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2011 Taxes Free

2011 taxes free 28. 2011 taxes free   Miscellaneous Deductions Table of Contents What's New Introduction Useful Items - You may want to see: Deductions Subject to the 2% LimitUnreimbursed Employee Expenses (Line 21) Tax Preparation Fees (Line 22) Other Expenses (Line 23) Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses What's New Standard mileage rate. 2011 taxes free  The 2013 rate for business use of a vehicle is 56½ cents per mile. 2011 taxes free Introduction This chapter explains which expenses you can claim as miscellaneous itemized deductions on Schedule A (Form 1040). 2011 taxes free You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. 2011 taxes free This chapter covers the following topics. 2011 taxes free Deductions subject to the 2% limit. 2011 taxes free Deductions not subject to the 2% limit. 2011 taxes free Expenses you cannot deduct. 2011 taxes free You must keep records to verify your deductions. 2011 taxes free You should keep receipts, canceled checks, substitute checks, financial account statements, and other documentary evidence. 2011 taxes free For more information on recordkeeping, get Publication 552, Record- keeping for Individuals. 2011 taxes free Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) 946 How To Depreciate Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040). 2011 taxes free You can claim the amount of expenses that is more than 2% of your adjusted gross income. 2011 taxes free You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. 2011 taxes free Your adjusted gross income is the amount on Form 1040, line 38. 2011 taxes free Generally, you apply the 2% limit after you apply any other deduction limit. 2011 taxes free For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed in chapter 26) before you apply the 2% limit. 2011 taxes free Deductions subject to the 2% limit are discussed in the three categories in which you report them on Schedule A (Form 1040). 2011 taxes free Unreimbursed employee expenses (line 21). 2011 taxes free Tax preparation fees (line 22). 2011 taxes free Other expenses (line 23). 2011 taxes free Unreimbursed Employee Expenses (Line 21) Generally, you can deduct on Schedule A (Form 1040), line 21, unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. 2011 taxes free An expense is ordinary if it is common and accepted in your trade, business, or profession. 2011 taxes free An expense is necessary if it is appropriate and helpful to your business. 2011 taxes free An expense does not have to be required to be considered necessary. 2011 taxes free Examples of unreimbursed employee expenses are listed next. 2011 taxes free The list is followed by discussions of additional unreimbursed employee expenses. 2011 taxes free Business bad debt of an employee. 2011 taxes free Education that is work related. 2011 taxes free (See chapter 27. 2011 taxes free ) Legal fees related to your job. 2011 taxes free Licenses and regulatory fees. 2011 taxes free Malpractice insurance premiums. 2011 taxes free Medical examinations required by an employer. 2011 taxes free Occupational taxes. 2011 taxes free Passport for a business trip. 2011 taxes free Subscriptions to professional journals and trade magazines related to your work. 2011 taxes free Travel, transportation, entertainment, and gifts related to your work. 2011 taxes free (See chapter 26. 2011 taxes free ) Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. 2011 taxes free Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer that are attributable to the pay you received from that employer. 2011 taxes free Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. 2011 taxes free For more information about the rules and exceptions to the rules affecting the allowable deductions for a home computer, see Publication 529. 2011 taxes free Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. 2011 taxes free Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. 2011 taxes free Lobbying and political activities. 2011 taxes free   You may not be able to deduct that part of your dues that is for certain lobbying and political activities. 2011 taxes free See Dues used for lobbying under Nondeductible Expenses, later. 2011 taxes free Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. 2011 taxes free If you file Form 1040A, you can deduct these expenses on line 16. 2011 taxes free If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. 2011 taxes free However, neither spouse can deduct more than $250 of his or her qualified expenses. 2011 taxes free Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. 2011 taxes free You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. 2011 taxes free The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. 2011 taxes free See Publication 587 for more detailed information and a worksheet. 2011 taxes free Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. 2011 taxes free You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. 2011 taxes free Employment and outplacement agency fees. 2011 taxes free   You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. 2011 taxes free Employer pays you back. 2011 taxes free   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. 2011 taxes free (See Recoveries in chapter 12. 2011 taxes free ) Employer pays the employment agency. 2011 taxes free   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. 2011 taxes free Résumé. 2011 taxes free   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. 2011 taxes free Travel and transportation expenses. 2011 taxes free   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. 2011 taxes free You can deduct the travel expenses if the trip is primarily to look for a new job. 2011 taxes free The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. 2011 taxes free   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. 2011 taxes free   You can choose to use the standard mileage rate to figure your car expenses. 2011 taxes free The 2013 rate for business use of a vehicle is 56½ cents per mile. 2011 taxes free See chapter 26 for more information. 2011 taxes free Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. 2011 taxes free Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. 2011 taxes free If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. 2011 taxes free Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. 2011 taxes free If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. 2011 taxes free Research Expenses of a College Professor If you are a college professor, you can deduct research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. 2011 taxes free You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. 2011 taxes free However, you cannot deduct the cost of travel as a form of education. 2011 taxes free Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. 2011 taxes free You can depreciate the cost of tools that have a useful life substantially beyond the tax year. 2011 taxes free For more information about depreciation, see Publication 946. 2011 taxes free Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. 2011 taxes free You can also deduct assessments for benefit payments to unemployed union members. 2011 taxes free However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. 2011 taxes free Also, you cannot deduct contributions to a pension fund, even if the union requires you to make the contributions. 2011 taxes free You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. 2011 taxes free See Lobbying Expenses under Nondeductible Expenses, later. 2011 taxes free Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. 2011 taxes free You must wear them as a condition of your employment. 2011 taxes free The clothes are not suitable for everyday wear. 2011 taxes free It is not enough that you wear distinctive clothing. 2011 taxes free The clothing must be specifically required by your employer. 2011 taxes free Nor is it enough that you do not, in fact, wear your work clothes away from work. 2011 taxes free The clothing must not be suitable for taking the place of your regular clothing. 