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Aarp free tax preparation locations 5. Aarp free tax preparation locations   Personal Use of Dwelling Unit (Including Vacation Home) Table of Contents Dividing Expenses Dwelling Unit Used as a HomeMain home. Aarp free tax preparation locations Shared equity financing agreement. Aarp free tax preparation locations Donation of use of the property. Aarp free tax preparation locations Examples. Aarp free tax preparation locations Days used for repairs and maintenance. Aarp free tax preparation locations Days used as a main home before or after renting. Aarp free tax preparation locations Reporting Income and DeductionsNot used as a home. Aarp free tax preparation locations Used as a home but rented less than 15 days. Aarp free tax preparation locations Used as a home and rented 15 days or more. Aarp free tax preparation locations If you have any personal use of a dwelling unit (including a vacation home) that you rent, you must divide your expenses between rental use and personal use. Aarp free tax preparation locations In general, your rental expenses will be no more than your total expenses multiplied by a fraction; the denominator of which is the total number of days the dwelling unit is used and the numerator of which is the total number of days actually rented at a fair rental price. Aarp free tax preparation locations Only your rental expenses may deducted on Schedule E (Form 1040). Aarp free tax preparation locations Some of your personal expenses may be deductible if you itemize your deductions on Schedule A (Form 1040). Aarp free tax preparation locations You must also determine if the dwelling unit is considered a home. Aarp free tax preparation locations The amount of rental expenses that you can deduct may be limited if the dwelling unit is considered a home. Aarp free tax preparation locations Whether a dwelling unit is considered a home depends on how many days during the year are considered to be days of personal use. Aarp free tax preparation locations There is a special rule if you used the dwelling unit as a home and you rented it for less than 15 days during the year. Aarp free tax preparation locations Dwelling unit. Aarp free tax preparation locations   A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. Aarp free tax preparation locations It also includes all structures or other property belonging to the dwelling unit. Aarp free tax preparation locations A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. Aarp free tax preparation locations   A dwelling unit does not include property (or part of the property) used solely as a hotel, motel, inn, or similar establishment. Aarp free tax preparation locations Property is used solely as a hotel, motel, inn, or similar establishment if it is regularly available for occupancy by paying customers and is not used by an owner as a home during the year. Aarp free tax preparation locations Example. Aarp free tax preparation locations You rent a room in your home that is always available for short-term occupancy by paying customers. Aarp free tax preparation locations You do not use the room yourself and you allow only paying customers to use the room. Aarp free tax preparation locations This room is used solely as a hotel, motel, inn, or similar establishment and is not a dwelling unit. Aarp free tax preparation locations Dividing Expenses If you use a dwelling unit for both rental and personal purposes, divide your expenses between the rental use and the personal use based on the number of days used for each purpose. Aarp free tax preparation locations When dividing your expenses, follow these rules. Aarp free tax preparation locations Any day that the unit is rented at a fair rental price is a day of rental use even if you used the unit for personal purposes that day. Aarp free tax preparation locations (This rule does not apply when determining whether you used the unit as a home. Aarp free tax preparation locations ) Any day that the unit is available for rent but not actually rented is not a day of rental use. Aarp free tax preparation locations Fair rental price. Aarp free tax preparation locations   A fair rental price for your property generally is the amount of rent that a person who is not related to you would be willing to pay. Aarp free tax preparation locations The rent you charge is not a fair rental price if it is substantially less than the rents charged for other properties that are similar to your property in your area. Aarp free tax preparation locations   Ask yourself the following questions when comparing another property with yours. Aarp free tax preparation locations Is it used for the same purpose? Is it approximately the same size? Is it in approximately the same condition? Does it have similar furnishings? Is it in a similar location? If any of the answers are no, the properties probably are not similar. Aarp free tax preparation locations Example. Aarp free tax preparation locations Your beach cottage was available for rent from June 1 through August 31 (92 days). Aarp free tax preparation locations Except for the first week in August (7 days), when you were unable to find a renter, you rented the cottage at a fair rental price during that time. Aarp free tax preparation locations The person who rented the cottage for July allowed you to use it over the weekend (2 days) without any reduction in or refund of rent. Aarp free tax preparation locations Your family also used the cottage during the last 2 weeks of May (14 days). Aarp free tax preparation locations The cottage was not used at all before May 17 or after August 31. Aarp free tax preparation locations You figure the part of the cottage expenses to treat as rental expenses as follows. Aarp free tax preparation locations The cottage was used for rental a total of 85 days (92 − 7). Aarp free tax preparation locations The days it was available for rent but not rented (7 days) are not days of rental use. Aarp free tax preparation locations The July weekend (2 days) you used it is rental use because you received a fair rental price for the weekend. Aarp free tax preparation locations You used the cottage for personal purposes for 14 days (the last 2 weeks in May). Aarp free tax preparation locations The total use of the cottage was 99 days (14 days personal use + 85 days rental use). Aarp free tax preparation locations Your rental expenses are 85/99 (86%) of the cottage expenses. Aarp free tax preparation locations Note. Aarp free tax preparation locations When determining whether you used the cottage as a home, the July weekend (2 days) you used it is considered personal use even though you received a fair rental price for the weekend. Aarp free tax preparation locations Therefore, you had 16 days of personal use and 83 days of rental use for this purpose. Aarp free tax preparation locations Because you used the cottage for personal purposes more than 14 days and more than 10% of the days of rental use (8 days), you used it as a home. Aarp free tax preparation locations If you have a net loss, you may not be able to deduct all of the rental expenses. Aarp free tax preparation locations See Dwelling Unit Used as a Home, next. Aarp free tax preparation locations Dwelling Unit Used as a Home If you use a dwelling unit for both rental and personal purposes, the tax treatment of the rental expenses you figured earlier under Dividing Expenses and rental income depends on whether you are considered to be using the dwelling unit as a home. Aarp free tax preparation locations You use a dwelling unit as a home during the tax year if you use it for personal purposes more than the greater of: 14 days, or 10% of the total days it is rented to others at a fair rental price. Aarp free tax preparation locations See What is a day of personal use , later. Aarp free tax preparation locations If a dwelling unit is used for personal purposes on a day it is rented at a fair rental price (discussed earlier), do not count that day as a day of rental use in applying (2) above. Aarp free tax preparation locations Instead, count it as a day of personal use in applying both (1) and (2) above. Aarp free tax preparation locations What is a day of personal use?   A day of personal use of a dwelling unit is any day that the unit is used by any of the following persons. Aarp free tax preparation locations You or any other person who owns an interest in it, unless you rent it to another owner as his or her main home under a shared equity financing agreement (defined later). Aarp free tax preparation locations However, see Days used as a main home before or after renting , later. Aarp free tax preparation locations A member of your family or a member of the family of any other person who owns an interest in it, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. Aarp free tax preparation locations Family includes only your spouse, brothers and sisters, half-brothers and half-sisters, ancestors (parents, grandparents, etc. Aarp free tax preparation locations ), and lineal descendants (children, grandchildren, etc. Aarp free tax preparation locations ). Aarp free tax preparation locations Anyone under an arrangement that lets you use some other dwelling unit. Aarp free tax preparation locations Anyone at less than a fair rental price. Aarp free tax preparation locations Main home. Aarp free tax preparation locations   If the other person or member of the family in (1) or (2) above has more than one home, his or her main home is ordinarily the one he or she lived in most of the time. Aarp free tax preparation locations Shared equity financing agreement. Aarp free tax preparation locations   This is an agreement under which two or more persons acquire undivided interests for more than 50 years in an entire dwelling unit, including the land, and one or more of the co-owners is entitled to occupy the unit as his or her main home upon payment of rent to the other co-owner or owners. Aarp free tax preparation locations Donation of use of the property. Aarp free tax preparation locations   You use a dwelling unit for personal purposes if: You donate the use of the unit to a charitable organization, The organization sells the use of the unit at a fund-raising event, and The “purchaser” uses the unit. Aarp free tax preparation locations Examples. Aarp free tax preparation locations   The following examples show how to determine if you have days of personal use. Aarp free tax preparation locations Example 1. Aarp free tax preparation locations You and your neighbor are co-owners of a condominium at the beach. Aarp free tax preparation locations Last year, you rented the unit to vacationers whenever possible. Aarp free tax preparation locations The unit was not used as a main home by anyone. Aarp free tax preparation locations Your neighbor used the unit for 2 weeks last year; you did not use it at all. Aarp free tax preparation locations Because your neighbor has an interest in the unit, both of you are considered to have used the unit for personal purposes during those 2 weeks. Aarp free tax preparation locations Example 2. Aarp free tax preparation locations You and your neighbors are co-owners of a house under a shared equity financing agreement. Aarp free tax preparation locations Your neighbors live in the house and pay you a fair rental price. Aarp free tax preparation locations Even though your neighbors have an interest in the house, the days your neighbors live there are not counted as days of personal use by you. Aarp free tax preparation locations This is because your neighbors rent the house as their main home under a shared equity financing agreement. Aarp free tax preparation locations Example 3. Aarp free tax preparation locations You own a rental property that you rent to your son. Aarp free tax preparation locations Your son does not