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Free online tax preparation Publication 54 - Additional Material Questions and AnswersThis section answers tax- related questions commonly asked by taxpayers living abroad. Free online tax preparation 1. Free online tax preparation Filing Requirements—Where, When, and How . Free online tax preparation 1) When are U. Free online tax preparation S. Free online tax preparation income tax returns due? . Free online tax preparation 2) I am going abroad this year and expect to qualify for the foreign earned income exclusion. Free online tax preparation How can I secure an extension of time to file my return, when should I file my return, and what forms are required? . Free online tax preparation 3) My entire income qualifies for the foreign earned income exclusion. Free online tax preparation Must I file a tax return? . Free online tax preparation 4) I was sent abroad by my company in November of last year. Free online tax preparation I plan to secure an extension of time on Form 2350 to file my tax return for last year because I expect to qualify for the foreign earned income exclusion under the physical presence test. Free online tax preparation However, if my company recalls me to the United States before the end of the qualifying period and I find I will not qualify for the exclusion, how and when should I file my return? . Free online tax preparation 5) I am a U. Free online tax preparation S. Free online tax preparation citizen and have no taxable income from the United States, but I have substantial income from a foreign source. Free online tax preparation Am I required to file a U. Free online tax preparation S. Free online tax preparation income tax return? . Free online tax preparation 6) I am a U. Free online tax preparation S. Free online tax preparation citizen who has retired, and I expect to remain in a foreign country. Free online tax preparation Do I have any further U. Free online tax preparation S. Free online tax preparation tax obligations? . Free online tax preparation 7) I have been a bona fide resident of a foreign country for over 5 years. Free online tax preparation Is it necessary for me to pay estimated tax? . Free online tax preparation 8) Will a check payable in foreign currency be acceptable in payment of my U. Free online tax preparation S. Free online tax preparation tax? . Free online tax preparation 9) I have met the test for physical presence in a foreign country and am filing returns for 2 years. Free online tax preparation Must I file a separate Form 2555 (or Form 2555-EZ) with each return? . Free online tax preparation 10) Does a Form 2555 (or 2555-EZ) with a Schedule C or Form W-2 attached constitute a return? . Free online tax preparation 11) On Form 2350, Application for Extension of Time To File U. Free online tax preparation S. Free online tax preparation Income Tax Return, I stated that I would qualify for the foreign earned income exclusion under the physical presence test. Free online tax preparation If I qualify under the bona fide residence test, can I file my return on that basis? . Free online tax preparation 12) I am a U. Free online tax preparation S. Free online tax preparation citizen who worked in the United States for 6 months last year. Free online tax preparation I accepted employment overseas in July of last year and expect to qualify for the foreign earned income exclusion. Free online tax preparation Should I file a return and pay tax on the income earned in the United States during the first 6 months and then, when I qualify, file another return covering the last 6 months of the year? . Free online tax preparation 13) I am a U. Free online tax preparation S. Free online tax preparation citizen. Free online tax preparation I have lived abroad for a number of years and recently realized that I should have been filing U. Free online tax preparation S. Free online tax preparation income tax returns. Free online tax preparation How do I correct this oversight in not having filed returns for these years? . Free online tax preparation 14) In 2008, I qualified to exclude my foreign earned income, but I did not claim this exclusion on the return I filed in 2009. Free online tax preparation I paid all outstanding taxes with the return. Free online tax preparation Can I file a claim for refund now? . Free online tax preparation 1) When are U. Free online tax preparation S. Free online tax preparation income tax returns due? Generally, for calendar year taxpayers, U. Free online tax preparation S. Free online tax preparation income tax returns are due on April 15. Free online tax preparation If you are a U. Free online tax preparation S. Free online tax preparation citizen or resident and both your tax home and your abode are outside the United States and Puerto Rico on the regular due date, an automatic extension is granted to June 15 for filing the return. Free online tax preparation Interest will be charged on any tax due, as shown on the return, from April 15. Free online tax preparation a) You should file Form 2350 by the due date of your return to request an extension of time to file. Free online tax preparation Form 2350 is a special form for those U. Free online tax preparation S. Free online tax preparation citizens or residents abroad who expect to qualify for the foreign earned income exclusion or the housing exclusion or deduction under either the bona fide residence test or physical presence test and would like to have an extension of time to delay filing until after they have qualified. Free online tax preparation b) If the extension is granted, you should file your return after you qualify, but by the approved extension date. Free online tax preparation c) You must file your Form 1040 with Form 2555 (or Form 2555-EZ). Free online tax preparation Generally, yes. Free online tax preparation Every U. Free online tax preparation S. Free online tax preparation citizen or resident who receives income must file a U. Free online tax preparation S. Free online tax preparation income tax return unless total income without regard to the foreign earned income exclusion is below an amount based on filing status. Free online tax preparation The income levels for filing purposes are discussed under Filing Requirements in chapter 1. Free online tax preparation If your regular filing date has passed, you should file a return, Form 1040, as soon as possible for last year. Free online tax preparation Include a statement with this return noting that you have returned to the United States and will not qualify for the foreign earned income exclusion. Free online tax preparation You must report your worldwide income on the return. Free online tax preparation If you paid a foreign tax on the income earned abroad, you may be able to either deduct this tax as an itemized deduction or claim it as a credit against your U. Free online tax preparation S. Free online tax preparation income tax. Free online tax preparation However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. Free online tax preparation Yes. Free online tax preparation All U. Free online tax preparation S. Free online tax preparation citizens and resident aliens are subject to U. Free online tax preparation S. Free online tax preparation tax on their worldwide income. Free online tax preparation If you paid taxes to a foreign government on income from sources outside the United States, you may be able to claim a foreign tax credit against your U. Free online tax preparation S. Free online tax preparation income tax liability for the foreign taxes paid. Free online tax preparation Form 1116 is used to figure the allowable credit. Free online tax preparation Your U. Free online tax preparation S. Free online tax preparation tax obligation on your income is the same as that of a retired person living in the United States. Free online tax preparation (See the discussion on filing requirements in chapter 1 of this publication. Free online tax preparation ) U. Free online tax preparation S. Free online tax preparation taxpayers overseas have the same requirements for paying estimated tax as those in the United States. Free online tax preparation See the discussion under Estimated Tax in chapter 1. Free online tax preparation Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. Free online tax preparation S. Free online tax preparation taxation. Free online tax preparation Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. Free online tax preparation The first installment of estimated tax is due on April 15 of the year for which the income is earned. Free online tax preparation Generally, only U. Free online tax preparation S. Free online tax preparation currency is acceptable for payment of income tax. Free online tax preparation However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. Free online tax preparation Yes. Free online tax preparation A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. Free online tax preparation No. Free online tax preparation The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. Free online