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Www handrblock com 5. Www handrblock com   Additional Rules for Listed Property Table of Contents Introduction Useful Items - You may want to see: What Is Listed Property?Passenger Automobiles Other Property Used for Transportation Computers and Related Peripheral Equipment Can Employees Claim a Deduction? What Is the Business-Use Requirement?How To Allocate Use Qualified Business Use Recapture of Excess Depreciation Lessee's Inclusion Amount Do the Passenger Automobile Limits Apply?Maximum Depreciation Deduction Deductions After the Recovery Period Deductions For Passenger Automobiles Acquired in a Trade-in What Records Must Be Kept?Adequate Records How Is Listed Property Information Reported? Introduction This chapter discusses the deduction limits and other special rules that apply to certain listed property. Www handrblock com Listed property includes cars and other property used for transportation, property used for entertainment, and certain computers. Www handrblock com Deductions for listed property (other than certain leased property) are subject to the following special rules and limits. Www handrblock com Deduction for employees. Www handrblock com If your use of the property is not for your employer's convenience or is not required as a condition of your employment, you cannot deduct depreciation or rent expenses for your use of the property as an employee. Www handrblock com Business-use requirement. Www handrblock com If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. Www handrblock com In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. Www handrblock com You may also have to recapture (include in income) any excess depreciation claimed in previous years. Www handrblock com A similar inclusion amount applies to certain leased property. Www handrblock com Passenger automobile limits and rules. Www handrblock com Annual limits apply to depreciation deductions (including section 179 deductions and any special depreciation allowance) for certain passenger automobiles. Www handrblock com You can continue to deduct depreciation for the unrecovered basis resulting from these limits after the end of the recovery period. Www handrblock com This chapter defines listed property and explains the special rules and depreciation deduction limits that apply, including the special inclusion amount rule for leased property. Www handrblock com It also discusses the recordkeeping rules for listed property and explains how to report information about the property on your tax return. Www handrblock com Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. Www handrblock com What Is Listed Property? Listed property is any of the following. Www handrblock com Passenger automobiles (as defined later). Www handrblock com Any other property used for transportation, unless it is an excepted vehicle. Www handrblock com Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video-recording equipment). Www handrblock com Computers and related peripheral equipment, unless used only at a regular business establishment and owned or leased by the person operating the establishment. Www handrblock com A regular business establishment includes a portion of a dwelling unit that is used both regularly and exclusively for business as discussed in Publication 587. Www handrblock com Improvements to listed property. Www handrblock com   An improvement made to listed property that must be capitalized is treated as a new item of depreciable property. Www handrblock com The recovery period and method of depreciation that apply to the listed property as a whole also apply to the improvement. Www handrblock com For example, if you must depreciate the listed property using the straight line method, you also must depreciate the improvement using the straight line method. Www handrblock com Passenger Automobiles A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (6,000 pounds or less of gross vehicle weight for trucks and vans). Www handrblock com It includes any part, component, or other item physically attached to the automobile at the time of purchase or usually included in the purchase price of an automobile. Www handrblock com The following vehicles are not considered passenger automobiles for these purposes. Www handrblock com An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business. Www handrblock com A vehicle used directly in the trade or business of transporting persons or property for pay or hire. Www handrblock com A truck or van that is a qualified nonpersonal use vehicle. Www handrblock com Qualified nonpersonal use vehicles. Www handrblock com   Qualified nonpersonal use vehicles are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Www handrblock com They include the trucks and vans listed as excepted vehicles under Other Property Used for Transportation , next. Www handrblock com They also include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Www handrblock com For a detailed discussion of passenger automobiles, including leased passenger automobiles, see  Publication 463. Www handrblock com Other Property Used for Transportation Although vehicles used to transport persons or property for pay or hire and vehicles rated at more than the 6,000-pound threshold are not passenger automobiles, they are still “other property used for transportation” and are subject to the special rules for listed property. Www handrblock com Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles used to transport persons or goods. Www handrblock com Excepted vehicles. Www handrblock com   Other property used for transportation does not include the following qualified nonpersonal use vehicles (defined earlier under Passenger Automobiles ). Www handrblock com Clearly marked police and fire vehicles. Www handrblock com Unmarked vehicles used by law enforcement officers if the use is officially authorized. Www handrblock com Ambulances used as such and hearses used as such. Www handrblock com Any vehicle with a loaded gross vehicle weight of over 14,000 pounds that is designed to carry cargo. Www handrblock com Bucket trucks (cherry pickers), cement mixers, dump trucks (including garbage trucks), flatbed trucks, and refrigerated trucks. Www handrblock com Combines, cranes and derricks, and forklifts. Www handrblock com Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat. Www handrblock com Qualified moving vans. Www handrblock com Qualified specialized utility repair trucks. Www handrblock com School buses used in transporting students and employees of schools. Www handrblock com Other buses with a capacity of at least 20 passengers that are used as passenger buses. Www handrblock com Tractors and other special purpose farm vehicles. Www handrblock com Clearly marked police and fire vehicle. Www handrblock com   A clearly marked police or fire vehicle is a vehicle that meets all the following requirements. Www handrblock com It is owned or leased by a governmental unit or an agency or instrumentality of a governmental unit. Www handrblock com It is required to be used for commuting by a police officer or fire fighter who, when not on a regular shift, is on call at all times. Www handrblock com It is prohibited from being used for personal use (other than commuting) outside the limit of the police officer's arrest powers or the fire fighter's obligation to respond to an emergency. Www handrblock com It is clearly marked with painted insignia or words that make it readily apparent that it is a police or fire vehicle. Www handrblock com A marking on a license plate is not a clear marking for these purposes. Www handrblock com Qualified moving van. Www handrblock com   A qualified moving van is any truck or van used by a professional moving company for moving household or business goods if the following requirements are met. Www handrblock com No personal use of the van is allowed other than for travel to and from a move site or for minor personal use, such as a stop for lunch on the way from one move site to another. Www handrblock com Personal use for travel to and from a move site happens no more than five times a month on average. Www handrblock com Personal use is limited to situations in which it is more convenient to the employer, because of the location of the employee's residence in relation to the location of the move site, for the van not to be returned to the employer's business location. Www handrblock com Qualified specialized utility repair truck. Www handrblock com   A truck is a qualified specialized utility repair truck if it is not a van or pickup truck and all the following apply. Www handrblock com The truck was specifically designed for and is used to carry heavy tools, testing equipment, or parts. Www handrblock com Shelves, racks, or other permanent interior construction has been installed to carry and store the tools, equipment, or parts and would make it unlikely that the truck would be used, other than minimally, for personal purposes. Www handrblock com The employer requires the employee to drive the truck home in order to be able to respond in emergency situations for purposes of restoring or maintaining electricity, gas, telephone, water, sewer, or steam utility services. Www handrblock com Computers and Related Peripheral Equipment A computer is a programmable, electronically activated device capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention. Www handrblock com It consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. Www handrblock com Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. Www handrblock com The following are neither computers nor related peripheral equipment. Www handrblock com Any equipment that is an integral part of other property that is not a computer. Www handrblock com Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment. Www handrblock com Equipment of a kind used primarily for the user's amusement or entertainment, such as video games. Www handrblock com Can Employees Claim a Deduction? If you are an employee, you can claim a depreciation deduction for the use of your listed property (whether owned or rented) in performing services as an employee only if your use is a business use. Www handrblock com The use of your property in performing services as an employee is a business use only if both the following requirements are met. Www handrblock com The use is for your employer's convenience. Www handrblock com The use is required as a condition of your employment. Www handrblock com If these requirements are not met, you cannot deduct depreciation (including the section 179 deduction) or rent expenses for your use of the property as