own any interest in this property. Aarp free tax preparation locations He uses it as his main home and pays you a fair rental price. Aarp free tax preparation locations Your son's use of the property is not personal use by you because your son is using it as his main home, he owns no interest in the property, and he is paying you a fair rental price. Aarp free tax preparation locations Example 4. Aarp free tax preparation locations You rent your beach house to Rosa. Aarp free tax preparation locations Rosa rents her cabin in the mountains to you. Aarp free tax preparation locations You each pay a fair rental price. Aarp free tax preparation locations You are using your beach house for personal purposes on the days that Rosa uses it because your house is used by Rosa under an arrangement that allows you to use her cabin. Aarp free tax preparation locations Example 5. Aarp free tax preparation locations You rent an apartment to your mother at less than a fair rental price. Aarp free tax preparation locations You are using the apartment for personal purposes on the days that your mother rents it because you rent it for less than a fair rental price. Aarp free tax preparation locations Days used for repairs and maintenance. Aarp free tax preparation locations   Any day that you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. Aarp free tax preparation locations Do not count such a day as a day of personal use even if family members use the property for recreational purposes on the same day. Aarp free tax preparation locations Example. Aarp free tax preparation locations Corey owns a cabin in the mountains that he rents for most of the year. Aarp free tax preparation locations He spends a week at the cabin with family members. Aarp free tax preparation locations Corey works on maintenance of the cabin 3 or 4 hours each day during the week and spends the rest of the time fishing, hiking, and relaxing. Aarp free tax preparation locations Corey's family members, however, work substantially full time on the cabin each day during the week. Aarp free tax preparation locations The main purpose of being at the cabin that week is to do maintenance work. Aarp free tax preparation locations Therefore, the use of the cabin during the week by Corey and his family will not be considered personal use by Corey. Aarp free tax preparation locations Days used as a main home before or after renting. Aarp free tax preparation locations   For purposes of determining whether a dwelling unit was used as a home, you may not have to count days you used the property as your main home before or after renting it or offering it for rent as days of personal use. Aarp free tax preparation locations Do not count them as days of personal use if: You rented or tried to rent the property for 12 or more consecutive months. Aarp free tax preparation locations You rented or tried to rent the property for a period of less than 12 consecutive months and the period ended because you sold or exchanged the property. Aarp free tax preparation locations However, this special rule does not apply when dividing expenses between rental and personal use. Aarp free tax preparation locations See Property Changed to Rental Use in chapter 4. Aarp free tax preparation locations Example 1. Aarp free tax preparation locations On February 29, 2012, you moved out of the house you had lived in for 6 years because you accepted a job in another town. Aarp free tax preparation locations You rented your house at a fair rental price from March 15, 2012, to May 14, 2013 (14 months). Aarp free tax preparation locations On June 1, 2013, you moved back into your old house. Aarp free tax preparation locations The days you used the house as your main home from January 1 to February 29, 2012, and from June 1 to December 31, 2013, are not counted as days of personal use. Aarp free tax preparation locations Therefore, you would use the rules in chapter 1 when figuring your rental income and expenses. Aarp free tax preparation locations Example 2. Aarp free tax preparation locations On January 31, you moved out of the condominium where you had lived for 3 years. Aarp free tax preparation locations You offered it for rent at a fair rental price beginning on February 1. Aarp free tax preparation locations You were unable to rent it until April. Aarp free tax preparation locations On September 15, you sold the condominium. Aarp free tax preparation locations The days you used the condominium as your main home from January 1 to January 31 are not counted as days of personal use when determining whether you used it as a home. Aarp free tax preparation locations Examples. Aarp free tax preparation locations   The following examples show how to determine whether you used your rental property as a home. Aarp free tax preparation locations Example 1. Aarp free tax preparation locations You converted the basement of your home into an apartment with a bedroom, a bathroom, and a small kitchen. Aarp free tax preparation locations You rented the basement apartment at a fair rental price to college students during the regular school year. Aarp free tax preparation locations You rented to them on a 9-month lease (273 days). Aarp free tax preparation locations You figured 10% of the total days rented to others at a fair rental price is 27 days. Aarp free tax preparation locations During June (30 days), your brothers stayed with you and lived in the basement apartment rent free. Aarp free tax preparation locations Your basement apartment was used as a home because you used it for personal purposes for 30 days. Aarp free tax preparation locations Rent-free use by your brothers is considered personal use. Aarp free tax preparation locations Your personal use (30 days) is more than the greater of 14 days or 10% of the total days it was rented (27 days). Aarp free tax preparation locations Example 2. Aarp free tax preparation locations You rented the guest bedroom in your home at a fair rental price during the local college's homecoming, commencement, and football weekends (a total of 27 days). Aarp free tax preparation locations Your sister-in-law stayed in the room, rent free, for the last 3 weeks (21 days) in July. Aarp free tax preparation locations You figured 10% of the total days rented to others at a fair rental price is 3 days. Aarp free tax preparation locations The room was used as a home because you used it for personal purposes for 21 days. Aarp free tax preparation locations That is more than the greater of 14 days or 10% of the 27 days it was rented (3 days). Aarp free tax preparation locations Example 3. Aarp free tax preparation locations You own a condominium apartment in a resort area. Aarp free tax preparation locations You rented it at a fair rental price for a total of 170 days during the year. Aarp free tax preparation locations For 12 of these days, the tenant was not able to use the apartment and allowed you to use it even though you did not refund any of the rent. Aarp free tax preparation locations Your family actually used the apartment for 10 of those days. Aarp free tax preparation locations Therefore, the apartment is treated as having been rented for 160 (170 – 10) days. Aarp free tax preparation locations You figured 10% of the total days rented to others at a fair rental price is 16 days. Aarp free tax preparation locations Your family also used the apartment for 7 other days during the year. Aarp free tax preparation locations You used the apartment as a home because you used it for personal purposes for 17 days. Aarp free tax preparation locations That is more than the greater of 14 days or 10% of the 160 days it was rented (16 days). Aarp free tax preparation locations Minimal rental use. Aarp free tax preparation locations   If you use the dwelling unit as a home and you rent it less than 15 days during the year, that period is not treated as rental activity. Aarp free tax preparation locations See Used as a home but rented less than 15 days, later, for more information. Aarp free tax preparation locations Limit on deductions. Aarp free tax preparation locations   Renting a dwelling unit that is considered a home is not a passive activity. Aarp free tax preparation locations Instead, if your rental expenses are more than your rental income, some or all of the excess expenses cannot be used to offset income from other sources. Aarp free tax preparation locations The excess expenses that cannot be used to offset income from other sources are carried forward to the next year and treated as rental expenses for the same property. Aarp free tax preparation locations Any expenses carried forward to the next year will be subject to any limits that apply for that year. Aarp free tax preparation locations This limitation will apply to expenses carried forward to another year even if you do not use the property as your home for that subsequent year. Aarp free tax preparation locations   To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 5–1. Aarp free tax preparation locations Reporting Income and Deductions Property not used for personal purposes. Aarp free tax preparation locations   If you do not use a dwelling unit for personal purposes, see chapter 3 for how to report your rental income and expenses. Aarp free tax preparation locations Property used for personal purposes. Aarp free tax preparation locations   If you do use a dwelling unit for personal purposes, then how you report your rental income and expenses depends on whether you used the dwelling unit as a home. Aarp free tax preparation locations Not used as a home. Aarp free tax preparation locations   If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. Aarp free tax preparation locations Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in this chapter under Dividing Expenses . Aarp free tax preparation locations The expenses for personal use are not deductible as rental expenses. Aarp free tax preparation locations   Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses in chapter 3. Aarp free tax preparation locations Used as a home but rented less than 15 days. Aarp free tax preparation locations   If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function is not considered to be rental and it should not be reported on Schedule E (Form 1040). Aarp free tax preparation locations You are not required to report the rental income and rental expenses from this activity. Aarp free tax preparation locations The expenses, including qualified mortgage interest, property taxes, and any qualified casualty loss will be reported as normally allowed on Schedule A (Form 1040). Aarp free tax preparation locations See the Instructions for Schedule A (Form 1040) for more information on deducting these expenses. Aarp free tax preparation locations Used as a home and rented 15 days or more. Aarp free tax preparation locations   If you use a dwelling unit as a home and rent it 15 days or more during the year, include all your rental income in your income. Aarp free tax preparation locations Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in this chapter under Dividing Expenses . Aarp free tax preparation locations The expenses for personal use are not deductible as rental expenses. Aarp free tax preparation locations   If you had a net profit from renting the dwelling unit for the year (that is, if your rental income is more than the total of your rental expenses, including depreciation), deduct all of your rental expenses. Aarp free tax preparation locations You do not need to use Worksheet 5-1. Aarp free tax preparation locations   However, if you had a net loss from renting the dwelling unit for the year, your deduction for certain rental expenses is limited. Aarp free tax preparation locations To figure your deductible rental expenses and any carryover to next year, use Worksheet 5–1. Aarp free tax