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

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

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

3. E-File for FREE

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

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

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

1040 Amended Tax Form

File 2007 TaxesTurbotax Premier Federal E File State 2012How To E File State Taxes For Free1040nr Ez DownloadFiling Amended Tax Return 2009Tax 1040xFree Federal Tax FilingFree State Tax Efile For Low IncomeNj 1040 Nr2011 Tax ReturnFile Taxes Online For Free1040ez Tax TablesHow To Amend 2012 TaxesI Need Tax Instruction Booklet For 1040ez2007 Tax Return FormsFree Online TaxesTax SoftwareEz Tax FormCan I File An Amended Tax ReturnMass Income State Tax FormsFile 1040ezState Efile1040x 2012Efile TaxesFree File 1040ez2012 1040xFree Tax Preparation For MilitaryWww Irs Gov Formspubs1040x Efile2010 Tax FormFile Free State Taxes OnlineFile Your Taxes Online For Free1040 Forms2011 1040ez Form IrsIrs 2012 Tax Forms 1040 InstructionsFree State Tax ExtensionAmendment Form2011 Tax Form 1040ezTax FormsFile 1040x Free

1040 Amended Tax Form

1040 amended tax form Publication 925 - Main Content Table of Contents Passive Activity LimitsWho Must Use These Rules? Passive Activity Loss Passive Activity Credit Publicly Traded Partnership Excess Farm Loss Passive Activities Activities That Are Not Passive Activities Passive Activity Income and Deductions Grouping Your Activities Recharacterization of Passive Income Dispositions How To Report Your Passive Activity Loss Comprehensive ExampleGeneral Information At-Risk LimitsWho Is Affected? Activities Covered by the At-Risk Rules At-Risk Amounts Amounts Not At Risk Reductions of Amounts At Risk Recapture Rule How To Get Tax HelpLow Income Taxpayer Clinics Passive Activity Limits Who Must Use These Rules? The passive activity rules apply to: Individuals, Estates, Trusts (other than grantor trusts), Personal service corporations, and Closely held corporations. 1040 amended tax form Even though the rules do not apply to grantor trusts, partnerships, and S corporations directly, they do apply to the owners of these entities. 1040 amended tax form For information about personal service corporations and closely held corporations, including definitions and how the passive activity rules apply to these corporations, see Form 8810 and its instructions. 1040 amended tax form Before applying the passive activity limits, you must first determine the amount of the deductions disallowed under the basis, excess farm loss, or at-risk rules. 1040 amended tax form See Passive Activity Deductions, later. 1040 amended tax form Passive Activity Loss Generally, the passive activity loss for the tax year is not allowed. 1040 amended tax form However, there is a special allowance under which some or all of your passive activity loss may be allowed. 1040 amended tax form See Special $25,000 allowance , later. 1040 amended tax form Definition of passive activity loss. 1040 amended tax form    Generally, your passive activity loss for the tax year is the excess of your passive activity deductions over your passive activity gross income. 1040 amended tax form See Passive Activity Income and Deductions , later. 1040 amended tax form   For a closely held corporation, the passive activity loss is the excess of passive activity deductions over the sum of passive activity gross income and net active income. 1040 amended tax form For details on net active income, see the Instructions for Form 8810. 1040 amended tax form For the definition of passive activity gross income, see Passive Activity Income , later. 1040 amended tax form For the definition of passive activity deductions, see Passive Activity Deductions , later. 1040 amended tax form Identification of Disallowed Passive Activity Deductions If all or a part of your passive activity loss is disallowed for the tax year, you may need to allocate the disallowed passive activity loss among different passive activities and among different deductions within a passive activity. 1040 amended tax form Allocation of disallowed passive activity loss among activities. 1040 amended tax form   If all or any part of your passive activity loss is disallowed for the tax year, a ratable portion of the loss (if any) from each of your passive activities is disallowed. 1040 amended tax form The ratable portion of a loss from an activity is computed by multiplying the passive activity loss that is disallowed for the tax year by the fraction obtained by dividing: The loss from the activity for the tax year; by The sum of the losses for the tax year from all activities having losses for the tax year. 1040 amended tax form Use Worksheet 5 of Form 8582 to figure the ratable portion of the loss from each activity that is disallowed. 1040 amended tax form Loss from an activity. 1040 amended tax form   The term “loss from an activity” means: The amount by which the passive activity deductions (defined later) from the activity for the tax year exceed the passive activity gross income (defined later) from the activity for the tax year; reduced by Any part of such amount that is allowed under the Special $25,000 Allowance , later. 1040 amended tax form   If your passive activity gross income from significant participation passive activities (defined later) for the tax year is more than your passive activity deductions from those activities for the tax year, those activities shall be treated, solely for purposes of figuring your loss from the activity, as a single activity that does not have a loss for such taxable year. 1040 amended tax form See Significant Participation Passive Activities , later. 1040 amended tax form Example. 1040 amended tax form John Pine holds interests in three passive activities, A, B, and C. 1040 amended tax form The gross income and deductions from these activities for the taxable year are as follows:   A B C Total Gross income $7,000 $4,000 $12,000 $23,000 Deductions (16,000) (20,000) (8,000) (44,000)           Net income (loss) ($9,000) ($16,000) $4,000 ($21,000)   John Pine’s $21,000 passive activity loss for the taxable year is disallowed. 1040 amended tax form Therefore, a ratable portion of the losses from activities A and B is disallowed. 1040 amended tax form He figures the disallowed portion of each loss as follows: A: $21,000 x $9,000/$25,000 $7,560 B: $21,000 x $16,000/$25,000 13,440     Total $21,000 Allocation within loss activities. 1040 amended tax form   If all or any part of your loss from an activity is disallowed under Allocation of disallowed passive activity loss among activities for the tax year, a ratable portion of each of your passive activity deductions (defined later), other than an excluded deduction (defined below) from such activity is disallowed. 1040 amended tax form The ratable portion of a passive activity deduction is the amount of the disallowed portion of the loss from the activity for the tax year multiplied by the fraction obtained by dividing: The amount of such deduction; by The sum of all of your passive activity deductions (other than excluded deductions) from that activity from the tax year. 1040 amended tax form Excluded deductions. 1040 amended tax form    “Excluded deduction” means any passive activity deduction that is taken into account in computing your net income from an item of property for a taxable year in which an amount of the taxpayer's gross income from such item of property is treated as not from a passive activity. 1040 amended tax form See Recharacterization of Passive Income , later. 1040 amended tax form Separately identified deductions. 1040 amended tax form   In identifying the deductions from an activity that are disallowed, you do not need to account separately for a deduction unless such deduction may, if separately taken into account, result in an income tax liability for any tax year different from that which would result were such deduction not taken into account separately. 1040 amended tax form   Use Form 8582, Worksheet 7, for any activity if you have passive activity deductions for that activity that must be separately identified. 1040 amended tax form   Deductions that must be accounted for separately include (but are not limited to) the following deductions. 1040 amended tax form Deductions that arise in a rental real estate activity in tax years in which you actively participate in such activity. 1040 amended tax form See Active participation , later. 1040 amended tax form Deductions that arise in a rental real estate activity in tax years in which you do not actively participate in such activity. 1040 amended tax form See Active participation , later. 1040 amended tax form Losses from sales or exchanges of capital assets. 1040 amended tax form Section 1231 losses. 1040 amended tax form See Section 1231 Gains and Losses in Publication 544, Sales and Other Disposition of Assets, for more information. 1040 amended tax form Carryover of Disallowed Deductions In the case of an activity with respect to which any deductions or credits are disallowed for a taxable year (the loss activity), the disallowed deductions are allocated among your activities for the next tax year in a manner that reasonably reflects the extent to which each activity continues the loss activity. 1040 amended tax form The disallowed deductions or credits allocated to an activity under the preceding sentence are treated as deductions or credits from the activity for the next tax year. 1040 amended tax form For more information, see Regulations section 1. 1040 amended tax form 469-1(f)(4). 1040 amended tax form Passive Activity Credit Generally, the passive activity credit for the tax year is disallowed. 1040 amended tax form The passive activity credit is the amount by which the sum of all your credits subject to the passive activity rules exceed your regular tax liability allocable to all passive activities for the tax year. 1040 amended tax form Credits that are included in figuring the general business credit are subject to the passive activity rules. 1040 amended tax form See the Instructions for Form 8582-CR for more information. 1040 amended tax form Publicly Traded Partnership You must apply the rules in this part separately to your income or loss from a passive activity held through a publicly traded partnership (PTP). 1040 amended tax form You also must apply the limit on passive activity credits separately to your credits from a passive activity held through a PTP. 1040 amended tax form You can offset deductions from passive activities of a PTP only against income or gain from passive activities of the same PTP. 1040 amended tax form Likewise, you can offset credits from passive activities of a PTP only against the tax on the net passive income from the same PTP. 1040 amended tax form This separate treatment rule also applies to a regulated investment company holding an interest in a PTP for the items attributable to that interest. 1040 amended tax form For more information on how to apply the passive activity loss rules to PTPs, and on how to apply the limit on passive activity credits to PTPs, see Publicly Traded Partnerships (PTPs) in the Instructions for Forms 8582 and 8582-CR, respectively. 1040 amended tax form Excess Farm Loss If you receive an applicable subsidy for any tax year and you have an excess farm loss for the tax year, special rules apply. 1040 amended tax form These rules do not apply to C corporations. 1040 amended tax form For information, see the Instructions for Schedule F (Form 1040), Profit or Loss From Farming. 1040 amended tax form Passive Activities There are two kinds of passive activities. 1040 amended tax form Trade or business activities in which you do not materially participate during the year. 1040 amended tax form Rental activities, even if you do materially participate in them, unless you are a real estate professional. 1040 amended tax form Material participation in a trade or business is discussed later, under Activities That Are Not Passive Activities . 1040 amended tax form Treatment of former passive activities. 1040 amended tax form   A former passive activity is an activity that was a passive activity in any earlier tax year, but is not a passive activity in the current tax year. 1040 amended tax form You can deduct a prior year's unallowed loss from the activity up to the amount of your current year net income from the activity. 1040 amended tax form Treat any remaining prior year unallowed loss like you treat any other passive loss. 1040 amended tax form   In addition, any prior year unallowed passive activity credits from a former passive activity offset the allocable part of your current year tax liability. 1040 amended tax form The allocable part of your current year tax liability is that part of this year's tax liability that is allocable to the current year net income from the former passive activity. 1040 amended tax form You figure this after you reduce your net income from the activity by any prior year unallowed loss from that activity (but not below zero). 1040 amended tax form Trade or Business Activities A trade or business activity is an activity that: Involves the conduct of a trade or business (that is, deductions would be allowable under section 162 of the Internal Revenue Code if other limitations, such as the passive activity rules, did not apply), Is conducted in anticipation of starting a trade or business, or Involves research or experimental expenditures that are deductible under Internal Revenue Code section 174 (or that would be deductible if you chose to deduct rather than capitalize them). 1040 amended tax form A trade or business activity does not include a rental activity or the rental of property that is incidental to an activity of holding the property for investment. 1040 amended tax form You generally report trade or business activities on Schedule C, C-EZ, F, or in Part II or III of Schedule E. 1040 amended tax form Rental Activities A rental activity is a passive activity even if you materially participated in that activity, unless you materially participated as a real estate professional. 1040 amended tax form See Real Estate Professional under Activities That Are Not Passive Activities, later. 1040 amended tax form An activity is a rental activity if tangible property (real or personal) is used by customers or held for use by customers, and the gross income (or expected gross income) from the activity represents amounts paid (or to be paid) mainly for the use of the property. 1040 amended tax form It does not matter whether the use is under a lease, a service contract, or some other arrangement. 1040 amended tax form Exceptions. 1040 amended tax form   Your activity is not a rental activity if any of the following apply. 1040 amended tax form The average period of customer use of the property is 7 days or less. 1040 amended tax form You figure the average period of customer use by dividing the total number of days in all rental periods by the number of rentals during the tax year. 1040 amended tax form If the activity involves renting more than one class of property, multiply the average period of customer use of each class by a fraction. 