an employee. Www handrblock com Employer's convenience. Www handrblock com   Whether the use of listed property is for your employer's convenience must be determined from all the facts. Www handrblock com The use is for your employer's convenience if it is for a substantial business reason of the employer. Www handrblock com The use of listed property during your regular working hours to carry on your employer's business generally is for the employer's convenience. Www handrblock com Condition of employment. Www handrblock com   Whether the use of listed property is a condition of your employment depends on all the facts and circumstances. Www handrblock com The use of property must be required for you to perform your duties properly. Www handrblock com Your employer does not have to require explicitly that you use the property. Www handrblock com However, a mere statement by the employer that the use of the property is a condition of your employment is not sufficient. Www handrblock com Example 1. Www handrblock com Virginia Sycamore is employed as a courier with We Deliver, which provides local courier services. Www handrblock com She owns and uses a motorcycle to deliver packages to downtown offices. Www handrblock com We Deliver explicitly requires all delivery persons to own a car or motorcycle for use in their employment. Www handrblock com Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. Www handrblock com Example 2. Www handrblock com Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. Www handrblock com He must travel to these sites on a regular basis. Www handrblock com Uplift does not furnish an automobile or explicitly require him to use his own automobile. Www handrblock com However, it pays him for any costs he incurs in traveling to the various sites. Www handrblock com The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. Www handrblock com Example 3. Www handrblock com Assume the same facts as in Example 2 except that Uplift furnishes a car to Bill, who chooses to use his own car and receive payment for using it. Www handrblock com The use of his own car is neither for the convenience of Uplift nor required as a condition of employment. Www handrblock com Example 4. Www handrblock com Marilyn Lee is a pilot for Y Company, a small charter airline. Www handrblock com Y requires pilots to obtain 80 hours of flight time annually in addition to flight time spent with the airline. Www handrblock com Pilots usually can obtain these hours by flying with the Air Force Reserve or by flying part-time with another airline. Www handrblock com Marilyn owns her own airplane. Www handrblock com The use of her airplane to obtain the required flight hours is neither for the convenience of the employer nor required as a condition of employment. Www handrblock com Example 5. Www handrblock com David Rule is employed as an engineer with Zip, an engineering contracting firm. Www handrblock com He occasionally takes work home at night rather than work late in the office. Www handrblock com He owns and uses a home computer which is virtually identical to the office model. Www handrblock com His use of the computer is neither for the convenience of his employer nor required as a condition of employment. Www handrblock com What Is the Business-Use Requirement? You can claim the section 179 deduction and a special depreciation allowance for listed property and depreciate listed property using GDS and a declining balance method if the property meets the business-use requirement. Www handrblock com To meet this requirement, listed property must be used predominantly (more than 50% of its total use) for qualified business use. Www handrblock com If this requirement is not met, the following rules apply. Www handrblock com Property not used predominantly for qualified business use during the year it is placed in service does not qualify for the section 179 deduction. Www handrblock com Property not used predominantly for qualified business use during the year it is placed in service does not qualify for a special depreciation allowance. Www handrblock com Any depreciation deduction under MACRS for property not used predominantly for qualified business use during any year must be figured using the straight line method over the ADS recovery period. Www handrblock com This rule applies each year of the recovery period. Www handrblock com Excess depreciation on property previously used predominantly for qualified business use must be recaptured (included in income) in the first year in which it is no longer used predominantly for qualified business use. Www handrblock com A lessee must add an inclusion amount to income in the first year in which the leased property is not used predominantly for qualified business use. Www handrblock com Being required to use the straight line method for an item of listed property not used predominantly for qualified business use is not the same as electing the straight line method. Www handrblock com It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. Www handrblock com Exception for leased property. Www handrblock com   The business-use requirement generally does not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. Www handrblock com   You are considered regularly engaged in the business of leasing listed property only if you enter into contracts for the leasing of listed property with some frequency over a continuous period of time. Www handrblock com This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of your business in its entirety. Www handrblock com Occasional or incidental leasing activity is insufficient. Www handrblock com For example, if you lease only one passenger automobile during a tax year, you are not regularly engaged in the business of leasing automobiles. Www handrblock com An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. Www handrblock com How To Allocate Use To determine whether the business-use requirement is met, you must allocate the use of any item of listed property used for more than one purpose during the year among its various uses. Www handrblock com For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. Www handrblock com You determine the percentage of qualified business use by dividing the number of miles you drove the vehicle for business purposes during the year by the total number of miles you drove the vehicle for all purposes (including business miles) during the year. Www handrblock com For other listed property, allocate the property's use on the basis of the most appropriate unit of time the property is actually used (rather than merely being available for use). Www handrblock com For example, you can determine the percentage of business use of a computer by dividing the number of hours you used the computer for business purposes during the year by the total number of hours you used the computer for all purposes (including business use) during the year. Www handrblock com Entertainment use. Www handrblock com   Treat the use of listed property for entertainment, recreation, or amusement purposes as a business use only to the extent you can deduct expenses (other than interest and property tax expenses) due to its use as an ordinary and necessary business expense. Www handrblock com Commuting use. Www handrblock com   The use of an automobile for commuting is not business use, regardless of whether work is performed during the trip. Www handrblock com For example, a business telephone call made on a car telephone while commuting to work does not change the character of the trip from commuting to business. Www handrblock com This is also true for a business meeting held in a car while commuting to work. Www handrblock com Similarly, a business call made on an otherwise personal trip does not change the character of a trip from personal to business. Www handrblock com The fact that an automobile is used to display material that advertises the owner's or user's trade or business does not convert an otherwise personal use into business use. Www handrblock com Use of your automobile by another person. Www handrblock com   If someone else uses your automobile, do not treat that use as business use unless one of the following conditions applies. Www handrblock com That use is directly connected with your business. Www handrblock com You properly report the value of the use as income to the other person and withhold tax on the income where required. Www handrblock com You are paid a fair market rent. Www handrblock com Treat any payment to you for the use of the automobile as a rent payment for purposes of item (3). Www handrblock com Employee deductions. Www handrblock com   If you are an employee, do not treat your use of listed property as business use unless it is for your employer's convenience and is required as a condition of your employment. Www handrblock com See Can Employees Claim a Deduction , earlier. Www handrblock com Qualified Business Use Qualified business use of listed property is any use of the property in your trade or business. Www handrblock com However, it does not include the following uses. Www handrblock com The leasing of property to any 5% owner or related person (to the extent the property is used by a 5% owner or person related to the owner or lessee of the property). Www handrblock com The use of property as pay for the services of a 5% owner or related person. Www handrblock com The use of property as pay for services of any person (other than a 5% owner or related person), unless the value of the use is included in that person's gross income and income tax is withheld on that amount where required. Www handrblock com Property does not stop being used predominantly for qualified business use because of a transfer at death. Www handrblock com Exception for leasing or compensatory use of aircraft. Www handrblock com   Treat the leasing of any aircraft by a 5% owner or related person, or the compensatory use of any aircraft, as a qualified business use if at least 25% of the total use of the aircraft during the year is for a qualified business use. Www handrblock com 5% owner. Www handrblock com   For a business entity that is not a corporation, a 5% owner is any person who owns more than 5% of the capital or profits interest in the business. Www handrblock com   For a corporation, a 5% owner is any person who owns, or is considered to own, either of the following. Www handrblock com More than 5% of the outstanding stock of the corporation. Www handrblock com Stock possessing more than 5% of the total combined voting power of all stock in the corporation. Www handrblock com Related persons. Www handrblock com   For a description