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1040ez fill in form Publication 51 - Main Content Table of Contents 1. 1040ez fill in form Taxpayer Identification NumbersWhen you receive your EIN. 1040ez fill in form Registering for SSNVS. 1040ez fill in form 2. 1040ez fill in form Who Are Employees?Crew Leaders Business Owned and Operated by Spouses 3. 1040ez fill in form Wages and Other Compensation 4. 1040ez fill in form Social Security and Medicare TaxesThe $150 Test or the $2,500 Test Social Security and Medicare Tax Withholding 5. 1040ez fill in form Federal Income Tax WithholdingImplementation of lock-in letter. 1040ez fill in form Seasonal employees and employees not currently performing services. 1040ez fill in form Termination and re-hire of employees. 1040ez fill in form How To Figure Federal Income Tax Withholding 6. 1040ez fill in form Required Notice to Employees About Earned Income Credit (EIC) 7. 1040ez fill in form Depositing TaxesWhen To Deposit How To Deposit Deposit Penalties Employers of Both Farm and Nonfarm Workers 8. 1040ez fill in form Form 943 9. 1040ez fill in form Reporting Adjustments on Form 943Current Year Adjustments Prior Year Adjustments 10. 1040ez fill in form Federal Unemployment (FUTA) Tax 11. 1040ez fill in form Reconciling Wage Reporting Forms 13. 1040ez fill in form Federal Income Tax Withholding MethodsWage Bracket Method Percentage Method Alternative Methods of Federal Income Tax Withholding How To Get Tax Help 1. 1040ez fill in form Taxpayer Identification Numbers If you are required to withhold any federal income, social security, or Medicare taxes, you will need an employer identification number (EIN) for yourself. 1040ez fill in form Also, you will need the SSN of each employee and the name of each employee as shown on the employee's social security card. 1040ez fill in form Employer identification number (EIN). 1040ez fill in form   An employer identification number (EIN) is a nine-digit number that the IRS issues. 1040ez fill in form The digits are arranged as follows: 00-0000000. 1040ez fill in form It is used to identify the tax accounts of employers and certain others who have no employees. 1040ez fill in form Use your EIN on all of the items that you send to the IRS and SSA. 1040ez fill in form   If you do not have an EIN, you may apply for one online. 1040ez fill in form Visit IRS. 1040ez fill in form gov and click on the Apply for an EIN Online link under Tools. 1040ez fill in form You may also apply for an EIN by calling 1-800-829-4933, or you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. 1040ez fill in form Do not use a SSN in place of an EIN. 1040ez fill in form   If you do not have an EIN by the time a return is due, write “Applied For” and the date you applied for it in the space shown for the number. 1040ez fill in form If you took over another employer's business, do not use that employer's EIN. 1040ez fill in form   You should have only one EIN. 1040ez fill in form If you have more than one, and are not sure which one to use, call the toll-free Business and Specialty Tax Line at 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). 1040ez fill in form Provide the EINs that you have, the name and address to which each number was assigned, and the address of your principal place of business. 1040ez fill in form The IRS will tell you which EIN to use. 1040ez fill in form   For more information, see Publication 1635 or Publication 583. 1040ez fill in form When you receive your EIN. 1040ez fill in form   If you are a new employer that indicated a federal tax obligation when requesting an EIN, you will be pre-enrolled in the Electronic Federal Tax Payment System (EFTPS). 1040ez fill in form You will receive information in your Employer Identification Number (EIN) Package about Express Enrollment and an additional mailing containing your EFTPS personal identification number (PIN) and instructions for activating your PIN. 1040ez fill in form Call the toll-free number located in your “How to Activate Your Enrollment” brochure to activate your enrollment and begin making your employment tax deposits. 1040ez fill in form If you outsource any of your payroll and related tax duties to a third party payer, such as a payroll service provider or reporting agent, be sure to tell them about your EFTPS enrollment. 1040ez fill in form Social security number (SSN). 1040ez fill in form   An employee's social security number (SSN) consists of nine digits arranged as follows: 000-00-0000. 1040ez fill in form You must obtain each employee's name and SSN as shown on the employee's social security card because you must enter them on Form W-2. 1040ez fill in form Do not accept a social security card that says “Not valid for employment. 1040ez fill in form ” A social security number issued with this legend does not permit employment. 1040ez fill in form You may, but are not required to, photocopy the social security card if the employee provides it. 1040ez fill in form If you do not show the employee's correct name and SSN on Form W-2, you may owe a penalty unless you have reasonable cause. 1040ez fill in form See Publication 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs. 1040ez fill in form Applying for a social security card. 1040ez fill in form   Any employee who is legally eligible to work in the United States and does not have a social security card can get one by completing Form SS-5, Application for a Social Security Card, and submitting the necessary documentation to SSA. 1040ez fill in form You can get Form SS-5 at SSA offices, by calling 1-800-772-1213 or 1-800-325-0778 (TTY), or from the SSA website at www. 1040ez fill in form socialsecurity. 1040ez fill in form gov/online/ss-5. 1040ez fill in form html. 1040ez fill in form The employee must complete and sign Form SS-5; it cannot be filed by the employer. 1040ez fill in form You may be asked to supply a letter to accompany Form SS-5 if the employee has exceeded his or her yearly or lifetime limit for the number of replacement cards allowed. 1040ez fill in form Applying for a social security number. 1040ez fill in form   If you file Form W-2 on paper and your employee has applied for an SSN but does not have one when you must file Form W-2, enter “Applied For” on the form. 1040ez fill in form If you are filing electronically, enter all zeros (000-00-0000) in the social security number field. 1040ez fill in form When the employee receives the SSN, file Copy A of Form W-2c, Corrected Wage and Tax Statement, with the SSA to show the employee's SSN. 1040ez fill in form Furnish Copies B, C, and 2 of Form W-2c to the employee. 1040ez fill in form Up to 25 Forms W-2c per Form W-3c, Transmittal of Corrected Wage and Tax Statements, may be filed per session over the Internet, with no limit on the number of sessions. 1040ez fill in form For more information, visit SSA's Employer W-2 Filing Instructions & Information webpage at www. 1040ez fill in form socialsecurity. 1040ez fill in form gov/employer. 1040ez fill in form Advise your employee to correct the SSN on his or her original Form W-2. 1040ez fill in form Correctly record the employee's name and SSN. 1040ez fill in form   Record the name and number of each employee as they are shown on the employee's social security card. 1040ez fill in form If the employee's name is not correct as shown on the card (for example, because of marriage or divorce), the employee should request a corrected card from the SSA. 1040ez fill in form Continue to report the employee's wages under the old name until the employee shows you an updated social security card with the new name. 1040ez fill in form   If the SSA issues the employee a replacement card after a name change, or a new card with a different social security number after a change in alien work status, file a Form W-2c to correct the name/SSN reported on the most recently filed Form W-2. 1040ez fill in form It is not necessary to correct other years if the previous name and SSN were used for years before the most recent Form W-2. 1040ez fill in form IRS individual taxpayer identification numbers (ITINs) for aliens. 1040ez fill in form   Do not accept an ITIN in place of an SSN for employee identification or for work. 1040ez fill in form An ITIN is issued for use by resident and nonresident aliens who need identification for tax purposes, but who are not eligible for U. 1040ez fill in form S. 1040ez fill in form employment. 1040ez fill in form The ITIN is a nine-digit number formatted like an SSN (for example, NNN-NN-NNNN). 1040ez fill in form However, it begins with the number “9” and has either a “7” or “8” as the fourth digit (for example, 9NN-7N-NNNN or 9NN-8N-NNNN). 1040ez fill in form    An individual with an ITIN who later becomes eligible to work in the United States must obtain an SSN. 1040ez fill in form If the individual is currently eligible to work in the United States, instruct the individual to apply for an SSN and follow the instructions under Applying for a social security number, earlier in this section. 1040ez fill in form Do not use an ITIN in place of an SSN on Form W-2. 1040ez fill in form Verification of social security numbers. 1040ez fill in form   Employers and authorized reporting agents can use the Social Security Number Verification Service (SSNVS) to instantly verify up to 10 employee names and SSNs (per screen) at a time, or submit an electronic file of up to 250,000 names and SSNs and usually receive results the next business day. 1040ez fill in form Visit www. 1040ez fill in form socialsecurity. 1040ez fill in form gov/employer/ssnv. 1040ez fill in form htm for more information. 1040ez fill in form Registering for SSNVS. 1040ez fill in form   You must register online and receive authorization from your employer to use SSNVS. 1040ez fill in form To register, visit SSA's website at www. 1040ez fill in form socialsecurity. 1040ez fill in form gov/employer and click on the Business Services Online link. 1040ez fill in form Follow the registration instructions to obtain a user identification (ID) and password. 1040ez fill in form You will need to provide the following information about yourself and your company. 1040ez fill in form Name. 1040ez fill in form SSN. 1040ez fill in form Date of birth. 1040ez fill in form Type of employer. 1040ez fill in form EIN. 1040ez fill in form Company name, address, and telephone number. 1040ez fill in form Email address. 1040ez fill in form When you have completed the online registration process, SSA will mail a one-time activation code to your employer. 1040ez fill in form You must enter the activation code online to use SSNVS. 1040ez fill in form 2. 1040ez fill in form Who Are Employees? Generally, employees are defined either under common law or under statutes for certain situations. 1040ez fill in form See Publication 15-A for details on statutory employees and nonemployees. 1040ez fill in form Employee status under common law. 1040ez fill in form   Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. 1040ez fill in form This is so even when you give the employee freedom of action. 1040ez fill in form What matters is that you have the right to control the details of how the services are performed. 1040ez fill in form See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. 1040ez fill in form If an employer-employee relationship exists, it does not matter what it is called. 1040ez fill in form The employee may be called an agent or independent contractor. 1040ez fill in form It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. 1040ez fill in form You are responsible for withholding and paying employment taxes for your employees. 1040ez fill in form You are also required to file employment tax returns. 1040ez fill in form These requirements do not apply to amounts that you pay to independent contractors. 1040ez fill in form The rules discussed in this publication apply only to workers who are your employees. 1040ez fill in form In general, you are an employer of farmworkers if your employees: Raise or harvest agricultural or horticultural products on your farm (including the raising and feeding of livestock); Work in connection with the operation, management, conservation, improvement, or maintenance of your farm and its tools and equipment; Provide services relating to salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor); Handle, process, or package any agricultural or horticultural commodity if you produced over half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity); or Do work for you related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. 1040ez fill in form For this purpose, the term “farm” includes stock, dairy, poultry, fruit, fur-bearing animal, and truck farms, as well as plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards. 1040ez fill in form Farmwork does not include reselling activities that do not involve any substantial activity of raising agricultural or horticultural commodities, such as a retail store or a greenhouse used primarily for display or storage. 1040ez fill in form The table in section 12, How Do Employment Taxes Apply to Farmwork , distinguishes between farm and nonfarm activities, and also addresses rules that apply in special situations. 1040ez fill in form Crew Leaders If you are a crew leader, you are an employer of farmworkers. 1040ez fill in form A crew leader is a person who furnishes and pays (either on his or her own behalf or on behalf of the farm operator) workers to do farmwork for the farm operator. 1040ez fill in form If there is no written agreement between you and the farm operator stating that you are his or her employee and if you pay the workers (either for yourself or for the farm operator), then you are a crew leader. 1040ez fill in form For FUTA tax rules, see section 10. 1040ez fill in form Business Owned and Operated by Spouses If you and your spouse jointly own and operate a farm or nonfarm business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. 1040ez fill in form See Publication 541, Partnerships, for more details. 1040ez fill in form The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. 1040ez fill in form Exception—Qualified joint venture. 1040ez fill in form   For tax years beginning after December 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a “qualified joint venture,” whose only members are spouses filing a joint income tax return, can elect not to be treated as a partnership for federal tax purposes. 1040ez fill in form A qualified joint venture conducts a trade or business where: The only members of the joint venture are spouses who file a joint income tax return, Both spouses materially participate (see Material participation in the Instructions for Schedule C (Form 1040), line G) in the trade or business (mere joint ownership of property is not enough), Both spouses elect to not be treated as a partnership, and The business is co-owned by both spouses and is not held in the name of a state law entity such as a partnership or limited liability company (LLC). 1040ez fill in form   To make the election, all items of income, gain, loss, deduction, and credit must be divided between the spouses, in accordance with each spouse's interest in the venture, and reported on separate Schedules C or F as sole proprietors. 1040ez fill in form Each spouse must also file a separate Schedule SE to pay self-employment taxes, as applicable. 1040ez fill in form   Spouses using the qualified joint venture rules are treated as sole proprietors for federal tax purposes and generally do not need an EIN. 1040ez fill in form If employment taxes are owed by the qualified joint venture, either spouse may report and pay the employment taxes due on the wages paid to the employees using the EIN of that spouse's sole proprietorship. 1040ez fill in form Generally, filing as a qualified joint venture will not increase the spouses' total tax owed on the joint income tax return. 1040ez fill in form However, it gives each spouse credit for social security earnings on which retirement benefits are based and for Medicare coverage without filing a partnership return. 1040ez fill in form    Note. 1040ez fill in form If your spouse is your employee, not your partner, you must pay social security and Medicare taxes for him or her. 1040ez fill in form   For more information on qualified joint ventures, visit IRS. 1040ez fill in form gov and enter “qualified joint venture” in the search box. 1040ez fill in form Exception—Community income. 1040ez fill in form   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. 1040ez fill in form S. 1040ez fill in form possession, you can treat the business either as a sole proprietorship (of the spouse who carried on the business) or a partnership. 1040ez fill in form You may still make an election to be taxed as a qualified joint venture instead of a partnership. 1040ez fill in form See Exception—Qualified joint venture , earlier in this section. 1040ez fill in form 3. 1040ez fill in form Wages and Other Compensation Cash wages that you pay to employees for farmwork are generally subject to social security tax and Medicare tax. 1040ez fill in form You may also be required to withhold, deposit, and report Additional Medicare Tax. 1040ez fill in form See section 4 for more information. 1040ez fill in form If the wages are subject to social security and Medicare taxes, they are also subject to federal income tax withholding. 1040ez fill in form You may also be liable for FUTA tax, which is not withheld by you or paid by the employee. 1040ez fill in form FUTA tax is discussed in section 10. 1040ez fill in form Cash wages include checks, money orders, etc. 1040ez fill in form Do not count as cash wages the value of food, lodging, and other noncash items. 1040ez fill in form For more information on what payments are considered taxable wages, see Publication 15 (Circular E). 1040ez fill in form Commodity wages. 1040ez fill in form   Commodity wages are not cash and are not subject to social security and Medicare taxes or federal income tax withholding. 1040ez fill in form However, noncash payments, including commodity wages, are treated as cash wages (see above) if the substance of the transaction is a cash payment. 1040ez fill in form These noncash payments are subject to social security and Medicare taxes and federal income tax withholding. 1040ez fill in form Other compensation. 1040ez fill in form   Publications 15-A and 15-B discuss other forms of compensation that may be taxable. 1040ez fill in form Family members. 1040ez fill in form   Generally, the wages that you pay to family members who are your employees are subject to social security and Medicare taxes, federal income tax withholding, and FUTA tax. 1040ez fill in form However, certain exemptions may apply for your child, spouse, or parent. 1040ez fill in form See the table, How Do Employment Taxes Apply to Farmwork , in section 12. 