Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Amending A Tax Return

State Tax Forms 2013File 2012 Federal Taxes2006 Free Tax Filing1040ez Fillable FormH And R Block Active DutyFree File GovHow To File Back Income TaxesH And R Block Online FilingTax Return 2012Amend 2011 Tax Return FreeState Tax Forms FreeIrs Gov 2012 Tax ReturnHow To File 2011 TaxesState TaxFederal Form 1040ezTax Filing 2010Amended Return FormAmendment For TaxesH&r Block State TaxesIncome Tax Form 1040xTaxes For College Students2011 State Tax FormHow To File Free State Taxes OnlineTax 20121040ez Instructions 2014Free 1040ez Instructions1040 Ez 2011Turbotax Military Discount 2011State Income Tax Help2011 Tax Forms 1040 InstructionsHow To Refile Taxes For 20121040ez2013 FormHow To Fill 1040nr Ez Form2010 E File TaxesNeed To File 2011 Taxes OnlineWww 1040ez ComTurbo Tax MilitaryIrs GovE-file Tax Extension FreeFederal Tax Forms For 2012

Amending A Tax Return

Amending a tax return Publication 957 - Main Content Table of Contents 1. Amending a tax return What is Back Pay?Reporting Back Pay Back Pay Under a Statute Nonstatutory Back Pay Format for Report to the SSA Questions 2. Amending a tax return Special Wage PaymentsReporting Special Wage Payments Reporting Nonstatutory (Nonqualified) Stock Options as Special Wage Payments Nonqualified Deferred Compensation and Section 457 Plans Additional Reporting Examples for Nonqualified Deferred Compensation (NQDC) PlansSpecial rule for box 11 of Form W-2 (distributions and deferral in the same year). Amending a tax return 1. Amending a tax return What is Back Pay? Back pay is pay received in a tax year(s) for actual or deemed employment in an earlier tax year(s). Amending a tax return For social security coverage and benefit purposes, all back pay, whether or not under a statute, is wages if it is payment for covered employment. Amending a tax return Damages for personal injury, interest, penalties, and legal fees included with back pay awards are not wages. Amending a tax return Report all back pay. Amending a tax return However, the tax year(s) for which back pay is credited as wages for social security purposes is different if it is awarded under a statute. Amending a tax return See Back Pay Under a Statute , later, for more information. Amending a tax return Reporting Back Pay The Internal Revenue Service (IRS) and the SSA consider back pay awards to be wages. Amending a tax return However, for income tax purposes, the IRS treats all back pay as wages in the year paid. Amending a tax return Employers should use Form W-2, Wage and Tax Statement, or electronic wage reports to report back pay as wages in the year they actually pay the employee. Amending a tax return The SSA no longer accepts reports on tapes, cartridges, and diskettes. Amending a tax return Example. Amending a tax return In 2012, Terry Morris earned wages of $50,000. Amending a tax return In the same year, she received $100,000 in settlement of a back pay case against her employer that covered the periods January 2007 through December 2011. Amending a tax return Her employer properly reflected social security wages of $110,100 and Medicare wages of $150,000 on her 2012 Form W-2. Amending a tax return However, if an employer did not include back pay wages on a previously filed Form W-2, magnetic media, or electronically filed wage report, the employer should prepare a wage correction report, Form W-2c, Corrected Wage and Tax Statement, or electronically filed report, to add the back pay award to the wages previously reported. Amending a tax return Example. Amending a tax return If, in the above example, Terry Morris' employer had prepared her 2012 Form W-2 reporting social security and Medicare wages of only $50,000 each, the employer would have to correct that report. Amending a tax return A Form W-2c correcting the 2012 Form W-2 would show previously reported social security and Medicare wages of $50,000 and the correct amount of $110,100 for social security wages and $150,000 for Medicare wages. Amending a tax return SSA treatment of back pay under a statute. Amending a tax return   Under the law, the SSA credits back pay awarded under a statute to an individual's earnings record in the period(s) the wages should have been paid. Amending a tax return This is important because wages not credited to the proper year may result in lower social security benefits or failure to meet the requirements for benefits. Amending a tax return   However, back pay under statute payments will remain posted to the employee's social security earnings record in the year reported on Form W-2 (or Form W-2c) unless the employer or employee notifies the SSA (in a separate, special report) of the back pay under a statute payment. Amending a tax return Then, the SSA can allocate the statutory back pay to the appropriate periods. Amending a tax return   If a back pay award is not made under a statute, the SSA credits back pay as wages in the year paid. Amending a tax return    If employers do notify the SSA of this payment, they should prepare a special report (with the information noted below) and send it to: Social Security Administration Attn: CPS Back Pay Staff 7-B-15 SWT 1500 Woodlawn Drive Baltimore, MD 21241-0001 Be sure to send this special report to the above address because the SSA handles it separately from other reports. Amending a tax return    If you paid the back pay award in the same tax year to which it applies, report the wages on that year's Form W-2. Amending a tax return No further action is necessary. Amending a tax return Example. Amending a tax return In 2012, Judy Wilson received a salary of $30,000 and a back pay under statute award of $2,000 for the period January through June 2012. Amending a tax return Her employer properly reported wages of $32,000 for social security and Medicare on her 2012 Form W-2. Amending a tax return No further action is necessary. Amending a tax return Information the SSA needs to properly credit back pay under a statute (special report). Amending a tax return   After you complete the special report, you or the employee should send it to the SSA when or after you submit the Form W-2 (on paper or electronically) to the SSA for the year you pay the statutory back pay to the employee. Amending a tax return There is no statute of limitations on the filing of the special report to enable the SSA to allocate the wages. Amending a tax return The special report must include the following information. Amending a tax return The employer's name, address, and employer identification number (EIN). Amending a tax return A signed statement citing the federal or state statute under which the payment was made. Amending a tax return If the statute is not identified, the SSA will assume the payment was not under a statute and will not allocate to earlier period(s). Amending a tax return The name and telephone number of a person to contact. Amending a tax return The SSA may have additional questions concerning the back pay case or the individual employee's information. Amending a tax return A list of employees receiving the payment and the following information for each employee: The tax year you paid and reported the back pay. Amending a tax return The employee's social security number (SSN). Amending a tax return The employee's name (as shown on his or her social security card). Amending a tax return The amount of the back pay award excluding any amounts specifically designated otherwise, for example, damages for personal injury, interest, penalties, and legal fees. Amending a tax return The period(s) the back pay award covers (beginning and ending dates—month and year). Amending a tax return The other wages paid subject to social security and/or Medicare taxes and reported in the same year as the back pay award (if none, show zero)*. Amending a tax return Do not include the back pay award shown in that wage report. Amending a tax return If you originally submitted the report under an establishment number, show that number and the amount of money that is to remain under that establishment number. Amending a tax return The amount to allocate to each reporting period*. Amending a tax return This includes