2011 taxes free Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. 2011 taxes free ). 2011 taxes free Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. 2011 taxes free However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. 2011 taxes free Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. 2011 taxes free Protective clothing. 2011 taxes free   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. 2011 taxes free   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. 2011 taxes free Military uniforms. 2011 taxes free   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. 2011 taxes free However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. 2011 taxes free In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. 2011 taxes free   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. 2011 taxes free   You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. 2011 taxes free Tax Preparation Fees (Line 22) You can usually deduct tax preparation fees in the year you pay them. 2011 taxes free Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. 2011 taxes free These fees include the cost of tax preparation software programs and tax publications. 2011 taxes free They also include any fee you paid for electronic filing of your return. 2011 taxes free Other Expenses (Line 23) You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2% limit. 2011 taxes free On Schedule A (Form 1040), line 23, you can deduct expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. 2011 taxes free You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonably and closely related to these purposes. 2011 taxes free Some of these other expenses are explained in the following discussions. 2011 taxes free If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses , later, under Nondeductible Expenses. 2011 taxes free Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. 2011 taxes free Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. 2011 taxes free First report the loss in Section B of Form 4684, Casualties and Thefts. 2011 taxes free You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. 2011 taxes free To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. 2011 taxes free For other casualty and theft losses, see chapter 25. 2011 taxes free Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. 2011 taxes free Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. 2011 taxes free The fees are deductible in the year paid. 2011 taxes free Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). 2011 taxes free You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. 2011 taxes free But if you work as an employee and also use the computer in that work, see Publication 946. 2011 taxes free Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. 2011 taxes free Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. 2011 taxes free The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. 2011 taxes free For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. 2011 taxes free Fees to Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. 2011 taxes free But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. 2011 taxes free You must add the fee to the cost of the property. 2011 taxes free You cannot deduct the fee you pay to a broker to sell securities. 2011 taxes free You can use the fee only to figure gain or loss from the sale. 2011 taxes free See the Instructions for Form 8949 for information on how to report the fee. 2011 taxes free Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. 2011 taxes free A hobby is not a business because it is not carried on to make a profit. 2011 taxes free See Activity not for profit in chapter 12 under Other Income. 2011 taxes free Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. 2011 taxes free Deductions of pass-through entities are passed through to the partners or shareholders. 2011 taxes free The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. 2011 taxes free Example. 2011 taxes free You are a member of an investment club that is formed solely to invest in securities. 2011 taxes free The club is treated as a partnership. 2011 taxes free The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. 2011 taxes free In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. 2011 taxes free However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. 2011 taxes free Publicly offered mutual funds. 2011 taxes free   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. 2011 taxes free A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. 2011 taxes free   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). 2011 taxes free This net figure is the amount you report on your return as income. 2011 taxes free You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. 2011 taxes free Information returns. 2011 taxes free   You should receive information returns from pass-through entities. 2011 taxes free Partnerships and S corporations. 2011 taxes free   These entities issue Schedule K-1, which lists the items and amounts you must report and identifies the tax return schedules and lines to use. 2011 taxes free Nonpublicly offered mutual funds. 2011 taxes free   These funds will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing your share of gross income and investment expenses. 2011 taxes free You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. 2011 taxes free Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. 2011 taxes free Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. 2011 taxes free You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce, if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. 2011 taxes free You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F), on the appropriate schedule. 2011 taxes free You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040). 2011 taxes free See Tax Preparation Fees , earlier. 2011 taxes free Loss on Deposits For information on whether, and if so, how, you may deduct a loss on your deposit in a qualified financial institution, see Loss on Deposits in chapter 25. 2011 taxes free Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. 2011 taxes free If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. 2011 taxes free If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. 2011 taxes free Repayments of Social Security Benefits For information on how to deduct your repayments of certain social security benefits, see Repayments More Than Gross Benefits in chapter 11. 2011 taxes free Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. 2011 taxes free You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. 2011 taxes free Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. 2011 taxes free These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. 2011 taxes free Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your individual retirement arrangement (IRA) are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. 2011 taxes free For more information about IRAs, see chapter 17. 2011 taxes free Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. 2011 taxes free They are not subject to the 2% limit. 2011 taxes free Report these items on Schedule A (Form 1040), line 28. 2011 taxes free List of Deductions Each of the following items is discussed in detail after the list (except where indicated). 2011 taxes free Amortizable premium on taxable bonds. 2011 taxes free Casualty and theft losses from income- producing property. 2011 taxes free Federal estate tax on income in respect of a decedent. 2011 taxes free Gambling losses up to the amount of gambling winnings. 2011 taxes free Impairment-related work expenses of persons with disabilities. 2011 taxes free Loss from other activities from Schedule K-1 (Form 1065-B), box 2. 2011 taxes free Losses from Ponzi-type investment schemes. 2011 taxes free See Losses from Ponzi-type investment schemes under Theft in chapter 25. 2011 taxes free Repayments of more than $3,000 under a claim of right. 2011 taxes free Unrecovered investment in an annuity. 