tax preparation Yes. Free online tax preparation You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. Free online tax preparation You are not bound by the test indicated in the application for extension of time. Free online tax preparation You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. Free online tax preparation If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. Free online tax preparation No. Free online tax preparation You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. Free online tax preparation After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. Free online tax preparation b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. Free online tax preparation This allows you to file only once and saves you from paying the tax and waiting for a refund. Free online tax preparation However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. Free online tax preparation If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. Free online tax preparation File the late returns as soon as possible, stating your reason for filing late. Free online tax preparation For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. Free online tax preparation It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. Free online tax preparation A return filed before the due date is considered filed on the due date. Free online tax preparation . Free online tax preparation 2) I am going abroad this year and expect to qualify for the foreign earned income exclusion. Free online tax preparation How can I secure an extension of time to file my return, when should I file my return, and what forms are required? a) You should file Form 2350 by the due date of your return to request an extension of time to file. Free online tax preparation Form 2350 is a special form for those U. Free online tax preparation S. Free online tax preparation citizens or residents abroad who expect to qualify for the foreign earned income exclusion or the housing exclusion or deduction under either the bona fide residence test or physical presence test and would like to have an extension of time to delay filing until after they have qualified. Free online tax preparation b) If the extension is granted, you should file your return after you qualify, but by the approved extension date. Free online tax preparation c) You must file your Form 1040 with Form 2555 (or Form 2555-EZ). Free online tax preparation Generally, yes. Free online tax preparation Every U. Free online tax preparation S. Free online tax preparation citizen or resident who receives income must file a U. Free online tax preparation S. Free online tax preparation income tax return unless total income without regard to the foreign earned income exclusion is below an amount based on filing status. Free online tax preparation The income levels for filing purposes are discussed under Filing Requirements in chapter 1. Free online tax preparation If your regular filing date has passed, you should file a return, Form 1040, as soon as possible for last year. Free online tax preparation Include a statement with this return noting that you have returned to the United States and will not qualify for the foreign earned income exclusion. Free online tax preparation You must report your worldwide income on the return. Free online tax preparation If you paid a foreign tax on the income earned abroad, you may be able to either deduct this tax as an itemized deduction or claim it as a credit against your U. Free online tax preparation S. Free online tax preparation income tax. Free online tax preparation However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. Free online tax preparation Yes. Free online tax preparation All U. Free online tax preparation S. Free online tax preparation citizens and resident aliens are subject to U. Free online tax preparation S. Free online tax preparation tax on their worldwide income. Free online tax preparation If you paid taxes to a foreign government on income from sources outside the United States, you may be able to claim a foreign tax credit against your U. Free online tax preparation S. Free online tax preparation income tax liability for the foreign taxes paid. Free online tax preparation Form 1116 is used to figure the allowable credit. Free online tax preparation Your U. Free online tax preparation S. Free online tax preparation tax obligation on your income is the same as that of a retired person living in the United States. Free online tax preparation (See the discussion on filing requirements in chapter 1 of this publication. Free online tax preparation ) U. Free online tax preparation S. Free online tax preparation taxpayers overseas have the same requirements for paying estimated tax as those in the United States. Free online tax preparation See the discussion under Estimated Tax in chapter 1. Free online tax preparation Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. Free online tax preparation S. Free online tax preparation taxation. Free online tax preparation Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. Free online tax preparation The first installment of estimated tax is due on April 15 of the year for which the income is earned. Free online tax preparation Generally, only U. Free online tax preparation S. Free online tax preparation currency is acceptable for payment of income tax. Free online tax preparation However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. Free online tax preparation Yes. Free online tax preparation A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. Free online tax preparation No. Free online tax preparation The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. Free online tax preparation Yes. Free online tax preparation You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. Free online tax preparation You are not bound by the test indicated in the application for extension of time. Free online tax preparation You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. Free online tax preparation If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. Free online tax preparation No. Free online tax preparation You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. Free online tax preparation After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. Free online tax preparation b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. Free online tax preparation This allows you to file only once and saves you from paying the tax and waiting for a refund. Free online tax preparation However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. Free online tax preparation If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. Free online tax preparation File the late returns as soon as possible, stating your reason for filing late. Free online tax preparation For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. Free online tax preparation It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. Free online tax preparation A return filed before the due date is considered filed on the due date. Free online tax preparation . Free online tax preparation 3) My entire income qualifies for the foreign earned income exclusion. Free online tax preparation Must I file a tax return? Generally, yes. Free online tax preparation Every U. Free online tax preparation S. Free online tax preparation citizen or resident who receives income must file a U. Free online tax preparation S. Free online tax preparation income tax return unless total income without regard to the foreign earned income exclusion is below an amount based on filing status. Free online tax preparation The income levels for filing purposes are discussed under Filing Requirements in chapter 1. Free online tax preparation If your regular filing date has passed, you should file a return, Form 1040, as soon as possible for last year. Free online tax preparation Include a statement with this return noting that you have returned to the United States and will not qualify for the foreign earned income exclusion. Free online tax preparation You must report your worldwide income on the return. Free online tax preparation If you paid a foreign tax on the income earned abroad, you may be able to either deduct this tax as an itemized deduction or claim it as a credit against your U. Free online tax preparation S. Free online tax preparation income tax. Free online tax preparation However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. Free online tax preparation Yes. Free online tax preparation All U. Free online tax preparation S. Free online tax preparation citizens and resident aliens are subject to U. Free online tax preparation S. Free online tax preparation tax on their worldwide income. Free online tax preparation If you paid taxes to a foreign government on income from sources outside the United States, you may be able to claim a foreign tax credit against your U. Free online tax preparation S. Free online tax preparation income tax liability for the foreign taxes paid. Free online tax preparation Form 1116 is used to figure the allowable credit. Free online tax preparation