any amount you want allocated (if applicable) to the tax year of the award payment. Amending a tax return If you do not give the SSA specific amounts to allocate, the SSA does the allocation by dividing the back pay award by the number of months or years covered by the award. Amending a tax return *Note. Amending a tax return   For periods before January 1, 1978 (before January 1, 1981, for state and local government employers covered by a Section 218 agreement), show the wage amounts for each calendar quarter ending March 31, June 30, September 30, and December 31. Amending a tax return For all tax years, show and identify the social security and/or Medicare Qualified Government Employment (MQGE) wages (where applicable) separately. Amending a tax return MQGE is applicable to federal employees beginning in 1983, and for certain state and local government employees beginning in 1986. Amending a tax return For tax years 1991 and later, list the social security and Medicare wages separately. Amending a tax return If you originally reported the individual's wages under an establishment or payroll record unit number, show the amount of wages to remain in the award year for that number and furnish that number to the SSA along with the EIN. Amending a tax return Back Pay Under a Statute Back pay awarded under a statute is a payment by an employer following an award, determination, or agreement approved or sanctioned by a court or government agency responsible for enforcing a federal or state statute that protects an employee's right to employment or wages. Amending a tax return Examples of pertinent statutes include: Age Discrimination in Employment Act, Americans with Disabilities Act, Equal Pay Act, Fair Labor Standards Act, National Labor Relations Act, State minimum wage laws, and State statutes that protect rights to employment and wages. Amending a tax return Payments based on laws that have a similar effect to those listed above also may qualify as payments made under a statute. Amending a tax return Back pay awards, under some of the statutes listed above, may be compensation for personal injury and not pay for employment. Amending a tax return Such awards are not wages for social security coverage purposes. Amending a tax return If a court-approved or sanctioned settlement agreement states that the agreement is not an admission of discrimination, liability, or act of wrongdoing, the statement does not change the nature of a back pay award. Amending a tax return The payments made in such a settlement may still be back pay and wages under the rules discussed here. Amending a tax return Nonstatutory Back Pay A payment for back wages negotiated between an employer and employee without an award, determination, or agreement approved or sanctioned by a court or government agency, the payment is not made under a statute. Amending a tax return Delayed wage payments and retroactive pay increases resulting from union negotiation or payments under local ordinances or regulations are back pay and are wages. Amending a tax return However, they are not payments made under a statute. Amending a tax return If you are uncertain whether the back pay award was under a qualified statute, you may need to contact your personnel department or legal counsel or the attorney who filed the suit. Amending a tax return Format for Report to the SSA Use the format shown in Table 1, later, to send the SSA the information needed to properly credit back pay under a statute. Amending a tax return In a cover letter, include: Name and address of the employer, Statute under which you paid the back pay, Name and telephone number of the employer contact, and Signature of the reporting official. Amending a tax return Under certain circumstances, back pay may be a special wage payment and excluded from wages counted under the social security earnings test. Amending a tax return If you pay back pay to an employee age 61 or older, report it to the SSA in accordance with this section. Amending a tax return Read Special Wage Payments, later, for additional reporting instructions. Amending a tax return Questions If you have questions concerning back pay under a statute, call the SSA at 1-800-772-6270. Amending a tax return Exception. Amending a tax return   If you are a state or local government employer who was covered by an agreement under Section 218 of the Social Security Act before January 1, 1987, and you paid a back pay award before January 1, 1987, which you did not report to the SSA, contact your state Social Security Administrator's office. Amending a tax return Table 1. Amending a tax return Format for Report (Under Covering Letter) to Request SSA to Allocate Back Pay Under Statute Wages Employer's EIN: xx-xxxxxxx Tax Year in Which Award Payment Was Paid: 2012 (1) SSN and Employee Name (2)1 Award Amount and Period(s) (3)2,3 Other Soc. Amending a tax return Sec. Amending a tax return /Med. Amending a tax return Wages Paid In Award Year (4)3 Allocation     Soc. Amending a tax return Sec. Amending a tax return Med. Amending a tax return /MQGE Year Soc. Amending a tax return Sec. Amending a tax return Med. Amending a tax return /MQGE xxx-xx-xxxx HELEN T. Amending a tax return SMITH $100,000 1/2009 - 12/2012 $40,000 $40,000 2009 2010 2011 2012 $20,000 25,000 27,000 28,000 $20,000 25,000 27,000 28,000 xxx-xx-xxxx SAM W. Amending a tax return EVANS 30,000 7/89-12/91 -0- -0- 1989 1990 1991   6,000 12,000 12,000 xxx-xx-xxxx ROLAND S. Amending a tax return ADAMS 15,000 7/80-12/81 -0- -0- 9/80 12/80 1981 3,500 3,500 8,000   1Exclude amounts specifically designated as damages, penalties, etc. Amending a tax return  2Exclude the amount of back pay, if any, included in that amount. Amending a tax return  3For periods before January 1, 1978 (and for state and local government (Section 218) employers before January 1, 1981), show the wage amounts by calendar quarters. Amending a tax return The social security and/or Medicare Qualified Government Employment (MQGE) wages (where applicable) must be shown separately FOR ALL YEARS. Amending a tax return (Wages subject ONLY to MQGE would be shown in the Medicare/MQGE column; no wages would be shown in the Soc. Amending a tax return Sec. Amending a tax return column. Amending a tax return ) For tax years 1991 and later, the social security and Medicare wages must be listed separately. Amending a tax return Explanation of examples. Amending a tax return Helen T. Amending a tax return Smith–The back pay award, excluding interest, was $100,000 for the periods 1/2009-12/2012. Amending a tax return In 2012, this employee was also paid $40,000 in other wages. Amending a tax return (Her Form W-2 for 2012 reported $110,100 for social security and $140,000 for Medicare. Amending a tax return The SSA allocation will result in adjusted posted wages of $68,000 for social security and $68,000 for Medicare for 2012. Amending a tax return ) Sam W. Amending a tax return Evans–The back pay award was $30,000 for the periods 7/89-12/91. Amending a tax return This employee was hired in 1989 and was subject to MQGE only. Amending a tax return He was no longer employed by this governmental employer in 2012. Amending a tax return (His Form W-2 for 2012 reported $30,000 for social security and $30,000 for Medicare. Amending a tax return After the SSA allocation, he will not have any net posted wages for 2012. Amending a tax return ) Roland S. Amending a tax return Adams–The back pay award was $15,000 for the periods 7/80-12/81. Amending a tax return He was no longer employed by this state and local government (Section 218) employer in 2012. Amending a tax return (His Form W-2 for 2012 reported $15,000 for social security and $15,000 for Medicare; after the SSA allocation, he will not have any net posted wages for 2012. Amending a tax return ) If the state Social Security Administrator's office needs more information, they can contact the SSA at the following address:   Social Security Administration Office of Income Security Programs Office of Earnings and Program Integrity Policy 6401 Security Boulevard 2506 OPS Baltimore, MD 21235 2. Amending a tax return Special Wage Payments A special wage payment (SWP) is an amount