) will be tax free and you will include $660 ($1,200 − $540) in your income. Turbotax military If you had received only six payments of $100 ($600) during the year, your exclusion would have been $270 (45% of $100 × 6 payments). Turbotax military Example 2. Turbotax military Gerald bought a joint and survivor annuity. Turbotax military Gerald's investment in the contract is $62,712 and the expected return is $121,200. Turbotax military The exclusion percentage is 51. Turbotax military 7% ($62,712 ÷ $121,200). Turbotax military Gerald will receive $500 a month ($6,000 a year). Turbotax military Each year, until his net cost is recovered, $3,102 (51. Turbotax military 7% of his total payments received of $6,000) will be tax free and $2,898 ($6,000 − $3,102) will be included in his income. Turbotax military If Gerald dies, his wife will receive $350 a month ($4,200 a year). Turbotax military If Gerald had not recovered all of his net cost before his death, his wife will use the same exclusion percentage (51. Turbotax military 7%). Turbotax military Each year, until the entire net cost is recovered, his wife will receive $2,171. Turbotax military 40 (51. Turbotax military 7% of her payments received of $4,200) tax free. Turbotax military She will include $2,028. Turbotax military 60 ($4,200 − $2,171. Turbotax military 40) in her income tax return. Turbotax military Example 3. Turbotax military Using the same facts as Example 2 under Different payments to survivor, you are to receive an annual annuity of $4,800 until you die or remarry. Turbotax military Your two daughters each receive annual annuities of $1,800 until they reach age 18. Turbotax military Your husband contributed $25,576 to the plan. Turbotax military You are eligible for the $5,000 death benefit exclusion because your husband died before August 21, 1996. Turbotax military Adjusted Investment in the Contract Contributions $25,576 Plus: Death benefit exclusion 5,000 Adjusted investment in the contract $30,576 The total expected return, as previously figured (in Example 2 under Different payments to survivor), is $169,680. Turbotax military The exclusion percentage of 18. Turbotax military 0% ($30,576 ÷ $169,680) applies to the annuity payments you and each of your daughters receive. Turbotax military Each full year $864 (18. Turbotax military 0% × $4,800) will be tax free to you, and you must include $3,936 in your income tax return. Turbotax military Each year, until age 18, $324 (18. Turbotax military 0% × $1,800) of each of your daughters' payments will be tax free and each must include the balance, $1,476, as income on her own income tax return. Turbotax military Part-year payments. Turbotax military   If you receive payments for only part of a year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments received during the year. Turbotax military   If you receive amounts during the year that represent 12 payments, one for each month in that year, and an amount that represents payments for months in a prior year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments the amounts received represent. Turbotax military For instance, if you received amounts during the year that represent the 12 payments for that year plus an amount that represents three payments for a prior year, multiply that amount by the 15 (12 + 3) payments received that the year. Turbotax military   If you received a fractional payment, follow Step 5, discussed earlier. Turbotax military This gives you the tax-free part of your total payment. Turbotax military Example. Turbotax military On September 28, Mary bought an annuity contract for $22,050 that will give her $125 a month for life, beginning October 30. Turbotax military The applicable multiple from Table V is 23. Turbotax military 3 (age 61). Turbotax military Her expected return is $34,950 ($125 × 12 × 23. Turbotax military 3). Turbotax military Mary's investment in the contract of $22,050, divided by her expected return of $34,950, equals 63. Turbotax military 1%. Turbotax military Each payment received will consist of 63. Turbotax military 1% return of cost and 36. Turbotax military 9% taxable income, until her net cost of the contract is fully recovered. Turbotax military During the first year, Mary received three payments of $125, or $375, of which $236. Turbotax military 63 (63. Turbotax military 1% × $375) is a return of cost. Turbotax military The remaining $138. Turbotax military 37 is included in income. Turbotax military Increase in annuity payments. Turbotax military   The tax-free amount remains the same as the amount figured at the annuity starting date, even if the payment increases. Turbotax military All increases in the installment payments are fully taxable. Turbotax military   However, if your annuity payments are scheduled to increase at a definite date in the future you must figure the expected return for that annuity using the method described in section 1. Turbotax military 72-5(a)(5) of the regulations. Turbotax military Example. Turbotax military Joe's wife died while she was still employed and, as her beneficiary, he began receiving an annuity of $147 per month. Turbotax military In figuring the taxable part, Joe elects to use Tables V through VIII. Turbotax military The cost of the contract was $7,938, consisting of the sum of his wife's net contributions, adjusted for any refund feature. Turbotax military His expected return as of the annuity starting date is $35,280 (age 65, multiple of 20. Turbotax military 0 × $1,764 annual payment). Turbotax military The exclusion percentage is $7,938 ÷ $35,280, or 22. Turbotax military 5%. Turbotax military During the year he received 11 monthly payments of $147, or $1,617. Turbotax military Of this amount, 22. Turbotax military 5% × $147 × 11 ($363. Turbotax military 83) is tax free as a return of cost and the balance of $1,253. Turbotax military 17 is taxable. Turbotax military Later, because of a cost-of-living increase, his annuity payment was increased to $166 per month, or $1,992 a year (12 × $166). Turbotax military The tax-free part is still only 22. Turbotax military 5% of the annuity payments as of the annuity starting date (22. Turbotax military 5% × $147 × 12 = $396. Turbotax military 90 for a full year). Turbotax military The increase of $228 ($1,992 − $1,764 (12 × $147)) is fully taxable. Turbotax military Variable annuities. Turbotax military   For variable annuity payments, figure the amount of each payment that is tax free by dividing your investment in the contract (adjusted for any refund feature) by the total number of periodic payments you expect to get under the contract. Turbotax military   If the annuity is for a definite period, you determine the total number of payments by multiplying the number of payments to be made each year by the number of years you will receive payments. Turbotax military If the annuity is for life, you determine the total number of payments by using a multiple from the appropriate actuarial table. Turbotax military Example. Turbotax military Frank purchased a variable annuity at age 65. Turbotax military The total cost of the contract was $12,000. Turbotax military The annuity starting date is January 1 of the year of purchase. Turbotax military His annuity will be paid, starting July 1, in variable annual installments for his life. Turbotax military The tax-free amount of each payment, until he has recovered his cost of his contract, is: Investment in the contract $12,000 Number of expected annual payments (multiple for age 65 from Table V) 20 Tax-free amount of each payment ($12,000 ÷ 20) $600 If Frank's first payment is $920, he includes only $320 ($920 − $600) in his gross income. Turbotax military   If the tax-free amount for a year is more than the payments you receive in that year, you may choose, when you receive the next payment, to refigure the tax-free part. Turbotax military Divide the amount of the periodic tax-free part that is more than the payment you received by the remaining number of payments you expect. Turbotax military The result is added to the previously figured periodic tax-free part. Turbotax military The sum is the amount of each future payment that will be tax free. Turbotax military Example. Turbotax military Using the facts of the previous example about Frank, assume that after Frank's $920 payment, he received $500 in the following year, and $1,200 in the year after that. Turbotax military Frank does not pay tax on the $500 (second year) payment because $600 of each annual pension payment is tax free. Turbotax military Since the $500 payment is less than the $600 annual tax-free amount, he may choose to refigure his tax-free part when he receives his $1,200 (third year) payment, as follows: Amount tax free in second year $600. Turbotax military 00 Amount received in second year 500. Turbotax military 00 Difference $100. Turbotax military 00 Number of remaining payments after the first 2 payments (age 67, from Table V) 18. Turbotax military 4 Amount to be added to previously determined annual tax-free part ($100 ÷ 18. Turbotax military 4) $5. Turbotax military 43 Revised annual tax-free part for third and later years ($600 + $5. Turbotax military 43) $605. Turbotax military 43 Amount taxable in third year ($1,200 − $605. Turbotax military 43) $594. Turbotax military 57 If you choose to refigure your tax-free amount,   you must file a statement with your income tax return stating that you are refiguring the tax-free amount in accordance with the rules of section 1. Turbotax military 72–4(d)(3) of the Income Tax Regulations. Turbotax military The statement must also show the following information: The annuity starting date and your age on that date. Turbotax military The first day of the first period for which you received an annuity payment in the current year. Turbotax military Your investment in the contract as originally figured. Turbotax military The total of all amounts received tax free under the annuity from the annuity starting date through the first day of the first period for which you received an annuity payment in the current tax year. Turbotax military Exclusion Limits Your annuity starting date determines the total amount of annuity income that you can exclude from income over the years. Turbotax military Exclusion limited to net cost. Turbotax military   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a return of your cost cannot exceed your net cost (figured without any reduction for a refund feature). Turbotax military This is the unrecovered investment in the contract as of the annuity starting date. Turbotax military   If your annuity starting date is after July 1, 1986, any unrecovered net cost at your (or last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. Turbotax military This deduction is not subject to the 2%-of-adjusted-gross-income limit. Turbotax military Example 1. Turbotax military Your annuity starting date is after 1986. Turbotax military Your total cost is $12,500, and your net cost is $10,000, taking