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Form 1040ez

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Form 1040ez

Form 1040ez Publication 531 - Introductory Material Table of Contents Future Developments What's New Reminder IntroductionOrdering forms and publications. Form 1040ez Tax questions. Form 1040ez Future Developments For the latest information about developments related to Publication 531, such as legislation enacted after this publication was published, go to www. Form 1040ez irs. Form 1040ez gov/pub531. Form 1040ez What's New Additional Medicare Tax. Form 1040ez  Beginning in 2013, a 0. Form 1040ez 9% Additional Medicare Tax applies to Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Form 1040ez An employer is required to withhold Additional Medicare Tax on any Medicare wages or RRTA compensation it pays to an employee in excess of $200,000 in a calendar year without regard to the employee's filing status. Form 1040ez An employer is required to begin withholding Additional Medicare Tax in the pay period in which it pays wages or compensation in excess of $200,000 to an employee and continue to withhold it until the end of the calendar year. Form 1040ez Additional Medicare Tax is only imposed on the employee. Form 1040ez There is no employer share of Additional Medicare Tax. Form 1040ez All wages and compensation that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Form 1040ez Tips are subject to Additional Medicare Tax withholding, if, in combination with other wages paid by the employer, they exceed the $200,000 withholding threshold. Form 1040ez Similarly, tips are subject to Additional Medicare Tax withholding, if, in combination with other RRTA compensation paid by the employer, they exceed the $200,000 withholding threshold. Form 1040ez For more information on Additional Medicare Tax, go to www. Form 1040ez irs. Form 1040ez gov and enter “Additional Medicare Tax” in the search box. Form 1040ez Reminder Photographs of missing children. Form 1040ez  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Form 1040ez Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Form 1040ez You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Form 1040ez Introduction This publication is for employees who receive tips. Form 1040ez All tips you receive are income and are subject to federal income tax. Form 1040ez You must include in gross income all tips you receive directly, charged tips paid to you by your employer, and your share of any tips you receive under a tip-splitting or tip-pooling arrangement. Form 1040ez The value of noncash tips, such as tickets, passes, or other items of value, is also income and subject to tax. Form 1040ez Reporting your tip income correctly is not difficult. Form 1040ez You must do three things. Form 1040ez Keep a daily tip record. Form 1040ez Report tips to your employer. Form 1040ez Report all your tips on your income tax return. Form 1040ez  This publication will explain these three things and show you what to do on your tax return if you have not done the first two. Form 1040ez This publication will also show you how to treat allocated tips. Form 1040ez Comments and suggestions. Form 1040ez   We welcome your comments about this publication and your suggestions for future editions. Form 1040ez   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Form 1040ez NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Form 1040ez Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Form 1040ez   You can send your comments from www. Form 1040ez irs. Form 1040ez gov/formspubs/. Form 1040ez Click on “More Information” and then on “Comment on Tax Forms and Publications”. Form 1040ez   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Form 1040ez Ordering forms and publications. Form 1040ez   Visit www. Form 1040ez irs. Form 1040ez gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Form 1040ez Internal Revenue Service 1201 N. Form 1040ez Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Form 1040ez   If you have a tax question, check the information available on IRS. Form 1040ez gov or call 1-800-829-1040. Form 1040ez We cannot answer tax questions sent to either of the above addresses. Form 1040ez Prev  Up  Next   Home   More Online Publications
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Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City  Street Address  Days/Hours of Service  Telephone* 
Manchester  1000 Elm St. 9th Floor
Manchester, NH 03101 

Monday-Friday - 8:30 a.m. - 4:30 p.m.

 

Services Provided

(603) 668-6763 
Nashua  410 Amherst St.
Nashua, NH 03063 

Monday-Friday - 8:30 a.m. - 4:30 p.m.
(Closed for lunch 1:00 p.m. - 2:00 p.m.)

 

Services Provided

(603) 594-8370 
Portsmouth  80 Daniel St.
Portsmouth, NH 03801 

Monday-Friday - 8:30 a.m. - 4:30 p.m.
(Closed for lunch 1:00 p.m. - 2:00 p.m.)
 

Services Provided

(603) 430-9598 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses). 

For information on where to file your tax return please see Where to File Addresses

The Taxpayer Advocate Service: Call (603)433-0571 in Portsmouth or 1-877-777-4778 elsewhere, or see  Publication 1546, The Taxpayer Advocate Service of the IRS.

For further information, see Tax Topic 104

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
1000 Elm St., Suite 900
Manchester, NH  03101

