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2011 Tax Preparation Software

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2011 Tax Preparation Software

2011 tax preparation software 10. 2011 tax preparation software   Employees of Foreign Governments and International Organizations Table of Contents Exemption Under Tax Treaty Exemption Under U. 2011 tax preparation software S. 2011 tax preparation software Tax LawCertification. 2011 tax preparation software Employees of foreign governments (including foreign municipalities) have two ways to get exemption of their governmental wages from U. 2011 tax preparation software S. 2011 tax preparation software income tax: By a provision in a tax treaty or consular convention between the United States and their country, or By meeting the requirements of U. 2011 tax preparation software S. 2011 tax preparation software tax law. 2011 tax preparation software Employees of international organizations can exempt their wages either by a provision, if one exists, in the international agreement creating the international organization, or by meeting the requirements of U. 2011 tax preparation software S. 2011 tax preparation software tax law. 2011 tax preparation software The exemption discussed in this chapter applies only to pay received for services performed for a foreign government or international organization. 2011 tax preparation software Other U. 2011 tax preparation software S. 2011 tax preparation software income received by persons who qualify for this exemption may be fully taxable or given favorable treatment under an applicable tax treaty provision. 2011 tax preparation software The proper treatment of this kind of income (interest, dividends, etc. 2011 tax preparation software ) is discussed earlier in this publication. 2011 tax preparation software Exemption Under Tax Treaty If you are from a country that has a tax treaty with the United States, you should first look at the treaty to see if there is a provision that exempts your income. 2011 tax preparation software The income of U. 2011 tax preparation software S. 2011 tax preparation software citizens and resident aliens working for foreign governments usually is not exempt. 2011 tax preparation software However, in a few instances, the income of a U. 2011 tax preparation software S. 2011 tax preparation software citizen with dual citizenship may qualify. 2011 tax preparation software Often the exemption is limited to the income of persons who also are nationals of the foreign country involved. 2011 tax preparation software Exemption Under U. 2011 tax preparation software S. 2011 tax preparation software Tax Law Employees of foreign governments who do not qualify under a tax treaty provision and employees of international organizations may qualify for exemption by meeting the following requirements of U. 2011 tax preparation software S. 2011 tax preparation software tax law. 2011 tax preparation software The exemption under U. 2011 tax preparation software S. 2011 tax preparation software tax law applies only to current employees and not to former employees. 2011 tax preparation software Pensions received by former employees living in the United States do not qualify for the exemption discussed here. 2011 tax preparation software Employees of foreign governments. 2011 tax preparation software   If you are not a U. 2011 tax preparation software S. 2011 tax preparation software citizen, or if you are a U. 2011 tax preparation software S. 2011 tax preparation software citizen but also a citizen of the Philippines, and you work for a foreign government in the United States, your foreign government salary is exempt from U. 2011 tax preparation software S. 2011 tax preparation software tax if you perform services similar to those performed by U. 2011 tax preparation software S. 2011 tax preparation software government employees in that foreign country and that foreign government grants an equivalent exemption to U. 2011 tax preparation software S. 2011 tax preparation software government employees. 2011 tax preparation software Certification. 2011 tax preparation software   To qualify for the exemption under U. 2011 tax preparation software S. 2011 tax preparation software tax law, either the Department of State must certify that you perform services similar to those performed by employees of the government of the United States in foreign countries and that your foreign government employer grants an equivalent exemption to U. 2011 tax preparation software S. 2011 tax preparation software government employees performing similar services in its country or you must establish those facts. 2011 tax preparation software However, see Aliens who keep immigrant status , later, for a special rule that may affect your qualifying for this exemption. 2011 tax preparation software Employees of international organizations. 2011 tax preparation software   If you work for an international organization in the United States and you are not a U. 2011 tax preparation software S. 2011 tax preparation software citizen (or you are a U. 2011 tax preparation software S. 2011 tax preparation software citizen but are also a citizen of the Philippines), your salary from that organization is exempt from U. 2011 tax preparation software S. 2011 tax preparation software tax. 2011 tax preparation software However, see Aliens who keep immigrant status , later, for a special rule that may affect your qualifying for this exemption. 2011 tax preparation software   An international organization is an organization designated by the President of the United States through Executive Order to qualify for the privileges, exemptions, and immunities provided in the International Organizations Immunities Act. 2011 tax preparation software   You should find out if you have been made known to, and have been accepted by, the Secretary of State as an officer or an employee of that organization, or if you have been designated by the Secretary of State, before formal notification and acceptance, as a prospective officer or employee. 2011 tax preparation software   If you are claiming exemption, you should know the number of the Executive Order covering the international organization and should have some written evidence of your acceptance or designation by the Secretary of State. 2011 tax preparation software   The exemption is denied when, because the Secretary of State determines your presence in the United States is no longer desirable, you leave the United States (or after a reasonable time allowed for leaving the United States). 2011 tax preparation software The exemption is also denied when a foreign country does not allow similar exemptions to U. 2011 tax preparation software S. 2011 tax preparation software citizens. 2011 tax preparation software Then the Secretary of State can withdraw the privileges, exemptions, and immunities from the nationals of that foreign country. 2011 tax preparation software Aliens who keep immigrant status. 2011 tax preparation software   If you file the waiver provided by section 247(b) of the Immigration and Nationality Act (USCIS Form I-508) to keep your immigrant status (green card), you no longer qualify for the exemption from U. 2011 tax preparation software S. 2011 tax preparation software tax under U. 2011 tax preparation software S. 2011 tax preparation software tax law from the date of filing the waiver with the Attorney General. 2011 tax preparation software   However, you do not lose the exemption if you file the waiver, and meet either of the following conditions. 2011 tax preparation software You are exempt from U. 2011 tax preparation software S. 2011 tax preparation software tax under an income tax treaty, consular agreement, or international agreement between the United States and your foreign government employer. 2011 tax preparation software You work for an international organization and the international organization agreement creating the international organization provides that alien employees are exempt from U. 2011 tax preparation software S. 2011 tax preparation software income tax. 2011 tax preparation software Two international organizations that have such a provision are the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank). 2011 tax preparation software . 2011 tax preparation software   For more information about a specific foreign country or international organization, send an email to embassy@irs. 2011 tax preparation software gov. 2011 tax preparation software Prev  Up  Next   Home   More Online Publications
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The 2011 Tax Preparation Software

2011 tax preparation software 12. 2011 tax preparation software   Other Income Table of Contents Introduction Useful Items - You may want to see: Bartering Canceled DebtsInterest included in canceled debt. 2011 tax preparation software Exceptions Host or Hostess Life Insurance ProceedsSurviving spouse. 2011 tax preparation software Endowment Contract Proceeds Accelerated Death Benefits Public Safety Officer Killed in the Line of Duty Partnership Income S Corporation Income RecoveriesItemized Deduction Recoveries Rents from Personal Property RepaymentsMethod 1. 2011 tax preparation software Method 2. 2011 tax preparation software RoyaltiesDepletion. 2011 tax preparation software Coal and iron ore. 2011 tax preparation software Sale of property interest. 2011 tax preparation software Part of future production sold. 2011 tax preparation software Unemployment BenefitsTypes of unemployment compensation. 2011 tax preparation software Governmental program. 2011 tax preparation software Repayment of unemployment compensation. 2011 tax preparation software Tax withholding. 2011 tax preparation software Repayment of benefits. 2011 tax preparation software Welfare and Other Public Assistance Benefits Other IncomeEmotional distress. 2011 tax preparation software Deduction for costs involved in unlawful discrimination suits. 2011 tax preparation software Energy conservation measure. 2011 tax preparation software Dwelling unit. 2011 tax preparation software Current income required to be distributed. 2011 tax preparation software Current income not required to be distributed. 2011 tax preparation software How to report. 2011 tax preparation software Losses. 2011 tax preparation software Grantor trust. 2011 tax preparation software Nonemployee compensation. 2011 tax preparation software Corporate director. 2011 tax preparation software Personal representatives. 2011 tax preparation software Manager of trade or business for bankruptcy estate. 2011 tax preparation software Notary public. 2011 tax preparation software Election precinct official. 2011 tax preparation software Difficulty-of-care payments. 2011 tax preparation software Maintaining space in home. 2011 tax preparation software Reporting taxable payments. 2011 tax preparation software Lotteries and raffles. 2011 tax preparation software Form W-2G. 2011 tax preparation software Reporting winnings and recordkeeping. 