2011 taxes free Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. 2011 taxes free You can elect to amortize the premium on taxable bonds. 2011 taxes free The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. 2011 taxes free Part of the premium on some bonds may be a miscellaneous deduction not subject to the 2% limit. 2011 taxes free For more information, see Amortizable Premium on Taxable Bonds in Publication 529, and Bond Premium Amortization in chapter 3 of Publication 550, Investment Income and Expenses. 2011 taxes free Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). 2011 taxes free First, report the loss in Form 4684, Section B. 2011 taxes free You may also have to include the loss on Form 4797, Sales of Business Property if you are otherwise required to file that form. 2011 taxes free To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. 2011 taxes free For more information on casualty and theft losses, see chapter 25. 2011 taxes free Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. 2011 taxes free Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. 2011 taxes free See Publication 559 for more information. 2011 taxes free Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. 2011 taxes free You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. 2011 taxes free You cannot deduct gambling losses that are more than your winnings. 2011 taxes free You cannot reduce your gambling winnings by your gambling losses and report the difference. 2011 taxes free You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. 2011 taxes free Therefore, your records should show your winnings separately from your losses. 2011 taxes free Diary of winnings and losses. 2011 taxes free You must keep an accurate diary or similar record of your losses and winnings. 2011 taxes free Your diary should contain at least the following information. 2011 taxes free The date and type of your specific wager or wagering activity. 2011 taxes free The name and address or location of the gambling establishment. 2011 taxes free The names of other persons present with you at the gambling establishment. 2011 taxes free The amount(s) you won or lost. 2011 taxes free See Publication 529 for more information. 2011 taxes free Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. 2011 taxes free Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and for other expenses in connection with your place of work that are necessary for you to be able to work. 2011 taxes free Self-employed. 2011 taxes free   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. 2011 taxes free Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28. 2011 taxes free It is not subject to the passive activity limitations. 2011 taxes free Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid or take a credit against your tax. 2011 taxes free See Repayments in chapter 12 for more information. 2011 taxes free Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. 2011 taxes free If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. 2011 taxes free See chapter 10 for more information about the tax treatment of pensions and annuities. 2011 taxes free Nondeductible Expenses Examples of nondeductible expenses are listed next. 2011 taxes free The list is followed by discussions of additional nondeductible expenses. 2011 taxes free List of Nondeductible Expenses Broker's commissions that you paid in connection with your IRA or other investment property. 2011 taxes free Burial or funeral expenses, including the cost of a cemetery lot. 2011 taxes free Capital expenses. 2011 taxes free Fees and licenses, such as car licenses, marriage licenses, and dog tags. 2011 taxes free Hobby losses, but see Hobby Expenses , earlier. 2011 taxes free Home repairs, insurance, and rent. 2011 taxes free Illegal bribes and kickbacks. 2011 taxes free See Bribes and kickbacks in chapter 11 of Publication 535. 2011 taxes free Losses from the sale of your home, furniture, personal car, etc. 2011 taxes free Personal disability insurance premiums. 2011 taxes free Personal, living, or family expenses. 2011 taxes free The value of wages never received or lost vacation time. 2011 taxes free Adoption Expenses You cannot deduct the expenses of adopting a child, but you may be able to take a credit for those expenses. 2011 taxes free See chapter 37. 2011 taxes free Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. 2011 taxes free These include qualification and registration fees for primary elections. 2011 taxes free Legal fees. 2011 taxes free   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. 2011 taxes free Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. 2011 taxes free Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. 2011 taxes free This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. 2011 taxes free You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. 2011 taxes free Dues paid to airline, hotel, and luncheon clubs are not deductible. 2011 taxes free Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). 2011 taxes free If you haul tools, instruments, or other items, in your car to and from work, you can deduct only the additional cost of hauling the items such as the rent on a trailer to carry the items. 2011 taxes free Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. 2011 taxes free This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). 2011 taxes free Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. 2011 taxes free Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. 2011 taxes free Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. 2011 taxes free However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. 2011 taxes free See Home Office under Unreimbursed Employee Expenses, earlier, and Security System under Deducting Expenses in Publication 587. 2011 taxes free Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. 2011 taxes free Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. 2011 taxes free You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. 2011 taxes free See chapter 18 for information on alimony. 2011 taxes free Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. 2011 taxes free These include expenses to: Influence legislation, Participate or intervene in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. 2011 taxes free Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. 2011 taxes free Dues used for lobbying. 2011 taxes free   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. 2011 taxes free See Lobbying Expenses in Publication 529 for information on exceptions. 2011 taxes free Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. 2011 taxes free However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. 2011 taxes free See chapter 25. 2011 taxes free Example. 2011 taxes free A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. 2011 taxes free The diamond falls from the ring and is never found. 2011 taxes free The loss of the diamond is a casualty. 2011 taxes free Lunches with Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. 2011 taxes free See chapter 26 for information on deductible expenses while traveling away from home. 2011 taxes free Meals While Working Late You cannot deduct the cost of meals while working late. 2011 taxes free However, you may be able to claim a deduction if the cost of meals is a deductible entertainment expense, or if you are traveling away from home. 2011 taxes free See chapter 26 for information on deductible entertainment expenses and expenses while traveling away from home. 2011 taxes free Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. 2011 taxes free Custody of children. 2011 taxes free Breach of promise to marry suit. 2011 taxes free Civil or criminal charges resulting from a personal relationship. 2011 taxes free Damages for personal injury, except for certain unlawful discrimination and whistleblower claims. 2011 taxes free Preparation of a title (or defense or perfection of a title). 2011 taxes free Preparation of a will. 2011 taxes free Property claims or property settlement in a divorce. 2011 taxes free You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. 