into account certain adjustments. Turbotax military There is no refund feature. Turbotax military Your monthly annuity payment is $833. Turbotax military 33. Turbotax military Your exclusion ratio is 12% and you exclude $100 a month. Turbotax military Your exclusion ends after 100 months, when you have excluded your net cost of $10,000. Turbotax military Thereafter, your annuity payments are fully taxable. Turbotax military Example 2. Turbotax military The facts are the same as in Example 1, except that there is a refund feature, and you die after 5 years with no surviving annuitant. Turbotax military The adjustment for the refund feature is $1,000, so the investment in the contract is $9,000. Turbotax military The exclusion ratio is 10. Turbotax military 8%, and your monthly exclusion is $90. Turbotax military After 5 years (60 months), you have recovered tax free only $5,400 ($90 x 60). Turbotax military An itemized deduction for the unrecovered net cost of $4,600 ($10,000 net cost minus $5,400) may be taken on your final income tax return. Turbotax military Your unrecovered investment is determined without regard to the refund feature adjustment, discussed earlier, under Adjustments. Turbotax military Exclusion not limited to net cost. Turbotax military   If your annuity starting date was before 1987, you could continue to take your monthly exclusion for as long as you receive your annuity. Turbotax military If you choose a joint and survivor annuity, your survivor continues to take the survivor's exclusion figured as of the annuity starting date. Turbotax military The total exclusion may be more than your investment in the contract. Turbotax military How To Use Actuarial Tables In figuring, under the General Rule, the taxable part of your annuity payments that you are to get for the rest of your life (rather than for a fixed number of years), you must use one or more of the actuarial tables in this publication. Turbotax military Unisex Annuity Tables Effective July 1, 1986, the Internal Revenue Service adopted new annuity Tables V through VIII, in which your sex is not considered when determining the applicable factor. Turbotax military These tables correspond to the old Tables I through IV. Turbotax military In general, Tables V through VIII must be used if you made contributions to the retirement plan after June 30, 1986. Turbotax military If you made no contributions to the plan after June 30, 1986, generally you must use only Tables I through IV. Turbotax military However, if you received an annuity payment after June 30, 1986, you may elect to use Tables V through VIII (see Annuity received after June 30, 1986, later). Turbotax military Special Elections Although you generally must use Tables V through VIII if you made contributions to the retirement plan after June 30, 1986, and Tables I through IV if you made no contributions after June 30, 1986, you can make the following special elections to select which tables to use. Turbotax military Contributions made both before July 1986 and after June 1986. Turbotax military   If you made contributions to the retirement plan both before July 1986 and after June 1986, you may elect to use Tables I through IV for the pre-July 1986 cost of the contract, and Tables V through VIII for the post-June 1986 cost. Turbotax military (See the examples below. Turbotax military )    Making the election. Turbotax military Attach this statement to your income tax return for the first year in which you receive an annuity:    “I elect to apply the provisions of paragraph (d) of section 1. Turbotax military 72–6 of the Income Tax Regulations. Turbotax military ”   The statement must also include your name, address, social security number, and the amount of the pre-July 1986 investment in the contract. Turbotax military   If your investment in the contract includes post-June 1986 contributions to the plan, and you do not make the election to use Tables I through IV and Tables V through VIII, then you can only use Tables V through VIII in figuring the taxable part of your annuity. Turbotax military You must also use Tables V through VIII if you are unable or do not wish to determine the portions of your contributions which were made before July 1, 1986, and after June 30, 1986. Turbotax military    Advantages of election. Turbotax military In general, a lesser amount of each annual annuity payment is taxable if you separately figure your exclusion ratio for pre-July 1986 and post-June 1986 contributions. Turbotax military    If you intend to make this election, save your records that substantiate your pre-July 1986 and post-June 1986 contributions. Turbotax military If the death benefit exclusion applies (see discussion, earlier), you do not have to apportion it between the pre-July 1986 and the post-June 1986 investment in the contract. Turbotax military   The following examples illustrate the separate computations required if you elect to use Tables I through IV for your pre-July 1986 investment in the contract and Tables V through VIII for your post-June 1986 investment in the contract. Turbotax military Example 1. Turbotax military Bill, who is single, contributed $42,000 to the retirement plan and will receive an annual annuity of $24,000 for life. Turbotax military Payment of the $42,000 contribution is guaranteed under a refund feature. Turbotax military Bill is 55 years old as of the annuity starting date. Turbotax military For figuring the taxable part of Bill's annuity, he chose to make separate computations for his pre-July 1986 investment in the contract of $41,300, and for his post-June 1986 investment in the contract of $700. Turbotax military       Pre- July 1986   Post- June 1986 A. Turbotax military Adjustment for refund feature         1) Net cost $41,300   $700   2) Annual annuity—$24,000  ($41,300/$42,000 × $24,000) $23,600       ($700/$42,000 × $24,000)     $400   3) Guarantee under contract $41,300   $700   4) No. Turbotax military of years payments  guaranteed (rounded), A(3) ÷ A(2) 2   2   5) Applicable percentage from  Tables III and VII 1%   0%   6) Adjustment for value of refund  feature, A(5) × smaller of A(1)  or A(3) $413   $0 B. Turbotax military Investment in the contract         1) Net cost $41,300   $700   2) Minus: Amount in A(6) 413   0   3) Investment in the contract $40,887   $700 C. Turbotax military Expected return         1) Annual annuity receivable $24,000   $24,000   2) Multiples from Tables I and V 21. Turbotax military 7   28. Turbotax military 6   3) Expected return, C(1) × C(2) $520,800   $686,400 D. Turbotax military Tax-free part of annuity         1) Exclusion ratio as decimal,  B(3) ÷ C(3) . Turbotax military 079   . Turbotax military 001   2) Tax-free part, C(1) × D(1) $1,896   $24 The tax-free part of Bill's total annuity is $1,920 ($1,896 plus $24). Turbotax military The taxable part of his annuity is $22,080 ($24,000 minus $1,920). Turbotax military If the annuity starting date is after 1986, the exclusion over the years cannot exceed the net cost (figured without any reduction for a refund feature). Turbotax military Example 2. Turbotax military Al is age 62 at his nearest birthday to the annuity starting date. Turbotax military Al's wife is age 60 at her nearest birthday to the annuity starting date. Turbotax military The joint and survivor annuity pays $1,000 per month to Al for life, and $500 per month to Al's surviving wife after his death. Turbotax military The pre-July 1986 investment in the contract is $53,100 and the post-June 1986 investment in the contract is $7,000. Turbotax military Al makes the election described in Example 1 . Turbotax military For purposes of this example, assume the refund feature adjustment is zero. Turbotax military If an adjustment is required, IRS will figure the amount. Turbotax military See Requesting a Ruling on Taxation of Annuity near the end of this publication. Turbotax military       Pre-  July 1986   Post-  June 1986 A. Turbotax military Adjustment for refund feature         1) Net cost $53,100   $7,000   2) Annual annuity—$12,000  ($53,100/$60,100 × $12,000) $10,602       ($7,000/$60,100 × $12,000)     $1,398   3) Guaranteed under the contract $53,100   $7,000   4) Number of years guaranteed,  rounded, A(3) ÷ A(2) 5   5   5) Applicable percentages 0%   0%   6) Refund feature adjustment, A(5) × smaller of A(1) or A(3) 0   0 B. Turbotax military Investment in the contract         1) Net cost $53,100   $7,000   2) Refund feature adjustment 0   0   3) Investment in the contract adjusted for refund feature $53,100   $7,000 C. Turbotax military Expected return         1) Multiple for both annuitants from Tables II and VI 25. Turbotax military 4   28. Turbotax military 8   2) Multiple for first annuitant from Tables I and V 16. Turbotax military 9   22. Turbotax military 5   3) Multiple applicable to surviving annuitant, subtract C(2) from C(1) 8. Turbotax military 5   6. Turbotax military 3   4) Annual annuity to surviving annuitant $6,000   $6,000   5) Portion of expected return for surviving annuitant, C(4) × C(3) $51,000   $37,800   6) Annual annuity to first annuitant $12,000   $12,000   7) Plus: Portion of expected return for first annuitant, C(6) × C(2) $202,800   $270,000   8) Expected return for both annuitants, C(5) + C(7) $253,800   $307,800 D. Turbotax military Tax-free part of annuity         1) Exclusion ratio as a decimal, B(3) ÷ C(8) . Turbotax military 209   . Turbotax military 023   2) Retiree's tax-free part of annuity, C(6) × D(1) $2,508   $276   3) Survivor's tax-free part of annuity, C(4) × D(1) $1,254   $138 The tax-free part of Al's total annuity is $2,784 ($2,508 + $276). Turbotax military The taxable part of his annuity is $9,216 ($12,000 − $2,784). Turbotax military The exclusion over the years cannot exceed the net cost of the contract (figured without any reduction for a refund feature) if the annuity starting date is after 1986. Turbotax military After Al's death, his widow will apply the same exclusion percentages (20. Turbotax military 9% and 2. Turbotax military 3%) to her annual annuity of $6,000 to figure the tax-free part of her annuity. Turbotax military Annuity received after June 30, 1986. Turbotax military   If you receive an annuity payment after June 30, 1986, (regardless of your annuity starting date), you may elect to treat the entire cost of the contract as post-June 1986 cost (even if you made no post-June 1986 contributions to the plan) and use Tables V through VIII. Turbotax military Once made, you cannot revoke the election, which will apply to all payments during the year and in any later year. Turbotax military    Make the election by attaching the following statement to your income tax return. Turbotax military    “I elect, under section 1. Turbotax military 72–9 of the Income Tax Regulations, to treat my entire cost of the contract as a post-June 1986 cost of the plan. Turbotax military ”   The statement must also include your name, address, and social security number. Turbotax military   You should