paid by an employer to an employee (or former employee) for services performed in a prior year. Amending a tax return Employers should report to the SSA special wage payments made to employees and former employees who are recipients of social security retirement benefits. Amending a tax return Special wage payments made to a retired employee receiving social security or to an employee who continues to work while receiving social security benefits may reduce the benefits the individual receives if not reported to the SSA. Amending a tax return Special wage payments may include (but are not limited to): Accumulated sick and vacation pay, Back pay, Bonuses, Deferred compensation, Payments because of retirement, Sales commissions, Severance pay, and Stock options. Amending a tax return Note. Amending a tax return Payments made after retirement that are part of the normal payroll cycle should not be routinely reported as special wage payments. Amending a tax return Earnings Test. Amending a tax return   Benefits paid to a social security beneficiary under full retirement age may be reduced if the beneficiary continues to work. Amending a tax return The SSA uses the information in boxes 1, 3, and 5 of Form W-2 to determine the beneficiary's current year earnings. Amending a tax return Special wage payments, which are for services performed in a prior year, will increase the current year earnings on Form W-2, which also may result in a reduction in the beneficiary's benefits. Amending a tax return If a benefit is reduced because of a special wage payment, the beneficiary must get documentation from the employer before the SSA can restore the deducted portion. Amending a tax return Therefore, employer reports of special wage payments help prevent incorrect benefit reductions. Amending a tax return Reporting Special Wage Payments Employers must report special wage payments for income tax purposes and social security and Medicare taxes in the year received. Amending a tax return Report income, social security, and/or Medicare taxes for special wage payments on Form W-2. Amending a tax return See Nonqualified Deferred Compensation and Section 457 Plans, later, for reporting nonqualified deferred compensation plan deferrals and payments on Form W-2. Amending a tax return In addition, report to the SSA special wage payments made during the reporting year to retired employees and employees who continue to work while receiving social security benefits. Amending a tax return Submit reports after the close of the tax year. Amending a tax return To avoid delays in processing, submit reports in time to reach the SSA by April 1. Amending a tax return Use one of the following reporting methods. Amending a tax return Electronic reporting. Amending a tax return   Special wage payment files can be sent electronically by logging onto Business Services Online (BSO) via the socialsecurity. Amending a tax return gov website. Amending a tax return BSO enables organizations and authorized individuals to conduct business with and submit confidential information to the Social Security Administration. Amending a tax return You must register to use this website. Amending a tax return The web address is www. Amending a tax return socialsecurity. Amending a tax return gov/bso/bsowelcome. Amending a tax return htm. Amending a tax return   Use the specifications and record layout shown in  Table 2, later. Amending a tax return Only one file at a time may be submitted. Amending a tax return If your file is large (>10MB), or you have a slow internet connection, the transmission will be faster if the file is zipped. Amending a tax return A zipped file contains a file that has been compressed to reduce its file size. Amending a tax return WinZip and PKZIP are examples of acceptable compression packages. Amending a tax return   Electronic submissions not meeting the specifications in Table 2 will be rejected. Amending a tax return Paper listing. Amending a tax return   A paper listing can be used to report special wage payments to several employees. Amending a tax return Use the format shown in Table 3, later. Amending a tax return Submit paper listings to the local SSA office nearest your place of business. Amending a tax return Visit www. Amending a tax return socialsecurity. Amending a tax return gov/locator to find a Social Security office near you. Amending a tax return Form SSA-131. Amending a tax return   Use Form SSA-131 to report special wage payments made to an employee. Amending a tax return Also use this form to report nonqualified deferred compensation and section 457 plan deferrals and payments that could not be reported in box 11 of Form W-2. Amending a tax return    This image is too large to be displayed in the current screen. Amending a tax return Please click the link to view the image. Amending a tax return Publication 957 Reporting Back Pay to the Social Security Administration Instructions for Form SSA–131   EMPLOYER INSTRUCTIONS FOR COMPLETING SPECIAL WAGE PAYMENT FORM 1. Amending a tax return Provide the EIN that was used or will be used to report the employee's wages on the Form W-2. Amending a tax return 2. Amending a tax return Enter the date the employee retired. Amending a tax return Enter “Not Retired” if the employee has not retired. Amending a tax return 3. Amending a tax return Enter the date that the employee last performed services; was not expected to return to work; and was not subject to recall to render additional services. Amending a tax return This date should be the same as or earlier than the date in item “2”. Amending a tax return Enter “Not Retired” if the employee has not retired. Amending a tax return 4. Amending a tax return Enter the wages that were paid to the employee in the tax year that were for services that were performed in years prior to the tax year or that were paid on account of retirement. Amending a tax return  Examples (not all inclusive) of payments to be included: Payments in lieu of vacation that were earned in a year prior to the tax year. Amending a tax return Accumulated sick payments which were paid in a lump sum based on “retirement” as the sole condition of payment. Amending a tax return Accumulated sick payments paid at or after the date in item 3, which were earned in a year prior to the tax year. Amending a tax return Payments “on account of retirement”–dismissal, severance or termination pay paid because of retirement. Amending a tax return Bonuses which are paid pursuant to a prior contract, agreement or promise causing the employee to expect such payments regularly; or announced to induce the employee to work more steadily, rapidly or efficiently or to remain with the employer. Amending a tax return Stock Options. Amending a tax return   Do not include in item “4” payments: For annual, sick, holiday, or vacation pay if used (absence from work) prior to the date of retirement (earlier of items “2” or “3”). Amending a tax return That were reported or will be reported under “Nonqualified Plans” on the Form W-2. Amending a tax return That were deducted from the employee's wages and paid to a deferred compensation plan (e. Amending a tax return g. Amending a tax return , 401k). Amending a tax return Employees health and dental plan benefits (non-covered/non-taxable for Social Security Wages). Amending a tax return Bonuses earned and paid in the tax year. Amending a tax return 5. Amending a tax return Check whether payments listed in item 4 will be made for years after the tax year. Amending a tax return If yes, please show the amounts and years in which these will be paid, if known. Amending a tax return 6. Amending a tax return Nonqualified deferred compensation and section 457 plans only. Amending a tax return If you were unable to report nonqualified deferred compensation or section 457 plan payments and deferrals (contributions) on Form W-2 because both payments and deferrals occurred during the year, show the amount of wages earned by the employee during the tax year. Amending a tax return Generally, the wages earned will be the compensation reported in block 1 of Form W-2 less payments from a nonqualified deferred compensation (or 457) plan, but including