1040 amended tax form The numerator of the fraction is the gross rental income from that class of property and the denominator is the activity's total gross rental income. 1040 amended tax form The activity's average period of customer use will equal the sum of the amounts for each class. 1040 amended tax form The average period of customer use of the property, as figured in (1) above, is 30 days or less and you provide significant personal services with the rentals. 1040 amended tax form Significant personal services include only services performed by individuals. 1040 amended tax form To determine if personal services are significant, all relevant facts and circumstances are taken into consideration, including the frequency of the services, the type and amount of labor required to perform the services, and the value of the services relative to the amount charged for use of the property. 1040 amended tax form Significant personal services do not include the following. 1040 amended tax form Services needed to permit the lawful use of the property, Services to repair or improve property that would extend its useful life for a period substantially longer than the average rental, and Services that are similar to those commonly provided with long-term rentals of real estate, such as cleaning and maintenance of common areas or routine repairs. 1040 amended tax form You provide extraordinary personal services in making the rental property available for customer use. 1040 amended tax form Services are extraordinary personal services if they are performed by individuals and the customers' use of the property is incidental to their receipt of the services. 1040 amended tax form The rental is incidental to a nonrental activity. 1040 amended tax form The rental of property is incidental to an activity of holding property for investment if the main purpose of holding the property is to realize a gain from its appreciation and the gross rental income from the property is less than 2% of the smaller of the property's unadjusted basis or fair market value. 1040 amended tax form The unadjusted basis of property is its cost not reduced by depreciation or any other basis adjustment. 1040 amended tax form The rental of property is incidental to a trade or business activity if all of the following apply. 1040 amended tax form You own an interest in the trade or business activity during the year. 1040 amended tax form The rental property was used mainly in that trade or business activity during the current year, or during at least 2 of the 5 preceding tax years. 1040 amended tax form Your gross rental income from the property is less than 2% of the smaller of its unadjusted basis or fair market value. 1040 amended tax form Lodging provided to an employee or the employee's spouse or dependents is incidental to the activity or activities in which the employee performs services if the lodging is furnished for the employer's convenience. 1040 amended tax form You customarily make the rental property available during defined business hours for nonexclusive use by various customers. 1040 amended tax form You provide the property for use in a nonrental activity in your capacity as an owner of an interest in the partnership, S corporation, or joint venture conducting that activity. 1040 amended tax form    If you meet any of the exceptions listed above, see the instructions for Form 8582 for information about how to report any income or loss from the activity. 1040 amended tax form Special $25,000 allowance. 1040 amended tax form   If you or your spouse actively participated in a passive rental real estate activity, the amount of the passive activity loss that is disallowed is decreased and you therefore can deduct up to $25,000 of loss from the activity from your nonpassive income. 1040 amended tax form This special allowance is an exception to the general rule disallowing the passive activity loss. 1040 amended tax form Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. 1040 amended tax form   If you are married, filing a separate return, and lived apart from your spouse for the entire tax year, your special allowance cannot be more than $12,500. 1040 amended tax form If you lived with your spouse at any time during the year and are filing a separate return, you cannot use the special allowance to reduce your nonpassive income or tax on nonpassive income. 1040 amended tax form   The maximum special allowance is reduced if your modified adjusted gross income exceeds certain amounts. 1040 amended tax form See Phaseout rule , later. 1040 amended tax form Example. 1040 amended tax form Kate, a single taxpayer, has $70,000 in wages, $15,000 income from a limited partnership, a $26,000 loss from rental real estate activities in which she actively participated, and is not subject to the modified adjusted gross income phaseout rule. 1040 amended tax form She can use $15,000 of her $26,000 loss to offset her $15,000 passive income from the partnership. 1040 amended tax form She actively participated in her rental real estate activities, so she can use the remaining $11,000 rental real estate loss to offset $11,000 of her nonpassive income (wages). 1040 amended tax form Commercial revitalization deduction (CRD). 1040 amended tax form   The special allowance must first be applied to losses from rental real estate activities figured without the CRD. 1040 amended tax form Any remaining part of the special allowance is available for the CRD from the rental real estate activities and is not subject to the active participation rules or the phaseout based on modified adjusted gross income. 1040 amended tax form You cannot claim a CRD for a building placed in service after December 31, 2009. 1040 amended tax form Active participation. 1040 amended tax form   Active participation is not the same as material participation (defined later). 1040 amended tax form Active participation is a less stringent standard than material participation. 1040 amended tax form For example, you may be treated as actively participating if you make management decisions in a significant and bona fide sense. 1040 amended tax form Management decisions that count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions. 1040 amended tax form   Only individuals can actively participate in rental real estate activities. 1040 amended tax form However, a decedent's estate is treated as actively participating for its tax years ending less than 2 years after the decedent's death, if the decedent would have satisfied the active participation requirement for the activity for the tax year the decedent died. 1040 amended tax form   A decedent's qualified revocable trust can also be treated as actively participating if both the trustee and the executor (if any) of the estate choose to treat the trust as part of the estate. 1040 amended tax form The choice applies to tax years ending after the decedent's death and before: 2 years after the decedent's death if no estate tax return is required, or 6 months after the estate tax liability is finally determined if an estate tax return is required. 1040 amended tax form   The choice is irrevocable and cannot be made later than the due date for the estate's first income tax return (including any extensions). 1040 amended tax form   Limited partners are not treated as actively participating in a partnership's rental real estate activities. 1040 amended tax form   You are not treated as actively participating in a rental real estate activity unless your interest in the activity (including your spouse's interest) was at least 10% (by value) of all interests in the activity throughout the year. 1040 amended tax form   Active participation is not required to take the low-income housing credit, the rehabilitation investment credit, or CRD from rental real estate activities. 1040 amended tax form Example. 1040 amended tax form Mike, a single taxpayer, had the following income and loss during the tax year: Salary $42,300 Dividends 300 Interest 1,400 Rental loss (4,000) The rental loss came from a house Mike owned. 1040 amended tax form He advertised and rented the house to the current tenant himself. 1040 amended tax form He also collected the rents and did the repairs or hired someone to do them. 1040 amended tax form Even though the rental loss is a loss from a passive activity, Mike can use the entire $4,000 loss to offset his other income because he actively participated. 1040 amended tax form Phaseout rule. 1040 amended tax form   The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that is more than $100,000 ($50,000 if you are married filing separately). 1040 amended tax form If your modified adjusted gross income is $150,000 or more ($75,000 or more if you are married filing separately), you generally cannot use the special allowance. 1040 amended tax form    Modified adjusted gross income for this purpose is your adjusted gross income figured without the following. 1040 amended tax form Taxable social security and tier 1 railroad retirement benefits. 1040 amended tax form Deductible contributions to individual retirement accounts (IRAs) and section 501(c)(18) pension plans. 1040 amended tax form The exclusion from income of interest from qualified U. 1040 amended tax form S. 1040 amended tax form savings bonds used to pay qualified higher education expenses. 1040 amended tax form The exclusion from income of amounts received from an employer's adoption assistance program. 1040 amended tax form Passive activity income or loss included on Form 8582. 1040 amended tax form Any rental real estate loss allowed because you materially participated in the rental activity as a Real Estate Professional (as discussed later, under Activities That Are Not Passive Activities). 1040 amended tax form Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the instructions for Form 8582). 1040 amended tax form The deduction for the employer-equivalent portion of self-employment tax. 1040 amended tax form The deduction for domestic production activities. 1040 amended tax form The deduction allowed for interest on student loans. 1040 amended tax form The deduction for qualified tuition and related expenses. 1040 amended tax form Example. 1040 amended tax form During 2013, John was unmarried and was not a real estate professional. 1040 amended tax form For 2013, he had $120,000 in salary and a $31,000 loss from his rental real estate activities in which he actively participated. 1040 amended tax form His modified adjusted gross income is $120,000. 1040 amended tax form When he files his 2013 return, he can deduct only $15,000 of his passive activity loss. 1040 amended tax form He must carry over the remaining $16,000 passive activity loss to 2014. 1040 amended tax form He figures his deduction and carryover as follows: Adjusted gross income, modified as required $120,000       Minus amount not subject to phaseout 100,000 Amount subject to phaseout rule $20,000 Multiply by 50% × 50% Required reduction to special allowance $10,000 Maximum special allowance $25,000 Minus required reduction (see above) 10,000 Adjusted special allowance $15,000 Passive loss from rental real estate $31,000 Deduction allowable/Adjusted  special allowance (see above) 15,000       Amount that must be carried forward $16,000 Exceptions to the phaseout rules. 1040 amended tax form   A higher phaseout range applies to rehabilitation investment credits from rental real estate activities. 1040 amended tax form For those credits, the phaseout of the $25,000 special allowance starts when your modified adjusted gross income exceeds $200,000 ($100,000 if you are a married individual filing a separate return and living apart at all times during the year). 1040 amended tax form   There is no phaseout of the $25,000 special allowance for low-income housing credits or for the CRD. 1040 amended tax form Ordering rules. 1040 amended tax form   If you have more than one of the exceptions to the phaseout rules in the same tax year, you must apply the $25,000 phaseout against your passive activity losses and credits in the following order. 1040 amended tax form The portion of passive activity losses not attributable to the CRD. 1040 amended tax form The portion of passive activity losses attributable to the CRD. 1040 amended tax form The portion of passive activity credits attributable to credits other than the rehabilitation and low-income housing credits. 1040 amended tax form The portion of passive activity credits attributable to the rehabilitation credit. 1040 amended tax form The portion of passive activity credits attributable to the low-income housing credit. 1040 amended tax form Activities That Are Not Passive Activities The following are not passive activities. 1040 amended tax form Trade or business activities in which you materially participated for the tax year. 1040 amended tax form A working interest in an oil or gas well which you hold directly or through an entity that does not limit your liability (such as a general partner interest in a partnership). 1040 amended tax form It does not matter whether you materially participated in the activity for the tax year. 1040 amended tax form However, if your liability was limited for part of the year (for example, you converted your general partner interest to a limited partner interest during the year) and you had a net loss from the well for the year, some of your income and deductions from the working interest may be treated as passive activity gross income and passive activity deductions. 1040 amended tax form  See Temporary Regulations section 1. 1040 amended tax form 469-1T(e)(4)(ii). 1040 amended tax form The rental of a dwelling unit that you also used for personal purposes during the year for more than the greater of 14 days or 10% of the number of days during the year that the home was rented at a fair rental. 1040 amended tax form An activity of trading personal property for the account of those who own interests in the activity. 1040 amended tax form See Temporary Regulations section 1. 1040 amended tax form 469-1T(e)(6). 1040 amended tax form Rental real estate activities in which you materially participated as a real estate professional. 1040 amended tax form See Real Estate Professional , later. 1040 amended tax form You should not enter income and losses from these activities on Form 8582. 1040 amended tax form Instead, enter them on the forms or schedules you would normally use. 1040 amended tax form Material Participation A trade or business activity is not a passive activity if you materially participated in the activity. 1040 amended tax form Material participation tests. 1040 amended tax form    You materially participated in a trade or business activity for a tax year if you satisfy any of the following tests. 1040 amended tax form You participated in the activity for more than 500 hours. 1040 amended tax form Your participation was substantially all the participation in the activity of all individuals for the tax year, including the participation of individuals who did not own any interest in the activity. 