also indicate you are making this election if you are unable or do not wish to determine the parts of your contributions which were made before July 1, 1986, and after June 30, 1986. Turbotax military Disqualifying form of payment or settlement. Turbotax military   If your annuity starting date is after June 30, 1986, and the contract provides for a disqualifying form of payment or settlement, such as an option to receive a lump sum in full discharge of the obligation under the contract, the entire investment in the contract is treated as post-June 1986 investment in the contract. Turbotax military See regulations section 1. Turbotax military 72–6(d)(3) for additional examples of disqualifying forms of payment or settlement. Turbotax military You can find the Income Tax Regulations in many libraries and at Internal Revenue Service Offices. Turbotax military Worksheets for Determining Taxable Annuity Worksheets I and II. Turbotax military   Worksheets I and II follow for determining your taxable annuity under Regulations Section 1. Turbotax military 72–6(d)(6) Election. Turbotax military Worksheet I For Determining Taxable Annuity Under Regulations Section 1. Turbotax military 72-6(d)(6) Election For Single Annuitant With No Survivor Annuity               Pre-July 1986   Post-June 1986 A. Turbotax military   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Turbotax military )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)   Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages* from Tables III and VII                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. Turbotax military If not, the IRS will calculate the refund feature percentage. Turbotax military             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Turbotax military   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund feature:                   B(1) minus B(2)                             C. Turbotax military   Expected Return             1)   Annual Annuity:                   12 times monthly annuity**             2)   Expected return multiples from Tables I and V             3)     Expected return:                   C(1) times C(2)                             D. Turbotax military   Tax-Free Part of Annuity             1)     Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(3)             2)     Tax-free part of annuity:                   C(1) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. Turbotax military     Worksheet II For Determining Taxable Annuity Under Regulations Section 1. Turbotax military 72-6(d)(6) Election For Joint and Survivor Annuity               Pre-July 1986   Post-June 1986 A. Turbotax military   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Turbotax military )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)     Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages*                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. Turbotax military If not, the IRS will calculate the refund feature percentage. Turbotax military             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Turbotax military   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund future:                   B(1) minus B(2)                             C. Turbotax military   Expected Return             1)   Multiples for both annuitants, Tables II and VI             2)   Multiple for retiree. Turbotax military Tables I and VI             3)   Multiple for survivor:                   C(1) minus C(2)             4)   Annual annuity to survivor:                   12 times potential monthly rate for survivor**             5)   Expected return for survivor:                   C(3) times C(4)             6)   Annual annuity to retiree:                   12 times monthly rate for retiree**             7)   Expected return for retiree:                   C(2) times C(6)             8)   Total expected return:                   C(5) plus C(7)                             D. Turbotax military   Tax-Free Part of Annuity             1)   Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(8)             2)   Retiree's tax-free part of annuity:                   C(6) times D(1)             3)   Survivor's tax-free part of annuity, if surviving after death of retiree:                   C(4) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. Turbotax military   Actuarial Tables Please click here for the text description of the image. Turbotax military Actuarial Tables Please click here for the text description of the image. Turbotax military Actuarial Tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Please click here for the text description of the image. Turbotax military Actuarial tables Requesting a Ruling on Taxation of Annuity If you are a retiree, or the survivor of an employee or retiree, you may ask the Internal Revenue Service to help you determine the taxation of your annuity. Turbotax military If you make this request, you are asking for a ruling. Turbotax military User fee. Turbotax military   Under the law in effect at the time this publication went to print, the IRS must charge a user fee for all ruling requests. Turbotax military You should call the IRS for the proper fee. Turbotax military A request solely for the value of the refund feature is not treated as a ruling request and requires no fee. Turbotax military Send your request to:     Internal Revenue Service  Attention: EP Letter Rulings P. Turbotax military O. Turbotax military Box 27063 McPherson Station Washington, DC 20038 The user fee is allowed as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit. Turbotax military When to make the request. Turbotax military   Please note that requests sent between February 1 and April 15 may experience some delay. Turbotax military We process requests in the order received, and we will reply to your request as soon as we can process it. Turbotax military If you do not receive your ruling by the required filing date, you may use Form 4868, Application for Automatic Extension of Time To File U. Turbotax military S. Turbotax military Individual Income Tax Return, to get an extension of time to file. Turbotax military Information you must furnish. Turbotax military   You must furnish the information listed below so the IRS can comply with your request. Turbotax military Failure to furnish the information will result in a delay in processing your request. Turbotax military Please send only copies of the following documents, as the IRS retains all material sent for its records: A letter explaining the question(s) you wish to have resolved or the information you need from the ruling. Turbotax military Copies of any documents showing distributions, annuity rates, and annuity options available to you. Turbotax military A copy of any Form 1099–R you received since your annuity began. Turbotax military A statement indicating whether you have filed your return for the year for which you are making the request. Turbotax military If you have requested an extension of time to file that return, please indicate the extension date. Turbotax military Your daytime phone number. Turbotax military Your current mailing address. Turbotax military A power of attorney if someone other than you, an attorney, a certified public accountant, or an enrolled agent is signing this request. Turbotax military Form 2848, Power of Attorney and Declaration of Representative, may be used for this purpose. Turbotax military A completed Tax Information Sheet (or facsimile) shown on the next page. Turbotax military Sign and date the Disclosure and Perjury Statement (or facsimile) at the end of the tax information sheet. Turbotax military This statement must be signed by the retiree or the survivor annuitant. Turbotax military It cannot be signed by a representative. Turbotax military Tax Information Sheet Please click here for the text description of the image. Turbotax military Tax Information Sheet Please click here for the text description of the image. Turbotax military Tax Information Sheet (continued) How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Turbotax military Free help with your tax return. Turbotax military   You can get free help preparing your return nationwide from IRS-certified volunteers. Turbotax military The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Turbotax military The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Turbotax military Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Turbotax military In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Turbotax military To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Turbotax military gov, download the IRS2Go app, or call 1-800-906-9887. Turbotax military   As part of the TCE program, AARP offers the Tax-Aide counseling program. Turbotax military To find the nearest AARP Tax-Aide site, visit AARP's website at www. Turbotax military aarp. Turbotax military org/money/taxaide or call 1-888-227-7669. Turbotax military For more information on these programs, go to IRS. Turbotax military gov and enter “VITA” in the search box. Turbotax military Internet. Turbotax military    IRS. Turbotax military gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Turbotax military Download the free IRS2Go app from the iTunes app store or from Google Play. Turbotax military Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Turbotax military Check the status of your 2013 refund with the Where's My Refund? application on IRS. Turbotax military gov or download the IRS2Go app and select the Refund Status option. Turbotax military The IRS issues more than 9 out of 10 refunds in less than 21 days. Turbotax military Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Turbotax military You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Turbotax military The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Turbotax military Use the Interactive Tax Assistant (ITA) to research your tax questions. Turbotax military No need to wait on the phone or stand in line. Turbotax military The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Turbotax military When you reach the response screen, you can print the entire interview and the final response for your records. Turbotax military New subject areas are added on a regular basis. Turbotax military  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Turbotax military gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Turbotax military You can use the IRS Tax Map, to search publications and instructions by topic or keyword. Turbotax military The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Turbotax military When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Turbotax military Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Turbotax military You can also ask the IRS to mail a return or an account transcript to you. Turbotax military Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Turbotax military gov or by calling 1-800-908-9946. Turbotax military Tax return and tax account transcripts are generally available for the current