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1040x Amendment Form

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1040x Amendment Form

1040x amendment form 8. 1040x amendment form   Paying Tax Through Withholding or Estimated Tax Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Notification of Alien Status Withholding From CompensationWithholding on Wages Withholding on Pensions Withholding on Tip Income Independent Contractors Withholding From Other IncomeTax Withheld on Partnership Income Withholding on Scholarships and Fellowship Grants Income Entitled to Tax Treaty BenefitsStudents, teachers, and researchers. 1040x amendment form Tax Withheld on Real Property Sales Social Security and Medicare TaxesStudents and Exchange Visitors Agricultural Workers Self-Employment Tax International Social Security Agreements Estimated Tax Form 1040-ES (NR)Fiscal year. 1040x amendment form Introduction This chapter discusses how to pay your U. 1040x amendment form S. 1040x amendment form income tax as you earn or receive income during the year. 1040x amendment form In general, the federal income tax is a pay as you go tax. 1040x amendment form There are two ways to pay as you go. 1040x amendment form Withholding. 1040x amendment form If you are an employee, your employer probably withholds income tax from your pay. 1040x amendment form Tax may also be withheld from certain other income—including pensions, bonuses, commissions, and gambling winnings. 1040x amendment form In each case, the amount withheld is paid to the U. 1040x amendment form S. 1040x amendment form Treasury in your name. 1040x amendment form Estimated tax. 1040x amendment form If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. 1040x amendment form People who are in business for themselves generally will have to pay their tax this way. 1040x amendment form You may have to pay estimated tax if you receive income such as dividends, interest, rent, and royalties. 1040x amendment form Estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well. 1040x amendment form Topics - This chapter discusses: How to notify your employer of your alien status, Income subject to withholding of income tax, Exemptions from withholding, Social security and Medicare taxes, and Estimated tax rules. 1040x amendment form Useful Items - You may want to see: Publication 515 Withholding of Tax on Nonresident Aliens and Foreign Entities 901 U. 1040x amendment form S. 1040x amendment form Tax Treaties Form (and Instructions) W-4 Employee's Withholding Allowance Certificate W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals) W-8ECI Certificate of Foreign Person's Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States W-9 Request for Taxpayer Identification Number and Certification 1040-ES (NR) U. 1040x amendment form S. 1040x amendment form Estimated Tax for Nonresident Alien Individuals 8233 Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual 8288-B Application for Withholding Certificate for Dispositions by Foreign Persons of U. 1040x amendment form S. 1040x amendment form Real Property Interests 13930 Application for Central Withholding Agreement See chapter 12 for information about getting these publications and forms. 1040x amendment form Notification of Alien Status You must let your employer know whether you are a resident or a nonresident alien so your employer can withhold the correct amount of tax from your wages. 1040x amendment form If you are a resident alien under the rules discussed in chapter 1, you must file Form W-9 or a similar statement with your employer. 1040x amendment form If you are a nonresident alien under those rules, you must furnish to your employer Form 8233 or Form W-8BEN, establishing that you are a foreign person, or Form W-4, establishing that your compensation is subject to graduated withholding at the same rates as resident aliens or U. 1040x amendment form S. 1040x amendment form citizens. 1040x amendment form If you are a resident alien and you receive income other than wages (such as dividends and royalties) from sources within the United States, file Form W-9 or similar statement with the withholding agent (generally, the payer of the income) so the agent will not withhold tax on the income at the 30% (or lower treaty) rate. 1040x amendment form If you receive this type of income as a nonresident alien, file Form W-8BEN with the withholding agent so that the agent will withhold tax at the 30% (or lower treaty) rate. 1040x amendment form However, if the income is effectively connected with a U. 1040x amendment form S. 1040x amendment form trade or business, file Form W-8ECI instead. 1040x amendment form Withholding From Compensation The following discussion generally applies only to nonresident aliens. 1040x amendment form Tax is withheld from resident aliens in the same manner as U. 1040x amendment form S. 1040x amendment form citizens. 1040x amendment form Wages and other compensation paid to a nonresident alien for services performed as an employee are usually subject to graduated withholding at the same rates as resident aliens and U. 1040x amendment form S. 1040x amendment form citizens. 1040x amendment form Therefore, your compensation, unless it is specifically excluded from the term “wages” by law, or is exempt from tax by treaty, is subject to graduated withholding. 1040x amendment form Withholding on Wages If you are an employee and you receive wages subject to graduated withholding, you will be required to fill out a Form W-4. 1040x amendment form Also fill out Form W-4 for a scholarship or fellowship grant to the extent it represents payment for past, present, or future services and for which you are not claiming a tax treaty withholding exemption on Form 8233 (discussed later under Income Entitled to Tax Treaty Benefits). 1040x amendment form These are services you are required to perform as an employee and as a condition of receiving the scholarship or fellowship (or tuition reduction). 1040x amendment form Nonresident aliens should fill out Form W-4 using the following instructions instead of the instructions on the Form W-4. 1040x amendment form This is because of the restrictions on a nonresident alien's filing status, the limited number of personal exemptions a nonresident alien is allowed, and because a nonresident alien cannot claim the standard deduction. 1040x amendment form Enter your social security number (SSN) on line 2. 1040x amendment form Do not enter an individual taxpayer identification number (ITIN). 1040x amendment form Check only “Single” marital status on line 3 (regardless of your actual marital status). 1040x amendment form Claim only one allowance on line 5, unless you are a resident of Canada, Mexico, or South Korea, or a U. 1040x amendment form S. 1040x amendment form national. 1040x amendment form Write “Nonresident Alien” or “NRA” on the dotted line on line 6. 1040x amendment form You can request additional withholding on line 6 at your option. 1040x amendment form Do not claim “Exempt” withholding status on line 7. 1040x amendment form A U. 1040x amendment form S. 1040x amendment form national is an individual who, although not a U. 1040x amendment form S. 1040x amendment form citizen, owes his or her allegiance to the United States. 1040x amendment form U. 1040x amendment form S. 1040x amendment form nationals include American Samoans, and Northern Mariana Islanders who chose to become U. 1040x amendment form S. 1040x amendment form nationals instead of U. 1040x amendment form S. 1040x amendment form citizens. 1040x amendment form See Withholding on Scholarships and Fellowship Grants later, for how to fill out Form W-4 if you receive a U. 1040x amendment form S. 1040x amendment form source scholarship or fellowship grant that is not a payment for services. 1040x amendment form Students and business apprentices from India. 1040x amendment form   If you are eligible for the benefits of Article 21(2) of the United States-India Income Tax Treaty, you may claim an additional withholding allowance for the standard deduction. 1040x amendment form You can claim an additional withholding allowance for your spouse only if your spouse will have no gross income for 2013 and cannot be claimed as a dependent on another U. 1040x amendment form S. 1040x amendment form taxpayer's 2013 return. 1040x amendment form You may also claim an additional withholding allowance for each of your dependents not admitted to the United States on “F-2,” “J-2,” or “M-2” visas if they meet the same rules that apply to U. 1040x amendment form S. 1040x amendment form citizens. 1040x amendment form Household employees. 1040x amendment form   If you work as a household employee, your employer does not have to withhold income tax. 1040x amendment form However, you may agree to voluntary income tax withholding by filing a Form W-4 with your employer. 1040x amendment form The agreement goes into effect when your employer accepts the agreement by beginning the withholding. 1040x amendment form You or your employer may end the agreement by letting the other know in writing. 1040x amendment form Agricultural workers. 1040x amendment form   If you are an agricultural worker on an H-2A visa, your employer does not have to withhold income tax. 1040x amendment form However, your employer will withhold income tax only if you and your employer agree to withhold. 1040x amendment form In that case, you must provide your employer with a properly completed Form W-4. 1040x amendment form You can find more information about not having tax withheld at www. 1040x amendment form irs. 1040x amendment form gov/Individuals/International-Taxpayers/Foreign-Agricultural-Workers. 1040x amendment form Wages Exempt From Withholding Wages that are exempt from U. 1040x amendment form S. 1040x amendment form income tax under an income tax treaty are generally exempt from withholding. 1040x amendment form For information on how to claim this exemption from withholding, see Income Entitled to Tax Treaty Benefits , later. 1040x amendment form Wages paid to aliens who are residents of American Samoa, Canada, Mexico, Puerto Rico, or the U. 1040x amendment form S. 1040x amendment form Virgin Islands may be exempt from withholding. 1040x amendment form The following paragraphs explain these exemptions. 1040x amendment form Residents of Canada or Mexico engaged in transportation-related employment. 1040x amendment form   Certain residents of Canada or Mexico who enter or leave the United States at frequent intervals are not subject to withholding on their wages. 