1040ez fill in form Household employees. 1040ez fill in form   The wages of an employee who performs household services, such as a maid, babysitter, gardener, or cook, in your home are not subject to social security and Medicare taxes if you pay that employee cash wages of less than $1,900 in 2014. 1040ez fill in form   Social security and Medicare taxes do not apply to cash wages for housework in your private home if it was done by your spouse or your child under age 21. 1040ez fill in form Nor do the taxes apply to housework done by your parent unless: You have a child living in your home who is under age 18 or has a physical or mental condition that requires care by an adult for at least 4 continuous weeks in a calendar quarter, and You are a widow or widower, or divorced and not remarried, or have a spouse in the home who, because of a physical or mental condition, cannot care for your child for at least 4 continuous weeks in the quarter. 1040ez fill in form   For more information, see Publication 926, Household Employer's Tax Guide. 1040ez fill in form    Wages for household work may not be a deductible farm expense. 1040ez fill in form See Publication 225, Farmer's Tax Guide. 1040ez fill in form Share farmers. 1040ez fill in form   You do not have to withhold or pay social security and Medicare taxes on amounts paid to share farmers under share-farming arrangements. 1040ez fill in form Compensation paid to H-2A visa holders. 1040ez fill in form   Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2 but do not report it as social security wages (box 3) or Medicare wages (box 5) on Form W-2 because compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes. 1040ez fill in form On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. 1040ez fill in form   An employer is not required to withhold federal income tax from compensation it pays an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. 1040ez fill in form In that case, the worker must give the employer a completed Form W-4. 1040ez fill in form Federal income tax withheld should be reported in box 2 of Form W-2. 1040ez fill in form These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. 1040ez fill in form For rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945. 1040ez fill in form 4. 1040ez fill in form Social Security and Medicare Taxes Generally, you must withhold social security and Medicare taxes on all cash wage payments that you make to your employees. 1040ez fill in form You may also be required to withhold Additional Medicare Tax. 1040ez fill in form For more information, see Additional Medicare Tax withholding , later. 1040ez fill in form The $150 Test or the $2,500 Test All cash wages that you pay to an employee during the year for farmwork are subject to social security and Medicare taxes and federal income tax withholding if either of the two tests below is met. 1040ez fill in form You pay cash wages to an employee of $150 or more in a year for farmwork (count all cash wages paid on a time, piecework, or other basis). 1040ez fill in form The $150 test applies separately to each farmworker that you employ. 1040ez fill in form If you employ a family of workers, each member is treated separately. 1040ez fill in form Do not count wages paid by other employers. 1040ez fill in form The total that you pay for farmwork (cash and noncash) to all your employees is $2,500 or more during the year. 1040ez fill in form Exceptions. 1040ez fill in form   The $150 and $2,500 tests do not apply to wages that you pay to a farmworker who receives less than $150 in annual cash wages and the wages are not subject to social security and Medicare taxes, or federal income tax withholding, even if you pay $2,500 or more in that year to all of your farmworkers if the farmworker: Is employed in agriculture as a hand-harvest laborer, Is paid piece rates in an operation that is usually paid on a piece-rate basis in the region of employment, Commutes daily from his or her permanent home to the farm, and Had been employed in agriculture less than 13 weeks in the preceding calendar year. 1040ez fill in form   Amounts that you pay to these seasonal farmworkers, however, count toward the $2,500-or-more test to determine whether wages that you pay to other farmworkers are subject to social security and Medicare taxes. 1040ez fill in form Social Security and Medicare Tax Withholding The social security tax rate is 6. 1040ez fill in form 2%, for both the employee and employer, on the first $117,000 paid to each employee. 1040ez fill in form You must withhold at this rate from each employee and pay a matching amount. 1040ez fill in form The Medicare tax rate is 1. 1040ez fill in form 45% each for the employee and employer on all wages. 1040ez fill in form You must withhold at this rate from each employee and pay a matching amount. 1040ez fill in form There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax. 1040ez fill in form Social security and Medicare taxes apply to most payments of sick pay, including payments made by third parties such as insurance companies. 1040ez fill in form For details, see Publication 15-A. 1040ez fill in form Additional Medicare Tax withholding. 1040ez fill in form   In addition to withholding Medicare tax at 1. 1040ez fill in form 45%, you must withhold a 0. 1040ez fill in form 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 1040ez fill in form You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. 1040ez fill in form Additional Medicare Tax is only imposed on the employee. 1040ez fill in form There is no employer share of Additional Medicare Tax. 1040ez fill in form All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. 1040ez fill in form   For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E). 1040ez fill in form For more information on Additional Medicare Tax, visit IRS. 1040ez fill in form gov and enter “Additional Medicare Tax” in the search box. 1040ez fill in form Employee share paid by employer. 1040ez fill in form   If you would rather pay a household or agricultural employee's share of the social security and Medicare taxes without withholding them from his or her wages, you may do so. 1040ez fill in form If you do not withhold the taxes, however, you must still pay them. 1040ez fill in form Any employee social security and Medicare taxes that you pay is additional income to the employee. 1040ez fill in form Include it in box 1 of the employee's Form W-2, but do not count it as social security and Medicare wages and do not include it in boxes 3 and 5. 1040ez fill in form Also, do not count the additional income as wages for FUTA tax purposes. 1040ez fill in form Different rules apply to employer payments of social security and Medicare taxes for non-household and non-agricultural employees. 1040ez fill in form See section 7 of Publication 15-A. 1040ez fill in form Withholding social security and Medicare taxes on nonresident alien employees. 1040ez fill in form   In general, if you pay wages to nonresident alien employees, you must withhold social security and Medicare taxes as you would for a U. 1040ez fill in form S. 1040ez fill in form citizen or resident alien. 1040ez fill in form However, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for exceptions to this general rule. 1040ez fill in form Also see Compensation paid to H-2A visa holders in section 3. 1040ez fill in form Religious exemption. 1040ez fill in form    An exemption from social security and Medicare taxes is available to members of a recognized religious sect opposed to public insurance. 1040ez fill in form This exemption is available only if both the employee and the employer are members of the sect. 1040ez fill in form   For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. 1040ez fill in form 5. 1040ez fill in form Federal Income Tax Withholding Farmers and crew leaders must withhold federal income tax from the wages of farmworkers if the wages are subject to social security and Medicare taxes. 1040ez fill in form The amount to withhold is figured on gross wages before taking out social security and Medicare taxes, union dues, insurance, etc. 1040ez fill in form You may use one of several methods to determine the amount of federal income tax withholding. 1040ez fill in form They are discussed in section 13. 1040ez fill in form Form W-4. 1040ez fill in form   To know how much federal income tax to withhold from employees' wages, you should have a Form W-4 on file for each employee. 1040ez fill in form Encourage your employees to file an updated Form W-4 for 2014, especially if they owed taxes or received a large refund when filing their 2013 tax return. 1040ez fill in form Advise your employees to use the IRS Withholding Calculator on the IRS website at www. 1040ez fill in form irs. 1040ez fill in form gov/individuals for help in determining how many withholding allowances to claim on their Form W-4. 1040ez fill in form   Ask each new employee to give you a signed Form W-4 when starting work. 1040ez fill in form Make the form effective with the first wage payment. 1040ez fill in form If a new employee does not give you a completed Form W-4, withhold tax as if he or she is single, with no withholding allowances. 1040ez fill in form Forms in Spanish. 1040ez fill in form   You can provide Formulario W-4(SP) in place of Form W-4 to your Spanish-speaking employees. 1040ez fill in form For more information, see Publicación 17(SP). 1040ez fill in form Effective date of Form W-4. 1040ez fill in form   A Form W-4 remains in effect until the employee gives you a new one. 1040ez fill in form When you receive a new Form W-4, do not adjust withholding for pay periods before the effective date of the new form. 1040ez fill in form Do not adjust withholding retroactively. 1040ez fill in form If an employee gives you a replacement Form W-4, begin withholding no later than the start of the first payroll period ending on or after the 30th day from the date when you received the replacement Form W-4. 1040ez fill in form For exceptions, see Exemption from federal income tax withholding , IRS review of requested Forms W-4 , and Invalid Forms W-4 , later in this section. 1040ez fill in form A Form W-4 that makes a change for the next calendar year will not take effect in the current calendar year. 1040ez fill in form Completing Form W-4. 1040ez fill in form   The amount of federal income tax withholding is based on marital status and withholding allowances. 1040ez fill in form Your employees may not base their withholding amounts on a fixed dollar amount or percentage. 1040ez fill in form However, the employee may specify a dollar amount to be withheld in addition to the amount of withholding based on filing status and withholding allowances claimed on Form W-4. 1040ez fill in form   Employees may claim fewer withholding allowances than they are entitled to claim. 1040ez fill in form They may do this to ensure that they have enough withholding or to offset other sources of taxable income that are not subject to withholding. 1040ez fill in form   See Publication 505, Tax Withholding and Estimated Tax, for more information about completing Form W-4. 1040ez fill in form Along with Form W-4, you may wish to order Publication 505 for use by your employees. 1040ez fill in form    Do not accept any withholding or estimated tax payments from your employees in addition to withholding based on their Form W-4. 1040ez fill in form If an employee wants additional withholding, he or she should submit a new Form W-4 and, if necessary, pay estimated tax by filing Form 1040-ES, Estimated Tax for Individuals, or by using the Electronic Federal Tax Payment System (EFTPS) to make estimated tax payments. 1040ez fill in form Exemption from federal income tax withholding. 1040ez fill in form   Generally, an employee may claim exemption from federal income tax withholding because he or she had no federal income tax liability last year and expects none this year. 1040ez fill in form See the Form W-4 instructions for more information. 1040ez fill in form However, the wages are still subject to social security and Medicare taxes. 1040ez fill in form   A Form W-4 claiming exemption from withholding is effective when it is filed with the employer and only for that calendar year. 1040ez fill in form To continue to be exempt from withholding in the next calendar year, an employee must give you a new Form W-4 by February 15. 1040ez fill in form If the employee does not give you a new Form W-4 by February 15, withhold tax based on the last valid Form W-4 you have for the employee that did not claim an exemption from withholding or, if one does not exist, withhold as if he or she is single with zero withholding allowances. 1040ez fill in form If the employee provides a new Form W-4 claiming an exemption from withholding on February 16 or later, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. 1040ez fill in form Withholding income taxes on the wages of nonresident alien employees. 1040ez fill in form   In general, you must withhold federal income taxes on the wages of nonresident alien employees. 1040ez fill in form However, see Publication 515 for exceptions to this general rule. 1040ez fill in form Also see Compensation paid to H-2A visa workers in section 3. 1040ez fill in form Withholding adjustment for nonresident alien employees. 1040ez fill in form   A special procedure applies for figuring the amount of income tax to withhold from wages of nonresident alien employees performing services within the United States for wages paid in 2014. 1040ez fill in form This procedure requires a special chart to be used with the withholding tables to determine the amount to withhold from the wages of the nonresident alien employee. 1040ez fill in form See Withholding adjustment for nonresident alien employees in section 9 of Publication 15 (Circular E). 1040ez fill in form Nonresident alien employee's Form W-4. 1040ez fill in form   When completing Forms W-4, nonresident aliens are required to: Not claim exemption from income tax withholding; Request withholding as if they are single, regardless of their actual marital status; Claim only one allowance (if the nonresident alien is a resident of Canada, Mexico, or Korea, he or she may claim more than one allowance); and Write “Nonresident Alien” or “NRA” above the dotted line on line 6 of Form W-4. 1040ez fill in form   If you maintain an electronic Form W-4 system, you should provide a field for nonresident alien employees to enter nonresident alien status in lieu of writing “Nonresident Alien” or “NRA” above the dotted line on line 6. 1040ez fill in form    A nonresident alien employee may request additional withholding at his or her option for other purposes, although such additions should not be necessary for withholding to cover federal income tax liability related to employment. 1040ez fill in form Form 8233. 1040ez fill in form   If a nonresident alien employee claims a tax treaty exemption from withholding, the employee must submit Form 8233, Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with respect to the income exempt under the treaty, instead of Form W-4. 1040ez fill in form See Publication 515 for details. 1040ez fill in form IRS review of requested Forms W-4. 1040ez fill in form   When requested by the IRS, you must make original Forms W-4 available for inspection by an IRS employee. 1040ez fill in form You may also be directed to send certain Forms W-4 to the IRS. 1040ez fill in form You may receive a notice from the IRS requiring you to submit a copy of Form W-4 for one or more of your named employees. 1040ez fill in form Send the requested copy or copies of Form W-4 to the IRS at the address provided and in the manner directed by the notice. 1040ez fill in form The IRS may also require you to submit copies of Form W-4 to the IRS as directed by a revenue procedure or notice published in the Internal Revenue Bulletin. 1040ez fill in form When we refer to Form W-4, the same rules apply to Formulario W-4(SP), its Spanish translation. 1040ez fill in form   After submitting a copy of the requested Form W-4 to the IRS, continue to withhold federal income tax based on that Form W-4 if it is valid (see Invalid Forms W-4 , later in this section). 1040ez fill in form However, if the IRS later notifies you in writing that the employee is not entitled to claim a complete exemption from withholding or more than the maximum number of withholding allowances specified by the IRS in the written notice, withhold federal income tax based on the effective date, marital status, and maximum number of withholding allowances specified in the notice (commonly referred to as a “lock-in letter”). 1040ez fill in form Initial lock-in letter. 1040ez fill in form   The IRS uses information reported on Form W-2 to identify employees with withholding compliance problems. 1040ez fill in form In some cases, where a serious under-withholding problem is found to exist for a particular employee, the IRS may issue a lock-in letter to the employer specifying the maximum number of withholding allowances and marital status permitted for a specific employee. 1040ez fill in form You will also receive a copy for the employee that identifies the maximum number of withholding allowances permitted and the process by which the employee can provide additional information to the IRS for purposes of determining the appropriate number of withholding allowances. 1040ez fill in form If the employee is employed by you as of the date of the notice, you must furnish the employee copy to the employee within 10 business days of receipt. 1040ez fill in form You may follow any reasonable business practice to furnish the employee copy to the employee. 1040ez fill in form Implementation of lock-in letter. 1040ez fill in form   When you receive the notice specifying the maximum number of withholding allowances and marital status permitted, you may not withhold immediately on the basis of the notice. 1040ez fill in form You must begin withholding tax on the basis of the notice for any wages paid after the date specified in the notice. 1040ez fill in form The delay between your receipt of the notice and the date to begin the withholding on the basis of the notice permits the employee to contact the IRS. 1040ez fill in form Seasonal employees and employees not currently performing services. 1040ez fill in form   If you receive a notice for an employee who is not currently performing services for you, you are still required to furnish the employee copy to the employee and withhold based on the notice if any of the following apply. 1040ez fill in form You are paying wages for the employee's prior services and the wages are subject to income tax withholding on or after the date specified in the notice. 1040ez fill in form You reasonably expect the employee to resume services within 12 months of the date of the notice. 