any amounts deferred under the plan during the tax year (See IRS Publication 957). Amending a tax return Paperwork/Privacy Act Notice: This report is authorized by regulation 20 CFR 404. Amending a tax return 702. Amending a tax return The information that you provide will be used in making a determination regarding the amount of Social Security benefits payable to the above named individual. Amending a tax return While your response is voluntary, if you do not respond we may not be able to make a correct determination regarding the amount of Social Security benefits payable to the above named individual for the year in question. Amending a tax return We may also use the information you give us when we match records by computer. Amending a tax return Matching programs compare our records with those of other Federal, State, or local government agencies. Amending a tax return Many agencies may use matching programs to find or prove that a person qualifies for benefits paid by the Federal Government. Amending a tax return The law allows us to do this even if you do not agree to it. Amending a tax return Explanations about these and other reasons why information you provide us may be used or given out are available in Social Security Offices. Amending a tax return If you want to learn more about this, contact any Social Security Office. Amending a tax return The Paperwork Reduction Act: This information collection meets the clearance requirements of 44 U. Amending a tax return S. Amending a tax return C. Amending a tax return §3507, as amended by Section 2 of the Paperwork Reduction Act of 1995. Amending a tax return You are not required to answer these questions unless we display a valid Office of Management and Budget control number. Amending a tax return We estimate that it will take you about 20 minutes to read the instructions, gather the necessary facts, and answer the questions. Amending a tax return Form SSA-131 (8-2001) EF (06-2002)   Submit Form SSA-131 to the SSA office nearest your place of business. Amending a tax return Or, the employee can submit it to the SSA office handling the claim. Amending a tax return You or the employee must submit this form before the SSA can exclude the special wage payments for purposes of the earnings test. Amending a tax return If reporting on more than one employee, complete a separate Form SSA-131 for each employee or use the paper listing format (except for reporting nonqualified and section 457 plan deferrals and payments) in Table 3. Amending a tax return Do not report payments from nonqualified deferred compensation or section 457 plans that were reported in box 11 of Form W-2. Amending a tax return Use Form SSA-131 if deferrals to and payments from nonqualified or section 457 plans occurred during the tax year. Amending a tax return Reporting Nonstatutory (Nonqualified) Stock Options as Special Wage Payments A nonstatutory (nonqualified) option to purchase stock which is exercised in a year after the year in which the option was earned is a special wage payment. Amending a tax return It should not count for the social security earnings test. Amending a tax return Nonstatutory (nonqualified) options exercised as special wage payments by retired employees or employees who continue to work while receiving social security benefits should be reported by employers using the above reporting methods. Amending a tax return Nonqualified Deferred Compensation and Section 457 Plans A nonqualified deferred compensation plan is a plan or arrangement established and maintained by an employer for one or more of its employees that provides for the deferral of compensation, but does not meet the requirements for a tax-qualified deferred compensation plan. Amending a tax return For social security and Medicare purposes, deferred compensation plans for employees of state and local governments (section 457 plans) are treated the same as nonqualified plans. Amending a tax return Nonqualified and section 457 plans are reported differently than other special wage payments. Amending a tax return See Reporting Amounts Deferred to Nonqualified and Section 457 Plans below for specific instructions. Amending a tax return Reporting Amounts Deferred to Nonqualified and Section 457 Plans Generally, when the related services are performed, nonqualified deferred compensation is subject to social security and Medicare tax when deferred. Amending a tax return However, if nonqualified and section 457 plans contain provisions that delay the employee's right to receive payments from the plan, a period of substantial risk of forfeiture exists. Amending a tax return The plans' deferrals, or contributions, are not subject to social security and Medicare taxes until the period of substantial risk of forfeiture ends. Amending a tax return No risk of forfeiture. Amending a tax return   If there is no risk of forfeiture, report wage amounts deferred to a nonqualified deferred compensation or section 457 plan in box 3 (up to the wage base maximum) and/or box 5 of Form W-2. Amending a tax return Example. Amending a tax return Company X's nonqualified deferred compensation plan allows the deferral of up to $20,000 of employee salaries each year. Amending a tax return The plan has no risk of forfeiture. Amending a tax return In 2012, Employee A defers $20,000 to the plan from a total salary of $200,000. Amending a tax return Form W-2 Completion Amount Box 1 $200,000 Box 3* 110,100 Box 5 200,000 *Wage base maximum for tax year 2012 Risk of forfeiture lapses before retirement. Amending a tax return   If the substantial risk of forfeiture lapses before the employee retires, report all past contributions to the plan (or the value of the plan), including accumulated earned interest, in box 3 (up to the wage base maximum) and/or box 5 of Form W-2. Amending a tax return The accumulated deferrals are reported along with any other social security and Medicare wages earned during the year. Amending a tax return   Report in box 11 of Form W-2 the amount of deferrals, including any accumulated interest, that became taxable for social security and Medicare taxes during the year (but were for prior year services) because the deferred amounts were no longer subject to a substantial risk of forfeiture. Amending a tax return If the employee continues working, future deferrals are social security and Medicare wages when they are earned. Amending a tax return    Do not include in box 11 deferrals that are included in boxes 3 and/or 5 and that are for current year services. Amending a tax return Risk of forfeiture lapses at retirement. Amending a tax return   When an employee's right to a payment is contingent upon working until retirement, report all past contributions to the plan (or the value of the plan), including accumulated earned interest, as social security and/or Medicare wages in the year of retirement. Amending a tax return Add the amount to other wages paid in that year, and enter in box 3 (up to the wage base maximum) and/or box 5 of Form W-2. Amending a tax return   Report in box 11 of Form W-2 the amount of deferrals, including any accumulated interest, that became taxable for social security and Medicare taxes during the year (but were for prior year services) because the deferred amounts were no longer subject to a substantial risk of forfeiture. Amending a tax return    Do not include in box 11 deferrals that are included in boxes 3 and/or 5 and that are for current year services. Amending a tax return Example—risk of forfeiture. Amending a tax return At the end of the risk-of-forfeiture period for Company Y's nonqualified deferred compensation plan, Employee B's accumulated deferrals, plus interest earned by the plan, are $120,000, not including B's $20,000 deferral for this year. Amending a tax return B's wages, including this year's deferred amount, are $80,000. Amending a tax return Form W-2 Completion Amount Box 1 $60,000 Box 3* 110,100 Box 5 200,000 Box 11 120,000 *Wage base maximum for tax year 2012 Reporting Payments From Nonqualified and Nongovernmental Section 457 Plans When an employee or former employee retires and begins receiving payments (distributions) from a nonqualified or