of related persons, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 . Www handrblock com For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. Www handrblock com Examples. Www handrblock com   The following examples illustrate whether the use of business property is qualified business use. Www handrblock com Example 1. Www handrblock com John Maple is the sole proprietor of a plumbing contracting business. Www handrblock com John employs his brother, Richard, in the business. Www handrblock com As part of Richard's pay, he is allowed to use one of the company automobiles for personal use. Www handrblock com The company includes the value of the personal use of the automobile in Richard's gross income and properly withholds tax on it. Www handrblock com The use of the automobile is pay for the performance of services by a related person, so it is not a qualified business use. Www handrblock com Example 2. Www handrblock com John, in Example 1, allows unrelated employees to use company automobiles for personal purposes. Www handrblock com He does not include the value of the personal use of the company automobiles as part of their compensation and he does not withhold tax on the value of the use of the automobiles. Www handrblock com This use of company automobiles by employees is not a qualified business use. Www handrblock com Example 3. Www handrblock com James Company Inc. Www handrblock com owns several automobiles that its employees use for business purposes. Www handrblock com The employees also are allowed to take the automobiles home at night. Www handrblock com The fair market value of each employee's use of an automobile for any personal purpose, such as commuting to and from work, is reported as income to the employee and James Company withholds tax on it. Www handrblock com This use of company automobiles by employees, even for personal purposes, is a qualified business use for the company. Www handrblock com Investment Use The use of property to produce income in a nonbusiness activity (investment use) is not a qualified business use. Www handrblock com However, you can treat the investment use as business use to figure the depreciation deduction for the property in a given year. Www handrblock com Example 1. Www handrblock com Sarah Bradley uses a home computer 50% of the time to manage her investments. Www handrblock com She also uses the computer 40% of the time in her part-time consumer research business. Www handrblock com Sarah's home computer is listed property because it is not used at a regular business establishment. Www handrblock com She does not use the computer predominantly for qualified business use. Www handrblock com Therefore, she cannot elect a section 179 deduction or claim a special depreciation allowance for the computer. Www handrblock com She must depreciate it using the straight line method over the ADS recovery period. Www handrblock com Her combined business/investment use for determining her depreciation deduction is 90%. Www handrblock com Example 2. Www handrblock com If Sarah uses her computer 30% of the time to manage her investments and 60% of the time in her consumer research business, it is used predominantly for qualified business use. Www handrblock com She can elect a section 179 deduction and, if she does not deduct all the computer's cost, she can claim a special depreciation allowance and depreciate the computer using the 200% declining balance method over the GDS recovery period. Www handrblock com Her combined business/investment use for determining her depreciation deduction is 90%. Www handrblock com Recapture of Excess Depreciation If you used listed property more than 50% in a qualified business use in the year you placed it in service, you must recapture (include in income) excess depreciation in the first year you use it 50% or less. Www handrblock com You also increase the adjusted basis of your property by the same amount. Www handrblock com Excess depreciation is: The depreciation allowable for the property (including any section 179 deduction and special depreciation allowance claimed) for years before the first year you do not use the property predominantly for qualified business use, minus The depreciation that would have been allowable for those years if you had not used the property predominantly for qualified business use in the year you placed it in service. Www handrblock com To determine the amount in (2) above, you must refigure the depreciation using the straight line method and the ADS recovery period. Www handrblock com Example. Www handrblock com In June 2009, Ellen Rye purchased and placed in service a pickup truck that cost $18,000. Www handrblock com She used it only for qualified business use for 2009 through 2012. Www handrblock com Ellen claimed a section 179 deduction of $10,000 based on the purchase of the truck. Www handrblock com She began depreciating it using the 200% DB method over a 5-year GDS recovery period. Www handrblock com The pickup truck's gross vehicle weight was over 6,000 pounds, so it was not subject to the passenger automobile limits discussed later under Do the Passenger Automobile Limits Apply. Www handrblock com During 2013, she used the truck 50% for business and 50% for personal purposes. Www handrblock com She includes $4,018 excess depreciation in her gross income for 2013. Www handrblock com The excess depreciation is determined as follows. Www handrblock com Total section 179 deduction ($10,000) and depreciation claimed ($6,618) for 2009 through 2012. Www handrblock com (Depreciation is from Table A-1. Www handrblock com ) $16,618 Minus: Depreciation allowable (Table A-8):     2009 – 10% of $18,000 $1,800   2010 – 20% of $18,000 3,600   2011 – 20% of $18,000 3,600   2012 – 20% of $18,000 3,600 12,600 Excess depreciation $4,018 If Ellen's use of the truck does not change to 50% for business and 50% for personal purposes until 2015, there will be no excess depreciation. Www handrblock com The total depreciation allowable using Table A-8 through 2015 will be $18,000, which equals the total of the section 179 deduction and depreciation she will have claimed. Www handrblock com Where to figure and report recapture. Www handrblock com   Use Form 4797, Part IV, to figure the recapture amount. Www handrblock com Report the recapture amount as other income on the same form or schedule on which you took the depreciation deduction. Www handrblock com For example, report the recapture amount as other income on Schedule C (Form 1040) if you took the depreciation deduction on Schedule C. Www handrblock com If you took the depreciation deduction on Form 2106, report the recapture amount as other income on Form 1040, line 21. Www handrblock com Lessee's Inclusion Amount If you use leased listed property other than a passenger automobile for business/investment use, you must include an amount in your income in the first year your qualified business-use percentage is 50% or less. Www handrblock com Your qualified business-use percentage is the part of the property's total use that is qualified business use (defined earlier). Www handrblock com For the inclusion amount rules for a leased passenger automobile, see Leasing a Car in chapter 4 of Publication 463. Www handrblock com The inclusion amount is the sum of Amount A and Amount B, described next. Www handrblock com However, see the special rules for the inclusion amount, later, if your lease begins in the last 9 months of your tax year or is for less than one year. Www handrblock com Amount A. Www handrblock com   Amount A is: The fair market value of the property, multiplied by The business/investment use for the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A-19 in Appendix A . Www handrblock com   The fair market value of the property is the value on the first day of the lease term. Www handrblock com If the capitalized cost of an item of listed property is specified in the lease agreement, you must treat that amount as the fair market value. Www handrblock com Amount B. Www handrblock com   Amount B is: The fair market value of the property, multiplied by The average of the business/investment use for all tax years the property was leased that precede the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A–20 in Appendix A . Www handrblock com Maximum inclusion amount. Www handrblock com   The inclusion amount cannot be more than the sum of the deductible amounts of rent for the tax year in which the lessee must include the amount in gross income. Www handrblock com Inclusion amount worksheet. Www handrblock com   The following worksheet is provided to help you figure the inclusion amount for leased listed property. Www handrblock com Inclusion Amount Worksheet for Leased Listed Property 1. Www handrblock com Fair market value   2. Www handrblock com Business/investment use for first year business use is 50% or less   3. Www handrblock com Multiply line 1 by line 2. Www handrblock com   4. Www handrblock com Rate (%) from Table A-19   5. Www handrblock com Multiply line 3 by line 4. Www handrblock com This is Amount A. Www handrblock com   6. Www handrblock com Fair market value   7. Www handrblock com Average business/investment use for years property leased before the first year business use is 50% or less . Www handrblock com . Www handrblock com . Www handrblock com . Www handrblock com . Www handrblock com . Www handrblock com . Www handrblock com . Www handrblock com . Www handrblock com . Www handrblock com . Www handrblock com . Www handrblock com . Www handrblock com   8. Www handrblock com Multiply line 6 by line 7   9. Www handrblock com Rate (%) from Table A-20   10. Www handrblock com Multiply line 8 by line 9. Www handrblock com This is Amount B. Www handrblock com   11. Www handrblock com Add line 5 and line 10. Www handrblock com This is your inclusion amount. Www handrblock com Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Www handrblock com )         Example. Www handrblock com On February 1, 2011, Larry House, a calendar year taxpayer, leased and placed in service a computer with a fair market value of $3,000. Www handrblock com The lease is for a period of 5 years. Www handrblock com Larry does not use the computer at a regular business establishment, so it is listed property. Www handrblock com His business use of the property (all of which is qualified business use) is 80% in 2011, 60% in 2012, and 40% in 2013. Www handrblock com He must add an inclusion amount to gross income for 2013, the first tax year his qualified business-use percentage is 50% or less. Www handrblock com The computer has a 5-year recovery period under both GDS and ADS. Www