1040ez fill in form The employee is on a bona fide leave of absence that does not exceed 12 months or the employee has a right to reemployment after the leave of absence. 1040ez fill in form Termination and re-hire of employees. 1040ez fill in form   If you are required to furnish and withhold based on the notice and the employment relationship is terminated after the date of the notice, you must continue to withhold based on the notice if you continue to pay any wages subject to income tax withholding. 1040ez fill in form You must also withhold based on the notice or modification notice (explained next) if the employee resumes the employment relationship with you within 12 months after the termination of the employment relationship. 1040ez fill in form Modification notice. 1040ez fill in form   After issuing the notice specifying the maximum number of withholding allowances and marital status permitted, the IRS may issue a subsequent notice (modification notice) that modifies the original notice. 1040ez fill in form The modification notice may change the marital status and/or the number of withholding allowances permitted. 1040ez fill in form You must withhold federal income tax based on the effective date specified in the modification notice. 1040ez fill in form New Form W-4 after IRS notice. 1040ez fill in form   After the IRS issues a notice or modification notice, if the employee provides you with a new Form W-4 claiming complete exemption from withholding or claims a marital status, a number of withholding allowances, and any additional withholding that results in less withholding than would result under the IRS notice or modification notice, you must disregard the new Form W-4. 1040ez fill in form You are required to withhold on the basis of the notice or modification notice unless the IRS subsequently notifies you to withhold based on the new Form W-4. 1040ez fill in form If the employee wants to put a new Form W-4 into effect that results in less withholding than required, the employee must contact the IRS. 1040ez fill in form   If, after you receive an IRS notice or modification notice, your employee provides you with a new Form W-4 that does not claim exemption from federal income tax withholding and claims a marital status, a number of withholding allowances, and any additional withholding that results in more withholding than would result under the notice or modification notice, you must withhold tax on the basis of that new Form W-4. 1040ez fill in form Otherwise, disregard any subsequent Forms W-4 provided by the employee and withhold based on the IRS notice or modification notice. 1040ez fill in form Substitute Forms W-4. 1040ez fill in form   You are encouraged to have your employees use the official version of Form W-4 to claim withholding allowances or exemption from withholding. 1040ez fill in form Call the IRS at 1-800-TAX-FORM (1-800-829-3676) or visit IRS. 1040ez fill in form gov to obtain copies of Form W-4. 1040ez fill in form   You may use a substitute version of Form W-4 to meet your business needs. 1040ez fill in form However, your substitute Form W-4 must contain language that is identical to the official Form W-4 and your form must meet all current IRS rules for substitute forms. 1040ez fill in form At the time that you provide your substitute form to the employee, you must provide him or her with all tables, instructions, and worksheets from the current Form W-4. 1040ez fill in form   You cannot accept a substitute Form W-4 developed by an employee, and the employee submitting such form will be treated as failing to furnish a Form W-4. 1040ez fill in form However, continue to use any valid Forms W-4 developed by your employees that you accepted before October 11, 2007. 1040ez fill in form Invalid Forms W-4. 1040ez fill in form   Any unauthorized change or addition to Form W-4 makes it invalid. 1040ez fill in form This includes taking out any language by which the employee certifies that the form is correct. 1040ez fill in form A Form W-4 is also invalid if, by the date an employee gives it to you, he or she indicates in any way that it is false. 1040ez fill in form An employee who submits a false Form W-4 may be subject to a $500 penalty. 1040ez fill in form You may treat a Form W-4 as invalid if the employee wrote “exempt” on line 7 and also entered a number on line 5 or an amount on line 6. 1040ez fill in form   When you get an invalid Form W-4, do not use it to figure federal income tax withholding. 1040ez fill in form Tell the employee that it is invalid and ask for another one. 1040ez fill in form If the employee does not give you a valid one, withhold taxes as if the employee was single and claiming no withholding allowances. 1040ez fill in form However, if you have an earlier Form W-4 for this worker that is valid, withhold as you did before. 1040ez fill in form   For additional information about these rules, see Treasury Decision 9337, 2007-35 I. 1040ez fill in form R. 1040ez fill in form B. 1040ez fill in form 455, available at www. 1040ez fill in form irs. 1040ez fill in form gov/irb/2007-35_IRB/ar10. 1040ez fill in form html. 1040ez fill in form Amounts exempt from levy on wages, salary, and other income. 1040ez fill in form   If you receive a Notice of Levy on Wages, Salary, and Other Income—Forms 668-W(ACS), 668-W(c)(DO), or 668-W(ICS), you must withhold amounts as described in the instructions for these forms. 1040ez fill in form Publication 1494, Tables for Figuring Amount Exempt From Levy on Wages, Salary, and Other Income—Forms 668-W(ACS), 668-W(c)(DO), and 668-W(ICS), shows the exempt amount. 1040ez fill in form If a levy issued in a prior year is still in effect and the taxpayer submits a new Statement of Exemptions and Filing Status, use the current year Publication 1494 to compute the exempt amount. 1040ez fill in form How To Figure Federal Income Tax Withholding There are several ways to figure federal income tax withholding. 1040ez fill in form Wage bracket tables. 1040ez fill in form See section 13 for directions on how to use the tables. 1040ez fill in form Percentage method. 1040ez fill in form See section 13 for directions on how to use the percentage method. 1040ez fill in form Alternative formula tables for percentage method withholding. 1040ez fill in form See Publication 15-A. 1040ez fill in form Wage bracket percentage method withholding tables. 1040ez fill in form See Publication 15-A. 1040ez fill in form Other alternative methods. 1040ez fill in form See Publication 15-A. 1040ez fill in form Employers with automated payroll systems will find the two alternative formula tables and the two alternative wage bracket percentage method tables in Publication 15-A useful. 1040ez fill in form If an employee wants additional federal tax withheld, have the employee show the extra amount on Form W-4. 1040ez fill in form Supplemental wages. 1040ez fill in form   Supplemental wages are wage payments to an employee that are not regular wages. 1040ez fill in form They include, but are not limited to, bonuses, commissions, overtime pay, accumulated sick leave, severance pay, awards, prizes, back pay and retroactive pay increases for current employees, and payments for nondeductible moving expenses. 1040ez fill in form Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. 1040ez fill in form   If you pay supplemental wages with regular wages but do not specify the amount of each, withhold federal income tax as if the total was a single payment for a regular payroll period. 1040ez fill in form   If you pay supplemental wages separately (or combine them in a single payment and specify the amount of each), the federal income tax withholding method depends partly on whether you withhold federal income tax from your employee's regular wages. 1040ez fill in form If you withheld federal income tax from an employee's regular wages in the current or immediately preceding calendar year, you can use one of the following methods for the supplemental wages. 1040ez fill in form Withhold a flat 25% (no other percentage allowed). 1040ez fill in form If the supplemental wages are paid concurrently with regular wages, add the supplemental wages to the concurrently paid regular wages. 1040ez fill in form If there are no concurrently paid regular wages, add the supplemental wages to alternatively, either the regular wages paid or to be paid for the current payroll period or the regular wages paid for the preceding payroll period. 1040ez fill in form Figure the income tax withholding as if the total of the regular wages and supplemental wages is a single payment. 1040ez fill in form Subtract the tax withheld from the regular wages. 1040ez fill in form Withhold the remaining tax from the supplemental wages. 1040ez fill in form If there were other payments of supplemental wages paid during the payroll period made before the current payment of supplemental wages, aggregate all the payments of supplemental wages paid during the payroll period with the regular wages paid during the payroll period, calculate the tax on the total, subtract the tax already withheld from the regular wages and previous supplemental wage payments, and withhold the remaining tax from the current payment of supplemental wages. 1040ez fill in form If you did not withhold federal income tax from the employee's regular wages in the current or immediately preceding calendar year, use method 1-b above. 1040ez fill in form This would occur, for example, when the value of the employee's withholding allowances claimed on Form W-4 is more than the wages. 1040ez fill in form    Separate rules apply to any supplemental wages exceeding $1 million that you pay to an individual during the year. 1040ez fill in form See section 7 in Publication 15 (Circular E) for details. 1040ez fill in form   Regardless of the method that you use to withhold federal income tax on supplemental wages, they are generally subject to social security, Medicare, and FUTA taxes. 1040ez fill in form 6. 1040ez fill in form Required Notice to Employees About Earned Income Credit (EIC) You must notify employees who have no federal income tax withheld that they may be able to claim a tax refund because of the EIC. 1040ez fill in form Although you do not have to notify employees who claim exemption from withholding on Form W-4 about the EIC, you are encouraged to notify any employees whose wages for 2013 were less than $46,227 ($51,567 if married filing jointly) that they may be eligible to claim the credit for 2013. 1040ez fill in form This is because eligible employees may get a refund of the amount of EIC that is more than the tax that they owe. 1040ez fill in form You will meet the notification requirement if you issue to the employee Form W-2 with the EIC notice on the back of Copy B, or a substitute Form W-2 with the same statement. 1040ez fill in form You may also meet the requirement by providing Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC), or your own statement that contains the same wording. 1040ez fill in form If a substitute Form W-2 is given to the employee on time but does not have the required statement, you must notify the employee within 1 week of the date that the substitute Form W-2 is given. 1040ez fill in form If Form W-2 is required but is not given on time, you must give the employee Notice 797 or your written statement by the date that Form W-2 is required to be given. 1040ez fill in form If Form W-2 is not required, you must notify the employee by February 7, 2014. 1040ez fill in form 7. 1040ez fill in form Depositing Taxes Generally, you must deposit both the employer and employee shares of social security and Medicare taxes and federal income tax withheld. 1040ez fill in form You must use electronic funds transfer to make all federal tax deposits. 1040ez fill in form See How To Deposit , later in this section. 1040ez fill in form The credit against employment taxes for COBRA premium assistance payments is treated as a deposit of taxes on the first day of your return period. 1040ez fill in form For more information, see COBRA premium assistance credit under Introduction. 1040ez fill in form Payment with return. 1040ez fill in form   You may make payments with Forms 943 or 945 instead of depositing if one of the following applies. 1040ez fill in form You report less than a $2,500 tax liability for the year (Form 943, line 11; Form 945, line 3) and you pay in full with a return that is filed on time. 1040ez fill in form However, if you are unsure that you will report less than $2,500, deposit under the rules explained in this section so that you will not be subject to failure-to-deposit penalties. 1040ez fill in form You are a monthly schedule depositor and make a payment in accordance with the Accuracy of Deposits Rule discussed later in this section. 1040ez fill in form This payment may be $2,500 or more. 1040ez fill in form Only monthly schedule depositors, defined later, are allowed to make an Accuracy of Deposits Rule payment with the return. 1040ez fill in form Semiweekly schedule depositors must timely deposit the amount. 1040ez fill in form See Accuracy of Deposits Rule and How To Deposit, later in this section. 1040ez fill in form When To Deposit If you employ both farm and nonfarm workers, do not combine the taxes reportable on Forms 941 or 944 with Form 943 to decide whether to make a deposit. 1040ez fill in form See Employers of Both Farm and Nonfarm Workers, later in this section. 1040ez fill in form The rules for determining when to deposit Form 943 taxes are discussed below. 1040ez fill in form See section 10 for the separate rules that apply to FUTA tax. 1040ez fill in form Under these rules, you are classified as either a monthly schedule depositor or a semiweekly schedule depositor. 1040ez fill in form The terms “monthly schedule depositor” and “semiweekly schedule depositor” do not refer to how often your business pays its employees or how often you are required to make deposits. 1040ez fill in form The terms identify which set of rules you must follow when you incur a tax liability (for example, when you have a payday). 1040ez fill in form The deposit schedule that you must use for a calendar year is determined from the tax liability reported on your Form 943, line 9, for the lookback period, discussed next. 1040ez fill in form If you reported $50,000 or less of Form 943 taxes for the lookback period, you are a monthly schedule depositor. 1040ez fill in form If you reported more than $50,000 of Form 943 taxes for the lookback period, you are a semiweekly schedule depositor. 1040ez fill in form Lookback period. 1040ez fill in form   The lookback period is the second calendar year preceding the current calendar year. 1040ez fill in form For example, the lookback period for 2014 is 2012. 1040ez fill in form Example of deposit schedule based on lookback period. 1040ez fill in form Rose Co. 1040ez fill in form reported taxes on Form 943 as follows. 1040ez fill in form 2012 — $48,000 2013 — $60,000 Rose Co. 1040ez fill in form is a monthly schedule depositor for 2014 because its taxes for the lookback period ($48,000 for calendar year 2012) were not more than $50,000. 1040ez fill in form However, for 2015, Rose Co. 1040ez fill in form is a semiweekly schedule depositor because the total taxes before adjustment for its lookback period ($60,000 for calendar year 2013) exceeded $50,000. 1040ez fill in form Adjustments to lookback period taxes. 1040ez fill in form   To determine your taxes for the lookback period, use only the tax that you reported on the original return (Form 943, line 9). 1040ez fill in form Do not include adjustments shown on Form 943-X, Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund. 1040ez fill in form Example of adjustments. 1040ez fill in form An employer originally reported total tax of $45,000 for the lookback period in 2012. 1040ez fill in form The employer discovered during March 2014 that the tax reported for the lookback period was understated by $10,000 and corrected this error by filing Form 943-X. 1040ez fill in form The total tax reported in the lookback period is still $45,000. 1040ez fill in form The $10,000 adjustment is also not treated as part of the 2014 taxes. 1040ez fill in form Deposit period. 1040ez fill in form   The term “deposit period” refers to the period during which tax liabilities are accumulated for each required deposit due date. 1040ez fill in form For monthly schedule depositors, the deposit period is a calendar month. 1040ez fill in form The deposit periods for semiweekly schedule depositors are Wednesday through Friday and Saturday through Tuesday. 1040ez fill in form Monthly Deposit Schedule If the tax liability reported on Form 943, line 9, for the lookback period is $50,000 or less, you are a monthly schedule depositor for the current year. 1040ez fill in form You must deposit Form 943 taxes on payments made during a calendar month by the 15th day of the following month. 1040ez fill in form Monthly schedule example. 1040ez fill in form   Red Co. 1040ez fill in form is a seasonal employer and a monthly schedule depositor. 1040ez fill in form It pays wages each Friday. 1040ez fill in form It paid wages during August 2014, but did not pay any wages during September. 1040ez fill in form Red Co. 1040ez fill in form must deposit the combined tax liabilities for the August paydays by September 15. 1040ez fill in form Red Co. 1040ez fill in form does not have a deposit requirement for September (that is, due by October 15, 2014) because no wages were paid in September; therefore, it did not have a tax liability for September. 1040ez fill in form New employers. 1040ez fill in form   For agricultural employers, your tax liability for any year in the lookback period before the date you started or acquired your business is considered to be zero. 1040ez fill in form Therefore, you are a monthly schedule depositor for the first and second calendar years of your agricultural business (but see the $100,000 Next-Day Deposit Rule , later in this section). 1040ez fill in form Semiweekly Deposit Schedule You are a semiweekly schedule depositor for a calendar year if the tax liability on Form 943, line 9, during your lookback period was more than $50,000. 1040ez fill in form Under the semiweekly deposit schedule, deposit Form 943 taxes for payments made on Wednesday, Thursday, and/or Friday by the following Wednesday. 1040ez fill in form Deposit amounts accumulated for payments made on Saturday, Sunday, Monday, and/or Tuesday by the following Friday. 1040ez fill in form Semiweekly depositors are not required to deposit twice a week if their payments were in the same semiweekly period unless the $100,000 Next-Day Deposit Rule (discussed later in this section) applies. 