Your U. Free online tax preparation S. Free online tax preparation tax obligation on your income is the same as that of a retired person living in the United States. Free online tax preparation (See the discussion on filing requirements in chapter 1 of this publication. Free online tax preparation ) U. Free online tax preparation S. Free online tax preparation taxpayers overseas have the same requirements for paying estimated tax as those in the United States. Free online tax preparation See the discussion under Estimated Tax in chapter 1. Free online tax preparation Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. Free online tax preparation S. Free online tax preparation taxation. Free online tax preparation Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. Free online tax preparation The first installment of estimated tax is due on April 15 of the year for which the income is earned. Free online tax preparation Generally, only U. Free online tax preparation S. Free online tax preparation currency is acceptable for payment of income tax. Free online tax preparation However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. Free online tax preparation Yes. Free online tax preparation A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. Free online tax preparation No. Free online tax preparation The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. Free online tax preparation Yes. Free online tax preparation You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. Free online tax preparation You are not bound by the test indicated in the application for extension of time. Free online tax preparation You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. Free online tax preparation If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. Free online tax preparation No. Free online tax preparation You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. Free online tax preparation After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. Free online tax preparation b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. Free online tax preparation This allows you to file only once and saves you from paying the tax and waiting for a refund. Free online tax preparation However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. Free online tax preparation If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. Free online tax preparation File the late returns as soon as possible, stating your reason for filing late. Free online tax preparation For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. Free online tax preparation It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. Free online tax preparation A return filed before the due date is considered filed on the due date. Free online tax preparation . Free online tax preparation 4) I was sent abroad by my company in November of last year. Free online tax preparation I plan to secure an extension of time on Form 2350 to file my tax return for last year because I expect to qualify for the foreign earned income exclusion under the physical presence test. Free online tax preparation However, if my company recalls me to the United States before the end of the qualifying period and I find I will not qualify for the exclusion, how and when should I file my return? If your regular filing date has passed, you should file a return, Form 1040, as soon as possible for last year. Free online tax preparation Include a statement with this return noting that you have returned to the United States and will not qualify for the foreign earned income exclusion. Free online tax preparation You must report your worldwide income on the return. Free online tax preparation If you paid a foreign tax on the income earned abroad, you may be able to either deduct this tax as an itemized deduction or claim it as a credit against your U. Free online tax preparation S. Free online tax preparation income tax. Free online tax preparation However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. Free online tax preparation Yes. Free online tax preparation All U. Free online tax preparation S. Free online tax preparation citizens and resident aliens are subject to U. Free online tax preparation S. Free online tax preparation tax on their worldwide income. Free online tax preparation If you paid taxes to a foreign government on income from sources outside the United States, you may be able to claim a foreign tax credit against your U. Free online tax preparation S. Free online tax preparation income tax liability for the foreign taxes paid. Free online tax preparation Form 1116 is used to figure the allowable credit. Free online tax preparation Your U. Free online tax preparation S. Free online tax preparation tax obligation on your income is the same as that of a retired person living in the United States. Free online tax preparation (See the discussion on filing requirements in chapter 1 of this publication. Free online tax preparation ) U. Free online tax preparation S. Free online tax preparation taxpayers overseas have the same requirements for paying estimated tax as those in the United States. Free online tax preparation See the discussion under Estimated Tax in chapter 1. Free online tax preparation Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. Free online tax preparation S. Free online tax preparation taxation. Free online tax preparation Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. Free online tax preparation The first installment of estimated tax is due on April 15 of the year for which the income is earned. Free online tax preparation Generally, only U. Free online tax preparation S. Free online tax preparation currency is acceptable for payment of income tax. Free online tax preparation However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. Free online tax preparation Yes. Free online tax preparation A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. Free online tax preparation No. Free online tax preparation The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. Free online tax preparation Yes. Free online tax preparation You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. Free online tax preparation You are not bound by the test indicated in the application for extension of time. Free online tax preparation You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. Free online tax preparation If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. Free online tax preparation No. Free online tax preparation You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. Free online tax preparation After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. Free online tax preparation b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. Free online tax preparation This allows you to file only once and saves you from paying the tax and waiting for a refund. Free online tax preparation However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. Free online tax preparation If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. Free online tax preparation File the late returns as soon as possible, stating your reason for filing late. Free online tax preparation For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. Free online tax preparation It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. Free online tax preparation A return filed before the due date is considered filed on the due date. Free online tax preparation . Free online tax preparation 5) I am a U. Free online tax preparation S. Free online tax preparation citizen and have no taxable income from the United States, but I have substantial income from a foreign source. Free online tax preparation Am I required to file a U. Free online tax preparation S. Free online tax preparation income tax return? Yes. Free online tax preparation All U. Free online tax preparation S. Free online tax preparation citizens and resident aliens are subject to U. Free online tax preparation S. Free online tax preparation tax on their worldwide income. Free online tax preparation If you paid taxes to a foreign government on income from sources outside the United States, you may be able to claim a foreign tax credit against your U. Free online tax preparation S. Free online tax preparation income tax liability for the foreign taxes paid. Free online tax preparation Form 1116 is used to figure the allowable credit. Free online tax preparation Your U. Free online tax preparation S. Free online tax preparation tax obligation on your income is the same as that of a retired person living in the United States. Free online tax preparation (See the discussion on filing requirements in chapter 1 of this publication. Free online tax preparation ) U. Free online tax preparation S. Free online tax preparation taxpayers overseas have the same requirements for paying estimated tax as those in the United States. Free online tax preparation See the discussion under Estimated Tax in chapter 1. Free online tax preparation Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. Free online tax preparation S. Free online tax preparation taxation. Free online