1040x amendment form These persons either: Perform duties in transportation service between the United States and Canada or Mexico, or Perform duties connected to the construction, maintenance, or operation of a waterway, viaduct, dam, or bridge crossed by, or crossing, the boundary between the United States and Canada or the boundary between the United States and Mexico. 1040x amendment form    This employment is subject to withholding of social security and Medicare taxes unless the services are performed for a railroad. 1040x amendment form   To qualify for the exemption from withholding during a tax year, a Canadian or Mexican resident must give the employer a statement in duplicate with name, address, and identification number, certifying that the resident: Is not a U. 1040x amendment form S. 1040x amendment form citizen or resident, Is a resident of Canada or Mexico, whichever applies, and Expects to perform duties previously described during the tax year in question. 1040x amendment form   The statement can be in any form, but it must be dated and signed by the employee and must include a written declaration that it is made under the penalties of perjury. 1040x amendment form Residents of American Samoa and Puerto Rico. 1040x amendment form   If you are a nonresident alien employee who is a resident of American Samoa or Puerto Rico, wages for services performed in American Samoa or Puerto Rico are generally not subject to withholding unless you are an employee of the United States or any of its agencies in American Samoa or Puerto Rico. 1040x amendment form Residents of the U. 1040x amendment form S. 1040x amendment form Virgin Islands. 1040x amendment form   Nonresident aliens who are bona fide residents of the U. 1040x amendment form S Virgin Islands are not subject to withholding of U. 1040x amendment form S. 1040x amendment form tax on income earned while temporarily employed in the United States. 1040x amendment form This is because those persons pay their income tax to the U. 1040x amendment form S. 1040x amendment form Virgin Islands. 1040x amendment form To avoid having tax withheld on income earned in the United States, bona fide residents of the U. 1040x amendment form S. 1040x amendment form Virgin Islands should write a letter, in duplicate, to their employers, stating that they are bona fide residents of the U. 1040x amendment form S. 1040x amendment form Virgin Islands and expect to pay tax on all income to the U. 1040x amendment form S. 1040x amendment form Virgin Islands. 1040x amendment form Withholding on Pensions If you receive a pension as a result of personal services performed in the United States, the pension income is subject to the 30% (or lower treaty) rate of withholding. 1040x amendment form You may, however, have tax withheld at graduated rates on the portion of the pension that arises from the performance of services in the United States after December 31, 1986. 1040x amendment form You must fill out Form W-8BEN and give it to the withholding agent or payer before the income is paid or credited to you. 1040x amendment form Withholding on Tip Income Tips you receive during the year for services performed in the United States are subject to U. 1040x amendment form S. 1040x amendment form income tax. 1040x amendment form Include them in taxable income. 1040x amendment form In addition, tips received while working for one employer, amounting to $20 or more in a month, are subject to graduated withholding. 1040x amendment form Independent Contractors If there is no employee-employer relationship between you and the person for whom you perform services, your compensation is subject to the 30% (or lower treaty) rate of withholding. 1040x amendment form However, if you are engaged in a trade or business in the United States during the tax year, your compensation for personal services as an independent contractor (independent personal services) may be entirely or partly exempt from withholding if you reach an agreement with the Internal Revenue Service on the amount of withholding required. 1040x amendment form An agreement that you reach with the IRS regarding withholding from your compensation for independent personal services is effective for payments covered by the agreement after it is agreed to by all parties. 1040x amendment form You must agree to timely file an income tax return for the current tax year. 1040x amendment form Central withholding agreements. 1040x amendment form   If you are a nonresident alien entertainer or athlete performing or participating in athletic events in the United States, you may be able to enter into a withholding agreement with the IRS for reduced withholding provided certain requirements are met. 1040x amendment form Under no circumstances will such a withholding agreement reduce taxes withheld to less than the anticipated amount of income tax liability. 1040x amendment form   File Form 13930 and the required attachments with the IRS to request a central withholding agreement. 1040x amendment form Either you or your authorized representative can file the form. 1040x amendment form It should be sent to the IRS at least 45 days before the tour begins or the event occurs. 1040x amendment form Exceptions will be considered on a case by case basis. 1040x amendment form   For more information on the CWA program, go to www. 1040x amendment form irs. 1040x amendment form gov/Individuals/International-Taxpayers/Central-Withholding-Agreements. 1040x amendment form Final payment exemption. 1040x amendment form   Your final payment of compensation during the tax year for independent personal services may be entirely or partly exempt from withholding. 1040x amendment form This exemption is available only once during your tax year and applies to a maximum of $5,000 of compensation. 1040x amendment form To obtain this exemption, you or your agent must give the following statements and information to the Commissioner or his delegate. 1040x amendment form A statement by each withholding agent from whom you have received gross income effectively connected with a trade or business in the United States during the tax year, showing the amount of income paid and the tax withheld. 1040x amendment form Each statement must be signed by the withholding agent and verified by a declaration that it is made under penalties of perjury. 1040x amendment form A statement by the withholding agent from whom you expect to receive the final payment of compensation, showing the amount of the payment and the amount of tax that would be withheld if a final payment exemption were not granted. 1040x amendment form This statement must also be signed by the withholding agent and verified by a declaration that it is made under penalties of perjury. 1040x amendment form A statement by you that you do not intend to receive any other income effectively connected with a trade or business in the United States during the current tax year. 1040x amendment form The amount of tax that has been withheld or paid under any other provision of the Internal Revenue Code or regulations for any income effectively connected with your trade or business in the United States during the current tax year. 1040x amendment form The amount of your outstanding tax liabilities, if any, including interest and penalties, from the current tax year or prior tax periods. 1040x amendment form Any provision of an income tax treaty under which a partial or complete exemption from withholding may be claimed, the country of your residence, and a statement of sufficient facts to justify an exemption under the treaty. 1040x amendment form A statement signed by you, and verified by a declaration that it is made under penalties of perjury, that all the information given is true and that to your knowledge no relevant information has been omitted. 1040x amendment form   If satisfied with the information, the IRS will determine the amount of your tentative income tax for the tax year on gross income effectively connected with your trade or business in the United States. 1040x amendment form Ordinary and necessary business expenses can be taken into account if proven to the satisfaction of the Commissioner or his delegate. 1040x amendment form   The Commissioner or his delegate will send you a letter, directed to the withholding agent, showing the amount of the final payment of compensation that is exempt from withholding and the amount that can be paid to you because of the exemption. 1040x amendment form You must give two copies of the letter to the withholding agent and must also attach a copy of the letter to your income tax return for the tax year for which the exemption is effective. 1040x amendment form Allowance for Personal Exemption Withholding on payments for independent personal services is generally based on the amount of your compensation payment minus the value of one exemption ($3,950 for 2014). 1040x amendment form To determine the income for independent personal services performed in the United States to which the 30% (or lower treaty) rate will apply, you are allowed one personal exemption if you are not a U. 1040x amendment form S. 1040x amendment form national and are not a resident of Canada, Mexico, or South Korea. 1040x amendment form For purposes of 30% withholding, the exemption is prorated at $10. 1040x amendment form 82 a day in 2014 for the period that labor or personal services are performed in the United States. 1040x amendment form To claim an exemption from withholding on the personal exemption amount, fill out the applicable parts of Form 8233 and give it to the withholding agent. 1040x amendment form Example. 1040x amendment form Eric Johannsen, who is a resident of Country X worked under a contract with a U. 1040x amendment form S. 1040x amendment form firm (not as an employee) in the United States for 100 days during 2014 before returning to his country. 1040x amendment form He earned $6,000 for the services performed (not considered wages) in the United States. 1040x amendment form Eric is married and has three dependent children. 1040x amendment form His wife is not employed and has no income subject to U. 1040x amendment form S. 1040x amendment form tax. 1040x amendment form The amount of the personal exemption to be allowed against the income for his personal services performed within the United States in 2014 is $1,082 (100 days × $10. 1040x amendment form 82), and withholding at 30% is applied against the balance. 1040x amendment form Thus, $1,475. 1040x amendment form 40 in tax is withheld from Eric's earnings (30% of $4,918 ($6,000 − $1,082). 1040x amendment form U. 1040x amendment form S. 1040x amendment form nationals or residents of Canada, Mexico, or South Korea. 