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Form 1040x Amended Return

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Form 1040x Amended Return

Form 1040x amended return 32. Form 1040x amended return   Child and Dependent Care Credit Table of Contents Reminders Introduction Useful Items - You may want to see: Tests To Claim the CreditQualifying Person Test Earned Income Test Work-Related Expense Test Joint Return Test Provider Identification Test How To Figure the CreditFiguring Total Work-Related Expenses Earned Income Limit Dollar Limit Amount of Credit How To Claim the CreditTax credit not refundable. Form 1040x amended return Employment Taxes for Household Employers Reminders Taxpayer identification number needed for each qualifying person. Form 1040x amended return  You must include on line 2 of Form 2441 the name and taxpayer identification number (generally the social security number) of each qualifying person. Form 1040x amended return See Taxpayer identification number under Qualifying Person Test, later. Form 1040x amended return You may have to pay employment taxes. Form 1040x amended return  If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer who has to pay employment taxes. Form 1040x amended return Usually, you are not a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business. Form 1040x amended return See Employment Taxes for Household Employers , later. Form 1040x amended return Introduction This chapter discusses the credit for child and dependent care expenses and covers the following topics. Form 1040x amended return Tests you must meet to claim the credit. Form 1040x amended return How to figure the credit. Form 1040x amended return How to claim the credit. Form 1040x amended return Employment taxes you may have to pay as a household employer. Form 1040x amended return You may be able to claim the credit if you pay someone to care for your dependent who is under age 13 or for your spouse or dependent who is not able to care for himself or herself. Form 1040x amended return The credit can be up to 35% of your expenses. Form 1040x amended return To qualify, you must pay these expenses so you can work or look for work. Form 1040x amended return This credit should not be confused with the child tax credit discussed in chapter 34. Form 1040x amended return Dependent care benefits. Form 1040x amended return   If you received any dependent care benefits from your employer during the year, you may be able to exclude from your income all or part of them. Form 1040x amended return You must complete Form 2441, Part III, before you can figure the amount of your credit. Form 1040x amended return See Dependent Care Benefits under How To Figure the Credit, later. Form 1040x amended return Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information 503 Child and Dependent Care Expenses 926 Household Employer's Tax Guide Form (and Instructions) 2441 Child and Dependent Care Expenses Schedule H (Form 1040) Household Employment Taxes W-7 Application for IRS Individual Taxpayer Identification Number W-10 Dependent Care Provider's Identification and Certification Tests To Claim the Credit To be able to claim the credit for child and dependent care expenses, you must file Form 1040 or Form 1040A, not Form 1040EZ, and meet all the following tests. Form 1040x amended return The care must be for one or more qualifying persons who are identified on Form 2441. Form 1040x amended return (See Qualifying Person Test . Form 1040x amended return ) You (and your spouse if filing jointly) must have earned income during the year. Form 1040x amended return (However, see Rule for student-spouse or spouse not able to care for self under Earned Income Test, later. Form 1040x amended return ) You must pay child and dependent care expenses so you (and your spouse if filing jointly) can work or look for work. Form 1040x amended return (See Work-Related Expense Test , later. Form 1040x amended return ) You must make payments for child and dependent care to someone you (and your spouse) cannot claim as a dependent. Form 1040x amended return If you make payments to your child, he or she cannot be your dependent and must be age 19 or older by the end of the year. Form 1040x amended return You cannot make payments to: Your spouse, or The parent of your qualifying person if your qualifying person is your child and under age 13. Form 1040x amended return (See Payments to Relatives or Dependents under Work-Related Expense Test, later. Form 1040x amended return ) Your filing status may be single, head of household, or qualifying widow(er) with dependent child. Form 1040x amended return If you are married, you must file a joint return, unless an exception applies to you. Form 1040x amended return (See Joint Return Test , later. Form 1040x amended return ) You must identify the care provider on your tax return. Form 1040x amended return (See Provider Identification Test , later. Form 1040x amended return ) If you exclude or deduct dependent care benefits provided by a dependent care benefits plan, the total amount you exclude or deduct must be less than the dollar limit for qualifying expenses (generally, $3,000 if one qualifying person was cared for or $6,000 if two or more qualifying persons were cared for). Form 1040x amended return (If two or more qualifying persons were cared for, the amount you exclude or deduct will always be less than the dollar limit, since the total amount you can exclude or deduct is limited to $5,000. Form 1040x amended return See Reduced Dollar Limit under How To Figure the Credit, later. Form 1040x amended return ) These tests are presented in Figure 32-A and are also explained in detail in this chapter. Form 1040x amended return Figure 32-A. Form 1040x amended return Can You Claim the Credit? Please click here for the text description of the image. Form 1040x amended return Figure 32-A Can You Claim the Credit? Qualifying Person Test Your child and dependent care expenses must be for the care of one or more qualifying persons. Form 1040x amended return A qualifying person is: Your qualifying child who is your dependent and who was under age 13 when the care was provided (but see Child of divorced or separated parents or parents living apart, later), Your spouse who was not physically or mentally able to care for himself or herself and lived with you for more than half the year, or A person who was not physically or mentally able to care for himself or herself, lived with you for more than half the year, and either: Was your dependent, or Would have been your dependent except that: He or she received gross income of $3,900 or more, He or she filed a joint return, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Form 1040x amended return Dependent defined. Form 1040x amended return   A dependent is a person, other than you or your spouse, for whom you can claim an exemption. Form 1040x amended return To be your dependent, a person must be your qualifying child (or your qualifying relative). Form 1040x amended return Qualifying child. Form 1040x amended return   To be your qualifying child, a child must live with you for more than half the year and meet other requirements. Form 1040x amended return More information. Form 1040x amended return   For more information about who is a dependent or a qualifying child, see chapter 3. Form 1040x amended return Physically or mentally not able to care for oneself. Form 1040x amended return   Persons who cannot dress, clean, or feed themselves because of physical or mental problems are considered not able to care for themselves. Form 1040x amended return Also, persons who must have constant attention to prevent them from injuring themselves or others are considered not able to care for themselves. Form 1040x amended return Person qualifying for part of year. Form 1040x amended return   You determine a person's qualifying status each day. Form 1040x amended return For example, if the person for whom you pay child and dependent care expenses no longer qualifies on September 16, count only those expenses through September 15. Form 1040x amended return Also see Yearly limit under Dollar Limit, later. Form 1040x amended return Birth or death of otherwise qualifying person. Form 1040x amended return   In determining whether a person is a qualifying person, a person who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the person's home for more than half the time he or she was alive in 2013. Form 