preparation locations Worksheet 5-1. Aarp free tax preparation locations Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Use this worksheet only if you answer “yes” to all of the following questions. Aarp free tax preparation locations Did you use the dwelling unit as a home this year? (See Dwelling Unit Used as a Home . Aarp free tax preparation locations ) Did you rent the dwelling unit at a fair rental price 15 days or more this year? Is the total of your rental expenses and depreciation more than your rental income? PART I. Aarp free tax preparation locations Rental Use Percentage A. Aarp free tax preparation locations Total days available for rent at fair rental price A. Aarp free tax preparation locations       B. Aarp free tax preparation locations Total days available for rent (line A) but not rented B. Aarp free tax preparation locations       C. Aarp free tax preparation locations Total days of rental use. Aarp free tax preparation locations Subtract line B from line A C. Aarp free tax preparation locations       D. Aarp free tax preparation locations Total days of personal use (including days rented at less than fair rental price) D. Aarp free tax preparation locations       E. Aarp free tax preparation locations Total days of rental and personal use. Aarp free tax preparation locations Add lines C and D E. Aarp free tax preparation locations       F. Aarp free tax preparation locations Percentage of expenses allowed for rental. Aarp free tax preparation locations Divide line C by line E     F. Aarp free tax preparation locations . Aarp free tax preparation locations PART II. Aarp free tax preparation locations Allowable Rental Expenses 1. Aarp free tax preparation locations Enter rents received 1. Aarp free tax preparation locations   2a. Aarp free tax preparation locations Enter the rental portion of deductible home mortgage interest and qualified mortgage insurance premiums (see instructions) 2a. Aarp free tax preparation locations       b. Aarp free tax preparation locations Enter the rental portion of real estate taxes b. Aarp free tax preparation locations       c. Aarp free tax preparation locations Enter the rental portion of deductible casualty and theft losses (see instructions) c. Aarp free tax preparation locations       d. Aarp free tax preparation locations Enter direct rental expenses (see instructions) d. Aarp free tax preparation locations       e. Aarp free tax preparation locations Fully deductible rental expenses. Aarp free tax preparation locations Add lines 2a–2d. Aarp free tax preparation locations Enter here and  on the appropriate lines on Schedule E (see instructions) 2e. Aarp free tax preparation locations   3. Aarp free tax preparation locations Subtract line 2e from line 1. Aarp free tax preparation locations If zero or less, enter -0- 3. Aarp free tax preparation locations   4a. Aarp free tax preparation locations Enter the rental portion of expenses directly related to operating or maintaining  the dwelling unit (such as repairs, insurance, and utilities) 4a. Aarp free tax preparation locations       b. Aarp free tax preparation locations Enter the rental portion of excess mortgage interest and qualified mortgage insurance premiums (see instructions) b. Aarp free tax preparation locations       c. Aarp free tax preparation locations Carryover of operating expenses from 2012 worksheet c. Aarp free tax preparation locations       d. Aarp free tax preparation locations Add lines 4a–4c d. Aarp free tax preparation locations       e. Aarp free tax preparation locations Allowable expenses. Aarp free tax preparation locations Enter the smaller of line 3 or line 4d (see instructions) 4e. Aarp free tax preparation locations   5. Aarp free tax preparation locations Subtract line 4e from line 3. Aarp free tax preparation locations If zero or less, enter -0- 5. Aarp free tax preparation locations   6a. Aarp free tax preparation locations Enter the rental portion of excess casualty and theft losses (see instructions) 6a. Aarp free tax preparation locations       b. Aarp free tax preparation locations Enter the rental portion of depreciation of the dwelling unit b. Aarp free tax preparation locations       c. Aarp free tax preparation locations Carryover of excess casualty losses and depreciation from 2012 worksheet c. Aarp free tax preparation locations       d. Aarp free tax preparation locations Add lines 6a–6c d. Aarp free tax preparation locations       e. Aarp free tax preparation locations Allowable excess casualty and theft losses and depreciation. Aarp free tax preparation locations Enter the smaller of  line 5 or line 6d (see instructions) 6e. Aarp free tax preparation locations   PART III. Aarp free tax preparation locations Carryover of Unallowed Expenses to Next Year 7a. Aarp free tax preparation locations Operating expenses to be carried over to next year. Aarp free tax preparation locations Subtract line 4e from line 4d 7a. Aarp free tax preparation locations   b. Aarp free tax preparation locations Excess casualty and theft losses and depreciation to be carried over to next year. Aarp free tax preparation locations  Subtract line 6e from line 6d b. Aarp free tax preparation locations   Worksheet 5-1 Instructions. Aarp free tax preparation locations Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Caution. Aarp free tax preparation locations Use the percentage determined in Part I, line F, to figure the rental portions to enter on lines 2a–2c, 4a–4b, and 6a–6b of  Part II. Aarp free tax preparation locations Line 2a. Aarp free tax preparation locations Figure the mortgage interest on the dwelling unit that you could deduct on Schedule A as if you had not rented the unit. Aarp free tax preparation locations Do not include interest on a loan that did not benefit the dwelling unit. Aarp free tax preparation locations For example, do not include interest on a home equity loan used to pay off credit cards or other personal loans, buy a car, or pay college tuition. Aarp free tax preparation locations Include interest on a loan used to buy, build, or improve the dwelling unit, or to refinance such a loan. Aarp free tax preparation locations Include the rental portion of this interest in the total you enter on line 2a of the worksheet. Aarp free tax preparation locations   Figure the qualified mortgage insurance premiums on the dwelling unit that you could deduct on line 13 of Schedule A as if you had not rented the unit. Aarp free tax preparation locations See the Schedule A instructions. Aarp free tax preparation locations However, figure your adjusted gross income (Form 1040, line 38) without your rental income and expenses from the dwelling unit. Aarp free tax preparation locations See Line 4b to deduct the part of the qualified mortgage insurance premiums not allowed because of the adjusted gross income limit. Aarp free tax preparation locations Include the rental portion of the amount from Schedule A, line 13, in the total you enter on line 2a of the worksheet. Aarp free tax preparation locations   Note. Aarp free tax preparation locations Do not file this Schedule A or use it to figure the amount to deduct on line 13 of that schedule. Aarp free tax preparation locations Instead, figure the personal portion on a separate Schedule A. Aarp free tax preparation locations If you have deducted mortgage interest or qualified mortgage insurance premiums on the dwelling unit on other forms, such as Schedule C or F, remember to reduce your Schedule A deduction by that amount. Aarp free tax preparation locations           Line 2c. Aarp free tax preparation locations Figure the casualty and theft losses related to the dwelling unit that you could deduct on Schedule A as if you had not rented the dwelling unit. Aarp free tax preparation locations To do this, complete Section A of Form 4684, Casualties and Thefts, treating the losses as personal losses. Aarp free tax preparation locations If any of the loss is due to a federally declared disaster, see the Instructions for Form 4684. Aarp free tax preparation locations On Form 4684, line 17, enter 10% of your adjusted gross income figured without your rental income and expenses from the dwelling unit. Aarp free tax preparation locations Enter the rental portion of the result from Form 4684, line 18, on line 2c of this worksheet. Aarp free tax preparation locations   Note. Aarp free tax preparation locations Do not file this Form 4684 or use it to figure your personal losses on Schedule A. Aarp free tax preparation locations Instead, figure the personal portion on a separate Form 4684. Aarp free tax preparation locations           Line 2d. Aarp free tax preparation locations Enter the total of your rental expenses that are directly related only to the rental activity. Aarp free tax preparation locations These include interest on loans used for rental activities other than to buy, build, or improve the dwelling unit. Aarp free tax preparation locations Also include rental agency fees, advertising, office supplies, and depreciation on office equipment used in your rental activity. Aarp free tax preparation locations           Line 2e. Aarp free tax preparation locations You can deduct the amounts on lines 2a, 2b, 2c, and 2d as rental expenses on Schedule E even if your rental expenses are more than your rental income. Aarp free tax preparation locations Enter the amounts on lines 2a, 2b, 2c, and 2d on the appropriate lines of Schedule E. Aarp free tax preparation locations           Line 4b. Aarp free tax preparation locations On line 2a, you entered the rental portion of the mortgage interest or qualified mortgage insurance premiums you could deduct on Schedule A if you had not rented the dwelling unit. Aarp free tax preparation locations If you had additional mortgage interest and qualified mortgage insurance premiums that would not be deductible on Schedule A because of limits imposed on them, enter on line 4b of this worksheet the rental portion of those excess amounts. Aarp free tax preparation locations Do not include interest on a loan that did not benefit the dwelling unit  (as explained in the line 2a instructions). Aarp free tax preparation locations           Line 4e. Aarp free tax preparation locations You can deduct the amounts on lines 4a, 4b, and 4c as rental expenses on Schedule E only to the extent they are not more than the amount on line 4e. Aarp free tax preparation locations *           Line 6a. Aarp free tax preparation locations To find the rental portion of excess casualty and theft losses, use the Form 4684 you prepared for line 2c of this worksheet. Aarp free tax preparation locations   A. Aarp free tax preparation locations Enter the amount from Form 4684, line 10       B. Aarp free tax preparation locations Enter the rental portion of line A       C. Aarp free tax preparation locations Enter the amount from line 2c of this worksheet       D. Aarp free tax preparation locations Subtract line C from line B. Aarp free tax preparation locations Enter the result here and on line 6a of this worksheet               Line 6e. Aarp free tax preparation locations You can deduct the amounts on lines 6a, 6b, and 6c as rental expenses on Schedule E only to the extent they are not more than the amount on line 6e. Aarp free tax preparation locations * *Allocating the limited deduction. Aarp free tax preparation locations If you cannot deduct all of the amount on line 4d or 6d this year, you can allocate the allowable deduction in any way you wish among the expenses included on line 4d or 6d. Aarp free tax preparation locations Enter the amount you allocate to each expense on the appropriate line of Schedule E, Part I. Aarp free tax preparation locations Prev  Up  Next   Home   More Online Publications
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Small Business Health Care Tax Credit for Small Employers