1040x amendment form   If you are a nonresident alien who is a resident of Canada, Mexico, or South Korea, or who is a national of the United States, you are subject to the same 30% withholding on your compensation for independent personal services performed in the United States. 1040x amendment form However, if you are a U. 1040x amendment form S. 1040x amendment form national or a resident of Canada or Mexico, you are allowed the same personal exemptions as U. 1040x amendment form S. 1040x amendment form citizens. 1040x amendment form For the 30% (or lower treaty) rate withholding, you can take $10. 1040x amendment form 82 per day for each allowable exemption in 2014. 1040x amendment form If you are a resident of South Korea, you are allowed personal exemptions for yourself and for your spouse and children who live with you in the United States at any time during the tax year. 1040x amendment form However, the additional exemptions for your spouse and children must be further prorated as explained in chapter 5 under Exemptions . 1040x amendment form Students and business apprentices from India. 1040x amendment form   If you are eligible for the benefits of Article 21(2) of the United States-India Income Tax Treaty, you are allowed an exemption for your spouse only if your spouse will have no gross income for 2014 and cannot be claimed as a dependent on another U. 1040x amendment form S. 1040x amendment form taxpayer's 2014 return. 1040x amendment form You are also allowed an exemption for each dependent not admitted to the United States on “F-2,” “J-2,” or “M-2” visas if they meet the same rules that apply to U. 1040x amendment form S. 1040x amendment form citizens. 1040x amendment form For the 30% (or lower treaty rate) withholding on compensation for independent personal services performed in the United States, you are allowed $10. 1040x amendment form 82 per day for each allowable exemption in 2014. 1040x amendment form Refund of Taxes Withheld in Error Multi-level marketing. 1040x amendment form   If you are a distributor for a multi-level marketing company who had taxes withheld in error, file a U. 1040x amendment form S. 1040x amendment form income tax return (Form 1040NR, Form 1040NR-EZ, or Form 1120-F) or, if a tax return has already been filed, a claim for refund (Form 1040X or amended Form 1120-F) to recover the amount withheld in error. 1040x amendment form You must also attach to the U. 1040x amendment form S. 1040x amendment form income tax return or claim for refund supporting information that includes, but is not limited to, the following items. 1040x amendment form A copy of your Form W-2, Form 1042-S, or Form 1099 to prove the amount of taxes withheld. 1040x amendment form A statement explaining why income reported on your Form W-2, Form 1042-S, or Form 1099 is not subject to U. 1040x amendment form S. 1040x amendment form taxation. 1040x amendment form A statement listing all the dates you entered and left the United States during the taxable year. 1040x amendment form If the compensation is multi-year compensation, the statement must list all the dates you entered and left the United States during each of the taxable years to which the compensation is attributable. 1040x amendment form A copy of any documents or records that show the number of days you actually were present in the United States during the years listed. 1040x amendment form A statement providing: (a) the number of days (or unit of time less than a day, if appropriate) that personal services were performed in the United States in connection with recruiting, training, and supporting your lower-tier distributors; and (b) the total number of days (or unit of time less than a day, if appropriate) that personal services were performed globally in connection with recruiting, training, and supporting your lower-tier distributors. 1040x amendment form Any further relevant document or record supporting your claim that the taxes were withheld in error. 1040x amendment form Withholding From Other Income Other income subject to 30% withholding generally includes fixed or determinable income such as interest (other than portfolio interest), dividends, pensions and annuities, and gains from certain sales and exchanges, discussed in chapter 4. 1040x amendment form It also includes 85% of social security benefits paid to nonresident aliens. 1040x amendment form Refund of taxes withheld in error on social security benefits paid to resident aliens. 1040x amendment form   Social security benefits paid to a lawful permanent resident (green card holder) are not subject to 30% withholding. 1040x amendment form For U. 1040x amendment form S. 1040x amendment form income tax purposes, green card holders continue to be resident aliens until their lawful permanent resident status under immigration laws is either taken away or is administratively or judicially determined to have been abandoned. 1040x amendment form See Green Card Test in chapter 1. 1040x amendment form If you are a green card holder and tax was withheld in error on your social security benefits because you have a foreign address, the withholding tax is refundable by the Social Security Administration (SSA) or the IRS. 1040x amendment form SSA will refund taxes erroneously withheld if the refund can be processed during the same calendar year in which the tax was withheld. 1040x amendment form If SSA cannot refund the taxes withheld, you must file a Form 1040 or 1040A with the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301 to determine if you are entitled to a refund. 1040x amendment form You must also attach the following to your Form 1040 or 1040A. 1040x amendment form A copy of Form SSA-1042S, Social Security Benefit Statement. 1040x amendment form A copy of the “green card. 1040x amendment form ” A signed declaration that includes the following statements: The SSA should not have withheld income tax from my social security benefits because I am a U. 1040x amendment form S. 1040x amendment form lawful permanent resident and my green card has been neither revoked nor administratively or judicially determined to have been abandoned. 1040x amendment form I am filing a U. 1040x amendment form S. 1040x amendment form income tax return for the tax year as a resident alien reporting all of my worldwide income. 1040x amendment form I have not claimed benefits for the tax year under an income tax treaty as the resident of a country other than the United States. 1040x amendment form Other income not subject to withholding of 30% (or lower treaty) rate. 1040x amendment form   The following income is not subject to withholding at the 30% (or lower treaty) rate if you file Form W-8ECI with the payer of the income. 1040x amendment form Income (other than compensation) that is effectively connected with your U. 1040x amendment form S. 1040x amendment form trade or business. 1040x amendment form Income from real property that you choose to treat as effectively connected with a U. 1040x amendment form S. 1040x amendment form trade or business. 1040x amendment form See Income From Real Property in chapter 4 for details about this choice. 1040x amendment form   Special rules for withholding on partnership income, scholarships, and fellowships are explained next. 1040x amendment form Tax Withheld on Partnership Income If you are a foreign partner in a U. 1040x amendment form S. 1040x amendment form or foreign partnership, the partnership will withhold tax on your share of effectively connected taxable income (ECTI) from the partnership. 1040x amendment form You may be able to reduce your ECTI subject to withholding by certain partner-level deductions. 1040x amendment form Generally, you must use Form 8804-C for this purpose. 1040x amendment form See the Instructions for Form 8804-C for more information. 1040x amendment form The withholding rate on your share of effectively connected income is generally the highest rate of tax specified under section 1 of the Code (39. 1040x amendment form 6% for 2014). 1040x amendment form However, the partnership may withhold at the highest rate that applies to a particular type of income allocable to you if you gave the partnership the appropriate documentation. 1040x amendment form Long-term capital gain is an example of a particular type of income to which the highest tax rate applies. 1040x amendment form Claim the tax withheld as a credit on your 2014 Form 1040NR. 1040x amendment form The partnership will give you a statement on Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, showing the tax withheld. 1040x amendment form A partnership that is publicly traded will withhold tax on your actual distributions of effectively connected income. 1040x amendment form In this case the partnership will give you a statement on Form 1042-S, Foreign Person's U. 1040x amendment form S. 1040x amendment form Source Income Subject to Withholding. 1040x amendment form Withholding on Scholarships and Fellowship Grants There is no withholding on a qualified scholarship received by a candidate for a degree. 1040x amendment form See chapter 3. 1040x amendment form If you are a nonresident alien student or grantee with an “F,” “J,” “M,” or “Q” visa and you receive a U. 1040x amendment form S. 1040x amendment form source grant or scholarship that is not fully exempt, the withholding agent (usually the payer of the scholarship) withholds tax at 14% (or lower treaty rate) of the taxable part of the grant or scholarship that is not a payment for services. 1040x amendment form However, if you are not a candidate for a degree and the grant does not meet certain requirements, tax will be withheld at the 30% (or lower treaty) rate. 1040x amendment form Any part of a scholarship or fellowship grant that is a payment for services is subject to graduated withholding as discussed earlier under Withholding on Wages. 1040x amendment form Alternate Withholding Procedure Your withholding agent may choose to use an alternate procedure by asking you to fill out Form W-4 and the Personal Allowances Worksheet (attached to Form W-4). 1040x amendment form Use the following instructions instead of the Form W-4 instructions to complete the worksheet. 1040x amendment form Line A. 1040x amendment form   Enter the total of the following amounts on line A. 1040x amendment form Personal exemption. 1040x amendment form   Include the prorated part of your allowable personal exemption. 1040x amendment form Figure the amount by multiplying the number of days you expect to be in the United States in 2014 by the daily exemption amount ($10. 1040x amendment form 82). 1040x amendment form Expenses. 1040x amendment form   Include expenses that will be deductible on your return. 