2011 tax preparation software Inherited pension or IRA. 2011 tax preparation software Employee awards or bonuses. 2011 tax preparation software Pulitzer, Nobel, and similar prizes. 2011 tax preparation software Payment for services. 2011 tax preparation software VA payments. 2011 tax preparation software Prizes. 2011 tax preparation software Strike and lockout benefits. 2011 tax preparation software Introduction You must include on your return all items of income you receive in the form of money, property, and services unless the tax law states that you do not include them. 2011 tax preparation software Some items, however, are only partly excluded from income. 2011 tax preparation software This chapter discusses many kinds of income and explains whether they are taxable or nontaxable. 2011 tax preparation software Income that is taxable must be reported on your tax return and is subject to tax. 2011 tax preparation software Income that is nontaxable may have to be shown on your tax return but is not taxable. 2011 tax preparation software This chapter begins with discussions of the following income items. 2011 tax preparation software Bartering. 2011 tax preparation software Canceled debts. 2011 tax preparation software Sales parties at which you are the host or hostess. 2011 tax preparation software Life insurance proceeds. 2011 tax preparation software Partnership income. 2011 tax preparation software S Corporation income. 2011 tax preparation software Recoveries (including state income tax refunds). 2011 tax preparation software Rents from personal property. 2011 tax preparation software Repayments. 2011 tax preparation software Royalties. 2011 tax preparation software Unemployment benefits. 2011 tax preparation software Welfare and other public assistance benefits. 2011 tax preparation software These discussions are followed by brief discussions of other income items. 2011 tax preparation software Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 544 Sales and Other Dispositions of Assets 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Bartering Bartering is an exchange of property or services. 2011 tax preparation software You must include in your income, at the time received, the fair market value of property or services you receive in bartering. 2011 tax preparation software If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise. 2011 tax preparation software Generally, you report this income on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. 2011 tax preparation software However, if the barter involves an exchange of something other than services, such as in Example 3 below, you may have to use another form or schedule instead. 2011 tax preparation software Example 1. 2011 tax preparation software You are a self-employed attorney who performs legal services for a client, a small corporation. 2011 tax preparation software The corporation gives you shares of its stock as payment for your services. 2011 tax preparation software You must include the fair market value of the shares in your income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) in the year you receive them. 2011 tax preparation software Example 2. 2011 tax preparation software You are self-employed and a member of a barter club. 2011 tax preparation software The club uses “credit units” as a means of exchange. 2011 tax preparation software It adds credit units to your account for goods or services you provide to members, which you can use to purchase goods or services offered by other members of the barter club. 2011 tax preparation software The club subtracts credit units from your account when you receive goods or services from other members. 2011 tax preparation software You must include in your income the value of the credit units that are added to your account, even though you may not actually receive goods or services from other members until a later tax year. 2011 tax preparation software Example 3. 2011 tax preparation software You own a small apartment building. 2011 tax preparation software In return for 6 months rent-free use of an apartment, an artist gives you a work of art she created. 2011 tax preparation software You must report as rental income on Schedule E (Form 1040), Supplemental Income and Loss, the fair market value of the artwork, and the artist must report as income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) the fair rental value of the apartment. 2011 tax preparation software Form 1099-B from barter exchange. 2011 tax preparation software   If you exchanged property or services through a barter exchange, Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a similar statement from the barter exchange should be sent to you by February 18, 2014. 2011 tax preparation software It should show the value of cash, property, services, credits, or scrip you received from exchanges during 2013. 2011 tax preparation software The IRS also will receive a copy of Form 1099-B. 2011 tax preparation software Canceled Debts In most cases, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income. 2011 tax preparation software You have no income from the canceled debt if it is intended as a gift to you. 2011 tax preparation software A debt includes any indebtedness for which you are liable or which attaches to property you hold. 2011 tax preparation software If the debt is a nonbusiness debt, report the canceled amount on Form 1040, line 21. 2011 tax preparation software If it is a business debt, report the amount on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) (or on Schedule F (Form 1040), Profit or Loss From Farming, if the debt is farm debt and you are a farmer). 2011 tax preparation software Form 1099-C. 2011 tax preparation software   If a Federal Government agency, financial institution, or credit union cancels or forgives a debt you owe of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. 2011 tax preparation software The amount of the canceled debt is shown in box 2. 2011 tax preparation software Interest included in canceled debt. 2011 tax preparation software   If any interest is forgiven and included in the amount of canceled debt in box 2, the amount of interest also will be shown in box 3. 2011 tax preparation software Whether or not you must include the interest portion of the canceled debt in your income depends on whether the interest would be deductible when you paid it. 2011 tax preparation software See Deductible debt under Exceptions, later. 2011 tax preparation software   If the interest would not be deductible (such as interest on a personal loan), include in your income the amount from Form 1099-C, box 2. 2011 tax preparation software If the interest would be deductible (such as on a business loan), include in your income the net amount of the canceled debt (the amount shown in box 2 less the interest amount shown in box 3). 2011 tax preparation software Discounted mortgage loan. 2011 tax preparation software   If your financial institution offers a discount for the early payment of your mortgage loan, the amount of the discount is canceled debt. 2011 tax preparation software You must include the canceled amount in your income. 2011 tax preparation software Mortgage relief upon sale or other disposition. 2011 tax preparation software   If you are personally liable for a mortgage (recourse debt), and you are relieved of the mortgage when you dispose of the property, you may realize gain or loss up to the fair market value of the property. 2011 tax preparation software To the extent the mortgage discharge exceeds the fair market value of the property, it is income from discharge of indebtedness unless it qualifies for exclusion under Excluded debt , later. 2011 tax preparation software Report any income from discharge of indebtedness on nonbusiness debt that does not qualify for exclusion as other income on Form 1040, line 21. 2011 tax preparation software    You may be able to exclude part of the mortgage relief on your principal residence. 2011 tax preparation software See Excluded debt, later. 2011 tax preparation software   If you are not personally liable for a mortgage (nonrecourse debt), and you are relieved of the mortgage when you dispose of the property (such as through foreclosure), that relief is included in the amount you realize. 2011 tax preparation software You may have a taxable gain if the amount you realize exceeds your adjusted basis in the property. 2011 tax preparation software Report any gain on nonbusiness property as a capital gain. 2011 tax preparation software   See Publication 4681 for more information. 2011 tax preparation software Stockholder debt. 2011 tax preparation software   If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution that is generally dividend income to you. 2011 tax preparation software For more information, see Publication 542, Corporations. 2011 tax preparation software   If you are a stockholder in a corporation and you cancel a debt owed to you by the corporation, you generally do not realize income. 2011 tax preparation software This is because the canceled debt is considered as a contribution to the capital of the corporation equal to the amount of debt principal that you canceled. 2011 tax preparation software Repayment of canceled debt. 2011 tax preparation software   If you included a canceled amount in your income and later pay the debt, you may be able to file a claim for refund for the year the amount was included in income. 2011 tax preparation software You can file a claim on Form 1040X if the statute of limitations for filing a claim is still open. 2011 tax preparation software The statute of limitations generally does not end until 3 years after the due date of your original return. 2011 tax preparation software Exceptions There are several exceptions to the inclusion of canceled debt in income. 2011 tax preparation software These are explained next. 2011 tax preparation software Student loans. 2011 tax preparation software   Certain student loans contain a provision that all or part of the debt incurred to attend the qualified educational institution will be canceled if you work for a certain period of time in certain professions for any of a broad class of employers. 2011 tax preparation software   You do not have income if your student loan is canceled after you agreed to this provision and then performed the services required. 2011 tax preparation software To qualify, the loan must have been made by: The Federal Government, a state or local government, or an instrumentality, agency, or subdivision thereof, A tax-exempt public benefit corporation that has assumed control of a state, county, or municipal hospital, and whose employees are considered public employees under state law, or An educational institution: Under an agreement with an entity described in (1) or (2) that provided the funds to the institution to make the loan, or As part of a program of the institution designed to encourage its students to serve in occupations with unmet needs or in areas with unmet needs and under which the services provided by the students (or former students) are for or under the direction of a governmental unit or a tax-exempt organization described in section 501(c)(3). 