handrblock com 2013 is the third tax year of the lease, so the applicable percentage from Table A-19 is −19. Www handrblock com 8%. Www handrblock com The applicable percentage from Table A-20 is 22. Www handrblock com 0%. Www handrblock com Larry's deductible rent for the computer for 2013 is $800. Www handrblock com Larry uses the Inclusion amount worksheet. Www handrblock com to figure the amount he must include in income for 2013. Www handrblock com His inclusion amount is $224, which is the sum of −$238 (Amount A) and $462 (Amount B). Www handrblock com Inclusion Amount Worksheet for Leased Listed Property 1. Www handrblock com Fair market value $3,000   2. Www handrblock com Business/investment use for first year business use is 50% or less 40 % 3. Www handrblock com Multiply line 1 by line 2. Www handrblock com 1,200   4. Www handrblock com Rate (%) from Table A-19 −19. Www handrblock com 8 % 5. Www handrblock com Multiply line 3 by line 4. Www handrblock com This is Amount A. Www handrblock com −238   6. Www handrblock com Fair market value 3,000   7. Www handrblock com Average business/investment use for years property leased before the first year business use is 50% or less 70 % 8. Www handrblock com Multiply line 6 by line 7 2,100   9. Www handrblock com Rate (%) from Table A-20 22. Www handrblock com 0 % 10. Www handrblock com Multiply line 8 by line 9. Www handrblock com This is Amount B. Www handrblock com 462   11. Www handrblock com Add line 5 and line 10. Www handrblock com This is your inclusion amount. Www handrblock com Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Www handrblock com ) $224           Lease beginning in the last 9 months of your tax year. Www handrblock com    The inclusion amount is subject to a special rule if all the following apply. Www handrblock com The lease term begins within 9 months before the close of your tax year. Www handrblock com You do not use the property predominantly (more than 50%) for qualified business use during that part of the tax year. Www handrblock com The lease term continues into your next tax year. Www handrblock com Under this special rule, add the inclusion amount to income in the next tax year. Www handrblock com Figure the inclusion amount by taking into account the average of the business/investment use for both tax years (line 2 of the Inclusion Amount Worksheet for Leased Listed Property) and the applicable percentage for the tax year the lease term begins. Www handrblock com Skip lines 6 through 9 of the worksheet and enter zero on line 10. Www handrblock com Example 1. Www handrblock com On August 1, 2012, Julie Rule, a calendar year taxpayer, leased and placed in service an item of listed property. Www handrblock com The property is 5-year property with a fair market value of $10,000. Www handrblock com Her property has a recovery period of 5 years under ADS. Www handrblock com The lease is for 5 years. Www handrblock com Her business use of the property was 50% in 2012 and 90% in 2013. Www handrblock com She paid rent of $3,600 for 2012, of which $3,240 is deductible. Www handrblock com She must include $147 in income in 2013. Www handrblock com The $147 is the sum of Amount A and Amount B. Www handrblock com Amount A is $147 ($10,000 × 70% × 2. Www handrblock com 1%), the product of the fair market value, the average business use for 2012 and 2013, and the applicable percentage for year one from Table A-19 . Www handrblock com Amount B is zero. Www handrblock com Lease for less than one year. Www handrblock com   A special rule for the inclusion amount applies if the lease term is less than one year and you do not use the property predominantly (more than 50%) for qualified business use. Www handrblock com The amount included in income is the inclusion amount (figured as described in the preceding discussions) multiplied by a fraction. Www handrblock com The numerator of the fraction is the number of days in the lease term and the denominator is 365 (or 366 for leap years). Www handrblock com   The lease term for listed property other than residential rental or nonresidential real property includes options to renew. Www handrblock com If you have two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property, treat them as one lease. Www handrblock com Example 2. Www handrblock com On October 1, 2012, John Joyce, a calendar year taxpayer, leased and placed in service an item of listed property that is 3-year property. Www handrblock com This property had a fair market value of $15,000 and a recovery period of 5 years under ADS. Www handrblock com The lease term was 6 months (ending on March 31, 2013), during which he used the property 45% in business. Www handrblock com He must include $71 in income in 2013. Www handrblock com The $71 is the sum of Amount A and Amount B. Www handrblock com Amount A is $71 ($15,000 × 45% × 2. Www handrblock com 1% × 183/365), the product of the fair market value, the average business use for both years, and the applicable percentage for year one from Table A-19 , prorated for the length of the lease. Www handrblock com Amount B is zero. Www handrblock com Where to report inclusion amount. Www handrblock com   Report the inclusion amount figured as described in the preceding discussions as other income on the same form or schedule on which you took the deduction for your rental costs. Www handrblock com For example, report the inclusion amount as other income on Schedule C (Form 1040) if you took the deduction on Schedule C. Www handrblock com If you took the deduction for rental costs on Form 2106, report the inclusion amount as other income on Form 1040, line 21. Www handrblock com Do the Passenger Automobile Limits Apply? The depreciation deduction, including the section 179 deduction and special depreciation allowance, you can claim for a passenger automobile (defined earlier) each year is limited. Www handrblock com This section describes the maximum depreciation deduction amounts for 2013 and explains how to deduct, after the recovery period, the unrecovered basis of your property that results from applying the passenger automobile limit. Www handrblock com Exception for leased cars. Www handrblock com   The passenger automobile limits generally do not apply to passenger automobiles leased or held for leasing by anyone regularly engaged in the business of leasing passenger automobiles. Www handrblock com For information on when you are considered regularly engaged in the business of leasing listed property, including passenger automobiles, see Exception for leased property , earlier, under What Is the Business-Use Requirement . Www handrblock com Maximum Depreciation Deduction The passenger automobile limits are the maximum depreciation amounts you can deduct for a passenger automobile. Www handrblock com They are based on the date you placed the automobile in service. Www handrblock com Passenger Automobiles The maximum deduction amounts for most passenger automobiles are shown in the following table. Www handrblock com Maximum Depreciation Deduction for Passenger Automobiles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,1601 $5,100 $3,050 $1,875 2012 11,1601 5,100 3,050 1,875 2011 11,0602 4,900 2,950 1,775 2010 11,0602  4,900 2,950 1,775 2009 10,9603 4,800 2,850 1,775 2008 10,9603  4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6104 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7105 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6606 4,900 2,950 1,775 1If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Www handrblock com 2If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,060. Www handrblock com 3If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $2,960. Www handrblock com 4If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $2,960. Www handrblock com 5If you acquired the vehicle before 5/06/03, the maximum deduction is $7,660. Www handrblock com If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Www handrblock com 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Www handrblock com If your business/investment use of the automobile is less than 100%, you must reduce the maximum deduction amount by multiplying the maximum amount by the percentage of business/investment use determined on an annual basis during the tax year. Www handrblock com If you have a short tax year, you must reduce the maximum deduction amount by multiplying the maximum amount by a fraction. Www handrblock com The numerator of the fraction is the number of months and partial months in the short tax year and the denominator is 12. Www handrblock com Example. Www handrblock com On April 15, 2013, Virginia Hart bought and placed in service a new car for $14,500. Www handrblock com She used the car only in her business. Www handrblock com She files her tax return based on the calendar year. Www handrblock com She does not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Www handrblock com Under MACRS, a car is 5-year property. Www handrblock com Since she placed her car in service on April 15 and used it only for business, she uses the percentages in Table A-1 to figure her MACRS depreciation on the car. Www handrblock com Virginia multiplies the $14,500 unadjusted basis of her car by 0. Www handrblock com 20 to get her MACRS depreciation of $2,900 for 2013. Www handrblock com This $2,900 is below the maximum depreciation deduction of $3,160 for passenger automobiles placed in service in 2013. Www handrblock com She can deduct the full $2,900. Www handrblock com Electric Vehicles The maximum depreciation deductions for passenger automobiles that are produced to run primarily on electricity are higher than those for other automobiles. Www handrblock com The maximum deduction amounts for electric vehicles placed in service after August 5, 1997, and before January 1, 2007, are shown in the following table. Www handrblock com Owners of electric vehicles placed in service after December 31, 2006, should use the table of maximum deduction amounts later for electric vehicles classified as passenger automobiles or use the table of maximum deduction amounts for trucks and vans later, for electric vehicles classified as trucks and vans. Www handrblock com Maximum Depreciation Deduction For Electric Vehicles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2006 $8,980 $14,400 $8,650 $5,225 2005 8,880 14,200 8,450 5,125 2004 31,8301 14,300 8,550 5,125 5/06/2003– 12/31/2003 32,0302 14,600 8,750 5,225 1/01/2003– 5/05/2003 22,8803 14,600 8,750 5,225 1If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $8,880. Www handrblock com 2If you acquired the vehicle before 5/06/03, the maximum deduction is $22,880. Www