1040x amendment form These include away-from-home expenses (meals, lodging, and transportation), certain state and local income taxes, charitable contributions, and casualty losses, discussed earlier under Itemized Deductions in chapter 5. 1040x amendment form They also include business expenses, moving expenses, and the IRA deduction discussed under Deductions in chapter 5. 1040x amendment form Nontaxable grant or scholarship. 1040x amendment form   Include the part of your grant or scholarship that is not taxable under U. 1040x amendment form S. 1040x amendment form law or under a tax treaty. 1040x amendment form Line B. 1040x amendment form   Enter -0- unless the following paragraph applies to you. 1040x amendment form   If you are a student who qualifies under Article 21(2) of the United States-India Income Tax Treaty, and you are not claiming deductions for away-from-home expenses or other itemized deductions (discussed earlier), enter the standard deduction on line B. 1040x amendment form The standard deduction amount for 2013 is $6,100. 1040x amendment form Lines C and D. 1040x amendment form   Enter -0- on both lines unless the following paragraphs apply to you. 1040x amendment form   If you are a resident of Canada, Mexico, South Korea, or a U. 1040x amendment form S. 1040x amendment form national, an additional daily exemption amount may be allowed for your spouse and each of your dependents. 1040x amendment form   If you are a resident of India who is eligible for the benefits of Article 21(2) of the United States-India Income Tax Treaty, you can claim an additional daily exemption amount for your spouse only if your spouse will have no gross income for 2014 and cannot be claimed as a dependent on another U. 1040x amendment form S. 1040x amendment form taxpayer's 2014 return. 1040x amendment form You can also claim an additional amount for each of your dependents not admitted to the United States on “F-2,” “J-2,” or “M-2” visas if they meet the same rules that apply to U. 1040x amendment form S. 1040x amendment form citizens. 1040x amendment form   Enter any additional amount for your spouse on line C. 1040x amendment form Enter any additional amount for your dependents on line D. 1040x amendment form Lines E, F, and G. 1040x amendment form   No entries should be made on lines E, F, and G. 1040x amendment form Line H. 1040x amendment form   Add the amounts on lines A through D and enter the total on line H. 1040x amendment form Form W-4. 1040x amendment form   Complete lines 1 through 4 of Form W-4. 1040x amendment form Sign and date the form and give it with the Personal Allowances Worksheet to your withholding agent. 1040x amendment form   If you file a Form W-4 to reduce or eliminate the withholding on your scholarship or grant, you must file an annual U. 1040x amendment form S. 1040x amendment form income tax return to be allowed the exemptions and deductions you claimed on that form. 1040x amendment form If you are in the United States during more than one tax year, you must attach a statement to your yearly Form W-4 indicating that you have filed a U. 1040x amendment form S. 1040x amendment form income tax return for the previous year. 1040x amendment form If you have not been in the United States long enough to be required to file a return, you must attach a statement to your Form W-4 saying you will file a U. 1040x amendment form S. 1040x amendment form income tax return when required. 1040x amendment form After the withholding agent has accepted your Form W-4, tax will be withheld on your scholarship or grant at the graduated rates that apply to wages. 1040x amendment form The gross amount of the income is reduced by the amount on line H of the worksheet and the withholding tax is figured on the remainder. 1040x amendment form You will receive a Form 1042-S from the withholding agent (usually the payer of your grant) showing the gross amount of your taxable scholarship or fellowship grant less the withholding allowance amount, the tax rate, and the amount of tax withheld. 1040x amendment form Use this form to prepare your annual U. 1040x amendment form S. 1040x amendment form income tax return. 1040x amendment form Income Entitled to Tax Treaty Benefits If a tax treaty between the United States and your country provides an exemption from, or a reduced rate of, tax for certain items of income, you should notify the payor of the income (the withholding agent) of your foreign status to claim a tax treaty withholding exemption. 1040x amendment form Generally, you do this by filing either Form W-8BEN or Form 8233 with the withholding agent. 1040x amendment form File Form W-8BEN for income that is not personal services income. 1040x amendment form File Form 8233 for personal services income as discussed next. 1040x amendment form Employees and independent contractors. 1040x amendment form   If you perform personal services as an employee or as an independent contractor and you can claim an exemption from withholding on that personal service income because of a tax treaty, give Form 8233 to each withholding agent from whom amounts will be received. 1040x amendment form   Even if you submit Form 8233, the withholding agent may have to withhold tax from your income. 1040x amendment form This is because the factors on which the treaty exemption is based may not be determinable until after the close of the tax year. 1040x amendment form In this case, you must file Form 1040NR (or Form 1040NR-EZ if you qualify) to recover any overwithheld tax and to provide the IRS with proof that you are entitled to the treaty exemption. 1040x amendment form Students, teachers, and researchers. 1040x amendment form   Students, teachers, and researchers must attach the appropriate statement shown in Appendix A (for students) or Appendix B (for teachers and researchers) at the end of this publication to the Form 8233 and give it to the withholding agent. 1040x amendment form For treaties not listed in the appendices, attach a statement in a format similar to those for other treaties. 1040x amendment form   If you received a scholarship or fellowship and personal services income from the same withholding agent, use Form 8233 to claim an exemption from withholding based on a tax treaty for both types of income. 1040x amendment form Special events and promotions. 1040x amendment form   Withholding at the full 30% rate is required for payments made to a nonresident alien or foreign corporation for gate receipts (or television or other receipts) from rock music festivals, boxing promotions, and other entertainment or sporting events, unless the withholding agent has been specifically advised otherwise by letter from the IRS. 1040x amendment form Form 13930 is used to request a reduction in withholding. 1040x amendment form Withholding may be required even if the income may be exempt from taxation by provisions of a tax treaty. 1040x amendment form One reason for this is that the partial or complete exemption is usually based on factors that cannot be determined until after the close of the tax year. 1040x amendment form You will be required to pay U. 1040x amendment form S. 1040x amendment form tax, at the time of your departure from the United States, on any income for which you incorrectly claimed a treaty exemption. 1040x amendment form For more details on treaty provisions that apply to compensation, see Publication 901. 1040x amendment form Tax Withheld on Real Property Sales If you are a nonresident alien and you dispose of a U. 1040x amendment form S. 1040x amendment form real property interest, the transferee (buyer) of the property generally must withhold a tax equal to 10% of the amount realized on the disposition. 1040x amendment form A distribution by a qualified investment entity to a nonresident alien shareholder that is treated as gain from the sale or exchange of a U. 1040x amendment form S. 1040x amendment form real property interest by the shareholder is subject to withholding at 35%. 1040x amendment form Withholding is also required on certain distributions and other transactions by domestic or foreign corporations, partnerships, trusts, and estates. 1040x amendment form These rules are covered in Publication 515. 1040x amendment form For information on the tax treatment of dispositions of U. 1040x amendment form S. 1040x amendment form real property interests, see Real Property Gain or Loss in chapter 4. 1040x amendment form If you are a partner in a domestic partnership, and the partnership disposes of a U. 1040x amendment form S. 1040x amendment form real property interest at a gain, the partnership will withhold tax on the amount of gain allocable to its foreign partners. 1040x amendment form Your share of the income and tax withheld will be reported to you on Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, or Form 1042-S, Foreign Person's U. 1040x amendment form S. 1040x amendment form Source Income Subject to Withholding (in the case of a publicly traded partnership). 1040x amendment form Withholding is not required in the following situations. 1040x amendment form The property is acquired by the buyer for use as a residence and the amount realized (sales price) is not more than $300,000. 1040x amendment form The property disposed of is an interest in a domestic corporation if any class of stock of the corporation is regularly traded on an established securities market. 1040x amendment form However, this exception does not apply to certain dispositions of substantial amounts of non-publicly traded interests in publicly traded corporations. 1040x amendment form The property disposed of is an interest in a U. 1040x amendment form S. 1040x amendment form corporation that is not regularly traded on an established market and you (the seller) give the buyer a copy of a statement issued by the corporation certifying that the interest is not a U. 1040x amendment form S. 1040x amendment form real property interest. 1040x amendment form You (the seller) give the buyer a certification stating, under penalties of perjury, that you are not a foreign person, and containing your name, U. 1040x amendment form S. 1040x amendment form taxpayer identification number, and home address. 1040x amendment form You can give the certification to a qualified substitute. 1040x amendment form The qualified substitute gives the buyer a statement, under penalties of perjury, that the certification is in the possession of the qualified substitute. 1040x amendment form For this purpose, a qualified substitute is (a) the person (including any attorney or title company) responsible for closing the transaction, other than your agent, and (b) the buyer's agent. 1040x amendment form The buyer receives a withholding certificate from the Internal Revenue Service. 