1040ez fill in form For example, if you made a payment on both Wednesday and Friday and incurred taxes of $10,000 for each pay date, deposit the $20,000 by the following Wednesday. 1040ez fill in form If you made no additional payments on Saturday through Tuesday, no deposit is due on Friday. 1040ez fill in form Semiweekly schedule depositors must complete Form 943-A, Agricultural Employer's Record of Federal Tax Liability, and submit it with Form 943. 1040ez fill in form Semiweekly Deposit Schedule IF the payday falls on a. 1040ez fill in form . 1040ez fill in form . 1040ez fill in form THEN deposit taxes by the following. 1040ez fill in form . 1040ez fill in form . 1040ez fill in form Wednesday, Thursday, and/or Friday Wednesday Saturday, Sunday, Monday, and/or Tuesday Friday Semiweekly schedule example. 1040ez fill in form   Green, Inc. 1040ez fill in form , is a semiweekly schedule depositor and pays wages once each month on the last Friday of the month. 1040ez fill in form Green, Inc. 1040ez fill in form , will deposit only once a month, but the deposit will be made under the semiweekly deposit schedule as follows. 1040ez fill in form Green, Inc. 1040ez fill in form 's tax liability for the April 25, 2014 (Friday), wage payment must be deposited by April 30, 2014 (Wednesday). 1040ez fill in form Semiweekly deposit period spanning two quarters. 1040ez fill in form   If you have more than one pay date during a semiweekly period and the pay dates fall in different calendar quarters, you will need to make separate deposits for the separate liabilities. 1040ez fill in form For example, if you have a pay date on Monday, March 31, 2014 (first quarter), and another pay date on Tuesday, April 1, 2014 (second quarter), two separate deposits will be required even though the pay dates fall within the same semiweekly period. 1040ez fill in form Both deposits will be due Friday, April 4, 2014 (3 business days from the end of the semiweekly deposit period). 1040ez fill in form Deposits on Business Days Only If a deposit is required to be made on a day that is not a business day, the deposit is considered timely if it is made by the close of the next business day. 1040ez fill in form A business day is any day other than a Saturday, Sunday, or legal holiday. 1040ez fill in form For example, if a deposit is required to be made on Friday and Friday is a legal holiday, the deposit is considered timely if it is made by the following Monday (if Monday is a business day). 1040ez fill in form Semiweekly schedule depositors   will always have 3 business days to make a deposit. 1040ez fill in form That is, if any of the 3 weekdays after the end of a semiweekly period is a legal holiday, you will have an additional day for each day that is a legal holiday to make the deposit. 1040ez fill in form For example, if a semiweekly schedule depositor accumulated taxes on Friday and the following Monday is a legal holiday, the deposit normally due on Wednesday may be made on Thursday (this allows 3 business days to make the deposit). 1040ez fill in form Legal holiday. 1040ez fill in form   The term “legal holiday” means any legal holiday in the District of Columbia. 1040ez fill in form Legal holidays for 2014 are listed below. 1040ez fill in form January 1— New Year's Day January 20— Birthday of Martin Luther King, Jr. 1040ez fill in form February 17— Washington's Birthday April 16— District of Columbia Emancipation Day May 26— Memorial Day July 4— Independence Day September 1— Labor Day October 13— Columbus Day November 11— Veterans' Day November 27— Thanksgiving Day December 25— Christmas Day $100,000 Next-Day Deposit Rule If you accumulate $100,000 or more of Form 943 taxes (that is, taxes reported on Form 943, line 11) on any day during a deposit period, you must deposit the tax by the close of the next business day, whether you are a monthly or a semiweekly schedule depositor. 1040ez fill in form For purposes of the $100,000 rule, do not continue accumulating a tax liability after the end of a deposit period. 1040ez fill in form For example, if a semiweekly schedule depositor has accumulated a liability of $95,000 on a Tuesday (of a Saturday-through-Tuesday deposit period) and accumulated a $10,000 liability on Wednesday, the $100,000 next-day deposit rule does not apply because the $10,000 is accumulated in the next deposit period. 1040ez fill in form Thus, $95,000 must be deposited by Friday and $10,000 must be deposited by the following Wednesday. 1040ez fill in form However, once you accumulate at least $100,000 in a deposit period, stop accumulating at the end of that day and begin to accumulate anew on the next day. 1040ez fill in form For example, Fir Co. 1040ez fill in form is a semiweekly schedule depositor. 1040ez fill in form On Monday, Fir Co. 1040ez fill in form accumulates taxes of $110,000 and must deposit this amount on Tuesday, the next business day. 1040ez fill in form On Tuesday, Fir Co. 1040ez fill in form accumulates additional taxes of $30,000. 1040ez fill in form Because the $30,000 is not added to the previous $110,000 and is less than $100,000, Fir Co. 1040ez fill in form does not have to deposit the $30,000 until Friday (following the semiweekly deposit schedule). 1040ez fill in form If you are a monthly schedule depositor and you accumulate a $100,000 tax liability on any day, you become a semiweekly schedule depositor on the next day and remain so for at least the rest of the calendar year and for the following calendar year. 1040ez fill in form Example of the $100,000 next-day deposit rule. 1040ez fill in form   Elm, Inc. 1040ez fill in form , started its business on May 1, 2014. 1040ez fill in form Because Elm, Inc. 1040ez fill in form , is a new employer, the taxes for its lookback period are considered to be zero; therefore, Elm, Inc. 1040ez fill in form , is a monthly schedule depositor. 1040ez fill in form On May 8, Elm, Inc. 1040ez fill in form , paid wages for the first time and accumulated taxes of $50,000. 1040ez fill in form On May 9 (Friday), Elm, Inc. 1040ez fill in form , paid wages and accumulated taxes of $60,000, for a total of $110,000. 1040ez fill in form Because Elm, Inc. 1040ez fill in form , accumulated $110,000 on May 9, it must deposit $110,000 by May 12 (Monday), the next business day. 1040ez fill in form Elm, Inc. 1040ez fill in form , became a semiweekly schedule depositor on May 10. 1040ez fill in form It will be a semiweekly schedule depositor for the remainder of 2014 and for 2015. 1040ez fill in form Accuracy of Deposits Rule You are required to deposit 100% of your tax liability on or before the deposit due date. 1040ez fill in form However, penalties will not be applied for depositing less than 100% if both of the following conditions are met. 1040ez fill in form Any deposit shortfall does not exceed the greater of $100 or 2% of the amount of taxes otherwise required to be deposited. 1040ez fill in form The deposit shortfall is paid or deposited by the shortfall makeup date as described below. 1040ez fill in form Makeup Date for Deposit Shortfall:    Monthly Schedule Depositor—Deposit the shortfall or pay it with your return by the due date of your Form 943. 1040ez fill in form You may pay the shortfall with your Form 943 even if the amount is $2,500 or more. 1040ez fill in form Semiweekly Schedule Depositor—Deposit by the earlier of (a) the first Wednesday or Friday (whichever comes first) that falls on or after the 15th of the month following the month in which the shortfall occurred, or (b) the due date for Form 943. 1040ez fill in form For example, if a semiweekly schedule depositor has a deposit shortfall during February 2014, the shortfall makeup date is March 19, 2014 (Wednesday). 1040ez fill in form How To Deposit You must deposit employment taxes by electronic funds transfer. 1040ez fill in form See Payment with return , earlier in this section, for exceptions explaining when taxes may be paid with the tax return instead of being deposited. 1040ez fill in form Electronic deposit requirement. 1040ez fill in form   You must use electronic funds transfer to make all federal tax deposits (such as deposits of employment tax, excise tax, and corporate income tax). 1040ez fill in form Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). 1040ez fill in form If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. 1040ez fill in form   EFTPS is a free service provided by the Department of Treasury. 1040ez fill in form To get more information or to enroll in EFTPS, call 1-800-555-4477 (business), 1-800-316-6541 (individual), or 1-800-733-4829 (TDD). 1040ez fill in form You can also visit the EFTPS website at www. 1040ez fill in form eftps. 1040ez fill in form gov. 1040ez fill in form Additional information about EFTPS is also available in Publication 966. 1040ez fill in form New employers that have a federal tax obligation will be pre-enrolled in EFTPS. 1040ez fill in form Call the toll-free number located in your Employer Identification Number (EIN) Package to activate your enrollment and begin making your tax deposit payments. 1040ez fill in form See When you receive your EIN in section 1 for more information. 1040ez fill in form Deposit record. 1040ez fill in form   For your records, an Electronic Funds Transfer (EFT) Trace Number will be provided with each successful payment. 1040ez fill in form The number can be used as a receipt or to trace the payment. 1040ez fill in form Depositing on time. 1040ez fill in form   For deposits made by EFTPS to be on time, you must initiate the deposit by 8 p. 1040ez fill in form m. 1040ez fill in form Eastern time the day before the date a deposit is due. 1040ez fill in form If you use a third party to make a deposit on your behalf, they may have different cutoff times. 1040ez fill in form Same-day payment option. 1040ez fill in form   If you fail to initiate a deposit transaction on EFTPS by 8 p. 1040ez fill in form m. 1040ez fill in form Eastern time the day before the date a deposit is due, you can still make your deposit on time by using the Federal Tax Application (FTA). 1040ez fill in form To use the same-day payment method, you will need to make arrangements with your financial institution ahead of time. 1040ez fill in form Please check with your financial institution regarding availability, deadlines, and costs. 1040ez fill in form Your financial institution may charge you a fee for payments made this way. 1040ez fill in form To learn more about the information you will need to provide to your financial institution to make a same-day wire payment, visit www. 1040ez fill in form eftps. 1040ez fill in form gov to download the Same-Day Payment Worksheet. 1040ez fill in form Deposit Penalties Penalties may apply if you do not make required deposits on time or if you make deposits for less than the required amount. 1040ez fill in form The penalties do not apply if any failure to make a proper and timely deposit was due to reasonable cause and not to willful neglect. 1040ez fill in form IRS may also waive deposit penalties if you inadvertently fail to deposit in the first quarter that a deposit is due, or the first quarter during which your frequency of deposits changed, if you timely filed your employment tax return. 1040ez fill in form For amounts not properly deposited or not deposited on time, the penalty rates are shown next. 1040ez fill in form Penalty Charged for. 1040ez fill in form . 1040ez fill in form . 1040ez fill in form 2% Deposits made 1 to 5 days late. 1040ez fill in form 5% Deposits made 6 to 15 days late. 1040ez fill in form 10% Deposits made 16 or more days late. 1040ez fill in form Also applies to amounts paid within 10 days of the date of the first notice the IRS sent asking for the tax due. 1040ez fill in form 10% Amounts (that should have been deposited) paid directly to the IRS or paid with your tax return. 1040ez fill in form See Payment with return , earlier in this section, for exceptions. 1040ez fill in form 15% Amounts still unpaid more than 10 days after the date of the first notice that the IRS sent asking for the tax due or the day on which you received notice and demand for immediate payment, whichever is earlier. 1040ez fill in form Late deposit penalty amounts are determined using calendar days, starting from the due date of the liability. 1040ez fill in form Order in which deposits are applied. 1040ez fill in form   Deposits generally are applied to the most recent tax liability within the year. 1040ez fill in form If you receive a failure-to-deposit penalty notice, you may designate how your deposits are to be applied in order to minimize the amount of the penalty, if you do so within 90 days of the date of the notice. 1040ez fill in form Follow the instructions on the penalty notice that you received. 1040ez fill in form For examples on how the IRS will apply deposits and more information on designating deposits, see Revenue Procedure 2001-58. 1040ez fill in form You can find Revenue Procedure 2001-58 on page 579 of Internal Revenue Bulletin 2001-50 at www. 1040ez fill in form irs. 1040ez fill in form gov/pub/irs-irbs/irb01-50. 1040ez fill in form pdf. 1040ez fill in form Example. 1040ez fill in form Cedar, Inc. 1040ez fill in form , is required to make a deposit of $1,000 on July 15 and $1,500 on August 15. 1040ez fill in form It does not make the deposit on July 15. 1040ez fill in form On August 15, Cedar, Inc. 1040ez fill in form , deposits $2,000. 1040ez fill in form Under the deposits rule, which applies deposits to the most recent tax liability, $1,500 of the deposit is applied to the August 15 deposit and the remaining $500 is applied to the July deposit. 1040ez fill in form Accordingly, $500 of the July 15 liability remains undeposited. 1040ez fill in form The penalty on this underdeposit will apply as explained above. 1040ez fill in form Trust fund recovery penalty. 1040ez fill in form   If federal income, social security, or Medicare taxes that must be withheld are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. 1040ez fill in form The penalty is the full amount of the unpaid trust fund tax. 1040ez fill in form This penalty may apply to you if these unpaid taxes cannot be immediately collected from the employer or business. 1040ez fill in form   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying over these taxes, and who acted willfully in not doing so. 1040ez fill in form   A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, an accountant, a volunteer director/trustee, or an employee of a sole proprietorship. 1040ez fill in form A responsible person also may include one who signs checks for the business or otherwise has authority to cause the spending of business funds. 1040ez fill in form    Willfully means voluntarily, consciously, and intentionally. 1040ez fill in form A responsible person acts willfully if the person knows that the required actions of collecting, accounting for or paying over trust fund taxes are not taking place, or recklessly disregards obvious and known risks to the government's right to receive trust fund taxes. 1040ez fill in form “Average” failure-to-deposit penalty. 1040ez fill in form   IRS may assess an “averaged” failure-to-deposit penalty of 2% to 10% if you are a monthly schedule depositor and did not properly complete Form 943, line 17, when your tax liability shown on Form 943, line 11, was $2,500 or more. 1040ez fill in form IRS may also assess this penalty of 2% to 10% if you are a semiweekly schedule depositor and your tax liability shown on Form 943, line 11, was $2,500 or more and you did any of the following. 1040ez fill in form Completed Form 943, line 17, instead of Form 943-A. 1040ez fill in form Failed to attach a properly completed Form 943-A. 1040ez fill in form Completed Form 943-A incorrectly, for example, by entering tax deposits instead of tax liabilities in the numbered spaces. 1040ez fill in form   IRS figures the penalty by allocating your tax liability on Form 943, line 11, equally throughout the tax period. 1040ez fill in form Your deposits and payments may not be counted as timely because IRS does not know the actual dates of your tax liabilities. 1040ez fill in form   You can avoid the penalty by reviewing your return before filing it. 1040ez fill in form Follow these steps before filing your Form 943. 1040ez fill in form If you are a monthly schedule depositor, report your tax liabilities (not your deposits) in the monthly entry spaces on Form 943, line 17. 1040ez fill in form If you are a semiweekly schedule depositor, report your tax liabilities (not your deposits) on Form 943-A in the lines that represent the dates you paid your employees. 1040ez fill in form Verify that your total liability shown on Form 943, line 17, or Form 943-A, line M, equals your tax liability shown on Form 943, line 11. 1040ez fill in form Do not show negative amounts on Form 943, line 17, or Form 943-A. 1040ez fill in form For prior period errors discovered after December 31, 2008, do not adjust your tax liabilities reported on Form 943, line 17, or on Form 943-A. 1040ez fill in form Employers of Both Farm and Nonfarm Workers If you employ both farm and nonfarm workers, you must treat employment taxes for the farmworkers (Form 943 taxes) separately from employment taxes for the nonfarm workers (Form 941 and 944 taxes). 1040ez fill in form Form 943 taxes and Form 941/944 taxes are not combined for purposes of applying any of the deposit schedule rules. 1040ez fill in form If a deposit is due, deposi
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The 1040ez Fill In Form