handrblock com If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Www handrblock com 3 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Www handrblock com Trucks and Vans The maximum depreciation deductions for trucks and vans placed in service after 2002 are higher than those for other passenger automobiles. Www handrblock com The maximum deduction amounts for trucks and vans are shown in the following table. Www handrblock com Maximum Depreciation Deduction For Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 11,3601 5,300 3,150 1,875 2011 11,2602 5,200 3,150 1,875 2010 11,1603 5,100 3,050 1,875 2009 11,0604 4,900 2,950 1,775 2008 11,1605 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2006 3,260 5,200 3,150 1,875 2005 3,260 5,200 3,150 1,875 2004 10,9106 5,300 3,150 1,875 5/06/2003– 12/31/2003 11,0107 5,400 3,250 1,975 1/01/2003– 5/05/2003 7,9608 5,400 3,250 1,975 1 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,360. Www handrblock com 2 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,260. Www handrblock com 3 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Www handrblock com 4 If you elect not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,060. Www handrblock com 5If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,160. Www handrblock com 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, or the maximum deduction is $3,260. Www handrblock com 7 If you acquired the vehicle before 5/06/03, the maximum deduction is $7,960. Www handrblock com If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Www handrblock com 8 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Www handrblock com Depreciation Worksheet for Passenger Automobiles You can use the following worksheet to figure your depreciation deduction using the percentage tables. Www handrblock com Then use the information from this worksheet to prepare Form 4562. Www handrblock com Depreciation Worksheet for Passenger Automobiles   Part I   1. Www handrblock com MACRS system (GDS or ADS)     2. Www handrblock com Property class     3. Www handrblock com Date placed in service     4. Www handrblock com Recovery period     5. Www handrblock com Method and convention     6. Www handrblock com Depreciation rate (from tables)     7. Www handrblock com Maximum depreciation deduction for this year from the appropriate table       8. Www handrblock com Business/investment-use percentage       9. Www handrblock com Multiply line 7 by line 8. Www handrblock com This is your adjusted maximum depreciation deduction       10. Www handrblock com Section 179 deduction claimed this year (not more than line 9). Www handrblock com Enter -0- if this is not the year you placed the car in service. Www handrblock com         Note. Www handrblock com  1) If line 10 is equal to line 9, stop here. Www handrblock com Your combined section 179 and depreciation deduction (including your special depreciation allowance) is limited to the amount on line 9. Www handrblock com  2) If line 10 is less than line 9, complete Part II. Www handrblock com   Part II   11. Www handrblock com Subtract line 10 from line 9. Www handrblock com This is the limit on the amount you can deduct for depreciation (including any special depreciation allowance )       12. Www handrblock com Cost or other basis (reduced by any alternative motor vehicle credit 1or credit for electric vehicles 2)       13. Www handrblock com Multiply line 12 by line 8. Www handrblock com This is your business/investment cost       14. Www handrblock com Section 179 deduction claimed in the year you placed the car in service       15. Www handrblock com Subtract line 14 from line 13. Www handrblock com This is your tentative basis for depreciation       16. Www handrblock com Multiply line 15 by . Www handrblock com 50 if the 50% special depreciation allowance applies. Www handrblock com This is your special depreciation allowance. Www handrblock com Enter -0- if this is not the year you placed the car in service, the car is not qualified property, or you elected not to claim a special depreciation allowance       Note 1) If line 16 is equal to line 11, stop here. Www handrblock com Your depreciation deduction (including your special depreciation allowance) is limited to the amount on line 11. Www handrblock com  2) If line 16 is less than line 11, complete Part III. Www handrblock com   Part III   17. Www handrblock com Subtract line 16 from 11. Www handrblock com This is the limit on the amount you can deduct for MACRS depreciation       18. Www handrblock com Subtract line 16 from line 15. Www handrblock com This is your basis for depreciation. Www handrblock com       19. Www handrblock com Multiply line 18 by line 6. Www handrblock com This is your tentative MACRS depreciation deduction. Www handrblock com       20. Www handrblock com Enter the lesser of line 17 or line 19. Www handrblock com This is your MACRS depreciation deduction. Www handrblock com     1 When figuring the amount to enter on line 12, do not reduce your cost or other basis by any section 179 deduction you claimed for your car. Www handrblock com 2 Reduce the basis by the lesser of $4,000 or 10% of the cost of the vehicle even if the credit is less than that amount. Www handrblock com             Deductions After the Recovery Period If the depreciation deductions for your automobile are reduced under the passenger automobile limits, you will have unrecovered basis in your automobile at the end of the recovery period. Www handrblock com If you continue to use the automobile for business, you can deduct that unrecovered basis after the recovery period ends. Www handrblock com You can claim a depreciation deduction in each succeeding tax year until you recover your full basis in the car. Www handrblock com The maximum amount you can deduct each year is determined by the date you placed the car in service and your business/investment-use percentage. Www handrblock com See Maximum Depreciation Deduction , earlier. Www handrblock com Unrecovered basis is the cost or other basis of the passenger automobile reduced by any clean-fuel vehicle deduction, electric vehicle credit, depreciation, and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use and the passenger automobile limits had not applied. Www handrblock com You cannot claim a depreciation deduction for listed property other than passenger automobiles after the recovery period ends. Www handrblock com There is no unrecovered basis at the end of the recovery period because you are considered to have used this property 100% for business and investment purposes during all of the recovery period. Www handrblock com Example. Www handrblock com In May 2007, you bought and placed in service a car costing $31,500. Www handrblock com The car was 5-year property under GDS (MACRS). Www handrblock com You did not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Www handrblock com You used the car exclusively for business during the recovery period (2007 through 2012). Www handrblock com You figured your depreciation as shown below. Www handrblock com Year Percentage Amount Limit   Allowed 2007 20. Www handrblock com 0% $6,300 $2,960   $2,960 2008 32. Www handrblock com 0 10,080 4,800   4,800 2009 19. Www handrblock com 2 6,048 2,850   2,850 2010 11. Www handrblock com 52 3,629 1,675   1,675 2011 11. Www handrblock com 52 3,629 1,675   1,675 2012 5. Www handrblock com 76 1,814 1,675   1,675 Total   $15,635 At the end of 2012, you had an unrecovered basis of $15,865 ($31,500 − $15,635). Www handrblock com If in 2013 and later years you continue to use the car 100% for business, you can deduct each year the lesser of $1,675 or your remaining unrecovered basis. Www handrblock com If your business use of the car had been less than 100% during any year, your depreciation deduction would have been less than the maximum amount allowable for that year. Www handrblock com However, in figuring your unrecovered basis in the car, you would still reduce your basis by the maximum amount allowable as if the business use had been 100%. Www handrblock com For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $9,519 ($15,865 × 60%), but you still would have to reduce your basis by $15,865 to determine your unrecovered basis. Www handrblock com Deductions For Passenger Automobiles Acquired in a Trade-in If you acquire a passenger automobile in a trade-in, depreciate the carryover basis separately as if the trade-in did not occur. Www handrblock com Depreciate the part of the new automobile's basis that exceeds its carryover basis (excess basis) as if it were newly placed in service property. Www handrblock com This excess basis is the additional cash paid for the new automobile in the trade-in. Www handrblock com The depreciation figured for the two components of the basis (carryover basis and excess basis) is subject to a single passenger automobile limit. Www handrblock com Special rules apply in determining the passenger automobile limits. Www handrblock com These rules and examples are discussed in section 1. Www handrblock com 168(i)-6(d)(3) of the regulations. Www handrblock com Instead of figuring depreciation for the carryover basis and the excess basis separately, you can elect to treat the old automobile as disposed of and both of the basis components for the new automobile as if placed in service at the time of the trade-in. Www handrblock com For more information, including how to make this election, see Election out under Property Acquired in a Like-kind Exchange or Involuntary Conversion in chapter 4 and sections 1. Www handrblock com 168(i)-6(i) and 1. Www handrblock com 168(i)-6(j) of the regulations. Www handrblock com What Records Must Be Kept? You cannot take any depreciation or section 179 deduction for the use of listed property unless you can prove your business/investment use with adequate records or with sufficient evidence to support your own statements. Www handrblock com For listed property, you must keep records for as long as any recapture can still occur. Www handrblock com Recapture can occur in any tax year of the recovery period. Www handrblock com Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. Www handrblock com You do not have to record information in an account book, diary, or similar record if the information is already shown on the receipt. Www handrblock com However, your records should back up your receipts in an orderly manner. Www handrblock com Elements of expenditure or use. Www handrblock com   Your records or other documentary evidence must support all the following. Www handrblock com The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses. Www