1040x amendment form You give the buyer written notice that you are not required to recognize any gain or loss on the transfer because of a nonrecognition provision in the Internal Revenue Code or a provision in a U. 1040x amendment form S. 1040x amendment form tax treaty. 1040x amendment form The buyer must file a copy of the notice with the Ogden Service Center, P. 1040x amendment form O. 1040x amendment form Box 409101, Ogden, UT 84409. 1040x amendment form You must verify the notice as true and sign it under penalties of perjury. 1040x amendment form The notice must contain the following information. 1040x amendment form A statement that the notice is a notice of nonrecognition under regulation section 1. 1040x amendment form 1445-2(d)(2). 1040x amendment form Your name, taxpayer identification number, and home address. 1040x amendment form A statement that you are not required to recognize any gain or loss on the transfer. 1040x amendment form A brief description of the transfer. 1040x amendment form A brief summary of the law and facts supporting your claim that recognition of gain or loss is not required. 1040x amendment form You may not give the buyer a written notice for any of the following transfers: the sale of your main home on which you exclude gain, a like-kind exchange that does not qualify for nonrecognition treatment in its entirety, or a deferred like-kind exchange that has not been completed at the time the buyer must file Form 8288. 1040x amendment form Instead, a withholding certificate (described next) must be obtained. 1040x amendment form The amount you realize on the transfer of a U. 1040x amendment form S. 1040x amendment form real property interest is zero. 1040x amendment form The property is acquired by the United States, a U. 1040x amendment form S. 1040x amendment form state or possession, a political subdivision, or the District of Columbia. 1040x amendment form The distribution is from a domestically controlled qualified investment entity (QIE) and is treated as a distribution of a U. 1040x amendment form S. 1040x amendment form real property interest only because an interest in the entity was disposed of in an applicable wash sale transaction. 1040x amendment form For the definition of a QIE, see Qualified investment entities under Real Property Gain or Loss, earlier. 1040x amendment form See Wash sale under Real Property Gain or Loss in chapter 4. 1040x amendment form The certifications in (3) and (4) must be disregarded by the buyer if the buyer or qualified substitute has actual knowledge, or receives notice from a seller's or buyer's agent (or substitute), that they are false. 1040x amendment form This also applies to the qualified substitute's statement under (4). 1040x amendment form Withholding certificates. 1040x amendment form   The tax required to be withheld on a disposition can be reduced or eliminated under a withholding certificate issued by the IRS. 1040x amendment form Either you or the buyer can request a withholding certificate. 1040x amendment form   A withholding certificate can be issued due to any of the following. 1040x amendment form The IRS determines that reduced withholding is appropriate because either: The amount required to be withheld would be more than your maximum tax liability, or Withholding of the reduced amount would not jeopardize collection of the tax. 1040x amendment form All of your realized gain is exempt from U. 1040x amendment form S. 1040x amendment form tax. 1040x amendment form You or the buyer enters into an agreement for the payment of tax providing security for the tax liability. 1040x amendment form   Get Publication 515 and Form 8288-B for information on procedures to request a withholding certificate. 1040x amendment form Credit for tax withheld. 1040x amendment form   The buyer must report and pay over the withheld tax within 20 days after the transfer using Form 8288, U. 1040x amendment form S. 1040x amendment form Withholding Tax Return for Dispositions by Foreign Persons of U. 1040x amendment form S. 1040x amendment form Real Property Interests. 1040x amendment form This form is filed with the IRS with copies A and B of Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U. 1040x amendment form S. 1040x amendment form Real Property Interests. 1040x amendment form Copy B of this statement will be stamped received by the IRS and returned to you (the seller) if the statement is complete and includes your taxpayer identification number (TIN). 1040x amendment form You must file Copy B with your tax return to take credit for the tax withheld. 1040x amendment form   A stamped copy of Form 8288-A will not be provided to you if your TIN is not included on that form. 1040x amendment form The IRS will send you a letter requesting the TIN and providing instructions for how to get a TIN. 1040x amendment form When you provide the IRS with a TIN, the IRS will provide you with a stamped Copy B of Form 8288-A. 1040x amendment form Social Security and Medicare Taxes If you work as an employee in the United States, you must pay social security and Medicare taxes in most cases. 1040x amendment form Your payments of these taxes contribute to your coverage under the U. 1040x amendment form S. 1040x amendment form social security system. 1040x amendment form Social security coverage provides retirement benefits, survivors and disability benefits, and medical insurance (Medicare) benefits to individuals who meet certain eligibility requirements. 1040x amendment form In most cases, the first $113,700 of taxable wages received in 2013 for services performed in the United States is subject to social security tax. 1040x amendment form All taxable wages are subject to Medicare tax. 1040x amendment form Your employer deducts these taxes from each wage payment. 1040x amendment form Your employer must deduct these taxes even if you do not expect to qualify for social security or Medicare benefits. 1040x amendment form You can claim a credit for excess social security tax on your income tax return if you have more than one employer and the amount deducted from your combined wages for 2013 is more than $7,049. 1040x amendment form 40. 1040x amendment form Use the appropriate worksheet in chapter 3 of Publication 505, Tax Withholding and Estimated Tax, to figure your credit. 1040x amendment form If any one employer deducted more than $7,049. 1040x amendment form 40, you cannot claim a credit for that amount. 1040x amendment form Ask your employer to refund the excess. 1040x amendment form If your employer does not refund the excess, you can file a claim for refund using Form 843. 1040x amendment form In general, U. 1040x amendment form S. 1040x amendment form social security and Medicare taxes apply to payments of wages for services performed as an employee in the United States, regardless of the citizenship or residence of either the employee or the employer. 1040x amendment form In limited situations, these taxes apply to wages for services performed outside the United States. 1040x amendment form Your employer should be able to tell you if social security and Medicare taxes apply to your wages. 1040x amendment form You cannot make voluntary payments if no taxes are due. 1040x amendment form Additional Medicare Tax. 1040x amendment form   Beginning in 2013, in addition to the Medicare tax, a 0. 1040x amendment form 9% Additional Medicare Tax applies to Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income that are more than: $250,000 if married filing jointly, $125,000 if married filing separately, or $200,000 for any other filing status. 1040x amendment form   There are no special rules for nonresident aliens for purposes of Additional Medicare Tax. 1040x amendment form Wages, RRTA compensation, and self-employment income that are subject to Medicare tax will also be subject to Additional Medicare Tax if in excess of the applicable threshold. 1040x amendment form   Your employer is responsible for withholding the 0. 1040x amendment form 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000 in the calendar year. 1040x amendment form If you intend to file a joint return and you anticipate that you and your spouse's individual wages are not going to be more than $200,000 but your combined wages and self-employment income are going to be more than $250,000, you may want to request additional withholding on Form W-4 and/or make estimated tax payments. 1040x amendment form   If you file Form 1040NR, you must pay Additional Medicare Tax if the total of your wages and your self-employment income was more than $125,000 if married (Box 3, 4, or 5 on page 1 of Form 1040NR), or $200,000 if single or qualifying widow(er) (Box 1, 2, or 6 on page 1 of Form 1040NR). 1040x amendment form    See Form 8959, Additional Medicare Tax, and the Instructions for Form 8959 to determine whether you are required to pay Additional Medicare Tax. 1040x amendment form For more information on Additional Medicare Tax, go to IRS. 1040x amendment form gov and enter “Additional Medicare Tax” in the search box. 1040x amendment form   Self-employed individuals may also be required to pay Additional Medicare Tax. 1040x amendment form See Self-Employment Tax , later. 1040x amendment form Students and Exchange Visitors Generally, services performed by you as a nonresident alien temporarily in the United States as a nonimmigrant under subparagraph (F), (J), (M), or (Q) of section 101(a)(15) of the Immigration and Nationality Act are not covered under the social security program if the services are performed to carry out the purpose for which you were admitted to the United States. 1040x amendment form This means that there will be no withholding of social security or Medicare taxes from the pay you receive for these services. 1040x amendment form These types of services are very limited, and generally include only on-campus work, practical training, and economic hardship employment. 1040x amendment form Social security and Medicare taxes will be withheld from your pay for these services if you are considered a resident alien as discussed in chapter 1, even though your nonimmigrant classification (“F,” “J,” “M,” or “Q”) remains the same. 1040x amendment form Services performed by a spouse or minor child of nonimmigrant aliens with the classification of “F-2,” “J-2,” “M-2,” and “Q-3” are covered under social security. 1040x amendment form Nonresident Alien Students If you are a nonresident alien temporarily admitted to the United States as a student, you generally are not permitted to work for a wage or salary or to engage in business while you are in the United States. 