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Free Income Tax Preparation

Free income tax preparation Publication 503 - Introductory Material Table of Contents Future Developments Reminders IntroductionOrdering forms and publications. Free income tax preparation Tax questions. Free income tax preparation Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 503, such as legislation enacted after it was published, go to www. Free income tax preparation irs. Free income tax preparation gov/pub503. Free income tax preparation Reminders Taxpayer identification number needed for each qualifying person. Free income tax preparation  You must include on line 2 of Form 2441, Child and Dependent Care Expenses, the name and taxpayer identification number (generally the social security number) of each qualifying person. Free income tax preparation See Taxpayer identification number under Qualifying Person Test, later. Free income tax preparation You may have to pay employment taxes. Free income tax preparation  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. Free income tax preparation 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. Free income tax preparation See Employment Taxes for Household Employers, later. Free income tax preparation Photographs of missing children. Free income tax preparation  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free income tax preparation Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free income tax preparation 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. Free income tax preparation Introduction This publication explains the tests you must meet to claim the credit for child and dependent care expenses. Free income tax preparation It explains how to figure and claim the credit. Free income tax preparation 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. Free income tax preparation The credit can be up to 35% of your expenses. Free income tax preparation To qualify, you must pay these expenses so you can work or look for work. Free income tax preparation This publication also discusses some of the employment tax rules for household employers. Free income tax preparation Dependent care benefits. Free income tax preparation   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. Free income tax preparation You must complete Form 2441, Part III, before you can figure the amount of your credit. Free income tax preparation See Dependent Care Benefits under How To Figure the Credit, later. Free income tax preparation Comments and suggestions. Free income tax preparation   We welcome your comments about this publication and your suggestions for future editions. Free income tax preparation   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free income tax preparation NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free income tax preparation Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free income tax preparation   You can send your comments from www. Free income tax preparation irs. Free income tax preparation gov/formspubs/. Free income tax preparation Click on “More Information” and then on “Comment on Tax Forms and Publications. Free income tax preparation ”   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. Free income tax preparation Ordering forms and publications. Free income tax preparation   Visit www. Free income tax preparation irs. Free income tax preparation 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. Free income tax preparation Internal Revenue Service 1201 N. Free income tax preparation Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free income tax preparation   If you have a tax question, check the information available on IRS. Free income tax preparation gov or call 1-800-829-1040. Free income tax preparation We cannot answer tax questions sent to either of the above addresses. Free income tax preparation Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information 926 Household Employer's Tax Guide Form (and Instructions) 2441 Child and Dependent Care Expenses Schedule H (Form 1040) Household Employment Taxes W-10 Dependent Care Provider's Identification and Certification See How To Get Tax Help , near the end of this publication, for information about getting these publications and forms. Free income tax preparation Prev  Up  Next   Home   More Online Publications
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The Free Income Tax Preparation

Free income tax preparation 1. Free income tax preparation   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. Free income tax preparation 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. Free income tax preparation There are exceptions to this rule, discussed under Exceptions , later. Free income tax preparation Generally, you must include the canceled debt in your income. Free income tax preparation However, you may be able to exclude the canceled debt. Free income tax preparation See Exclusions , later. Free income tax preparation Example. Free income tax preparation John owed $1,000 to Mary. Free income tax preparation Mary agreed to accept and John paid $400 in satisfaction of the entire debt. Free income tax preparation John has canceled debt of $600. Free income tax preparation Example. Free income tax preparation Margaret owed $1,000 to Henry. Free income tax preparation Henry and Margaret agreed that Margaret would provide Henry with services (instead of money) in full satisfaction of the debt. Free income tax preparation Margaret does not have canceled debt. Free income tax preparation Instead, she has income from services. Free income tax preparation A debt includes any indebtedness: For which you are liable, or Subject to which you hold property. Free income tax preparation Debt for which you are personally liable is recourse debt. Free income tax preparation All other debt is nonrecourse debt. Free income tax preparation 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. Free income tax preparation See Discounts and loan modifications , later. Free income tax preparation 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. Free income tax preparation 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. Free income tax preparation For more details on figuring your gain or loss, see chapter 2 of this publication or see Publication 544. Free income tax preparation There are several exceptions and exclusions that may result in part or all of a canceled debt being nontaxable. Free income tax preparation See Exceptions and Exclusions, later. Free income tax preparation 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. Free income tax preparation 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. Free income tax preparation 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. Free income tax preparation For information on the reasons an applicable entity files Form 1099-C, see Identifiable event codes, later. Free