tax preparation Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. Free online tax preparation The first installment of estimated tax is due on April 15 of the year for which the income is earned. Free online tax preparation Generally, only U. Free online tax preparation S. Free online tax preparation currency is acceptable for payment of income tax. Free online tax preparation However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. Free online tax preparation Yes. Free online tax preparation A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. Free online tax preparation No. Free online tax preparation The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. Free online tax preparation Yes. Free online tax preparation You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. Free online tax preparation You are not bound by the test indicated in the application for extension of time. Free online tax preparation You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. Free online tax preparation If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. Free online tax preparation No. Free online tax preparation You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. Free online tax preparation After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. Free online tax preparation b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. Free online tax preparation This allows you to file only once and saves you from paying the tax and waiting for a refund. Free online tax preparation However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. Free online tax preparation If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. Free online tax preparation File the late returns as soon as possible, stating your reason for filing late. Free online tax preparation For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. Free online tax preparation It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. Free online tax preparation A return filed before the due date is considered filed on the due date. Free online tax preparation . Free online tax preparation 6) I am a U. Free online tax preparation S. Free online tax preparation citizen who has retired, and I expect to remain in a foreign country. Free online tax preparation Do I have any further U. Free online tax preparation S. Free online tax preparation tax obligations? Your U. Free online tax preparation S. Free online tax preparation tax obligation on your income is the same as that of a retired person living in the United States. Free online tax preparation (See the discussion on filing requirements in chapter 1 of this publication. Free online tax preparation ) U. Free online tax preparation S. Free online tax preparation taxpayers overseas have the same requirements for paying estimated tax as those in the United States. Free online tax preparation See the discussion under Estimated Tax in chapter 1. Free online tax preparation Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. Free online tax preparation S. Free online tax preparation taxation. Free online tax preparation Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. Free online tax preparation The first installment of estimated tax is due on April 15 of the year for which the income is earned. Free online tax preparation Generally, only U. Free online tax preparation S. Free online tax preparation currency is acceptable for payment of income tax. Free online tax preparation However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. Free online tax preparation Yes. Free online tax preparation A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. Free online tax preparation No. Free online tax preparation The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. Free online tax preparation Yes. Free online tax preparation You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. Free online tax preparation You are not bound by the test indicated in the application for extension of time. Free online tax preparation You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. Free online tax preparation If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. Free online tax preparation No. Free online tax preparation You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. Free online tax preparation After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. Free online tax preparation b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. Free online tax preparation This allows you to file only once and saves you from paying the tax and waiting for a refund. Free online tax preparation However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. Free online tax preparation If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. Free online tax preparation File the late returns as soon as possible, stating your reason for filing late. Free online tax preparation For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. Free online tax preparation It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. Free online tax preparation A return filed before the due date is considered filed on the due date. Free online tax preparation . Free online tax preparation 7) I have been a bona fide resident of a foreign country for over 5 years. Free online tax preparation Is it necessary for me to pay estimated tax? U. Free online tax preparation S. Free online tax preparation taxpayers overseas have the same requirements for paying estimated tax as those in the United States. Free online tax preparation See the discussion under Estimated Tax in chapter 1. Free online tax preparation Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. Free online tax preparation S. Free online tax preparation taxation. Free online tax preparation Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. Free online tax preparation The first installment of estimated tax is due on April 15 of the year for which the income is earned. Free online tax preparation Generally, only U. Free online tax preparation S. Free online tax preparation currency is acceptable for payment of income tax. Free online tax preparation However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. Free online tax preparation Yes. Free online tax preparation A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. Free online tax preparation No. Free online tax preparation The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. Free online tax preparation Yes. Free online tax preparation You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. Free online tax preparation You are not bound by the test indicated in the application for extension of time. Free online tax preparation You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. Free online tax preparation If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. Free online tax preparation No. Free online tax preparation You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. Free online tax preparation After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. Free online tax preparation b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. Free online tax preparation This allows you to file only once and saves you from paying the tax and waiting for a refund. Free online tax preparation However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. Free online tax preparation If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. Free online tax preparation File the late returns as soon as possible, stating your reason for filing late. Free online tax preparation For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. Free online tax preparation It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. Free online tax preparation A return filed before the due date is considered filed on the due date. Free online tax preparation . Free online tax preparation 8) Will a check payable in foreign currency be acceptable in payment of my U. Free online tax preparation S. Free online tax preparation tax? Generally, only U. Free online tax preparation S. Free online tax preparation currency is acceptable for payment of income tax. Free online tax preparation However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. Free online tax preparation Yes. Free online tax preparation A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. Free online tax preparation No. Free online tax preparation The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. Free online tax preparation Yes. Free online tax preparation You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. Free online tax preparation You are not bound by the test indicated in the application for extension of time. Free online tax preparation You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. Free online tax preparation If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. Free online tax preparation No. Free online tax preparation You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. Free online tax preparation After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. Free online tax preparation b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. Free online tax preparation