2011 tax preparation software   A loan to refinance a qualified student loan also will qualify if it was made by an educational institution or a qualified tax-exempt organization under its program designed as described in (3)(b) above. 2011 tax preparation software Education loan repayment assistance. 2011 tax preparation software   Education loan repayments made to you by the National Health Service Corps Loan Repayment Program (NHSC Loan Repayment Program), a state education loan repayment program eligible for funds under the Public Health Service Act, or any other state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health services in underserved or health professional shortage areas are not taxable. 2011 tax preparation software    The provision relating to the “other state loan repayment or loan forgiveness program” was added to this exclusion for amounts received in tax years beginning after December 31, 2008. 2011 tax preparation software If you included these amounts in income in 2010, 2011, or 2012, you should file an amended tax return to exclude this income. 2011 tax preparation software See Form 1040X and its instructions for details on filing. 2011 tax preparation software Deductible debt. 2011 tax preparation software   You do not have income from the cancellation of a debt if your payment of the debt would be deductible. 2011 tax preparation software This exception applies only if you use the cash method of accounting. 2011 tax preparation software For more information, see chapter 5 of Publication 334, Tax Guide for Small Business. 2011 tax preparation software Price reduced after purchase. 2011 tax preparation software   In most cases, if the seller reduces the amount of debt you owe for property you purchased, you do not have income from the reduction. 2011 tax preparation software The reduction of the debt is treated as a purchase price adjustment and reduces your basis in the property. 2011 tax preparation software Excluded debt. 2011 tax preparation software   Do not include a canceled debt in your gross income in the following situations. 2011 tax preparation software The debt is canceled in a bankruptcy case under title 11 of the U. 2011 tax preparation software S. 2011 tax preparation software Code. 2011 tax preparation software See Publication 908, Bankruptcy Tax Guide. 2011 tax preparation software The debt is canceled when you are insolvent. 2011 tax preparation software However, you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent. 2011 tax preparation software See Publication 908. 2011 tax preparation software The debt is qualified farm debt and is canceled by a qualified person. 2011 tax preparation software See chapter 3 of Publication 225, Farmer's Tax Guide. 2011 tax preparation software The debt is qualified real property business debt. 2011 tax preparation software See chapter 5 of Publication 334. 2011 tax preparation software The cancellation is intended as a gift. 2011 tax preparation software The debt is qualified principal residence indebtedness. 2011 tax preparation software See Publication 525 for additional information. 2011 tax preparation software Host or Hostess If you host a party or event at which sales are made, any gift or gratuity you receive for giving the event is a payment for helping a direct seller make sales. 2011 tax preparation software You must report this item as income at its fair market value. 2011 tax preparation software Your out-of-pocket party expenses are subject to the 50% limit for meal and entertainment expenses. 2011 tax preparation software These expenses are deductible as miscellaneous itemized deductions subject to the 2%-of-AGI limit on Schedule A (Form 1040), but only up to the amount of income you receive for giving the party. 2011 tax preparation software For more information about the 50% limit for meal and entertainment expenses, see chapter 26. 2011 tax preparation software Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. 2011 tax preparation software This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. 2011 tax preparation software However, interest income received as a result of life insurance proceeds may be taxable. 2011 tax preparation software Proceeds not received in installments. 2011 tax preparation software   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. 2011 tax preparation software If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. 2011 tax preparation software Proceeds received in installments. 2011 tax preparation software   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. 2011 tax preparation software   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. 2011 tax preparation software Include anything over this excluded part in your income as interest. 2011 tax preparation software Surviving spouse. 2011 tax preparation software   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude up to $1,000 a year of the interest included in the installments. 2011 tax preparation software If you remarry, you can continue to take the exclusion. 2011 tax preparation software Surrender of policy for cash. 2011 tax preparation software   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. 2011 tax preparation software In most cases, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. 2011 tax preparation software    You should receive a Form 1099-R showing the total proceeds and the taxable part. 2011 tax preparation software Report these amounts on lines 16a and 16b of Form 1040 or lines 12a and 12b of Form 1040A. 2011 tax preparation software More information. 2011 tax preparation software   For more information, see Life Insurance Proceeds in Publication 525. 2011 tax preparation software Endowment Contract Proceeds An endowment contract is a policy under which you are paid a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. 2011 tax preparation software Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. 2011 tax preparation software To determine your cost, subtract any amount that you previously received under the contract and excluded from your income from the total premiums (or other consideration) paid for the contract. 2011 tax preparation software Include the part of the lump sum payment that is more than your cost in your income. 2011 tax preparation software Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are excluded from income if the insured is terminally or chronically ill. 2011 tax preparation software Viatical settlement. 2011 tax preparation software   This is the sale or assignment of any part of the death benefit under a life insurance contract to a viatical settlement provider. 2011 tax preparation software A viatical settlement provider is a person who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill and who meets the requirements of section 101(g)(2)(B) of the Internal Revenue Code. 2011 tax preparation software Exclusion for terminal illness. 2011 tax preparation software    Accelerated death benefits are fully excludable if the insured is a terminally ill individual. 2011 tax preparation software This is a person who has been certified by a physician as having an illness or physical condition that can reasonably be expected to result in death within 24 months from the date of the certification. 2011 tax preparation software Exclusion for chronic illness. 2011 tax preparation software    If the insured is a chronically ill individual who is not terminally ill, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. 2011 tax preparation software Accelerated death benefits paid on a per diem or other periodic basis are excludable up to a limit. 2011 tax preparation software This limit applies to the total of the accelerated death benefits and any periodic payments received from long-term care insurance contracts. 2011 tax preparation software For information on the limit and the definitions of chronically ill individual, qualified long-term care services, and long-term care insurance contracts, see Long-Term Care Insurance Contracts under Sickness and Injury Benefits in Publication 525. 2011 tax preparation software Exception. 2011 tax preparation software   The exclusion does not apply to any amount paid to a person (other than the insured) who has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the person, or Has a financial interest in the person's business. 2011 tax preparation software Form 8853. 2011 tax preparation software   To claim an exclusion for accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. 2011 tax preparation software You do not have to file Form 8853 to exclude accelerated death benefits paid on the basis of actual expenses incurred. 2011 tax preparation software Public Safety Officer Killed in the Line of Duty If you are a survivor of a public safety officer who was killed in the line of duty, you may be able to exclude from income certain amounts you receive. 2011 tax preparation software For this purpose, the term public safety officer includes law enforcement officers, firefighters, chaplains, and rescue squad and ambulance crew members. 2011 tax preparation software For more information, see Publication 559, Survivors, Executors, and Administrators. 2011 tax preparation software Partnership Income A partnership generally is not a taxable entity. 2011 tax preparation software The income, gains, losses, deductions, and credits of a partnership are passed through to the partners based on each partner's distributive share of these items. 2011 tax preparation software Schedule K-1 (Form 1065). 2011 tax preparation software    Although a partnership generally pays no tax, it must file an information return on Form 1065, U. 2011 tax preparation software S. 2011 tax preparation software Return of Partnership Income, and send Schedule K-1 (Form 1065) to each partner. 2011 tax preparation software In addition, the partnership will send each partner a copy of the Partner's Instructions for Schedule K-1 (Form 1065) to help each partner report his or her share of the partnership's income, deductions, credits, and tax preference items. 2011 tax preparation software Keep Schedule K-1 (Form 1065) for your records. 2011 tax preparation software Do not attach it to your Form 1040, unless you are specifically required to do so. 2011 tax preparation software For more information on partnerships, see Publication 541, Partnerships. 2011 tax preparation software Qualified joint venture. 2011 tax preparation software   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. 2011 tax preparation software To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. 2011 tax preparation software For further information on how to make the election and which schedule(s) to file, see the instructions for your individual tax return. 2011 tax preparation software S Corporation Income In most cases, an S corporation does not pay tax on its income. 