year and the past three years. Turbotax military Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Turbotax military Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Turbotax military If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Turbotax military Check the status of your amended return using Where's My Amended Return? Go to IRS. Turbotax military gov and enter Where's My Amended Return? in the search box. Turbotax military You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Turbotax military It can take up to 3 weeks from the date you mailed it to show up in our system. Turbotax military Make a payment using one of several safe and convenient electronic payment options available on IRS. Turbotax military gov. Turbotax military Select the Payment tab on the front page of IRS. Turbotax military gov for more information. Turbotax military Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Turbotax military Figure your income tax withholding with the IRS Withholding Calculator on IRS. Turbotax military gov. Turbotax military Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Turbotax military Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Turbotax military gov. Turbotax military Request an Electronic Filing PIN by going to IRS. Turbotax military gov and entering Electronic Filing PIN in the search box. Turbotax military Download forms, instructions and publications, including accessible versions for people with disabilities. Turbotax military Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Turbotax military gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Turbotax military An employee can answer questions about your tax account or help you set up a payment plan. Turbotax military Before you visit, check the Office Locator on IRS. Turbotax military gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Turbotax military If you have a special need, such as a disability, you can request an appointment. Turbotax military Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Turbotax military Apply for an Employer Identification Number (EIN). Turbotax military Go to IRS. Turbotax military gov and enter Apply for an EIN in the search box. Turbotax military Read the Internal Revenue Code, regulations, or other official guidance. Turbotax military Read Internal Revenue Bulletins. Turbotax military Sign up to receive local and national tax news and more by email. Turbotax military Just click on “subscriptions” above the search box on IRS. Turbotax military gov and choose from a variety of options. Turbotax military    Phone. Turbotax military You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Turbotax military Download the free IRS2Go app from the iTunes app store or from Google Play. Turbotax military Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. Turbotax military gov, or download the IRS2Go app. Turbotax military Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Turbotax military The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Turbotax military Mos
Español

Primary and Secondary Education

Find government information on primary and secondary education, including bullying, education reform, financial aid, libraries, school enrollment data, and more.

The Turbotax Military

Turbotax military 12. Turbotax military   Other Income Table of Contents Introduction Useful Items - You may want to see: Bartering Canceled DebtsInterest included in canceled debt. Turbotax military Exceptions Host or Hostess Life Insurance ProceedsSurviving spouse. Turbotax military 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. Turbotax military Method 2. Turbotax military RoyaltiesDepletion. Turbotax military Coal and iron ore. Turbotax military Sale of property interest. Turbotax military Part of future production sold. Turbotax military Unemployment BenefitsTypes of unemployment compensation. Turbotax military Governmental program. Turbotax military Repayment of unemployment compensation. Turbotax military Tax withholding. Turbotax military Repayment of benefits. Turbotax military Welfare and Other Public Assistance Benefits Other IncomeEmotional distress. Turbotax military Deduction for costs involved in unlawful discrimination suits. Turbotax military Energy conservation measure. Turbotax military Dwelling unit. Turbotax military Current income required to be distributed. Turbotax military Current income not required to be distributed. Turbotax military How to report. Turbotax military Losses. Turbotax military Grantor trust. Turbotax military Nonemployee compensation. Turbotax military Corporate director. Turbotax military Personal representatives. Turbotax military Manager of trade or business for bankruptcy estate. Turbotax military Notary public. Turbotax military Election precinct official. Turbotax military Difficulty-of-care payments. Turbotax military Maintaining space in home. Turbotax military Reporting taxable payments. Turbotax military Lotteries and raffles. Turbotax military Form W-2G. Turbotax military Reporting winnings and recordkeeping. Turbotax military Inherited pension or IRA. Turbotax military Employee awards or bonuses. Turbotax military Pulitzer, Nobel, and similar prizes. Turbotax military Payment for services. Turbotax military VA payments. Turbotax military Prizes. Turbotax military Strike and lockout benefits. Turbotax military 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. Turbotax military Some items, however, are only partly excluded from income. Turbotax military This chapter discusses many kinds of income and explains whether they are taxable or nontaxable. Turbotax military Income that is taxable must be reported on your tax return and is subject to tax. Turbotax military Income that is nontaxable may have to be shown on your tax return but is not taxable. Turbotax military This chapter begins with discussions of the following income items. Turbotax military Bartering. Turbotax military Canceled debts. Turbotax military Sales parties at which you are the host or hostess. Turbotax military Life insurance proceeds. Turbotax military Partnership income. Turbotax military S Corporation income. Turbotax military Recoveries (including state income tax refunds). Turbotax military Rents from personal property. Turbotax military Repayments. Turbotax military Royalties. Turbotax military Unemployment benefits. Turbotax military Welfare and other public assistance benefits. Turbotax military These discussions are followed by brief discussions of other income items. Turbotax military 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. Turbotax military You must include in your income, at the time received, the fair market value of property or services you receive in bartering. Turbotax military 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. Turbotax military 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. Turbotax military 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. Turbotax military Example 1. Turbotax military You are a self-employed attorney who performs legal services for a client, a small corporation. Turbotax military The corporation gives you shares of its stock as payment for your services. Turbotax military 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. Turbotax military Example 2. Turbotax military You are self-employed and a member of a barter club. Turbotax military The club uses “credit units” as a means of exchange. Turbotax military 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. Turbotax military The club subtracts credit units from your account when you receive goods or services from other members. Turbotax military 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. Turbotax military Example 3. Turbotax military You own a small apartment building. Turbotax military In return for 6 months rent-free use of an apartment, an artist gives you a work of art she created. Turbotax military 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. Turbotax military Form 1099-B from barter exchange. Turbotax military   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. Turbotax military It should show the value of cash, property, services, credits, or scrip you received from exchanges during 2013. Turbotax military The IRS also will receive a copy of Form 1099-B. Turbotax military 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. Turbotax military You have no income from the canceled debt if it is intended as a gift to you. Turbotax military A debt includes any indebtedness for which you are liable or which attaches to property you hold. Turbotax military If the debt is a nonbusiness debt, report the canceled amount on Form 1040, line 21. Turbotax military 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). Turbotax military Form 1099-C. Turbotax military   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. Turbotax military The amount of the canceled debt is shown in box 2. Turbotax military Interest included in canceled debt. Turbotax military   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. Turbotax military 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. Turbotax military See Deductible debt under Exceptions, later. Turbotax military   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. Turbotax military 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). Turbotax military Discounted mortgage loan. Turbotax military   If your financial institution offers a discount for the early payment of your mortgage loan, the amount of the discount is canceled debt. Turbotax military You must include the canceled amount in your income. Turbotax military Mortgage relief upon sale or other disposition. Turbotax military   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. Turbotax military 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. Turbotax military Report any income from discharge of indebtedness on nonbusiness debt that does not qualify for exclusion as other income on Form 1040, line 21. Turbotax military    You may be able to exclude part of the mortgage relief on your principal residence. Turbotax military See Excluded debt, later. Turbotax military   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. Turbotax military You may have a taxable gain if the amount you realize exceeds your adjusted basis in the property. Turbotax military Report any gain on nonbusiness property as a capital gain. Turbotax military   See Publication 4681 for more information. Turbotax military Stockholder debt. Turbotax military   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. Turbotax military For more information, see Publication 542, Corporations. Turbotax military   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. Turbotax military 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. Turbotax military Repayment of canceled debt. Turbotax military   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. Turbotax military You can file a claim on Form 1040X if the statute of limitations for filing a claim is still open. Turbotax