1040 amended tax form You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other individual (including individuals who did not own any interest in the activity) for the year. 1040 amended tax form The activity is a significant participation activity, and you participated in all significant participation activities for more than 500 hours. 1040 amended tax form A significant participation activity is any trade or business activity in which you participated for more than 100 hours during the year and in which you did not materially participate under any of the material participation tests, other than this test. 1040 amended tax form See Significant Participation Passive Activities , under Recharacterization of Passive Income, later. 1040 amended tax form You materially participated in the activity for any 5 (whether or not consecutive) of the 10 immediately preceding tax years. 1040 amended tax form The activity is a personal service activity in which you materially participated for any 3 (whether or not consecutive) preceding tax years. 1040 amended tax form An activity is a personal service activity if it involves the performance of personal services in the fields of health (including veterinary services), law, engineering, architecture, accounting, actuarial science, performing arts, consulting, or any other trade or business in which capital is not a material income-producing factor. 1040 amended tax form Based on all the facts and circumstances, you participated in the activity on a regular, continuous, and substantial basis during the year. 1040 amended tax form   You did not materially participate in the activity under test (7) if you participated in the activity for 100 hours or less during the year. 1040 amended tax form Your participation in managing the activity does not count in determining whether you materially participated under this test if: Any person other than you received compensation for managing the activity, or Any individual spent more hours during the tax year managing the activity than you did (regardless of whether the individual was compensated for the management services). 1040 amended tax form Participation. 1040 amended tax form   In general, any work you do in connection with an activity in which you own an interest is treated as participation in the activity. 1040 amended tax form Work not usually performed by owners. 1040 amended tax form   You do not treat the work you do in connection with an activity as participation in the activity if both of the following are true. 1040 amended tax form The work is not work that is customarily done by the owner of that type of activity. 1040 amended tax form One of your main reasons for doing the work is to avoid the disallowance of any loss or credit from the activity under the passive activity rules. 1040 amended tax form Participation as an investor. 1040 amended tax form   You do not treat the work you do in your capacity as an investor in an activity as participation unless you are directly involved in the day-to-day management or operations of the activity. 1040 amended tax form Work you do as an investor includes: Studying and reviewing financial statements or reports on operations of the activity, Preparing or compiling summaries or analyses of the finances or operations of the activity for your own use, and Monitoring the finances or operations of the activity in a nonmanagerial capacity. 1040 amended tax form Spouse's participation. 1040 amended tax form   Your participation in an activity includes your spouse's participation. 1040 amended tax form This applies even if your spouse did not own any interest in the activity and you and your spouse do not file a joint return for the year. 1040 amended tax form Proof of participation. 1040 amended tax form You can use any reasonable method to prove your participation in an activity for the year. 1040 amended tax form You do not have to keep contemporaneous daily time reports, logs, or similar documents if you can establish your participation in some other way. 1040 amended tax form For example, you can show the services you performed and the approximate number of hours spent by using an appointment book, calendar, or narrative summary. 1040 amended tax form Limited partners. 1040 amended tax form   If you owned an activity as a limited partner, you generally are not treated as materially participating in the activity. 1040 amended tax form However, you are treated as materially participating in the activity if you met test (1), (5), or (6) under Material participation tests , discussed earlier, for the tax year. 1040 amended tax form   You are not treated as a limited partner, however, if you also were a general partner in the partnership at all times during the partnership's tax year ending with or within your tax year (or, if shorter, during that part of the partnership's tax year in which you directly or indirectly owned your limited partner interest). 1040 amended tax form Retired or disabled farmer and surviving spouse of a farmer. 1040 amended tax form   If you are a retired or disabled farmer, you are treated as materially participating in a farming activity if you materially participated for 5 or more of the 8 years before your retirement or disability. 1040 amended tax form Similarly, if you are a surviving spouse of a farmer, you are treated as materially participating in a farming activity if the real property used in the activity meets the estate tax rules for special valuation of farm property passed from a qualifying decedent, and you actively manage the farm. 1040 amended tax form Corporations. 1040 amended tax form   A closely held corporation or a personal service corporation is treated as materially participating in an activity only if one or more shareholders holding more than 50% by value of the outstanding stock of the corporation materially participate in the activity. 1040 amended tax form   A closely held corporation can also satisfy the material participation standard by meeting the first two requirements for the qualifying business exception from the at-risk limits. 1040 amended tax form See Special exception for qualified corporations under Activities Covered by the At-Risk Rules, later. 1040 amended tax form Real Estate Professional Generally, rental activities are passive activities even if you materially participated in them. 1040 amended tax form However, if you qualified as a real estate professional, rental real estate activities in which you materially participated are not passive activities. 1040 amended tax form For this purpose, each interest you have in a rental real estate activity is a separate activity, unless you choose to treat all interests in rental real estate activities as one activity. 1040 amended tax form See the Instructions for Schedule E (Form 1040), Supplemental Income and Loss, for information about making this choice. 1040 amended tax form If you qualified as a real estate professional for 2013, report income or losses from rental real estate activities in which you materially participated as nonpassive income or losses, and complete line 43 of Schedule E (Form 1040). 1040 amended tax form If you also have an unallowed loss from these activities from an earlier year when you did not qualify, see Treatment of former passive activities under Passive Activities, earlier. 1040 amended tax form Qualifications. 1040 amended tax form   You qualified as a real estate professional for the year if you met both of the following requirements. 1040 amended tax form More than half of the personal services you performed in all trades or businesses during the tax year were performed in real property trades or businesses in which you materially participated. 1040 amended tax form You performed more than 750 hours of services during the tax year in real property trades or businesses in which you materially participated. 1040 amended tax form   Do not count personal services you performed as an employee in real property trades or businesses unless you were a 5% owner of your employer. 1040 amended tax form You were a 5% owner if you owned (or are considered to have owned) more than 5% of your employer's outstanding stock, outstanding voting stock, or capital or profits interest. 1040 amended tax form   If you file a joint return, do not count your spouse's personal services to determine whether you met the preceding requirements. 1040 amended tax form However, you can count your spouse's participation in an activity in determining if you materially participated. 1040 amended tax form Real property trades or businesses. 1040 amended tax form   A real property trade or business is a trade or business that does any of the following with real property. 1040 amended tax form Develops or redevelops it. 1040 amended tax form Constructs or reconstructs it. 1040 amended tax form Acquires it. 1040 amended tax form Converts it. 1040 amended tax form Rents or leases it. 1040 amended tax form Operates or manages it. 1040 amended tax form Brokers it. 1040 amended tax form Closely held corporations. 1040 amended tax form   A closely held corporation can qualify as a real estate professional if more than 50% of the gross receipts for its tax year came from real property trades or businesses in which it materially participated. 1040 amended tax form Passive Activity Income and Deductions In figuring your net income or loss from a passive activity, take into account only passive activity income and passive activity deductions. 1040 amended tax form Self-charged interest. 1040 amended tax form   Certain self-charged interest income or deductions may be treated as passive activity gross income or passive activity deductions if the loan proceeds are used in a passive activity. 1040 amended tax form   Generally, self-charged interest income and deductions result from loans between you and a partnership or S corporation in which you had a direct or indirect ownership interest. 1040 amended tax form This includes both loans you made to the partnership or S corporation and loans the partnership or S corporation made to you. 1040 amended tax form   It also includes loans from one partnership or S corporation to another partnership or S corporation if each owner in the borrowing entity has the same proportional ownership interest in the lending entity. 1040 amended tax form    Exception. 1040 amended tax form The self-charged interest rules do not apply to your interest in a partnership or S corporation if the entity made an election under Regulations section 1. 1040 amended tax form 469-7(g) to avoid the application of these rules. 1040 amended tax form For more details on the self-charged interest rules, see Regulations section 1. 1040 amended tax form 469-7. 1040 amended tax form Passive Activity Income Passive activity income includes all income from passive activities and generally includes gain from disposition of an interest in a passive activity or property used in a passive activity. 1040 amended tax form Passive activity income does not include the following items. 1040 amended tax form Income from an activity that is not a passive activity. 1040 amended tax form These activities are discussed under Activities That Are Not Passive Activities , earlier. 1040 amended tax form Portfolio income. 1040 amended tax form This includes interest, dividends, annuities, and royalties not derived in the ordinary course of a trade or business. 1040 amended tax form It includes gain or loss from the disposition of property that produces these types of income or that is held for investment. 1040 amended tax form The exclusion for portfolio income does not apply to self-charged interest treated as passive activity income. 1040 amended tax form For more information on self-charged interest, see Self-charged interest , earlier. 1040 amended tax form Personal service income. 1040 amended tax form This includes salaries, wages, commissions, self-employment income from trade or business activities in which you materially participated, deferred compensation, taxable social security and other retirement benefits, and payments from partnerships to partners for personal services. 1040 amended tax form Income from positive section 481 adjustments allocated to activities other than passive activities. 1040 amended tax form (Section 481 adjustments are adjustments that must be made due to changes in your accounting method. 1040 amended tax form ) Income or gain from investments of working capital. 1040 amended tax form Income from an oil or gas property if you treated any loss from a working interest in the property for any tax year beginning after 1986 as a nonpassive loss, as discussed in item (2) under Activities That Are Not Passive Activities , earlier. 1040 amended tax form This also applies to income from other oil and gas property the basis of which is determined wholly or partly by the basis of the property in the preceding sentence. 1040 amended tax form Any income from intangible property, such as a patent, copyright, or literary, musical, or artistic composition, if your personal efforts significantly contributed to the creation of the property. 1040 amended tax form Any other income that must be treated as nonpassive income. 1040 amended tax form See Recharacterization of Passive Income , later. 1040 amended tax form Overall gain from any interest in a publicly traded partnership. 1040 amended tax form See Publicly Traded Partnerships (PTPs) in the instructions for Form 8582. 1040 amended tax form State, local, and foreign income tax refunds. 1040 amended tax form Income from a covenant not to compete. 1040 amended tax form Reimbursement of a casualty or theft loss included in gross income to recover all or part of a prior year loss deduction, if the loss deduction was not a passive activity deduction. 1040 amended tax form Alaska Permanent Fund dividends. 1040 amended tax form Cancellation of debt income, if at the time the debt is discharged the debt is not allocated to passive activities under the interest expense allocation rules. 1040 amended tax form See chapter 4 of Publication 535, Business Expenses, for information about the rules for allocating interest. 1040 amended tax form Disposition of property interests. 1040 amended tax form   Gain on the disposition of an interest in property generally is passive activity income if, at the time of the disposition, the property was used in an activity that was a passive activity in the year of disposition. 1040 amended tax form The gain generally is not passive activity income if, at the time of disposition, the property was used in an activity that was not a passive activity in the year of disposition. 1040 amended tax form An exception to this general rule may apply if you previously used the property in a different activity. 1040 amended tax form Exception for more than one use in the preceding 12 months. 1040 amended tax form   If you used the property in more than one activity during the 12-month period before its disposition, you must allocate the gain between the activities on a basis that reasonably reflects the property's use during that period. 