This allows you to file only once and saves you from paying the tax and waiting for a refund. Free online tax preparation However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. Free online tax preparation If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. Free online tax preparation File the late returns as soon as possible, stating your reason for filing late. Free online tax preparation For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. Free online tax preparation It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. Free online tax preparation A return filed before the due date is considered filed on the due date. Free online tax preparation . Free online tax preparation 9) I have met the test for physical presence in a foreign country and am filing returns for 2 years. Free online tax preparation Must I file a separate Form 2555 (or Form 2555-EZ) with each return? Yes. Free online tax preparation A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. Free online tax preparation No. Free online tax preparation The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. Free online tax preparation Yes. Free online tax preparation You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. Free online tax preparation You are not bound by the test indicated in the application for extension of time. Free online tax preparation You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. Free online tax preparation If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. Free online tax preparation No. Free online tax preparation You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. Free online tax preparation After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. Free online tax preparation b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. Free online tax preparation This allows you to file only once and saves you from paying the tax and waiting for a refund. Free online tax preparation However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. Free online tax preparation If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. Free online tax preparation File the late returns as soon as possible, stating your reason for filing late. Free online tax preparation For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. Free online tax preparation It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. Free online tax preparation A return filed before the due date is considered filed on the due date. Free online tax preparation . Free online tax preparation 10) Does a Form 2555 (or 2555-EZ) with a Schedule C or Form W-2 attached constitute a return? No. Free online tax preparation The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. Free online tax preparation Yes. Free online tax preparation You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. Free online tax preparation You are not bound by the test indicated in the application for extension of time. Free online tax preparation You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. Free online tax preparation If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. Free online tax preparation No. Free online tax preparation You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. Free online tax preparation After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. Free online tax preparation b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. Free online tax preparation This allows you to file only once and saves you from paying the tax and waiting for a refund. Free online tax preparation However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. Free online tax preparation If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. Free online tax preparation File the late returns as soon as possible, stating your reason for filing late. Free online tax preparation For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. Free online tax preparation It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. Free online tax preparation A return filed before the due date is considered filed on the due date. Free online tax preparation . Free online tax preparation 11) On Form 2350, Application for Extension of Time To File U. Free online tax preparation S. Free online tax preparation Income Tax Return, I stated that I would qualify for the foreign earned income exclusion under the physical presence test. Free online tax preparation If I qualify under the bona fide residence test, can I file my return on that basis? Yes. Free online tax preparation You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. Free online tax preparation You are not bound by the test indicated in the application for extension of time. Free online tax preparation You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. Free online tax preparation If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. Free online tax preparation No. Free online tax preparation You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. Free online tax preparation After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. Free online tax preparation b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. Free online tax preparation This allows you to file only once and saves you from paying the tax and waiting for a refund. Free online tax preparation However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. Free online tax preparation If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. Free online tax preparation File the late returns as soon as possible, stating your reason for filing late. Free online tax preparation For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. Free online tax preparation It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. Free online tax preparation A return filed before the due date is considered filed on the due date. Free online tax preparation . Free online tax preparation 12) I am a U. Free online tax preparation S. Free online tax preparation citizen who worked in the United States for 6 months last year. Free online tax preparation I accepted employment overseas in July of last year and expect to qualify for the foreign earned income exclusion. Free online tax preparation Should I file a return and pay tax on the income earned in the United States during the first 6 months and then, when I qualify, file another return covering the last 6 months of the year? No. Free online tax preparation You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. Free online tax preparation After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. Free online tax preparation b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. Free online tax preparation This allows you to file only once and saves you from paying the tax and waiting for a refund. Free online tax preparation However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. Free online tax preparation If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. Free online tax preparation File the late returns as soon as possible, stating your reason for filing late. Free online tax preparation For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. Free online tax preparation It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. Free online tax preparation A return filed before the due date is considered filed on the due date. Free online tax preparation . Free online tax preparation 13) I am a U. Free online tax preparation S. Free online tax preparation citizen. Free online tax preparation I have lived abroad for a number of years and recently realized that I should have been filing U. Free online tax preparation S. Free online tax preparation income tax returns. Free online tax preparation How do I correct this oversight in not having filed returns for these years? File the late returns as soon as possible, stating your reason for filing late. Free online tax preparation For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. Free online tax preparation It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. Free online tax preparation A return filed before the due date is considered filed on the due date. Free online tax preparation . Free online tax preparation 14) In 2008, I qualified to exclude my foreign earned income, but I did not claim this exclusion on the return I filed in 2009. Free online tax preparation I paid all outstanding taxes with the return. Free online tax preparation Can I file a claim for refund now? It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. Free online tax preparation A return filed before the due date is considered filed on the due date. Free online tax preparation 2. Free online tax preparation Meeting the Requirements of Either the Bona Fide Residence Test or the Physical Presence Test . Free online tax preparation 1) I recently came to Country X to work for the Orange Tractor Co. Free online tax preparation and I expect to be here for 5 or 6 years. Free online tax preparation I understand that upon the completion of 1 full year I will qualify for an exclusion or deduction under the bona fide residence test. Free online tax preparation Is this correct? . Free online