handrblock com The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year. Www handrblock com The date of the expenditure or use. Www handrblock com The business or investment purpose for the expenditure or use. Www handrblock com   Written documents of your expenditure or use are generally better evidence than oral statements alone. Www handrblock com You do not have to keep a daily log. Www handrblock com However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time of the expenditure or use and backed up by other documents is preferable to a statement you prepare later. Www handrblock com Timeliness. Www handrblock com   You must record the elements of an expenditure or use at the time you have full knowledge of the elements. Www handrblock com An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use generally is considered a timely record if, in the regular course of business: The statement is given by an employee to the employer, or The statement is given by an independent contractor to the client or customer. Www handrblock com   For example, a log maintained on a weekly basis, that accounts for use during the week, will be considered a record made at or near the time of use. Www handrblock com Business purpose supported. Www handrblock com   Generally, an adequate record of business purpose must be in the form of a written statement. Www handrblock com However, the amount of detail necessary to establish a business purpose depends on the facts and circumstances of each case. Www handrblock com A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. Www handrblock com For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. Www handrblock com Business use supported. Www handrblock com   An adequate record contains enough information on each element of every business or investment use. Www handrblock com The amount of detail required to support the use depends on the facts and circumstances. Www handrblock com For example, a taxpayer who uses a truck for both business and personal purposes and whose only business use of the truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. Www handrblock com   Although you generally must prepare an adequate written record, you can prepare a record of the business use of listed property in a computer memory device that uses a logging program. Www handrblock com Separate or combined expenditures or uses. Www handrblock com   Each use by you normally is considered a separate use. Www handrblock com However, you can combine repeated uses as a single item. Www handrblock com   Record each expenditure as a separate item. Www handrblock com Do not combine it with other expenditures. Www handrblock com If you choose, however, you can combine amounts you spent for the use of listed property during a tax year, such as for gasoline or automobile repairs. Www handrblock com If you combine these expenses, you do not need to support the business purpose of each expense. Www handrblock com Instead, you can divide the expenses based on the total business use of the listed property. Www handrblock com   You can account for uses that can be considered part of a single use, such as a round trip or uninterrupted business use, by a single record. Www handrblock com For example, you can account for the use of a truck to make deliveries at several locations that begin and end at the business premises and can include a stop at the business in between deliveries by a single record of miles driven. Www handrblock com You can account for the use of a passenger automobile by a salesperson for a business trip away from home over a period of time by a single record of miles traveled. Www handrblock com Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. Www handrblock com Confidential information. Www handrblock com   If any of the information on the elements of an expenditure or use is confidential, you do not need to include it in the account book or similar record if you record it at or near the time of the expenditure or use. Www handrblock com You must keep it elsewhere and make it available as support to the IRS director for your area on request. Www handrblock com Substantial compliance. Www handrblock com   If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the satisfaction of the IRS director for your area, you can establish this element by any evidence the IRS director for your area deems adequate. Www handrblock com   If you fail to establish to the satisfaction of the IRS director for your area that you have substantially complied with the adequate records requirement for an element of an expenditure or use, you must establish the element as follows. Www handrblock com By your own oral or written statement containing detailed information as to the element. Www handrblock com By other evidence sufficient to establish the element. Www handrblock com   If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct evidence, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. Www handrblock com If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. Www handrblock com Sampling. Www handrblock com   You can maintain an adequate record for part of a tax year and use that record to support your business and investment use of listed property for the entire tax year if it can be shown by other evidence that the periods for which you maintain an adequate record are representative of the use throughout the year. Www handrblock com Example 1. Www handrblock com Denise Williams, a sole proprietor and calendar year taxpayer, operates an interior decorating business out of her home. Www handrblock com She uses her automobile for local business visits to the homes or offices of clients, for meetings with suppliers and subcontractors, and to pick up and deliver items to clients. Www handrblock com There is no other business use of the automobile, but she and family members also use it for personal purposes. Www handrblock com She maintains adequate records for the first 3 months of the year showing that 75% of the automobile use was for business. Www handrblock com Subcontractor invoices and paid bills show that her business continued at approximately the same rate for the rest of the year. Www handrblock com If there is no change in circumstances, such as the purchase of a second car for exclusive use in her business, the determination that her combined business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Www handrblock com Example 2. Www handrblock com Assume the same facts as in Example 1, except that Denise maintains adequate records during the first week of every month showing that 75% of her use of the automobile is for business. Www handrblock com Her business invoices show that her business continued at the same rate during the later weeks of each month so that her weekly records are representative of the automobile's business use throughout the month. Www handrblock com The determination that her business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Www handrblock com Example 3. Www handrblock com Bill Baker, a sole proprietor and calendar year taxpayer, is a salesman in a large metropolitan area for a company that manufactures household products. Www handrblock com For the first 3 weeks of each month, he occasionally uses his own automobile for business travel within the metropolitan area. Www handrblock com During these weeks, his business use of the automobile does not follow a consistent pattern. Www handrblock com During the fourth week of each month, he delivers all business orders taken during the previous month. Www handrblock com The business use of his automobile, as supported by adequate records, is 70% of its total use during that fourth week. Www handrblock com The determination based on the record maintained during the fourth week of the month that his business/investment use of the automobile for the tax year is 70% does not rest on sufficient supporting evidence because his use during that week is not representative of use during other periods. Www handrblock com Loss of records. Www handrblock com   When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. Www handrblock com How Is Listed Property Information Reported? You must provide the information about your listed property requested in Part V of Form 4562, Section A, if you claim either of the following deductions. Www handrblock com Any deduction for a vehicle. Www handrblock com A depreciation deduction for any other listed property. Www handrblock com If you claim any deduction for a vehicle, you also must provide the information requested in Section B. Www handrblock com If you provide the vehicle for your employee's use, the employee must give you this information. Www handrblock com If you provide any vehicle for use by an employee, you must first answer the questions in Section C to see if you meet an exception to completing Section B for that vehicle. Www handrblock com Vehicles used by your employees. Www handrblock com   You do not have to complete Section B, Part V, for vehicles used by your employees who are not more-than-5% owners or related persons if you meet at least one of the following requirements. Www handrblock com You maintain a written policy statement that prohibits one of the following uses of the vehicles. Www handrblock com All personal use including commuting. Www handrblock com Personal use, other than commuting, by employees who are not officers, directors, or 1%-or-more owners. Www handrblock com You treat all use of the vehicles by your employees as personal use. Www handrblock com You provide more than five vehicles for use by your employees, and you keep in your records the information on their use given to you by the employees. Www handrblock com For demonstrator automobiles provided to full-time salespersons, you maintain a written policy statement that limits the total mileage outside the salesperson's normal working hours and prohibits use of the automobile by anyone else, for vacation trips, or to store personal possessions. Www handrblock com Exceptions. Www handrblock com   If you file Form 2106, 2106-EZ, or Schedule C-EZ (Form 1040), and you are not required to file Form 4562, report information about listed property on that form and not on Form 4562. Www handrblock com Also, if you file Schedule C (Form 1040) and are claiming the standard mileage rate or actual vehicle expenses (except depreciation) and you are not required to file Form 4562 for any other reason, report vehicle information in Part IV of Schedule C and not on Form 4562. Www handrblock com Prev  Up  Next   Home   More Online Publications
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Compliance & Enforcement News