2011 tax preparation software Instead, the income, losses, deductions, and credits of the corporation are passed through to the shareholders based on each shareholder's pro rata share. 2011 tax preparation software Schedule K-1 (Form 1120S). 2011 tax preparation software   An S corporation must file a return on Form 1120S, U. 2011 tax preparation software S. 2011 tax preparation software Income Tax Return for an S Corporation, and send Schedule K-1 (Form 1120S) to each shareholder. 2011 tax preparation software In addition, the S corporation will send each shareholder a copy of the Shareholder's Instructions for Schedule K-1 (Form 1120S) to help each shareholder report his or her share of the S corporation's income, losses, credits, and deductions. 2011 tax preparation software Keep Schedule K-1 (Form 1120S) for your records. 2011 tax preparation software Do not attach it to your Form 1040, unless you are specifically required to do so. 2011 tax preparation software For more information on S corporations and their shareholders, see the Instructions for Form 1120S. 2011 tax preparation software Recoveries A recovery is a return of an amount you deducted or took a credit for in an earlier year. 2011 tax preparation software The most common recoveries are refunds, reimbursements, and rebates of deductions itemized on Schedule A (Form 1040). 2011 tax preparation software You also may have recoveries of non-itemized deductions (such as payments on previously deducted bad debts) and recoveries of items for which you previously claimed a tax credit. 2011 tax preparation software Tax benefit rule. 2011 tax preparation software   You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. 2011 tax preparation software For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year. 2011 tax preparation software For more information, see Publication 525. 2011 tax preparation software Federal income tax refund. 2011 tax preparation software   Refunds of federal income taxes are not included in your income because they are never allowed as a deduction from income. 2011 tax preparation software State tax refund. 2011 tax preparation software   If you received a state or local income tax refund (or credit or offset) in 2013, you generally must include it in income if you deducted the tax in an earlier year. 2011 tax preparation software The payer should send Form 1099-G, Certain Government Payments, to you by January 31, 2014. 2011 tax preparation software The IRS also will receive a copy of the Form 1099-G. 2011 tax preparation software If you file Form 1040, use the State and Local Income Tax Refund Worksheet in the 2013 Form 1040 instructions for line 10 to figure the amount (if any) to include in your income. 2011 tax preparation software See Publication 525 for when you must use another worksheet. 2011 tax preparation software   If you could choose to deduct for a tax year either: State and local income taxes, or State and local general sales taxes, then the maximum refund that you may have to include in income is limited to the excess of the tax you chose to deduct for that year over the tax you did not choose to deduct for that year. 2011 tax preparation software For examples, see Publication 525. 2011 tax preparation software Mortgage interest refund. 2011 tax preparation software    If you received a refund or credit in 2013 of mortgage interest paid in an earlier year, the amount should be shown in box 3 of your Form 1098, Mortgage Interest Statement. 2011 tax preparation software Do not subtract the refund amount from the interest you paid in 2013. 2011 tax preparation software You may have to include it in your income under the rules explained in the following discussions. 2011 tax preparation software Interest on recovery. 2011 tax preparation software   Interest on any of the amounts you recover must be reported as interest income in the year received. 2011 tax preparation software For example, report any interest you received on state or local income tax refunds on Form 1040, line 8a. 2011 tax preparation software Recovery and expense in same year. 2011 tax preparation software   If the refund or other recovery and the expense occur in the same year, the recovery reduces the deduction or credit and is not reported as income. 2011 tax preparation software Recovery for 2 or more years. 2011 tax preparation software   If you receive a refund or other recovery that is for amounts you paid in 2 or more separate years, you must allocate, on a pro rata basis, the recovered amount between the years in which you paid it. 2011 tax preparation software This allocation is necessary to determine the amount of recovery from any earlier years and to determine the amount, if any, of your allowable deduction for this item for the current year. 2011 tax preparation software For information on how to compute the allocation, see Recoveries in Publication 525. 2011 tax preparation software Itemized Deduction Recoveries If you recover any amount that you deducted in an earlier year on Schedule A (Form 1040), you generally must include the full amount of the recovery in your income in the year you receive it. 2011 tax preparation software Where to report. 2011 tax preparation software   Enter your state or local income tax refund on Form 1040, line 10, and the total of all other recoveries as other income on Form 1040, line 21. 2011 tax preparation software You cannot use Form 1040A or Form 1040EZ. 2011 tax preparation software Standard deduction limit. 2011 tax preparation software   You generally are allowed to claim the standard deduction if you do not itemize your deductions. 2011 tax preparation software Only your itemized deductions that are more than your standard deduction are subject to the recovery rule (unless you are required to itemize your deductions). 2011 tax preparation software If your total deductions on the earlier year return were not more than your income for that year, include in your income this year the lesser of: Your recoveries, or The amount by which your itemized deductions exceeded the standard deduction. 2011 tax preparation software Example. 2011 tax preparation software For 2012, you filed a joint return. 2011 tax preparation software Your taxable income was $60,000 and you were not entitled to any tax credits. 2011 tax preparation software Your standard deduction was $11,900, and you had itemized deductions of $14,000. 2011 tax preparation software In 2013, you received the following recoveries for amounts deducted on your 2012 return: Medical expenses $200 State and local income tax refund 400 Refund of mortgage interest 325 Total recoveries $925 None of the recoveries were more than the deductions taken for 2012. 2011 tax preparation software The difference between the state and local income tax you deducted and your local general sales tax was more than $400. 2011 tax preparation software Your total recoveries are less than the amount by which your itemized deductions exceeded the standard deduction ($14,000 − 11,900 = $2,100), so you must include your total recoveries in your income for 2013. 2011 tax preparation software Report the state and local income tax refund of $400 on Form 1040, line 10, and the balance of your recoveries, $525, on Form 1040, line 21. 2011 tax preparation software Standard deduction for earlier years. 2011 tax preparation software   To determine if amounts recovered in 2013 must be included in your income, you must know the standard deduction for your filing status for the year the deduction was claimed. 2011 tax preparation software Look in the instructions for your tax return from prior years to locate the standard deduction for the filing status for that prior year. 2011 tax preparation software Example. 2011 tax preparation software You filed a joint return on Form 1040 for 2012 with taxable income of $45,000. 2011 tax preparation software Your itemized deductions were $12,350. 2011 tax preparation software The standard deduction that you could have claimed was $11,900. 2011 tax preparation software In 2013, you recovered $2,100 of your 2012 itemized deductions. 2011 tax preparation software None of the recoveries were more than the actual deductions for 2012. 2011 tax preparation software Include $450 of the recoveries in your 2013 income. 2011 tax preparation software This is the smaller of your recoveries ($2,100) or the amount by which your itemized deductions were more than the standard deduction ($12,350 − $11,900 = $450). 2011 tax preparation software Recovery limited to deduction. 2011 tax preparation software   You do not include in your income any amount of your recovery that is more than the amount you deducted in the earlier year. 2011 tax preparation software The amount you include in your income is limited to the smaller of: The amount deducted on Schedule A (Form 1040), or The amount recovered. 2011 tax preparation software Example. 2011 tax preparation software During 2012 you paid $1,700 for medical expenses. 2011 tax preparation software From this amount you subtracted $1,500, which was 7. 2011 tax preparation software 5% of your adjusted gross income. 2011 tax preparation software Your actual medical expense deduction was $200. 2011 tax preparation software In 2013, you received a $500 reimbursement from your medical insurance for your 2012 expenses. 2011 tax preparation software The only amount of the $500 reimbursement that must be included in your income for 2013 is $200—the amount actually deducted. 2011 tax preparation software Other recoveries. 2011 tax preparation software   See Recoveries in Publication 525 if: You have recoveries of items other than itemized deductions, or You received a recovery for an item for which you claimed a tax credit (other than investment credit or foreign tax credit) in a prior year. 2011 tax preparation software Rents from Personal Property If you rent out personal property, such as equipment or vehicles, how you report your income and expenses is in most cases determined by: Whether or not the rental activity is a business, and Whether or not the rental activity is conducted for profit. 2011 tax preparation software In most cases, if your primary purpose is income or profit and you are involved in the rental activity with continuity and regularity, your rental activity is a business. 2011 tax preparation software See Publication 535, Business Expenses, for details on deducting expenses for both business and not-for-profit activities. 2011 tax preparation software Reporting business income and expenses. 2011 tax preparation software    If you are in the business of renting personal property, report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). 2011 tax preparation software The form instructions have information on how to complete them. 2011 tax preparation software Reporting nonbusiness income. 2011 tax preparation software   If you are not in the business of renting personal property, report your rental income on Form 1040, line 21. 