 

 

Small employer? Get the credit you deserve.

     If you are a small employer. . .

              with fewer than 25 full-time equivalent employees,
              pay an average wage of less than $50,000 a year, and
               pay at least half of employee health insurance premiums

 

                               . . .then there is a tax credit that may put money in your pocket.

 

 

What You Need to Know about the Small Business Health Care Tax Credit

How will the credit make a difference for you?                 

For tax years 2010 through 2013, the maximum credit is 35 percent of premiums paid for small business employers and 25 percent of premiums paid for small tax-exempt employers such as charities.

 

For tax years beginning in 2014 or later, there will be changes to the credit:

 

  • The maximum credit will increase to 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers. 
  • To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace.
  • The credit will be available to eligible employers for two consecutive taxable years.

 

Here’s what this means for you. If you pay $50,000 a year toward workers’ health care premiums — and if you qualify for a 15 percent credit, you save... $7,500. If you save $7,500 a year from tax year 2010 through 2013, that’s total savings of $30,000. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $10,000 a year.

 

Even if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

 

There is good news for small tax-exempt employers too. The credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.

 

And finally, if you can benefit from the credit this year but forgot to claim it on your tax return, there’s still time to file an amended return.

 

Click here if you want more examples of how the credit applies in different circumstances.

Can you claim the credit?

Now that you know how the credit can make a difference for your business, let’s determine if you can claim it.

To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs). Those employees must have average wages of less than $50,000 (as adjusted for inflation beginning in 2014) per year. Remember, you will have to purchase insurance through the SHOP Marketplace to be eligible for the credit for tax years 2014 and beyond.

Let us break it down for you even more.

You are probably wondering: what IS an FTE. Basically, two half-time workers count as one FTE. That means 20 half-time employees are equivalent to 10 FTEs, which makes the number of FTEs 10, not 20.

Now let’s talk about average annual wages. Say you pay total wages of $200,000 and have 10 FTEs. To figure average annual wages you divide $200,000 by 10 — the number of FTEs — and the result is your average annual wage. The average annual wage would be $20,000.

Also, the amount of the credit you receive works on a sliding scale. The smaller the business or charity, the bigger the credit. So if you have more than 10 FTEs or if the average wage is more than $25,000 (as adjusted for inflation beginning in 2014), the amount of the credit you receive will be less.

How do you claim the credit?

You must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit. For detailed information on filling out this form, see the Instructions for Form 8941.

 

If you are a small business, include the amount as part of the general business credit on your income tax return.

 

If you are a tax-exempt organization, include the amount on line 44f of the Form 990-T, Exempt Organization Business Income Tax Return. You must file the Form 990-T in order to claim the credit, even if you don't ordinarily do so.
 

Don’t forget... if you are a small business employer, you may be able to carry the credit back or forward. And if you are a tax-exempt employer, you may be eligible for a refundable credit.

 

          

Versión en Español

Información acerca del Crédito Tributario por Cuidados de Salud para Pequeñas Empresas

Questions and Answers

Got questions? We have answers.

Small Business Health Care Tax Credit Estimator

Use the estimator to find out whether you may be eligible and get an estimate of how much you might receive.

Forms and Step-by-Step Instructions

Form 8941, Credit for Small Employer Health Insurance Premiums and Instructions for Form 8941

Additional Guidance

Additional guidance on the credit is available in Notices 2010-44, 2010-82 and Notice 2014-6. Find guidance for the 2014 changes in REG-113792-13

News Releases

Affordable Care Act News Releases, Multimedia and Legal Guidance

Widgets

IRS small business health care tax credit Widgets available on Marketing Express.

Information Flyer

Flyer on the Small Business Health Care Tax Credit for small employers.

 

 

 

 

 

 

 

