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Www freetaxusa com Index A Accrual period, Accrual period. Www freetaxusa com Acquisition premium, Acquisition premium. Www freetaxusa com Adjusted issue price, Adjusted issue price. Www freetaxusa com Assistance (see Tax help) B Backup withholding, Backup Withholding Bearer bonds and coupons, Bearer Bonds and Coupons Brokers (see Information for brokers and other middlemen) C Certificates of deposit, Certificates of Deposit Comments and suggestions, Comments and suggestions. Www freetaxusa com Contingent payment debt instruments, Contingent Payment Debt Instruments D Debt instrument, Debt instrument. Www freetaxusa com Debt instruments Long-term, Long-Term Debt Instruments Short-term, Short-Term Obligations Redeemed at Maturity Debt instruments and coupons purchased after 1984, Debt Instruments and Coupons Purchased After 1984 Debt instruments and coupons purchased after July 1, 1982, and before 1985, Debt Instruments and Coupons Purchased After July 1, 1982, and Before 1985 Debt instruments issued after 1954, corporate, Corporate Debt Instruments Issued After 1954 and Before May 28, 1969, and Government Debt Instruments Issued After 1954 and Before July 2, 1982 Debt instruments issued after 1984, Debt Instruments Issued After 1984 Debt instruments issued after July 1, 1982, Debt Instruments Issued After July 1, 1982, and Before 1985 Debt instruments issued after May 27, 1969, corporate, Corporate Debt Instruments Issued After May 27, 1969, and Before July 2, 1982 Debt instruments not on the OID list, Debt Instruments Not on the OID List Debt Instruments on the OID list, Debt Instruments on the OID List Definitions, Definitions Accrual period, Accrual period. Www freetaxusa com Acquisition premium, Acquisition premium. Www freetaxusa com Adjusted issue price, Adjusted issue price. Www freetaxusa com Debt instrument, Debt instrument. Www freetaxusa com Issue price, Issue price. Www freetaxusa com Market discount, Market discount. Www freetaxusa com Original issue discount (OID), Original issue discount (OID). Www freetaxusa com Premium, Premium. Www freetaxusa com Qualified stated interest, Qualified stated interest. Www freetaxusa com Stated redemption price at maturity, Stated redemption price at maturity. Www freetaxusa com Yield to maturity, Yield to maturity (YTM). Www freetaxusa com E Electronic payee statements, Electronic payee statements. Www freetaxusa com F Form 1099-OID, Form 1099-OID. Www freetaxusa com Free tax services, Free help with your tax return. Www freetaxusa com H Help (see Tax help) I Inflation-indexed debt instruments, Inflation-Indexed Debt Instruments Information for brokers and other middlemen, Information for Brokers and Other Middlemen Information for owners of OID debt instruments, Information for Owners of OID Debt Instruments Issue price, Issue price. Www freetaxusa com Issuers of OID debt instruments, Instructions for, Instructions for issuers of OID debt instruments. Www freetaxusa com L Long-term debt instruments, Long-Term Debt Instruments M Market discount, Market discount. Www freetaxusa com O OID list, Debt Instruments on, Debt Instruments on the OID List OID on long-term debt instruments, figuring, Figuring OID on Long-Term Debt Instruments OID on stripped bonds and coupons, figuring, Figuring OID on Stripped Bonds and Coupons OID, figuring, Figuring OID. Www freetaxusa com Using section I, Using Section I. Www freetaxusa com Using the income tax regulations, Using the income tax regulations. Www freetaxusa com Original issue discount (OID), Original issue discount (OID). Www freetaxusa com Owners of OID debt instruments, information for, Information for Owners of OID Debt Instruments P Premium, Premium. Www freetaxusa com Publications (see Tax help) Q Qualified stated interest, Qualified stated interest. Www freetaxusa com R REMIC and CDO information reporting requirements, REMIC and CDO information reporting requirements. Www freetaxusa com S Section I, Section I. Www freetaxusa com Section II, Section II. Www freetaxusa com Section III, Section III. Www freetaxusa com Short-term obligations redeemed at maturity, Short-Term Obligations Redeemed at Maturity Stated redemption price at maturity, Stated redemption price at maturity. Www freetaxusa com Stripped bonds and coupons, figuring OID, Figuring OID on Stripped Bonds and Coupons Suggestions, Comments and, Comments and suggestions. Www freetaxusa com T Tax help, How To Get Tax Help Y Yield to maturity, Yield to maturity (YTM). Www freetaxusa com , Yield to maturity (YTM). Www freetaxusa com Prev  Up     Home   More Online Publications
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IRS Criminal Investigation Combats Identity Theft Refund Fraud

IRS YouTube Videos
ID Theft: IRS Efforts on Identity Theft

FS-2014-3, January 2014

The Internal Revenue Service (IRS) has seen a significant increase in refund fraud that involves identity thieves who file false claims for refunds by stealing and using someone's Social Security number. The investigative work done by Criminal Investigation (CI) is a major component of the IRS’s efforts to combat tax-related identity theft. 

Statistical Data 

In Fiscal Year (FY) 2013, the IRS initiated approximately 1,492 identity theft related criminal investigations, an increase of 66 percent over investigations initiated in FY 2012. Direct investigative time applied to identity theft related investigations has increased 216 percent over the last two years. Prosecution recommendations, indictments, and those convicted and sentenced for identity theft violations have increased dramatically since FY 2011. Sentences handed down for convictions relating to identity theft have been significant, ranging from two months to 317 months.  
 