nongovernmental section 457 plan, report the payments in boxes 1 and 11 of Form W-2. Amending a tax return Report payments (distributions) from a governmental section 457 plan on Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Amending a tax return Example. Amending a tax return Employee D retired from the XYZ company and began receiving social security benefits. Amending a tax return XYZ paid D a $12,000 bonus upon retirement for sales made in a prior year, and D received $25,000 in payments from XYZ's nonqualified deferred compensation plan. Amending a tax return In addition, D agreed to continue performing services for XYZ, but on a part-time basis for wages of $15,000 per year. Amending a tax return D made no deferrals to the nonqualified plan this year. Amending a tax return Form W-2 Completion Amount Box 1 $52,000 Box 3 27,000 Box 5 27,000 Box 11 25,000 Report the $12,000 bonus to the SSA using electronic reporting, a paper listing, or Form SSA-131. Amending a tax return For more information, see Reporting Special Wage Payments , earlier. Amending a tax return Reporting Payments and Deferrals in the Same Year Do not complete box 11 when payments (distributions) are made from a nonqualified plan and deferrals are reported in boxes 3 and/or 5 of Form W-2 (including current year deferrals). Amending a tax return Report to the SSA on Form SSA-131 the total amount the employee earned during the tax year. Amending a tax return Normally, the amount earned is the amount reported in box 1 of Form W-2 less payments from a nonqualified or section 457 plan, but including any amounts deferred under the plan during the tax year. Amending a tax return See Form SSA-131 and its instructions, earlier. Amending a tax return Example. Amending a tax return Employee K retired this year from Company XYZ and began receiving social security benefits. Amending a tax return During the year he earned wages of $50,000 and deferred $35,000 of the wages into the company's nonqualified deferred compensation plan. Amending a tax return K also received $75,000 in payments from the company's nonqualified plan. Amending a tax return Form W-2 Completion Amount Special Wage Payment $75,000 Wages 50,000 Minus: deferral 35,000 Total reported in Box 1 $90,000     Wages including deferral reported in  Boxes 3 and 5 $50,000     Leave Box 11 blank. Amending a tax return File Form SSA-131 -0-     Form SSA-131 Completion Amount from Box 1 of Form W-2 $90,000 Minus: payments from a nonqualified plan 75,000 Plus: amounts deferred into the plan during the year 35,000 Total wages earned for purposes of Form SSA-131 (item 6) $50,000 Additional Reporting Examples for Nonqualified Deferred Compensation (NQDC) Plans It is not necessary to show amounts deferred during the year under an NQDC plan subject to section 409A. Amending a tax return If you report section 409A deferrals, show the amount in box 12 of Form W-2 using code Y. Amending a tax return For more information, see Notice 2008-115, 2008-52 I. Amending a tax return R. Amending a tax return B. Amending a tax return 1367, available at www. Amending a tax return irs. Amending a tax return gov/irb/2008-52_IRB/ar10. Amending a tax return html. Amending a tax return Special reporting rules apply when an NQDC plan is not compliant with section 409A (when there has been a “plan failure”). Amending a tax return Income included under section 409A from an NQDC plan is reported in box 1 and box 12 of Form W-2 using code Z. Amending a tax return See Notice 2008-115. Amending a tax return The following examples use small dollar amounts for illustrative purposes. Amending a tax return However, the amount reported in box 3 of Form W-2 is always limited by the social security earnings wage base (for example, $110,100 for 2012). Amending a tax return The term “vested” in the following examples means that the amount deferred is not subject to a substantial risk of forfeiture. Amending a tax return Conversely, the term “not vested” means that the amount deferred is subject to a substantial risk of forfeiture. Amending a tax return The examples assume that the NQDC plan is in compliance with section 409A, and that amounts deferred under the plan are not includible in gross income as they are deferred. Amending a tax return For purposes of the examples, it is assumed that the regular pay of the employee is remuneration for employment and wages for employment tax purposes except to the extent the deferral of a portion of the regular pay results in a reduction in wages. Amending a tax return Example 1: Deferral that is immediately vested (no substantial risk of forfeiture) with no distributions and no vesting of prior-year deferrals. Amending a tax return For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into her employer’s NQDC plan. Amending a tax return The deferral of $20 was vested upon deferral and there was an employer match of $10 under the plan, which was also vested. Amending a tax return Regular pay = $200; Deferral, vested = $20; Employer match, vested = $10. Amending a tax return Form W-2 Completion Amount Box 1 ($200 Regular pay minus $20 vested deferral) $180 Box 3 ($200 Regular pay plus $10 Employer match, vested) 210 Box 5 ($200 Regular pay plus $10 Employer match, vested) 210 Box 11 -0- Example 2: Deferral with delayed vesting (substantial risk of forfeiture) of employee and employer portions (no distributions and no vesting of prior-year deferrals). Amending a tax return For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s nonqualified deferred compensation plan. Amending a tax return The deferral of $20 was not vested upon deferral, and there was an employer match of $10 under the plan, which was also not vested. Amending a tax return Regular pay = $200; Deferral, not vested = $20; Employer match, not vested = $10. Amending a tax return Form W-2 Completion Amount Box 1 ($200 Regular pay minus $20 Deferral, not vested) $180 Box 3 ($200 Regular pay minus $20 Deferral, not vested) 180 Box 5 ($200 Regular pay minus $20 Deferral, not vested) 180 Box 11 -0- Example 3: Deferral that is immediately vested with prior-year deferrals and investment earnings on the prior-year deferrals that are now vesting (no distributions). Amending a tax return For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s nonqualified deferred compensation plan. Amending a tax return The deferral of $20 was vested upon deferral. Amending a tax return During the year, $100 of prior-year deferrals and $15 of investment earnings on the $100 of prior-year deferrals became vested. Amending a tax return Regular pay = $200; Deferral, vested = $20; Vesting of prior-year deferrals = $100; Vesting of investment earnings on $100 of prior-year deferral = $15. Amending a tax return Form W-2 Completion Amount Box 1 ($200 Regular pay minus $20 Deferral, vested) $180 Box 3 ($200 Regular pay plus $100 vested prior-year deferral plus $15 earnings on deferral) 315 Box 5 ($200 Regular pay plus $100 vested prior-year deferral plus $15 vested investment earnings on prior year deferral) 315 Box 11 ($100 vested prior-year deferral plus $15 earnings) 115 Example 4: No deferrals but there are distributions (no vesting of prior-year deferrals). Amending a tax return For the year, the employee’s regular pay was $100, and the employee deferred no pay into the employer’s NQDC plan. Amending a tax return There was no vesting of prior-year deferrals under the plan. Amending a tax return During the year, there were total distributions of $50 from the plan to the employee. Amending a tax return Regular pay = $100; Distribution = $50. Amending a tax return Form W-2 Completion Amount Box 1 ($100 Regular pay plus $50 Distribution) $150 Box 3 ($100 Regular pay ) 100 Box 5 ($100 Regular pay) 100 Box 11 ($50 Distribution) 50 Special rule for box 11 of Form W-2 (distributions and deferral in the same year). Amending a tax return   If, in the same year, there are NQDC distributions and there are deferrals that are reportable in boxes 3 and/or 5 (current or prior-year deferrals) of Form W-2, do not complete box 11. Amending a tax return Instead, report on Form SSA-131 the total amount the employee earned during the year. Amending a tax return * Submit the SSA-131 to the nearest SSA office or give it to the employee. Amending a tax return   *Generally, the amount earned by the employee during the tax year for purposes of item 6 of Form SSA-131 is the amount reported in box 1 of Form W-2 plus current-year deferrals that are vested (employee and employer portions) less distributions. Amending a tax return Do not consider prior-year deferrals that are vesting in the current year. Amending a tax return If there was a plan failure, the box 1 amount in this calculation should be as if there were no plan failure. Amending a tax return Example 5: Deferral that is immediately vested and there are distributions (no vesting of prior-year deferrals). Amending a tax return For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. Amending a tax return There was also an employer match of $10. Amending a tax return The deferral and employer match were vested upon deferral. Amending a tax return There was no vesting of prior-year deferrals under the plan. Amending a tax return During the year, there were total distributions of $50 from the plan to the employee. Amending a tax return Regular pay = $200; Deferral, vested = $20; Employer match, vested = $10; Distribution = $50. Amending a tax return Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 Regular pay minus $20 Deferral, vested) $230 Boxes 3 and 5 ($200 Regular pay plus $10 vested employer match) 210 Leave Box 11 blank. Amending a tax return File Form SSA-131 -0-     Form SSA-131 Completion Item 6 - amount of wages earned by the employee during the tax year ($230 from Box 1 of Form W-2 minus $50 Distribution plus $30 vested current year employee deferral and employer match) $210 Example 6: Deferral with delayed vesting and there are distributions (no vesting of prior-year deferrals). Amending a tax return For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. Amending a tax return The deferral was not vested upon deferral. Amending a tax return There was no vesting of prior-year deferrals under the plan. Amending a tax return During the year, there were total distributions of $50 from the plan to the employee. Amending a tax return Regular pay = $200; Deferral, not vested = $20; Distribution = $50. Amending a tax return Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 Regular pay minus $20 Deferral, not vested) $230 Boxes 3 and 5 ($200 Regular pay minus $20 deferral that is not vested) 180 Box 11 ($50 Distribution). Amending a tax return 50 Example 7: Deferral that is immediately vested and there are distributions (also vesting of prior-year deferrals and earnings on those prior-year deferrals). Amending a tax return For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. Amending a tax return The deferral was vested upon deferral. Amending a tax return There was vesting of $100 of prior-year deferrals and $15 of earnings on the $100 prior-year deferral under the plan. Amending a tax return During the year, there were total distributions of $50 from the plan to the employee. Amending a tax return Regular pay = $200; Deferral, vested = $20; Distribution = $50; Vesting of prior-year deferrals ($100) and earnings on those prior-year deferrals ($15) = $115. Amending a tax return Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 Regular pay minus $20 vested deferral $230 Boxes 3 and 5 ($200 Regular pay Plus $115 vested prior deferral (with vested earnings on the deferral)) 315 Leave Box 11 blank. Amending a tax return File Form SSA-131 -0-     Form SSA-131 Completion Item 6, amount of wages earned by the employee during the tax year ($230 from Box 1 of Form W-2 minus $50 Distribution plus $20 vested current year deferral) $200 Example 8: Deferral with delayed vesting and there are distributions (vesting of prior-year deferrals, including employer matches, and earnings on those deferrals). Amending a tax return For the year, the employee’s regular pay was $200, and the employee deferred $20 of the pay into the employer’s NQDC plan. Amending a tax return The deferral was not vested upon deferral. Amending a tax return There was also vesting of prior-year deferrals and employer matches and earnings on these amounts under the plan ($115). Amending a tax return During the year, there were total distributions of $50 from the plan to the employee. Amending a tax return Regular pay = $200; Deferral, not vested = $20; Distribution = $50; Vesting of prior-year deferrals and employer match = $100 plus earnings on that $100 of $15. Amending a tax return Form W-2 Completion Amount Box 1 ($50 Special Wage Payment (Distribution) plus $200 regular pay minus $20 Deferral, not vested) $230 Boxes 3 and 5 ($200 Regular pay plus $115 vested prior-year deferral and prior year employer match and earning on the prior year amounts minus $20 deferral that is not vested) 295 Leave Box 11 blank. Amending a tax return File Form SSA-131 -0-     Form SSA-131 Completion Item 6 ($230 Amount from Box 1 of Form W-2 minus $50 Distribution) $180 Table 2. Amending a tax return Specifications for Electronic Reporting of Special Wage Payments Record Position  Field Size   Description Start End 1 3 3 Record Type—must include only the capital letters “SWP” 4 12 9 SSN—must be numeric and may not be all zeros 13 27 15 Last Name—all capitals and no punctuation; may have blanks on right only 28 38 11 First Name—all capitals and no punctuation; may have blanks on right only 39 39 1 Middle Initial—must be either a capital letter or blank 40 48 9 EIN—must be numeric and may not be all zeros 49 59 11 Payment—must be numeric; may not be all zeros; last two digits on right are assumed to be cents; no period or dollar sign 60 63 4 Payment Year—must be only a four-digit year 64 66 3 SSA Office Code—must be numeric and may be all zeros 67 67 1 Payment Type Code—must be the capital letter “T” 68 117 50 Filler  The record format is a fixed length of 117. Amending a tax return  The file format is ASCII. Amending a tax return  Submit only one file at a time. Amending a tax return   Table 3. Amending a tax return Sample—Paper Listing for Reporting Special Wage Payments to Several Employees Report of Special Wage PaymentsTax Year: Page of A. Amending a tax return Employer Name: EIN:   Address: Contact Name:     Phone: ( )   . Amending a tax return 1) B. Amending a tax return Employee Name: (Last) (First) (MI)   C. Amending a tax return SSN: D. Amending a tax return SWP:$ E. Amending a tax return Type: Other: 2) B. Amending a tax return Employee Name: (Last) (First) (MI)   C. Amending a tax return SSN: D. Amending a tax return SWP:$ E. Amending a tax return Type: Other: 3) B. Amending a tax return Employee Name: (Last) (First) (MI)   C. Amending a tax return SSN: D. Amending a tax return SWP:$ E. Amending a tax return Type: Other: 4) B. Amending a tax return Employee Name: (Last) (First) (MI)   C. Amending a tax return SSN: D. Amending a tax return SWP:$ E. Amending a tax return Type: Other: 5) B. Amending a tax return Employee Name: (Last) (First) (MI)   C. Amending a tax return SSN: D. Amending a tax return SWP:$ E. Amending a tax return Type: Other:     INSTRUCTIONS:   Enter tax year and page number. Amending a tax return   A. Amending a tax return Employer name, employer identification number (EIN), address, the name of a contact person, and a phone number where the contact person can be reached during normal business hours. Amending a tax return   B. Amending a tax return Employee's name. Amending a tax return   C. Amending a tax return Employee's social security number (SSN). Amending a tax return   D. Amending a tax return Total amount of special wage payments made to the employee. Amending a tax return   E. Amending a tax return Type of special wage payment from the following list: (1) Vacation Pay, (2) Sick Pay, (3) Severance Pay,  (4) Bonus, (5) Deferred Compensation, (6) Stock Options, and (7) Other—Please explain. Amending a tax return   Do not use a paper listing for nonqualified deferred compensation and section 457 plan deferrals and payments that could not be reported in block 11 of Form W-2. Amending a tax return (Get Form SSA-131. Amending a tax return )                 Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