1040x amendment form In some cases, a student admitted to the United States in “F-1,” “M-1,” or “J-1” status is granted permission to work. 1040x amendment form Social security and Medicare taxes are not withheld from pay for the work unless the student is considered a resident alien. 1040x amendment form Any student who is enrolled and regularly attending classes at a school may be exempt from social security and Medicare taxes on pay for services performed for that school. 1040x amendment form The U. 1040x amendment form S. 1040x amendment form Citizenship and Immigration Services (USCIS) permits on-campus work for students in “F-1” status if it does not displace a U. 1040x amendment form S. 1040x amendment form resident. 1040x amendment form On-campus work means work performed on the school's premises. 1040x amendment form On-campus work includes work performed at an off-campus location that is educationally affiliated with the school. 1040x amendment form On-campus work under the terms of a scholarship, fellowship, or assistantship is considered part of the academic program of a student taking a full course of study and is permitted by the USCIS. 1040x amendment form Social security and Medicare taxes are not withheld from pay for this work unless the student is considered a resident alien. 1040x amendment form If services performed by a nonresident alien student are not considered as performed to carry out the purpose for which the student was admitted to the United States, social security and Medicare taxes will be withheld from pay for the services unless the pay is exempt under the Internal Revenue Code. 1040x amendment form Exchange Visitors Exchange visitors are temporarily admitted to the United States under section 101(a)(15)(J) of the Immigration and Nationality Act. 1040x amendment form Social security and Medicare taxes are not withheld on pay for services of an exchange visitor who has been given permission to work and who possesses or obtains a letter of authorization from the sponsor unless the exchange visitor is considered a resident alien. 1040x amendment form If services performed by an exchange visitor are not considered as performed to carry out the purpose for which the visitor was admitted to the United States, social security and Medicare taxes are withheld from pay for the services unless the pay is exempt under the Internal Revenue Code. 1040x amendment form Nonresident aliens temporarily admitted to the United States as participants in international cultural exchange programs under section 101(a)(15)(Q) of the Immigration and Nationality Act may be exempt from social security and Medicare taxes. 1040x amendment form The employer must be the petitioner through whom the alien obtained the “Q” visa. 1040x amendment form Social security and Medicare taxes are not withheld from pay for this work unless the alien is considered a resident alien. 1040x amendment form Refund of Taxes Withheld in Error If social security or Medicare taxes were withheld in error from pay that is not subject to these taxes, contact the employer who withheld the taxes for a refund. 1040x amendment form If you are unable to get a full refund of the amount from your employer, file a claim for refund with the Internal Revenue Service on Form 843, Claim for Refund and Request for Abatement. 1040x amendment form Attach the following items to Form 843. 1040x amendment form A copy of your Form W-2 to prove the amount of social security and Medicare taxes withheld. 1040x amendment form A copy of your visa. 1040x amendment form Form I-94 (or other documentation showing your dates of arrival or departure). 1040x amendment form If you have an F-1 visa, documentation showing permission to work in the U. 1040x amendment form S. 1040x amendment form If you have a J-1 visa, documentation showing permission to work in the U. 1040x amendment form S. 1040x amendment form If you are engaged in optional practical training or employment due to severe economic necessity, documentation showing permission to work in the U. 1040x amendment form S. 1040x amendment form A statement from your employer indicating the amount of the reimbursement your employer provided and the amount of the credit or refund your employer claimed or you authorized your employer to claim. 1040x amendment form If you cannot obtain this statement from your employer, you must provide this information on your own statement and explain why you are not attaching a statement from your employer or on Form 8316 claiming your employer will not issue the refund. 1040x amendment form If you were exempt from social security and Medicare tax for only part of the year, pay statements showing the tax paid during the period you were exempt. 1040x amendment form File Form 843 (with attachments) with the Department of the Treasury, Internal Revenue Service Center, Ogden, UT 84201-0038. 1040x amendment form Do not use Form 843 to request a refund of Additional Medicare Tax. 1040x amendment form If Additional Medicare Tax was withheld from your pay in error, you can claim a credit for any withheld Additional Medicare Tax against the total tax liability shown on your tax return by filing Form 8959 with Form 1040 or 1040NR. 1040x amendment form If Additional Medicare Tax was withheld in error in a prior year for which you already filed Form 1040 or 1040NR, you must file Form 1040X, Amended U. 1040x amendment form S. 1040x amendment form Individual Income Tax Return, for the prior year in which the wages or compensation were originally received to recover the Additional Medicare Tax withheld in error. 1040x amendment form See the Instructions for Form 1040X. 1040x amendment form Agricultural Workers Agricultural workers temporarily admitted into the United States on H-2A visas are exempt from social security and Medicare taxes on compensation paid to them for services performed in connection with the H-2A visa. 1040x amendment form You can find more information about not having tax withheld at www. 1040x amendment form irs. 1040x amendment form gov/Individuals/International-Taxpayers/Foreign-Agricultural-Workers. 1040x amendment form Self-Employment Tax Self-employment tax is the social security and Medicare taxes for individuals who are self-employed. 1040x amendment form Nonresident aliens are not subject to self-employment tax unless an international social security agreement in effect determines that they are covered under the U. 1040x amendment form S. 1040x amendment form social security system. 1040x amendment form Residents of the U. 1040x amendment form S. 1040x amendment form Virgin Islands, Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, or American Samoa are considered U. 1040x amendment form S. 1040x amendment form residents for this purpose and are subject to the self-employment tax. 1040x amendment form Resident aliens must pay self-employment tax under the same rules that apply to U. 1040x amendment form S. 1040x amendment form citizens. 1040x amendment form However, a resident alien employed by an international organization, a foreign government, or a wholly-owned instrumentality of a foreign government is not subject to the self-employment tax on income earned in the United States. 1040x amendment form Self-employment income you receive while you are a resident alien is subject to self-employment tax even if it was paid for services you performed as a nonresident alien. 1040x amendment form Example. 1040x amendment form Bill Jones is an author engaged in the business of writing books. 1040x amendment form Bill had several books published in a foreign country while he was a citizen and resident of that country. 1040x amendment form During 2013, Bill entered the United States as a resident alien. 1040x amendment form After becoming a U. 1040x amendment form S. 1040x amendment form resident, he continued to receive royalties from his foreign publisher. 1040x amendment form Bill reports his income and expenses on the cash basis (he reports income on his tax return when received and deducts expenses when paid). 1040x amendment form Bill's 2013 self-employment income includes the royalties received after he became a U. 1040x amendment form S. 1040x amendment form resident even though the books were published while he was a nonresident alien. 1040x amendment form This royalty income is subject to self-employment tax. 1040x amendment form Reporting self-employment tax. 1040x amendment form   Use Schedule SE (Form 1040) to report and figure your self-employment tax. 1040x amendment form Then enter the tax on Form 1040, line 56, or Form 1040NR, line 54. 1040x amendment form Attach Schedule SE to Form 1040 or Form 1040NR. 1040x amendment form Additional Medicare Tax. 1040x amendment form   Self-employed individuals must pay a 0. 1040x amendment form 9% Additional Medicare Tax on self-employment income that exceeds one of the following threshold amounts (based on your filing status): Married filing jointly — $250,000; Married filing separately — $125,000; Single, Head of household, or Qualifying widow(er) — $200,000. 1040x amendment form   If you have both wages and self-employment income, the threshold amount for applying the Additional Medicare Tax on the self-employment income is reduced (but not below zero) by the amount of wages subject to Additional Medicare Tax. 1040x amendment form A self-employment loss should not be considered for purposes of this tax   If you file Form 1040NR, you must pay Additional Medicare Tax if the total of your wages and your self-employment income was more than $125,000 if married (Box 3, 4, or 5 on page 1 of Form 1040NR), or $200,000 if single or qualifying widow(er) (Box 1, 2, or 6 on page 1 of Form 1040NR). 1040x amendment form   See Form 8959, Additional Medicare Tax, and the Instructions for Form 8959 to determine whether you are required to pay Additional Medicare Tax. 1040x amendment form For more information on Additional Medicare Tax, go to IRS. 1040x amendment form gov and enter “Additional Medicare Tax” in the search box. 1040x amendment form Deduction for employer-equivalent portion of self-employment tax. 1040x amendment form   If you must pay self-employment tax, you can deduct a portion of the self-employment tax paid in figuring your adjusted gross income. 1040x amendment form This deduction is figured on Schedule SE (Form 1040). 1040x amendment form Note. 1040x amendment form No portion of the Additional Medicare Tax is deductible for self-employment tax. 1040x amendment form More information. 1040x amendment form   Get Publication 334, Tax Guide for Small Business, for more information about self-employment tax. 1040x amendment form International Social Security Agreements The United States has entered into social security agreements with foreign countries to coordinate social security coverage and taxation of workers employed for part or all of their working careers in one of the countries. 