2011 tax preparation software List the type and amount of the income on the dotted line next to line 21. 2011 tax preparation software Reporting nonbusiness expenses. 2011 tax preparation software   If you rent personal property for profit, include your rental expenses in the total amount you enter on Form 1040, line 36. 2011 tax preparation software Also enter the amount and “PPR” on the dotted line next to line 36. 2011 tax preparation software   If you do not rent personal property for profit, your deductions are limited and you cannot report a loss to offset other income. 2011 tax preparation software See Activity not for profit , under Other Income, later. 2011 tax preparation software Repayments If you had to repay an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income for the year in which you repaid it. 2011 tax preparation software Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. 2011 tax preparation software Generally, you can claim a deduction or credit only if the repayment qualifies as an expense or loss incurred in your trade or business or in a for-profit transaction. 2011 tax preparation software Type of deduction. 2011 tax preparation software   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. 2011 tax preparation software You generally deduct the repayment on the same form or schedule on which you previously reported it as income. 2011 tax preparation software For example, if you reported it as self-employment income, deduct it as a business expense on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). 2011 tax preparation software If you reported it as a capital gain, deduct it as a capital loss as explained in the Instructions for Schedule D (Form 1040). 2011 tax preparation software If you reported it as wages, unemployment compensation, or other nonbusiness income, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040). 2011 tax preparation software Repaid social security benefits. 2011 tax preparation software   If you repaid social security benefits or equivalent railroad retirement benefits, see Repayment of benefits in chapter 11. 2011 tax preparation software Repayment of $3,000 or less. 2011 tax preparation software   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. 2011 tax preparation software If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 23. 2011 tax preparation software Repayment over $3,000. 2011 tax preparation software   If the amount you repaid was more than $3,000, you can deduct the repayment (as explained under Type of deduction , earlier). 2011 tax preparation software However, you can choose instead to take a tax credit for the year of repayment if you included the income under a claim of right. 2011 tax preparation software This means that at the time you included the income, it appeared that you had an unrestricted right to it. 2011 tax preparation software If you qualify for this choice, figure your tax under both methods and compare the results. 2011 tax preparation software Use the method (deduction or credit) that results in less tax. 2011 tax preparation software When determining whether the amount you repaid was more or less than $3,000, consider the total amount being repaid on the return. 2011 tax preparation software Each instance of repayment is not considered separately. 2011 tax preparation software Method 1. 2011 tax preparation software   Figure your tax for 2013 claiming a deduction for the repaid amount. 2011 tax preparation software If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 28. 2011 tax preparation software Method 2. 2011 tax preparation software   Figure your tax for 2013 claiming a credit for the repaid amount. 2011 tax preparation software Follow these steps. 2011 tax preparation software Figure your tax for 2013 without deducting the repaid amount. 2011 tax preparation software Refigure your tax from the earlier year without including in income the amount you repaid in 2013. 2011 tax preparation software Subtract the tax in (2) from the tax shown on your return for the earlier year. 2011 tax preparation software This is the credit. 2011 tax preparation software Subtract the answer in (3) from the tax for 2013 figured without the deduction (Step 1). 2011 tax preparation software   If method 1 results in less tax, deduct the amount repaid. 2011 tax preparation software If method 2 results in less tax, claim the credit figured in (3) above on Form 1040, line 71, by adding the amount of the credit to any other credits on this line, and entering “I. 2011 tax preparation software R. 2011 tax preparation software C. 2011 tax preparation software 1341” in the column to the right of line 71. 2011 tax preparation software   An example of this computation can be found in Publication 525. 2011 tax preparation software Repaid wages subject to social security and Medicare taxes. 2011 tax preparation software   If you had to repay an amount that you included in your wages or compensation in an earlier year on which social security, Medicare, or tier 1 RRTA taxes were paid, ask your employer to refund the excess amount to you. 2011 tax preparation software If the employer refuses to refund the taxes, ask for a statement indicating the amount of the overcollection to support your claim. 2011 tax preparation software File a claim for refund using Form 843, Claim for Refund and Request for Abatement. 2011 tax preparation software Repaid wages subject to Additional Medicare Tax. 2011 tax preparation software   Employers cannot make an adjustment or file a claim for refund for Additional Medicare Tax withholding when there is a repayment of wages received by an employee in a prior year because the employee determines liability for Additional Medicare Tax on the employee's income tax return for the prior year. 2011 tax preparation software If you had to repay an amount that you included in your wages or compensation in an earlier year, and on which Additional Medicare Tax was paid, you may be able to recover the Additional Medicare Tax paid on the amount. 2011 tax preparation software To recover Additional Medicare Tax on the repaid wages or compensation, you must file Form 1040X, Amended U. 2011 tax preparation software S. 2011 tax preparation software Individual Income Tax Return, for the prior year in which the wages or compensation were originally received. 2011 tax preparation software See the Instructions for Form 1040X. 2011 tax preparation software Royalties Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income. 2011 tax preparation software In most cases you report royalties in Part I of Schedule E (Form 1040). 2011 tax preparation software However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc. 2011 tax preparation software , report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). 2011 tax preparation software Copyrights and patents. 2011 tax preparation software   Royalties from copyrights on literary, musical, or artistic works, and similar property, or from patents on inventions, are amounts paid to you for the right to use your work over a specified period of time. 2011 tax preparation software Royalties generally are based on the number of units sold, such as the number of books, tickets to a performance, or machines sold. 2011 tax preparation software Oil, gas, and minerals. 2011 tax preparation software   Royalty income from oil, gas, and mineral properties is the amount you receive when natural resources are extracted from your property. 2011 tax preparation software The royalties are based on units, such as barrels, tons, etc. 2011 tax preparation software , and are paid to you by a person or company who leases the property from you. 2011 tax preparation software Depletion. 2011 tax preparation software   If you are the owner of an economic interest in mineral deposits or oil and gas wells, you can recover your investment through the depletion allowance. 2011 tax preparation software For information on this subject, see chapter 9 of Publication 535. 2011 tax preparation software Coal and iron ore. 2011 tax preparation software   Under certain circumstances, you can treat amounts you receive from the disposal of coal and iron ore as payments from the sale of a capital asset, rather than as royalty income. 2011 tax preparation software For information about gain or loss from the sale of coal and iron ore, see Publication 544. 2011 tax preparation software Sale of property interest. 2011 tax preparation software   If you sell your complete interest in oil, gas, or mineral rights, the amount you receive is considered payment for the sale of property used in a trade or business under section 1231, not royalty income. 2011 tax preparation software Under certain circumstances, the sale is subject to capital gain or loss treatment as explained in the Instructions for Schedule D (Form 1040). 2011 tax preparation software For more information on selling section 1231 property, see chapter 3 of Publication 544. 2011 tax preparation software   If you retain a royalty, an overriding royalty, or a net profit interest in a mineral property for the life of the property, you have made a lease or a sublease, and any cash you receive for the assignment of other interests in the property is ordinary income subject to a depletion allowance. 2011 tax preparation software Part of future production sold. 2011 tax preparation software   If you own mineral property but sell part of the future production, in most cases you treat the money you receive from the buyer at the time of the sale as a loan from the buyer. 2011 tax preparation software Do not include it in your income or take depletion based on it. 2011 tax preparation software   When production begins, you include all the proceeds in your income, deduct all the production expenses, and deduct depletion from that amount to arrive at your taxable income from the property. 2011 tax preparation software Unemployment Benefits The tax treatment of unemployment benefits you receive depends on the type of program paying the benefits. 2011 tax preparation software Unemployment compensation. 2011 tax preparation software   You must include in income all unemployment compensation you receive. 2011 tax preparation software You should receive a Form 1099-G showing in box 1 the total unemployment compensation paid to you. 2011 tax preparation software In most cases, you enter unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. 2011 tax preparation software Types of unemployment compensation. 2011 tax preparation software   Unemployment compensation generally includes any amount received under an unemployment compensation law of the United States or of a state. 2011 tax preparation software It includes the following benefits. 2011 tax preparation software Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund. 2011 tax preparation software State unemployment insurance benefits. 2011 tax preparation software Railroad unemployment compensation benefits. 2011 tax preparation software Disability payments from a government program paid as a substitute for unemployment compensation. 