1040x amended return Taxpayer identification number. Form 1040x amended return   You must include on your return the name and taxpayer identification number (generally the social security number) of the qualifying person(s). Form 1040x amended return If the correct information is not shown, the credit may be reduced or disallowed. Form 1040x amended return Individual taxpayer identification number (ITIN) for aliens. Form 1040x amended return   If your qualifying person is a nonresident or resident alien who does not have and cannot get a social security number (SSN), use that person's ITIN. Form 1040x amended return The ITIN is entered wherever an SSN is requested on a tax return. Form 1040x amended return To apply for an ITIN, see Form W-7. Form 1040x amended return   An ITIN is for tax use only. Form 1040x amended return It does not entitle the holder to social security benefits or change the holder's employment or immigration status under U. Form 1040x amended return S. Form 1040x amended return law. Form 1040x amended return Adoption taxpayer identification number (ATIN). Form 1040x amended return   If your qualifying person is a child who was placed in your home for adoption and for whom you do not have an SSN, you must get an ATIN for the child. Form 1040x amended return File Form W-7A, Application for Taxpayer Identification Number for Pending U. Form 1040x amended return S. Form 1040x amended return Adoptions. Form 1040x amended return Child of divorced or separated parents or parents living apart. Form 1040x amended return   Even if you cannot claim your child as a dependent, he or she is treated as your qualifying person if: The child was under age 13 or was not physically or mentally able to care for himself or herself, The child received over half of his or her support during the calendar year from one or both parents who are divorced or legally separated under a decree of divorce or separate maintenance, are separated under a written separation agreement, or lived apart at all times during the last 6 months of the calendar year, The child was in the custody of one or both parents for more than half the year, and You were the child's custodial parent. Form 1040x amended return   The custodial parent is the parent with whom the child lived for the greater number of nights in 2013. Form 1040x amended return If the child was with each parent for an equal number of nights, the custodial parent is the parent with the higher adjusted gross income. Form 1040x amended return For details and an exception for a parent who works at night, see Pub. Form 1040x amended return 501. Form 1040x amended return   The noncustodial parent cannot treat the child as a qualifying person even if that parent is entitled to claim the child as a dependent under the special rules for a child of divorced or separated parents. Form 1040x amended return Earned Income Test To claim the credit, you (and your spouse if filing jointly) must have earned income during the year. Form 1040x amended return Earned income. Form 1040x amended return   Earned income includes wages, salaries, tips, other taxable employee compensation, and net earnings from self-employment. Form 1040x amended return A net loss from self-employment reduces earned income. Form 1040x amended return Earned income also includes strike benefits and any disability pay you report as wages. Form 1040x amended return   Generally, only taxable compensation is included. Form 1040x amended return However, you can elect to include nontaxable combat pay in earned income. Form 1040x amended return If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election. Form 1040x amended return (In other words, if one of you makes the election, the other one can also make it but does not have to. Form 1040x amended return ) You should figure your credit both ways and make the election if it gives you a greater tax benefit. Form 1040x amended return Members of certain religious faiths opposed to social security. Form 1040x amended return   Certain income earned by persons who are members of certain religious faiths that are opposed to participation in Social Security Act programs and have an IRS-approved form that exempts certain income from social security and Medicare taxes may not be considered earned income for this purpose. Form 1040x amended return See Earned Income Test in Publication 503. Form 1040x amended return Not earned income. Form 1040x amended return   Earned income does not include: Pensions and annuities, Social security and railroad retirement benefits, Workers' compensation, Interest and dividends, Unemployment compensation, Scholarship or fellowship grants, except for those reported on a Form W-2 and paid to you for teaching or other services, Nontaxable workfare payments, Child support payments received by you, Income of nonresident aliens that is not effectively connected with a U. Form 1040x amended return S. Form 1040x amended return trade or business, or Any amount received for work while an inmate in a penal institution. Form 1040x amended return Rule for student-spouse or spouse not able to care for self. Form 1040x amended return   Your spouse is treated as having earned income for any month that he or she is: A full-time student, or Physically or mentally not able to care for himself or herself. Form 1040x amended return (Your spouse also must live with you for more than half the year. Form 1040x amended return )   If you are filing a joint return, this rule also applies to you. Form 1040x amended return You can be treated as having earned income for any month you are a full-time student or not able to care for yourself. Form 1040x amended return   Figure the earned income of the nonworking spouse described under (1) or (2) above as explained under Earned Income Limit , later. Form 1040x amended return   This rule applies to only one spouse for any one month. Form 1040x amended return If, in the same month, both you and your spouse do not work and are either full-time students or not physically or mentally able to care for yourselves, only one of you can be treated as having earned income in that month. Form 1040x amended return Full-time student. Form 1040x amended return   You are a full-time student if you are enrolled at a school for the number of hours or classes that the school considers full time. Form 1040x amended return You must have been a full-time student for some part of each of 5 calendar months during the year. Form 1040x amended return (The months need not be consecutive. Form 1040x amended return ) School. Form 1040x amended return   The term “school” includes high schools, colleges, universities, and technical, trade, and mechanical schools. Form 1040x amended return A school does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Form 1040x amended return Work-Related Expense Test Child and dependent care expenses must be work-related to qualify for the credit. Form 1040x amended return Expenses are considered work-related only if both of the following are true. Form 1040x amended return They allow you (and your spouse if filing jointly) to work or look for work. Form 1040x amended return They are for a qualifying person's care. Form 1040x amended return Working or Looking for Work To be work-related, your expenses must allow you to work or look for work. Form 1040x amended return If you are married, generally both you and your spouse must work or look for work. Form 1040x amended return One spouse is treated as working during any month he or she is a full-time student or is not physically or mentally able to care for himself or herself. Form 1040x amended return Your work can be for others or in your own business or partnership. Form 1040x amended return It can be either full time or part time. Form 1040x amended return Work also includes actively looking for work. Form 1040x amended return However, if you do not find a job and have no earned income for the year, you cannot take this credit. Form 1040x amended return See Earned Income Test , earlier. Form 1040x amended return An expense is not considered work-related merely because you had it while you were working. Form 1040x amended return The purpose of the expense must be to allow you to work. Form 1040x amended return Whether your expenses allow you to work or look for work depends on the facts. Form 1040x amended return Example 1. Form 1040x amended return The cost of a babysitter while you and your spouse go out to eat