IRS Urges Taxpayers to Avoid Becoming Victims of Tax Scams

IR-2011-73, July 11, 2011

IRS YouTube Videos:
Tax Refund Scams :
English | Spanish  |  ASL

WASHINGTON — The Internal Revenue Service today encouraged taxpayers to guard against being misled by unscrupulous individuals trying to persuade them to file false claims for tax credits or rebates.

The IRS has noted an increase in tax-return-related scams, frequently involving unsuspecting taxpayers who normally do not have a filing requirement in the first place. These taxpayers are led to believe they should file a return with the IRS for tax credits, refunds or rebates for which they are not really entitled. Many of these recent scams have been targeted in the South and Midwest.

Most paid tax return preparers provide honest and professional service, but there are some who engage in fraud and other illegal activities.   Unscrupulous promoters deceive people into paying for advice on how to file false claims. Some promoters may charge unreasonable amounts for preparing legitimate returns that could have been prepared for free by the IRS or IRS sponsored Volunteer Income Tax Assistance partners. In other situations, identity theft is involved.

Taxpayers should be wary of any of the following:

  • Fictitious claims for refunds or rebates based on excess or withheld Social Security benefits.
  • Claims that Treasury Form 1080 can be used to transfer funds from the Social Security Administration to the IRS enabling a payout from the IRS.
  • Unfamiliar for-profit tax services teaming up with local churches.
  • Home-made flyers and brochures implying credits or refunds are available without proof of eligibility.
  • Offers of free money with no documentation required.
  • Promises of refunds for “Low Income – No Documents Tax Returns.”
  • Claims for the expired Economic Recovery Credit Program or Recovery Rebate Credit. 
  • Advice on claiming the Earned Income Tax Credit based on exaggerated reports of self-employment income.

In some cases non-existent Social Security refunds or rebates have been the bait used by the con artists.  In other situations, taxpayers deserve the tax credits they are promised but the preparer uses fictitious or inflated information on the return which results in a fraudulent return.

Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file with little or no documentation, have been appearing in community churches around the country. Promoters are targeting church congregations, exploiting their good intentions and credibility. These schemes also often spread by word of mouth among unsuspecting and well-intentioned people telling their friends and relatives. 
Promoters of these scams often prey upon low income individuals and the elderly. 

They build false hopes and charge people good money for bad advice.  In the end, the victims discover their claims are rejected or the refund barely exceeds what they paid the promoter.  Meanwhile, their money and the promoters are long gone.

Unsuspecting individuals are most likely to get caught up in scams and the IRS is warning all taxpayers, and those that help others prepare returns, to remain vigilant. If it sounds too good to be true, it probably is.

Anyone with questions about a tax credit or program should visit www.IRS.gov, call the IRS toll-free number at 800-829-1040 or visit a local IRS Taxpayer Assistance Center.

For questions about rebates, credit and benefits from other federal agencies contact the relevant agency directly for accurate information. 