1040 amended tax form Any gain allocated to a passive activity is passive activity income. 1040 amended tax form   For this purpose, an allocation of the gain solely to the activity in which the property was mainly used during that period reasonably reflects the property's use if the fair market value of your interest in the property is not more than the lesser of: $10,000, or 10% of the total of the fair market value of your interest in the property and the fair market value of all other property used in that activity immediately before the disposition. 1040 amended tax form Exception for substantially appreciated property. 1040 amended tax form   The gain is passive activity income if the fair market value of the property at disposition was more than 120% of its adjusted basis and either of the following conditions applies. 1040 amended tax form You used the property in a passive activity for 20% of the time you held your interest in the property. 1040 amended tax form You used the property in a passive activity for the entire 24-month period before its disposition. 1040 amended tax form If neither condition applies, the gain is not passive activity income. 1040 amended tax form However, it is treated as portfolio income only if you held the property for investment for more than half of the time you held it in nonpassive activities. 1040 amended tax form   For this purpose, treat property you held through a corporation (other than an S corporation) or other entity whose owners receive only portfolio income as property held in a nonpassive activity and as property held for investment. 1040 amended tax form Also, treat the date you agree to transfer your interest for a fixed or determinable amount as the disposition date. 1040 amended tax form   If you used the property in more than one activity during the 12-month period before its disposition, this exception applies only to the part of the gain allocated to a passive activity under the rules described in the preceding discussion. 1040 amended tax form Disposition of property converted to inventory. 1040 amended tax form   If you disposed of property that you had converted to inventory from its use in another activity (for example, you sold condominium units you previously held for use in a rental activity), a special rule may apply. 1040 amended tax form Under this rule, you disregard the property's use as inventory and treat it as if it were still used in that other activity at the time of disposition. 1040 amended tax form This rule applies only if you meet all of the following conditions. 1040 amended tax form At the time of disposition, you held your interest in the property in a dealing activity (an activity that involves holding the property or similar property mainly for sale to customers in the ordinary course of a trade or business). 1040 amended tax form Your other activities included a nondealing activity (an activity that does not involve holding similar property for sale to customers in the ordinary course of a trade or business) in which you used the property for more than 80% of the period you held it. 1040 amended tax form You did not acquire or hold your interest in the property for the main purpose of selling it to customers in the ordinary course of a trade or business. 1040 amended tax form Passive Activity Deductions Generally, a deduction is a passive activity deduction for a taxable year if and only if such deduction either: Arises in connection with the conduct of an activity that is a passive activity for the tax year; or Is treated as a deduction from an activity for the tax year because it was disallowed by the passive activity rules in the preceding year and carried forward to the tax year. 1040 amended tax form For purposes of item (1), above, an item of deduction arises in the taxable year in which the item would be allowable as a deduction under the taxpayer's method of accounting if taxable income for all taxable years were determined without regard to the passive activity rules and without regard to the basis, excess farm loss, and at-risk limits. 1040 amended tax form See Coordination with other limitations on deductions that apply before the passive activity rules , later. 1040 amended tax form Passive activity deductions generally include losses from dispositions of property used in a passive activity at the time of the disposition and losses from a disposition of less than your entire interest in a passive activity. 1040 amended tax form Exceptions. 1040 amended tax form   Passive activity deductions do not include the following items. 1040 amended tax form Deductions for expenses (other than interest expense) that are clearly and directly allocable to portfolio income. 1040 amended tax form Qualified home mortgage interest, capitalized interest expenses, and other interest expenses (other than self-charged interest) properly allocable to passive activities. 1040 amended tax form For more information on self-charged interest, see Self-charged interest under Passive Activity Income and Deductions, earlier. 1040 amended tax form Losses from dispositions of property that produce portfolio income or property held for investment. 1040 amended tax form State, local, and foreign income taxes. 1040 amended tax form Miscellaneous itemized deductions that may be disallowed because of the 2%-of-adjusted-gross-income limit. 1040 amended tax form Charitable contribution deductions. 1040 amended tax form Net operating loss deductions. 1040 amended tax form Percentage depletion carryovers for oil and gas wells. 1040 amended tax form Capital loss carrybacks and carryovers. 1040 amended tax form Items of deduction from a passive activity that are disallowed under the limits on deductions that apply before the passive activity rules. 1040 amended tax form See Coordination with other limitations on deductions that apply before the passive activity rules , later. 1040 amended tax form Deductions and losses that would have been allowed for tax years beginning before 1987 but for basis or at-risk limits. 1040 amended tax form Net negative section 481 adjustments allocated to activities other than passive activities. 1040 amended tax form (Section 481 adjustments are adjustments required due to changes in accounting methods. 1040 amended tax form ) Casualty and theft losses, unless losses similar in cause and severity recur regularly in the activity. 1040 amended tax form The deduction for the employer-equivalent portion of self-employment tax. 1040 amended tax form Coordination with other limitations on deductions that apply before the passive activity rules. 1040 amended tax form   An item of deduction from a passive activity that is disallowed for a tax year under the basis or at-risk limitations is not a passive activity deduction for the tax year. 1040 amended tax form The following sections provide rules for figuring the extent to which items of deduction from a passive activity are disallowed for a tax year under the basis or at-risk limitations. 1040 amended tax form Proration of deductions disallowed under basis limitations. 1040 amended tax form   If any amount of your distributive share of a partnership's loss for the tax year is disallowed under the basis limitation, a ratable portion of your distributive share of each item of deduction or loss of the partnership is disallowed for the tax year. 1040 amended tax form For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of your distributive share of partnership loss that is disallowed for the taxable year; by The sum of your distributive shares of all items of deduction and loss of the partnership for the tax year. 1040 amended tax form   If any amount of your pro rata share of an S corporation's loss for the tax year is disallowed under the basis limitation, a ratable portion of your pro rata share of each item of deduction or loss of the S corporation is disallowed for the tax year. 1040 amended tax form For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of your share of S corporation loss that is disallowed for the tax year; by The sum of your pro rata shares of all items of deduction and loss of the corporation for the tax year. 1040 amended tax form Proration of deductions disallowed under at-risk limitation. 1040 amended tax form   If any amount of your loss from an activity (as defined in Activities Covered by the At-Risk Rules , later) is disallowed under the at-risk rules for the tax year, a ratable portion of each item of deduction or loss from the activity is disallowed for the tax year. 1040 amended tax form For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of the loss from the activity that is disallowed for the tax year; by The sum of all deductions from the activity for the taxable year. 1040 amended tax form Coordination of basis and at-risk limitations. 1040 amended tax form   The portion of any item of deduction or loss that is disallowed for the tax year under the basis limitations is not taken into account for the taxable year in determining the loss from an activity (as defined in Activities Covered by the At-Risk Rules , later) for purposes of applying the at-risk rules. 1040 amended tax form Separately identified items of deduction and loss. 1040 amended tax form   In identifying the items of deduction and loss from an activity that are not disallowed under the basis and at-risk limitations (and that therefore may be treated as passive activity deductions), you need not account separately for any item of deduction or loss unless such item may, if separately taken into account, result in an income tax liability different from that which would result were such item of deduction or loss taken into account separately. 1040 amended tax form   Items of deduction or loss that must be accounted for separately include (but are not limited to) items of deduction or loss that: Are attributable to separate activities. 1040 amended tax form See Grouping Your Activities , later. 1040 amended tax form Arise in a rental real estate activity in tax years in which you actively participate in such activity; Arise in a rental real estate activity in taxable years in which you do not actively participate in such activity; Arose in a taxable year beginning before 1987 and were not allowed for such taxable year under the basis or at-risk limitations; Are taken into account under section 613A(d) (relating to limitations on certain depletion deductions); Are taken into account under section 1211 (relating to the limitation on capital losses); Are taken into account under section 1231 (relating to property used in a trade or business and involuntary conversions). 1040 amended tax form See Section 1231 Gains and Losses in Publication 544 for more information. 1040 amended tax form Are attributable to pre-enactment interests in activities. 1040 amended tax form See Regulations section 1. 1040 amended tax form 469-11T(c). 1040 amended tax form Grouping Your Activities You can treat one or more trade or business activities, or rental activities, as a single activity if those activities form an appropriate economic unit for measuring gain or loss under the passive activity rules. 1040 amended tax form Grouping is important for a number of reasons. 1040 amended tax form If you group two activities into one larger activity, you need only show material participation in the activity as a whole. 1040 amended tax form But if the two activities are separate, you must show material participation in each one. 1040 amended tax form On the other hand, if you group two activities into one larger activity and you dispose of one of the two, then you have disposed of only part of your entire interest in the activity. 1040 amended tax form But if the two activities are separate and you dispose of one of them, then you have disposed of your entire interest in that activity. 1040 amended tax form Grouping can also be important in determining whether you meet the 10% ownership requirement for actively participating in a rental real estate activity. 1040 amended tax form Appropriate Economic Units Generally, to determine if activities form an appropriate economic unit, you must consider all the relevant facts and circumstances. 1040 amended tax form You can use any reasonable method of applying the relevant facts and circumstances in grouping activities. 1040 amended tax form The following factors have the greatest weight in determining whether activities form an appropriate economic unit. 1040 amended tax form All of the factors do not have to apply to treat more than one activity as a single activity. 1040 amended tax form The factors that you should consider are: The similarities and differences in the types of trades or businesses, The extent of common control, The extent of common ownership, The geographical location, and The interdependencies between or among activities, which may include the extent to which the activities: Buy or sell goods between or among themselves, Involve products or services that are generally provided together, Have the same customers, Have the same employees, or Use a single set of books and records to account for the activities. 1040 amended tax form Example 1. 1040 amended tax form John Jackson owns a bakery and a movie theater at a shopping mall in Baltimore and a bakery and movie theater in Philadelphia. 1040 amended tax form Based on all the relevant facts and circumstances, there may be more than one reasonable method for grouping John's activities. 1040 amended tax form For example, John may be able to group the movie theaters and the bakeries into: One activity, A movie theater activity and a bakery activity, A Baltimore activity and a Philadelphia activity, or Four separate activities. 1040 amended tax form Example 2. 1040 amended tax form Betty is a partner in ABC partnership, which sells nonfood items to grocery stores. 1040 amended tax form Betty is also a partner in DEF (a trucking business). 1040 amended tax form ABC and DEF are under common control. 1040 amended tax form The main part of DEF's business is transporting goods for ABC. 1040 amended tax form DEF is the only trucking business in which Betty is involved. 1040 amended tax form Based on the rules of this section, Betty treats ABC's wholesale activity and DEF's trucking activity as a single activity. 1040 amended tax form Consistency and disclosure requirement. 1040 amended tax form   Generally, when you group activities into appropriate economic units, you may not regroup those activities in a later tax year. 1040 amended tax form You must meet any disclosure requirements of the IRS when you first group your activities and when you add or dispose of any activities in your groupings. 1040 amended tax form   However, if the original grouping is clearly inappropriate or there is a material change in the facts and circumstances that makes the original grouping clearly inappropriate, you must regroup the activities and comply with any disclosure requirements of the IRS. 1040 amended tax form   See Disclosure Requirement , later. 