Offshore Tax-Avoidance and IRS Compliance Efforts
The IRS continues to uncover abusive tax-avoidance schemes involving offshore activity. Find information here pertaining to Union Bank of Switzerland (UBS).

Fiscal Year 2013 Enforcement and Service Results
The Fiscal Year 2013 Enforcement and Service Results provide the dollars collected from the examination (audit) and collection functions of the IRS. The results also tally various taxpayer assistance program results.

FY 2011 Enforcement Results
FY 2011 IRS Enforcement and Service Results.

FY 2009 Enforcement Results
The IRS FY 2009 Enforcement and Service Results detail the agency's audit, collection and taxpayer service efforts.

Tips for Choosing a Tax Return Preparer
FS-2012-5, January 2012 — If you pay someone to prepare your tax return, the IRS urges you to choose that preparer wisely.

IRS Releases New Tax Gap Estimates; Compliance Rates Remain Statistically Unchanged From Previous Study
IR-2012-4, Jan. 6, 2012 — The Internal Revenue Service today released a new set of tax gap estimates for tax year 2006. The tax gap is defined as the amount of tax liability faced by taxpayers that is not paid on time.

IRS Office of Professional Responsibility Prevails on Appeal Against CPA
IR-2011-48, April 25, 2011 — IRS Office of Professional Responsibility prevailed in an agency appeal against a Florida certified public accountant, according to the published Decision on Appeal.

IRS Begins Enforcement of New Return Preparer Rules
IR-2011-47, April 25, 2011 — The IRS is taking steps to stop tax preparers with criminal tax convictions or permanent injunctions from preparing tax returns.

How to Choose a Tax Return Preparer and Avoid Preparer Fraud
FS-2010-03, January 2010 — IRS fact sheet on how to choose a tax return preparer and avoid preparer fraud.

How to Choose a Tax Preparer and Avoid Preparer Fraud
FS-2009-7, January 2009 — Taxpayers should put as much care in choosing a preparer as they would a doctor or lawyer.

Tax Return Preparer Fraud
FS-2008-10, January 2008 — Get hints from IRS on how to choose a reputable tax preparer.

Fraudulent Telephone Tax Refunds, Abusive Roth IRAs Top Off 2007 “Dirty Dozen” Tax Scams
IR-2007-37, Feb. 20, 2007 –– Also new to the "Dirty Dozen" are abuses involving the American Indian Employment Credit, domestic shell companies and structured entities.

IRS Moves to Prevent Telephone Tax Refund Abuse; Help Taxpayers Make Accurate Requests
IR-2007-27, Feb. 7, 2007 — The Internal Revenue Service announced today it is taking additional steps to prevent abuse by tax preparers and help taxpayers make accurate requests for the one-time telephone excise tax refund.

Statement of IRS Commissioner Mark W. Everson on the FY 2008 Budget
Feb. 5, 2007 — The president’s 2008 budget request for the IRS, together with the accompanying legislative proposals concerning tax administration... will do much to promote compliance with our tax law.

Tax Return Preparer Fraud
FS-2007-12, January 2007 — Taxpayers should use caution when engaging professional tax return preparers and learn the warning signs of potential fraud.

IRS Accepts Settlement Offer in Largest Transfer Pricing Dispute
IR-2006-142, Sept. 11, 2006 — IRS has reached a satisfactory settlement in a transfer pricing dispute with Glaxo SmithKline in the largest tax dispute in the IRS's history.

IRS and States Join Forces to Combat Money Laundering
IR-2006-70, April 27, 2006 — Thirty-three states and Puerto Rico have signed agreements with the IRS to share Bank Secrecy Act information on money services businesses.

IRS Debunks Frivolous Arguments on Paying Taxes
IR-2006-45, March 16, 2006 — The IRS today issued updated guidance describing and rebutting frivolous arguments taxpayers should avoid when filing their tax returns

IRS Updates Tax Gap Estimates
IR-2006-28, Feb. 14, 2006 — The revised tax gap estimate is $345 billion for tax year 2001. The tax gap is the difference between what taxpayers timely and voluntarily should have paid and what they did pay.

IRS Improves Enforcement and Services in 2005
Prepared remarks by IRS Commissioner Mark W. Everson reqarding new Fiscal Year 2005 data that show improvements in enforcement and services to taxpayers.

IRS Launches Abusive Transaction Settlement Initiative
IR-2005-129, Oct. 27, 2005 — Internal Revenue Service officials today announced a broad-based, limited-in-time opportunity for taxpayers to come forward and settle an array of transactions the IRS considers abusive.

KPMG to Pay $456 Million for Criminal Violations
IR-2005-83, Aug. 29, 2005 — KPMG LLP (KPMG) has admitted to criminal wrongdoing and agreed to pay $456 million in fines, restitution and penalties as part of an agreement to defer prosecution of the firm, the Justice Department and the Internal Revenue Service announced today.

Robust Response for Executive Stock Option Initiative; Son of Boss Settlement Heading for $4 Billion
IR-2005-72, July 11, 2005 — IRS officials announced today that they received a strong turnout for the executive stock option settlement initiative launched in February.

IRS Collects $3.2 Billion from Son of Boss; Final Figure Should Top $3.5 Billion
IR-2005-37 — Abusive transaction aggressively marketed to wealthy individuals. Settlement required taxpayers to concede 100 percent of claimed tax losses.

IRS Obtains More Than 100 Injunctions Against Tax Scheme Promoters
FS-2005-15 — Many of the injunctions order promoters to turn over client lists and to cease preparing federal income tax returns for others.