2011 tax preparation software (Amounts received as workers' compensation for injuries or illness are not unemployment compensation. 2011 tax preparation software See chapter 5 for more information. 2011 tax preparation software ) Trade readjustment allowances under the Trade Act of 1974. 2011 tax preparation software Unemployment assistance under the Disaster Relief and Emergency Assistance Act. 2011 tax preparation software Unemployment assistance under the Airline Deregulation Act of 1974 Program. 2011 tax preparation software Governmental program. 2011 tax preparation software   If you contribute to a governmental unemployment compensation program and your contributions are not deductible, amounts you receive under the program are not included as unemployment compensation until you recover your contributions. 2011 tax preparation software If you deducted all of your contributions to the program, the entire amount you receive under the program is included in your income. 2011 tax preparation software Repayment of unemployment compensation. 2011 tax preparation software   If you repaid in 2013 unemployment compensation you received in 2013, subtract the amount you repaid from the total amount you received and enter the difference on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. 2011 tax preparation software On the dotted line next to your entry enter “Repaid” and the amount you repaid. 2011 tax preparation software If you repaid unemployment compensation in 2013 that you included in income in an earlier year, you can deduct the amount repaid on Schedule A (Form 1040), line 23, if you itemize deductions. 2011 tax preparation software If the amount is more than $3,000, see Repayments , earlier. 2011 tax preparation software Tax withholding. 2011 tax preparation software   You can choose to have federal income tax withheld from your unemployment compensation. 2011 tax preparation software To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. 2011 tax preparation software Tax will be withheld at 10% of your payment. 2011 tax preparation software    If you do not choose to have tax withheld from your unemployment compensation, you may be liable for estimated tax. 2011 tax preparation software If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. 2011 tax preparation software For more information on estimated tax, see chapter 4. 2011 tax preparation software Supplemental unemployment benefits. 2011 tax preparation software   Benefits received from an employer-financed fund (to which the employees did not contribute) are not unemployment compensation. 2011 tax preparation software They are taxable as wages and are subject to withholding for income tax. 2011 tax preparation software They may be subject to social security and Medicare taxes. 2011 tax preparation software For more information, see Supplemental Unemployment Benefits in section 5 of Publication 15-A, Employer's Supplemental Tax Guide. 2011 tax preparation software Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. 2011 tax preparation software Repayment of benefits. 2011 tax preparation software   You may have to repay some of your supplemental unemployment benefits to qualify for trade readjustment allowances under the Trade Act of 1974. 2011 tax preparation software If you repay supplemental unemployment benefits in the same year you receive them, reduce the total benefits by the amount you repay. 2011 tax preparation software If you repay the benefits in a later year, you must include the full amount of the benefits received in your income for the year you received them. 2011 tax preparation software   Deduct the repayment in the later year as an adjustment to gross income on Form 1040. 2011 tax preparation software (You cannot use Form 1040A or Form 1040EZ. 2011 tax preparation software ) Include the repayment on Form 1040, line 36, and enter “Sub-Pay TRA” and the amount on the dotted line next to line 36. 2011 tax preparation software If the amount you repay in a later year is more than $3,000, you may be able to take a credit against your tax for the later year instead of deducting the amount repaid. 2011 tax preparation software For more information on this, see Repayments , earlier. 2011 tax preparation software Private unemployment fund. 2011 tax preparation software   Unemployment benefit payments from a private (nonunion) fund to which you voluntarily contribute are taxable only if the amounts you receive are more than your total payments into the fund. 2011 tax preparation software Report the taxable amount on Form 1040, line 21. 2011 tax preparation software Payments by a union. 2011 tax preparation software   Benefits paid to you as an unemployed member of a union from regular union dues are included in your income on Form 1040, line 21. 2011 tax preparation software However, if you contribute to a special union fund and your payments to the fund are not deductible, the unemployment benefits you receive from the fund are includible in your income only to the extent they are more than your contributions. 2011 tax preparation software Guaranteed annual wage. 2011 tax preparation software   Payments you receive from your employer during periods of unemployment, under a union agreement that guarantees you full pay during the year, are taxable as wages. 2011 tax preparation software Include them on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. 2011 tax preparation software State employees. 2011 tax preparation software   Payments similar to a state's unemployment compensation may be made by the state to its employees who are not covered by the state's unemployment compensation law. 2011 tax preparation software Although the payments are fully taxable, do not report them as unemployment compensation. 2011 tax preparation software Report these payments on Form 1040, line 21. 2011 tax preparation software Welfare and Other Public Assistance Benefits Do not include in your income governmental benefit payments from a public welfare fund based upon need, such as payments to blind individuals under a state public assistance law. 2011 tax preparation software Payments from a state fund for the victims of crime should not be included in the victims' incomes if they are in the nature of welfare payments. 2011 tax preparation software Do not deduct medical expenses that are reimbursed by such a fund. 2011 tax preparation software You must include in your income any welfare payments that are compensation for services or that are obtained fraudulently. 2011 tax preparation software Reemployment Trade Adjustment Assistance (RTAA) payments. 2011 tax preparation software   RTAA payments received from a state must be included in your income. 2011 tax preparation software The state must send you Form 1099-G to advise you of the amount you should include in income. 2011 tax preparation software The amount should be reported on Form 1040, line 21. 2011 tax preparation software Persons with disabilities. 2011 tax preparation software   If you have a disability, you must include in income compensation you receive for services you perform unless the compensation is otherwise excluded. 2011 tax preparation software However, you do not include in income the value of goods, services, and cash that you receive, not in return for your services, but for your training and rehabilitation because you have a disability. 2011 tax preparation software Excludable amounts include payments for transportation and attendant care, such as interpreter services for the deaf, reader services for the blind, and services to help individuals with an intellectual disability do their work. 2011 tax preparation software Disaster relief grants. 2011 tax preparation software    Do not include post-disaster grants received under the Robert T. 2011 tax preparation software Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, child care, or funeral expenses. 2011 tax preparation software Do not deduct casualty losses or medical expenses that are specifically reimbursed by these disaster relief grants. 2011 tax preparation software If you have deducted a casualty loss for the loss of your personal residence and you later receive a disaster relief grant for the loss of the same residence, you may have to include part or all of the grant in your taxable income. 2011 tax preparation software See Recoveries , earlier. 2011 tax preparation software Unemployment assistance payments under the Act are taxable unemployment compensation. 2011 tax preparation software See Unemployment compensation under Unemployment Benefits, earlier. 2011 tax preparation software Disaster relief payments. 2011 tax preparation software   You can exclude from income any amount you receive that is a qualified disaster relief payment. 2011 tax preparation software A qualified disaster relief payment is an amount paid to you: To reimburse or pay reasonable and necessary personal, family, living, or funeral expenses that result from a qualified disaster; To reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of your home or repair or replacement of its contents to the extent it is due to a qualified disaster; By a person engaged in the furnishing or sale of transportation as a common carrier because of the death or personal physical injuries incurred as a result of a qualified disaster; or By a federal, state, or local government, or agency, or instrumentality in connection with a qualified disaster in order to promote the general welfare. 2011 tax preparation software You can exclude this amount only to the extent any expense it pays for is not paid for by insurance or otherwise. 2011 tax preparation software The exclusion does not apply if you were a participant or conspirator in a terrorist action or a representative of one. 2011 tax preparation software   A qualified disaster is: A disaster which results from a terrorist or military action; A federally declared disaster; or A disaster which results from an accident involving a common carrier, or from any other event, which is determined to be catastrophic by the Secretary of the Treasury or his or her delegate. 2011 tax preparation software   For amounts paid under item (4), a disaster is qualified if it is determined by an applicable federal, state, or local authority to warrant assistance from the federal, state, or local government, agency, or instrumentality. 2011 tax preparation software Disaster mitigation payments. 2011 tax preparation software   You also can exclude from income any amount you receive that is a qualified disaster mitigation payment. 2011 tax preparation software Qualified disaster mitigation payments are also most commonly paid to you in the period immediately following damage to property as a result of a natural disaster. 2011 tax preparation software However, disaster mitigation payments are used to mitigate (reduce the severity of) potential damage from future natural disasters. 