2011 taxes free Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. 2011 taxes free Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. 2011 taxes free Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. 2011 taxes free Accounting certificate fees paid for the initial right to practice accounting. 2011 taxes free Bar exam fees and incidental expenses in securing initial admission to the bar. 2011 taxes free Medical and dental license fees paid to get initial licensing. 2011 taxes free Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. 2011 taxes free Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. 2011 taxes free Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. 2011 taxes free Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. 2011 taxes free You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. 2011 taxes free Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. 2011 taxes free You cannot deduct interest on a debt incurred or continued to buy or carry  tax-exempt securities. 2011 taxes free If you have expenses to produce both taxable and tax-exempt income, but you cannot identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct. 2011 taxes free Example. 2011 taxes free During the year, you received taxable interest of $4,800 and tax-exempt interest of $1,200. 2011 taxes free In earning this income, you had total expenses of $500 during the year. 2011 taxes free You cannot identify the amount of each expense item that is for each income item. 2011 taxes free Therefore, 80% ($4,800/$6,000) of the expense is for the taxable interest and 20% ($1,200/$6,000) is for the tax-exempt interest. 2011 taxes free You can deduct, subject to the 2% limit, expenses of $400 (80% of $500). 2011 taxes free Travel Expenses for Another Individual You generally cannot deduct travel expenses you pay or incur for a spouse, dependent, or other individual who accompanies you (or your employee) on business or personal travel unless the spouse, dependent, or other individual is an employee of the taxpayer, the travel is for a bona fide business purpose, and such expenses would otherwise be deductible by the spouse, dependent, or other individual. 2011 taxes free See chapter 26 for more information on deductible travel expenses. 2011 taxes free Voluntary Unemployment Benefit Fund Contributions You cannot deduct voluntary unemployment benefit fund contributions you make to a union fund or a private fund. 2011 taxes free However, you can deduct contributions as taxes if state law requires you to make them to a state unemployment fund that covers you for the loss of wages from unemployment caused by business conditions. 2011 taxes free Wristwatches You cannot deduct the cost of a wristwatch, even if there is a job requirement that you know the correct time to properly perform your duties. 2011 taxes free Prev  Up  Next   Home   More Online Publications
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The 2011 Taxes Free

2011 taxes free 4. 2011 taxes free   Filing U. 2011 taxes free S. 2011 taxes free Tax Returns Table of Contents Who Must FileFiling Requirement if Possession Income Is Excluded When To FileExtension of Time To File Where To File Special Rules for Completing Your U. 2011 taxes free S. 2011 taxes free Tax ReturnU. 2011 taxes free S. 2011 taxes free Armed Forces. 2011 taxes free Deductions if Possession Income Is Excluded Foreign Tax Credit if Possession Income Is Excluded Self-Employment Tax Additional Medicare Tax Net Investment Income Tax Paying Your TaxesEstimated Tax Double TaxationCompetent Authority Assistance The information in chapter 3 will tell you if a U. 2011 taxes free S. 2011 taxes free income tax return is required for your situation. 2011 taxes free If a U. 2011 taxes free S. 2011 taxes free return is required, your next step is to see if you meet the filing requirements. 2011 taxes free If you do meet the filing requirements, the information presented in this chapter will help you understand the special procedures involved. 2011 taxes free This chapter discusses: Filing requirements, When to file your return, Where to send your return, How to adjust your deductions and credits if you are excluding income from American Samoa or Puerto Rico, How to make estimated tax payments and pay self-employment tax, and How to request assistance in resolving instances of double taxation. 2011 taxes free Who Must File If you are not required to file a possession tax return that includes your worldwide income, you must generally file a U. 2011 taxes free S. 2011 taxes free income tax return if your gross income is at least the amount shown in Table 4-1, later, for your filing status and age. 2011 taxes free If you were a bona fide resident of American Samoa or Puerto Rico and are able to exclude your possession income from your U. 2011 taxes free S. 2011 taxes free tax return, your filing requirement may be less than the amount in Table 4-1. 2011 taxes free For details, see the information under Filing Requirement if Possession Income Is Excluded , later. 2011 taxes free Some individuals (such as those who can be claimed as a dependent on another person's return or who owe certain taxes, such as self-employment tax) must file a tax return even though the gross income is less than the amount shown in Table 4-1 for their filing status and age. 2011 taxes free For more information, see the Form 1040 instructions. 2011 taxes free Filing Requirement if Possession Income Is Excluded If you were a bona fide resident of American Samoa or Puerto Rico and qualify to exclude possession income on your U. 2011 taxes free S. 2011 taxes free tax return, you must determine your adjusted filing requirement. 2011 taxes free Generally, your filing requirement is based on the total of your (and your spouse's if filing a joint return) personal exemption(s) plus your standard deduction. 2011 taxes free Personal exemption. 2011 taxes free   When figuring your filing requirement, your personal exemption is allowed in full. 2011 taxes free Do not reduce it for this purpose. 2011 taxes free Do not include exemptions for your dependents. 2011 taxes free Allowable standard deduction. 2011 taxes free   Unless your filing status is married filing separately, the minimum income level at which you must file a return is based, in part, on the standard deduction for your filing status and age. 2011 taxes free Because the standard deduction applies to all types of income, it must be divided between your excluded income and income from other sources. 2011 taxes free Multiply the regular standard deduction for your filing status and age (this is zero if you are married filing a separate return; all others, see Form 1040 instructions) by the following fraction:      Gross income subject to U. 2011 taxes free S. 2011 taxes free income tax     Gross income from all sources (including excluded possession income)   Example. 2011 taxes free Barbara Spruce, a U. 2011 taxes free S. 2011 taxes free citizen, is single, under 65, and a bona fide resident of American Samoa. 2011 taxes free During 2013, she received $20,000 of income from American Samoa sources (qualifies for exclusion) and $8,000 of income from sources outside the possession (subject to U. 2011 taxes free S. 2011 taxes free income tax). 2011 taxes free Her allowable standard deduction for 2013 is figured as follows:   $8,000 $28,000 × $6,100 (regular standard deduction) = $1,743   Adjusted filing requirement. 2011 taxes free   Figure your adjusted filing requirement by adding the amount of your allowable standard deduction to the amount of your personal exemption. 2011 taxes free You must file a U. 2011 taxes free S. 2011 taxes free income tax return if your gross income is at least the amount shown on line 3 of the following worksheet. 2011 taxes free    1. 2011 taxes free Enter the allowable standard deduction you figured earlier under Allowable standard deduction . 2011 taxes free If your filing status is married filing separately, enter -0-   2. 2011 taxes free Personal exemption. 