States See Son of Boss Benefits; Tax Administrators Praise Efforts
FS-2005-13 –– States are beginning to see results from the IRS Son of Boss settlement initiative. California and New York have also conducted compliance initiatives.

Understanding the Tax Gap
FS-2005-14 — The tax gap measures the extent to which taxpayers do not file their tax returns and pay the correct tax on time.

Report on IRS Review of Alleged Political Campaign Intervention 2005
The Treasury Inspector General reports that IRS properly ran its program for investigating claims of inappropriate political campaign actions by tax-exempt organizations.

Page Last Reviewed or Updated: 28-Mar-2014

The Www Handrblock Com

Www handrblock com Índice Pérdidas en ciertas actividades madereras, retroactivación a 5 años, Traspaso a 5 años de NOL por ciertas pérdidas en actividades madereras. Www handrblock com A Actividad maderera: Costos de reforestación, Costos de Reforestación Retroactivación a 5 años de NOL, Costos de Reforestación Apógrafo de la declaración de impuestos, solicitud de, Solicitud de apógrafo de la declaración de impuestos. Www handrblock com Ayuda: Ayuda especial del IRS, Cómo Obtener Ayuda con los Impuestos Cibersitio del IRS, Cómo Obtener Ayuda con los Impuestos Cómo obtener, Cómo Obtener Ayuda con los Impuestos Teléfono, Cómo Obtener Ayuda con los Impuestos C Cancelación de endeudamiento, Exclusión de Ciertas Cancelaciones de Endeudamiento por Motivos del Huracán Katrina Cibersitio del IRS, Servicios gratis con los impuestos. Www handrblock com Contribuciones caritativas, Suspensión Temporal de los Límites sobre las Contribuciones Caritativas Contribuyentes afectados, Contribuyentes afectados. Www handrblock com Conversión involuntaria (ver Plazo de reposición para que las ganancias no sean reconocidas) Copia de su declaración de impuestos, solicitud de, Solicitud de copia de la declaración de impuestos. Www handrblock com Costos de demolición, Costos de Demolición y Limpieza Costos de limpieza, Costos de Demolición y Limpieza Costos de reforestación, Costos de Reforestación Crédito Hope (ver Créditos por enseñanza superior) Crédito perpétuo (vitalicio) por aprendizaje (ver Créditos por enseñanza superior) Crédito por ingreso del trabajo, Crédito por Ingreso del Trabajo y Crédito Tributario por Hijos Crédito por la retención de empleados, Créditos por la Retención de Empleados Crédito por oportunidad de trabajo, Crédito por Oportunidad de Trabajo Crédito por vivienda para afectados por el huracán Katrina, Crédito por Vivienda del Huracán Katrina Crédito tributario por hijos, Crédito por Ingreso del Trabajo y Crédito Tributario por Hijos Crédito tributario por rehabilitación, Aumento del Crédito Tributario por Rehabilitación Créditos por enseñanza superior, Créditos Tributarios por Enseñanza Superior Créditos: Enseñanza superior, Créditos Tributarios por Enseñanza Superior Impuesto por rehabilitación, Aumento del Crédito Tributario por Rehabilitación Ingreso del trabajo, Crédito por Ingreso del Trabajo y Crédito Tributario por Hijos Oportunidad de trabajo, Crédito por Oportunidad de Trabajo Retención de empleados , Créditos por la Retención de Empleados Tributario por hijos, Crédito por Ingreso del Trabajo y Crédito Tributario por Hijos Vivienda para afectados por el huracán Katrina, Crédito por Vivienda del Huracán Katrina Cuentas IRA y otros planes de jubilación, Las Cuentas IRA y Otros Planes de Jubilación D Declaración de impuestos: Solicitud de apógrafo, Solicitud de apógrafo de la declaración de impuestos. Www handrblock com Solicitud de una copia, Solicitud de copia de la declaración de impuestos. Www handrblock com Deducción caritativa: Inventario de alimentos, Deducción Caritativa por Contribuciones de Inventario de Alimentos Inventario de libros, Deducción Caritativa por Contribuciones de Inventarios de Libros a Escuelas Públicas Deducción conforme a la sección 179, Mayor Deducción Conforme a la Sección 179 Defensor del contribuyente, Poniéndose en contacto con el Defensor del Contribuyente. Www handrblock com Depreciación : Asignación especial , Asignación (Descuento) Especial de Depreciación Depreciación: Propiedad calificada de la Zona GO, Propiedad calificada de la Zona GO. Www handrblock com Distribución calificada por motivos del huracán, Distribución calificada por motivos del huracán. Www handrblock com Distribuciones: Compra o construcción de una vivienda, Reintegro de Distribuciones Calificadas por la Compra o Construcción de un Hogar Principal Huracán calificado, Distribución calificada por motivos del huracán. Www handrblock com Reintegro de, Reintegro de Distribuciones Calificadas por Motivos de un Huracán Tributación de, Tributación de Distribuciones Calificadas por Motivos de un Huracán E Exención adicional por provisión de vivienda, Exenciones Adicionales por la Provisión de Vivienda para Personas que Tuvieron que Abandonar sus Hogares por Causa del Huracán Katrina F Fechas de vencimiento, prorrogadas, Prórrogas de las Fechas de Vencimiento Tributarias I Internet: Cibersitio del IRS, Servicios gratis con los impuestos. Www handrblock com Inventario de alimentos, deducción caritativa por , Deducción Caritativa por Contribuciones de Inventario de Alimentos Inventario de libros, deducción caritativa por, Deducción Caritativa por Contribuciones de Inventarios de Libros a Escuelas Públicas P Pérdida calificada en una Zona GO, Pérdida calificada en una Zona GO. Www handrblock com Pérdidas netas de operación , Pérdidas Netas de Operación Pérdidas por hechos fortuitos y robos, Pérdidas por Hechos Fortuitos y Robos Pérdidas por robo, Pérdidas por Hechos Fortuitos y Robos Plan de jubilación elegible, Plan de jubilación elegible. Www handrblock com Planes de jubilación, Las Cuentas IRA y Otros Planes de Jubilación Plazo de reposición para que las ganancias no sean reconocidas, Período de Reposición para que las Ganancias no sean Reconocidas R Reembolsos de millas, voluntarios que prestaron servicios con fines caritativos, Reembolsos de Millas a Voluntarios que Prestaron Servicios con Fines Caritativos Reubicación temporal, Alivio Tributario para la Reubicación Temporal S Servicio de Impuestos Internos (IRS): Cibersitio del, Servicios gratis con los impuestos. Www handrblock com Subsidio hipotecario federal, recuperación, Recuperación del Subsidio Hipotecario Federal T Tasa estándar por milla, uso con fines caritativos, Tasa Estándar por Milla para el Uso de Vehículos para Fines Caritativos Z Zona central del desastre, Zona de Oportunidad del Golfo (GO) (Zona Central del Desastre) Zona de desastre con cobertura: Katrina, Zona de Desastre del Huracán Katrina con Cobertura Rita, Zona de Desastre del Huracán Rita (Zona de Desastre de Rita con Cobertura) Wilma, Zona de Desastre del Huracán Wilma con Cobertura Zona de desastre: Huracán Katrina, Zona de Desastre del Huracán Katrina Huracán Rita, Zona de Desastre del Huracán Rita (Zona de Desastre de Rita con Cobertura) Huracán Wilma, Zona de Desastre del Huracán Wilma Zona de Oportunidad del Golfo (GO), Zona de Oportunidad del Golfo (GO) (Zona Central del Desastre) Zona GO de Rita, Zona GO de Rita Zona GO de Wilma, Zona GO de Wilma Anterior  Subir     Inicio   More Online Publications