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The Form 1040ez

Form 1040ez 1. Form 1040ez   Overview of Depreciation Table of Contents Introduction Useful Items - You may want to see: What Property Can Be Depreciated?Property You Own Property Used in Your Business or Income-Producing Activity Property Having a Determinable Useful Life Property Lasting More Than One Year What Property Cannot Be Depreciated?Land Excepted Property When Does Depreciation Begin and End?Placed in Service Idle Property Cost or Other Basis Fully Recovered Retired From Service What Method Can You Use To Depreciate Your Property?Property You Placed in Service Before 1987 Property Owned or Used in 1986 Intangible Property Corporate or Partnership Property Acquired in a Nontaxable Transfer Election To Exclude Property From MACRS What Is the Basis of Your Depreciable Property?Cost as Basis Other Basis Adjusted Basis How Do You Treat Repairs and Improvements? Do You Have To File Form 4562? How Do You Correct Depreciation Deductions?Filing an Amended Return Changing Your Accounting Method Introduction Depreciation is an annual income tax deduction that allows you to recover the cost or other basis of certain property over the time you use the property. Form 1040ez It is an allowance for the wear and tear, deterioration, or obsolescence of the property. Form 1040ez This chapter discusses the general rules for depreciating property and answers the following questions. Form 1040ez What property can be depreciated? What property cannot be depreciated? When does depreciation begin and end? What method can you use to depreciate your property? What is the basis of your depreciable property? How do you treat repairs and improvements? Do you have to file Form 4562? How do you correct depreciation deductions? Useful Items - You may want to see: Publication 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 538 Accounting Periods and Methods 551 Basis of Assets Form (and Instructions) Sch C (Form 1040) Profit or Loss From Business Sch C-EZ (Form 1040) Net Profit From Business 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization See chapter 6 for information about getting publications and forms. Form 1040ez What Property Can Be Depreciated? You can depreciate most types of tangible property (except land), such as buildings, machinery, vehicles, furniture, and equipment. Form 1040ez You also can depreciate certain intangible property, such as patents, copyrights, and computer software. Form 1040ez To be depreciable, the property must meet all the following requirements. Form 1040ez It must be property you own. Form 1040ez It must be used in your business or income-producing activity. Form 1040ez It must have a determinable useful life. Form 1040ez It must be expected to last more than one year. Form 1040ez The following discussions provide information about these requirements. Form 1040ez Property You Own To claim depreciation, you usually must be the owner of the property. Form 1040ez You are considered as owning property even if it is subject to a debt. Form 1040ez Example 1. Form 1040ez You made a down payment to purchase rental property and assumed the previous owner's mortgage. Form 1040ez You own the property and you can depreciate it. Form 1040ez Example 2. Form 1040ez You bought a new van that you will use only for your courier business. Form 1040ez You will be making payments on the van over the next 5 years. Form 1040ez You own the van and you can depreciate it. Form 1040ez Leased property. Form 1040ez   You can depreciate leased property only if you retain the incidents of ownership in the property (explained below). Form 1040ez This means you bear the burden of exhaustion of the capital investment in the property. Form 1040ez Therefore, if you lease property from someone to use in your trade or business or for the production of income, you generally cannot depreciate its cost because you do not retain the incidents of ownership. Form 1040ez You can, however, depreciate any capital improvements you make to the property. Form 1040ez See How Do You Treat Repairs and Improvements later in this chapter and Additions and Improvements under Which Recovery Period Applies in chapter 4. Form 1040ez   If you lease property to someone, you generally can depreciate its cost even if the lessee (the person leasing from you) has agreed to preserve, replace, renew, and maintain the property. Form 1040ez However, if the lease provides that the lessee is to maintain the property and return to you the same property or its equivalent in value at the expiration of the lease in as good condition and value as when leased, you cannot depreciate the cost of the property. Form 1040ez Incidents of ownership. Form 1040ez   Incidents of ownership in property include the following. Form 1040ez The legal title to the property. Form 1040ez The legal obligation to pay for the property. Form 1040ez The responsibility to pay maintenance and operating expenses. Form 1040ez The duty to pay any taxes on the property. Form 1040ez The risk of loss if the property is destroyed, condemned, or diminished in value through obsolescence or exhaustion. Form 1040ez Life tenant. Form 1040ez   Generally, if you hold business or investment property as a life tenant, you can depreciate it as if you were the absolute owner of the property. Form 1040ez However, see Certain term interests in property under Excepted Property, later. Form 1040ez Cooperative apartments. Form 1040ez   If you are a tenant-stockholder in a cooperative housing corporation and use your cooperative apartment in your business or for the production of income, you can depreciate your stock in the corporation, even though the corporation owns the apartment. Form 1040ez   Figure your depreciation deduction as follows. Form 1040ez Figure the depreciation for all the depreciable real property owned by the corporation in which you have a proprietary lease or right of tenancy. Form 1040ez If you bought your cooperative stock after its first offering, figure the depreciable basis of this property as follows. Form 1040ez Multiply your cost per share by the total number of outstanding shares, including any shares held by the corporation. Form 1040ez Add to the amount figured in (a) any mortgage debt on the property on the date you bought the stock. Form 1040ez Subtract from the amount figured in (b) any mortgage debt that is not for the depreciable real property, such as the part for the land. Form 1040ez Subtract from the amount figured in (1) any depreciation for space owned by the corporation that can be rented but cannot be lived in by tenant-stockholders. Form 1040ez Divide the number of your shares of stock by the total number of outstanding shares, including any shares held by the corporation. Form 1040ez Multiply the result of (2) by the percentage you figured in (3). Form 1040ez This is your depreciation on the stock. Form 1040ez   Your depreciation deduction for the year cannot be more than the part of your adjusted basis in the stock of the corporation that is allocable to your business or income-producing property. Form 1040ez You must also reduce your depreciation deduction if only a portion of the property is used in a business or for the production of income. Form 1040ez Example. Form 1040ez You figure your share of the cooperative housing corporation's depreciation to be $30,000. Form 1040ez Your adjusted basis in the stock of the corporation is $50,000. Form 1040ez You use one half of your apartment solely for business purposes. Form 1040ez Your depreciation deduction for the stock for the year cannot be more than $25,000 (½ of $50,000). Form 1040ez Change to business use. Form 1040ez   If you change your cooperative apartment to business use, figure your allowable depreciation as explained earlier. Form 1040ez The basis of all the depreciable real property owned by the cooperative housing corporation is the smaller of the following amounts. Form 1040ez The fair market value of the property on the date you change your apartment to business use. Form 1040ez This is considered to be the same as the corporation's adjusted basis minus straight line depreciation, unless this value is unrealistic. Form 1040ez The corporation's adjusted basis in the property on that date. Form 1040ez Do not subtract depreciation