2011 tax preparation software They are paid to you through state and local governments based on the provisions of the Robert T. 2011 tax preparation software Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act. 2011 tax preparation software   You cannot increase the basis or adjusted basis of your property for improvements made with nontaxable disaster mitigation payments. 2011 tax preparation software Home Affordable Modification Program (HAMP). 2011 tax preparation software   If you benefit from Pay-for-Performance Success Payments under HAMP, the payments are not taxable. 2011 tax preparation software Mortgage assistance payments under section 235 of the National Housing Act. 2011 tax preparation software   Payments made under section 235 of the National Housing Act for mortgage assistance are not included in the homeowner's income. 2011 tax preparation software Interest paid for the homeowner under the mortgage assistance program cannot be deducted. 2011 tax preparation software Medicare. 2011 tax preparation software   Medicare benefits received under title XVIII of the Social Security Act are not includible in the gross income of the individuals for whom they are paid. 2011 tax preparation software This includes basic (part A (Hospital Insurance Benefits for the Aged)) and supplementary (part B (Supplementary Medical Insurance Benefits for the Aged)). 2011 tax preparation software Old-age, survivors, and disability insurance benefits (OASDI). 2011 tax preparation software   Generally, OASDI payments under section 202 of title II of the Social Security Act are not includible in the gross income of the individuals to whom they are paid. 2011 tax preparation software This applies to old-age insurance benefits, and insurance benefits for wives, husbands, children, widows, widowers, mothers and fathers, and parents, as well as the lump-sum death payment. 2011 tax preparation software Nutrition Program for the Elderly. 2011 tax preparation software    Food benefits you receive under the Nutrition Program for the Elderly are not taxable. 2011 tax preparation software If you prepare and serve free meals for the program, include in your income as wages the cash pay you receive, even if you are also eligible for food benefits. 2011 tax preparation software Payments to reduce cost of winter energy. 2011 tax preparation software   Payments made by a state to qualified people to reduce their cost of winter energy use are not taxable. 2011 tax preparation software Other Income The following brief discussions are arranged in alphabetical order. 2011 tax preparation software Other income items briefly discussed below are referenced to publications which provide more topical information. 2011 tax preparation software Activity not for profit. 2011 tax preparation software   You must include on your return income from an activity from which you do not expect to make a profit. 2011 tax preparation software An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. 2011 tax preparation software Enter this income on Form 1040, line 21. 2011 tax preparation software Deductions for expenses related to the activity are limited. 2011 tax preparation software They cannot total more than the income you report and can be taken only if you itemize deductions on Schedule A (Form 1040). 2011 tax preparation software See Not-for-Profit Activities in chapter 1 of Publication 535 for information on whether an activity is considered carried on for a profit. 2011 tax preparation software Alaska Permanent Fund dividend. 2011 tax preparation software   If you received a payment from Alaska's mineral income fund (Alaska Permanent Fund dividend), report it as income on line 21 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. 2011 tax preparation software The state of Alaska sends each recipient a document that shows the amount of the payment with the check. 2011 tax preparation software The amount also is reported to IRS. 2011 tax preparation software Alimony. 2011 tax preparation software   Include in your income on Form 1040, line 11, any alimony payments you receive. 2011 tax preparation software Amounts you receive for child support are not income to you. 2011 tax preparation software Alimony and child support payments are discussed in chapter 18. 2011 tax preparation software Bribes. 2011 tax preparation software   If you receive a bribe, include it in your income. 2011 tax preparation software Campaign contributions. 2011 tax preparation software   These contributions are not income to a candidate unless they are diverted to his or her personal use. 2011 tax preparation software To be exempt from tax, the contributions must be spent for campaign purposes or kept in a fund for use in future campaigns. 2011 tax preparation software However, interest earned on bank deposits, dividends received on contributed securities, and net gains realized on sales of contributed securities are taxable and must be reported on Form 1120-POL, U. 2011 tax preparation software S. 2011 tax preparation software Income Tax Return for Certain Political Organizations. 2011 tax preparation software Excess campaign funds transferred to an office account must be included in the officeholder's income on Form 1040, line 21, in the year transferred. 2011 tax preparation software Car pools. 2011 tax preparation software   Do not include in your income amounts you receive from the passengers for driving a car in a car pool to and from work. 2011 tax preparation software These amounts are considered reimbursement for your expenses. 2011 tax preparation software However, this rule does not apply if you have developed car pool arrangements into a profit-making business of transporting workers for hire. 2011 tax preparation software Cash rebates. 2011 tax preparation software   A cash rebate you receive from a dealer or manufacturer of an item you buy is not income, but you must reduce your basis by the amount of the rebate. 2011 tax preparation software Example. 2011 tax preparation software You buy a new car for $24,000 cash and receive a $2,000 rebate check from the manufacturer. 2011 tax preparation software The $2,000 is not income to you. 2011 tax preparation software Your basis in the car is $22,000. 2011 tax preparation software This is the basis on which you figure gain or loss if you sell the car and depreciation if you use it for business. 2011 tax preparation software Casualty insurance and other reimbursements. 2011 tax preparation software   You generally should not report these reimbursements on your return unless you are figuring gain or loss from the casualty or theft. 2011 tax preparation software See chapter 25 for more information. 2011 tax preparation software Child support payments. 2011 tax preparation software   You should not report these payments on your return. 2011 tax preparation software See chapter 18 for more information. 2011 tax preparation software Court awards and damages. 2011 tax preparation software   To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. 2011 tax preparation software The character of the income as ordinary income or capital gain depends on the nature of the underlying claim. 2011 tax preparation software Include the following as ordinary income. 2011 tax preparation software Interest on any award. 2011 tax preparation software Compensation for lost wages or lost profits in most cases. 2011 tax preparation software Punitive damages, in most cases. 2011 tax preparation software It does not matter if they relate to a physical injury or physical sickness. 2011 tax preparation software Amounts received in settlement of pension rights (if you did not contribute to the plan). 2011 tax preparation software Damages for: Patent or copyright infringement, Breach of contract, or Interference with business operations. 2011 tax preparation software Back pay and damages for emotional distress received to satisfy a claim under title VII of the Civil Rights Act of 1964. 2011 tax preparation software Attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income. 2011 tax preparation software   Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments). 2011 tax preparation software Emotional distress. 2011 tax preparation software   Emotional distress itself is not a physical injury or physical sickness, but damages you receive for emotional distress due to a physical injury or sickness are treated as received for the physical injury or sickness. 2011 tax preparation software Do not include them in your income. 2011 tax preparation software   If the emotional distress is due to a personal injury that is not due to a physical injury or sickness (for example, employment discrimination or injury to reputation), you must include the damages in your income, except for any damages you receive for medical care due to that emotional distress. 2011 tax preparation software Emotional distress includes physical symptoms that result from emotional distress, such as headaches, insomnia, and stomach disorders. 2011 tax preparation software Deduction for costs involved in unlawful discrimination suits. 2011 tax preparation software   You may be able to deduct attorney fees and court costs paid to recover a judgment or settlement for a claim of unlawful discrimination under various provisions of federal, state, and local law listed in Internal Revenue Code section 62(e), a claim against the United States government, or a claim under section 1862(b)(3)(A) of the Social Security Act. 2011 tax preparation software For more information, see Publication 525. 2011 tax preparation software Credit card insurance. 2011 tax preparation software   In most cases, if you receive benefits under a credit card disability or unemployment insurance plan, the benefits are taxable to you. 2011 tax preparation software These plans make the minimum monthly payment on your credit card account if you cannot make the payment due to injury, illness, disability, or unemployment. 2011 tax preparation software Report on Form 1040, line 21, the amount of benefits you received during the year that is more than the amount of the premiums you paid during the year. 2011 tax preparation software Down payment assistance. 2011 tax preparation software   If you purchase a home and receive assistance from a nonprofit corporation to make the down payment, that assistance is not included in your income. 2011 tax preparation software If the corporation qualifies as a tax-exempt charitable organization, the assistance is treated as a gift and is included in your basis of the house. 2011 tax preparation software If the corporation does not qualify, the assistance is treated as a rebate or reduction of the purchase price and is not included in your basis. 2011 tax preparation software Employment agency fees. 2011 tax preparation software   If you get a job through an employment agency, and the fee is paid by your employer, the fee is not includible in your income if you are not liable for it. 2011 tax preparation software However, if you pay it and your employer reimburses you for it, it is includible in your income. 2011 tax preparation software Energy conservation subsidies. 