2011 taxes free If your filing status is married filing jointly, enter $7,800; if someone can claim you as a dependent, enter -0-; otherwise, enter $3,900   3. 2011 taxes free Add lines 1 and 2. 2011 taxes free You must file a U. 2011 taxes free S. 2011 taxes free income tax return if your gross income from sources outside the relevant possession is at least this amount   Table 4-1. 2011 taxes free 2013 Filing Requirements Chart for Most Taxpayers IF your filing status is. 2011 taxes free . 2011 taxes free . 2011 taxes free AND at the end of 2013 you were*. 2011 taxes free . 2011 taxes free . 2011 taxes free THEN file a return if your gross income** was at least. 2011 taxes free . 2011 taxes free . 2011 taxes free single under 65 $10,000 65 or older $11,500 married filing jointly*** under 65 (both spouses) $20,000 65 or older (one spouse) $21,200 65 or older (both spouses) $22,400 married filing separately any age $3,900 head of household under 65 $12,850 65 or older $14,350 qualifying widow(er)  with dependent child under 65 $16,100 65 or older $17,300 * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. 2011 taxes free ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States (even if you can exclude part or all of it). 2011 taxes free Do not include social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time during 2013, or (b) one-half of your social security benefits plus your other gross income is more than $25,000 ($32,000 if married filing jointly). 2011 taxes free If (a) or (b) applies, see the instructions for Form 1040 or Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure the taxable part of social security benefits you must include in gross income. 2011 taxes free *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900 you must file a return regardless of your age. 2011 taxes free Example 1. 2011 taxes free James and Joan Thompson, one over 65, are U. 2011 taxes free S. 2011 taxes free citizens and bona fide residents of Puerto Rico during the entire tax year. 2011 taxes free They file a joint income tax return. 2011 taxes free During 2013, they received $35,000 of income from Puerto Rico sources (qualifies for exclusion) and $6,000 of income from sources outside Puerto Rico (subject to U. 2011 taxes free S. 2011 taxes free income tax). 2011 taxes free Their allowable standard deduction for 2013 is figured as follows:   $6,000 $41,000 × $13,400 ( standard deduction for 65 or older (one spouse) ) = $1,961   The Thompsons do not have to file a U. 2011 taxes free S. 2011 taxes free income tax return because their gross income subject to U. 2011 taxes free S. 2011 taxes free tax ($6,000) is less than their allowable standard deduction plus their personal exemptions ($1,961+ $7,800= $9,761). 2011 taxes free Example 2. 2011 taxes free Barbara Spruce (see Example under Allowable standard deduction, earlier), however, must file a U. 2011 taxes free S. 2011 taxes free income tax return because her gross income subject to U. 2011 taxes free S. 2011 taxes free tax ($8,000) is more than her allowable standard deduction plus her personal exemption ($1,743 + $3,900 = $5,643). 2011 taxes free If you must file a U. 2011 taxes free S. 2011 taxes free income tax return, you may be able to file a paperless return using IRS e-file. 2011 taxes free See your form instructions or visit our website at IRS. 2011 taxes free gov. 2011 taxes free When To File If you file on a calendar year basis, the due date for filing your U. 2011 taxes free S. 2011 taxes free income tax return is April 15 following the end of your tax year. 2011 taxes free If you use a fiscal year (a year ending on the last day of a month other than December), the due date is the 15th day of the 4th month after the end of your fiscal year. 2011 taxes free If any due date falls on a Saturday, Sunday, or legal holiday, your tax return is due on the next business day. 2011 taxes free For your 2013 tax return, the due date is April 15, 2014. 2011 taxes free If you mail your federal tax return, it is considered timely if it bears an official postmark dated on or before the due date, including any extensions. 2011 taxes free If you use a private delivery service designated by the IRS, generally the postmark date is the date the private delivery service records in its database or marks on the mailing label. 2011 taxes free See your form instructions for a list of designated private delivery services. 2011 taxes free Extension of Time To File You can get an extension of time to file your U. 2011 taxes free S. 2011 taxes free income tax return. 2011 taxes free Special rules apply for those living outside the United States. 2011 taxes free Automatic 6-Month Extension If you cannot file your 2013 return by the due date, you can get an automatic 6-month extension of time to file. 2011 taxes free Example. 2011 taxes free If your return must be filed by April 15, 2014, you will have until October 15, 2014, to file. 2011 taxes free Although you are not required to make a payment of the tax you estimate as due, Form 4868 does not extend the time to pay taxes. 2011 taxes free If you do not pay the amount due by the regular due date (generally April 15), you will owe interest on any unpaid tax from the original due date to the date you pay the tax. 2011 taxes free You may also be charged penalties (see the Instructions for Form 4868). 2011 taxes free How to get the automatic extension. 2011 taxes free   You can get the automatic 6-month extension if you do one of the following by the due date for filing your return. 2011 taxes free E-file Form 4868 using your personal computer or a tax professional. 2011 taxes free E-file and pay by credit or debit card. 2011 taxes free Your payment must be at least $1. 2011 taxes free You may pay by phone or over the Internet. 2011 taxes free Do not file Form 4868. 2011 taxes free File a paper Form 4868. 2011 taxes free If you are a fiscal year taxpayer, you must file a paper Form 4868. 2011 taxes free See Form 4868 for information on getting an extension using these options. 2011 taxes free When to file. 2011 taxes free   You must request the automatic extension by the due date for your return. 2011 taxes free You can file your return any time before the 6-month extension period ends. 2011 taxes free When you file your return. 2011 taxes free   Enter any payment you made related to the extension of time to file on Form 1040, line 68. 2011 taxes free If you file Form 1040A, U. 2011 taxes free S. 2011 taxes free Individual Income Tax Return, or Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, include that payment in your total payments on Form 1040A, line 41, or Form 1040EZ, line 9. 2011 taxes free Also enter “Form 4868” and the amount paid in the space to the left of the entry space for line 41 or line 9. 2011 taxes free You cannot ask the Internal Revenue Service to figure your tax if you use the extension of time to file. 2011 taxes free Individuals Outside the United States and Puerto Rico You are allowed an automatic 2-month extension (until June 16, 2014, if you use the calendar year) to file your 2013 return and pay any federal income tax due if: You are a U. 2011 taxes free S. 2011 taxes free citizen or resident, and On the due date of your return: You are living outside of the United States and Puerto Rico, and your main place of business or post of duty is outside the United States and Puerto Rico, or You are in military or naval service on duty outside the United States and Puerto Rico. 2011 taxes free However, if you pay the tax due after the regular due date (generally April 15), interest will be charged from April 15 until the date the tax is paid. 2011 taxes free If you serve in a combat zone or qualified hazardous duty area, you may be eligible for a longer extension of time to file. 2011 taxes free For more information, see Publication 3, Armed Forces' Tax Guide. 2011 taxes free Married taxpayers. 2011 taxes free   If you file a joint return, only one spouse has to qualify for this automatic extension. 2011 taxes free However, if you and your spouse file separate returns, this automatic extension applies only to the spouse who qualifies. 