is not normally a work-related expense. Form 1040x amended return Example 2. Form 1040x amended return You work during the day. Form 1040x amended return Your spouse works at night and sleeps during the day. Form 1040x amended return You pay for care of your 5-year-old child during the hours when you are working and your spouse is sleeping. Form 1040x amended return Your expenses are considered work-related. Form 1040x amended return Volunteer work. Form 1040x amended return    For this purpose, you are not considered to be working if you do unpaid volunteer work or volunteer work for a nominal salary. Form 1040x amended return Work for part of year. Form 1040x amended return   If you work or actively look for work during only part of the period covered by the expenses, then you must figure your expenses for each day. Form 1040x amended return For example, if you work all year and pay care expenses of $250 a month ($3,000 for the year), all the expenses are work-related. Form 1040x amended return However, if you work or look for work for only 2 months and 15 days during the year and pay expenses of $250 a month, your work-related expenses are limited to $625 (2½ months × $250). Form 1040x amended return Temporary absence from work. Form 1040x amended return   You do not have to figure your expenses for each day during a short, temporary absence from work, such as for vacation or a minor illness, if you have to pay for care anyway. Form 1040x amended return Instead, you can figure your credit including the expenses you paid for the period of absence. Form 1040x amended return   An absence of 2 weeks or less is a short, temporary absence. Form 1040x amended return An absence of more than 2 weeks may be considered a short, temporary absence, depending on the circumstances. Form 1040x amended return Example. Form 1040x amended return You pay a nanny to care for your 2-year-old son and 4-year-old daughter so you can work. Form 1040x amended return You become ill and miss 4 months of work but receive sick pay. Form 1040x amended return You continue to pay the nanny to care for the children while you are ill. Form 1040x amended return Your absence is not a short, temporary absence, and your expenses are not considered work-related. Form 1040x amended return Part-time work. Form 1040x amended return   If you work part-time, you generally must figure your expenses for each day. Form 1040x amended return However, if you have to pay for care weekly, monthly, or in another way that includes both days worked and days not worked, you can figure your credit including the expenses you paid for days you did not work. Form 1040x amended return Any day when you work at least 1 hour is a day of work. Form 1040x amended return Example 1. Form 1040x amended return You work 3 days a week. Form 1040x amended return While you work, your 6-year-old child attends a dependent care center, which complies with all state and local regulations. Form 1040x amended return You can pay the center $150 for any 3 days a week or $250 for 5 days a week. Form 1040x amended return Your child attends the center 5 days a week. Form 1040x amended return Your work-related expenses are limited to $150 a week. Form 1040x amended return Example 2. Form 1040x amended return The facts are the same as in Example 1 except the center does not offer a 3-day option. Form 1040x amended return The entire $250 weekly fee may be a work-related expense. Form 1040x amended return Care of a Qualifying Person To be work-related, your expenses must be to provide care for a qualifying person. Form 1040x amended return You do not have to choose the least expensive way of providing care. Form 1040x amended return The cost of a paid care provider may be an expense for the care of a qualifying person even if another care provider is available at no cost. Form 1040x amended return Expenses are for the care of a qualifying person only if their main purpose is the person's well-being and protection. Form 1040x amended return Expenses for household services qualify if part of the services is for the care of qualifying persons. Form 1040x amended return See Household services , later. Form 1040x amended return Expenses not for care. Form 1040x amended return   Expenses for care do not include amounts you pay for food, lodging, clothing, education, and entertainment. Form 1040x amended return However, you can include small amounts paid for these items if they are incidental to and cannot be separated from the cost of caring for the qualifying person. Form 1040x amended return   Child support payments are not for care and do not qualify for the credit. Form 1040x amended return Education. Form 1040x amended return   Expenses for a child in nursery school, preschool, or similar programs for children below the level of kindergarten are expenses for care. Form 1040x amended return Expenses to attend kindergarten or a higher grade are not expenses for care. Form 1040x amended return Do not use these expenses to figure your credit. Form 1040x amended return   However, expenses for before- or after-school care of a child in kindergarten or a higher grade may be expenses for care. Form 1040x amended return   Summer school and tutoring programs are not for care. Form 1040x amended return Example 1. Form 1040x amended return You take your 3-year-old child to a nursery school that provides lunch and educational activities as a part of its preschool childcare service. Form 1040x amended return The lunch and educational activities are incidental to the childcare, and their cost cannot be separated from the cost of care. Form 1040x amended return You can count the total cost when you figure the credit. Form 1040x amended return Example 2. Form 1040x amended return You place your 10-year-old child in a boarding school so you can work full time. Form 1040x amended return Only the part of the boarding school expense that is for the care of your child is a work-related expense. Form 1040x amended return You can count that part of the expense in figuring your credit if it can be separated from the cost of education. Form 1040x amended return You cannot count any part of the amount you pay the school for your child's education. Form 1040x amended return Care outside your home. Form 1040x amended return   You can count the cost of care provided outside your home if the care is for your dependent under age 13 or any other qualifying person who regularly spends at least 8 hours each day in your home. Form 1040x amended return Dependent care center. Form 1040x amended return   You can count care provided outside your home by a dependent care center only if the center complies with all state and local regulations that apply to these centers. Form 1040x amended return   A dependent care center is a place that provides care for more than six persons (other than persons who live there) and receives a fee, payment, or grant for providing services for any of those persons, even if the center is not run for profit. Form 1040x amended return Camp. Form 1040x amended return   The cost of sending your child to an overnight camp is not considered a work-related expense. Form 1040x amended return The cost of sending your child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers or soccer. Form 1040x amended return Transportation. Form 1040x amended return   If a care provider takes a qualifying person to or from a place where care is provided, that transportation is for the care of the qualifying person. Form 1040x amended return This includes transportation by bus, subway, taxi, or private car. Form 1040x amended return However, transportation not provided by a care provider is not for the care of a qualifying person. Form 1040x amended return Also, if you pay the transportation cost for the care provider to come to your home, that expense is not for care of a qualifying person. Form 1040x amended return Fees and deposits. Form 1040x amended return   Fees you paid to an agency to get the services of a care provider, deposits you paid to an agency or preschool, application fees, and other indirect expenses are work-related expenses if you have to pay them to get care, even though they are not directly for care. Form 1040x amended return However, a forfeited deposit is not for the care of a qualifying person if care is not provided. Form 1040x amended return Example 1. Form 1040x amended return You paid a fee to an agency to get the services of the nanny who cares