2011 tax preparation software   You can exclude from gross income any subsidy provided, either directly or indirectly, by public utilities for the purchase or installation of an energy conservation measure for a dwelling unit. 2011 tax preparation software Energy conservation measure. 2011 tax preparation software   This includes installations or modifications that are primarily designed to reduce consumption of electricity or natural gas, or improve the management of energy demand. 2011 tax preparation software Dwelling unit. 2011 tax preparation software   This includes a house, apartment, condominium, mobile home, boat, or similar property. 2011 tax preparation software If a building or structure contains both dwelling and other units, any subsidy must be properly allocated. 2011 tax preparation software Estate and trust income. 2011 tax preparation software    An estate or trust, unlike a partnership, may have to pay federal income tax. 2011 tax preparation software If you are a beneficiary of an estate or trust, you may be taxed on your share of its income distributed or required to be distributed to you. 2011 tax preparation software However, there is never a double tax. 2011 tax preparation software Estates and trusts file their returns on Form 1041, U. 2011 tax preparation software S. 2011 tax preparation software Income Tax Return for Estates and Trusts, and your share of the income is reported to you on Schedule K-1 (Form 1041). 2011 tax preparation software Current income required to be distributed. 2011 tax preparation software   If you are the beneficiary of an estate or trust that must distribute all of its current income, you must report your share of the distributable net income, whether or not you actually received it. 2011 tax preparation software Current income not required to be distributed. 2011 tax preparation software    If you are the beneficiary of an estate or trust and the fiduciary has the choice of whether to distribute all or part of the current income, you must report: All income that is required to be distributed to you, whether or not it is actually distributed, plus All other amounts actually paid or credited to you, up to the amount of your share of distributable net income. 2011 tax preparation software How to report. 2011 tax preparation software   Treat each item of income the same way that the estate or trust would treat it. 2011 tax preparation software For example, if a trust's dividend income is distributed to you, you report the distribution as dividend income on your return. 2011 tax preparation software The same rule applies to distributions of tax-exempt interest and capital gains. 2011 tax preparation software   The fiduciary of the estate or trust must tell you the type of items making up your share of the estate or trust income and any credits you are allowed on your individual income tax return. 2011 tax preparation software Losses. 2011 tax preparation software   Losses of estates and trusts generally are not deductible by the beneficiaries. 2011 tax preparation software Grantor trust. 2011 tax preparation software   Income earned by a grantor trust is taxable to the grantor, not the beneficiary, if the grantor keeps certain control over the trust. 2011 tax preparation software (The grantor is the one who transferred property to the trust. 2011 tax preparation software ) This rule applies if the property (or income from the property) put into the trust will or may revert (be returned) to the grantor or the grantor's spouse. 2011 tax preparation software   Generally, a trust is a grantor trust if the grantor has a reversionary interest valued (at the date of transfer) at more than 5% of the value of the transferred property. 2011 tax preparation software Expenses paid by another. 2011 tax preparation software   If your personal expenses are paid for by another person, such as a corporation, the payment may be taxable to you depending upon your relationship with that person and the nature of the payment. 2011 tax preparation software But if the payment makes up for a loss caused by that person, and only restores you to the position you were in before the loss, the payment is not includible in your income. 2011 tax preparation software Fees for services. 2011 tax preparation software   Include all fees for your services in your income. 2011 tax preparation software Examples of these fees are amounts you receive for services you perform as: A corporate director, An executor, administrator, or personal representative of an estate, A manager of a trade or business you operated before declaring Chapter 11 bankruptcy, A notary public, or An election precinct official. 2011 tax preparation software Nonemployee compensation. 2011 tax preparation software   If you are not an employee and the fees for your services from the same payer total $600 or more for the year, you may receive a Form 1099-MISC. 2011 tax preparation software You may need to report your fees as self-employment income. 2011 tax preparation software See Self-Employed Persons , in chapter 1, for a discussion of when you are considered self-employed. 2011 tax preparation software Corporate director. 2011 tax preparation software   Corporate director fees are self-employment income. 2011 tax preparation software Report these payments on Schedule C or Schedule C-EZ (Form 1040). 2011 tax preparation software Personal representatives. 2011 tax preparation software   All personal representatives must include in their gross income fees paid to them from an estate. 2011 tax preparation software If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on Form 1040, line 21. 2011 tax preparation software If you are in the trade or business of being an executor, report these fees as self-employment income on Schedule C or Schedule C-EZ (Form 1040). 2011 tax preparation software The fee is not includible in income if it is waived. 2011 tax preparation software Manager of trade or business for bankruptcy estate. 2011 tax preparation software   Include in your income all payments received from your bankruptcy estate for managing or operating a trade or business that you operated before you filed for bankruptcy. 2011 tax preparation software Report this income on Form 1040, line 21. 2011 tax preparation software Notary public. 2011 tax preparation software    Report payments for these services on Schedule C or Schedule C-EZ (Form 1040). 2011 tax preparation software These payments are not subject to self-employment tax. 2011 tax preparation software See the separate instructions for Schedule SE (Form 1040) for details. 2011 tax preparation software Election precinct official. 2011 tax preparation software    You should receive a Form W-2 showing payments for services performed as an election official or election worker. 2011 tax preparation software Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. 2011 tax preparation software Foster care providers. 2011 tax preparation software   Payments you receive from a state, political subdivision, or a qualified foster care placement agency for providing care to qualified foster individuals in your home generally are not included in your income. 2011 tax preparation software However, you must include in your income payments received for the care of more than 5 individuals age 19 or older and certain difficulty-of-care payments. 2011 tax preparation software   A qualified foster individual is a person who: Is living in a foster family home, and Was placed there by: An agency of a state or one of its political subdivisions, or A qualified foster care placement agency. 2011 tax preparation software Difficulty-of-care payments. 2011 tax preparation software   These are additional payments that are designated by the payer as compensation for providing the additional care that is required for physically, mentally, or emotionally handicapped qualified foster individuals. 2011 tax preparation software A state must determine that the additional compensation is needed, and the care for which the payments are made must be provided in your home. 2011 tax preparation software   You must include in your income difficulty-of-care payments received for more than: 10 qualified foster individuals under age 19, or 5 qualified foster individuals age 19 or older. 2011 tax preparation software Maintaining space in home. 2011 tax preparation software   If you are paid to maintain space in your home for emergency foster care, you must include the payment in your income. 2011 tax preparation software Reporting taxable payments. 2011 tax preparation software    If you receive payments that you must include in your income, you are in business as a foster care provider and you are self-employed. 2011 tax preparation software Report the payments on Schedule C or Schedule C-EZ (Form 1040). 2011 tax preparation software See Publication 587, Business Use of Your Home, to help you determine the amount you can deduct for the use of your home. 2011 tax preparation software Found property. 2011 tax preparation software   If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession. 2011 tax preparation software Free tour. 2011 tax preparation software   If you received a free tour from a travel agency for organizing a group of tourists, you must include its value in your income. 2011 tax preparation software Report the fair market value of the tour on Form 1040, line 21, if you are not in the trade or business of organizing tours. 2011 tax preparation software You cannot deduct your expenses in serving as the voluntary leader of the group at the group's request. 2011 tax preparation software If you organize tours as a trade or business, report the tour's value on Schedule C or Schedule C-EZ (Form 1040). 2011 tax preparation software Gambling winnings. 2011 tax preparation software   You must include your gambling winnings in income on Form 1040, line 21. 2011 tax preparation software If you itemize your deductions on Schedule A (Form 1040), you can deduct gambling losses you had during the year, but only up to the amount of your winnings. 2011 tax preparation software Lotteries and raffles. 2011 tax preparation software   Winnings from lotteries and raffles are gambling winnings. 2011 tax preparation software In addition to cash winnings, you must include in your income the fair market value of bonds, cars, houses, and other noncash prizes. 2011 tax preparation software    If you win a state lottery prize payable in installments, see Publication 525 for more information. 2011 tax preparation software Form W-2G. 2011 tax preparation software   You may have received a Form W-2G, Certain Gambling Winnings, showing the amount of your gambling winnings and any tax taken out of them. 2011 tax preparation software Include the amount from box 1 on Form 1040, line 21. 2011 tax preparation software Include the amount shown in box 4 on Form 1040, line 62, as federal income tax withheld. 2011 tax preparation software Reporting winnings and recordkeeping. 2011 tax preparation software   For more information on reporting gam