1040ez fill in form Publication 547 - Main Content Table of Contents CasualtyFamily pet. 1040ez fill in form Progressive deterioration. 1040ez fill in form Special Procedure for Damage From Corrosive Drywall Theft Loss on Deposits Proof of Loss Figuring a LossGain from reimbursement. 1040ez fill in form Business or income-producing property. 1040ez fill in form Loss of inventory. 1040ez fill in form Leased property. 1040ez fill in form Exception for personal-use real property. 1040ez fill in form Decrease in Fair Market Value Adjusted Basis Insurance and Other Reimbursements Deduction Limits2% Rule $100 Rule 10% Rule Figuring the Deduction Figuring a GainPostponement of Gain When To Report Gains and LossesLoss on deposits. 1040ez fill in form Lessee's loss. 1040ez fill in form Disaster Area LossesDisaster loss to inventory. 1040ez fill in form Main home in disaster area. 1040ez fill in form Unsafe home. 1040ez fill in form Time limit for making choice. 1040ez fill in form Revoking your choice. 1040ez fill in form Figuring the loss deduction. 1040ez fill in form How to report the loss on Form 1040X. 1040ez fill in form Records. 1040ez fill in form Need a copy of your tax return for the preceding year? Postponed Tax Deadlines Contacting the Federal Emergency Management Agency (FEMA) How To Report Gains and LossesProperty held 1 year or less. 1040ez fill in form Property held more than 1 year. 1040ez fill in form Depreciable property. 1040ez fill in form Adjustments to Basis If Deductions Are More Than Income How To Get Tax HelpLow Income Taxpayer Clinics Casualty A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. 1040ez fill in form A sudden event is one that is swift, not gradual or progressive. 1040ez fill in form An unexpected event is one that is ordinarily unanticipated and unintended. 1040ez fill in form An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. 1040ez fill in form Generally, casualty losses are deductible during the taxable year that the loss occurred. 1040ez fill in form See Table 3, later. 1040ez fill in form Deductible losses. 1040ez fill in form   Deductible casualty losses can result from a number of different causes, including the following. 1040ez fill in form Car accidents (but see Nondeductible losses , next, for exceptions). 1040ez fill in form Earthquakes. 1040ez fill in form Fires (but see Nondeductible losses , next, for exceptions). 1040ez fill in form Floods. 1040ez fill in form Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses , later. 1040ez fill in form Mine cave-ins. 1040ez fill in form Shipwrecks. 1040ez fill in form Sonic booms. 1040ez fill in form Storms, including hurricanes and tornadoes. 1040ez fill in form Terrorist attacks. 1040ez fill in form Vandalism. 1040ez fill in form Volcanic eruptions. 1040ez fill in form Nondeductible losses. 1040ez fill in form   A casualty loss is not deductible if the damage or destruction is caused by the following. 1040ez fill in form Accidentally breaking articles such as glassware or china under normal conditions. 1040ez fill in form A family pet (explained below). 1040ez fill in form A fire if you willfully set it, or pay someone else to set it. 1040ez fill in form A car accident if your willful negligence or willful act caused it. 1040ez fill in form The same is true if the willful act or willful negligence of someone acting for you caused the accident. 1040ez fill in form Progressive deterioration (explained below). 1040ez fill in form However, see Special Procedure for Damage From Corrosive Drywall , later. 1040ez fill in form Family pet. 1040ez fill in form   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed earlier under Casualty are met. 1040ez fill in form Example. 1040ez fill in form Your antique oriental rug was damaged by your new puppy before it was housebroken. 1040ez fill in form Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. 1040ez fill in form Progressive deterioration. 1040ez fill in form   Loss of property due to progressive deterioration is not deductible as a casualty loss. 1040ez fill in form This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. 1040ez fill in form The following are examples of damage due to progressive deterioration. 1040ez fill in form The steady weakening of a building due to normal wind and weather conditions. 1040ez fill in form The deterioration and damage to a water heater that bursts. 1040ez fill in form However, the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty. 1040ez fill in form Most losses of property caused by droughts. 1040ez fill in form To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit. 1040ez fill in form Termite or moth damage. 1040ez fill in form The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. 1040ez fill in form However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. 1040ez fill in form Special Procedure for Damage From Corrosive Drywall Under a special procedure, you can deduct the amounts you paid to repair damage to your home and household appliances due to corrosive drywall. 1040ez fill in form Under this procedure, you treat the amounts paid for repairs as a casualty loss in the year of payment. 1040ez fill in form For example, amounts you paid for repairs in 2013 are deductible on your 2013 tax return and amounts you paid for repairs in 2012 are deductible on your 2012 tax return. 1040ez fill in form Note. 1040ez fill in form If you paid for any repairs before 2013 and you choose to follow this special procedure, you can amend your return for the earlier year by filing Form 1040X, Amended U. 1040ez fill in form S. 1040ez fill in form Individual Income Tax Return, and attaching a completed Form 4684 for the appropriate year. 1040ez fill in form Form 4684 for the appropriate year can be found at IRS. 1040ez fill in form gov. 1040ez fill in form Generally, Form 1040X must be filed within 3 years after the date the original return was filed or within 2 years after the date the tax was paid, whichever is later. 1040ez fill in form Corrosive drywall. 1040ez fill in form   For purposes of this special procedure, “corrosive drywall” means drywall that is identified as problem drywall under the two-step identification method published by the Consumer Product Safety Commission (CPSC) and the Department of Housing and Urban Development (HUD) in their interim guidance dated January 28, 2010, as revised by the CPSC and HUD. 1040ez fill in form The revised identification guidance and remediation guidelines are available at www. 1040ez fill in form cpsc. 1040ez fill in form gov/Safety-Education/Safety-Education-Centers/Drywall. 1040ez fill in form Special instructions for completing Form 4684. 1040ez fill in form   If you choose to follow this special procedure, complete Form 4684, Section A, according to the instructions below. 1040ez fill in form The IRS will not challenge your treatment of damage resulting from corrosive drywall as a casualty loss if you determine and report the loss as explained below. 1040ez fill in form Top margin of Form 4684. 1040ez fill in form   Enter “Revenue Procedure 2010-36”. 1040ez fill in form Line 1. 1040ez fill in form   Enter the information required by the line 1 instructions. 1040ez fill in form Line 2. 1040ez fill in form   Skip this line. 1040ez fill in form Line 3. 1040ez fill in form   Enter the amount of insurance or other reimbursements you received (including through litigation). 1040ez fill in form If none, enter -0-. 1040ez fill in form Lines 4–7. 1040ez fill in form   Skip these lines. 1040ez fill in form Line 8. 1040ez fill in form   Enter the amount you paid to repair the damage to your home and household appliances due to corrosive drywall. 1040ez fill in form Enter only the amounts you paid to restore your home to the condition existing immediately before the damage. 1040ez fill in form Do not enter any amounts you paid for improvements or additions that increased the value of your home above its pre-loss value. 1040ez fill in form If you replaced a household appliance instead of repairing it, enter the lesser of: The current cost to replace the original appliance, or The basis of the original appliance (generally its cost). 1040ez fill in form Line 9. 1040ez fill in form   If line 8 is more than line 3, do one of the following. 1040ez fill in form If you have a pending claim for reimbursement (or you intend to pursue reimbursement), enter 75% of the difference between lines 3 and 8. 1040ez fill in form If item (1) does not apply to you, enter the full amount of the difference between lines 3 and 8. 1040ez fill in form If line 8 is less than or equal to line 3, you cannot claim a casualty loss deduction using this special procedure. 1040ez fill in form    If you have a pending claim for reimbursement (or you intend to pursue reimbursement), you may have income or an additional deduction in a later tax year depending on the actual amount of reimbursement received. 1040ez fill in form See Reimbursement Received After Deducting Loss, later. 1040ez fill in form Lines 10–18. 1040ez fill in form   Complete these lines according to the Instructions for Form 4684. 1040ez fill in form Choosing not to follow this special procedure. 1040ez fill in form   If you choose not to follow this special procedure, you are subject to all of the provisions that apply to the deductibility of casualty losses, and you must complete lines 1–9 according to the Instructions for Form 4684. 1040ez fill in form This means, for example, that you must establish that the damage, destruction, or loss of property resulted from an identifiable event as defined earlier under Casualty . 1040ez fill in form Furthermore, you must have proof that shows the following. 1040ez fill in form The loss is properly deductible in the tax year you claimed it and not in some other year. 1040ez fill in form See When To Report Gains and Losses , later. 1040ez fill in form The amount of the claimed loss. 1040ez fill in form See Proof of Loss , later. 1040ez fill in form No claim for reimbursement of any portion of the loss exists for which there is a reasonable prospect of recovery. 1040ez fill in form See When To Report Gains and Losses , later. 1040ez fill in form Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. 1040ez fill in form The taking of property must be illegal under the law of the state where it occurred and it must have been done with criminal intent. 1040ez fill in form You do not need to show a conviction for theft. 1040ez fill in form Theft includes the taking of money or property by the following means. 1040ez fill in form Blackmail. 1040ez fill in form Burglary. 1040ez fill in form Embezzlement. 1040ez fill in form Extortion. 1040ez fill in form Kidnapping for ransom. 1040ez fill in form Larceny. 1040ez fill in form Robbery. 1040ez fill in form The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. 1040ez fill in form Decline in market value of stock. 1040ez fill in form   You cannot deduct as a theft loss the decline in market value of stock acquired on the open market for investment if the decline is caused by disclosure of accounting fraud or other illegal misconduct by the officers or directors of the corporation that issued the stock. 1040ez fill in form However, you can deduct as a capital loss the loss you sustain when you sell or exchange the stock or the stock becomes completely worthless. 1040ez fill in form You report a capital loss on Schedule D (Form 1040). 1040ez fill in form For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. 1040ez fill in form Mislaid or lost property. 1040ez fill in form    The simple disappearance of money or property is not a theft. 1040ez fill in form However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. 1040ez fill in form Sudden, unexpected, and unusual events were defined earlier under Casualty . 1040ez fill in form Example. 1040ez fill in form A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. 1040ez fill in form The diamond falls from the ring and is never found. 1040ez fill in form The loss of the diamond is a casualty. 1040ez fill in form Losses from Ponzi-type investment schemes. 1040ez fill in form   The IRS has issued the following guidance to assist taxpayers who are victims of losses from Ponzi-type investment schemes: Revenue Ruling 2009-9, 2009-14 I. 1040ez fill in form R. 1040ez fill in form B. 1040ez fill in form 735 (available at www. 1040ez fill in form irs. 1040ez fill in form gov/irb/2009-14_IRB/ar07. 1040ez fill in form html). 1040ez fill in form Revenue Procedure 2009-20, 2009-14 I. 1040ez fill in form R. 1040ez fill in form B. 1040ez fill in form 749 (available at www. 1040ez fill in form irs. 1040ez fill in form gov/irb/2009-14_IRB/ar11. 1040ez fill in form html). 1040ez fill in form Revenue Procedure 2011-58, 2011-50 I. 1040ez fill in form R. 1040ez fill in form B. 1040ez fill in form 847 (available at www. 1040ez fill in form irs. 1040ez fill in form gov/irb/2011-50_IRB/ar11. 1040ez fill in form html). 1040ez fill in form If you qualify to use Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, and you choose to follow the procedures in the guidance, first fill out Section C of Form 4684 to determine the amount to enter on Section B, line 28. 1040ez fill in form Skip lines 19 to 27, but you must fill out Section B, lines 29 to 39, as appropriate. 1040ez fill in form Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. 1040ez fill in form You do not need to complete Appendix A. 1040ez fill in form For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. 1040ez fill in form   If you choose not to use the procedures in Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate. 1040ez fill in form Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. 1040ez fill in form If you incurred this type of loss, you can choose one of the following ways to deduct the loss. 1040ez fill in form As a casualty loss. 1040ez fill in form As an ordinary loss. 1040ez fill in form As a nonbusiness bad debt. 1040ez fill in form Casualty loss or ordinary loss. 1040ez fill in form   You can choose to deduct a loss on deposits as a casualty loss or as an ordinary loss for any year in which you can reasonably estimate how much of your deposits you have lost in an insolvent or bankrupt financial institution. 1040ez fill in form The choice generally is made on the return you file for that year and applies to all your losses on deposits for the year in that particular financial institution. 1040ez fill in form If you treat the loss as a casualty or ordinary loss, you cannot treat the same amount of the loss as a nonbusiness bad debt when it actually becomes worthless. 1040ez fill in form However, you can take a nonbusiness bad debt deduction for any amount of loss that is more than the estimated amount you deducted as a casualty or ordinary loss. 1040ez fill in form Once you make the choice, you cannot change it without permission from the Internal Revenue Service. 1040ez fill in form   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. 1040ez fill in form The maximum amount you can claim is $20,000 ($10,000 if you are married filing separately) reduced by any expected state insurance proceeds. 1040ez fill in form Your loss is subject to the 2%-of-adjusted-gross-income limit. 1040ez fill in form You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. 1040ez fill in form Nonbusiness bad debt. 1040ez fill in form   If you do not choose to deduct the loss as a casualty loss or as an ordinary loss, you must wait until the year the actual loss is determined and deduct the loss as a nonbusiness bad debt in that year. 1040ez fill in form How to report. 1040ez fill in form   The kind of deduction you choose for your loss on deposits determines how you report your loss. 1040ez fill in form See Table 1. 1040ez fill in form More information. 1040ez fill in form   For more information, see Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the Instructions for Form 4684. 1040ez fill in form Deducted loss recovered. 1040ez fill in form   If you recover an amount you deducted as a loss in an earlier year, you may have to include the amount recovered in your income for the year of recovery. 1040ez fill in form If any part of the original deduction did not reduce your tax in the earlier year, you do not have to include that part of the recovery in your income. 1040ez fill in form For more information, see Recoveries in Publication 525. 1040ez fill in form Proof of Loss To deduct a casualty or theft loss, you must be able to show that there was a casualty or theft. 1040ez fill in form You also must be able to support the amount you take as a deduction. 1040ez fill in form Casualty loss proof. 1040ez fill in form   For a casualty loss, you should be able to show all of the following. 1040ez fill in form The type of casualty (car accident, fire, storm, etc. 1040ez fill in form ) and when it occurred. 1040ez fill in form That the loss was a direct result of the casualty. 1040ez fill in form That you were the owner of the property, or if you leased the property from someone else, that you were contractually liable to the owner for the damage. 1040ez fill in form Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. 1040ez fill in form Theft loss proof. 1040ez fill in form   For a theft loss, you should be able to show all of the following. 1040ez fill in form When you discovered that your property was missing. 1040ez fill in form That your property was stolen. 1040ez fill in form That you were the owner of the property. 1040ez fill in form Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. 1040ez fill in form    It is important that you have records that will prove your deduction. 1040ez fill in form If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. 1040ez fill in form Figuring a Loss To determine your deduction for a casualty or theft loss, you must first figure your loss. 1040ez fill in form Table 1. 1040ez fill in form Reporting Loss on Deposits IF you choose to report the loss as a(n). 1040ez fill in form . 1040ez fill in form . 1040ez fill in form   THEN report it on. 1040ez fill in form . 1040ez fill in form . 1040ez fill in form casualty loss   Form 4684 and Schedule A  (Form 1040). 1040ez fill in form ordinary loss   Schedule A (Form 1040). 1040ez fill in form nonbusiness bad debt   Form 8949 and Schedule D (Form 1040). 1040ez fill in form Amount of loss. 1040ez fill in form   Figure the amount of your loss using the following steps. 1040ez fill in form Determine your adjusted basis in the property before the casualty or theft. 1040ez fill in form Determine the decrease in fair market value (FMV) of the property as a result of the casualty or theft. 1040ez fill in form From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. 1040ez fill in form For personal-use property and property used in performing services as an employee, apply the deduction limits, discussed later, to determine the amount of your deductible loss. 1040ez fill in form Gain from reimbursement. 1040ez fill in form   If your reimbursement is more than your adjusted basis in the property, you have a gain. 1040ez fill in form This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. 1040ez fill in form If you have a gain, you may have to pay tax on it, or you may be able to postpone reporting the gain. 1040ez fill in form See Figuring a Gain , later. 1040ez fill in form Business or income-producing property. 1040ez fill in form   If you have business or income-producing property, such as rental property, and it is stolen or completely destroyed, the decrease in FMV is not considered. 1040ez fill in form Your loss is figured as follows:   Your adjusted basis in the property     MINUS     Any salvage value     MINUS     Any insurance or other reimbursement you  receive or expect to receive   Loss of inventory. 1040ez fill in form   There are two ways you can deduct a casualty or theft loss of inventory, including items you hold for sale to customers. 1040ez fill in form   One way is to deduct the loss through the increase in the cost of goods sold by properly reporting your opening and closing inventories. 1040ez fill in form Do not claim this loss again as a casualty or theft loss. 1040ez fill in form If you take the loss through the increase in the cost of goods sold, include any insurance or other reimbursement you receive for the loss in gross income. 