when figuring the corporation's adjusted basis. Form 1040ez   If you bought the stock after its first offering, the corporation's adjusted basis in the property is the amount figured in (1), above. Form 1040ez The fair market value of the property is considered to be the same as the corporation's adjusted basis figured in this way minus straight line depreciation, unless the value is unrealistic. Form 1040ez   For a discussion of fair market value and adjusted basis, see Publication 551. Form 1040ez Property Used in Your Business or Income-Producing Activity To claim depreciation on property, you must use it in your business or income-producing activity. Form 1040ez If you use property to produce income (investment use), the income must be taxable. Form 1040ez You cannot depreciate property that you use solely for personal activities. Form 1040ez Partial business or investment use. Form 1040ez   If you use property for business or investment purposes and for personal purposes, you can deduct depreciation based only on the business or investment use. Form 1040ez For example, you cannot deduct depreciation on a car used only for commuting, personal shopping trips, family vacations, driving children to and from school, or similar activities. Form 1040ez    You must keep records showing the business, investment, and personal use of your property. Form 1040ez For more information on the records you must keep for listed property, such as a car, see What Records Must Be Kept in chapter 5. Form 1040ez    Although you can combine business and investment use of property when figuring depreciation deductions, do not treat investment use as qualified business use when determining whether the business-use requirement for listed property is met. Form 1040ez For information about qualified business use of listed property, see What Is the Business-Use Requirement in chapter 5. Form 1040ez Office in the home. Form 1040ez   If you use part of your home as an office, you may be able to deduct depreciation on that part based on its business use. Form 1040ez For information about depreciating your home office, see Publication 587. Form 1040ez Inventory. Form 1040ez   You cannot depreciate inventory because it is not held for use in your business. Form 1040ez Inventory is any property you hold primarily for sale to customers in the ordinary course of your business. Form 1040ez   If you are a rent-to-own dealer, you may be able to treat certain property held in your business as depreciable property rather than as inventory. Form 1040ez See Rent-to-own dealer under Which Property Class Applies Under GDS in chapter 4. Form 1040ez   In some cases, it is not clear whether property is held for sale (inventory) or for use in your business. Form 1040ez If it is unclear, examine carefully all the facts in the operation of the particular business. Form 1040ez The following example shows how a careful examination of the facts in two similar situations results in different conclusions. Form 1040ez Example. Form 1040ez Maple Corporation is in the business of leasing cars. Form 1040ez At the end of their useful lives, when the cars are no longer profitable to lease, Maple sells them. Form 1040ez Maple does not have a showroom, used car lot, or individuals to sell the cars. Form 1040ez Instead, it sells them through wholesalers or by similar arrangements in which a dealer's profit is not intended or considered. Form 1040ez Maple can depreciate the leased cars because the cars are not held primarily for sale to customers in the ordinary course of business, but are leased. Form 1040ez If Maple buys cars at wholesale prices, leases them for a short time, and then sells them at retail prices or in sales in which a dealer's profit is intended, the cars are treated as inventory and are not depreciable property. Form 1040ez In this situation, the cars are held primarily for sale to customers in the ordinary course of business. Form 1040ez Containers. Form 1040ez   Generally, containers for the products you sell are part of inventory and you cannot depreciate them. Form 1040ez However, you can depreciate containers used to ship your products if they have a life longer than one year and meet the following requirements. Form 1040ez They qualify as property used in your business. Form 1040ez Title to the containers does not pass to the buyer. Form 1040ez   To determine if these requirements are met, consider the following questions. Form 1040ez Does your sales contract, sales invoice, or other type of order acknowledgment indicate whether you have retained title? Does your invoice treat the containers as separate items? Do any of your records state your basis in the containers? Property Having a Determinable Useful Life To be depreciable, your property must have a determinable useful life. Form 1040ez This means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Form 1040ez Property Lasting More Than One Year To be depreciable, property must have a useful life that extends substantially beyond the year you place it in service. Form 1040ez Example. Form 1040ez You maintain a library for use in your profession. Form 1040ez You can depreciate it. Form 1040ez However, if you buy technical books, journals, or information services for use in your business that have a useful life of one year or less, you cannot depreciate them. Form 1040ez Instead, you deduct their cost as a business expense. Form 1040ez What Property Cannot Be Depreciated? Certain property cannot be depreciated. Form 1040ez This includes land and certain excepted property. Form 1040ez Land You cannot depreciate the cost of land because land does not wear out, become obsolete, or get used up. Form 1040ez The cost of land generally includes the cost of clearing, grading, planting, and landscaping. Form 1040ez Although you cannot depreciate land, you can depreciate certain land preparation costs, such as landscaping costs, incurred in preparing land for business use. Form 1040ez These costs must be so closely associated with other depreciable property that you can determine a life for them along with the life of the associated property. Form 1040ez Example. Form 1040ez You constructed a new building for use in your business and paid for grading, clearing, seeding, and planting bushes and trees. Form 1040ez Some of the bushes and trees were planted right next to the building, while others were planted around the outer border of the lot. Form 1040ez If you replace the building, you would have to destroy the bushes and trees right next to it. Form 1040ez These bushes and trees are closely associated with the building, so they have a determinable useful life. Form 1040ez Therefore, you can depreciate them. Form 1040ez Add your other land preparation costs to the basis of your land because they have no determinable life and you cannot depreciate them. Form 1040ez Excepted Property Even if the requirements explained in the preceding discussions are met, you cannot depreciate the following property. Form 1040ez Property placed in service and disposed of in the same year. Form 1040ez Determining when property is placed in service is explained later. Form 1040ez Equipment used to build capital improvements. Form 1040ez You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. Form 1040ez See Uniform Capitalization Rules in Publication 551. Form 1040ez Section 197 intangibles. Form 1040ez You must amortize these costs. Form 1040ez Section 197 intangibles are discussed in detail in Chapter 8 of Publication 535. Form 1040ez Intangible property, such as certain computer software, that is not section 197 intangible property, can be depreciated if it meets certain requirements. Form 1040ez See Intangible Property , later. Form 1040ez Certain term interests. Form 1040ez Certain term interests in property. Form 1040ez   You cannot depreciate a term interest in property created or acquired after July 27, 1989, for any period during which the remainder interest is held, directly or indirectly, by a person related to you. Form 1040ez A term interest in property means a life interest in property, an interest in property for a term of years, or an income interest in a trust. Form 1040ez Related persons. Form 1040ez   For a description of related persons, see Related Persons, later. Form 1040ez