 

FY2013

FY 2012

  FY 2011

 Investigations Initiated

1492

898

276

 Prosecution Recommendations

1257

544

218

 Indictments/Informations

1050

494

165

 Sentenced

438

223

80


Enforcement Efforts 

Criminal Investigation is committed to investigating and prosecuting identity thieves who attempt to defraud the federal government by filing fraudulent refund claims using another person’s identifying information.

The IRS continues to seek out and identify additional tools and methods to combat the proliferation of tax-related identity theft.  FY 2013 efforts include: 

Identity Theft Enforcement Sweeps - In January 2013, Criminal Investigation conducted a coordinated identity theft enforcement sweep in collaboration with DOJ-Tax and United States Attorney’s Offices throughout the country.  This nationwide effort resulted in 734 enforcement actions related to identity theft and refund fraud and involved 389 individuals, 109 arrests, 48 search warrants, and 189 indictments, information and criminal complaints.

Law Enforcement Assistance Program - In March 2013, IRS announced to the public that the Law Enforcement Assistance Program, formerly known as the Identity Theft Pilot Disclosure Program, was expanded nationwide.  This program provides for the disclosure of federal tax return information associated with the accounts of known and suspected identity victims of identity theft with the express written consent of those victims.  There are currently more than 300 state/local law enforcement agencies from 35 states participating.  For FY 2013, more than 2,400 requests had been received from state and local law enforcement agencies.

Identify Theft Clearinghouse (ITC) - The Identity Theft Clearinghouse (ITC) continues to develop and refer identity theft refund fraud schemes to CI Field Offices for investigation.  For FY 2013 the ITC had received more than 1,400 identity theft related leads. 

Data Processing Center(DPC) Identity Theft Victims List Process - This process centralizes identity theft victims’ lists and information forwarded to IRS-CI by other federal, state and local agencies during nationwide investigative efforts.  The information is analyzed and necessary adjustments are made to accounts of taxpayers that are likely targets of ID theft.  The DPC processed over 71.7 percent more identity records in FY 2013 than it did in FY 2012.

Multi-Agency Task Forces and Working Groups - CI is the lead agency or actively involved in more than 30 multi-regional task forces or working groups including state/local and federal law enforcement agencies solely focusing on identity theft.      

The following are highlights from significant identity-theft cases. All details are based on court documents.

Self-Proclaimed “First Lady” of Tax Fraud Sentenced

On July 16, 2013, in Tampa, Fla., Rashia Wilson, was sentenced to 234 months in prison on wire fraud and aggravated identity theft charges stemming from her scheme to defraud the IRS, and to a consecutive 18 months in prison for being a felon in possession of a firearm.  Wilson was also ordered to forfeit $2,240,096, which constituted the proceeds traceable to the offense.  According to court documents, from at least April 2009 through their arrests in September 2012, Wilson and her co-conspirator, Maurice J. Larry, engaged in a scheme to defraud the IRS by negotiating fraudulently obtained tax refunds. They did so by receiving U.S. Treasury checks and pre-paid debit cards that were loaded with proceeds derived from filing false and fraudulent federal income tax returns in other persons' names, without those persons’ permission or knowledge.  Wilson and Larry filed these false and fraudulent federal income tax returns from multiple locations, including Wilson's residence and hotels in the Tampa area.  Wilson, Larry, and others then used these fraudulently obtained tax refunds to make hundreds of thousands of dollars’ worth of retail purchases, to purchase money orders, and to withdraw cash. Larry was sentenced to 174 months in prison and ordered to forfeit $2,240,096.

Woman Sentenced for Running Stolen Identity Tax Fraud Scheme
On July 30, 2013, in St. Louis, Mo., Tania Henderson was sentenced to 144 months in prison and ordered to pay $835,883 in restitution to the IRS. Henderson pleaded guilty on April 29, 2013, to theft of government funds and aggravated identity theft. According to her plea agreement and other court documents, Henderson stole the identities of more than 400 individuals, many of whom were deceased, and filed fraudulent tax returns using their names and Social Security account numbers. Between August and November 2012, Henderson filed 236 fraudulent tax returns. Using a network of family and friends, she would collect refund checks or prepaid debit cards for the refund amounts and liquidate the proceeds of her scheme.  

Leaders of Multi-Million Dollar Fraud Ring Sentenced
On May 8, 2012, in Montgomery, Ala., Veronica Dale and Alchico Grant, who jointly ran a stolen identity refund fraud ring that attempted to defraud the United States of millions of dollars over several years, were sentenced to prison. Veronica Dale was sentenced to 334 months in prison and Alchico Grant was sentenced to 310 months in prison.  Dale and Grant were both ordered to pay more than $2.8 million in restitution to the IRS. In September 2011, Grant pleaded guilty to five charges from two separate indictments, including conspiracy, wire fraud and aggravated identity theft. In October 2011, Dale pleaded guilty to seven charges from two indictments, including conspiracy, filing false claims, wire fraud and aggravated identity theft.  According to court documents, beginning in 2009 and continuing through 2010, the defendants were part of a scheme that involved fraudulently obtaining tax refunds by filing false tax returns using stolen identities. Dale admitted that she filed more than 500 fraudulent returns that sought at least $3,741,908 in tax refunds.  These returns were filed using the names of Medicaid beneficiaries, whose personal information Dale obtained while working for a company that serviced Medicaid programs.  Dale directed the refunds to different bank accounts that she and other co-conspirators controlled.

The latest information on Identity Theft enforcement efforts and individual cases are available on IRS.gov.

Page Last Reviewed or Updated: 07-Jan-2014

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