2011 taxes free How to get the extension. 2011 taxes free   To use this special automatic extension, you must attach a statement to your return explaining what situation qualified you for the extension. 2011 taxes free (See the situations listed under (2), earlier. 2011 taxes free ) Extension beyond 2 months. 2011 taxes free   If you cannot file your 2013 return within the automatic 2-month extension period, you can get an additional 4-month extension, for a total of 6 months. 2011 taxes free File Form 4868 by the end of the automatic extension period (June 16, 2014 for calendar year taxpayers). 2011 taxes free Be sure to check the box on Form 4868, line 8, if appropriate. 2011 taxes free   In addition to this 6-month extension, taxpayers who are out of the country (as defined under (2) earlier) can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). 2011 taxes free   To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. 2011 taxes free Send the letter by the extended due date (October 15 for calendar year taxpayers) to:  Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA   You will not receive any notification from the IRS unless your request is denied for being untimely. 2011 taxes free Where To File Use the addresses listed below if you have to file Form 1040 with the United States and you are excluding possession income from American Samoa or Puerto Rico. 2011 taxes free If you are not including a check or a money order, send your U. 2011 taxes free S. 2011 taxes free tax return and all attachments to:   Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA If you are including a check or a money order, send your U. 2011 taxes free S. 2011 taxes free tax return and all attachments to:  Internal Revenue Service P. 2011 taxes free O. 2011 taxes free Box 1303 Charlotte, NC 28201-1303 USA Also send your U. 2011 taxes free S. 2011 taxes free return to these addresses if you are attaching Form 5074 or Form 8689. 2011 taxes free If you are not in either of the above categories, send your return to the address shown in the Form 1040 instructions for the possession or state in which you reside. 2011 taxes free Special Rules for Completing Your U. 2011 taxes free S. 2011 taxes free Tax Return If you are not excluding possession income from your U. 2011 taxes free S. 2011 taxes free tax return, follow the instructions for the specific forms you file. 2011 taxes free However, you may not qualify to claim the earned income credit (EIC). 2011 taxes free Earned income credit. 2011 taxes free   Even if you maintain a household in one of the possessions discussed in this publication that is your main home and the home of your qualifying child, you cannot claim the earned income credit on your U. 2011 taxes free S. 2011 taxes free tax return. 2011 taxes free This credit is available only if you maintain the household in the United States or you are serving on extended active duty in the U. 2011 taxes free S. 2011 taxes free Armed Forces. 2011 taxes free U. 2011 taxes free S. 2011 taxes free Armed Forces. 2011 taxes free   U. 2011 taxes free S. 2011 taxes free military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. 2011 taxes free Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. 2011 taxes free Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. 2011 taxes free Income from American Samoa or Puerto Rico excluded. 2011 taxes free   You will not be allowed to take deductions and credits that apply to the excluded income. 2011 taxes free The additional information you need follows. 2011 taxes free Deductions if Possession Income Is Excluded Deductions that specifically apply to your excluded possession income, such as employee business expenses, are not allowable on your U. 2011 taxes free S. 2011 taxes free income tax return. 2011 taxes free Deductions that do not specifically apply to any particular type of income must be divided between your excluded income from sources in the relevant possession and income from all other sources to find the part that you can deduct on your U. 2011 taxes free S. 2011 taxes free tax return. 2011 taxes free Examples of such deductions are alimony payments, the standard deduction, and certain itemized deductions (such as medical expenses, charitable contributions, real estate taxes, and mortgage interest on your home). 2011 taxes free Figuring the deduction. 2011 taxes free   To find the part of a deduction that is allowable, multiply the deduction by the following fraction. 2011 taxes free   Gross income subject to U. 2011 taxes free S. 2011 taxes free income tax     Gross income from all sources (including excluded possession income)   Adjustments to Income Your adjusted gross income equals your gross income minus certain deductions (adjustments). 2011 taxes free Moving expense deduction. 2011 taxes free   Generally, expenses of a move to a possession are directly attributable to wages, salaries, and other earned income from that possession. 2011 taxes free Likewise, the expenses of a move back to the United States are generally attributable to U. 2011 taxes free S. 2011 taxes free earned income. 2011 taxes free   If you are claiming expenses for a move to a relevant possession, how and where you will deduct the expenses depends on your status as a bona fide resident and if any of your possession income is excluded on your U. 2011 taxes free S. 2011 taxes free tax return. 2011 taxes free For more information, see Moving expense deduction in chapter 3 under the name of the relevant possession. 2011 taxes free   If you are claiming expenses for a move from a U. 2011 taxes free S. 2011 taxes free possession to the United States, use Form 3903 to figure your deductible expenses and enter the amount on Form 1040, line 26. 2011 taxes free For purposes of deducting moving expenses, the possessions are considered part of the United States. 2011 taxes free See Publication 521, Moving Expenses, for information about what expenses are deductible. 2011 taxes free Self-employment tax deduction. 2011 taxes free   Generally, if you are reporting self-employment income on your U. 2011 taxes free S. 2011 taxes free return, you can include the deductible part of your self-employment tax on Form 1040, line 27. 2011 taxes free This is an income tax deduction only; it is not a deduction in figuring net earnings from self-employment (for self-employment tax). 2011 taxes free   However, if you are a bona fide resident of American Samoa or Puerto Rico and you exclude all of your self-employment income from gross income, you cannot take the deduction on Form 1040, line 27, because the deduction is related to excluded income. 2011 taxes free   If only part of your self-employment income is excluded, the part of the deduction that is based on the nonexcluded income is allowed. 2011 taxes free This would happen if, for instance, you have two businesses and only the income from one of them is excludable. 2011 taxes free   For purposes of the deduction only, figure the self-employment tax on the nonexcluded income by multiplying your total self-employment tax (from Schedule SE (Form 1040)), Self-Employment Tax) by the following fraction. 2011 taxes free   Self-employment income subject to U. 2011 taxes free S. 2011 taxes free income tax     Total self-employment income (including excluded possession income)   The result is your self-employment tax on nonexcluded income. 2011 taxes free Include the deductible part of this amount on Form 1040, line 27. 2011 taxes free Individual retirement arrangement (IRA) deduction. 2011 taxes free   Do not take excluded income into account when figuring your deductible IRA contribution. 2011 taxes free Standard Deduction The standard deduction is composed of the regular standard deduction amount and the additional standard deduction for taxpayers who are blind or age 65 or over. 2011 taxes free To find the amount you can claim on Form 1040, line 40, first figure your full standard deduction according to the Instructions for Form 1040. 2011 taxes free Then multiply your full standard deduction by the following fraction. 