For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. Form 1040ez Basis adjustments. Form 1040ez   If you would be allowed a depreciation deduction for a term interest in property except that the holder of the remainder interest is related to you, you generally must reduce your basis in the term interest by any depreciation or amortization not allowed. Form 1040ez   If you hold the remainder interest, you generally must increase your basis in that interest by the depreciation not allowed to the term interest holder. Form 1040ez However, do not increase your basis for depreciation not allowed for periods during which either of the following situations applies. Form 1040ez The term interest is held by an organization exempt from tax. Form 1040ez The term interest is held by a nonresident alien individual or foreign corporation, and the income from the term interest is not effectively connected with the conduct of a trade or business in the United States. Form 1040ez Exceptions. Form 1040ez   The above rules do not apply to the holder of a term interest in property acquired by gift, bequest, or inheritance. Form 1040ez They also do not apply to the holder of dividend rights that were separated from any stripped preferred stock if the rights were purchased after April 30, 1993, or to a person whose basis in the stock is determined by reference to the basis in the hands of the purchaser. Form 1040ez When Does Depreciation Begin and End? You begin to depreciate your property when you place it in service for use in your trade or business or for the production of income. Form 1040ez You stop depreciating property either when you have fully recovered your cost or other basis or when you retire it from service, whichever happens first. Form 1040ez Placed in Service You place property in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. Form 1040ez Even if you are not using the property, it is in service when it is ready and available for its specific use. Form 1040ez Example 1. Form 1040ez Donald Steep bought a machine for his business. Form 1040ez The machine was delivered last year. Form 1040ez However, it was not installed and operational until this year. Form 1040ez It is considered placed in service this year. Form 1040ez If the machine had been ready and available for use when it was delivered, it would be considered placed in service last year even if it was not actually used until this year. Form 1040ez Example 2. Form 1040ez On April 6, Sue Thorn bought a house to use as residential rental property. Form 1040ez She made several repairs and had it ready for rent on July 5. Form 1040ez At that time, she began to advertise it for rent in the local newspaper. Form 1040ez The house is considered placed in service in July when it was ready and available for rent. Form 1040ez She can begin to depreciate it in July. Form 1040ez Example 3. Form 1040ez James Elm is a building contractor who specializes in constructing office buildings. Form 1040ez He bought a truck last year that had to be modified to lift materials to second-story levels. Form 1040ez The installation of the lifting equipment was completed and James accepted delivery of the modified truck on January 10 of this year. Form 1040ez The truck was placed in service on January 10, the date it was ready and available to perform the function for which it was bought. Form 1040ez Conversion to business use. Form 1040ez   If you place property in service in a personal activity, you cannot claim depreciation. Form 1040ez However, if you change the property's use to use in a business or income-producing activity, then you can begin to depreciate it at the time of the change. Form 1040ez You place the property in service in the business or income-producing activity on the date of the change. Form 1040ez Example. Form 1040ez You bought a home and used it as your personal home several years before you converted it to rental property. Form 1040ez Although its specific use was personal and no depreciation was allowable, you placed the home in service when you began using it as your home. Form 1040ez You can begin to claim depreciation in the year you converted it to rental property because its use changed to an income-producing use at that time. Form 1040ez Idle Property Continue to claim a deduction for depreciation on property used in your business or for the production of income even if it is temporarily idle (not in use). Form 1040ez For example, if you stop using a machine because there is a temporary lack of a market for a product made with that machine, continue to deduct depreciation on the machine. Form 1040ez Cost or Other Basis Fully Recovered You stop depreciating property when you have fully recovered your cost or other basis. Form 1040ez You recover your basis when your section 179 and allowed or allowable depreciation deductions equal your cost or investment in the property. Form 1040ez See What Is the Basis of Your Depreciable Property , later. Form 1040ez Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. Form 1040ez You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. Form 1040ez You sell or exchange the property. Form 1040ez You convert the property to personal use. Form 1040ez You abandon the property. Form 1040ez You transfer the property to a supplies or scrap account. Form 1040ez The property is destroyed. Form 1040ez If you included the property in a general asset account, see How Do You Use General Asset Accounts in chapter 4 for the rules that apply when you dispose of that property. Form 1040ez What Method Can You Use To Depreciate Your Property? You must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate most property. Form 1040ez MACRS is discussed in chapter 4. Form 1040ez You cannot use MACRS to depreciate the following property. Form 1040ez Property you placed in service before 1987. Form 1040ez Certain property owned or used in 1986. Form 1040ez Intangible property. Form 1040ez Films, video tapes, and recordings. Form 1040ez Certain corporate or partnership property acquired in a nontaxable transfer. Form 1040ez Property you elected to exclude from MACRS. Form 1040ez The following discussions describe the property listed above and explain what depreciation method should be used. Form 1040ez Property You Placed in Service Before 1987 You cannot use MACRS for property you placed in service before 1987 (except property you placed in service after July 31, 1986, if MACRS was elected). Form 1040ez Property placed in service before 1987 must be depreciated under the methods discussed in Publication 534. Form 1040ez For a discussion of when property is placed in service, see When Does Depreciation Begin and End , earlier. Form 1040ez Use of real property changed. Form 1040ez   You generally must use MACRS to depreciate real property that you acquired for personal use before 1987 and changed to business or income-producing use after 1986. Form 1040ez Improvements made after 1986. Form 1040ez   You must treat an improvement made after 1986 to property you placed in service before 1987 as separate depreciable property. Form 1040ez Therefore, you can depreciate that improvement as separate property under MACRS if it is the type of property that otherwise qualifies for MACRS depreciation. Form 1040ez For more information about improvements, see How Do You Treat Repairs and Improvements , later and Additions and Improvements under Which Recovery Period Applies in chapter 4. Form 1040ez Property Owned or Used in 1986 You may not be able to use MACRS for property you acquired and placed in service after 1986 if any of the situations described below apply. Form 1040ez If you cannot use MACRS, the property must be depreciated under the methods discussed in Publication 534. Form 1040ez For the following discussions, do not treat property as owned before you placed it in service. Form 1040ez If you owned property in 1986 but did not place it in service until 1987, you do not treat it as owned in 1986. Form 1040ez Personal property. Form 1040ez   You cannot use MACRS for personal property (section 1245 property) in any of the following situations. Form 1040ez You or someone related to you owned or used the property in 1986. Form 1040ez You acquired the property from a person who owned it in 1986 and as part of the transaction the user of the property did not