military The statute of limitations generally does not end until 3 years after the due date of your original return. Turbotax military Exceptions There are several exceptions to the inclusion of canceled debt in income. Turbotax military These are explained next. Turbotax military Student loans. Turbotax military   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. Turbotax military   You do not have income if your student loan is canceled after you agreed to this provision and then performed the services required. Turbotax military 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). Turbotax military   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. Turbotax military Education loan repayment assistance. Turbotax military   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. Turbotax military    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. Turbotax military If you included these amounts in income in 2010, 2011, or 2012, you should file an amended tax return to exclude this income. Turbotax military See Form 1040X and its instructions for details on filing. Turbotax military Deductible debt. Turbotax military   You do not have income from the cancellation of a debt if your payment of the debt would be deductible. Turbotax military This exception applies only if you use the cash method of accounting. Turbotax military For more information, see chapter 5 of Publication 334, Tax Guide for Small Business. Turbotax military Price reduced after purchase. Turbotax military   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. Turbotax military The reduction of the debt is treated as a purchase price adjustment and reduces your basis in the property. Turbotax military Excluded debt. Turbotax military   Do not include a canceled debt in your gross income in the following situations. Turbotax military The debt is canceled in a bankruptcy case under title 11 of the U. Turbotax military S. Turbotax military Code. Turbotax military See Publication 908, Bankruptcy Tax Guide. Turbotax military The debt is canceled when you are insolvent. Turbotax military However, you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent. Turbotax military See Publication 908. Turbotax military The debt is qualified farm debt and is canceled by a qualified person. Turbotax military See chapter 3 of Publication 225, Farmer's Tax Guide. Turbotax military The debt is qualified real property business debt. Turbotax military See chapter 5 of Publication 334. Turbotax military The cancellation is intended as a gift. Turbotax military The debt is qualified principal residence indebtedness. Turbotax military See Publication 525 for additional information. Turbotax military 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. Turbotax military You must report this item as income at its fair market value. Turbotax military Your out-of-pocket party expenses are subject to the 50% limit for meal and entertainment expenses. Turbotax military 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. Turbotax military For more information about the 50% limit for meal and entertainment expenses, see chapter 26. Turbotax military 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. Turbotax military This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. Turbotax military However, interest income received as a result of life insurance proceeds may be taxable. Turbotax military Proceeds not received in installments. Turbotax military   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. Turbotax military 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. Turbotax military Proceeds received in installments. Turbotax military   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. Turbotax military   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. Turbotax military Include anything over this excluded part in your income as interest. Turbotax military Surviving spouse. Turbotax military   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. Turbotax military If you remarry, you can continue to take the exclusion. Turbotax military Surrender of policy for cash. Turbotax military   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. Turbotax military 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. Turbotax military    You should receive a Form 1099-R showing the total proceeds and the taxable part. Turbotax military Report these amounts on lines 16a and 16b of Form 1040 or lines 12a and 12b of Form 1040A. Turbotax military More information. Turbotax military   For more information, see Life Insurance Proceeds in Publication 525. Turbotax military 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. Turbotax military 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. Turbotax military 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. Turbotax military Include the part of the lump sum payment that is more than your cost in your income. Turbotax military 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. Turbotax military Viatical settlement. Turbotax military   This is the sale or assignment of any part of the death benefit under a life insurance contract to a viatical settlement provider. Turbotax military 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. Turbotax military Exclusion for terminal illness. Turbotax military    Accelerated death benefits are fully excludable if the insured is a terminally ill individual. Turbotax military 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. Turbotax military Exclusion for chronic illness. Turbotax military    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. Turbotax military Accelerated death benefits paid on a per diem or other periodic basis are excludable up to a limit. Turbotax military This limit applies to the total of the accelerated death benefits and any periodic payments received from long-term care insurance contracts. Turbotax military 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. Turbotax military Exception. Turbotax military   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. Turbotax military Form 8853. Turbotax military   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. Turbotax military You do not have to file Form 8853 to exclude accelerated death benefits paid on the basis of actual expenses incurred. Turbotax military 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. Turbotax military For this purpose, the term public safety officer includes law enforcement officers, firefighters, chaplains, and rescue squad and ambulance crew members. Turbotax military For more information, see Publication 559, Survivors, Executors, and Administrators. Turbotax military Partnership Income A partnership generally is not a taxable entity. Turbotax military 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. Turbotax military Schedule K-1 (Form 1065). Turbotax military    Although a partnership generally pays no tax, it must file an information return on Form 1065, U. Turbotax military S. Turbotax military Return of Partnership Income, and send Schedule K-1 (Form 1065) to each partner. Turbotax military 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. Turbotax military Keep Schedule K-1 (Form 1065) for your records. Turbotax military Do not attach it to your Form 1040, unless you are specifically required to do so. Turbotax military For more information on partnerships, see Publication 541, Partnerships. Turbotax military Qualified joint venture. Turbotax military   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. Turbotax military 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. Turbotax military For further information on how to make the election and which schedule(s) to file, see the instructions for your individual tax return. Turbotax military S Corporation Income In most cases, an S corporation does not pay tax on its income. Turbotax military Instead, the income, losses, deductions, and credits of the corporation are passed through to the shareholders based on each shareholder's pro rata share. Turbotax military Schedule K-1 (Form 1120S). Turbotax military   An S corporation must file a return on Form 1120S, U. Turbotax military S. Turbotax military Income Tax Return for an S Corporation, and send Schedule K-1 (Form 1120S) to each shareholder. Turbotax military 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. Turbotax military Keep Schedule K-1 (Form 1120S) for your records. Turbotax military Do not attach it to your Form 1040, unless you are specifically required to do so. Turbotax military For more information on S corporations and their shareholders, see the Instructions for Form 1120S. Turbotax military Recoveries A recovery is a return of an amount you deducted or took a credit for in an earlier year. Turbotax military The most common recoveries are refunds, reimbursements, and rebates of deductions itemized on Schedule A (Form 1040). Turbotax military 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. Turbotax military Tax benefit rule. Turbotax military   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. Turbotax military 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. Turbotax military For more information, see Publication 525. Turbotax military Federal income tax refund. Turbotax military   Refunds of federal income taxes are not included in your income because they are never allowed as a deduction from income. Turbotax military State tax refund. Turbotax military   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. Turbotax military The payer should send Form 1099-G, Certain Government Payments, to you by January 31, 2014. Turbotax military The IRS also will receive a copy of the Form 1099-G. Turbotax military 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. Turbotax military See Publication 525 for when you must use another worksheet. Turbotax military   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. Turbotax military For examples, see Publication 525. Turbotax military Mortgage interest refund. Turbotax military    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. Turbotax military Do not subtract the refund amount from the interest you paid in 2013. Turbotax military You may have to include it in your income under the rules explained in the following discussions. Turbotax military Interest on recovery. Turbotax military   Interest on any of the amounts you recover must be reported as interest income in the year received. Turbotax military For example, report any interest you received on state or local income tax refunds on Form 1040, line 8a. Turbotax military Recovery and expense in same year. Turbotax military   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. Turbotax military Recovery for 2 or more years. Turbotax military   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. Turbotax military 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. Turbotax military For information on how to compute the allocation, see Recoveries in Publication 525. Turbotax military 