2011 taxes free   Gross income subject to U. 2011 taxes free S. 2011 taxes free income tax     Gross income from all sources (including excluded possession income)   In the space above line 40, enter “Standard deduction modified due to income excluded under section 931 (if American Samoa) or section 933 (if Puerto Rico). 2011 taxes free ” This calculation may not be the same as the one you used to determine if you need to file a U. 2011 taxes free S. 2011 taxes free tax return. 2011 taxes free Itemized Deductions Most itemized deductions do not apply to a particular type of income. 2011 taxes free However, itemized deductions can be divided into three categories. 2011 taxes free Those that apply specifically to excluded income, such as employee business expenses, are not deductible. 2011 taxes free Those that apply specifically to income subject to U. 2011 taxes free S. 2011 taxes free income tax, which might also be employee business expenses, are fully allowable under the Instructions for Schedule A (Form 1040), Itemized Deductions. 2011 taxes free Those that do not apply to specific income must be allocated between your gross income subject to U. 2011 taxes free S. 2011 taxes free income tax and your total gross income from all sources. 2011 taxes free The example given later shows how to figure the deductible part of each type of expense that is not related to specific income. 2011 taxes free Example. 2011 taxes free In 2013, you and your spouse are both under 65 and U. 2011 taxes free S. 2011 taxes free citizens who are bona fide residents of Puerto Rico during the entire tax year. 2011 taxes free You file a joint income tax return. 2011 taxes free During 2013, you earned $20,000 from Puerto Rican sources (excluded from U. 2011 taxes free S. 2011 taxes free gross income) and your spouse earned $60,000 from the U. 2011 taxes free S. 2011 taxes free Government. 2011 taxes free You have $16,000 of itemized deductions that do not apply to any specific type of income. 2011 taxes free These are medical expenses of $4,000, real estate taxes of $5,000, home mortgage interest of $6,000, and charitable contributions of $1,000 (cash contributions). 2011 taxes free You determine the amount of each deduction that you can claim on your Schedule A (Form 1040), Itemized Deductions, by multiplying the deduction by the fraction shown under Figuring the deduction , earlier under Deductions if Possession Income is Excluded. 2011 taxes free   Medical Expenses   $60,000$80,000 × $4,000 = $3,000  (enter on line 1  of Schedule A)     Real Estate Taxes   $60,000$80,000 × $5,000 = $3,750  (enter on line 6  of Schedule A)     Home Mortgage Interest   $60,000$80,000 × $6,000 = $4,500  (enter on line 10 or 11 of  Schedule A)     Charitable Contributions (cash contributions)   $60,000$80,000 × $1,000 = $750  (enter on line 16 of Schedule A)   Enter on Schedule A (Form 1040) only the allowable portion of each deduction. 2011 taxes free Overall limitation on itemized deductions. 2011 taxes free   If your adjusted gross income (discussed earlier) is over $300,000 if married filing jointly or qualifying widow(er); $275,000 if head of household; $250,000 if single; or $150,000 if married filing separately; see the Itemized Deductions Worksheet in the Instructions for Schedule A (Form 1040), to figure your itemized deductions. 2011 taxes free Personal Exemptions Personal exemptions are allowed in full even if excluding possession income. 2011 taxes free However, depending upon your adjusted gross income and filing status, the amount you can deduct may be reduced. 2011 taxes free See the Deduction for Exemptions Worksheet—Line 42 in the instructions for Form 1040. 2011 taxes free Foreign Tax Credit if Possession Income Is Excluded If you must report American Samoa or Puerto Rico source income on your U. 2011 taxes free S. 2011 taxes free tax return, you can claim a foreign tax credit for income taxes paid to the possession on that income. 2011 taxes free However, you cannot claim a foreign tax credit for taxes paid on possession income that is excluded on your U. 2011 taxes free S. 2011 taxes free tax return. 2011 taxes free The foreign tax credit is generally figured on Form 1116. 2011 taxes free If you have income, such as U. 2011 taxes free S. 2011 taxes free Government wages, that is not excludable, and you also have possession source income that is excludable, you must figure the credit by reducing your foreign taxes paid or accrued by the taxes based on the excluded income. 2011 taxes free You make this reduction for each separate income category. 2011 taxes free To find the amount of this reduction, use the following formula for each income category. 2011 taxes free Excluded income from possession sources less deductible expenses based on that income x Tax paid or accrued to the possession = Reduction in foreign taxes Total income subject to possession tax less deductible expenses based on that income Enter the amount of the reduction on Form 1116, line 12. 2011 taxes free For more information on the foreign tax credit, see Publication 514. 2011 taxes free Example. 2011 taxes free Jason and Lynn Reddy are U. 2011 taxes free S. 2011 taxes free citizens who were bona fide residents of Puerto Rico during all of 2013. 2011 taxes free They file a joint tax return. 2011 taxes free The following table shows their excludable and taxable income for U. 2011 taxes free S. 2011 taxes free federal income tax purposes. 2011 taxes free   Taxable   Excludable Jason's wages from  U. 2011 taxes free S. 2011 taxes free Government $25,000     Lynn's wages from Puerto Rico  corp. 2011 taxes free     $15,000 Dividend from Puerto Rico corp. 2011 taxes free doing business in Puerto Rico     200 Dividend from U. 2011 taxes free S. 2011 taxes free  corp. 2011 taxes free doing business  in U. 2011 taxes free S. 2011 taxes free * 1,000     Totals $26,000   $15,200 * Income from sources outside Puerto Rico is taxable. 2011 taxes free   Jason and Lynn must file 2013 income tax returns with both Puerto Rico and the United States. 2011 taxes free They have gross income of $26,000 for U. 2011 taxes free S. 2011 taxes free tax purposes. 2011 taxes free They paid taxes to Puerto Rico of $4,000 ($3,980 on their wages and $20 on the dividend from the Puerto Rico corporation). 2011 taxes free They figure their foreign tax credit on two Forms 1116, which they must attach to their U. 2011 taxes free S. 2011 taxes free return. 2011 taxes free They fill out one Form 1116 for wages and one Form 1116 for the dividend. 2011 taxes free Jason and Lynn figure the Puerto Rico taxes on excluded income as follows. 2011 taxes free   Wages: ($15,000 ÷ $40,000) × $3,980 = $1,493   Dividend: ($200 ÷ $200) × $20 = $20 They enter $1,493 on Form 1116, line 12, for wages and $20 on the second Form 1116, line 12, for the dividend. 2011 taxes free Self-Employment Tax Self-employment tax includes both social security and Medicare taxes for individuals who are self-employed. 2011 taxes free A U. 2011 taxes free S. 2011 taxes free citizen or resident alien who is self-employed must pay self-employment tax on net self-employment earnings of $400 or more. 2011 taxes free This rule applies whether or not the earnings are excludable from gross income (or whether or not a U. 2011 taxes free S. 2011 taxes free income tax return must otherwise be filed). 2011 taxes free Bona fide residents of the possessions discussed in this publication are considered U. 2011 taxes free S. 2011 taxes free residents for this purpose and are subject to the self-employment tax. 2011 taxes free Forms to file. 2011 taxes free   If you have net self-employment income and are subject to self-employment tax, file one of the following with the United States. 2011 taxes free If you are required to file Form 1040 with the United States, complete Schedule SE (Form 1040) and attach it to your Form 1040. 2011 taxes free If you are not required to file Form 1040 with the United States and you are a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI, file Form 1040-SS. 2011 taxes free If you are a resident of Puerto Rico, you can file the Spanish-language Form 1040-PR instead. 