1040x amendment form These agreements are commonly referred to as totalization agreements. 1040x amendment form Under these agreements, dual coverage and dual contributions (taxes) for the same work are eliminated. 1040x amendment form The agreements generally make sure that social security taxes (including self-employment tax) are paid only to one country. 1040x amendment form Agreements are in effect with the following countries. 1040x amendment form Australia. 1040x amendment form Austria. 1040x amendment form Belgium. 1040x amendment form Canada. 1040x amendment form Chile. 1040x amendment form Czech Republic. 1040x amendment form Denmark. 1040x amendment form Finland. 1040x amendment form France. 1040x amendment form Germany. 1040x amendment form Greece. 1040x amendment form Ireland. 1040x amendment form Italy. 1040x amendment form Japan. 1040x amendment form Korea, South. 1040x amendment form Luxembourg. 1040x amendment form The Netherlands. 1040x amendment form Norway. 1040x amendment form Poland. 1040x amendment form Portugal. 1040x amendment form Spain. 1040x amendment form Sweden. 1040x amendment form Switzerland. 1040x amendment form The United Kingdom. 1040x amendment form Agreements with other countries are expected to enter into force in the future. 1040x amendment form Employees. 1040x amendment form   Generally, under these agreements, you are subject to social security taxes only in the country where you are working. 1040x amendment form However, if you are temporarily sent to work for the same employer in the United States and your pay would normally be subject to social security taxes in both countries, most agreements provide that you remain covered only by the social security system of the country from which you were sent. 1040x amendment form You can get more information on any agreement by contacting the U. 1040x amendment form S. 1040x amendment form Social Security Administration at the address given later. 1040x amendment form If you have access to the Internet, you can get more information at www. 1040x amendment form socialsecurity. 1040x amendment form gov/international. 1040x amendment form   To establish that your pay is subject only to foreign social security taxes and is exempt from U. 1040x amendment form S. 1040x amendment form social security taxes (including the Medicare tax) under an agreement, you or your employer should request a certificate of coverage from the appropriate agency of the foreign country. 1040x amendment form This will usually be the same agency to which you or your employer pays your foreign social security taxes. 1040x amendment form The foreign agency will be able to tell you what information is needed for them to issue the certificate. 1040x amendment form Your employer should keep a copy of the certificate because it may be needed to show why you are exempt from U. 1040x amendment form S. 1040x amendment form social security taxes. 1040x amendment form Only wages paid on or after the effective date of the agreement can be exempt from U. 1040x amendment form S. 1040x amendment form social security taxes. 1040x amendment form    Some of the countries with which the United States has agreements will not issue certificates of coverage. 1040x amendment form In this case, either you or your employer should request a statement that your wages are not covered by the U. 1040x amendment form S. 1040x amendment form social security system. 1040x amendment form Request the statement from the following address. 1040x amendment form U. 1040x amendment form S. 1040x amendment form Social Security Administration Office of International Programs P. 1040x amendment form O. 1040x amendment form Box 17741 Baltimore, MD 21235-7741 Self-employed individuals. 1040x amendment form   Under most agreements, self-employed individuals are covered by the social security system of the country where they reside. 1040x amendment form However, under some agreements, you may be exempt from U. 1040x amendment form S. 1040x amendment form self-employment tax if you temporarily transfer your business activity to or from the United States. 1040x amendment form   If you believe that your self-employment income is subject only to U. 1040x amendment form S. 1040x amendment form self-employment tax and is exempt from foreign social security taxes, request a certificate of coverage from the U. 1040x amendment form S. 1040x amendment form Social Security Administration at the address given earlier. 1040x amendment form This certificate will establish your exemption from foreign social security taxes. 1040x amendment form   To establish that your self-employment income is subject only to foreign social security taxes and is exempt from U. 1040x amendment form S. 1040x amendment form self-employment tax, request a certificate of coverage from the appropriate agency of the foreign country. 1040x amendment form If the foreign country will not issue the certificate, you should request a statement that your income is not covered by the U. 1040x amendment form S. 1040x amendment form social security system. 1040x amendment form Request it from the U. 1040x amendment form S. 1040x amendment form Social Security Administration at the address given earlier. 1040x amendment form Attach a photocopy of either statement to Form 1040 each year you are exempt. 1040x amendment form Also print “Exempt, see attached statement” on the line for self-employment tax. 1040x amendment form Estimated Tax Form 1040-ES (NR) You may have income from which no U. 1040x amendment form S. 1040x amendment form income tax is withheld. 1040x amendment form Or the amount of tax withheld may be less than the income tax you estimate you will owe at the end of the year. 1040x amendment form If so, you may have to pay estimated tax. 1040x amendment form Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax and you expect your withholding and certain refundable credits to be less than the smaller of: 90% of the tax to be shown on your 2014 income tax return, or 100% of the tax shown on your 2013 income tax return (if your 2013 return covered all 12 months of the year). 1040x amendment form If your adjusted gross income for 2013 was more than $150,000 ($75,000 if your filing status for 2014 is married filing separately), substitute 110% for 100% in (2) above if you are not a farmer or fisherman. 1040x amendment form Item (2) does not apply if you did not file a 2013 return. 1040x amendment form A nonresident alien should use Form 1040-ES (NR) to figure and pay estimated tax. 1040x amendment form If you pay by check, make it payable to the "United States Treasury. 1040x amendment form " How to estimate your tax for 2014. 1040x amendment form   If you filed a 2013 return on Form 1040NR or Form 1040NR-EZ and expect your income, number of exemptions, and total deductions for 2014 to be nearly the same, you should use your 2013 return as a guide to complete the Estimated Tax Worksheet in the Form 1040-ES (NR) instructions. 1040x amendment form If you did not file a return for 2013, or if your income, exemptions, deductions, or credits will be different for 2014, you must estimate these amounts. 1040x amendment form Figure your estimated tax liability using the Tax Rate Schedule in the 2014 Form 1040-ES (NR) instructions for your filing status. 1040x amendment form Note. 1040x amendment form If you expect to be a resident of Puerto Rico during the entire year, use Form 1040-ES or Formulario 1040-ES (PR). 1040x amendment form When to pay estimated tax. 1040x amendment form   Make your first estimated tax payment by the due date for filing the previous year's Form 1040NR or Form 1040NR-EZ. 1040x amendment form If you have wages subject to the same withholding rules that apply to U. 1040x amendment form S. 1040x amendment form citizens, you must file Form 1040NR or Form 1040NR-EZ and make your first estimated tax payment by April 15, 2014. 1040x amendment form If you do not have wages subject to withholding, file your income tax return and make your first estimated tax payment by June 16, 2014. 1040x amendment form   If your first estimated tax payment is due April 15, 2014, you can pay your estimated tax in full at that time or in four equal installments by the dates shown next. 1040x amendment form 1st installment April 15, 2014 2nd installment June 16, 2014 3rd installment Sept. 1040x amendment form 15, 2014 4th installment Jan. 1040x amendment form 15, 2015 If your first payment is not due until June 16, 2014, you can pay your estimated tax in full at that time or: ½ of your estimated tax by June 16, 2014, 1/4 of the tax by September 15, 2014, and 1/4 by January 15, 2015. 1040x amendment form    You do not have to make the payment due January 15, 2015, if you file your 2014 Form 1040NR or 1040NR-EZ by February 2, 2015, and pay the entire balance due with your return. 1040x amendment form Fiscal year. 1040x amendment form   If your return is not on a calendar year basis, your due dates are the 15th day of the 4th, 6th, and 9th months of your fiscal year, and the 1st month of the following fiscal year. 1040x amendment form If any date falls on a Saturday, Sunday, or legal holiday, use the next day that is not a Saturday, Sunday, or legal holiday. 1040x amendment form Changes in income, deductions, or exemptions. 1040x amendment form   Even if you are not required to make an estimated tax payment in April or June, your circumstances may change so that you will have to make estimated tax payments later. 1040x amendment form This can happen if you receive additional income or if any of your deductions are reduced or eliminated. 1040x amendment form If so, see the instructions for Form 1040-ES (NR) and Publication 505 for information on figuring your estimated tax. 1040x amendment form Amended estimated tax. 1040x amendment form   If, after you have made estimated tax payments, you find your estimated tax is substantially increased or decreased because of a change in your income or exemptions, you should adjust your remaining estimated tax payments. 1040x amendment form To do this, see the instructions for Form 1040-ES (NR) and Publication 505. 1040x amendment form Penalty for failure to pay estimated income tax. 1040x amendment form   You will be subject to a penalty for underpayment of installments of estimated tax except in certain situations. 1040x amendment form These situations are explained on Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts. 1040x amendment form Prev  Up  Next   Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Tennessee Department of Commerce and Insurance