change. Form 1040ez You lease the property to a person (or someone related to this person) who owned or used the property in 1986. Form 1040ez You acquired the property in a transaction in which: The user of the property did not change, and The property was not MACRS property in the hands of the person from whom you acquired it because of (2) or (3) above. Form 1040ez Real property. Form 1040ez   You generally cannot use MACRS for real property (section 1250 property) in any of the following situations. Form 1040ez You or someone related to you owned the property in 1986. Form 1040ez You lease the property to a person who owned the property in 1986 (or someone related to that person). Form 1040ez You acquired the property in a like-kind exchange, involuntary conversion, or repossession of property you or someone related to you owned in 1986. Form 1040ez MACRS applies only to that part of your basis in the acquired property that represents cash paid or unlike property given up. Form 1040ez It does not apply to the carried-over part of the basis. Form 1040ez Exceptions. Form 1040ez   The rules above do not apply to the following. Form 1040ez Residential rental property or nonresidential real property. Form 1040ez Any property if, in the first tax year it is placed in service, the deduction under the Accelerated Cost Recovery System (ACRS) is more than the deduction under MACRS using the half-year convention. Form 1040ez For information on how to figure depreciation under ACRS, see Publication 534. Form 1040ez Property that was MACRS property in the hands of the person from whom you acquired it because of (2) above. Form 1040ez Related persons. Form 1040ez   For this purpose, the following are related persons. Form 1040ez An individual and a member of his or her family, including only a spouse, child, parent, brother, sister, half-brother, half-sister, ancestor, and lineal descendant. Form 1040ez A corporation and an individual who directly or indirectly owns more than 10% of the value of the outstanding stock of that corporation. Form 1040ez Two corporations that are members of the same controlled group. Form 1040ez A trust fiduciary and a corporation if more than 10% of the value of the outstanding stock is directly or indirectly owned by or for the trust or grantor of the trust. Form 1040ez The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Form 1040ez The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. Form 1040ez A tax-exempt educational or charitable organization and any person (or, if that person is an individual, a member of that person's family) who directly or indirectly controls the organization. Form 1040ez Two S corporations, and an S corporation and a regular corporation, if the same persons own more than 10% of the value of the outstanding stock of each corporation. Form 1040ez A corporation and a partnership if the same persons own both of the following. Form 1040ez More than 10% of the value of the outstanding stock of the corporation. Form 1040ez More than 10% of the capital or profits interest in the partnership. Form 1040ez The executor and beneficiary of any estate. Form 1040ez A partnership and a person who directly or indirectly owns more than 10% of the capital or profits interest in the partnership. Form 1040ez Two partnerships, if the same persons directly or indirectly own more than 10% of the capital or profits interest in each. Form 1040ez The related person and a person who is engaged in trades or businesses under common control. Form 1040ez See section 52(a) and 52(b) of the Internal Revenue Code. Form 1040ez When to determine relationship. Form 1040ez   You must determine whether you are related to another person at the time you acquire the property. Form 1040ez   A partnership acquiring property from a terminating partnership must determine whether it is related to the terminating partnership immediately before the event causing the termination. Form 1040ez For this rule, a terminating partnership is one that sells or exchanges, within 12 months, 50% or more of its total interest in partnership capital or profits. Form 1040ez Constructive ownership of stock or partnership interest. Form 1040ez   To determine whether a person directly or indirectly owns any of the outstanding stock of a corporation or an interest in a partnership, apply the following rules. Form 1040ez Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Form 1040ez However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more of the value of the stock of the corporation. Form 1040ez An individual is considered to own the stock or partnership interest directly or indirectly owned by or for the individual's family. Form 1040ez An individual who owns, except by applying rule (2), any stock in a corporation is considered to own the stock directly or indirectly owned by or for the individual's partner. Form 1040ez For purposes of rules (1), (2), or (3), stock or a partnership interest considered to be owned by a person under rule (1) is treated as actually owned by that person. Form 1040ez However, stock or a partnership interest considered to be owned by an individual under rule (2) or (3) is not treated as owned by that individual for reapplying either rule (2) or (3) to make another person considered to be the owner of the same stock or partnership interest. Form 1040ez Intangible Property Generally, if you can depreciate intangible property, you usually use the straight line method of depreciation. Form 1040ez However, you can choose to depreciate certain intangible property under the income forecast method (discussed later). Form 1040ez You cannot depreciate intangible property that is a section 197 intangible or that otherwise does not meet all the requirements discussed earlier under What Property Can Be Depreciated. Form 1040ez Straight Line Method This method lets you deduct the same amount of depreciation each year over the useful life of the property. Form 1040ez To figure your deduction, first determine the adjusted basis, salvage value, and estimated useful life of your property. Form 1040ez Subtract the salvage value, if any, from the adjusted basis. Form 1040ez The balance is the total depreciation you can take over the useful life of the property. Form 1040ez Divide the balance by the number of years in the useful life. Form 1040ez This gives you your yearly depreciation deduction. Form 1040ez Unless there is a big change in adjusted basis or useful life, this amount will stay the same throughout the time you depreciate the property. Form 1040ez If, in the first year, you use the property for less than a full year, you must prorate your depreciation deduction for the number of months in use. Form 1040ez Example. Form 1040ez In April, Frank bought a patent for $5,100 that is not a section 197 intangible. Form 1040ez He depreciates the patent under the straight line method, using a 17-year useful life and no salvage value. Form 1040ez He divides the $5,100 basis by 17 years to get his $300 yearly depreciation deduction. Form 1040ez He only used the patent for 9 months during the first year, so he multiplies $300 by 9/12 to get his deduction of $225 for the first year. Form 1040ez Next year, Frank can deduct $300 for the full year. Form 1040ez Patents and copyrights. Form 1040ez   If you can depreciate the cost of a patent or copyright, use the straight line method over the useful life. Form 1040ez The useful life of a patent or copyright is the lesser of the life granted to it by the government or the remaining life when you acquire it. Form 1040ez However, if the patent or copyright becomes valueless before the end of its useful life, you can deduct in that year any of its remaining cost or other basis. Form 1040ez Computer software. Form 1040ez   Computer software is generally a section 197 intangible and cannot be depreciated if you acquired it in connection with the acquisition of assets constituting a business or a substantial part of a business. Form 1040ez   However, computer software is not a section 197 intangible and can be depreciated, even if acquired in connection with the acquisition of a business, if it meets all of the following tests. Form 1040ez It is readily available for purchase by the general public. Form 1040ez It is subject to a nonexclusive license. Form 1040ez It