tax preparation 2) I understand the physical presence test to be simply a matter of being physically present in a foreign country for at least 330 days within 12 consecutive months; but what are the criteria of the bona fide residence test? . Free online tax preparation 3) To meet the qualification of an uninterrupted period which includes an entire taxable year, do I have to be physically present in a foreign country for the entire year? . Free online tax preparation 4) I am a U. Free online tax preparation S. Free online tax preparation citizen and during 2012 was a bona fide resident of Country X. Free online tax preparation On January 15, 2013, I was notified that I was to be assigned to Country Y. Free online tax preparation I was recalled to New York for 90 days orientation and then went to Country Y, where I have been since. Free online tax preparation Although I was not in Country Y on January 1, I was a bona fide resident of Country X and was in Country Y on December 31, 2013. Free online tax preparation My family remained in Country X until completion of the orientation period, and my household goods were shipped directly to my new post. Free online tax preparation Am I a bona fide resident of a foreign country for 2013, or must I wait for the entire year of 2014 to become one? . Free online tax preparation 5) Due to illness, I returned to the United States before I completed my qualifying period to claim the foreign earned income exclusion. Free online tax preparation Can I figure the exclusion for the period I resided abroad? . Free online tax preparation 6) Can a resident alien of the United States qualify for an exclusion or deduction under the bona fide residence test or the physical presence test? . Free online tax preparation 7) On August 13 of last year I left the United States and arrived in Country Z to work for the Gordon Manufacturing Company. Free online tax preparation I expected to be able to exclude my foreign earned income under the physical presence test because I planned to be in Country Z for at least 1 year. Free online tax preparation However, I was reassigned back to the United States and left Country Z on July 1 of this year. Free online tax preparation Can I exclude any of my foreign earned income? . Free online tax preparation 1) I recently came to Country X to work for the Orange Tractor Co. Free online tax preparation and I expect to be here for 5 or 6 years. Free online tax preparation I understand that upon the completion of 1 full year I will qualify for an exclusion or deduction under the bona fide residence test. Free online tax preparation Is this correct? Not necessarily. Free online tax preparation The law provides that to qualify under this test for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, a person must be a “bona fide resident of a foreign country or countries for an uninterrupted period which includes an entire taxable year. Free online tax preparation ” If, like most U. Free online tax preparation S. Free online tax preparation citizens, you file your return on a calendar year basis, the taxable year referred to in the law would be from January 1 to December 31 of any particular year. Free online tax preparation Unless you established residence in Country X on January 1, it would be more than 1 year before you would be a bona fide resident of a foreign country. Free online tax preparation Once you have completed your qualifying period, however, you are entitled to exclude the income or to claim the housing exclusion or deduction from the date you established bona fide residence. Free online tax preparation To be a bona fide resident of a foreign country, you must show that you entered a foreign country intending to remain there for an indefinite or prolonged period and, to that end, you are making your home in that country. Free online tax preparation Consideration is given to the type of quarters occupied, whether your family went with you, the type of visa, the employment agreement, and any other factor pertinent to show whether your stay in the foreign country is indefinite or prolonged. Free online tax preparation To claim the foreign earned income exclusion or foreign housing exclusion or deduction under this test, the period of foreign residence must include 1 full tax year (usually January 1 – December 31), but once you meet this time requirement, you figure the exclusions and the deduction from the date the residence actually began. Free online tax preparation No. Free online tax preparation Uninterrupted refers to the bona fide residence proper and not to the physical presence of the individual. Free online tax preparation During the period of bona fide residence in a foreign country, even during the first full year, you can leave the country for brief and temporary trips back to the United States or elsewhere for vacation, or even for business. Free online tax preparation To preserve your status as a bona fide resident of a foreign country, you must have a clear intention of returning from those trips, without unreasonable delay, to your foreign residence. Free online tax preparation Since you did not break your period of foreign residence, you would continue to be a bona fide resident of a foreign country for 2013. Free online tax preparation No. Free online tax preparation You are not entitled to any exclusion of foreign earned income since you did not complete your qualifying period under either the bona fide residence test or physical presence test. Free online tax preparation If you paid foreign tax on the income earned abroad, you may be able to claim that tax as a deduction or as a credit against your U. Free online tax preparation S. Free online tax preparation tax. Free online tax preparation Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. Free online tax preparation Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. Free online tax preparation No. Free online tax preparation You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. Free online tax preparation . Free online tax preparation 2) I understand the physical presence test to be simply a matter of being physically present in a foreign country for at least 330 days within 12 consecutive months; but what are the criteria of the bona fide residence test? To be a bona fide resident of a foreign country, you must show that you entered a foreign country intending to remain there for an indefinite or prolonged period and, to that end, you are making your home in that country. Free online tax preparation Consideration is given to the type of quarters occupied, whether your family went with you, the type of visa, the employment agreement, and any other factor pertinent to show whether your stay in the foreign country is indefinite or prolonged. Free online tax preparation To claim the foreign earned income exclusion or foreign housing exclusion or deduction under this test, the period of foreign residence must include 1 full tax year (usually January 1 – December 31), but once you meet this time requirement, you figure the exclusions and the deduction from the date the residence actually began. Free online tax preparation No. Free online tax preparation Uninterrupted refers to the bona fide residence proper and not to the physical presence of the individual. Free online tax preparation During the period of bona fide residence in a foreign country, even during the first full year, you can leave the country for brief and temporary trips back to the United States or elsewhere for vacation, or even for business. Free online tax preparation To preserve your status as a bona fide resident of a foreign country, you must have a clear intention of returning from those trips, without unreasonable delay, to your foreign residence. Free online tax preparation Since you did not break your period of foreign residence, you would continue to be a bona fide resident of a foreign country for 2013. Free online tax preparation No. Free online tax preparation You are not entitled to any exclusion of foreign earned income since you did not complete your qualifying period under either the bona fide residence test or physical presence test. Free online tax preparation If you paid foreign tax on the income earned abroad, you may be able to claim that tax as a deduction or as a credit against your U. Free online tax preparation S. Free online tax preparation tax. Free online tax preparation Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. Free online tax preparation Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. Free online tax preparation No. Free online tax preparation You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. Free online tax preparation . Free online tax preparation 3) To meet the qualification of “an uninterrupted period which includes an entire taxable year,” do I have to be physically present in a foreign country for the entire year? No. Free online tax preparation Uninterrupted refers to the bona fide residence proper and not to the physical presence of the individual. Free online tax preparation During the period of bona fide residence