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. Turbotax military Where to report. Turbotax military   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. Turbotax military You cannot use Form 1040A or Form 1040EZ. Turbotax military Standard deduction limit. Turbotax military   You generally are allowed to claim the standard deduction if you do not itemize your deductions. Turbotax military 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). Turbotax military 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. Turbotax military Example. Turbotax military For 2012, you filed a joint return. Turbotax military Your taxable income was $60,000 and you were not entitled to any tax credits. Turbotax military Your standard deduction was $11,900, and you had itemized deductions of $14,000. Turbotax military 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. Turbotax military The difference between the state and local income tax you deducted and your local general sales tax was more than $400. Turbotax military 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. Turbotax military 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. Turbotax military Standard deduction for earlier years. Turbotax military   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. Turbotax military Look in the instructions for your tax return from prior years to locate the standard deduction for the filing status for that prior year. Turbotax military Example. Turbotax military You filed a joint return on Form 1040 for 2012 with taxable income of $45,000. Turbotax military Your itemized deductions were $12,350. Turbotax military The standard deduction that you could have claimed was $11,900. Turbotax military In 2013, you recovered $2,100 of your 2012 itemized deductions. Turbotax military None of the recoveries were more than the actual deductions for 2012. Turbotax military Include $450 of the recoveries in your 2013 income. Turbotax military 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). Turbotax military Recovery limited to deduction. Turbotax military   You do not include in your income any amount of your recovery that is more than the amount you deducted in the earlier year. Turbotax military 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. Turbotax military Example. Turbotax military During 2012 you paid $1,700 for medical expenses. Turbotax military From this amount you subtracted $1,500, which was 7. Turbotax military 5% of your adjusted gross income. Turbotax military Your actual medical expense deduction was $200. Turbotax military In 2013, you received a $500 reimbursement from your medical insurance for your 2012 expenses. Turbotax military The only amount of the $500 reimbursement that must be included in your income for 2013 is $200—the amount actually deducted. Turbotax military Other recoveries. Turbotax military   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. Turbotax military 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. Turbotax military 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. Turbotax military See Publication 535, Business Expenses, for details on deducting expenses for both business and not-for-profit activities. Turbotax military Reporting business income and expenses. Turbotax military    If you are in the business of renting personal property, report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Turbotax military The form instructions have information on how to complete them. Turbotax military Reporting nonbusiness income. Turbotax military   If you are not in the business of renting personal property, report your rental income on Form 1040, line 21. Turbotax military List the type and amount of the income on the dotted line next to line 21. Turbotax military Reporting nonbusiness expenses. Turbotax military   If you rent personal property for profit, include your rental expenses in the total amount you enter on Form 1040, line 36. Turbotax military Also enter the amount and “PPR” on the dotted line next to line 36. Turbotax military   If you do not rent personal property for profit, your deductions are limited and you cannot report a loss to offset other income. Turbotax military See Activity not for profit , under Other Income, later. Turbotax military 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. Turbotax military 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. Turbotax military 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. Turbotax military Type of deduction. Turbotax military   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. Turbotax military You generally deduct the repayment on the same form or schedule on which you previously reported it as income. Turbotax military 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). Turbotax military If you reported it as a capital gain, deduct it as a capital loss as explained in the Instructions for Schedule D (Form 1040). Turbotax military If you reported it as wages, unemployment compensation, or other nonbusiness income, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040). Turbotax military Repaid social security benefits. Turbotax military   If you repaid social security benefits or equivalent railroad retirement benefits, see Repayment of benefits in chapter 11. Turbotax military Repayment of $3,000 or less. Turbotax military   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Turbotax military If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 23. Turbotax military Repayment over $3,000. Turbotax military   If the amount you repaid was more than $3,000, you can deduct the repayment (as explained under Type of deduction , earlier). Turbotax military 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. Turbotax military This means that at the time you included the income, it appeared that you had an unrestricted right to it. Turbotax military If you qualify for this choice, figure your tax under both methods and compare the results. Turbotax military Use the method (deduction or credit) that results in less tax. Turbotax military When determining whether the amount you repaid was more or less than $3,000, consider the total amount being repaid on the return. Turbotax military Each instance of repayment is not considered separately. Turbotax military Method 1. Turbotax military   Figure your tax for 2013 claiming a deduction for the repaid amount. Turbotax military If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 28. Turbotax military Method 2. Turbotax military   Figure your tax for 2013 claiming a credit for the repaid amount. Turbotax military Follow these steps. Turbotax military Figure your tax for 2013 without deducting the repaid amount. Turbotax military Refigure your tax from the earlier year without including in income the amount you repaid in 2013. Turbotax military Subtract the tax in (2) from the tax shown on your return for the earlier year. Turbotax military This is the credit. Turbotax military Subtract the answer in (3) from the tax for 2013 figured without the deduction (Step 1). Turbotax military   If method 1 results in less tax, deduct the amount repaid. Turbotax military 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. Turbotax military R. Turbotax military C. Turbotax military 1341” in the column to the right of line 71. Turbotax military   An example of this computation can be found in Publication 525. Turbotax military Repaid wages subject to social security and Medicare taxes. Turbotax military   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. Turbotax military If the employer refuses to refund the taxes, ask for a statement indicating the amount of the overcollection to support your claim. Turbotax military File a claim for refund using Form 843, Claim for Refund and Request for Abatement. Turbotax military Repaid wages subject to Additional Medicare Tax. Turbotax military   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. Turbotax military 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. Turbotax military To recover Additional Medicare Tax on the repaid wages or compensation, you must file Form 1040X, Amended U. Turbotax military S. Turbotax military Individual Income Tax Return, for the prior year in which the wages or compensation were originally received. Turbotax military See the Instructions for Form 1040X. Turbotax military Royalties Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income. Turbotax military In most cases you report royalties in Part I of Schedule E (Form 1040). Turbotax military However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc. Turbotax military , report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Turbotax military Copyrights and patents. Turbotax military   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. Turbotax military Royalties generally are based on the number of units sold, such as the number of books, tickets to a performance, or machines sold. Turbotax military Oil, gas, and minerals. Turbotax military   Royalty income from oil, gas, and mineral properties is the amount you receive when natural resources are extracted from your property. Turbotax military The royalties are based on units, such as barrels, tons, etc. Turbotax military , and are paid to you by a person or company who leases the property from you. Turbotax military Depletion. Turbotax military   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. Turbotax military For information on this subject, see chapter 9 of Publication 535. Turbotax military Coal and iron ore. Turbotax military   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. Turbotax military For information about gain or loss from the sale of coal and iron ore, see Publication 544. Turbotax military Sale of property interest. Turbotax military   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. Turbotax military Under certain circumstances, the sale is subject to capital gain or loss treatment as explained in the Instructions for Schedule D (Form 1040). Turbotax military For more information on selling section 1231 property, see chapter 3 of Publication 544. Turbotax military   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. Turbotax military Part of future production sold. Turbotax military   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. Turbotax military Do not include it in your income or take depletion based on it. Turbotax military   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. Turbotax military Unemployment Benefits The tax treatment of unemployment benefits you receive depends on the type of program paying the benefits. Turbotax military Unemployment compensation. Turbotax military   You must include in income all unemployment compensation you receive. Turbotax military You should receive a Form 1099-G showing in box 1 the total unemployment compensation paid to you. Turbotax military In most cases, you enter unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Turbotax military Types of unemployment compensation. Turbotax