2011 taxes free Do not file forms 1040-SS or 1040-PR with Form 1040. 2011 taxes free If you are required to pay Additional Medicare Tax (discussed later) on your self-employment income, attach Form 8959, Additional Medicare Tax to Form 1040, Form 1040-SS, or Form 1040-PR, as applicable. 2011 taxes free Chapter 11 Bankruptcy cases. 2011 taxes free   While you are a debtor in a chapter 11 bankruptcy case, your net profit or loss from self-employment will be included on the income tax return (Form 1041, U. 2011 taxes free S. 2011 taxes free Income Tax Return for Estates and Trusts) of the bankruptcy estate. 2011 taxes free However, you—not the bankruptcy estate—are responsible for paying self-employment tax on your net earnings from self-employment. 2011 taxes free   Use Schedule SE (Form 1040), Form 1040-SS, or Form 1040-PR, as determined above, to figure your correct amount of self-employment tax. 2011 taxes free   For other reporting requirements, see Chapter 11 Bankruptcy Cases in the Instructions for Form 1040. 2011 taxes free Additional Medicare Tax Beginning in 2013, a 0. 2011 taxes free 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 if single, head of household, or qualifying widow(er). 2011 taxes free Medicare wages and self-employment income are combined to determine if income exceeds the threshold. 2011 taxes free A self-employment loss should not be considered for purposes of this tax. 2011 taxes free RRTA compensation should be separately compared to the threshold. 2011 taxes free Your employer is responsible for withholding the 0. 2011 taxes free 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000. 2011 taxes free You should consider this withholding, if applicable, in determining whether you need to make estimated tax payments. 2011 taxes free There are no special rules for U. 2011 taxes free S. 2011 taxes free citizens and nonresident aliens living abroad for purposes of this provision. 2011 taxes free Wages, RRTA compensation, and self-employment income that are subject to Medicare tax will also be subject to Additional Medicare Tax if in excess of the applicable threshold. 2011 taxes free For more information, see Form 8959, Additional Medicare Tax, and its instructions or visit www. 2011 taxes free irs. 2011 taxes free gov and enter the following words in the search box: Additional Medicare Tax. 2011 taxes free You cannot include the Additional Medicare Tax as a deductible part of your self-employment tax. 2011 taxes free Net Investment Income Tax Beginning in 2013, the Net Investment Income Tax (NIIT) imposes a 3. 2011 taxes free 8% tax on the lesser of an individual’s net investment income or the excess of the individual’s modified adjusted gross income over a specified threshold amount. 2011 taxes free Bona fide residents of Puerto Rico and American Samoa who may have a federal income tax return filing obligation may be liable for the NIIT if the taxpayer’s modified adjusted gross income from non-territory sources exceeds a specified threshold amount. 2011 taxes free The NIIT does not apply to any individual who is a nonresident alien with respect to the United States. 2011 taxes free Bona fide residents must take into account any additional tax liability associated with the NIIT when calculating your estimated tax payments. 2011 taxes free Forms to file. 2011 taxes free   If you are a bona fide resident of American Samoa and Puerto Rico and you are required to pay the NIIT, you must file Form 1040 with the United States and attach Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts. 2011 taxes free For more information, see Form 8960 and its instructions. 2011 taxes free Paying Your Taxes You may find that not all of your income tax has been paid through withholding by either the United States or the possession. 2011 taxes free This is often true if you have income that is not subject to withholding, such as self-employment, interest, or rental income. 2011 taxes free In this situation, you may need to make estimated tax payments. 2011 taxes free Estimated Tax If your estimated income tax obligation is to the United States, use the worksheet in the Form 1040-ES package to figure your estimated tax, including self-employment tax. 2011 taxes free Include the Additional Medicare Tax and Net Investment Income Tax if applicable. 2011 taxes free If you are paying by check or money order, use the payment vouchers in the Form 1040-ES package. 2011 taxes free Or, you can make your payments electronically and not have to file any paper forms. 2011 taxes free See the Form 1040-ES instructions for information on making payments. 2011 taxes free Double Taxation Mutual agreement procedures exist to settle issues where there is inconsistent tax treatment between the IRS and the taxing authorities of the following possessions. 2011 taxes free American Samoa. 2011 taxes free The Commonwealth of Puerto Rico. 2011 taxes free The Commonwealth of the Northern Mariana Islands. 2011 taxes free Guam. 2011 taxes free The U. 2011 taxes free S. 2011 taxes free Virgin Islands. 2011 taxes free These issues usually involve allocations of income, deductions, credits, or allowances between related persons; determinations of residency; and determinations of the source of income and related expenses. 2011 taxes free Competent Authority Assistance The tax coordination agreements between the United States and the possession tax departments contain provisions allowing the competent authorities of the United States and the relevant possession to resolve, by mutual agreement, inconsistent tax treatment by the two jurisdictions. 2011 taxes free How to make your request. 2011 taxes free   Your request for competent authority assistance must include all the information listed in Revenue Procedure 2006-23, 2006-20 I. 2011 taxes free R. 2011 taxes free B. 2011 taxes free 900 available at www. 2011 taxes free irs. 2011 taxes free gov/pub/irs-irbs/irb06-49. 2011 taxes free pdf. 2011 taxes free    Also, see Notice 2013-78, which provides proposed updates to the procedures for requesting U. 2011 taxes free S. 2011 taxes free competent authority assistance under tax treaties. 2011 taxes free As noted, an update to Revenue Procedure 2006-23 will be published in the future. 2011 taxes free   Your request must be in the form of a letter addressed to the Deputy Commissioner (International) LB&I. 2011 taxes free It must contain a statement that competent authority assistance is requested under the mutual agreement procedure with the possession. 2011 taxes free You (or a person having authority to sign your federal return) must sign and date the request. 2011 taxes free    Send your written request for U. 2011 taxes free S. 2011 taxes free assistance under this procedure to:   Deputy Commissioner (International) Large Business and International Division Internal Revenue Service 1111 Constitution Avenue, N. 2011 taxes free W. 2011 taxes free  Routing: M4-365 Washington, DC 20224 (Attention: TAIT) Nonresident aliens generally must present their initial request for assistance to the relevant possession tax agency. 2011 taxes free Credit or Refund In addition to the tax assistance request, if you seek a credit or refund of any overpayment of U. 2011 taxes free S. 2011 taxes free tax paid on the income in question, you should file a claim on Form 1040X, Amended U. 2011 taxes free S. 2011 taxes free Individual Income Tax Return. 2011 taxes free Indicate on the form that a request for assistance under the mutual agreement procedure with the possession has been filed. 2011 taxes free Attach a copy of the request to the form. 2011 taxes free Also, you should take whatever steps must be taken under the possession tax code to prevent the expiration of the statutory period for filing a claim for credit or refund of a possession tax. 2011 taxes free See Revenue Procedure 2006-54 (or its successor), section 9, for complete information. 2011 taxes free Prev  Up  Next   Home   More Online Publications