Page Last Reviewed or Updated: 07-Feb-2014

The Aarp Free Tax Preparation Locations

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Aarp free tax preparation locations You must be given reasonable notice in advance that, in examining or collecting your tax liability, the IRS may contact third parties such as your neighbors, banks, employers, or employees. Aarp free tax preparation locations The IRS must also give you notice of specific contacts by providing you with a record of persons contacted on both a periodic basis and upon your request. Aarp free tax preparation locations    This provision does not apply: To any pending criminal investigation, When providing notice would jeopardize collection of any tax liability, Where providing notice may result in reprisal against any person, or When you authorized the contact. Aarp free tax preparation locations Taxpayer Advocate Service. Aarp free tax preparation locations   The Taxpayer Advocate Service is an independent organization within the IRS whose goal is to help taxpayers resolve problems with the IRS. 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Aarp free tax preparation locations    The suspension does not apply to a: Failure-to-pay penalty, Fraudulent tax return, Penalty, interest, addition to tax, or additional amount with respect to any tax liability shown on your return or with respect to any gross misstatement, Penalty, interest, addition to tax, or additional amount with respect to any reportable transaction that is not adequately disclosed or any listed transaction, or Criminal penalty. Aarp free tax preparation locations Seeking relief from improperly assessed interest. Aarp free tax preparation locations   You can seek relief if interest is assessed for periods during which interest should have been suspended because the IRS did not mail a notice to you in a timely manner. 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Aarp free tax preparation locations   If you believe that an IRS officer or employee has made an unreasonable error or delay in performing a ministerial or managerial act (discussed later under Abatement of Interest Due to Error or Delay by the IRS ), file Form 843 with the IRS Service Center where you filed the tax return. Aarp free tax preparation locations If the IRS denies your claim, the Tax Court may be able to review that determination. Aarp free tax preparation locations See Tax Court can review failure to abate interest later under Abatement of Interest Due to Error or Delay by the IRS . Aarp free tax preparation locations If you later agree. Aarp free tax preparation locations    If you agree with the examiner's changes after receiving the examination report or the 30-day letter, sign and return either the examination report or the waiver form. Aarp free tax preparation locations Keep a copy for your records. 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Aarp free tax preparation locations The agent's supervisor decides not to reassign your case, so the work is unreasonably delayed until the agent returns. Aarp free tax preparation locations Interest from the unreasonable delay can be abated since both the decision to send the agent to the training class and not to reassign the case are managerial acts. Aarp free tax preparation locations How to request abatement of interest. Aarp free tax preparation locations    You request an abatement (reduction) of interest on Form 843. Aarp free tax preparation locations You should file the claim with the IRS Service Center where you filed the tax return that was affected by the error or delay. Aarp free tax preparation locations   If you have already paid the interest and you would like a credit or refund of interest paid, you must file Form 843 within 3 years from the date you filed your original return or 2 years from the date you paid the interest, whichever is later. Aarp free tax preparation locations If you have not paid any of the interest, these time limitations for filing Form 843 do not apply. Aarp free tax preparation locations   Generally, you should file a separate Form 843 for each tax period and each type of tax. Aarp free tax preparation locations However, complete only one Form 843 if the interest is from an IRS error or delay that affected your tax for more than one tax period or for more than one type of tax (for example, where 2 or more tax years were being examined). Aarp free tax preparation locations   If your request for abatement of interest is denied, you can appeal the decision to the IRS Appeals Office. Aarp free tax preparation locations Tax Court can review failure to abate interest. Aarp free tax preparation locations    The Tax Court can review the IRS's refusal to abate (reduce) interest if all of the following requirements are met: You filed a request for abatement of interest (Form 843) with the IRS after July 30,1996. Aarp free tax preparation locations The IRS has mailed you a notice of final determination or a notice of disallowance. Aarp free tax preparation locations You file a petition with the Tax Court within 180 days of the mailing of the notice of final determination or the notice of disallowance. Aarp free tax preparation locations   The following requirements must also be met: For individual and estate taxpayers — your net worth must not exceed $2 million as of the filing date of your petition for review. Aarp free tax preparation locations For this purpose, individuals filing a joint return shall be treated as separate individuals. Aarp free tax preparation locations For charities and certain cooperatives — you must not have more than 500 employees as of the filing date of your petition for review. Aarp free tax preparation locations For all other taxpayers — your net worth must not exceed $7 million, and you must not have more than 500 employees as of the filing date of your petition for review. Aarp free tax preparation locations Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions If you are (or were) affected by a Presidentially declared disaster occurring after 1996 or a terrorist or military action occurring after September 10, 2001, the IRS may abate (reduce) the amount of interest you owe on certain taxes. Aarp free tax preparation locations The IRS may abate interest for the period of any additional time to file or pay that the IRS provides on account of the disaster or the terrorist or military action. Aarp free tax preparation locations The IRS will issue a notice or news release indicating who are affected taxpayers and stating the period of relief. Aarp free tax preparation locations If you are eligible for relief from interest, but were charged interest for the period of relief, the IRS may retroactively abate your interest. Aarp free tax preparation locations To the extent possible, the IRS can take the following actions: Make appropriate adjustments to your account. Aarp free tax preparation locations Notify you when the adjustments are made. Aarp free tax preparation locations Refund any interest paid by you where appropriate. Aarp free tax preparation locations For more information on disaster area losses, see Disaster Area Losses in Publication 547. Aarp free tax preparation locations For more information on other tax relief for victims of terrorist attacks, see Publication 3920. Aarp free tax preparation locations Offer in Compromise In certain circumstances, the IRS will allow you to pay less than the full amount you owe. Aarp free tax preparation locations If you think you may qualify, you should submit your offer by filing Form 656, Offer in Compromise. Aarp free tax preparation locations The IRS may accept your offer for any of the following reasons: There is doubt about the amount you owe (or whether you owe it). Aarp free tax preparation locations There is doubt as to whether you can pay the amount you owe based on your financial situation. Aarp free tax preparation locations An economic hardship would result if you had to pay the full amount owed. Aarp free tax preparation locations Your case presents compelling reasons that the IRS determines are a sufficient basis for compromise. Aarp free tax preparation locations If your offer is rejected, you have 30 days to ask the Appeals Office of the IRS to reconsider your offer. Aarp free tax preparation locations The IRS offers fast track mediation services to help taxpayers resolve many issues including a dispute regarding an offer in compromise. Aarp free tax preparation locations For more information, see Publication 3605. Aarp free tax preparation locations Generally, if you submit an offer in compromise, the IRS will delay certain collection activities. Aarp free tax preparation locations The IRS usually will not levy (take) your property to settle your tax bill during the following periods: While the IRS is evaluating your offer in compromise. Aarp free tax preparation locations The 30 days immediately after the offer is rejected. Aarp free tax preparation locations While your timely-filed appeal is being considered by Appeals. Aarp free tax preparation locations Also, if the IRS rejects your original offer and you submit a revised offer within 30 days of the rejection, the IRS generally will not levy your property while it considers your revised offer. Aarp free tax preparation locations For more information about submitting an offer in compromise, see Form 656. Aarp free tax preparation locations Appeal Rights Because people sometimes disagree on tax matters, the IRS has an appeals system. Aarp free tax preparation locations Most differences can be settled within this system without expensive and time-consuming court trials. Aarp free tax preparation locations However, your reasons for disagreeing must come within the scope of the tax laws. Aarp free tax preparation locations For example, you cannot appeal your case based only on moral, religious, political, constitutional, conscientious, or similar grounds. Aarp free tax preparation locations In most instances, you may be eligible to take your case to court if you do not reach an agreement at your appeals conference, or if you do not want to appeal your case to the IRS Office of Appeals. Aarp free tax preparation locations See Appeals to the Courts , later, for more information. Aarp free tax preparation locations Appeal Within the IRS You can appeal an IRS tax decision to a local Appeals Office, which is separate from and independent of the IRS office taking the action you disagree with. Aarp free tax preparation locations The Appeals Office is the only level of appeal within the IRS. Aarp free tax preparation locations Conferences with Appeals Office personnel are held in an informal manner by correspondence, by telephone, or at a personal conference. Aarp free tax preparation locations If you want an appeals conference, follow the instructions in the letter you received. Aarp free tax preparation locations Your request will be sent to the Appeals Office to arrange a conference at a convenient time and place. Aarp free tax preparation locations You or your representative should be prepared to discuss all disputed issues at the conference. Aarp free tax preparation locations Most differences are settled at this level. Aarp free tax preparation locations If agreement is not reached at your appeals conference, you may be eligible to take your case to court. Aarp free tax preparation locations See Appeals to the Courts , later. Aarp free tax preparation locations Protests and Small Case Requests When you request an Appeals conference, you may also need to file either a formal written protest or a small case request with the office named in the letter you received. Aarp free tax preparation locations Also, see the special appeal request procedures in Publication 1660. Aarp free tax preparation locations Written protest. Aarp free tax preparation locations   You need to file a written protest in the following cases: All employee plan and exempt organization cases without regard to the dollar amount at issue. Aarp free tax preparation locations All partnership and S corporation cases without regard to the dollar amount at issue. Aarp free tax preparation locations All other cases, unless you qualify for the small case request procedure, or other special appeal procedures such as requesting Appeals consideration of liens, levies, seizures, or installment agreements. Aarp free tax preparation locations   If you must submit a written protest, see the instructions in Publication 5 about the information you need to provide. Aarp free tax preparation locations The IRS urges you to provide as much information as you can, as it will help speed up your appeal. Aarp free tax preparation locations That will save you both time and money. Aarp free tax preparation locations    Be sure to send the protest within the time limit specified in the letter you received. Aarp free tax preparation locations Small case request. Aarp free tax preparation locations   If the total amount for any tax period is not more than $25,000, you may make a small case request instead of filing a formal written protest. Aarp free tax preparation locations In figuring the total amount, include a proposed increase or decrease in tax (including penalties), or claimed refund. Aarp free tax preparation locations If you are making an offer in compromise, include total unpaid tax, penalty, and interest due. Aarp free tax preparation locations For a small case request, follow