military   Unemployment compensation generally includes any amount received under an unemployment compensation law of the United States or of a state. Turbotax military It includes the following benefits. Turbotax military Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund. Turbotax military State unemployment insurance benefits. Turbotax military Railroad unemployment compensation benefits. Turbotax military Disability payments from a government program paid as a substitute for unemployment compensation. Turbotax military (Amounts received as workers' compensation for injuries or illness are not unemployment compensation. Turbotax military See chapter 5 for more information. Turbotax military ) Trade readjustment allowances under the Trade Act of 1974. Turbotax military Unemployment assistance under the Disaster Relief and Emergency Assistance Act. Turbotax military Unemployment assistance under the Airline Deregulation Act of 1974 Program. Turbotax military Governmental program. Turbotax military   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. Turbotax military If you deducted all of your contributions to the program, the entire amount you receive under the program is included in your income. Turbotax military Repayment of unemployment compensation. Turbotax military   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. Turbotax military On the dotted line next to your entry enter “Repaid” and the amount you repaid. Turbotax military 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. Turbotax military If the amount is more than $3,000, see Repayments , earlier. Turbotax military Tax withholding. Turbotax military   You can choose to have federal income tax withheld from your unemployment compensation. Turbotax military To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. Turbotax military Tax will be withheld at 10% of your payment. Turbotax military    If you do not choose to have tax withheld from your unemployment compensation, you may be liable for estimated tax. Turbotax military 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. Turbotax military For more information on estimated tax, see chapter 4. Turbotax military Supplemental unemployment benefits. Turbotax military   Benefits received from an employer-financed fund (to which the employees did not contribute) are not unemployment compensation. Turbotax military They are taxable as wages and are subject to withholding for income tax. Turbotax military They may be subject to social security and Medicare taxes. Turbotax military For more information, see Supplemental Unemployment Benefits in section 5 of Publication 15-A, Employer's Supplemental Tax Guide. Turbotax military Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Turbotax military Repayment of benefits. Turbotax military   You may have to repay some of your supplemental unemployment benefits to qualify for trade readjustment allowances under the Trade Act of 1974. Turbotax military If you repay supplemental unemployment benefits in the same year you receive them, reduce the total benefits by the amount you repay. Turbotax military 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. Turbotax military   Deduct the repayment in the later year as an adjustment to gross income on Form 1040. Turbotax military (You cannot use Form 1040A or Form 1040EZ. Turbotax military ) Include the repayment on Form 1040, line 36, and enter “Sub-Pay TRA” and the amount on the dotted line next to line 36. Turbotax military 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. Turbotax military For more information on this, see Repayments , earlier. Turbotax military Private unemployment fund. Turbotax military   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. Turbotax military Report the taxable amount on Form 1040, line 21. Turbotax military Payments by a union. Turbotax military   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. Turbotax military 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. Turbotax military Guaranteed annual wage. Turbotax military   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. Turbotax military Include them on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Turbotax military State employees. Turbotax military   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. Turbotax military Although the payments are fully taxable, do not report them as unemployment compensation. Turbotax military Report these payments on Form 1040, line 21. Turbotax military 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. Turbotax military 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. Turbotax military Do not deduct medical expenses that are reimbursed by such a fund. Turbotax military You must include in your income any welfare payments that are compensation for services or that are obtained fraudulently. Turbotax military Reemployment Trade Adjustment Assistance (RTAA) payments. Turbotax military   RTAA payments received from a state must be included in your income. Turbotax military The state must send you Form 1099-G to advise you of the amount you should include in income. Turbotax military The amount should be reported on Form 1040, line 21. Turbotax military Persons with disabilities. Turbotax military   If you have a disability, you must include in income compensation you receive for services you perform unless the compensation is otherwise excluded. Turbotax military 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. Turbotax military 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. Turbotax military Disaster relief grants. Turbotax military    Do not include post-disaster grants received under the Robert T. Turbotax military 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. Turbotax military Do not deduct casualty losses or medical expenses that are specifically reimbursed by these disaster relief grants. Turbotax military 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. Turbotax military See Recoveries , earlier. Turbotax military Unemployment assistance payments under the Act are taxable unemployment compensation. Turbotax military See Unemployment compensation under Unemployment Benefits, earlier. Turbotax military Disaster relief payments. Turbotax military   You can exclude from income any amount you receive that is a qualified disaster relief payment. Turbotax military 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. Turbotax military You can exclude this amount only to the extent any expense it pays for is not paid for by insurance or otherwise. Turbotax military The exclusion does not apply if you were a participant or conspirator in a terrorist action or a representative of one. Turbotax military   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. Turbotax military   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. Turbotax military Disaster mitigation payments. Turbotax military   You also can exclude from income any amount you receive that is a qualified disaster mitigation payment. Turbotax military 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. Turbotax military However, disaster mitigation payments are used to mitigate (reduce the severity of) potential damage from future natural disasters. Turbotax military They are paid to you through state and local governments based on the provisions of the Robert T. Turbotax military Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act. Turbotax military   You cannot increase the basis or adjusted basis of your property for improvements made with nontaxable disaster mitigation payments. Turbotax military Home Affordable Modification Program (HAMP). Turbotax military   If you benefit from Pay-for-Performance Success Payments under HAMP, the payments are not taxable. Turbotax military Mortgage assistance payments under section 235 of the National Housing Act. Turbotax military   Payments made under section 235 of the National Housing Act for mortgage assistance are not included in the homeowner's income. Turbotax military Interest paid for the homeowner under the mortgage assistance program cannot be deducted. Turbotax military Medicare. Turbotax military   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. Turbotax military This includes basic (part A (Hospital Insurance Benefits for the Aged)) and supplementary (part B (Supplementary Medical Insurance Benefits for the Aged)). Turbotax military Old-age, survivors, and disability insurance benefits (OASDI). Turbotax military   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. Turbotax military 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. Turbotax military Nutrition Program for the Elderly. Turbotax military    Food benefits you receive under the Nutrition Program for the Elderly are not taxable. Turbotax military 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. Turbotax military Payments to reduce cost of winter energy. Turbotax military   Payments made by a state to qualified people to reduce their cost of winter energy use are not taxable. Turbotax military Other Income The following brief discussions are arranged in alphabetical order. Turbotax military Other income items briefly discussed below are referenced to publications which provide more topical information. Turbotax military Activity not for profit. Turbotax military   You must include on your return income from an activity from which you do not expect to make a profit. Turbotax military An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. Turbotax military Enter this income on Form 1040, line 21. Turbotax military Deductions for expenses related to the activity are limited. Turbotax military They cannot total more than the income you report and can be taken only if you itemize deductions on Schedule A (Form 1040). Turbotax military See Not-for-Profit Activities in chapter 1 of Publication 535 for information on whether an activity is considered carried on for a profit. Turbotax military Alaska Permanent Fund dividend. Turbotax military   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. Turbotax military The state of Alaska sends each recipient a document that shows the amount of the payment with the check. Turbotax military The amount also is reported to IRS. Turbotax military Alimony. Turbotax military   Include in your income on Form 1040, line 11, any alimony payments you receive. Turbotax military Amounts you receive for child support are not income to you. Turbotax military Alimony and child support payments are discussed in chapter 18. Turbotax military Bribes. Turbotax military   If you receive a bribe, include it in your income. Turbotax military Campaign contributions. Turbotax military   These contributions are not income to a candidate unless they are diverted to his or her personal use. Turbotax military To be exempt from tax, the contributions must be spent for campaign purposes or kept in a fund for use in future campaigns. Turbotax military 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. Turbotax military S. Turbotax military Income