1040ez fill in form   The other way is to deduct the loss separately. 1040ez fill in form If you deduct it separately, eliminate the affected inventory items from the cost of goods sold by making a downward adjustment to opening inventory or purchases. 1040ez fill in form Reduce the loss by the reimbursement you received. 1040ez fill in form Do not include the reimbursement in gross income. 1040ez fill in form If you do not receive the reimbursement by the end of the year, you may not claim a loss to the extent you have a reasonable prospect of recovery. 1040ez fill in form Leased property. 1040ez fill in form   If you are liable for casualty damage to property you lease, your loss is the amount you must pay to repair the property minus any insurance or other reimbursement you receive or expect to receive. 1040ez fill in form Separate computations. 1040ez fill in form   Generally, if a single casualty or theft involves more than one item of property, you must figure the loss on each item separately. 1040ez fill in form Then combine the losses to determine the total loss from that casualty or theft. 1040ez fill in form Exception for personal-use real property. 1040ez fill in form   In figuring a casualty loss on personal-use real property, the entire property (including any improvements, such as buildings, trees, and shrubs) is treated as one item. 1040ez fill in form Figure the loss using the smaller of the following. 1040ez fill in form The decrease in FMV of the entire property. 1040ez fill in form The adjusted basis of the entire property. 1040ez fill in form   See Real property under Figuring the Deduction, later. 1040ez fill in form Decrease in Fair Market Value Fair market value (FMV) is the price for which you could sell your property to a willing buyer when neither of you has to sell or buy and both of you know all the relevant facts. 1040ez fill in form The decrease in FMV used to figure the amount of a casualty or theft loss is the difference between the property's fair market value immediately before and immediately after the casualty or theft. 1040ez fill in form FMV of stolen property. 1040ez fill in form   The FMV of property immediately after a theft is considered to be zero because you no longer have the property. 1040ez fill in form Example. 1040ez fill in form Several years ago, you purchased silver dollars at face value for $150. 1040ez fill in form This is your adjusted basis in the property. 1040ez fill in form Your silver dollars were stolen this year. 1040ez fill in form The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. 1040ez fill in form Your theft loss is $150. 1040ez fill in form Recovered stolen property. 1040ez fill in form   Recovered stolen property is your property that was stolen and later returned to you. 1040ez fill in form If you recovered property after you had already taken a theft loss deduction, you must refigure your loss using the smaller of the property's adjusted basis (explained later) or the decrease in FMV from the time just before it was stolen until the time it was recovered. 1040ez fill in form Use this amount to refigure your total loss for the year in which the loss was deducted. 1040ez fill in form   If your refigured loss is less than the loss you deducted, you generally have to report the difference as income in the recovery year. 1040ez fill in form But report the difference only up to the amount of the loss that reduced your tax. 1040ez fill in form For more information on the amount to report, see Recoveries in Publication 525. 1040ez fill in form Figuring Decrease in FMV — Items To Consider To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. 1040ez fill in form However, other measures also can be used to establish certain decreases. 1040ez fill in form See Appraisal and Cost of cleaning up or making repairs , next. 1040ez fill in form Appraisal. 1040ez fill in form   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterwards should be made by a competent appraiser. 1040ez fill in form The appraiser must recognize the effects of any general market decline that may occur along with the casualty. 1040ez fill in form This information is needed to limit any deduction to the actual loss resulting from damage to the property. 1040ez fill in form   Several factors are important in evaluating the accuracy of an appraisal, including the following. 1040ez fill in form The appraiser's familiarity with your property before and after the casualty or theft. 1040ez fill in form The appraiser's knowledge of sales of comparable property in the area. 1040ez fill in form The appraiser's knowledge of conditions in the area of the casualty. 1040ez fill in form The appraiser's method of appraisal. 1040ez fill in form You may be able to use an appraisal that you used to get a federal loan (or a federal loan guarantee) as the result of a federally declared disaster to establish the amount of your disaster loss. 1040ez fill in form For more information on disasters, see Disaster Area Losses, later. 1040ez fill in form Cost of cleaning up or making repairs. 1040ez fill in form   The cost of repairing damaged property is not part of a casualty loss. 1040ez fill in form Neither is the cost of cleaning up after a casualty. 1040ez fill in form But you can use the cost of cleaning up or of making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. 1040ez fill in form The repairs are actually made. 1040ez fill in form The repairs are necessary to bring the property back to its condition before the casualty. 1040ez fill in form The amount spent for repairs is not excessive. 1040ez fill in form The repairs take care of the damage only. 1040ez fill in form The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. 1040ez fill in form Landscaping. 1040ez fill in form   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. 1040ez fill in form You may be able to measure your loss by what you spend on the following. 1040ez fill in form Removing destroyed or damaged trees and shrubs, minus any salvage you receive. 1040ez fill in form Pruning and other measures taken to preserve damaged trees and shrubs. 1040ez fill in form Replanting necessary to restore the property to its approximate value before the casualty. 1040ez fill in form Car value. 1040ez fill in form   Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. 1040ez fill in form You can use the books' retail values and modify them by factors such as the mileage and condition of your car to figure its value. 1040ez fill in form The prices are not official, but they may be useful in determining value and suggesting relative prices for comparison with current sales and offerings in your area. 1040ez fill in form If your car is not listed in the books, determine its value from other sources. 1040ez fill in form A dealer's offer for your car as a trade-in on a new car is not usually a measure of its true value. 1040ez fill in form Figuring Decrease in FMV — Items Not To Consider You generally should not consider the following items when attempting to establish the decrease in FMV of your property. 1040ez fill in form Cost of protection. 1040ez fill in form   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. 1040ez fill in form The amount you spend on insurance or to board up your house against a storm is not part of your loss. 1040ez fill in form If the property is business property, these expenses are deductible as business expenses. 1040ez fill in form   If you make permanent improvements to your property to protect it against a casualty or theft, add the cost of these improvements to your basis in the property. 1040ez fill in form An example would be the cost of a dike to prevent flooding. 1040ez fill in form Exception. 1040ez fill in form   You cannot increase your basis in the property by, or deduct as a business expense, any expenditures you made with respect to qualified disaster mitigation payments (discussed later under Disaster Area Losses ). 1040ez fill in form Related expenses. 1040ez fill in form   The incidental expenses due to a casualty or theft, such as expenses for the treatment of personal injuries, for temporary housing, or for a rental car, are not part of your casualty or theft loss. 1040ez fill in form However, they may be deductible as business expenses if the damaged or stolen property is business property. 1040ez fill in form Replacement cost. 1040ez fill in form   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. 1040ez fill in form Example. 1040ez fill in form You bought a new chair 4 years ago for $300. 1040ez fill in form In April, a fire destroyed the chair. 1040ez fill in form You estimate that it would cost $500 to replace it. 1040ez fill in form If you had sold the chair before the fire, you estimate that you could have received only $100 for it because it was 4 years old. 1040ez fill in form The chair was not insured. 1040ez fill in form Your loss is $100, the FMV of the chair before the fire. 1040ez fill in form It is not $500, the replacement cost. 1040ez fill in form Sentimental value. 1040ez fill in form   Do not consider sentimental value when determining your loss. 1040ez fill in form If a family portrait, heirloom, or keepsake is damaged, destroyed, or stolen, you must base your loss on its FMV, as limited by your adjusted basis in the property. 1040ez fill in form Decline in market value of property in or near casualty area. 1040ez fill in form   A decrease in the value of your property because it is in or near an area that suffered a casualty, or that might again suffer a casualty, is not to be taken into consideration. 1040ez fill in form You have a loss only for actual casualty damage to your property. 1040ez fill in form However, if your home is in a federally declared disaster area, see Disaster Area Losses , later. 1040ez fill in form Costs of photographs and appraisals. 1040ez fill in form   Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. 1040ez fill in form Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. 1040ez fill in form   Appraisals are used to figure the decrease in FMV because of a casualty or theft. 1040ez fill in form See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. 1040ez fill in form   The costs of photographs and appraisals used as evidence of the value and condition of property damaged as a result of a casualty are not a part of the loss. 1040ez fill in form They are expenses in determining your tax liability. 1040ez fill in form You can claim these costs as a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit on Schedule A (Form 1040). 1040ez fill in form Adjusted Basis The measure of your investment in the property you own is its basis. 1040ez fill in form For property you buy, your basis is usually its cost to you. 1040ez fill in form For property you acquire in some other way, such as inheriting it, receiving it as a gift, or getting it in a nontaxable exchange, you must figure your basis in another way, as explained in Publication 551. 1040ez fill in form If you inherited the property from someone who died in 2010 and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. 1040ez fill in form Adjustments to basis. 1040ez fill in form    While you own the property, various events may take place that change your basis. 1040ez fill in form Some events, such as additions or permanent improvements to the property, increase basis. 1040ez fill in form Others, such as earlier casualty losses and depreciation deductions, decrease basis. 1040ez fill in form When you add the increases to the basis and subtract the decreases from the basis, the result is your adjusted basis. 1040ez fill in form See Publication 551 for more information on figuring the basis of your property. 1040ez fill in form Insurance and Other Reimbursements If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. 1040ez fill in form You do not have a casualty or theft loss to the extent you are reimbursed. 1040ez fill in form If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. 1040ez fill in form You must reduce your loss even if you do not receive payment until a later tax year. 1040ez fill in form See Reimbursement Received After Deducting Loss , later. 1040ez fill in form Failure to file a claim for reimbursement. 1040ez fill in form   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. 1040ez fill in form Otherwise, you cannot deduct this loss as a casualty or theft. 1040ez fill in form The portion of the loss usually not covered by insurance (for example, a deductible) is not subject to this rule. 1040ez fill in form Example. 1040ez fill in form You have a car insurance policy with a $1,000 deductible. 1040ez fill in form Because your insurance did not cover the first $1,000 of an auto collision, the $1,000 would be deductible (subject to the $100 and 10% rules, discussed later). 1040ez fill in form This is true, even if you do not file an insurance claim, because your insurance policy would never have reimbursed you for the deductible. 1040ez fill in form Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. 1040ez fill in form Other types of reimbursements are discussed next. 1040ez fill in form Also see the Instructions for Form 4684. 1040ez fill in form Employer's emergency disaster fund. 1040ez fill in form   If you receive money from your employer's emergency disaster fund and you must use that money to rehabilitate or replace property on which you are claiming a casualty loss deduction, you must take that money into consideration in computing the casualty loss deduction. 1040ez fill in form Take into consideration only the amount you used to replace your destroyed or damaged property. 1040ez fill in form Example. 1040ez fill in form Your home was extensively damaged by a tornado. 1040ez fill in form Your loss after reimbursement from your insurance company was $10,000. 1040ez fill in form Your employer set up a disaster relief fund for its employees. 1040ez fill in form Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. 1040ez fill in form You received $4,000 from the fund and spent the entire amount on repairs to your home. 1040ez fill in form In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer's fund. 1040ez fill in form Your casualty loss before applying the deduction limits (discussed later) is $6,000. 1040ez fill in form Cash gifts. 1040ez fill in form   If you receive excludable cash gifts as a disaster victim and there are no limits on how you can use the money, you do not reduce your casualty loss by these excludable cash gifts. 1040ez fill in form This applies even if you use the money to pay for repairs to property damaged in the disaster. 1040ez fill in form Example. 1040ez fill in form Your home was damaged by a hurricane. 1040ez fill in form Relatives and neighbors made cash gifts to you that were excludable from your income. 1040ez fill in form You used part of the cash gifts to pay for repairs to your home. 1040ez fill in form There were no limits or restrictions on how you could use the cash gifts. 1040ez fill in form It was an excludable gift, so the money you received and used to pay for repairs to your home does not reduce your casualty loss on the damaged home. 1040ez fill in form Insurance payments for living expenses. 1040ez fill in form   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. 1040ez fill in form You lose the use of your main home because of a casualty. 1040ez fill in form Government authorities do not allow you access to your main home because of a casualty or threat of one. 1040ez fill in form Inclusion in income. 1040ez fill in form   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. 1040ez fill in form Report this amount on Form 1040, line 21. 1040ez fill in form However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. 1040ez fill in form See Qualified disaster relief payments , later, under Disaster Area Losses. 1040ez fill in form   A temporary increase in your living expenses is the difference between the actual living expenses you and your family incurred during the period you could not use your home and your normal living expenses for that period. 1040ez fill in form Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. 1040ez fill in form Generally, these expenses include the amounts you pay for the following. 1040ez fill in form Renting suitable housing. 1040ez fill in form Transportation. 1040ez fill in form Food. 1040ez fill in form Utilities. 1040ez fill in form Miscellaneous services. 1040ez fill in form Normal living expenses consist of these same expenses that you would have incurred but did not because of the casualty or the threat of one. 1040ez fill in form Example. 1040ez fill in form As a result of a fire, you vacated your apartment for a month and moved to a motel. 1040ez fill in form You normally pay $525 a month for rent. 1040ez fill in form None was charged for the month the apartment was vacated. 1040ez fill in form Your motel rent for this month was $1,200. 1040ez fill in form You normally pay $200 a month for food. 1040ez fill in form Your food expenses for the month you lived in the motel were $400. 1040ez fill in form You received $1,100 from your insurance company to cover your living expenses. 1040ez fill in form You determine the payment you must include in income as follows. 1040ez fill in form 1. 1040ez fill in form Insurance payment for living expenses $1,100 2. 1040ez fill in form Actual expenses during the month you are unable to use your home because of the fire $1,600   3. 1040ez fill in form Normal living expenses 725   4. 1040ez fill in form Temporary increase in living expenses: Subtract line 3  from line 2 875 5. 1040ez fill in form Amount of payment includible in income: Subtract line 4 from line 1 $ 225 Tax year of inclusion. 1040ez fill in form   You include the taxable part of the insurance payment in income for the year you regain the use of your main home or, if later, for the year you receive the taxable part of the insurance payment. 1040ez fill in form Example. 1040ez fill in form Your main home was destroyed by a tornado in August 2011. 1040ez fill in form You regained use of your home in November 2012. 1040ez fill in form The insurance payments you received in 2011 and 2012 were $1,500 more than the temporary increase in your living expenses during those years. 1040ez fill in form You include this amount in income on your 2012 Form 1040. 1040ez fill in form If, in 2013, you receive further payments to cover the living expenses you had in 2011 and 2012, you must include those payments in income on your 2013 Form 1040. 1040ez fill in form Disaster relief. 1040ez fill in form   Food, medical supplies, and other forms of assistance you receive do not reduce your casualty loss, unless they are replacements for lost or destroyed property. 1040ez fill in form Table 2. 