for your 2-year-old daughter while you work. Form 1040x amended return The fee you paid is a work-related expense. Form 1040x amended return Example 2. Form 1040x amended return You placed a deposit with a preschool to reserve a place for your 3-year-old child. Form 1040x amended return You later sent your child to a different preschool and forfeited the deposit. Form 1040x amended return The forfeited deposit is not for care and so is not a work-related expense. Form 1040x amended return Household services. Form 1040x amended return   Expenses you pay for household services meet the work-related expense test if they are at least partly for the well-being and protection of a qualifying person. Form 1040x amended return   Household services are ordinary and usual services done in and around your home that are necessary to run your home. Form 1040x amended return They include the services of a housekeeper, maid, or cook. Form 1040x amended return However, they do not include the services of a chauffeur, bartender, or gardener. Form 1040x amended return See Household Services in Publication 503 for more information. Form 1040x amended return   In this chapter, the term housekeeper refers to any household employee whose services include the care of a qualifying person. Form 1040x amended return Taxes paid on wages. Form 1040x amended return   The taxes you pay on wages for qualifying child and dependent care services are work-related expenses. Form 1040x amended return See Employment Taxes for Household Employers , later. Form 1040x amended return Payments to Relatives or Dependents You can count work-related payments you make to relatives who are not your dependents, even if they live in your home. Form 1040x amended return However, do not count any amounts you pay to: A dependent for whom you (or your spouse if filing jointly) can claim an exemption, Your child who was under age 19 at the end of the year, even if he or she is not your dependent, A person who was your spouse any time during the year, or The parent of your qualifying person if your qualifying person is your child and under age 13. Form 1040x amended return Joint Return Test Generally, married couples must file a joint return to take the credit. Form 1040x amended return However, if you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. Form 1040x amended return Legally separated. Form 1040x amended return   You are not considered married if you are legally separated from your spouse under a decree of divorce or separate maintenance. Form 1040x amended return You may be eligible to take the credit on your return using head of household filing status. Form 1040x amended return Married and living apart. Form 1040x amended return   You are not considered married and are eligible to take the credit if all the following apply. Form 1040x amended return You file a return apart from your spouse. Form 1040x amended return Your home is the home of a qualifying person for more than half the year. Form 1040x amended return You pay more than half the cost of keeping up your home for the year. Form 1040x amended return Your spouse does not live in your home for the last 6 months of the year. Form 1040x amended return Costs of keeping up a home. Form 1040x amended return   The costs of keeping up a home normally include property taxes, mortgage interest, rent, utility charges, home repairs, insurance on the home, and food eaten at home. Form 1040x amended return   The costs of keeping up a home do not include payments for clothing, education, medical treatment, vacations, life insurance, transportation, or mortgage principal. Form 1040x amended return   They also do not include the purchase, permanent improvement, or replacement of property. Form 1040x amended return For example, you cannot include the cost of replacing a water heater. Form 1040x amended return However, you can include the cost of repairing a water heater. Form 1040x amended return Death of spouse. Form 1040x amended return   If your spouse died during the year and you do not remarry before the end of the year, you generally must file a joint return to take the credit. Form 1040x amended return If you do remarry before the end of the year, the credit can be claimed on your deceased spouse's return. Form 1040x amended return Provider Identification Test You must identify all persons or organizations that provide care for your child or dependent. Form 1040x amended return Use Form 2441, Part I, to show the information. Form 1040x amended return If you do not have any care providers and you are filing Form 2441 only to report taxable income in Part III, enter “none” in line 1, column (a). Form 1040x amended return Information needed. Form 1040x amended return   To identify the care provider, you must give the provider's: Name, Address, and Taxpayer identification number. Form 1040x amended return   If the care provider is an individual, the taxpayer identification number is his or her social security number or individual taxpayer identification number. Form 1040x amended return If the care provider is an organization, then it is the employer identification number (EIN). Form 1040x amended return   You do not have to show the taxpayer identification number if the care provider is a tax-exempt organization (such as a church or school). Form 1040x amended return In this case, enter “Tax-Exempt” in the space where Form 2441 asks for the number. Form 1040x amended return   If you cannot provide all of the information or if the information is incorrect, you must be able to show that you used due diligence (discussed later) in trying to furnish the necessary information. Form 1040x amended return Getting the information. Form 1040x amended return   You can use Form W-10 to request the required information from the care provider. Form 1040x amended return If you do not use Form W-10, you can get the information from one of the other sources listed in the instructions for Form W-10 including: A copy of the provider's social security card, A copy of the provider's completed Form W-4 if he or she is your household employee, A copy of the statement furnished by your employer if the provider is your employer's dependent care plan, or A letter or invoice from the provider if it shows the information. Form 1040x amended return    You should keep this information with your tax records. Form 1040x amended return Do not send Form W-10 (or other document containing this information) to the Internal Revenue Service. Form 1040x amended return Due diligence. Form 1040x amended return   If the care provider information you give is incorrect or incomplete, your credit may not be allowed. Form 1040x amended return However, if you can show that you used due diligence in trying to supply the information, you can still claim the credit. Form 1040x amended return   You can show due diligence by getting and keeping the provider's completed Form W-10 or one of the other sources of information just listed. Form 1040x amended return Care providers can be penalized if they do not provide this information to you or if they provide incorrect information. Form 1040x amended return Provider refusal. Form 1040x amended return   If the provider refuses to give you their identifying information, you should report on Form 2441 whatever information you have (such as the name and address). Form 1040x amended return Enter “See Attached Statement” in the columns calling for the information you do not have. Form 1040x amended return Then attach a statement explaining that you requested the information from the care provider, but the provider did not give you the information. Form 1040x amended return Be sure to write your name and social security number on this statement. Form 1040x amended return The statement will show that you used due diligence in trying to furnish the necessary information. Form 1040x amended return U. Form 1040x amended return S. Form 1040x amended return citizens and resident aliens living abroad. Form 1040x amended return   If you are living abroad, your care provider may not have, and may not be required to get, a U. Form 1040x amended return S. Form 1040x amended return taxpayer identification number (for example, an SSN or EIN). Form 1040x amended return If so, enter “LAFCP” (Living Abroad Foreign Care Provider) in the space for the care provider's taxpayer identification number. Form 1040x amended return How To Figure the Credit Your credit is a percentage of