1040 amended tax form Regrouping by the IRS. 1040 amended tax form   If any of the activities resulting from your grouping is not an appropriate economic unit and one of the primary purposes of your grouping (or failure to regroup) is to avoid the passive activity rules, the IRS may regroup your activities. 1040 amended tax form Rental activities. 1040 amended tax form   In general, you cannot group a rental activity with a trade or business activity. 1040 amended tax form However, you can group them together if the activities form an appropriate economic unit and: The rental activity is insubstantial in relation to the trade or business activity, The trade or business activity is insubstantial in relation to the rental activity, or Each owner of the trade or business activity has the same ownership interest in the rental activity, in which case the part of the rental activity that involves the rental of items of property for use in the trade or business activity may be grouped with the trade or business activity. 1040 amended tax form Example. 1040 amended tax form Herbert and Wilma are married and file a joint return. 1040 amended tax form Healthy Food, an S corporation, is a grocery store business. 1040 amended tax form Herbert is Healthy Food's only shareholder. 1040 amended tax form Plum Tower, an S corporation, owns and rents out the building. 1040 amended tax form Wilma is Plum Tower's only shareholder. 1040 amended tax form Plum Tower rents part of its building to Healthy Food. 1040 amended tax form Plum Tower's grocery store rental business and Healthy Food's grocery business are not insubstantial in relation to each other. 1040 amended tax form Herbert and Wilma file a joint return, so they are treated as one taxpayer for purposes of the passive activity rules. 1040 amended tax form The same owner (Herbert and Wilma) owns both Healthy Food and Plum Tower with the same ownership interest (100% in each). 1040 amended tax form If the grouping forms an appropriate economic unit, as discussed earlier, Herbert and Wilma can group Plum Tower's grocery store rental and Healthy Food's grocery business into a single trade or business activity. 1040 amended tax form Grouping of real and personal property rentals. 1040 amended tax form   In general, you cannot treat an activity involving the rental of real property and an activity involving the rental of personal property as a single activity. 1040 amended tax form However, you can treat them as a single activity if you provide the personal property in connection with the real property or the real property in connection with the personal property. 1040 amended tax form Certain activities may not be grouped. 1040 amended tax form   In general, if you own an interest as a limited partner or a limited entrepreneur in one of the following activities, you may not group that activity with any other activity in another type of business. 1040 amended tax form Holding, producing, or distributing motion picture films or video tapes. 1040 amended tax form Farming. 1040 amended tax form Leasing any section 1245 property (as defined in section 1245(a)(3) of the Internal Revenue Code). 1040 amended tax form For a list of section 1245 property, see Section 1245 property under Activities Covered by the At-Risk Rules , later. 1040 amended tax form Exploring for, or exploiting, oil and gas resources. 1040 amended tax form Exploring for, or exploiting, geothermal deposits. 1040 amended tax form   If you own an interest as a limited partner or a limited entrepreneur in an activity described in the list above, you may group that activity with another activity in the same type of business if the grouping forms an appropriate economic unit as discussed earlier. 1040 amended tax form Limited entrepreneur. 1040 amended tax form   A limited entrepreneur is a person who: Has an interest in an enterprise other than as a limited partner, and Does not actively participate in the management of the enterprise. 1040 amended tax form Activities conducted through another entity. 1040 amended tax form   A personal service corporation, closely held corporation, partnership, or S corporation must group its activities using the rules discussed in this section. 1040 amended tax form Once the entity groups its activities, you, as the partner or shareholder of the entity, may group those activities (following the rules of this section): With each other, With activities conducted directly by you, or With activities conducted through other entities. 1040 amended tax form    You may not treat activities grouped together by the entity as separate activities. 1040 amended tax form Personal service and closely held corporations. 1040 amended tax form   You may group an activity conducted through a personal service or closely held corporation with your other activities only to determine whether you materially or significantly participated in those other activities. 1040 amended tax form See Material Participation , earlier, and Significant Participation Passive Activities , later. 1040 amended tax form Publicly traded partnership (PTP). 1040 amended tax form   You may not group activities conducted through a PTP with any other activity, including an activity conducted through another PTP. 1040 amended tax form Partial dispositions. 1040 amended tax form   If you dispose of substantially all of an activity during your tax year, you may treat the part disposed of as a separate activity. 1040 amended tax form However, you can do this only if you can show with reasonable certainty: The amount of deductions and credits disallowed in prior years under the passive activity rules that is allocable to the part of the activity disposed of, and The amount of gross income and any other deductions and credits for the current tax year that is allocable to the part of the activity disposed of. 1040 amended tax form Disclosure Requirement For tax years beginning after January 24, 2010, the following disclosure requirements for groupings apply. 1040 amended tax form You are required to report certain changes to your groupings that occur during the tax year to the IRS. 1040 amended tax form If you fail to report these changes, each trade or business activity or rental activity will be treated as a separate activity. 1040 amended tax form You will be considered to have made a timely disclosure if you filed all affected income tax returns consistent with the claimed grouping and make the required disclosure on the income tax return for the year in which you first discovered the failure to disclose. 1040 amended tax form If the IRS discovered the failure to disclose, you must have reasonable cause for not making the required disclosure. 1040 amended tax form New grouping. 1040 amended tax form   You must file a written statement with your original income tax return for the first tax year in which two or more activities are originally grouped into a single activity. 1040 amended tax form The statement must provide the names, addresses, and employer identification numbers (EINs), if applicable, for the activities being grouped as a single activity. 1040 amended tax form In addition, the statement must contain a declaration that the grouped activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. 1040 amended tax form Addition to an existing grouping. 1040 amended tax form   You must file a written statement with your original income tax return for the tax year in which you add a new activity to an existing group. 1040 amended tax form The statement must provide the name, address, and EIN, if applicable, for the activity that is being added and for the activities in the existing group. 1040 amended tax form In addition, the statement must contain a declaration that the activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. 1040 amended tax form Regrouping. 1040 amended tax form   You must file a written statement with your original income tax return for the tax year in which you regroup the activities. 1040 amended tax form The statement must provide the names, addresses, and EINs, if applicable, for the activities that are being regrouped. 1040 amended tax form If two or more activities are being regrouped into a single activity, the statement must contain a declaration that the regrouped activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. 1040 amended tax form In addition, the statement must contain an explanation of the material change in the facts and circumstances that made the original grouping clearly inappropriate. 1040 amended tax form Groupings by partnerships and S corporations. 1040 amended tax form   Partnerships and S corporations are not subject to the rules for new grouping, addition to an existing grouping, or regrouping. 1040 amended tax form Instead, they must comply with the disclosure instructions for grouping activities provided in their Form 1065, U. 1040 amended tax form S. 1040 amended tax form Return of Partnership Income, or Form 1120S, U. 1040 amended tax form S. 1040 amended tax form Income Tax Return for an S Corporation, whichever is applicable. 1040 amended tax form   The partner or shareholder is not required to make a separate disclosure of the groupings disclosed by the entity unless the partner or shareholder: Groups together any of the activities that the entity does not group together, Groups the entity's activities with activities conducted directly by the partner or shareholder, or Groups an entity's activities with activities conducted through another entity. 1040 amended tax form   A partner or shareholder may not treat activities grouped together by the entity as separate activities. 1040 amended tax form Recharacterization of Passive Income Net income from the following passive activities may have to be recharacterized and excluded from passive activity income. 1040 amended tax form Significant participation passive activities, Rental of property when less than 30% of the unadjusted basis of the property is subject to depreciation, Equity-financed lending activities, Rental of property incidental to development activities, Rental of property to nonpassive activities, and Licensing of intangible property by  pass-through entities. 1040 amended tax form If you are engaged in or have an interest in one of these activities during the tax year (either directly or through a partnership or an S corporation), combine the income and losses from the activity to determine if you have a net loss or net income from that activity. 1040 amended tax form If the result is a net loss, treat the income and losses the same as any other income or losses from that type of passive activity (trade or business activity or rental activity). 1040 amended tax form If the result is net income, do not enter any of the income or losses from the activity or property on Form 8582 or its worksheets. 1040 amended tax form Instead, enter income or losses on the form and schedules you normally use. 1040 amended tax form However, see Significant Participation Passive Activities , later, if the activity is a significant participation passive activity and you also have a net loss from a different significant participation passive activity. 1040 amended tax form Limit on recharacterized passive income. 1040 amended tax form   The total amount that you treat as nonpassive income under the rules described later in this discussion for significant participation passive activities, rental of nondepreciable property, and equity-financed lending activities cannot exceed the greatest amount that you treat as nonpassive income under any one of these rules. 1040 amended tax form Investment income and investment expense. 1040 amended tax form   To figure your investment interest expense limitation on Form 4952, treat as investment income any net passive income recharacterized as nonpassive income from rental of nondepreciable property, equity-financed lending activity, or licensing of intangible property by a pass-through entity. 1040 amended tax form Significant Participation Passive Activities A significant participation passive activity is any trade or business activity in which you participated for more than 100 hours during the tax year but did not materially participate. 1040 amended tax form If your gross income from all significant participation passive activities is more than your deductions from those activities, a part of your net income from each significant participation passive activity is treated as nonpassive income. 1040 amended tax form Corporations. 1040 amended tax form   An activity of a personal service corporation or closely held corporation is a significant participation passive activity if both of the following statements are true. 1040 amended tax form The corporation is not treated as materially participating in the activity for the year. 1040 amended tax form One or more individuals, each of whom is treated as significantly participating in the activity, directly or indirectly hold (in total) more than 50% (by value) of the corporation's outstanding stock. 1040 amended tax form Worksheet A. 1040 amended tax form   Complete Worksheet A. 1040 amended tax form Significant Participation Passive Activities , below, if you have income or losses from any significant participation activity. 1040 amended tax form Begin by entering the name of each activity in the left column. 1040 amended tax form Column (a). 1040 amended tax form   Enter the number of hours you participated in each activity and total the column. 1040 amended tax form   If the total is more than 500, do not complete Worksheet A or B. 1040 amended tax form None of the activities are passive activities because you satisfy test 4 for material participation. 1040 amended tax form (See Material participation tests , earlier. 1040 amended tax form ) Report all the income and losses from these activities on the forms and schedules you normally use. 1040 amended tax form Do not include the income and losses on Form 8582. 1040 amended tax form Column (b). 1040 amended tax form   Enter the net loss, if any, from the activity. 1040 amended tax form Net loss from an activity means either: The activity's current year net loss (if any) plus prior year unallowed losses (if any), or The excess of prior year unallowed losses over the current year net income (if any). 1040 amended tax form Enter -0- here if the prior year unallowed loss is the same as the current year net income. 1040 amended tax form Column (c). 1040 amended tax form   Enter net income (if any) from the activity. 1040 amended tax form Net income means the excess of the current year's net income from the activity over any prior year unallowed losses from the activity. 1040 amended tax form Column (d). 1040 amended tax form   Combine amounts in the Totals row for columns (b) and (c) and enter the total net income or net loss in the Totals row of column (d). 1040 amended tax form If column (d) is a net loss, skip Worksheet B, Significant Participation Activities With Net Income. 1040 amended tax form Include the income and losses in Worksheet 3 of Form 8582 (or Worksheet 2 in the Form 88
Print - Click this link to Print this page