income tax preparation 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. Free income tax preparation 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. Free income tax preparation Identifiable event codes. Free income tax preparation    Box 6 of Form 1099-C should indicate the reason the creditor filed this form. Free income tax preparation The codes shown in box 6 are explained below. Free income tax preparation Also see the chart after the explanation for a quick reference guide for the codes used in Box 6. Free income tax preparation Note. Free income tax preparation Codes A through G and I identify specific occurrences resulting from an actual discharge of indebtedness. Free income tax preparation However, Code H, Expiration of nonpayment testing period, does not necessarily identify an actual discharge of indebtedness. Free income tax preparation Code A — Bankruptcy. Free income tax preparation Code A is used to identify cancellation of debt as a result of a title 11 bankruptcy case. Free income tax preparation See Bankruptcy , later. Free income tax preparation Code B — Other judicial debt relief. Free income tax preparation 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. Free income tax preparation Code C — Statute of limitations or expiration of deficiency period. Free income tax preparation 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. Free income tax preparation 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. Free income tax preparation Code D — Foreclosure election. Free income tax preparation 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. Free income tax preparation 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. Free income tax preparation Code E — Debt relief from probate or similar proceeding. Free income tax preparation Code E is used to identify cancellation of debt as a result of a probate court or similar legal proceeding. Free income tax preparation Code F — By agreement. Free income tax preparation 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. Free income tax preparation Code G — Decision or policy to discontinue collection. Free income tax preparation 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. Free income tax preparation For purposes of this identifiable event, a defined policy includes both a written policy and the creditor's established business practice. Free income tax preparation Code H — Expiration of nonpayment testing period. Free income tax preparation 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. Free income tax preparation 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. Free income tax preparation 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. Free income tax preparation Expiration of the nonpayment testing period does not necessarily result from an actual discharge of indebtedness. Free income tax preparation Code I — Other actual discharge before identifiable event. Free income tax preparation 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. Free income tax preparation 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. Free income tax preparation Amount of canceled debt. Free income tax preparation    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. Free income tax preparation The amount in box 2 will include principal and may include interest and other nonprincipal amounts (such as fees or penalties). Free income tax preparation 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. Free income tax preparation Interest included in canceled debt. Free income tax preparation    If any interest is included in the amount of canceled debt in box 2, it will be shown in box 3. Free income tax preparation 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. Free income tax preparation See Deductible Debt under Exceptions, later. Free income tax preparation Persons who each receive a Form 1099-C showing the full amount of debt. Free income tax preparation    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. Free income tax preparation However, you may not have to report that entire amount as income. Free income tax preparation 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. Free income tax preparation See Example 3 under Insolvency, later. Free income tax preparation 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. Free income tax preparation However, if the debt is nonrecourse and you did not retain the collateral, you do not have cancellation of the debt income. Free income tax preparation The amount of the canceled debt must be included in income unless one of the exceptions or exclusions described later applies. Free income tax preparation For more details, see Exceptions and Exclusions, later. Free income tax preparation Sales or other dispositions (such as foreclosures and repossessions) Recourse debt. Free income tax preparation   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. Free income tax preparation 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. Free income tax preparation The character of the gain or loss (such as ordinary or capital) is determined by the character of the property. Free income tax preparation 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. Free income tax preparation 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. Free income tax preparation For more details, see Exceptions and Exclusions, later. Free income tax preparation Nonrecourse debt. Free income tax preparation   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. Free income tax preparation The entire amount of the nonrecourse debt is treated as an amount realized on the disposition of the property. Free income tax preparation 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. Free income tax preparation The character of the gain or loss is determined by the character of the property. Free income tax preparation More information. Free income tax preparation    See Publications 523, 544, and 551, and chapter 2 of this publication for more details. Free income tax preparation Abandonments Recourse debt. Free income tax preparation   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. Free income tax preparation You must report this income on your tax return unless one of the exceptions or exclusions described later applies. Free income tax preparation For more details, see Exceptions and Exclusions, later. Free income tax preparation This income is separate from any amount realized from the abandonment of the property. Free income tax preparation For more details, see chapter 3. Free income tax preparation Nonrecourse debt. Free income tax preparation   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. Free income tax preparation 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. Free income tax preparation For more information, see Publication 542, Corporations. Free income tax preparation Prev  Up  Next   Home   More Online Publications