your work-related expenses. Form 1040x amended return Your expenses are subject to the earned income limit and the dollar limit. Form 1040x amended return The percentage is based on your adjusted gross income. Form 1040x amended return Figuring Total Work-Related Expenses To figure the credit for 2013 work-related expenses, count only those you paid by December 31, 2013. Form 1040x amended return Expenses prepaid in an earlier year. Form 1040x amended return   If you pay for services before they are provided, you can count the prepaid expenses only in the year the care is received. Form 1040x amended return Claim the expenses for the later year as if they were actually paid in that later year. Form 1040x amended return Expenses not paid until the following year. Form 1040x amended return   Do not count 2012 expenses that you paid in 2013 as work-related expenses for 2013. Form 1040x amended return You may be able to claim an additional credit for them on your 2013 return, but you must figure it separately. Form 1040x amended return See Payments for prior year's expenses under Amount of Credit in Publication 503. Form 1040x amended return    If you had expenses in 2013 that you did not pay until 2014, you cannot count them when figuring your 2013 credit. Form 1040x amended return You may be able to claim a credit for them on your 2014 return. Form 1040x amended return Expenses reimbursed. Form 1040x amended return   If a state social services agency pays you a nontaxable amount to reimburse you for some of your child and dependent care expenses, you cannot count the expenses that are reimbursed as work-related expenses. Form 1040x amended return Example. Form 1040x amended return You paid work-related expenses of $3,000. Form 1040x amended return You are reimbursed $2,000 by a state social services agency. Form 1040x amended return You can use only $1,000 to figure your credit. Form 1040x amended return Medical expenses. Form 1040x amended return   Some expenses for the care of qualifying persons who are not able to care for themselves may qualify as work-related expenses and also as medical expenses. Form 1040x amended return You can use them either way, but you cannot use the same expenses to claim both a credit and a medical expense deduction. Form 1040x amended return   If you use these expenses to figure the credit and they are more than the earned income limit or the dollar limit, discussed later, you can add the excess to your medical expenses. Form 1040x amended return However, if you use your total expenses to figure your medical expense deduction, you cannot use any part of them to figure your credit. Form 1040x amended return    Amounts excluded from your income under your employer's dependent care benefits plan cannot be used to claim a medical expense deduction. Form 1040x amended return Dependent Care Benefits If you receive dependent care benefits, your dollar limit for purposes of the credit may be reduced. Form 1040x amended return See Reduced Dollar Limit , later. Form 1040x amended return But, even if you cannot take the credit, you may be able to take an exclusion or deduction for the dependent care benefits. Form 1040x amended return Dependent care benefits. Form 1040x amended return   Dependent care benefits include: Amounts your employer paid directly to either you or your care provider for the care of your qualifying person while you work, The fair market value of care in a daycare facility provided or sponsored by your employer, and Pre-tax contributions you made under a dependent care flexible spending arrangement. Form 1040x amended return Your salary may have been reduced to pay for these benefits. Form 1040x amended return If you received benefits as an employee, they should be shown in box 10 of your Form W-2. Form 1040x amended return See Statement for employee , later. Form 1040x amended return Benefits you received as a partner should be shown in box 13 of your Schedule K-1 (Form 1065) with code O. Form 1040x amended return Enter the amount of these benefits on Form 2441, Part III, line 12. Form 1040x amended return Exclusion or deduction. Form 1040x amended return   If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Form 1040x amended return Your employer can tell you whether your benefit plan qualifies. Form 1040x amended return To claim the exclusion, you must complete Part III of Form 2441. Form 1040x amended return You cannot use Form 1040EZ. Form 1040x amended return   If you are self-employed and receive benefits from a qualified dependent care benefit plan, you are treated as both employer and employee. Form 1040x amended return Therefore, you would not get an exclusion from wages. Form 1040x amended return Instead, you would get a deduction on Form 1040, Schedule C, line 14; Schedule E, line 19 or 28; or Schedule F, line 15. Form 1040x amended return To claim the deduction, you must use Form 2441. Form 1040x amended return   The amount you can exclude or deduct is limited to the smallest of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). Form 1040x amended return The definition of earned income for the exclusion or deduction is the same as the definition used when figuring the credit except that earned income for the exclusion or deduction does not include any dependent care benefits you receive. Form 1040x amended return See Earned Income Limit, later. Form 1040x amended return    You can choose to include your nontaxable combat pay in earned income when figuring your exclusion or deduction, even if you choose not to include it in earned income for the earned income credit or the credit for child and dependent care expenses. Form 1040x amended return Statement for employee. Form 1040x amended return   Your employer must give you a Form W-2 (or similar statement) showing in box 10 the total amount of dependent care benefits provided to you during the year under a qualified plan. Form 1040x amended return Your employer will also include any dependent care benefits over $5,000 in your wages shown on your Form W-2 in box 1. Form 1040x amended return Effect of exclusion on credit. Form 1040x amended return   If you exclude dependent care benefits from your income, the amount of the excluded benefits: Is not included in your work-related expenses, and Reduces the dollar limit, discussed later. Form 1040x amended return Earned Income Limit The amount of work-related expenses you use to figure your credit cannot be more than: Your earned income for the year if you are single at the end of the year, or The smaller of your or your spouse's earned income for the year if you are married at the end of the year. Form 1040x amended return Earned income is defined under Earned Income Test , earlier. Form 1040x amended return For purposes of item (2), use your spouse's earned income for the entire year, even if you were married for only part of the year. Form 1040x amended return Separated spouse. Form 1040x amended return   If you are legally separated or married and living apart from your spouse (as described under Joint Return Test , earlier), you are not considered married for purposes of the earned income limit. Form 1040x amended return Use only your income in figuring the earned income limit. Form 1040x amended return Surviving spouse. Form 1040x amended return   If your spouse died during the year and you file a joint return as a surviving spouse, you may, but are not required to, take into account the earned income of your spouse who died during the year. Form 1040x amended return Community property laws. Form 1040x amended return   You should disregard community property laws when you figure earned income for this credit. Form 1040x amended return You or your spouse is a student or not able to care for self. Form 1040x amended return   Your spouse who is either a full-time student or not able to care for himself or herself is treated as having earned income. Form 1040x amended return His or her earned income for each month is considered to be at least $250 if there is one qualifying person in your home, or at least $500 if there are two or more. Form 1040x amended return Spouse works. Form 1040x amended return   If your spouse works during that month, use the higher of $250 (or $500) or his or her actual earned income for that month. Form 1040x amended return Spouse qualifies for part of month. Form 1040x amended return    If your spouse is a full-time student or not able to care for himself or herself for only