Privacy Impact Assessments - PIA

The IRS conducts a PIA on information systems that collect personally identifiable information. Performing Privacy Impact Assessments ensures that:

  • the public is aware of the information we collect about them;
  • any impact these systems have on personal privacy is adequately addressed; and,
  • we collect only enough personal information to administer our programs, and no more.

In addition, PIAs confirm that we use the information for the purpose intended; that the information remains timely and accurate; and that it is protected while we have it and that we hold it only for as long as we need it.

As indicated by "XXXXX" some of these documents are edited, or redacted. We have withheld information that, if released might harm our systems, compromise law enforcement efforts or, jeopardize competitive business interests.

PIAs are available in either HTML or PDF format. If no link is provided, then the PIA is not yet available. (See text below the listing for additional information.)


Full Title

Acronym

 
A
Accounts Management Service AMS

Alaska Permanent Fund Dividend

AKPFD
Appeals Centralized Database System ACDS
Appeals Customer Service ACuServ
Appeals Customer Satisfaction Survey ACSS
Audit Information Management System Reference AIMS-R
Audit Information Management System Related Reports AIMS-RR
Automated Collection System ACS

Automated Computational Tool

ACT

AIMS Computer Information System

A-CIS

Automated Electronic Fingerprinting

AEF
Automated Freedom of Information Act AFOIA

Automated Insolvency System

AIS

Automated Lien System

ALS-Entity

Automated Manual Assessments AMA
Automated Non Master File ANMF
Automated Offer In Compromise

AOIC

Automated Quarterly Excise Tax Listing, Milestone 4B AQETL
Automated Substitute for Returns (ASFR) System ASFR

Automated Substitute for Return A6020(b)

A6020-B
Automated Trust Fund Recovery Application ATFR
Automated Under Reporter AUR

Automated Under Reporter Inv. Strategy Database

AURISD

B
Bank Discrepancy Application  
Bank Secrecy Act Dun & Bradstreet Project and Automated Internet Research Process BSA-D&B AIRP
Big Data Analytics BDA
Bulkdata Electronic File Transfer System BEFT
Business Master File BMF
Business Master File Document Specific BDOCSPEC
Business Master File Case Creation Nonfiler Indentification Process BMF CCNIP
Business Master File-Individual Master File Notices Milestone 4B BMFIMMFNOT
Business Master File On-Line/Employee Plans Master File On-Line BMFOL/EMFOL
Business Objects Enterprise BOE
C

Certified Transcripts

CERTS

CFO/ARDI Audit Management System  
Chapter Three Withholding CTW
Chief Counsel System Domain CC-1
Combined Annual Wage Reporting CAWR
Compliance Data Environment, Release 3 CDEr3