1040ez fill in form Deduction Limit Rules for Personal-Use and Employee Property       $100 Rule 10% Rule 2% Rule General Application You must reduce each casualty or theft loss by $100 when figuring your deduction. 1040ez fill in form Apply this rule to personal-use property after you have figured the amount of your loss. 1040ez fill in form You must reduce your total casualty or theft loss by 10% of your adjusted gross income. 1040ez fill in form Apply this rule to personal-use property after you reduce each loss by $100 (the $100 rule). 1040ez fill in form You must reduce your total casualty or theft loss by 2% of your adjusted gross income. 1040ez fill in form Apply this rule to property you used in performing services as an employee after you have figured the amount of your loss and added it to your job expenses and most other miscellaneous itemized deductions. 1040ez fill in form Single Event Apply this rule only once, even if many pieces of property are affected. 1040ez fill in form Apply this rule only once, even if many pieces of property are affected. 1040ez fill in form Apply this rule only once, even if many pieces of property are affected. 1040ez fill in form More Than One Event Apply to the loss from each event. 1040ez fill in form Apply to the total of all your losses from all events. 1040ez fill in form Apply to the total of all your losses from all events. 1040ez fill in form More Than One Person— With Loss From the   Same Event  (other than a married couple  filing jointly) Apply separately to each person. 1040ez fill in form Apply separately to each person. 1040ez fill in form Apply separately to each person. 1040ez fill in form Married Couple—  With Loss From the  Same Event Filing Joint Return Apply as if you were one person. 1040ez fill in form Apply as if you were one person. 1040ez fill in form Apply as if you were one person. 1040ez fill in form Filing Separate Return Apply separately to each spouse. 1040ez fill in form Apply separately to each spouse. 1040ez fill in form Apply separately to each spouse. 1040ez fill in form More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. 1040ez fill in form Apply separately to each owner of jointly owned property. 1040ez fill in form Apply separately to each owner of jointly owned property. 1040ez fill in form    Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster, are not taxable income to you. 1040ez fill in form For more information, see Qualified disaster relief payments under Disaster Area Losses, later. 1040ez fill in form   Disaster unemployment assistance payments are unemployment benefits that are taxable. 1040ez fill in form   Generally, disaster relief grants received under the Robert T. 1040ez fill in form Stafford Disaster Relief and Emergency Assistance Act are not included in your income. 1040ez fill in form See Federal disaster relief grants , later, under Disaster Area Losses. 1040ez fill in form Loan proceeds. 1040ez fill in form   Do not reduce your casualty loss by loan proceeds you use to rehabilitate or replace property on which you are claiming a casualty loss deduction. 1040ez fill in form If you have a federal loan that is canceled (forgiven), see Federal loan canceled , later, under Disaster Area Losses. 1040ez fill in form Reimbursement Received After Deducting Loss If you figured your casualty or theft loss using the amount of your expected reimbursement, you may have to adjust your tax return for the tax year in which you get your actual reimbursement. 1040ez fill in form This section explains the adjustment you may have to make. 1040ez fill in form Actual reimbursement less than expected. 1040ez fill in form   If you later receive less reimbursement than you expected, include that difference as a loss with your other losses (if any) on your return for the year in which you can reasonably expect no more reimbursement. 1040ez fill in form Example. 1040ez fill in form Your personal car had a FMV of $2,000 when it was destroyed in a collision with another car in 2012. 1040ez fill in form The accident was due to the negligence of the other driver. 1040ez fill in form At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. 1040ez fill in form You did not have a deductible loss in 2012. 1040ez fill in form In January 2013, the court awards you a judgment of $2,000. 1040ez fill in form However, in July it becomes apparent that you will be unable to collect any amount from the other driver. 1040ez fill in form Since this is your only casualty or theft loss, you can deduct the loss in 2013 that is figured by applying the Deduction Limits (discussed later). 1040ez fill in form Actual reimbursement more than expected. 1040ez fill in form   If you later receive more reimbursement than you expected, after you have claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. 1040ez fill in form However, if any part of the original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. 1040ez fill in form You do not refigure your tax for the year you claimed the deduction. 1040ez fill in form See Recoveries in Publication 525 to find out how much extra reimbursement to include in income. 1040ez fill in form Example. 1040ez fill in form In 2012, a hurricane destroyed your motorboat. 1040ez fill in form Your loss was $3,000, and you estimated that your insurance would cover $2,500 of it. 1040ez fill in form You did not itemize deductions on your 2012 return, so you could not deduct the loss. 1040ez fill in form When the insurance company reimburses you for the loss, you do not report any of the reimbursement as income. 1040ez fill in form This is true even if it is for the full $3,000 because you did not deduct the loss on your 2012 return. 1040ez fill in form The loss did not reduce your tax. 1040ez fill in form    If the total of all the reimbursements you receive is more than your adjusted basis in the destroyed or stolen property, you will have a gain on the casualty or theft. 1040ez fill in form If you have already taken a deduction for a loss and you receive the reimbursement in a later year, you may have to include the gain in your income for the later year. 1040ez fill in form Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. 1040ez fill in form You may be able to postpone reporting any remaining gain as explained under Postponement of Gain, later. 1040ez fill in form Actual reimbursement same as expected. 1040ez fill in form   If you receive exactly the reimbursement you expected to receive, you do not have to include any of the reimbursement in your income and you cannot deduct any additional loss. 1040ez fill in form Example. 1040ez fill in form In December 2013, you had a collision while driving your personal car. 1040ez fill in form Repairs to the car cost $950. 1040ez fill in form You had $100 deductible collision insurance. 1040ez fill in form Your insurance company agreed to reimburse you for the rest of the damage. 1040ez fill in form Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. 1040ez fill in form Due to the $100 rule, you cannot deduct the $100 you paid as the deductible. 1040ez fill in form When you receive the $850 from the insurance company in 2014, do not report it as income. 1040ez fill in form Deduction Limits After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. 1040ez fill in form The deduction for casualty and theft losses of employee property and personal-use property is limited. 1040ez fill in form A loss on employee property is subject to the 2% rule, discussed next. 1040ez fill in form With certain exceptions, a loss on property you own for your personal use is subject to the $100 and 10% rules, discussed later. 1040ez fill in form The 2%, $100, and 10% rules are also summarized in Table 2 . 1040ez fill in form Losses on business property (other than employee property) and income-producing property are not subject to these rules. 1040ez fill in form However, if your casualty or theft loss involved a home you used for business or rented out, your deductible loss may be limited. 1040ez fill in form See the Instructions for Form 4684, Section B. 1040ez fill in form If the casualty or theft loss involved property used in a passive activity, see Form 8582, Passive Activity Loss Limitations, and its instructions. 1040ez fill in form 2% Rule The casualty and theft loss deduction for employee property, when added to your job expenses and most other miscellaneous itemized deductions on Schedule A (Form 1040) or Form 1040NR, Schedule A, must be reduced by 2% of your adjusted gross income. 1040ez fill in form Employee property is property used in performing services as an employee. 1040ez fill in form $100 Rule After you have figured your casualty or theft loss on personal-use property, as discussed earlier, you must reduce that loss by $100. 1040ez fill in form This reduction applies to each total casualty or theft loss. 1040ez fill in form It does not matter how many pieces of property are involved in an event. 1040ez fill in form Only a single $100 reduction applies. 1040ez fill in form Example. 1040ez fill in form You have $750 deductible collision insurance on your car. 1040ez fill in form The car is damaged in a collision. 1040ez fill in form The insurance company pays you for the damage minus the $750 deductible. 1040ez fill in form The amount of the casualty loss is based solely on the deductible. 1040ez fill in form The casualty loss is $650 ($750 − $100) because the first $100 of a casualty loss on personal-use property is not deductible. 1040ez fill in form Single event. 1040ez fill in form   Generally, events closely related in origin cause a single casualty. 1040ez fill in form It is a single casualty when the damage is from two or more closely related causes, such as wind and flood damage caused by the same storm. 1040ez fill in form A single casualty may also damage two or more pieces of property, such as a hailstorm that damages both your home and your car parked in your driveway. 1040ez fill in form Example 1. 1040ez fill in form A thunderstorm destroyed your pleasure boat. 1040ez fill in form You also lost some boating equipment in the storm. 1040ez fill in form Your loss was $5,000 on the boat and $1,200 on the equipment. 1040ez fill in form Your insurance company reimbursed you $4,500 for the damage to your boat. 1040ez fill in form You had no insurance coverage on the equipment. 1040ez fill in form Your casualty loss is from a single event and the $100 rule applies once. 1040ez fill in form Figure your loss before applying the 10% rule (discussed later) as follows. 1040ez fill in form     Boat Equipment 1. 1040ez fill in form Loss $5,000 $1,200 2. 1040ez fill in form Subtract insurance 4,500 -0- 3. 1040ez fill in form Loss after reimbursement $ 500 $1,200 4. 1040ez fill in form Total loss $1,700 5. 1040ez fill in form Subtract $100 100 6. 1040ez fill in form Loss before 10% rule $1,600 Example 2. 1040ez fill in form Thieves broke into your home in January and stole a ring and a fur coat. 1040ez fill in form You had a loss of $200 on the ring and $700 on the coat. 1040ez fill in form This is a single theft. 1040ez fill in form The $100 rule applies to the total $900 loss. 1040ez fill in form Example 3. 1040ez fill in form In September, hurricane winds blew the roof off your home. 1040ez fill in form Flood waters caused by the hurricane further damaged your home and destroyed your furniture and personal car. 1040ez fill in form This is considered a single casualty. 1040ez fill in form The $100 rule is applied to your total loss from the flood waters and the wind. 1040ez fill in form More than one loss. 1040ez fill in form   If you have more than one casualty or theft loss during your tax year, you must reduce each loss by $100. 1040ez fill in form Example. 1040ez fill in form Your family car was damaged in an accident in January. 1040ez fill in form Your loss after the insurance reimbursement was $75. 1040ez fill in form In February, your car was damaged in another accident. 1040ez fill in form This time your loss after the insurance reimbursement was $90. 1040ez fill in form Apply the $100 rule to each separate casualty loss. 1040ez fill in form Since neither accident resulted in a loss of over $100, you are not entitled to any deduction for these accidents. 1040ez fill in form More than one person. 1040ez fill in form   If two or more individuals (other than a husband and wife filing a joint return) have losses from the same casualty or theft, the $100 rule applies separately to each individual. 1040ez fill in form Example. 1040ez fill in form A fire damaged your house and also damaged the personal property of your house guest. 1040ez fill in form You must reduce your loss by $100. 1040ez fill in form Your house guest must reduce his or her loss by $100. 1040ez fill in form Married taxpayers. 1040ez fill in form   If you and your spouse file a joint return, you are treated as one individual in applying the $100 rule. 1040ez fill in form It does not matter whether you own the property jointly or separately. 1040ez fill in form   If you and your spouse have a casualty or theft loss and you file separate returns, each of you must reduce your loss by $100. 1040ez fill in form This is true even if you own the property jointly. 1040ez fill in form If one spouse owns the property, only that spouse can figure a loss deduction on a separate return. 1040ez fill in form   If the casualty or theft loss is on property you own as tenants by the entirety, each of you can figure your deduction on only one-half of the loss on separate returns. 1040ez fill in form Neither of you can figure your deduction on the entire loss on a separate return. 1040ez fill in form Each of you must reduce the loss by $100. 1040ez fill in form More than one owner. 1040ez fill in form   If two or more individuals (other than a husband and wife filing a joint return) have a loss on property jointly owned, the $100 rule applies separately to each. 1040ez fill in form For example, if two sisters live together in a home they own jointly and they have a casualty loss on the home, the $100 rule applies separately to each sister. 1040ez fill in form 10% Rule You must reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. 1040ez fill in form Apply this rule after you reduce each loss by $100. 1040ez fill in form For more information, see the Form 4684 instructions. 1040ez fill in form If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. 1040ez fill in form Example. 1040ez fill in form In June, you discovered that your house had been burglarized. 1040ez fill in form Your loss after insurance reimbursement was $2,000. 1040ez fill in form Your adjusted gross income for the year you discovered the theft is $29,500. 1040ez fill in form Figure your theft loss as follows. 1040ez fill in form 1. 1040ez fill in form Loss after insurance $2,000 2. 1040ez fill in form Subtract $100 100 3. 1040ez fill in form Loss after $100 rule $1,900 4. 1040ez fill in form Subtract 10% of $29,500 AGI $2,950 5. 1040ez fill in form Theft loss deduction $-0- You do not have a theft loss deduction because your loss ($1,900) is less than 10% of your adjusted gross income ($2,950). 1040ez fill in form More than one loss. 1040ez fill in form   If you have more than one casualty or theft loss during your tax year, reduce each loss by any reimbursement and by $100. 1040ez fill in form Then you must reduce the total of all your losses by 10% of your adjusted gross income. 1040ez fill in form Example. 1040ez fill in form In March, you had a car accident that totally destroyed your car. 1040ez fill in form You did not have collision insurance on your car, so you did not receive any insurance reimbursement. 1040ez fill in form Your loss on the car was $1,800. 1040ez fill in form In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items you had stored there. 1040ez fill in form Your loss on the basement items after reimbursement was $2,100. 1040ez fill in form Your adjusted gross income for the year that the accident and fire occurred is $25,000. 1040ez fill in form You figure your casualty loss deduction as follows. 1040ez fill in form     Car Basement 1. 1040ez fill in form Loss $1,800 $2,100 2. 1040ez fill in form Subtract $100 per incident 100 100 3. 1040ez fill in form Loss after $100 rule $1,700 $2,000 4. 1040ez fill in form Total loss $3,700 5. 1040ez fill in form Subtract 10% of $25,000 AGI 2,500 6. 1040ez fill in form Casualty loss deduction $1,200 Married taxpayers. 1040ez fill in form   If you and your spouse file a joint return, you are treated as one individual in applying the 10% rule. 1040ez fill in form It does not matter if you own the property jointly or separately. 1040ez fill in form   If you file separate returns, the 10% rule applies to each return on which a loss is claimed. 1040ez fill in form More than one owner. 1040ez fill in form   If two or more individuals (other than husband and wife filing a joint return) have a loss on property that is owned jointly, the 10% rule applies separately to each. 1040ez fill in form Gains and losses. 1040ez fill in form   If you have casualty or theft gains as well as losses to personal-use property, you must compare your total gains to your total losses. 1040ez fill in form Do this after you have reduced each loss by any reimbursements and by $100 but before you have reduced the losses by 10% of your adjusted gross income. 1040ez fill in form Casualty or theft gains do not include gains you choose to postpone. 1040ez fill in form See Postponement of Gain, later. 1040ez fill in form Losses more than gains. 1040ez fill in form   If your losses are more than your recognized gains, subtract your gains from your losses and reduce the result by 10% of your adjusted gross income. 1040ez fill in form The rest, if any, is your deductible loss from personal-use property. 1040ez fill in form Example. 1040ez fill in form Your theft loss after reducing it by reimbursements and by $100 is $2,700. 1040ez fill in form Your casualty gain is $700. 1040ez fill in form Your loss is more than your gain, so you must reduce your $2,000 net loss ($2,700 − $700) by 10% of your adjusted gross income. 1040ez fill in form Gains more than losses. 1040ez fill in form   If your recognized gains are more than your losses, subtract your losses from your gains. 1040ez fill in form The difference is treated as a capital gain and must be reported on Schedule D (Form 1040). 1040ez fill in form The 10% rule does not apply to your gains. 1040ez fill in form Example. 1040ez fill in form Your theft loss is $600 after reducing it by reimbursements and by $100. 1040ez fill in form Your casualty gain is $1,600. 1040ez fill in form Because your gain is more than your loss, you must report the $1,000 net gain ($1,600 − $600) on Schedule D (Form 1040). 1040ez fill in form More information. 1040ez fill in form   For information on how to figure recognized gains, see Figuring a Gain , later. 