Website: Tennessee Department of Commerce and Insurance

Address: Tennessee Department of Commerce and Insurance
Division of Consumer Affairs
500 James Robertson Pkwy., 12th Floor
Nashville, TN 37243-0600

Phone Number: 615-741-4737

Toll-free: 1-800-342-8385 (TN)

Tennessee Office of the Attorney General

Website: Tennessee Office of the Attorney General

Address: Tennessee Office of the Attorney General
Consumer Advocate and Protection Division
PO Box 20207
Nashville, TN 37202-0207

Phone Number: 615-741-1671

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Financial Institutions

Website: Department of Financial Institutions

Address: Department of Financial Institutions
Consumer Resources Division
414 Union St., Suite 1000
Nashville, TN 37219

Phone Number: 615-253-2023

Toll-free: 1-800-778-4215 (TN)

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Department of Commerce and Insurance

Website: Department of Commerce and Insurance

Address: Department of Commerce and Insurance
Consumer Insurance Services
500 James Robertson Pkwy., 4th Floor
Nashville, TN 37243-0574

Phone Number: 615-741-2218

Toll-free: 1-800-342-4029 (TN)

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Department of Commerce and Insurance

Website: Department of Commerce and Insurance

Address: Department of Commerce and Insurance
Securities Division
500 James Robertson Pkwy.
Nashville, TN 37243-0575

Phone Number: 615-741-2947

Toll-free: 1-800-863-9117 (TN)

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Regulatory Authority

Website: Regulatory Authority

Address: Regulatory Authority
Consumer Services Division
460 James Robertson Pkwy.
Nashville, TN 37243-0505

Phone Number: 615-741-2904

Toll-free: 1-800-342-8359 (Consumer Services)

TTY: 1-888-276-0677

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The 1040x Amendment Form

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