Compliance Data Warehouse

CDW
Compliance Research Information System CRIS

Compliance Research Initiative Tracking System

CRITS
Contact Analytics CA
Contact Recording for Taxpayer Assistance Centers CR-TAC
Control Data Analysis CDA-PCD
Corporate Data Initiative CDI
Correspondence Examination Automation Support CEAS
Counsel Automated System Environment CASE
Counsel Litigation Support Project CLSP
CASE Management Information System CASE-MIS
CASE Tax Litigation – Counsel Automated Tracking System CASE-TLCATS
Criminal Investigation - 1 General Support System CI–1 GSS
Criminal Investigation – 2 General Support System CI-2 GSS

Criminal Investigation Management Information System, integrated with, Asset Forfeiture Tracking and Retrieval

CIMIS-AFTRAK

Custodial Audit Support Tracking System CASTS
Customer Account Data Engine CADE2
Customer Account Data Engine 2 - Database CADE - 2 DB
Customer Self Service Voice Response Unit CSS-VRU
 
D

Department of Labor Standards Enforcement

DLSE
Dependent Data Base DDb
Dun & Bradstreet Full Service Restaurants Database DB FSRDB
 
E
eAuthentication3 eAuth
e-Services, Release 3.0, Version 1.0  
eBay/PayPal Law Enforcement eRequest System LERS
Elections by Foreign Corporations  
Electronic Disclosure Information Management System
Electronic Faxic Fax
EDIMS
Electronic Faxic Fax e-FAX

Electronic Federal Payment Posting System

EFPPS
Electronic Filing of 94xXML Returns 94xXML

Electronic Filing System

ELF-R
Electronic Filing Automated Report System EARS

Electronic Fraud Detection System

EFDS
Electronic Installment Agreement eIA

Electronic Management System

EMS

Electronic MFTRA

E-MFTRA

Electronic Tax Administration Marketing Database

ETA-MDB
Electronic Tax Administration Research & Analysis System ETARAS
Electronic Tax Law Assistance System ETLA
Embedded Quality Review System EQRS
Embedded Quality Review System – Campus EQRS-C
Embedded Quality Review System Field EQRS-F
Employee Plans Audit Information Management System DPTE
Employee Plans/Exempt Organizations/Government Entities Audit Information Management System Report Processing System EARP

Employee Plans Master File

EPMF

Employee Protection System EPS
Enforcement Revenue Information System ERIS
Employee Plans/Exempt Organizations Determination System EDS
Enterprise Forensics & eDiscovery EnCase
Enterprise Informatica Platform EIP
e-Postcard Public Disclosure Application  
e-Trak Civil Rights Division e-Track CRD

e-Trak Communications and Correspondence System Module

e-Trak C&C
e-Trak Non-Resident Filing e-Trak NRF
e-Trak Veterans Employment Tracking System e-Trak VETS
e-Trak Voluntary Disclosure Program e-Trak VDP
e-Trak Whistleblower Office e-Trak WO

Error Resolution System

ERS
Estate/Inheritance and Gift Non-Filer and Underreporter EGNFUR
Examination Desktop Support System EDSS
Examination Operational Automation Database EOAD

Examination Returns Control System

ERCS

Excise Files Information Retrieval System ExFIRS
Exempt Organization Entity EOE
Exempt Organizations Extracts EXEMPTORG

Excise Files Information Retrieval System

ExFIRS

Exempt Orgs & Govt Entities Audit System DEXP
 
F
Facebook: IRS Recruitment Page  
Facilitated Self-Assistance Research Project FSRP
Federal Student Aid – Datashare FSA-D

Federal Tax Deposit

FTD
Federal Payment Levy Program FPLP
Federal/State Fed/State
Federal Unemployment Tax Act FUTA

Filing Information Returns Electronically

FIRE

Financial Management Information System FMIS
Foreign Account Tax Compliance Act – Foreign Finance Institution Registration FATCA–FFIR
Fraud Inventory Management System FIMS
Fresh Start – Failure to Pay Penalty Relief, FTP Penalty Relief FTP
 
G

Generalized Mainline Framework

GMF
Generalized Unpostable Framework GUF
Global High Wealth Industry Workload Services Database GHW
Grant Solutions GS
 
H
Headquarters Employee Plans Inventory Control HQEP

Health Coverage Tax Credit

HCTC

HQEO System HQEO
 
I
Individual Master File IMF
Individual Taxpayer Burden Surveys ITBS
Individual Taxpayer Identification Number Real-Time System ITIN-RTS
Informant Claims Examination ICE
Information Reporting and Document Matching IRDM
Information Return Master File IRMF
Information Returns Processing IRP
Information Returns Processing Paper Documents IRPPD
Integrated Collection System ICS

Integrated Data Retrieval System

IDRS

Integrated Financial System IFS
Integrated Production Model IPM

Integrated Submission and Remittance Processing System

ISRP

Intelligent Business Solutions Advanced Research Lab (IBS ARL)

IBS-ARL

International Passport Program Office

IPOP

International National Standard Application

INTL-NSA
Inventory Delivery System IDS

Investigative Scanning & Document Management

ISDM

IRS.gov Public Website

 
IRS2Go IRS2Go

Issue Based Management Information System

IBMIS

Issue Management System Integration IMSI
 
J  
Joint Operations Center National Data Center JOC-NDC
 
K
 
L
Letter & Information Network User-fee System LINUS
Link & Learn Taxes Automated Certification Tracking  
LMSB Decision Support & Data Capture System LMSB DCS
Large and Midsize Business 1446–6 International Database LMSB 1446-6
LMSB Workload Identification System LWIS
Low Income Taxpayer Clinic LITC
 
M
Mail Labels and Media Support MLMS
Making Work Pay MPW

Management Information System Data Warehouse

MISDW

Microfilm Replacement System MRS
Minister Waivers Min Waiv
Modernized e-File MeF
Modernized e-File Application Excise Tax for e-File MeF-ETEC
Modernized Enterprise Data Reporting MEDR
Modernized Internet Employer Identification Number Mod IEIN
Modified EP/EO Determination System MEDS
 
N
National Account Profile NAP

National Research Program

NRP

Nationwide Tax Forums Customer Satisfaction Surveys Database NTF-CSSD
Nationwide Tax Forum Online Feedback Form NTFO
Notice Conversion NC
Notice Delivery System NDS
Notice Prints Processing (NPP) CY 2012, Release/Milestone 4B NPP
Notice Review Processing System NRPS
 
O
Office of Tax Shelter Analysis Database OTSA

Offshore Credit Card Program

OCCP

On-Line Notice Review OLNR
Online Payment Agreement OPA
 
P
Payer Master File PMF
Payment Tracer PT
Photocopy Refunds Program PHOREF
Political Action Committee/Political Organization Filing and Disclosure PAC527/POFD
Public Information Officers Database PioNeer
 

Q

 

Qualifying Therapeutic Discovery Grant/Credit Program Project

QTDG/CPP
 
R
Recruitment Tracking System R-TRAK
Remittance Processing System RPS

Remittance Processing System - Pre-Mainline

RPS-PM
Remittance Strategy for Paper Check Conversion RS-PCC
Remittance Transaction Research RTR

Report Generation Software

RGS
Reporting Compliance Case Management System RCCMS
Return Preparer Database RPD
Return Review Program RRP
Return Review Program – Transition State RRP
Returns Inventory and Classification System-Compliance Decision Analytics RICS-CDA
Returns Inventory & Classification System RICS

Risk Based Scoring System Version 2.0

RBSS
 
S

Selection and Workload Classification Component

SWC-C1

Service Center Recognition Image Processing System

SCRIPS
Short Term Transcript ST-TRA
SPEC Total Relationship Management SPECTRM
Specialist Referral System SRS-2

SS-8 Integrated Case Processing System

SS8ICP
Standard IDRS Access Tier II SIA
Standard Corporate Files On-Line (CFOL) Access Protocol SCAP
State Income Tax Levy Program SITLP
Statistics of Income Distributed Processing System SOI-DPS
System Advocacy Management System, Release II SAMS-II
 
T
Tax Exempt/Exempt Government Entities Rulings and Agreements Control TRAC
Tax Forms & Pubs Oracle Program Tracking System TFPOPTS
Tax Return Database TRDB
Taxpayer Advocate Service Customer Survey  
Taxpayer Advocate Service Integrated System TASIS
Taxpayer Advocate Service Management Information System TAMIS
Tax Professional Preparer Tax Identification Number System PTIN-TPPS
Third Party Contact TPC
Title 31 Non-Banking Financial Institution Database  
 
U
U.S. Residency Certification US-CERT
 
V
 
W

Web-Based Employee Technical Time System

WebETS
Web Currency & Banking Retrieval System WebCBRS
Where's My Refund WMR
Withholding Compliance System   WHCS
   
Y  

YK1 Readiness

 

YK1

For questions regarding disclosure procedures or to request IRS records and documents, you may contact:

IRS Headquarters Disclosure Office
OS:P:GLD:D
1111 Constitution Avenue, N.W .
Washington, DC 20224

For questions regarding the Privacy Impact Assessment process at the IRS:

Director, Office of Privacy
Internal Revenue Service
Room 7050 OS:P:PIP
1111 Constitution Ave. NW
Washington, DC 20224

Are you having trouble viewing or downloading PDF files?