in a foreign country, even during the first full year, you can leave the country for brief and temporary trips back to the United States or elsewhere for vacation, or even for business. Free online tax preparation To preserve your status as a bona fide resident of a foreign country, you must have a clear intention of returning from those trips, without unreasonable delay, to your foreign residence. Free online tax preparation Since you did not break your period of foreign residence, you would continue to be a bona fide resident of a foreign country for 2013. Free online tax preparation No. Free online tax preparation You are not entitled to any exclusion of foreign earned income since you did not complete your qualifying period under either the bona fide residence test or physical presence test. Free online tax preparation If you paid foreign tax on the income earned abroad, you may be able to claim that tax as a deduction or as a credit against your U. Free online tax preparation S. Free online tax preparation tax. Free online tax preparation Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. Free online tax preparation Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. Free online tax preparation No. Free online tax preparation You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. Free online tax preparation . Free online tax preparation 4) I am a U. Free online tax preparation S. Free online tax preparation citizen and during 2012 was a bona fide resident of Country X. Free online tax preparation On January 15, 2013, I was notified that I was to be assigned to Country Y. Free online tax preparation I was recalled to New York for 90 days orientation and then went to Country Y, where I have been since. Free online tax preparation Although I was not in Country Y on January 1, I was a bona fide resident of Country X and was in Country Y on December 31, 2013. Free online tax preparation My family remained in Country X until completion of the orientation period, and my household goods were shipped directly to my new post. Free online tax preparation Am I a bona fide resident of a foreign country for 2013, or must I wait for the entire year of 2014 to become one? Since you did not break your period of foreign residence, you would continue to be a bona fide resident of a foreign country for 2013. Free online tax preparation No. Free online tax preparation You are not entitled to any exclusion of foreign earned income since you did not complete your qualifying period under either the bona fide residence test or physical presence test. Free online tax preparation If you paid foreign tax on the income earned abroad, you may be able to claim that tax as a deduction or as a credit against your U. Free online tax preparation S. Free online tax preparation tax. Free online tax preparation Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. Free online tax preparation Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. Free online tax preparation No. Free online tax preparation You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. Free online tax preparation . Free online tax preparation 5) Due to illness, I returned to the United States before I completed my qualifying period to claim the foreign earned income exclusion. Free online tax preparation Can I figure the exclusion for the period I resided abroad? No. Free online tax preparation You are not entitled to any exclusion of foreign earned income since you did not complete your qualifying period under either the bona fide residence test or physical presence test. Free online tax preparation If you paid foreign tax on the income earned abroad, you may be able to claim that tax as a deduction or as a credit against your U. Free online tax preparation S. Free online tax preparation tax. Free online tax preparation Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. Free online tax preparation Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. Free online tax preparation No. Free online tax preparation You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. Free online tax preparation . Free online tax preparation 6) Can a resident alien of the United States qualify for an exclusion or deduction under the bona fide residence test or the physical presence test? Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. Free online tax preparation Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. Free online tax preparation No. Free online tax preparation You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. Free online tax preparation . Free online tax preparation 7) On August 13 of last year I left the United States and arrived in Country Z to work for the Gordon Manufacturing Company. Free online tax preparation I expected to be able to exclude my foreign earned income under the physical presence test because I planned to be in Country Z for at least 1 year. Free online tax preparation However, I was reassigned back to the United States and left Country Z on July 1 of this year. Free online tax preparation Can I exclude any of my foreign earned income? No. Free online tax preparation You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. Free online tax preparation 3. Free online tax preparation Foreign Earned Income . Free online tax preparation 1) I am an employee of the U. Free online tax preparation S. Free online tax preparation Government working abroad. Free online tax preparation Can all or part of my government income earned abroad qualify for the foreign earned income exclusion? . Free online tax preparation 2) I qualify for the foreign earned income exclusion under the bona fide residence test. Free online tax preparation Does my foreign earned income include my U. Free online tax preparation S. Free online tax preparation dividends and the interest I receive on a foreign bank account? . Free online tax preparation 3) My company pays my foreign income tax on my foreign earnings. Free online tax preparation Is this taxable compensation? . Free online tax preparation 4) I live in an apartment in a foreign city for which my employer pays the rent. Free online tax preparation Should I include in my income the cost to my employer ($1,200 a month) or the fair market value of equivalent housing in the United States ($800 a month)? . Free online tax preparation 5) My U. Free online tax preparation S. Free online tax preparation employer pays my salary into my U. Free online tax preparation S. Free online tax preparation bank account. Free online tax preparation Is this income considered earned in the United States or is it considered foreign earned income? . Free online tax preparation 6) What is considered a foreign country? . Free online tax preparation 7) What is the source of earned income? . Free online tax preparation 1) I am an employee of the U. Free online tax preparation S. Free online tax preparation Government working abroad. Free online tax preparation Can all or part of my government income earned abroad qualify for the foreign earned income exclusion? No. Free online tax preparation The foreign earned income exclusion applies to your foreign earned income. Free online tax preparation Amounts paid by the United States or its agencies to their employees are not treated, for this purpose, as foreign earned income. Free online tax preparation No. Free online tax preparation The only income that is foreign earned income is income from the performance of personal services abroad. Free online tax preparation Investment income is not earned income. Free online tax preparation However, you must include it in gross income reported on your Form 1040. Free online tax preparation Yes. Free online tax preparation The amount is compensation for services performed. Free online tax preparation The tax paid by your company should be reported on Form 1040, line 7, and on Form 2555, Part IV, line 22(f) (or on Form 2555-EZ, Part IV, line 17). Free online tax preparation You must include in income the fair market value (FMV) of the facility provided, where it is provided. Free online tax preparation This will usually be the rent your employer pays. Free online tax preparation Situations when the FMV is not included in income are discussed in chapter 4 under Exclusion of Meals and Lodging. Free online tax preparation If you performed the services to earn this salary outside the United States, your salary is considered earned abroad. Free online tax preparation It does not matter that you are paid by a U. Free online tax preparation S. Free online tax preparation employer or that your salary is deposited in a U. Free online tax preparation S. Free online tax preparation bank account in the United States. Free online tax preparation The source of salary, wages, commissions, and other personal service income is the place where you perform the services. Free online tax preparation For the purposes of the foreign earned income exclusion and the foreign housing exclusion or deduction, any territory under the sovereignty of a countr
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Iowa Office of the Attorney General