has not been substantially modified. Form 1040ez   If the software meets the tests above, it may also qualify for the section 179 deduction and the special depreciation allowance, discussed later. Form 1040ez If you can depreciate the cost of computer software, use the straight line method over a useful life of 36 months. Form 1040ez    Tax-exempt use property subject to a lease. Form 1040ez   The useful life of computer software leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership), cannot be less than 125% of the lease term. Form 1040ez Certain created intangibles. Form 1040ez   You can amortize certain intangibles created on or after December 31, 2003, over a 15-year period using the straight line method and no salvage value, even though they have a useful life that cannot be estimated with reasonable accuracy. Form 1040ez For example, amounts paid to acquire memberships or privileges of indefinite duration, such as a trade association membership, are eligible costs. Form 1040ez   The following are not eligible. Form 1040ez Any intangible asset acquired from another person. Form 1040ez Created financial interests. Form 1040ez Any intangible asset that has a useful life that can be estimated with reasonable accuracy. Form 1040ez Any intangible asset that has an amortization period or limited useful life that is specifically prescribed or prohibited by the Code, regulations, or other published IRS guidance. Form 1040ez Any amount paid to facilitate an acquisition of a trade or business, a change in the capital structure of a business entity, and certain other transactions. Form 1040ez   You must also increase the 15-year safe harbor amortization period to a 25-year period for certain intangibles related to benefits arising from the provision, production, or improvement of real property. Form 1040ez For this purpose, real property includes property that will remain attached to the real property for an indefinite period of time, such as roads, bridges, tunnels, pavements, and pollution control facilities. Form 1040ez Income Forecast Method You can choose to use the income forecast method instead of the straight line method to depreciate the following depreciable intangibles. Form 1040ez Motion picture films or video tapes. Form 1040ez Sound recordings. Form 1040ez Copyrights. Form 1040ez Books. Form 1040ez Patents. Form 1040ez Under the income forecast method, each year's depreciation deduction is equal to the cost of the property, multiplied by a fraction. Form 1040ez The numerator of the fraction is the current year's net income from the property, and the denominator is the total income anticipated from the property through the end of the 10th taxable year following the taxable year the property is placed in service. Form 1040ez For more information, see section 167(g) of the Internal Revenue Code. Form 1040ez Films, video tapes, and recordings. Form 1040ez   You cannot use MACRS for motion picture films, video tapes, and sound recordings. Form 1040ez For this purpose, sound recordings are discs, tapes, or other phonorecordings resulting from the fixation of a series of sounds. Form 1040ez You can depreciate this property using either the straight line method or the income forecast method. Form 1040ez Participations and residuals. Form 1040ez   You can include participations and residuals in the adjusted basis of the property for purposes of computing your depreciation deduction under the income forecast method. Form 1040ez The participations and residuals must relate to income to be derived from the property before the end of the 10th taxable year after the property is placed in service. Form 1040ez For this purpose, participations and residuals are defined as costs which by contract vary with the amount of income earned in connection with the property. Form 1040ez   Instead of including these amounts in the adjusted basis of the property, you can deduct the costs in the taxable year that they are paid. Form 1040ez Videocassettes. Form 1040ez   If you are in the business of renting videocassettes, you can depreciate only those videocassettes bought for rental. Form 1040ez If the videocassette has a useful life of one year or less, you can currently deduct the cost as a business expense. Form 1040ez Corporate or Partnership Property Acquired in a Nontaxable Transfer MACRS does not apply to property used before 1987 and transferred after 1986 to a corporation or partnership (except property the transferor placed in service after July 31, 1986, if MACRS was elected) to the extent its basis is carried over from the property's adjusted basis in the transferor's hands. Form 1040ez You must continue to use the same depreciation method as the transferor and figure depreciation as if the transfer had not occurred. Form 1040ez However, if MACRS would otherwise apply, you can use it to depreciate the part of the property's basis that exceeds the carried-over basis. Form 1040ez The nontaxable transfers covered by this rule include the following. Form 1040ez A distribution in complete liquidation of a subsidiary. Form 1040ez A transfer to a corporation controlled by the transferor. Form 1040ez An exchange of property solely for corporate stock or securities in a reorganization. Form 1040ez A contribution of property to a partnership in exchange for a partnership interest. Form 1040ez A partnership distribution of property to a partner. Form 1040ez Election To Exclude Property From MACRS If you can properly depreciate any property under a method not based on a term of years, such as the unit-of-production method, you can elect to exclude that property from MACRS. Form 1040ez You make the election by reporting your depreciation for the property on line 15 in Part II of Form 4562 and attaching a statement as described in the instructions for Form 4562. Form 1040ez You must make this election by the return due date (including extensions) for the tax year you place your property in service. Form 1040ez However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within six months of the due date of the return (excluding extensions). Form 1040ez Attach the election to the amended return and write “Filed pursuant to section 301. Form 1040ez 9100-2” on the election statement. Form 1040ez File the amended return at the same address you filed the original return. Form 1040ez Use of standard mileage rate. Form 1040ez   If you use the standard mileage rate to figure your tax deduction for your business automobile, you are treated as having made an election to exclude the automobile from MACRS. Form 1040ez See Publication 463 for a discussion of the standard mileage rate. Form 1040ez What Is the Basis of Your Depreciable Property? To figure your depreciation deduction, you must determine the basis of your property. Form 1040ez To determine basis, you need to know the cost or other basis of your property. Form 1040ez Cost as Basis The basis of property you buy is its cost plus amounts you paid for items such as sales tax (see Exception , below), freight charges, and installation and testing fees. Form 1040ez The cost includes the amount you pay in cash, debt obligations, other property, or services. Form 1040ez Exception. Form 1040ez   You can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040). Form 1040ez If you make that choice, you cannot include those sales taxes as part of your cost basis. Form 1040ez Assumed debt. Form 1040ez   If you buy property and assume (or buy subject to) an existing mortgage or other debt on the property, your basis includes the amount you pay for the property plus the amount of the assumed debt. Form 1040ez Example. Form 1040ez You make a $20,000 down payment on property and assume the seller's mortgage of $120,000. Form 1040ez Your total cost is $140,000, the cash you paid plus the mortgage you assumed. Form 1040ez Settlement costs. Form 1040ez   The basis of real property also includes certain fees and charges you pay in addition to the purchase price. Form 1040ez These generally are shown on your settlement statement and include the following. Form 1040ez Legal and recording fees. Form 1040ez Abstract fees. Form 1040ez Survey charges. Form 1040ez Owner's title insurance. Form 1040ez Amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Form 1040ez   For fees and charges you cannot include