Tax Return for Certain Political Organizations. Turbotax military 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. Turbotax military Car pools. Turbotax military   Do not include in your income amounts you receive from the passengers for driving a car in a car pool to and from work. Turbotax military These amounts are considered reimbursement for your expenses. Turbotax military However, this rule does not apply if you have developed car pool arrangements into a profit-making business of transporting workers for hire. Turbotax military Cash rebates. Turbotax military   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. Turbotax military Example. Turbotax military You buy a new car for $24,000 cash and receive a $2,000 rebate check from the manufacturer. Turbotax military The $2,000 is not income to you. Turbotax military Your basis in the car is $22,000. Turbotax military This is the basis on which you figure gain or loss if you sell the car and depreciation if you use it for business. Turbotax military Casualty insurance and other reimbursements. Turbotax military   You generally should not report these reimbursements on your return unless you are figuring gain or loss from the casualty or theft. Turbotax military See chapter 25 for more information. Turbotax military Child support payments. Turbotax military   You should not report these payments on your return. Turbotax military See chapter 18 for more information. Turbotax military Court awards and damages. Turbotax military   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. Turbotax military The character of the income as ordinary income or capital gain depends on the nature of the underlying claim. Turbotax military Include the following as ordinary income. Turbotax military Interest on any award. Turbotax military Compensation for lost wages or lost profits in most cases. Turbotax military Punitive damages, in most cases. Turbotax military It does not matter if they relate to a physical injury or physical sickness. Turbotax military Amounts received in settlement of pension rights (if you did not contribute to the plan). Turbotax military Damages for: Patent or copyright infringement, Breach of contract, or Interference with business operations. Turbotax military Back pay and damages for emotional distress received to satisfy a claim under title VII of the Civil Rights Act of 1964. Turbotax military Attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income. Turbotax military   Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments). Turbotax military Emotional distress. Turbotax military   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. Turbotax military Do not include them in your income. Turbotax military   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. Turbotax military Emotional distress includes physical symptoms that result from emotional distress, such as headaches, insomnia, and stomach disorders. Turbotax military Deduction for costs involved in unlawful discrimination suits. Turbotax military   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. Turbotax military For more information, see Publication 525. Turbotax military Credit card insurance. Turbotax military   In most cases, if you receive benefits under a credit card disability or unemployment insurance plan, the benefits are taxable to you. Turbotax military 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. Turbotax military 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. Turbotax military Down payment assistance. Turbotax military   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. Turbotax military 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. Turbotax military 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. Turbotax military Employment agency fees. Turbotax military   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. Turbotax military However, if you pay it and your employer reimburses you for it, it is includible in your income. Turbotax military Energy conservation subsidies. Turbotax military   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. Turbotax military Energy conservation measure. Turbotax military   This includes installations or modifications that are primarily designed to reduce consumption of electricity or natural gas, or improve the management of energy demand. Turbotax military Dwelling unit. Turbotax military   This includes a house, apartment, condominium, mobile home, boat, or similar property. Turbotax military If a building or structure contains both dwelling and other units, any subsidy must be properly allocated. Turbotax military Estate and trust income. Turbotax military    An estate or trust, unlike a partnership, may have to pay federal income tax. Turbotax military 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. Turbotax military However, there is never a double tax. Turbotax military Estates and trusts file their returns on Form 1041, U. Turbotax military S. Turbotax military Income Tax Return for Estates and Trusts, and your share of the income is reported to you on Schedule K-1 (Form 1041). Turbotax military Current income required to be distributed. Turbotax military   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. Turbotax military Current income not required to be distributed. Turbotax military    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. Turbotax military How to report. Turbotax military   Treat each item of income the same way that the estate or trust would treat it. Turbotax military For example, if a trust's dividend income is distributed to you, you report the distribution as dividend income on your return. Turbotax military The same rule applies to distributions of tax-exempt interest and capital gains. Turbotax military   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. Turbotax military Losses. Turbotax military   Losses of estates and trusts generally are not deductible by the beneficiaries. Turbotax military Grantor trust. Turbotax military   Income earned by a grantor trust is taxable to the grantor, not the beneficiary, if the grantor keeps certain control over the trust. Turbotax military (The grantor is the one who transferred property to the trust. Turbotax military ) 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. Turbotax military   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. Turbotax military Expenses paid by another. Turbotax military   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. Turbotax military 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. Turbotax military Fees for services. Turbotax military   Include all fees for your services in your income. Turbotax military 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. Turbotax military Nonemployee compensation. Turbotax military   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. Turbotax military You may need to report your fees as self-employment income. Turbotax military See Self-Employed Persons , in chapter 1, for a discussion of when you are considered self-employed. Turbotax military Corporate director. Turbotax military   Corporate director fees are self-employment income. Turbotax military Report these payments on Schedule C or Schedule C-EZ (Form 1040). Turbotax military Personal representatives. Turbotax military   All personal representatives must include in their gross income fees paid to them from an estate. Turbotax military 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. Turbotax military 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). Turbotax military The fee is not includible in income if it is waived. Turbotax military Manager of trade or business for bankruptcy estate. Turbotax military   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. Turbotax military Report this income on Form 1040, line 21. Turbotax military Notary public. Turbotax military    Report payments for these services on Schedule C or Schedule C-EZ (Form 1040). Turbotax military These payments are not subject to self-employment tax. Turbotax military See the separate instructions for Schedule SE (Form 1040) for details. Turbotax military Election precinct official. Turbotax military    You should receive a Form W-2 showing payments for services performed as an election official or election worker. Turbotax military Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Turbotax military Foster care providers. Turbotax military   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. Turbotax military 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. Turbotax military   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. Turbotax military Difficulty-of-care payments. Turbotax military   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. Turbotax military 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. Turbotax military   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. Turbotax military Maintaining space in home. Turbotax military   If you are paid to maintain space in your home for emergency foster care, you must include the payment in your income. Turbotax military Reporting taxable payments. Turbotax military    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. Turbotax military Report the payments on Schedule C or Schedule C-EZ (Form 1040). Turbotax military See Publication 587, Business Use of Your Home, to help you determine the amount you can deduct for the use of your home. Turbotax military Found property. Turbotax military   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. Turbotax military Free tour. Turbotax military   If you received a free tour from a travel agency for organizing a group of tourists, you must include its value in your income. Turbotax military 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. Turbotax military You cannot deduct your expenses in serving as the voluntary leader of the group at the group's request. Turbotax military If you organize tours as a trade or business, report the tour's value on Schedule C or Schedule C-EZ (Form 1040). Turbotax military Gambling winnings. Turbotax military   You must include your gambling winnings in income on Form 1040, line 21. Turbotax military 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. Turbotax military Lotteries and raffles. Turbotax military   Winnings from lotteries and raffles are gambling winnings. Turbotax military In addition to cash winnings, you must include in your income the fair market value of bonds, cars, houses, and other noncash prizes. Turbotax military    If you win a state lottery prize payable in installments, see Publication 525 for more information. Turbotax military Form W-2G. Turbotax military   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. Turbotax military Include the amount from box 1 on Form 1040, line 21. Turbotax military Include the amount shown in box 4 on Form 1040, line 62, as federal income tax withheld. Turbotax military Reporting winnings and recordkeeping. Turbotax military   For more information on reporting gam