the instructions in our letter to you by sending a letter: Requesting Appeals consideration, Indicating the changes you do not agree with, and Indicating the reasons why you do not agree. Aarp free tax preparation locations Representation You can represent yourself at your appeals conference, or you can be represented by any federally authorized practitioner, including an attorney, a certified public accountant, an enrolled actuary, or an enrolled agent. Aarp free tax preparation locations If your representative attends a conference without you, he or she can receive or inspect confidential information only if you have filed a power of attorney or a tax information authorization. Aarp free tax preparation locations You can use a Form 2848 or any other properly written power of attorney or authorization. Aarp free tax preparation locations You can also bring witnesses to support your position. Aarp free tax preparation locations Confidentiality privilege. Aarp free tax preparation locations   Generally, the same confidentiality protection that you have with an attorney also applies to certain communications that you have with federally authorized practitioners. Aarp free tax preparation locations See Confidentiality privilege under If Your Return Is Examined , earlier. Aarp free tax preparation locations Appeals to the Courts If you and the IRS still disagree after the appeals conference, you may be entitled to take your case to the United States Tax Court, the United States Court of Federal Claims, or a United States District Court. Aarp free tax preparation locations These courts are independent of the IRS. Aarp free tax preparation locations If you elect to bypass the IRS's appeals system, you may be able to take your case to one of the courts listed above. Aarp free tax preparation locations However, a case petitioned to the United States Tax Court will normally be considered for settlement by an Appeals Officer before the Tax Court hears the case. Aarp free tax preparation locations If you unreasonably fail to pursue the IRS's appeals system, or if your case is intended primarily to cause a delay, or your position is frivolous or groundless, the Tax Court may impose a penalty of up to $25,000. Aarp free tax preparation locations See Appeal Within the IRS, earlier. Aarp free tax preparation locations Prohibition on requests to taxpayers to give up rights to bring civil action. Aarp free tax preparation locations   The Government cannot ask you to waive your right to sue the United States or a Government officer or employee for any action taken in connection with the tax laws. Aarp free tax preparation locations However, your right to sue can be waived if: You knowingly and voluntarily waive that right, The request to waive that right is made in writing to your attorney or other federally authorized practitioner, or The request is made in person and your attorney or other representative is present. Aarp free tax preparation locations Burden of proof. Aarp free tax preparation locations   For court proceedings resulting from examinations started after July 22, 1998, the IRS generally has the burden of proof for any factual issue if you have met the following requirements: You introduced credible evidence relating to the issue. Aarp free tax preparation locations You complied with all substantiation requirements of the Internal Revenue Code. Aarp free tax preparation locations You maintained all records required by the Internal Revenue Code. Aarp free tax preparation locations You cooperated with all reasonable requests by the IRS for information regarding the preparation and related tax treatment of any item reported on your tax return. Aarp free tax preparation locations You had a net worth of $7 million or less and not more than 500 employees at the time your tax liability is contested in any court proceeding if your tax return is for a corporation, partnership, or trust. Aarp free tax preparation locations    The burden of proof does not change on an issue when another provision of the tax laws requires a specific burden of proof with respect to that issue. Aarp free tax preparation locations Use of statistical information. Aarp free tax preparation locations   In the case of an individual, the IRS has the burden of proof in court proceedings based on any IRS reconstruction of income solely through the use of statistical information on unrelated taxpayers. Aarp free tax preparation locations Penalties. Aarp free tax preparation locations   The IRS has the burden of initially producing evidence in court proceedings with respect to the liability of any individual taxpayer for any penalty, addition to tax, or additional amount imposed by the tax laws. Aarp free tax preparation locations Recovering litigation or administrative costs. Aarp free tax preparation locations   These are the expenses that you pay to defend your position to the IRS or the courts. Aarp free tax preparation locations You may be able to recover reasonable litigation or administrative costs if all of the following conditions apply: You are the prevailing party. Aarp free tax preparation locations You exhaust all administrative remedies within the IRS. Aarp free tax preparation locations Your net worth is below a certain limit (see Net worth requirements , later). Aarp free tax preparation locations You do not unreasonably delay the proceeding. Aarp free tax preparation locations You apply for administrative costs within 90 days of the date on which the final decision of the IRS Office of Appeals as to the determination of the tax, interest, or penalty was mailed to you. Aarp free tax preparation locations You apply for litigation costs within the time frames provided by Tax Court Rule 231, found at http://www. Aarp free tax preparation locations ustaxcourt. Aarp free tax preparation locations gov  www. Aarp free tax preparation locations ustaxcourt. Aarp free tax preparation locations gov . Aarp free tax preparation locations   Prevailing party, reasonable litigation costs, and reasonable administrative costs are explained later. Aarp free tax preparation locations Note. Aarp free tax preparation locations If the IRS denies your award of administrative costs, and you want to appeal, you must petition the Tax Court within 90 days of the date on which the IRS mails the denial notice. Aarp free tax preparation locations Prevailing party. Aarp free tax preparation locations   Generally, you are the prevailing party if: You substantially prevail with respect to the amount in controversy or on the most significant tax issue or set of issues in question, and You meet the net worth requirements, discussed later. Aarp free tax preparation locations   You will not be treated as the prevailing party if the United States establishes that its position was substantially justified. Aarp free tax preparation locations The position of the United States is presumed not to be substantially justified if the IRS: Did not follow its applicable published guidance (such as regulations, revenue rulings, notices, announcements, private letter rulings, technical advice memoranda, and determination letters issued to the taxpayer) in the proceeding (This presumption can be overcome by evidence. Aarp free tax preparation locations ), or Has lost in courts of appeal for other circuits on substantially similar issues. Aarp free tax preparation locations   The court will generally decide who is the prevailing party. Aarp free tax preparation locations Reasonable litigation costs. Aarp free tax preparation locations   These include the following costs: Reasonable court costs. Aarp free tax preparation locations The reasonable costs of studies, analyses, engineering reports, tests, or projects found by the court to be necessary for the preparation of your case. Aarp free tax preparation locations The reasonable costs of expert witnesses. Aarp free tax preparation locations Attorney fees that generally may not exceed $125 maximum hourly rate as set by statute and indexed for inflation. Aarp free tax preparation locations See Attorney fees , later. Aarp free tax preparation locations Reasonable administrative costs. Aarp free tax preparation locations   These include the following costs: Any administrative fees or similar charges imposed by the IRS. Aarp free tax preparation locations The reasonable costs of studies, analyses, engineering reports, tests, or projects. Aarp free tax preparation locations The reasonable costs of expert witnesses. Aarp free tax preparation locations Attorney fees that generally may not exceed $125 per hour. Aarp free tax preparation locations See Attorney fees , later. Aarp free tax preparation locations Timing of costs. Aarp free tax preparation locations    Administrative costs can be awarded for costs incurred after the earliest of: The date the first letter of proposed deficiency is sent that allows you an opportunity to request administrative review in the IRS Office of Appeals, The date you receive notice of the IRS Office of Appeals' decision, or The date of the notice of deficiency. Aarp free tax preparation locations Net worth requirements. Aarp free tax preparation locations   An individual taxpayer may be able to recover litigation or administrative costs if the following requirements are met: For individuals — your net worth does not exceed $2 million as of the filing date of your petition for review. Aarp free tax preparation locations For this purpose, individuals filing a joint return are treated as separate individuals. Aarp free tax preparation locations For estates — your net worth does not exceed $2 million as of the date of the decedent's death. Aarp free tax preparation locations For charities and certain cooperatives — you do not have more than 500 employees as of the filing date of your petition for review. Aarp free tax preparation locations For all other taxpayers — as of the filing date of your petition for review, your net worth does not exceed $7 million, and you must not have more than 500 employees. Aarp free tax preparation locations Qualified offer rule. Aarp free tax preparation locations    You can also receive reasonable costs and fees and be treated as a prevailing party in a civil action or proceeding if: You make a qualified offer to the IRS to settle your case, The IRS does not accept that offer, and The tax liability (not including interest, unless interest is at issue) later determined by the court is equal to or less than the amount of your qualified offer. Aarp free tax preparation locations You must also meet the remaining requirements, including the exhaustion of administrative remedies and the net worth requirement, discussed earlier, to get the benefit of the qualified offer rule. Aarp free tax preparation locations Qualified offer. Aarp free tax preparation locations    This is a written offer made by you during the qualified offer period. Aarp free tax preparation locations It must specify both the offered amount of your liability (not including interest) and that it is a qualified offer. Aarp free tax preparation locations   To be a qualified offer, it must remain open from the date it is made until the earliest of: The date it is rejected, The date the trial begins, or 90 days from the date it is made. Aarp free tax preparation locations Qualified offer period. Aarp free tax preparation locations    This period begins on the day the IRS mails you the first letter of proposed deficiency that allows you to request review by the IRS Office of Appeals. Aarp free tax preparation locations It ends 30 days before your case is first set for trial. Aarp free tax preparation locations Attorney fees. Aarp free tax preparation locations   Attorney fees generally may not exceed $125 maximum hourly rate as set by statute and indexed for inflation. Aarp free tax preparation locations However, this amount can be higher in certain limited circumstances depending on the level of difficulty of the issues in the case and the local availability of tax expertise. Aarp free tax preparation locations See IRS. Aarp free tax preparation locations gov for more information. Aarp free tax preparation locations    Attorney fees include the fees paid by a taxpayer for the services of anyone who is authorized to practice before the Tax Court or before the IRS. Aarp free tax preparation locations In addition, attorney fees can be awarded in civil actions for unauthorized inspection or disclosure of a taxpayer's return or return information. Aarp free tax preparation locations   Fees can be awarded in excess of the actual amount charged if: You are represented for no fee, or for a nominal fee, as a pro bono service, and The award is paid to your representative or to your representative's employer. Aarp free tax preparation locations Jurisdiction for determination of employment status. Aarp free tax preparation locations    The Tax Court can review IRS employment status determinations (for example, whether individuals hired by you are in fact your employees or independent contractors) and the amount of employment tax under such determinations. Aarp free tax preparation locations Tax Court review can take place only if, in connection with an audit of any person, there is a controversy involving a determination by the IRS that either: One or more individuals performing services for that person are employees of that person, or That person is not entitled to relief under Section 