Page Last Reviewed or Updated: 24-Mar-2014

The 1040 Amended Tax Form

1040 amended tax form 5. 1040 amended tax form   Illustrated Examples Table of Contents Illustrated Example of Form 4563Line 1. 1040 amended tax form Line 2. 1040 amended tax form Lines 3a and 3b. 1040 amended tax form Lines 4a and 4b. 1040 amended tax form Line 5. 1040 amended tax form Line 6. 1040 amended tax form Line 7. 1040 amended tax form Line 9. 1040 amended tax form Line 15. 1040 amended tax form Illustrated Example of Form 5074Part I. 1040 amended tax form Part II. 1040 amended tax form Part III. 1040 amended tax form Illustrated Example of Form 8689Part I. 1040 amended tax form Part II. 1040 amended tax form Part III. 1040 amended tax form Part IV. 1040 amended tax form Use the following examples to help you complete the correct attachment to your Form 1040. 1040 amended tax form The completed form for each example is shown on the pages that follow. 1040 amended tax form Illustrated Example of Form 4563 John Black is a U. 1040 amended tax form S. 1040 amended tax form citizen, single, and under 65. 1040 amended tax form He was a bona fide resident of American Samoa during all of 2013. 1040 amended tax form John must file Form 1040 because his gross income from sources outside the possessions ($10,000 of dividends from U. 1040 amended tax form S. 1040 amended tax form corporations) is more than his adjusted filing requirement for single filers under 65. 1040 amended tax form (See Filing Requirement if Possession Income Is Excluded in chapter 4. 1040 amended tax form ) Because he must file Form 1040 (not illustrated), he fills out Form 4563 to determine the amount of income from American Samoa he can exclude. 1040 amended tax form See Bona Fide Resident of American Samoa in chapter 3. 1040 amended tax form Completing Form 4563. 1040 amended tax form   John enters his name and social security number at the top of the form. 1040 amended tax form Line 1. 1040 amended tax form   On Form 4563 (see later), John enters the date his bona fide residence began in American Samoa, June 2, 2012. 1040 amended tax form Because he is still a bona fide resident, he enters “not ended” in the second blank space. 1040 amended tax form Line 2. 1040 amended tax form   He checks the box labeled “Rented house or apartment” to describe his type of living quarters in American Samoa. 1040 amended tax form Lines 3a and 3b. 1040 amended tax form   He checks “No” on line 3a because no family members lived with him. 1040 amended tax form He leaves line 3b blank. 1040 amended tax form Lines 4a and 4b. 1040 amended tax form   He checks “No” on line 4a because he did not maintain a home outside American Samoa. 1040 amended tax form He leaves line 4b blank. 1040 amended tax form Line 5. 1040 amended tax form   He enters the name and address of his employer, Samoa Products Co. 1040 amended tax form It is a private American Samoa corporation. 1040 amended tax form Line 6. 1040 amended tax form   He enters the dates of his 2-week vacation to New Zealand from November 11 to November 25. 1040 amended tax form That was his only trip outside American Samoa during the year. 1040 amended tax form Line 7. 1040 amended tax form   He enters the $24,000 in wages he received from Samoa Products Co. 1040 amended tax form Line 9. 1040 amended tax form   He received $220 in dividends from an American Samoa corporation, which he enters here. 1040 amended tax form He also received $10,000 of dividends from a U. 1040 amended tax form S. 1040 amended tax form corporation, but he will enter that amount only on his Form 1040 because the U. 1040 amended tax form S. 1040 amended tax form dividends do not qualify for the possession exclusion. 1040 amended tax form Line 15. 1040 amended tax form   John totals the amounts on lines 7 and 9 to get the amount he can exclude from his gross income in 2013. 1040 amended tax form He will not enter his excluded income on Form 1040. 1040 amended tax form However, he will attach his completed Form 4563 to his Form 1040. 1040 amended tax form Illustrated Example of Form 5074 Tracy Grey is a U. 1040 amended tax form S. 1040 amended tax form citizen who is a self-employed fisheries consultant with a tax home in New York. 1040 amended tax form Her only income for 2013 was net self-employment income of $80,000. 1040 amended tax form Of the $80,000, $20,000 was from consulting work in Guam and the rest was earned in the United States. 1040 amended tax form Thinking she would owe tax to Guam on the $20,000, Tracy made estimated tax payments of $1,409 to Guam. 1040 amended tax form She was not a bona fide resident of Guam during 2013. 1040 amended tax form Tracy completes Form 1040 (not illustrated), reporting her worldwide income. 1040 amended tax form Because the adjusted gross income on her Form 1040 was $50,000 or more and at least $5,000 of her gross income is from Guam, Tracy must file Form 5074 with her Form 1040. 1040 amended tax form All amounts reported on Form 5074 are also reported on her Form 1040. 1040 amended tax form See U. 1040 amended tax form S. 1040 amended tax form Citizen or Resident Alien (Other Than a Bona Fide Resident of Guam) in chapter 3. 1040 amended tax form Completing Form 5074. 1040 amended tax form   Tracy enters her name and social security number at the top of the form. 1040 amended tax form Part I. 1040 amended tax form   On Form 5074 (see later), Tracy enters her self-employment income from Guam ($20,000) on line 6. 1040 amended tax form She has no other income from Guam, so the total on line 16 is $20,000. 1040 amended tax form Part II. 1040 amended tax form   Tracy's only adjustment in Part II is the deductible part of the self-employment tax on her net income earned in Guam. 1040 amended tax form She enters $1,413 on line 21 and line 28. 1040 amended tax form Her adjusted gross income on line 29 is $18,587. 1040 amended tax form Part III. 1040 amended tax form   Tracy made estimated tax payments of $1,409. 1040 amended tax form She enters this amount on line 30, and again on line 34 as the total payments. 1040 amended tax form Illustrated Example of Form 8689 Juan and Carla Moreno live and work in the United States. 1040 amended tax form In 2013, they received $14,400 in income from the rental of a condominium they own in the U. 1040 amended tax form S. 1040 amended tax form Virgin Islands (USVI). 1040 amended tax form The rental income was deposited in a bank in the USVI and they received $500 of interest on this income. 1040 amended tax form They were not bona fide residents of the USVI during the entire tax year. 1040 amended tax form The Morenos complete Form 1040 (not illustrated), reporting their income from all sources, including their interest income and the income and expenses from their USVI rental property (reported on Schedule E (Form 1040)). 1040 amended tax form The Morenos take the standard deduction for married filing jointly, both are under 65, and they have no dependents. 1040 amended tax form The Morenos also complete Form 8689 to determine how much of their U. 1040 amended tax form S. 1040 amended tax form tax shown on Form 1040, line 61 (with certain adjustments), must be paid to the U. 1040 amended tax form S. 1040 amended tax form Virgin Islands. 1040 amended tax form See U. 1040 amended tax form S. 1040 amended tax form Citizen or Resident Alien (Other Than a Bona Fide Resident of the USVI) in chapter 3. 1040 amended tax form The Morenos file their Form 1040, attaching Form 8689 and all other schedules, with the Internal Revenue Service. 1040 amended tax form At the same time, they send a copy of their Form 1040 with all attachments, including Form 8689, to the Virgin Islands Bureau of Internal Revenue. 1040 amended tax form The Virgin Islands Bureau of Internal Revenue will process this copy. 1040 amended tax form Completing Form 8689. 1040 amended tax form   Juan and Carla enter their names and Juan's social security number at the top of the form. 1040 amended tax form Part I. 1040 amended tax form   The Morenos enter their income from the USVI in Part I (see later). 1040 amended tax form The interest income is entered on line 2 and the net rental income of $6,200 ($14,400 of rental income minus $8,200 of rental expenses) is entered on line 11. 1040 amended tax form The Morenos' total USVI income of $6,700 is entered on line 16. 1040 amended tax form Part II. 1040 amended tax form   The Morenos have no adjustments to their USVI income, so they enter zero (-0-) on line 28, and $6,700 on line 29. 1040 amended tax form Their USVI adjusted gross income (AGI) is $6,700. 1040 amended tax form Part III. 1040 amended tax form   On line 30, the Morenos enter the amount from Form 1040, line 61 ($4,539). 1040 amended tax form Their Form 1040 does not show any entries required on line 31, so they leave that line blank and enter $4,539 on line 32. 1040 amended tax form   The Morenos enter their worldwide AGI, $54,901 (Form 1040, line 38), on line 33. 1040 amended tax form Next, they find what percentage of their AGI is from USVI sources ($6,700 ÷ $54,901 = 0. 1040 amended tax form 122) and enter that as a decimal on line 34. 1040 amended tax form They then apply that percentage to the U. 1040 amended tax form S. 1040 amended tax form tax entered on line 32 to find the amount of U. 1040 amended tax form S. 1040 amended tax form tax allocated to USVI income ($4,539 x 0. 1040 amended tax form 122 = $554), and enter that amount on line 35. 1040 amended tax form Part IV. 1040 amended tax form   Part IV is used to show payments of income tax to the USVI only. 1040 amended tax form The Morenos had no tax withheld by the U. 1040 amended tax form S. 1040 amended tax form Virgin Islands, but made estimated tax payments to the USVI of $400, which they entered on lines 37 and 39. 1040 amended tax form They include this amount ($400) in the total payments on Form 1040, line 72. 1040 amended tax form On the dotted line next to the entry space for line 72, they enter “Form 8689” and show the amount. 1040 amended tax form The Morenos do not complete Form 1116 because they receive credit on Form 1040, line 72, for the tax paid to the USVI. 1040 amended tax form   The income tax they owe to the USVI ($154) is shown on Form 8689, line 44. 1040 amended tax form They enter this amount on line 45. 1040 amended tax form They also include this additional amount ($154) on the dotted line next to the entry space and in the total on Form 1040, line 72. 1040 amended tax form The Morenos will pay their USVI tax at the same time they file the copy of their U. 1040 amended tax form S. 1040 amended tax form income tax return with the U. 1040 amended tax form S. 1040 amended tax form Virgin Islands. 1040 amended tax form This image is too large to be displayed in the current screen. 1040 amended tax form Please click the link to view the image. 1040 amended tax form Form 4563, page 1 for John Black This image is too large to be displayed in the current screen. 1040 amended tax form Please click the link to view the image. 1040 amended tax form Form 5074, for Tracy Grey This image is too large to be displayed in the current screen. 1040 amended tax form Please click the link to view the image. 1040 amended tax form Form 8689, page 1 for Juan and Carla Moreno Prev  Up  Next   Home   More Online Publications