in the basis of property, see Real Property in Publication 551. Form 1040ez Property you construct or build. Form 1040ez   If you construct, build, or otherwise produce property for use in your business, you may have to use the uniform capitalization rules to determine the basis of your property. Form 1040ez For information about the uniform capitalization rules, see Publication 551 and the regulations under section 263A of the Internal Revenue Code. Form 1040ez Other Basis Other basis usually refers to basis that is determined by the way you received the property. Form 1040ez For example, your basis is other than cost if you acquired the property in exchange for other property, as payment for services you performed, as a gift, or as an inheritance. Form 1040ez If you acquired property in this or some other way, see Publication 551 to determine your basis. Form 1040ez Property changed from personal use. Form 1040ez   If you held property for personal use and later use it in your business or income-producing activity, your depreciable basis is the lesser of the following. Form 1040ez The fair market value (FMV) of the property on the date of the change in use. Form 1040ez Your original cost or other basis adjusted as follows. Form 1040ez Increased by the cost of any permanent improvements or additions and other costs that must be added to basis. Form 1040ez Decreased by any deductions you claimed for casualty and theft losses and other items that reduced your basis. Form 1040ez Example. Form 1040ez Several years ago, Nia paid $160,000 to have her home built on a lot that cost her $25,000. Form 1040ez Before changing the property to rental use last year, she paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house. Form 1040ez Land is not depreciable, so she includes only the cost of the house when figuring the basis for depreciation. Form 1040ez Nia's adjusted basis in the house when she changed its use was $178,000 ($160,000 + $20,000 − $2,000). Form 1040ez On the same date, her property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. Form 1040ez The basis for depreciation on the house is the FMV on the date of change ($165,000), because it is less than her adjusted basis ($178,000). Form 1040ez Property acquired in a nontaxable transaction. Form 1040ez   Generally, if you receive property in a nontaxable exchange, the basis of the property you receive is the same as the adjusted basis of the property you gave up. Form 1040ez Special rules apply in determining the basis and figuring the MACRS depreciation deduction and special depreciation allowance for property acquired in a like-kind exchange or involuntary conversion. Form 1040ez See Like-kind exchanges and involuntary conversions. Form 1040ez under How Much Can You Deduct? in chapter 3 and Figuring the Deduction for Property Acquired in a Nontaxable Exchange in chapter 4. Form 1040ez   There are also special rules for determining the basis of MACRS property involved in a like-kind exchange or involuntary conversion when the property is contained in a general asset account. Form 1040ez See How Do You Use General Asset Accounts in chapter 4. Form 1040ez Adjusted Basis To find your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service. Form 1040ez These events could include the following. Form 1040ez Installing utility lines. Form 1040ez Paying legal fees for perfecting the title. Form 1040ez Settling zoning issues. Form 1040ez Receiving rebates. Form 1040ez Incurring a casualty or theft loss. Form 1040ez For a discussion of adjustments to the basis of your property, see Adjusted Basis in Publication 551. Form 1040ez If you depreciate your property under MACRS, you also may have to reduce your basis by certain deductions and credits with respect to the property. Form 1040ez For more information, see What Is the Basis for Depreciation in chapter 4. Form 1040ez . Form 1040ez Basis adjustment for depreciation allowed or allowable. Form 1040ez   You must reduce the basis of property by the depreciation allowed or allowable, whichever is greater. Form 1040ez Depreciation allowed is depreciation you actually deducted (from which you received a tax benefit). Form 1040ez Depreciation allowable is depreciation you are entitled to deduct. Form 1040ez   If you do not claim depreciation you are entitled to deduct, you must still reduce the basis of the property by the full amount of depreciation allowable. Form 1040ez   If you deduct more depreciation than you should, you must reduce your basis by any amount deducted from which you received a tax benefit (the depreciation allowed). Form 1040ez How Do You Treat Repairs and Improvements? If you improve depreciable property, you must treat the improvement as separate depreciable property. Form 1040ez Improvement means an addition to or partial replacement of property that adds to its value, appreciably lengthens the time you can use it, or adapts it to a different use. Form 1040ez You generally deduct the cost of repairing business property in the same way as any other business expense. Form 1040ez However, if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it. Form 1040ez Example. Form 1040ez You repair a small section on one corner of the roof of a rental house. Form 1040ez You deduct the cost of the repair as a rental expense. Form 1040ez However, if you completely replace the roof, the new roof is an improvement because it increases the value and lengthens the life of the property. Form 1040ez You depreciate the cost of the new roof. Form 1040ez Improvements to rented property. Form 1040ez   You can depreciate permanent improvements you make to business property you rent from someone else. Form 1040ez Do You Have To File Form 4562? Use Form 4562 to figure your deduction for depreciation and amortization. Form 1040ez Attach Form 4562 to your tax return for the current tax year if you are claiming any of the following items. Form 1040ez A section 179 deduction for the current year or a section 179 carryover from a prior year. Form 1040ez See chapter 2 for information on the section 179 deduction. Form 1040ez Depreciation for property placed in service during the current year. Form 1040ez Depreciation on any vehicle or other listed property, regardless of when it was placed in service. Form 1040ez See chapter 5 for information on listed property. Form 1040ez A deduction for any vehicle if the deduction is reported on a form other than Schedule C (Form 1040) or Schedule C-EZ (Form 1040). Form 1040ez Amortization of costs if the current year is the first year of the amortization period. Form 1040ez Depreciation or amortization on any asset on a corporate income tax return (other than Form 1120S, U. Form 1040ez S. Form 1040ez Income Tax Return for an S Corporation) regardless of when it was placed in service. Form 1040ez You must submit a separate Form 4562 for each business or activity on your return for which a Form 4562 is required. Form 1040ez Table 1-1 presents an overview of the purpose of the various parts of Form 4562. Form 1040ez Employee. Form 1040ez   Do not use Form 4562 if you are an employee and you deduct job-related vehicle expenses using either actual expenses (including depreciation) or the standard mileage rate. Form 1040ez Instead, use either Form 2106 or Form 2106-EZ. Form 1040ez Use Form 2106-EZ if you are claiming the standard mileage rate and you are not reimbursed by your employer for any expenses. Form 1040ez How Do You Correct Depreciation Deductions? If you deducted an incorrect amount of depreciation in any year, you may be able to make a correction by filing an amended return for that year. Form 1040ez See Filing an Amended Return , next. Form 1040ez If you are not allowed to make the correction on an amended return, you may be able to change your accounting method to claim the correct amount of depreciation. Form 1040ez See Changing Your Accounting Method , later. Form 1040ez Filing an Amended Return You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. Form 1040ez You claimed the incorrect amount because of a mathematical error made in any year. Form 1040ez You claimed the incorrect amount because of a posting error made in any year. Form 1040ez You have not adopted a method of accounting for property placed in service by you in tax years ending after December 29, 