530(a) of the Revenue Act of 1978 (discussed later). Aarp free tax preparation locations   The following rules also apply to a Tax Court review of employment status: A Tax Court petition to review these determinations can be filed only by the person for whom the services are performed, If you receive a Notice of Determination by certified or registered mail, you must file a petition for Tax Court review within 90 days of the date of mailing that notice (150 days if the notice is addressed to you outside the United States), If during the Tax Court proceeding, you begin to treat as an employee an individual whose employment status is at issue, the Tax Court will not consider that change in its decision, Assessment and collection of tax is suspended while the Tax Court review is taking place, Payment of the asserted employment tax deficiency is not required to petition the U. Aarp free tax preparation locations S. Aarp free tax preparation locations Tax Court for a determination of employment status. Aarp free tax preparation locations There can be a de novo review by the Tax Court (a review which does not consider IRS administrative findings), and At your request and with the Tax Court's agreement, small tax case procedures (discussed later) are available to simplify the case resolution process when the amount at issue (including additions to tax and penalties) is $50,000 or less for each tax period involved. Aarp free tax preparation locations   For further information, see Publication 3953, Questions and Answers About Tax Court Proceedings for Determination of Employment Status Under IRC Section 7436. Aarp free tax preparation locations Section 530(a) of the Revenue Act of 1978. Aarp free tax preparation locations   This section relieves an employer of certain employment tax responsibilities for individuals not treated as employees. Aarp free tax preparation locations It also provides relief to taxpayers under audit or involved in administrative or judicial proceedings. Aarp free tax preparation locations Tax Court review of request for relief from joint and several liability on a joint return. Aarp free tax preparation locations    As discussed later, at Relief from joint and several liability on a joint return under Claims for Refund, you can request relief from liability for tax you owe, plus related penalties and interest, that you believe should be paid by your spouse (or former spouse). Aarp free tax preparation locations You also can petition (ask) the Tax Court to review your request for innocent spouse relief or separation of liability if either: The IRS sends you a determination notice denying, in whole or in part, your request, or You do not receive a determination notice from the IRS within 6 months from the date you file Form 8857. Aarp free tax preparation locations   If you receive a determination notice, you must petition the Tax Court to review your request during the 90-day period that begins on the date the IRS mails the notice. Aarp free tax preparation locations See Publication 971 for more information. Aarp free tax preparation locations Note. Aarp free tax preparation locations Your spouse or former spouse may file a written protest and request an Appeals conference to protest your claim of innocent spouse relief or separation of liability. Aarp free tax preparation locations See Rev. Aarp free tax preparation locations Proc. Aarp free tax preparation locations 2003-19, which is on page 371 of the Internal Revenue Bulletin 2003-5 at  www. Aarp free tax preparation locations irs. Aarp free tax preparation locations gov/pub/irs-irbs/irb03-05. Aarp free tax preparation locations pdf. Aarp free tax preparation locations Tax Court You can take your case to the United States Tax Court if you disagree with the IRS over: Income tax, Estate tax, Gift tax, Employment tax involving IRS employment status determinations, or Certain excise taxes of private foundations, public charities, qualified pension and other retirement plans, or real estate investment trusts. Aarp free tax preparation locations For information on Tax Court review of a determination of employment status, see Jurisdiction for determination of employment status, earlier. Aarp free tax preparation locations For information on Tax Court review of an IRS refusal to abate interest, see Tax Court can review failure to abate interest, earlier under Examination of Returns. Aarp free tax preparation locations For information on Tax Court review of Appeals determinations with respect to lien notices and proposed levies, see Publication 1660. Aarp free tax preparation locations You cannot take your case to the Tax Court before the IRS sends you a notice of deficiency. Aarp free tax preparation locations You can only appeal your case if you file a petition within 90 days from the date the notice is mailed to you (150 days if it is addressed to you outside the United States). Aarp free tax preparation locations The notice will show the 90th (or 150th) day by which you must file your petition with the Tax Court. Aarp free tax preparation locations Withdrawal of notice of deficiency. Aarp free tax preparation locations If you consent, the IRS can withdraw a notice of deficiency. Aarp free tax preparation locations A notice of deficiency may be rescinded if the notice was issued as a result of an administrative error; the taxpayer submits information establishing the actual tax due is less than the amount shown in the notice; the taxpayer specifically requests a conference with the appropriate Appeals office for the purpose of entering into settlement negotiations. Aarp free tax preparation locations However, the notice may be rescinded only if the appropriate Appeals office first decides that the case is susceptible to agreement. Aarp free tax preparation locations See Revenue Procedure 98-54 for a more detailed explanation of the requirements. Aarp free tax preparation locations Once withdrawn, the limits on credits, refunds, and assessments concerning the notice are void, and you and the IRS have the rights and obligations that you had before the notice was issued. Aarp free tax preparation locations The suspension of any time limitation while the notice of deficiency was issued will not change when the notice is withdrawn. Aarp free tax preparation locations After the notice is withdrawn, you cannot file a petition with the Tax Court based on the notice. Aarp free tax preparation locations Also, the IRS can later issue a notice of deficiency in a greater or lesser amount than the amount in the withdrawn deficiency. Aarp free tax preparation locations Generally, the Tax Court hears cases before any tax has been assessed and paid; however, you can pay the tax after the notice of deficiency has been issued and still petition the Tax Court for review. Aarp free tax preparation locations If you do not file your petition on time, the proposed tax will be assessed, a bill will be sent, and you will not be able to take your case to the Tax Court. Aarp free tax preparation locations Under the law, you must pay the tax within 21 days (10 business days if the amount is $100,000 or more). Aarp free tax preparation locations Collection can proceed even if you think that the amount is excessive. Aarp free tax preparation locations Publication 594 explains IRS collection procedures. Aarp free tax preparation locations If you filed your petition on time, the court will schedule your case for trial at a location convenient to you. Aarp free tax preparation locations You can represent yourself before the Tax Court or you can be represented by anyone admitted to practice before that court. Aarp free tax preparation locations Small tax case procedure. Aarp free tax preparation locations   If the amount in your case is $50,000 or less for any 1 tax year or period, you can request that your case be handled under the small tax case procedure. Aarp free tax preparation locations If the Tax Court approves, you can present your case to the Tax Court for a decision that is final and that you cannot appeal. Aarp free tax preparation locations You can get more information regarding the small tax case procedure and other Tax Court matters from the United States Tax Court, 400 Second Street, N. Aarp free tax preparation locations W. Aarp free tax preparation locations , Washington, DC 20217. Aarp free tax preparation locations More information can be found on the Tax Court's website at www. Aarp free tax preparation locations ustaxcourt. Aarp free tax preparation locations gov. Aarp free tax preparation locations Motion to request redetermination of interest. Aarp free tax preparation locations   In certain cases, you can file a motion asking the Tax Court to redetermine the amount of interest on either an underpayment or an overpayment. Aarp free tax preparation locations You can do this only in a situation that meets all of the following requirements: The IRS has assessed a deficiency that was determined by the Tax Court. Aarp free tax preparation locations The assessment included interest. Aarp free tax preparation locations You have paid the entire amount of the deficiency plus the interest claimed by the IRS. Aarp free tax preparation locations The Tax Court has found that you made an overpayment. Aarp free tax preparation locations You must file the motion within one year after the decision of the Tax Court becomes final. Aarp free tax preparation locations District Court and Court of Federal Claims Generally, the District Courts and the Court of Federal Claims hear tax cases only after you have paid the entire tax and penalties, and filed a claim for a credit or refund. Aarp free tax preparation locations The taxpayer may litigate certain types of employment tax cases in either the United States District Court or the United States Court of Federal Claims. Aarp free tax preparation locations Before taxpayers can initiate suit in either of these courts with respect to certain employment taxes, they will have to pay, at a minimum, the employment tax assessment attributable to one employee for any one quarter and file a claim for refund of the tax. Aarp free tax preparation locations Once the claim for refund is denied or 6 months elapse without any action by the IRS, the taxpayer may initiate suit. Aarp free tax preparation locations As explained later under Claims for Refund, you can file a claim with the IRS for a credit or refund if you think that the tax you paid is incorrect or excessive. Aarp free tax preparation locations If your claim is totally or partially disallowed by the IRS, you should receive a notice of claim disallowance. Aarp free tax preparation locations If the IRS does not act on your claim within 6 months from the date you filed it, you can then file suit for a refund. Aarp free tax preparation locations You generally must file suit for a credit or refund no later than 2 years after the IRS informs you that your claim has been rejected. Aarp free tax preparation locations However, you can file suit if it has been 6 months since you filed your claim and the IRS has not yet delivered a decision. Aarp free tax preparation locations You can file suit for a credit or refund in your United States District Court or in the United States Court of Federal Claims. Aarp free tax preparation locations However, you cannot appeal to the United States Court of Federal Claims if your claim is for credit or refund of a penalty that relates to promoting an abusive tax shelter or to aiding and abetting the understatement of tax liability on someone else's return. Aarp free tax preparation locations For information about procedures for filing suit in either court, contact the Clerk of your District Court or of the United States Court of Federal Claims. Aarp free tax preparation locations Refund or Credit of Overpayments Before Final Determination Any court with proper jurisdiction, including the Tax Court, can order the IRS to refund any part of a tax deficiency that the IRS collects from you during a period when the IRS is not permitted to assess that deficiency, or to levy or engage in any court proceeding to collect that deficiency. Aarp free tax preparation locations In addition, the court can order a refund of any part of an overpayment determined by the Tax Court that is not at issue on appeal to a higher court. Aarp free tax preparation locations The court can order these refunds before its decision on the case is final. Aarp free tax preparation locations Taxpayers should thoroughly review IRS settlement offers before signing a Tax Court Decision document to ensure that all adjustments are correct, including the inclusion of any tax credits that the taxpayer is allowed to claim. Aarp free tax preparation locations Note. Aarp free tax preparation locations The court may no longer order a refund of an overpayment after the case is final. Aarp free tax preparation locations Generally, the IRS is not permitted to take action on a tax deficiency during: The 90-day (or 150-day if outside the United States) period that you have to petition a notice of deficiency to the Tax Court, or The period that the case is under appeal if a bond is provided. Aarp free tax preparation locations Claims for Refund If you believe you have overpaid your tax, you have a limited amount of time in which to file a claim for a credit or refund. Aarp free tax preparation locations You can claim a credit or refund by filing Form 1040X. Aarp