1040ez fill in form Figuring the Deduction Generally, you must figure your loss separately for each item stolen, damaged, or destroyed. 1040ez fill in form However, a special rule applies to real property you own for personal use. 1040ez fill in form Real property. 1040ez fill in form   In figuring a loss to real estate you own for personal use, all improvements (such as buildings and ornamental trees and the land containing the improvements) are considered together. 1040ez fill in form Example 1. 1040ez fill in form In June, a fire destroyed your lakeside cottage, which cost $144,800 (including $14,500 for the land) several years ago. 1040ez fill in form (Your land was not damaged. 1040ez fill in form ) This was your only casualty or theft loss for the year. 1040ez fill in form The FMV of the property immediately before the fire was $180,000 ($145,000 for the cottage and $35,000 for the land). 1040ez fill in form The FMV immediately after the fire was $35,000 (value of the land). 1040ez fill in form You collected $130,000 from the insurance company. 1040ez fill in form Your adjusted gross income for the year the fire occurred is $80,000. 1040ez fill in form Your deduction for the casualty loss is $6,700, figured in the following manner. 1040ez fill in form 1. 1040ez fill in form Adjusted basis of the entire property (cost in this example) $144,800 2. 1040ez fill in form FMV of entire property  before fire $180,000 3. 1040ez fill in form FMV of entire property after fire 35,000 4. 1040ez fill in form Decrease in FMV of entire property (line 2 − line 3) $145,000 5. 1040ez fill in form Loss (smaller of line 1 or line 4) $144,800 6. 1040ez fill in form Subtract insurance 130,000 7. 1040ez fill in form Loss after reimbursement $14,800 8. 1040ez fill in form Subtract $100 100 9. 1040ez fill in form Loss after $100 rule $14,700 10. 1040ez fill in form Subtract 10% of $80,000 AGI 8,000 11. 1040ez fill in form Casualty loss deduction $ 6,700 Example 2. 1040ez fill in form You bought your home a few years ago. 1040ez fill in form You paid $150,000 ($10,000 for the land and $140,000 for the house). 1040ez fill in form You also spent an additional $2,000 for landscaping. 1040ez fill in form This year a fire destroyed your home. 1040ez fill in form The fire also damaged the shrubbery and trees in your yard. 1040ez fill in form The fire was your only casualty or theft loss this year. 1040ez fill in form Competent appraisers valued the property as a whole at $175,000 before the fire, but only $50,000 after the fire. 1040ez fill in form Shortly after the fire, the insurance company paid you $95,000 for the loss. 1040ez fill in form Your adjusted gross income for this year is $70,000. 1040ez fill in form You figure your casualty loss deduction as follows. 1040ez fill in form 1. 1040ez fill in form Adjusted basis of the entire property (cost of land, building, and landscaping) $152,000 2. 1040ez fill in form FMV of entire property  before fire $175,000 3. 1040ez fill in form FMV of entire property after fire 50,000 4. 1040ez fill in form Decrease in FMV of entire property (line 2 − line 3) $125,000 5. 1040ez fill in form Loss (smaller of line 1 or line 4) $125,000 6. 1040ez fill in form Subtract insurance 95,000 7. 1040ez fill in form Loss after reimbursement $30,000 8. 1040ez fill in form Subtract $100 100 9. 1040ez fill in form Loss after $100 rule $29,900 10. 1040ez fill in form Subtract 10% of $70,000 AGI 7,000 11. 1040ez fill in form Casualty loss deduction $ 22,900 Personal property. 1040ez fill in form   Personal property is any property that is not real property. 1040ez fill in form If your personal property is stolen or is damaged or destroyed by a casualty, you must figure your loss separately for each item of property. 1040ez fill in form Then combine these separate losses to figure the total loss. 1040ez fill in form Reduce the total loss by $100 and 10% of your adjusted gross income to figure the loss deduction. 1040ez fill in form Example 1. 1040ez fill in form In August, a storm destroyed your pleasure boat, which cost $18,500. 1040ez fill in form This was your only casualty or theft loss for the year. 1040ez fill in form Its FMV immediately before the storm was $17,000. 1040ez fill in form You had no insurance, but were able to salvage the motor of the boat and sell it for $200. 1040ez fill in form Your adjusted gross income for the year the casualty occurred is $70,000. 1040ez fill in form Although the motor was sold separately, it is part of the boat and not a separate item of property. 1040ez fill in form You figure your casualty loss deduction as follows. 1040ez fill in form 1. 1040ez fill in form Adjusted basis (cost in this example) $18,500 2. 1040ez fill in form FMV before storm $17,000 3. 1040ez fill in form FMV after storm 200 4. 1040ez fill in form Decrease in FMV  (line 2 − line 3) $16,800 5. 1040ez fill in form Loss (smaller of line 1 or line 4) $16,800 6. 1040ez fill in form Subtract insurance -0- 7. 1040ez fill in form Loss after reimbursement $16,800 8. 1040ez fill in form Subtract $100 100 9. 1040ez fill in form Loss after $100 rule $16,700 10. 1040ez fill in form Subtract 10% of $70,000 AGI 7,000 11. 1040ez fill in form Casualty loss deduction $ 9,700 Example 2. 1040ez fill in form In June, you were involved in an auto accident that totally destroyed your personal car and your antique pocket watch. 1040ez fill in form You had bought the car for $30,000. 1040ez fill in form The FMV of the car just before the accident was $17,500. 1040ez fill in form Its FMV just after the accident was $180 (scrap value). 1040ez fill in form Your insurance company reimbursed you $16,000. 1040ez fill in form Your watch was not insured. 1040ez fill in form You had purchased it for $250. 1040ez fill in form Its FMV just before the accident was $500. 1040ez fill in form Your adjusted gross income for the year the accident occurred is $97,000. 1040ez fill in form Your casualty loss deduction is zero, figured as follows. 1040ez fill in form     Car Watch 1. 1040ez fill in form Adjusted basis (cost) $30,000 $250 2. 1040ez fill in form FMV before accident $17,500 $500 3. 1040ez fill in form FMV after accident 180 -0- 4. 1040ez fill in form Decrease in FMV (line 2 − line 3) $17,320 $500 5. 1040ez fill in form Loss (smaller of line 1 or line 4) $17,320 $250 6. 1040ez fill in form Subtract insurance 16,000 -0- 7. 1040ez fill in form Loss after reimbursement $1,320 $250 8. 1040ez fill in form Total loss $1,570 9. 1040ez fill in form Subtract $100 100 10. 1040ez fill in form Loss after $100 rule $1,470 11. 1040ez fill in form Subtract 10% of $97,000 AGI 9,700 12. 1040ez fill in form Casualty loss deduction $ -0- Both real and personal properties. 1040ez fill in form   When a casualty involves both real and personal properties, you must figure the loss separately for each type of property. 1040ez fill in form However, you apply a single $100 reduction to the total loss. 1040ez fill in form Then, you apply the 10% rule to figure the casualty loss deduction. 1040ez fill in form Example. 1040ez fill in form In July, a hurricane damaged your home, which cost you $164,000 including land. 1040ez fill in form The FMV of the property (both building and land) immediately before the storm was $170,000 and its FMV immediately after the storm was $100,000. 1040ez fill in form Your household furnishings were also damaged. 1040ez fill in form You separately figured the loss on each damaged household item and arrived at a total loss of $600. 1040ez fill in form You collected $50,000 from the insurance company for the damage to your home, but your household furnishings were not insured. 1040ez fill in form Your adjusted gross income for the year the hurricane occurred is $65,000. 1040ez fill in form You figure your casualty loss deduction from the hurricane in the following manner. 1040ez fill in form 1. 1040ez fill in form Adjusted basis of real property (cost in this example) $164,000 2. 1040ez fill in form FMV of real property before hurricane $170,000 3. 1040ez fill in form FMV of real property after hurricane 100,000 4. 1040ez fill in form Decrease in FMV of real property (line 2 − line 3) $70,000 5. 1040ez fill in form Loss on real property (smaller of line 1 or line 4) $70,000 6. 1040ez fill in form Subtract insurance 50,000 7. 1040ez fill in form Loss on real property after reimbursement $20,000 8. 1040ez fill in form Loss on furnishings $600 9. 1040ez fill in form Subtract insurance -0- 10. 1040ez fill in form Loss on furnishings after reimbursement $600 11. 1040ez fill in form Total loss (line 7 plus line 10) $20,600 12. 1040ez fill in form Subtract $100 100 13. 1040ez fill in form Loss after $100 rule $20,500 14. 1040ez fill in form Subtract 10% of $65,000 AGI 6,500 15. 1040ez fill in form Casualty loss deduction $14,000 Property used partly for business and partly for personal purposes. 1040ez fill in form   When property is used partly for personal purposes and partly for business or income-producing purposes, the casualty or theft loss deduction must be figured separately for the personal-use portion and for the business or income-producing portion. 1040ez fill in form You must figure each loss separately because the losses attributed to these two uses are figured in two different ways. 1040ez fill in form When figuring each loss, allocate the total cost or basis, the FMV before and after the casualty or theft loss, and the insurance or other reimbursement between the business and personal use of the property. 1040ez fill in form The $100 rule and the 10% rule apply only to the casualty or theft loss on the personal-use portion of the property. 1040ez fill in form Example. 1040ez fill in form You own a building that you constructed on leased land. 1040ez fill in form You use half of the building for your business and you live in the other half. 1040ez fill in form The cost of the building was $400,000. 1040ez fill in form You made no further improvements or additions to it. 1040ez fill in form A flood in March damaged the entire building. 1040ez fill in form The FMV of the building was $380,000 immediately before the flood and $320,000 afterwards. 1040ez fill in form Your insurance company reimbursed you $40,000 for the flood damage. 1040ez fill in form Depreciation on the business part of the building before the flood totaled $24,000. 1040ez fill in form Your adjusted gross income for the year the flood occurred is $125,000. 1040ez fill in form You have a deductible business casualty loss of $10,000. 1040ez fill in form You do not have a deductible personal casualty loss because of the 10% rule. 1040ez fill in form You figure your loss as follows. 1040ez fill in form     Business   Personal     Part   Part 1. 1040ez fill in form Cost (total $400,000) $200,000   $200,000 2. 1040ez fill in form Subtract depreciation 24,000   -0- 3. 1040ez fill in form Adjusted basis $176,000   $200,000 4. 1040ez fill in form FMV before flood (total $380,000) $190,000   $190,000 5. 1040ez fill in form FMV after flood (total $320,000) 160,000   160,000 6. 1040ez fill in form Decrease in FMV  (line 4 − line 5) $30,000   $30,000 7. 1040ez fill in form Loss (smaller of line 3 or line 6) $30,000   $30,000 8. 1040ez fill in form Subtract insurance 20,000   20,000 9. 1040ez fill in form Loss after reimbursement $10,000   $10,000 10. 1040ez fill in form Subtract $100 on personal-use property -0-   100 11. 1040ez fill in form Loss after $100 rule $10,000   $9,900 12. 1040ez fill in form Subtract 10% of $125,000 AGI on personal-use property -0-   12,500 13. 1040ez fill in form Deductible business loss $10,000     14. 1040ez fill in form Deductible personal loss $-0- Figuring a Gain If you receive an insurance payment or other reimbursement that is more than your adjusted basis in the destroyed, damaged, or stolen property, you have a gain from the casualty or theft. 1040ez fill in form Your gain is figured as follows. 1040ez fill in form The amount you receive (discussed next), minus Your adjusted basis in the property at the time of the casualty or theft. 1040ez fill in form See Adjusted Basis , earlier, for information on adjusted basis. 1040ez fill in form Even if the decrease in FMV of your property is smaller than the adjusted basis of your property, use your adjusted basis to figure the gain. 1040ez fill in form Amount you receive. 1040ez fill in form   The amount you receive includes any money plus the value of any property you receive minus any expenses you have in obtaining reimbursement. 1040ez fill in form It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property. 1040ez fill in form Example. 1040ez fill in form A hurricane destroyed your personal residence and the insurance company awarded you $145,000. 1040ez fill in form You received $140,000 in cash. 1040ez fill in form The remaining $5,000 was paid directly to the holder of a mortgage on the property. 1040ez fill in form The amount you received includes the $5,000 reimbursement paid on the mortgage. 1040ez fill in form Main home destroyed. 1040ez fill in form   If you have a gain because your main home was destroyed, you generally can exclude the gain from your income as if you had sold or exchanged your home. 1040ez fill in form You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). 1040ez fill in form To exclude a gain, you generally must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date it was destroyed. 1040ez fill in form For information on this exclusion, see Publication 523. 1040ez fill in form If your gain is more than the amount you can exclude, but you buy replacement property, you may be able to postpone reporting the excess gain. 1040ez fill in form See Postponement of Gain , later. 1040ez fill in form Reporting a gain. 1040ez fill in form   You generally must report your gain as income in the year you receive the reimbursement. 1040ez fill in form However, you do not have to report your gain if you meet certain requirements and choose to postpone reporting the gain according to the rules explained under Postponement of Gain, next. 1040ez fill in form   For information on how to report a gain, see How To Report Gains and Losses , later. 1040ez fill in form    If you have a casualty or theft gain on personal-use property that you choose to postpone reporting (as explained next) and you also have another casualty or theft loss on personal-use property, do not consider the gain you are postponing when figuring your casualty or theft loss deduction. 1040ez fill in form See 10% Rule under Deduction Limits, earlier. 1040ez fill in form Postponement of Gain Do not report a gain if you receive reimbursement in the form of property similar or related in service or use to the destroyed or stolen property. 1040ez fill in form Your basis in the new property is generally the same as your adjusted basis in the property it replaces. 1040ez fill in form You must ordinarily report the gain on your stolen or destroyed property if you receive money or unlike property as reimbursement. 1040ez fill in form However, you can choose to postpone reporting the gain if you purchase property that is similar or related in service or use to the stolen or destroyed property within a specified replacement period, discussed later. 1040ez fill in form You also can choose to postpone reporting the gain if you purchase a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the property. 1040ez fill in form See Controlling interest in a corporation , later. 1040ez fill in form If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property. 1040ez fill in form To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. 1040ez fill in form If the cost of the replacement property is less than the reimbursement, you must include the gain in your income up to the amount of the unspent reimbursement. 1040ez fill in form Example. 1040ez fill in form In 1970, you bought an oceanfront cottage for your personal use at a cost of $18,000. 1040ez fill in form You made no further improvements or additions to it. 1040ez fill in form When a storm destroyed the cottage this January, the cottage was worth $250,000. 1040ez fill in form You received $146,000 from the insurance company in March. 1040ez fill in form You had a gain of $128,000 ($146,000 − $18,000). 1040ez fill in form You spent $144,000 to rebuild the cottage. 1040ez fill in form Since this is less than the insurance proceeds received, you must include $2,000 ($146,000 − $144,000) in your income. 1040ez fill in form Buying replacement property from a related person. 1040ez fill in form   You cannot postpone reporting a gain from a casualty or theft if you buy the replacement property from a related person (discussed later). 1040ez fill in form This rule applies to the following taxpayers. 1040ez fill in form C corporations. 1040ez fill in form Partnerships in which more than 50% of the capital or profits interests is owned by C corporations. 1040ez fill in form All others (including individuals, partnerships — other than those in (2) — and S corporations) if the total realized gain for the tax year on all destroyed or stolen properties on which there are realized gains is more than $100,000. 1040ez fill in form For casualties and thefts described in (3) above, gains cannot be offset by any losses when determining whether the total gain is more than $100,000. 1040ez fill in form If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. 1040ez fill in form If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. 1040ez fill in form Exception. 1040ez fill in form   This rule does not apply if the related person acquired the property from an unrelated person within the period of time allowed for replacing the destroyed or stolen property. 1040ez fill in form Related persons. 1040ez fill in form   Under this rule, related persons include, for example, a parent and child, a brother and sister, a corporation and an individual who owns more than 50% of its outstanding stock, and two partnerships in which the same C corporations own more than 50% of the capital or profits interests. 1040ez fill in form For more information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. 1040ez fill in form Death of a taxpayer. 1040ez fill in form   If a taxpayer dies after having a gain but before buying replacement property, the gain must be reported for the year in which the decedent realized the gain. 1040ez fill in form The executor of the estate or the person succeeding to the funds from the casualty or theft cannot postpone reporting the gain by buying replacement property. 1040ez fill in form Replacement Property You must buy replacement property for the specific purpose of replacing your destroyed or stolen property. 1040ez fill in form Property you acquire as a gift or inheritance does not qualify. 1040ez fill in form You do not have to use the same funds you receive as