part of a month, the full $250 (or $500) still applies for that month. Form 1040x amended return You are a student or not able to care for self. Form 1040x amended return   These rules also apply if you are a student or not able to care for yourself and you are filing a joint return. Form 1040x amended return For each month or part of a month you are a student or not able to care for yourself, your earned income is considered to be at least $250 (or $500). Form 1040x amended return If you also work during that month, use the higher of $250 (or $500) or your actual earned income for that month. Form 1040x amended return Both spouses qualify. Form 1040x amended return   If, in the same month, both you and your spouse are either full-time students or not able to care for yourselves, only one spouse can be considered to have this earned income of $250 (or $500) for that month. Form 1040x amended return Dollar Limit There is a dollar limit on the amount of your work-related expenses you can use to figure the credit. Form 1040x amended return This limit is $3,000 for one qualifying person, or $6,000 for two or more qualifying persons. Form 1040x amended return If you paid work-related expenses for the care of two or more qualifying persons, the applicable dollar limit is $6,000. Form 1040x amended return This $6,000 limit does not need to be divided equally among them. Form 1040x amended return For example, if your work-related expenses for the care of one qualifying person are $3,200 and your work-related expenses for another qualifying person are $2,800, you can use the total, $6,000, when figuring the credit. Form 1040x amended return Yearly limit. Form 1040x amended return   The dollar limit is a yearly limit. Form 1040x amended return The amount of the dollar limit remains the same no matter how long, during the year, you have a qualifying person in your household. Form 1040x amended return Use the $3,000 limit if you paid work-related expenses for the care of one qualifying person at any time during the year. Form 1040x amended return Use $6,000 if you paid work-related expenses for the care of more than one qualifying person at any time during the year. Form 1040x amended return Reduced Dollar Limit If you received dependent care benefits that you exclude or deduct from your income, you must subtract that amount from the dollar limit that applies to you. Form 1040x amended return Your reduced dollar limit is figured on Form 2441, Part III. Form 1040x amended return See Dependent Care Benefits , earlier, for information on excluding or deducting these benefits. Form 1040x amended return Example 1. Form 1040x amended return George is a widower with one child and earns $24,000 a year. Form 1040x amended return He pays work-related expenses of $2,900 for the care of his 4-year-old child and qualifies to claim the credit for child and dependent care expenses. Form 1040x amended return His employer pays an additional $1,000 under a dependent care benefit plan. Form 1040x amended return This $1,000 is excluded from George's income. Form 1040x amended return Although the dollar limit for his work-related expenses is $3,000 (one qualifying person), George figures his credit on only $2,000 of the $2,900 work-related expenses he paid. Form 1040x amended return This is because his dollar limit is reduced as shown next. Form 1040x amended return   George's Reduced Dollar Limit 1) Maximum allowable expenses for one qualifying person $3,000 2) Minus: Dependent care benefits George excludes from income −1,000 3) Reduced dollar limit on expenses George can use for the credit $2,000 Example 2. Form 1040x amended return Randall is married and both he and his wife are employed. Form 1040x amended return Each has earned income in excess of $6,000. Form 1040x amended return They have two children, Anne and Andy, ages 2 and 4, who attend a daycare facility licensed and regulated by the state. Form 1040x amended return Randall's work-related expenses are $6,000 for the year. Form 1040x amended return Randall's employer has a dependent care assistance program as part of its cafeteria plan, which allows employees to make pre-tax contributions to a dependent care flexible spending arrangement. Form 1040x amended return Randall has elected to take the maximum $5,000 exclusion from his salary to cover dependent care expenses through this program. Form 1040x amended return Although the dollar limit for his work- related expenses is $6,000 (two or more qualifying persons), Randall figures his credit on only $1,000 of the $6,000 work-related expense paid. Form 1040x amended return This is because his dollar limit is reduced as shown next. Form 1040x amended return   Randall's Reduced Dollar Limit 1) Maximum allowable expenses for two qualifying persons $6,000 2) Minus: Dependent care benefits Randall selects from employer's cafeteria plan and excludes from income −5,000 3) Reduced dollar limit on expenses Randall can use for the credit $1,000 Amount of Credit To determine the amount of your credit, multiply your work-related expenses (after applying the earned income and dollar limits) by a percentage. Form 1040x amended return This percentage depends on your adjusted gross income shown on Form 1040, line 38, or Form 1040A, line 22. Form 1040x amended return The following table shows the percentage to use based on adjusted gross income. Form 1040x amended return   IF your adjusted gross income is: THEN the percentage is:       Over   But not over         $0   $15,000   35%       15,000   17,000   34%       17,000   19,000   33%       19,000   21,000   32%       21,000   23,000   31%       23,000   25,000   30%       25,000   27,000   29%       27,000   29,000   28%       29,000   31,000   27%       31,000   33,000   26%       33,000   35,000   25%       35,000   37,000   24%       37,000   39,000   23%       39,000   41,000   22%       41,000   43,000   21%       43,000   No limit   20%   How To Claim the Credit To claim the credit, you can file Form 1040 or Form 1040A. Form 1040x amended return You cannot claim the credit on Form 1040EZ. Form 1040x amended return Form 1040 or 1040A. Form 1040x amended return   You must complete Form 2441 and attach it to your Form 1040 or 1040A. Form 1040x amended return Enter the credit on Form 1040, line 48, or Form 1040A, line 29. Form 1040x amended return Limit on credit. Form 1040x amended return   The amount of credit you can claim is generally limited to the amount of your tax. Form 1040x amended return For more information, see the Instructions for Form 2441. Form 1040x amended return Tax credit not refundable. Form 1040x amended return   You cannot get a refund for any part of the credit that is more than this limit. Form 1040x amended return Recordkeeping. Form 1040x amended return You should keep records of your work-related expenses. Form 1040x amended return Also, if your dependent or spouse is not able to care for himself or herself, your records should show both the nature and the length of the disability. Form 1040x amended return Other records you should keep to support your claim for the credit are described earlier under Provider Identification Test . Form 1040x amended return Employment Taxes for Household Employers If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer. Form 1040x amended return If you are a household employer, you will need an employer identification number (EIN) and you may have to pay employment taxes. Form 1040x amended return If the individuals who work in your home are self-employed, you are not liable for any of the taxes discussed in this section. Form 1040x amended return Self-employed persons who are in business for themselves are not household employees. Form 1040x amended return Usually, you are not a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business. Form 1040x amended return If you use a placement agency that exercises control over what work is done and how it will be done by a babysitter or companion who works in your home, the worker is not your employee. Form 1040x amended return This control could include providing rules of conduct and appearance and requiring regular reports. Form 1040x amended return In this case, you do not have to pay employment taxes. Form 1040x amended return But, if an agency merely gives you a list of sitters and you hire one from that list, and pay the sitter directly, the sitter may be your employee. Form 1040x amended return If you have a household employee, you