Follow the IRS on new media

Subscribe to IRS Newswire

Page Last Reviewed or Updated: 19-Mar-2014

The Amending A Tax Return

Amending a tax return 2. Amending a tax return   Foreclosures and Repossessions Table of Contents Amount realized and ordinary income on a recourse debt. Amending a tax return Amount realized on a nonrecourse debt. Amending a tax return If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. Amending a tax return The foreclosure or repossession is treated as a sale from which you may realize gain or loss. Amending a tax return This is true even if you voluntarily return the property to the lender. Amending a tax return If the outstanding loan balance was more than the FMV of the property and the lender cancels all or part of the remaining loan balance, you also may realize ordinary income from the cancellation of debt. Amending a tax return You must report this income on your return unless certain exceptions or exclusions apply. Amending a tax return See chapter 1 for more details. Amending a tax return Borrower's gain or loss. Amending a tax return    You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale. Amending a tax return The gain is the difference between the amount realized and your adjusted basis in the transferred property (amount realized minus adjusted basis). Amending a tax return The loss is the difference between your adjusted basis in the transferred property and the amount realized (adjusted basis minus amount realized). Amending a tax return For more information on figuring gain or loss from the sale of property, see Gain or Loss From Sales and Exchanges in Publication 544. Amending a tax return You can use Table 1-1 to figure your ordinary income from the cancellation of debt and your gain or loss from a foreclosure or repossession. Amending a tax return Amount realized and ordinary income on a recourse debt. Amending a tax return    If you are personally liable for the debt, the amount realized on the foreclosure or repossession includes the smaller of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The FMV of the transferred property. Amending a tax return The amount realized also includes any proceeds you received from the foreclosure sale. Amending a tax return If the FMV of the transferred property is less than the total outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, the difference is ordinary income from the cancellation of debt. Amending a tax return You must report this income on your return unless certain exceptions or exclusions apply. Amending a tax return See chapter 1 for more details. Amending a tax return       Example 1. Amending a tax return Tara bought a new car for $15,000. Amending a tax return She made a $2,000 downpayment and borrowed the remaining $13,000 from the dealer's credit company. Amending a tax return Tara is personally liable for the loan (recourse debt) and the car is pledged as security for the loan. Amending a tax return On August 1, 2013, the credit company repossessed the car because Tara had stopped making loan payments. Amending a tax return The balance due after taking into account the payments Tara made was $10,000. Amending a tax return The FMV of the car when it was repossessed was $9,000. Amending a tax return On November 15, 2013, the credit company forgave the remaining $1,000 balance on the loan due to insufficient assets. Amending a tax return In this case, the amount Tara realizes is $9,000. Amending a tax return This is the smaller of: The $10,000 outstanding debt immediately before the repossession reduced by the $1,000 for which she remains personally liable immediately after the repossession ($10,000 − $1,000 = $9,000), or The $9,000 FMV of the car. Amending a tax return Tara figures her gain or loss on the repossession by comparing the $9,000 amount realized with her $15,000 adjusted basis. Amending a tax return She has a $6,000 nondeductible loss. Amending a tax return After the cancellation of the remaining balance on the loan in November, Tara also has ordinary income from cancellation of debt in the amount of $1,000 (the remaining balance on the $10,000 loan after the $9,000 amount satisfied by the FMV of the repossessed car). Amending a tax return Tara must report this $1,000 on her return unless one of the exceptions or exclusions described in chapter 1 applies. Amending a tax return Example 2. Amending a tax return Lili paid $200,000 for her home. Amending a tax return She made a $15,000 downpayment and borrowed the remaining $185,000 from a bank. Amending a tax return Lili is personally liable for the mortgage loan and the house secures the loan. Amending a tax return In 2013, the bank foreclosed on the mortgage because Lili stopped making payments. Amending a tax return When the bank foreclosed the mortgage, the balance due was $180,000, the FMV of the house was $170,000, and Lili's adjusted basis was $175,000 due to a casualty loss she had deducted. Amending a tax return At the time of the foreclosure, the bank forgave $2,000 of the $10,000 debt in excess of the FMV ($180,000 minus $170,000). Amending a tax return She remained personally liable for the $8,000 balance. Amending a tax return In this case, Lili has ordinary income from the cancellation of debt in the amount of $2,000. Amending a tax return The $2,000 income from the cancellation of debt is figured by subtracting the $170,000 FMV of the house from the $172,000 difference between her total outstanding debt immediately before the transfer of property and the amount for which she remains personally liable immediately after the transfer ($180,000 minus $8,000). Amending a tax return She is able to exclude the $2,000 of canceled debt from her income under the qualified principal residence indebtedness rules discussed earlier. Amending a tax return Lili must also determine her gain or loss from the foreclosure. Amending a tax return In this case, the amount that she realizes is $170,000. Amending a tax return This is the smaller of: (a) the $180,000 outstanding debt immediately before the transfer reduced by the $8,000 for which she remains personally liable immediately after the transfer ($180,000 − $8,000 = $172,000) or (b) the $170,000 FMV of the house. Amending a tax return Lili figures her gain or loss on the foreclosure by comparing the $170,000 amount realized with her $175,000 adjusted basis. Amending a tax return She has a $5,000 nondeductible loss. Amending a tax return Table 1-1. Amending a tax return Worksheet for Foreclosures and Repossessions Part 1. Amending a tax return Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Amending a tax return Otherwise, go to Part 2. Amending a tax return 1. Amending a tax return Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property   2. Amending a tax return Enter the fair market value of the transferred property   3. Amending a tax return Ordinary income from the cancellation of debt upon foreclosure or repossession. Amending a tax return * Subtract line 2 from line 1. Amending a tax return If less than zero, enter zero. Amending a tax return Next, go to Part 2   Part 2. Amending a tax return Gain or loss from foreclosure or repossession. Amending a tax return   4. Amending a tax return Enter the smaller of line 1 or line 2. Amending a tax return If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property   5. Amending a tax return Enter any proceeds you received from the foreclosure sale   6. Amending a tax return Add line 4 and line 5   7. Amending a tax return Enter the adjusted basis of the transferred property   8. Amending a tax return Gain or loss from foreclosure or repossession. Amending a tax return Subtract line 7 from line 6   * The income may not be taxable. Amending a tax return See chapter 1 for more details. Amending a tax return Amount realized on a nonrecourse debt. Amending a tax return    If you are not personally liable for repaying the debt secured by the transferred property, the amount you realize includes the full amount of the outstanding debt immediately before the transfer. Amending a tax return This is true even if the FMV of the property is less than the outstanding debt immediately before the transfer. Amending a tax return Example 1. Amending a tax return Tara bought a new car for $15,000. Amending a tax return She made a $2,000 downpayment and borrowed the remaining $13,000 from the dealer's credit company. Amending a tax return Tara is not personally liable for the loan (nonrecourse), but pledged the new car as security for the loan. Amending a tax return On August 1, 2013, the credit company repossessed the car because Tara had stopped making loan payments. Amending a tax return The balance due after taking into account the payments Tara made was $10,000. Amending a tax return The FMV of the car when it was repossessed was $9,000. Amending a tax return The amount Tara realized on the repossession is $10,000. Amending a tax return That is the outstanding amount of debt immediately before the repossession, even though the FMV of the car is less than $10,000. Amending a tax return Tara figures her gain or loss on the repossession by comparing the $10,000 amount realized with her $15,000 adjusted basis. Amending a tax return Tara has a $5,000 nondeductible loss. Amending a tax return Example 2. Amending a tax return Lili paid $200,000 for her home. Amending a tax return She made a $15,000 downpayment and borrowed the remaining $185,000 from a bank. Amending a tax return She is not personally liable for the loan, but grants the bank a mortgage. Amending a tax return The bank foreclosed on the mortgage because Lili stopped making payments. Amending a tax return When the bank foreclosed on the mortgage, the balance due was $180,000, the FMV of the house was $170,000, and Lili's adjusted basis was $175,000 due to a casualty loss she had deducted. Amending a tax return The amount Lili realized on the foreclosure is $180,000, the outstanding debt immediately before the foreclosure. Amending a tax return She figures her gain or loss by comparing the $180,000 amount realized with her $175,000 adjusted basis. Amending a tax return Lili has a $5,000 realized gain. Amending a tax return See Publication 523 to figure and report any taxable amount. Amending a tax return Forms 1099-A and 1099-C. Amending a tax return    A lender who acquires an interest in your property in a foreclosure or repossession should send you Form 1099-A, Acquisition or Abandonment of Secured Property, showing information you need to figure your gain or loss. Amending a tax return However, if the lender also cancels part of your debt and must file Form 1099-C, the lender can include the information about the foreclosure or repossession on that form instead of on Form 1099-A. Amending a tax return The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. Amending a tax return For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. Amending a tax return Prev  Up  Next   Home   More Online Publications