free tax preparation locations See Time for Filing a Claim for Refund , later. Aarp free tax preparation locations File your claim by mailing it to the IRS Service Center where you filed your original return. Aarp free tax preparation locations File a separate form for each year or period involved. Aarp free tax preparation locations Include an explanation of each item of income, deduction, or credit on which you are basing your claim. Aarp free tax preparation locations Corporations should file Form 1120X, Amended U. Aarp free tax preparation locations S. Aarp free tax preparation locations Corporation Income Tax Return, or other form appropriate to the type of credit or refund claimed. Aarp free tax preparation locations See Publication 3920 for information on filing claims for tax forgiveness for individuals affected by terrorist attacks. Aarp free tax preparation locations Requesting a copy of your tax return. Aarp free tax preparation locations   You can obtain a copy of the actual return and all attachments you filed with the IRS for an earlier year. Aarp free tax preparation locations This includes a copy of the Form W-2 or Form 1099 filed with your return. Aarp free tax preparation locations Use Form 4506 to make your request. Aarp free tax preparation locations You will be charged a fee, which you must pay when you submit Form 4506. Aarp free tax preparation locations Requesting a copy of your tax account information. Aarp free tax preparation locations   Use Form 4506-T, Request for Transcript of Tax Return, to request free copies of your tax return transcript, tax account transcript, record of account, verification of nonfiling, or Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript. Aarp free tax preparation locations The tax return transcript contains most of the line items of a tax return. Aarp free tax preparation locations A tax account transcript contains information on the financial status of the account, such as payments, penalty assessments, and adjustments. Aarp free tax preparation locations A record of account is a combination of line item information and later adjustments to the account. Aarp free tax preparation locations Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript contains data from these information returns. Aarp free tax preparation locations Penalty for erroneous claim for refund. Aarp free tax preparation locations   If you claim an excessive amount of tax refund or credit relating to income tax (other than a claim relating to the earned income credit), you may be liable for a penalty of 20% of the amount that is determined to be excessive. Aarp free tax preparation locations An excessive amount is the amount of the claim for refund or credit that is more than the amount of claim allowable for the tax year. Aarp free tax preparation locations The penalty may be waived if you can show that you had a reasonable basis for making the claim. Aarp free tax preparation locations Time for Filing a Claim for Refund Generally, you must file a claim for a credit or refund within 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later. Aarp free tax preparation locations If you do not file a claim within this period, you may no longer be entitled to a credit or a refund. Aarp free tax preparation locations If the due date to file a return or a claim for a credit or refund is a Saturday, Sunday, or legal holiday, it is filed on time if it is filed on the next business day. Aarp free tax preparation locations Returns you filed before the due date are considered filed on the due date. Aarp free tax preparation locations This is true even when the due date is a Saturday, Sunday, or legal holiday. Aarp free tax preparation locations Disaster area claims for refund. Aarp free tax preparation locations   If you live in a Presidentially declared disaster area or are affected by terroristic or military action, the deadline to file a claim for a refund may be postponed. Aarp free tax preparation locations This section discusses the special rules that apply to Presidentially declared disaster area refunds. Aarp free tax preparation locations    A Presidentially declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Disaster Relief and Emergency Assistance Act. Aarp free tax preparation locations Postponed refund deadlines. Aarp free tax preparation locations   The IRS may postpone for up to 1 year the deadlines for filing a claim for refund. Aarp free tax preparation locations The postponement can be used by taxpayers who are affected by a Presidentially declared disaster. Aarp free tax preparation locations The IRS may also postpone deadlines for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. Aarp free tax preparation locations For more information, see Publication 547. Aarp free tax preparation locations   If any deadline is postponed, the IRS will publicize the postponement in your area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin. Aarp free tax preparation locations A list of the areas eligible for assistance under the Disaster Relief and Emergency Assistance Act is available at the Federal Emergency Management Agency (FEMA) website at www. Aarp free tax preparation locations fema. Aarp free tax preparation locations gov and at the IRS website at www. Aarp free tax preparation locations irs. Aarp free tax preparation locations gov. Aarp free tax preparation locations Nonfilers can get refund of overpayments paid within 3-year period. Aarp free tax preparation locations   The Tax Court can consider taxes paid during the 3-year period preceding the date of a notice of deficiency for determining any refund due to a nonfiler. Aarp free tax preparation locations This means that if you do not file your return, and you receive a notice of deficiency in the third year after the due date (with extensions) of your return and file suit with the Tax Court to contest the notice of deficiency, you may be able to receive a refund of excessive amounts paid within the 3-year period preceding the date of the notice of deficiency. Aarp free tax preparation locations The IRS may postpone for up to 1 year certain tax deadlines, including the time for filing claims for refund, for taxpayers who are affected by a terrorist attack occurring after September 10, 2001. Aarp free tax preparation locations For more information, see Publication 3920. Aarp free tax preparation locations Claim for refund by estates electing the installment method of payment. Aarp free tax preparation locations   In certain cases where an estate has elected to make tax payments through the installment method, the executor can file a suit for refund with a U. Aarp free tax preparation locations S. Aarp free tax preparation locations District Court or the U. Aarp free tax preparation locations S. Aarp free tax preparation locations Court of Federal Claims before all the installment payments have been made. Aarp free tax preparation locations However, all the following must be true before a suit can be filed: The estate consists largely of an interest in a closely-held business. Aarp free tax preparation locations All installment payments due on or before the date the suit is filed have been made. Aarp free tax preparation locations No accelerated installment payments have been made. Aarp free tax preparation locations No Tax Court case is pending with respect to any estate tax liability. Aarp free tax preparation locations If a notice of deficiency was issued to the estate regarding its liability for estate tax, the time for petitioning the Tax Court has passed. Aarp free tax preparation locations No proceeding is pending for a declaratory judgment by the Tax Court on whether the estate is eligible to pay tax in installments. Aarp free tax preparation locations The executor has not included any previously litigated issues in the current suit for refund. Aarp free tax preparation locations The executor does not discontinue making installment payments timely, while the court considers the suit for refund. Aarp free tax preparation locations    If in its final decision on the suit for refund the court redetermines the estate's tax liability, the IRS must refund any part of the estate tax amount that is disallowed. Aarp free tax preparation locations This includes any part of the disallowed amount previously collected by the IRS. Aarp free tax preparation locations Protective claim for refund. Aarp free tax preparation locations   If your right to a refund is contingent on future events and may not be determinable until after the time period for filing a claim for refund expires, you can file a protective claim for refund. Aarp free tax preparation locations A protective claim can be either a formal claim or an amended return for credit or refund. Aarp free tax preparation locations Protective claims are often based on current litigation or expected changes in the tax law, other legislation, or regulations. Aarp free tax preparation locations A protective claim preserves your right to claim a refund when the contingency is resolved. Aarp free tax preparation locations A protective claim does not have to state a particular dollar amount or demand an immediate refund. Aarp free tax preparation locations However, to be valid, a protective claim must: Be in writing and be signed, Include your name, address, social security number or individual taxpayer identification number, and other contact information, Identify and describe the contingencies affecting the claim, Clearly alert the IRS to the essential nature of the claim, and Identify the specific year(s) for which a refund is sought. Aarp free tax preparation locations   Generally, the IRS will delay action on the protective claim until the contingency is resolved. Aarp free tax preparation locations Once the contingency is resolved, the IRS may obtain additional information necessary to process the claim and then either allow or disallow the claim. Aarp free tax preparation locations   Mail your protective claim for refund to the address listed in the instructions for Form 1040X, under Where To File. Aarp free tax preparation locations Exceptions The limits on your claim for refund can be affected by the type of item that forms the basis of your claim. Aarp free tax preparation locations Special refunds. Aarp free tax preparation locations   If you file a claim for refund based on one of the items listed below, the limits discussed earlier under Time for Filing a Claim for Refund may not apply. Aarp free tax preparation locations These special items are: A bad debt, A worthless security, A payment or accrual of foreign tax, A net operating loss carryback, and A carryback of certain tax credits. Aarp free tax preparation locations   The limits discussed earlier also may not apply if you have signed an agreement to extend the period of assessment of tax. Aarp free tax preparation locations For information on special rules on filing claims for an individual affected by a terrorist attack, see Publication 3920. Aarp free tax preparation locations Periods of financial disability. Aarp free tax preparation locations   If you are an individual (not a corporation or other taxpaying entity), the period of limitations on credits and refunds can be suspended during periods when you cannot manage your financial affairs because of physical or mental impairment that is medically determinable and either: Has lasted or can be expected to last continuously for at least 12 months, or Can be expected to result in death. Aarp free tax preparation locations    The period for filing a claim for refund will not be suspended for any time that someone else, such as your spouse or guardian, was authorized to act for you in financial matters. Aarp free tax preparation locations   To claim financial disability, you generally must submit the following statements with your claim for credit or refund: A written statement signed by a physician, qualified to make the determination, that sets forth: The name and a description of your physical or mental impairment, The physician's medical opinion that your physical or mental impairment prevented you from managing your financial affairs, The physician's medical opinion that your physical or mental impairment was or can be expected to result in death, or that it has lasted (or can be expected to last) for a continuous period of not less than 12 months, and To the best of the physician's knowledge, the specific time period during which you were prevented by such physical or mental impairment from managing your financial affairs, and A written statement by the person signing the claim for credit or refund that no person, including your spouse, was authorized to act on your behalf in financial matters during the period described in paragraph (1)(d) of the physician's statement. Aarp free tax preparation locations Alternatively, if a person was authorized to act on your behalf in financial matters during any part of the period described in that paragraph, the beginning and ending dates of the period of time the person was so authorized. Aarp free tax preparation locations    The period of limitations will not be suspended on any claim for refund that (without regard to this provision) was barred as of July 22, 1998. Aarp free tax preparation locations Limit on Amount of Refund If you file your claim within 3 years after filing your return, the credit or refund cannot be more than the part of the tax paid wi