2003. Form 1040ez You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. Form 1040ez Adoption of accounting method defined. Form 1040ez   Generally, you adopt a method of accounting for depreciation by using a permissible method of determining depreciation when you file your first tax return, or by using the same impermissible method of determining depreciation in two or more consecutively filed tax returns. Form 1040ez   For an exception to this 2-year rule, see Revenue Procedure 2011-14 on page 330 of the Internal Revenue Bulletin 2011-4, available at www. Form 1040ez irs. Form 1040ez gov/pub/irs-irbs/irb11-04. Form 1040ez pdf. Form 1040ez (Note. Form 1040ez Revenue Procedure 2011-14 is clarified and modified by Revenue Procedure 2012-20. Form 1040ez For more information, see Revenue Procedure 2012-20 on page 700 of the Internal Revenue Bulletin 2012-14, available at www. Form 1040ez irs. Form 1040ez gov/pub/irs-irbs/irb12-14. Form 1040ez pdf. Form 1040ez )   For a safe harbor method of accounting to treat rotable spare parts as depreciable assets and procedures to obtain automatic consent to change to the safe harbor method of accounting, see Revenue Procedure 2007-48 on page 110 of Internal Revenue Bulletin 2007-29, available at www. Form 1040ez irs. Form 1040ez gov/pub/irs-irbs/irb07-29. Form 1040ez pdf. Form 1040ez When to file. Form 1040ez   If an amended return is allowed, you must file it by the later of the following. Form 1040ez 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. Form 1040ez A return filed before an unextended due date is considered filed on that due date. Form 1040ez 2 years from the time you paid your tax for that year. Form 1040ez Changing Your Accounting Method Generally, you must get IRS approval to change your method of accounting. Form 1040ez You generally must file Form 3115, Application for Change in Accounting Method, to request a change in your method of accounting for depreciation. Form 1040ez The following are examples of a change in method of accounting for depreciation. Form 1040ez A change from an impermissible method of determining depreciation for depreciable property, if the impermissible method was used in two or more consecutively filed tax returns. Form 1040ez A change in the treatment of an asset from nondepreciable to depreciable or vice versa. Form 1040ez A change in the depreciation method, period of recovery, or convention of a depreciable asset. Form 1040ez A change from not claiming to claiming the special depreciation allowance if you did not make the election to not claim any special allowance. Form 1040ez A change from claiming a 50% special depreciation allowance to claiming a 30% special depreciation allowance for qualified property (including property that is included in a class of property for which you elected a 30% special allowance instead of a 50% special allowance). Form 1040ez Changes in depreciation that are not a change in method of accounting (and may only be made on an amended return) include the following. Form 1040ez An adjustment in the useful life of a depreciable asset for which depreciation is determined under section 167. Form 1040ez A change in use of an asset in the hands of the same taxpayer. Form 1040ez Making a late depreciation election or revoking a timely valid depreciation election (including the election not to deduct the special depreciation allowance). Form 1040ez If you elected not to claim any special allowance, a change from not claiming to claiming the special allowance is a revocation of the election and is not an accounting method change. Form 1040ez Generally, you must get IRS approval to make a late depreciation election or revoke a depreciation election. Form 1040ez You must submit a request for a letter ruling to make a late election or revoke an election. Form 1040ez Any change in the placed in service date of a depreciable asset. Form 1040ez See section 1. Form 1040ez 446-1(e)(2)(ii)(d) of the regulations for more information and examples. Form 1040ez IRS approval. Form 1040ez   In some instances, you may be able to get approval from the IRS to change your method of accounting for depreciation under the automatic change request procedures generally covered in Revenue Procedure 2011-14. Form 1040ez If you do not qualify to use the automatic procedures to get approval, you must use the advance consent request procedures generally covered in Revenue Procedure 97-27, 1997-1 C. Form 1040ez B. Form 1040ez 680. Form 1040ez Also see the Instructions for Form 3115 for more information on getting approval, including lists of scope limitations and automatic accounting method changes. Form 1040ez Additional guidance. Form 1040ez    For additional guidance and special procedures for changing your accounting method, automatic change procedures, amending your return, and filing Form 3115, see Revenue Procedure 2011-14 on page 330 of the Internal Revenue Bulletin 2011-4, available at www. Form 1040ez irs. Form 1040ez gov/pub/irs-irbs/irb11-04. Form 1040ez pdf. Form 1040ez (Note. Form 1040ez Revenue Procedure 2011-14 is clarified and modified by Revenue Procedure 2012-20. Form 1040ez For more information, see Revenue Procedure 2012-20 on page 700 of the Internal Revenue Bulletin 2012-14, available at www. Form 1040ez irs. Form 1040ez gov/pub/irs-irbs/irb12-14. Form 1040ez pdf. Form 1040ez )   For a safe harbor method of accounting to treat rotable spare parts as depreciable assets, see Revenue Procedure 2007-48 on page 110 of Internal Revenue Bulletin 2007-29, available at www. Form 1040ez irs. Form 1040ez gov/pub/irs-irbs/irb07-29. Form 1040ez pdf. Form 1040ez Table 1-1. Form 1040ez Purpose of Form 4562 This table describes the purpose of the various parts of Form 4562. Form 1040ez For more information, see Form 4562 and its instructions. Form 1040ez Part Purpose I • Electing the section 179 deduction • Figuring the maximum section 179 deduction for the current year • Figuring any section 179 deduction carryover to the next year II • Reporting the special depreciation allowance for property (other than listed property) placed in service during the tax year • Reporting depreciation deductions on property being depreciated under any method other than Modified Accelerated Cost Recovery System (MACRS) III • Reporting MACRS depreciation deductions for property placed in service before this year • Reporting MACRS depreciation deductions for property (other than listed property) placed in service during the current year IV • Summarizing other parts V • Reporting the special depreciation allowance for automobiles and other listed property • Reporting MACRS depreciation on automobiles and other listed property • Reporting the section 179 cost elected for automobiles and other listed property • Reporting information on the use of automobiles and other transportation vehicles VI • Reporting amortization deductions Section 481(a) adjustment. Form 1040ez   If you file Form 3115 and change from an impermissible method to a permissible method of accounting for depreciation, you can make a section 481(a) adjustment for any unclaimed or excess amount of allowable depreciation. Form 1040ez The adjustment is the difference between the total depreciation actually deducted for the property and the total amount allowable prior to the year of change. Form 1040ez If no depreciation was deducted, the adjustment is the total depreciation allowable prior to the year of change. Form 1040ez A negative section 481(a) adjustment results in a decrease in taxable income. Form 1040ez It is taken into account in the year of change and is reported on your business tax returns as “other expenses. Form 1040ez ” A positive section 481(a) adjustment results in an increase in taxable income. Form 1040ez It is generally taken into account over 4 tax years and is reported on your business tax returns as “other income. Form 1040ez ” However, you can elect to use a one-year adjustment period and report the adjustment in the year of change if the total adjustment is less than $25,000. Form 1040ez Make the election by completing the appropriate line on Form 3115. Form 1040ez   If you file a Form 3115 and change from one permissible method to another permissible method, the section 481(a) adjustment is zero. Form 1040ez Prev  Up  Next   Home   More Online Publications