may be subject to: Social security and Medicare taxes, Federal unemployment tax, and Federal income tax withholding. Form 1040x amended return Social security and Medicare taxes are generally withheld from the employee's pay and matched by the employer. Form 1040x amended return Federal unemployment (FUTA) tax is paid by the employer only and provides for payments of unemployment compensation to workers who have lost their jobs. Form 1040x amended return Federal income tax is withheld from the employee's total pay if the employee asks you to do so and you agree. Form 1040x amended return For more information on a household employer's tax responsibilities, see Publication 926 and Schedule H (Form 1040) and its instructions. Form 1040x amended return State employment tax. Form 1040x amended return   You may also have to pay state unemployment tax. Form 1040x amended return Contact your state unemployment tax office for information. Form 1040x amended return You should also find out whether you need to pay or collect other state employment taxes or carry workers' compensation insurance. Form 1040x amended return For a list of state unemployment tax agencies, visit the U. Form 1040x amended return S. Form 1040x amended return Department of Labor's website. Form 1040x amended return A link to that website is in Publication 926, or you can find it with an online search. Form 1040x amended return Prev  Up  Next   Home   More Online Publications
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The Form 1040x Amended Return

Form 1040x amended return 1. Form 1040x amended return   Canceled Debts Table of Contents General RulesForm 1099-C Discounts and loan modifications Sales or other dispositions (such as foreclosures and repossessions) Abandonments Stockholder debt This chapter discusses the tax treatment of canceled debts. Form 1040x amended return General Rules Generally, if a debt for which you are personally liable is forgiven or discharged for less than the full amount owed, the debt is considered canceled in whatever amount it remained unpaid. Form 1040x amended return There are exceptions to this rule, discussed under Exceptions , later. Form 1040x amended return Generally, you must include the canceled debt in your income. Form 1040x amended return However, you may be able to exclude the canceled debt. Form 1040x amended return See Exclusions , later. Form 1040x amended return Example. Form 1040x amended return John owed $1,000 to Mary. Form 1040x amended return Mary agreed to accept and John paid $400 in satisfaction of the entire debt. Form 1040x amended return John has canceled debt of $600. Form 1040x amended return Example. Form 1040x amended return Margaret owed $1,000 to Henry. Form 1040x amended return Henry and Margaret agreed that Margaret would provide Henry with services (instead of money) in full satisfaction of the debt. Form 1040x amended return Margaret does not have canceled debt. Form 1040x amended return Instead, she has income from services. Form 1040x amended return A debt includes any indebtedness: For which you are liable, or Subject to which you hold property. Form 1040x amended return Debt for which you are personally liable is recourse debt. Form 1040x amended return All other debt is nonrecourse debt. Form 1040x amended return If you are not personally liable for the debt, you do not have ordinary income from the cancellation of debt unless you retain the collateral and either: The lender offers a discount for the early payment of the debt, or The lender agrees to a loan modification that results in the reduction of the principal balance of the debt. Form 1040x amended return See Discounts and loan modifications , later. Form 1040x amended return However, upon the disposition of the property securing a nonrecourse debt, the amount realized includes the entire unpaid amount of the debt, not just the FMV of the property. Form 1040x amended return As a result, you may realize a gain or loss if the outstanding debt immediately before the disposition is more or less than your adjusted basis in the property. Form 1040x amended return For more details on figuring your gain or loss, see chapter 2 of this publication or see Publication 544. Form 1040x amended return There are several exceptions and exclusions that may result in part or all of a canceled debt being nontaxable. Form 1040x amended return See Exceptions and Exclusions, later. Form 1040x amended return You must report any taxable canceled debt as ordinary income on: Form 1040 or Form 1040NR, line 21, if the debt is a nonbusiness debt; Schedule C (Form 1040), line 6 (or Schedule C-EZ (Form 1040), line 1), if the debt is related to a nonfarm sole proprietorship; Schedule E (Form 1040), line 3, if the debt is related to nonfarm rental of real property; Form 4835, line 6, if the debt is related to a farm rental activity for which you use Form 4835 to report farm rental income based on crops or livestock produced by a tenant; or Schedule F (Form 1040), line 8, if the debt is farm debt and you are a farmer. Form 1040x amended return Form 1099-C If you receive a Form 1099-C, that means an applicable entity has reported an identifiable event to the IRS regarding a debt you owe. Form 1040x amended return The identifiable event may be an actual cancellation of the debt or it may be an event the applicable entity is required, solely for purposes of reporting to the IRS, to treat as a cancellation of debt. Form 1040x amended return For information on the reasons an applicable entity files Form 1099-C, see Identifiable event codes, later. Form 1040x amended return Unless you meet one of the exceptions or exclusions discussed later, this canceled debt is ordinary income and must be reported on the appropriate form discussed above. Form 1040x amended return An applicable entity includes: A federal government agency, A financial institution, A credit union, and Any organization a significant trade or business of which is lending money. Form 1040x amended return Identifiable event codes. Form 1040x amended return    Box 6 of Form 1099-C should indicate the reason the creditor filed this form. Form 1040x amended return The codes shown in box 6 are explained below. Form 1040x amended return Also see the chart after the explanation for a quick reference guide for the codes used in Box 6. Form 1040x amended return Note. Form 1040x amended return Codes A through G and I identify specific occurrences resulting from an actual discharge of indebtedness. Form 1040x amended return However, Code H, Expiration of nonpayment testing period, does not necessarily identify an actual discharge of indebtedness. Form 1040x amended return Code A — Bankruptcy. Form 1040x amended return Code A is used to identify cancellation of debt as a result of a title 11 bankruptcy case. Form 1040x amended return See Bankruptcy , later. Form 1040x amended return Code B — Other judicial debt relief. Form 1040x amended return Code B is used to identify cancellation of debt as a result of a receivership, foreclosure, or similar federal or state court proceeding other than bankruptcy. Form 1040x amended return Code C — Statute of limitations or expiration of deficiency period. Form 1040x amended return Code C is used to identify cancellation of debt either when the statute of limitations for collecting the debt expires or when the statutory period for filing a claim or beginning a deficiency judgment proceeding expires. Form 1040x amended return In the case of the expiration of a statute of limitations, an identifiable event occurs only if and when your affirmative defense of the statute of limitations is upheld in a final judgment or decision in a judicial proceeding, and the period for appealing the judgment or decision has expired. Form 1040x amended return Code D — Foreclosure election. Form 1040x amended return Code D is used to identify cancellation of debt when the creditor elects foreclosure remedies that statutorily end or bar the creditor's right to pursue collection of the debt. Form 1040x amended return This event applies to a mortgage lender or holder who is barred from pursuing debt collection after a power of sale in the mortgage or deed of trust is exercised. Form 1040x amended return Code E — Debt relief from probate or similar proceeding. Form 1040x amended return Code E is used to identify cancellation of debt as a result of a probate court or similar legal proceeding. Form 1040x amended return Code F — By agreement. Form 1040x amended return Code F is used to identify cancellation of debt as a result of an agreement between the creditor and the debtor to cancel the debt at less than full consideration. Form 1040x amended return Code G — Decision or policy to discontinue collection. Form 1040x amended return Code G is used to identify cancellation of debt as a result of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt. Form 1040x amended return For purposes of this identifiable event, a defined policy includes both a written policy and the creditor's established business practice. Form 1040x amended return Code H — Expiration of nonpayment testing period. Form 1040x amended return Code H is used to indicate that the creditor has not received a payment on the debt during a testing period ending on December 31, 2013. Form 1040x amended return The testing period is a 36-month period increased by the number of months the creditor was prevented from engaging in collection activity by a stay in bankruptcy or similar bar under state or local law. Form 1040x amended return This identifiable event applies only for a creditor that is a financial institution or credit union (and certain of their subsidiaries), the Federal Deposit Insurance Corporation (FDIC), Resolution Trust Corporation (RTC), National Credit Union Administration (NCUA), and other Federal executive agencies. Form 1040x amended return Expiration of the nonpayment testing period does not necessarily result from an actual discharge of indebtedness. Form 1040x amended return Code I — Other actual discharge before identifiable event. Form 1040x amended return Code I is used to identify an actual cancellation of debt that occurs before any of the identifiable events described in codes A through H. Form 1040x amended return Form 1099-C Reference Guide for Box 6 Identifiable Event Codes A Bankruptcy B Other judicial debt relief C Statute of limitations or expiration of deficiency period D Foreclosure election E Debt relief from probate or similar proceeding F By agreement G Decision or policy to discontinue collection H Expiration of nonpayment testing period I Other actual discharge before identifiable event Even if you did not receive a Form 1099-C, you must report canceled debt as gross income on your tax return unless one of the exceptions or exclusions described later applies. Form 1040x amended return Amount of canceled debt. Form 1040x amended return    The amount in box 2 of Form 1099-C may represent some or all of the debt that has been canceled or treated as canceled. Form 1040x amended return The amount in box 2 will include principal and may include interest and other nonprincipal amounts (such as fees or penalties). Form 1040x amended return Unless you meet one of the exceptions or exclusions discussed later, the amount of the debt that has been canceled is ordinary income and must be reported on the appropriate form as discussed earlier. Form 1040x amended return Interest included in canceled debt. Form 1040x amended return    If any interest is included in the amount of canceled debt in box 2, it will be shown in box 3. Form 1040x amended return Whether the interest portion of the canceled debt must be included in your income depends on whether the interest would be deductible if you paid it. Form 1040x amended return See Deductible Debt under Exceptions, later. Form 1040x amended return Persons who each receive a Form 1099-C showing the full amount of debt. Form 1040x amended return    If you and another person were jointly and severally liable for a canceled debt, each of you may get a Form 1099-C showing the entire amount of the canceled debt. Form 1040x amended return However, you may not have to report that entire amount as income. Form 1040x amended return The amount, if any, you must report depends on all the facts and circumstances, including: State law, The amount of debt proceeds each person received, How much of any interest deduction from the debt was claimed by each person, How much of the basis of any co-owned property bought with the debt proceeds was allocated to each co-owner, and Whether the canceled debt qualifies for any of the exceptions or exclusions described in this publication. Form 1040x amended return See Example 3 under Insolvency, later. Form 1040x amended return Discounts and loan modifications If a lender discounts (reduces) the principal balance of a loan because you pay it off early, or agrees to a loan modification (a “workout”) that includes a reduction in the principal balance of a loan, the amount of the discount or the amount of principal reduction is canceled debt. Form 1040x amended return However, if the debt is nonrecourse and you did not retain the collateral, you do not have cancellation of the debt income. Form 1040x amended return The amount of the canceled debt must be included in income unless one of the exceptions or exclusions described later applies. Form 1040x amended return For more details, see Exceptions and Exclusions, later. Form 1040x amended return Sales or other dispositions (such as foreclosures and repossessions) Recourse debt. Form 1040x amended return   If you owned property that was subject to a recourse debt in excess of the FMV of the property, the lender's foreclosure or repossession of the property is treated as a sale or disposition of the property by you and may result in your realization of gain or loss. Form 1040x amended return The gain or loss on the disposition of the property is measured by the difference between the FMV of the property at the time of the disposition and your adjusted basis (usually your cost) in the property. Form 1040x amended return The character of the gain or loss (such as ordinary or capital) is determined by the character of the property. Form 1040x amended return If the lender forgives all or part of the amount of the debt in excess of the FMV of the property, the cancellation of the excess debt may result in ordinary income. Form 1040x amended return The ordinary income from the cancellation of debt (the excess of the canceled debt over the FMV of the property) must be included in your gross income reported on your tax return unless one of the exceptions or exclusions described later applies. Form 1040x amended return For more details, see Exceptions and Exclusions, later. Form 1040x amended return Nonrecourse debt. Form 1040x amended return   If you owned property that was subject to a nonrecourse debt in excess of the FMV of the property, the lender's foreclosure on the property does not result in ordinary income from the cancellation of debt. Form 1040x amended return The entire amount of the nonrecourse debt is treated as an amount realized on the disposition of the property. Form 1040x amended return The gain or loss on the disposition of the property is measured by the difference between the total amount realized (the entire amount of the nonrecourse debt plus the amount of cash and the FMV of any property received) and your adjusted basis in the property. Form 1040x amended return The character of the gain or loss is determined by the character of the property. Form 1040x amended return More information. Form 1040x amended return    See Publications 523, 544, and 551, and chapter 2 of this publication for more details. Form 1040x amended return Abandonments Recourse debt. Form 1040x amended return   If you abandon property that secures a debt for which you are personally liable (recourse debt) and the debt is canceled, you will realize ordinary income equal to the canceled debt. Form 1040x amended return You must report this income on your tax return unless one of the exceptions or exclusions described later applies. Form 1040x amended return For more details, see Exceptions and Exclusions, later. Form 1040x amended return This income is separate from any amount realized from the abandonment of the property. Form 1040x amended return For more details, see chapter 3. Form 1040x amended return Nonrecourse debt. Form 1040x amended return   If you abandon property that secures a debt for which you are not personally liable (nonrecourse debt), you may realize gain or loss but will not have cancellation of indebtedness income. Form 1040x amended return Stockholder debt If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution. Form 1040x amended return For more information, see Publication 542, Corporations. Form 1040x amended return Prev  Up  Next   Home   More Online Publications