Website: Iowa Office of the Attorney General

Address: Iowa Office of the Attorney General
Consumer Protection Division
1305 E. Walnut St.
Des Moines, IA 50319

Phone Number: 515-281-5926

Toll-free: 1-888-777-4590 (IA)

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Division of Banking

Website: Division of Banking

Address: Division of Banking
200 E. Grand Ave., Suite 300
Des Moines, IA 50309-1827

Phone Number: 515-281-4014

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Division of Insurance

Website: Division of Insurance

Address: Division of Insurance
330 Maple St.
Des Moines, IA 50319-0065

Phone Number: 515-281-5705

Toll-free: 1-877-955-1212 (IA)

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Securities Bureau

Website: Securities Bureau

Address: Securities Bureau
340 Maple St.
Des Moines, IA 50319

Phone Number: 515-281-5705

Toll-free: 1-877-955-1212 (IA)

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Utilities Board

Website: Utilities Board

Address: Utilities Board
Customer Service Group
1375 E. Court Ave., Room 69
Des Moines, IA 50319-0069

Phone Number: 515-725-7321

Toll-free: 1-877-565-4450 (IA)

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The Free Online Tax Preparation

Free online tax preparation Publication 561 - Main Contents Table of Contents What Is Fair Market Value (FMV)?Factors. Free online tax preparation Stock. Free online tax preparation Options. Free online tax preparation Determining Fair Market Value Problems in Determining Fair Market Value Valuation of Various Kinds of PropertyHousehold Goods Used Clothing Jewelry and Gems Paintings, Antiques, and Other Objects of Art Collections Cars, Boats, and Aircraft Inventory Patents Stocks and Bonds Real Estate Interest in a Business Annuities, Interests for Life or Terms of Years, Remainders, and Reversions Certain Life Insurance and Annuity Contracts Partial Interest in Property Not in Trust AppraisalsDeductions of More Than $5,000 Deductions of More Than $500,000 Qualified Appraisal Form 8283 Internal Revenue Service Review of Appraisals Penalty How To Get Tax HelpLow income tax clinics (LITCs). Free online tax preparation What Is Fair Market Value (FMV)? To figure how much you may deduct for property that you contribute, you must first determine its fair market value on the date of the contribution. Free online tax preparation Fair market value. Free online tax preparation   Fair market value (FMV) is the price that property would sell for on the open market. Free online tax preparation It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. Free online tax preparation If you put a restriction on the use of property you donate, the FMV must reflect that restriction. Free online tax preparation Example 1. Free online tax preparation If you give used clothing to the Salvation Army, the FMV would be the price that typical buyers actually pay for clothing of this age, condition, style, and use. Free online tax preparation Usually, such items are worth far less than what you paid for them. Free online tax preparation Example 2. Free online tax preparation If you donate land and restrict its use to agricultural purposes, you must value the land at its value for agricultural purposes, even though it would have a higher FMV if it were not restricted. Free online tax preparation Factors. Free online tax preparation   In making and supporting the valuation of property, all factors affecting value are relevant and must be considered. Free online tax preparation These include: The cost or selling price of the item, Sales of comparable properties, Replacement cost, and Opinions of experts. Free online tax preparation   These factors are discussed later. Free online tax preparation Also, see Table 1 for a summary of questions to ask as you consider each factor. Free online tax preparation Date of contribution. Free online tax preparation   Ordinarily, the date of a contribution is the date that the transfer of the property takes place. Free online tax preparation Stock. Free online tax preparation   If you deliver, without any conditions, a properly endorsed stock certificate to a qualified organization or to an agent of the organization, the date of the contribution is the date of delivery. Free online tax preparation If the certificate is mailed and received through the regular mail, it is the date of mailing. Free online tax preparation If you deliver the certificate to a bank or broker acting as your agent or to the issuing corporation or its agent, for transfer into the name of the organization, the date of the contribution is the date the stock is transferred on the books of the corporation. Free online tax preparation Options. Free online tax preparation   If you grant an option to a qualified organization to buy real property, you have not made a charitable contribution until the organization exercises the option. Free online tax preparation The amount of the contribution is the FMV of the property on the date the option is exercised minus the exercise price. Free online tax preparation Example. Free online tax preparation You grant an option to a local university, which is a qualified organization, to buy real property. Free online tax preparation Under the option, the university could buy the property at any time during a 2-year period for $40,000. Free online tax preparation The FMV of the property on the date the option is granted is $50,000. Free online tax preparation In the following tax year, the university exercises the option. Free online tax preparation The FMV of the property on the date the option is exercised is $55,000. Free online tax preparation Therefore, you have made a charitable contribution of $15,000 ($55,000, the FMV, minus $40,000, the exercise price) in the tax year the option is exercised. Free online tax preparation Determining Fair Market Value Determining the value of donated property would be a simple matter if you could rely only on fixed formulas, rules, or methods. Free online tax preparation Usually it is not that simple. Free online tax preparation Using such formulas, etc. Free online tax preparation , seldom results in an acceptable determination of FMV. Free online tax preparation There is no single formula that always applies when determining the value of property. Free online tax preparation This is not to say that a valuation is only guesswork. Free online tax preparation You must consider all the facts and circumstances connected with the property, such as its desirability, use, and scarcity. Free online tax preparation For example, donated furniture should not be evaluated at some fixed rate such as 15% of the cost of new replacement furniture. Free online tax preparation When the furniture is contributed, it may be out of style or in poor condition, therefore having little or no market value. Free online tax preparation On the other hand, it may be an antique, the value of which could not be determined by using any formula. Free online tax preparation Cost or Selling Price of the Donated Property The cost of the property to you or the actual selling price received by the qualified organization may be the best indication of its FMV. Free online tax preparation However, because conditions in the market change, the cost or selling price of property may have less weight if the property was not bought or sold reasonably close to the date of contribution. Free online tax preparation The cost or selling price is a good indication of the property's value if: The purchase or sale took place close to the valuation date in an open market, The purchase or sale was at “arm's-length,” The buyer and seller knew all relevant facts, The buyer and seller did not have to act, and The market did not change between the date of purchase or sale and the valuation date. Free online tax preparation Example. Free online tax preparation Tom Morgan, who is not a dealer in gems, bought an assortment of gems for $5,000 from a promoter. Free online tax preparation The promoter claimed that the price was “wholesale” even though he and other dealers made similar sales at similar prices to other persons who were not dealers. Free online tax preparation The promoter said that if Tom kept the gems for more than 1 year and then gave them to charity, Tom could claim a charitable deduction of $15,000, which, according to the promoter, would be the value of the gems at the time of contribution. Free online tax preparation Tom gave the gems to a qualified charity 13 months after buying them. Free online tax preparation The selling price for these gems had not changed from the date of purchase to the date he donated them to charity. Free online tax preparation The best evidence of FMV depends on actual transactions and not on some artificial estimate. Free online tax preparation The $5,000 charged Tom and others is, therefore, the best evidence of the maximum FMV of the gems. Free online tax preparation Terms of the purchase or sale. Free online tax preparation   The terms of the purchase or sale should be considered in determining FMV if they influenced the price. Free online tax preparation These terms include any restrictions, understandings, or covenants limiting the use or disposition of the property. Free online tax preparation Rate of increase or decrease in value. Free online tax preparation   Unless you can show that there were unusual circumstances, it is assumed that the increase or decrease in the value of your donated property from your cost has been at a reasonable rate. Free online tax preparation For time adjustments, an appraiser may consider published price indexes for information on general price trends, building costs, commodity costs, securities, and works of art sold at auction in arm's-length sales. Free online tax preparation Example. Free online tax preparation Bill Brown bought a painting for $10,000. Free online tax preparation Thirteen months later he gave it to an art museum, claiming a charitable deduction of $15,000 on his tax return. Free online tax preparation The appraisal of the painting should include information showing that there were unusual circumstances that justify a 50% increase in value for the 13 months Bill held the property. Free online tax preparation Arm's-length offer. Free online tax preparation   An arm's-length offer to buy the property close to the valuation date may help to prove its value if the person making the offer was willing and able to complete the transaction. Free online tax preparation To rely on an offer, you should be able to show proof of the offer and the specific amount to be paid. Free online tax preparation Offers to buy property other than the donated item will help to determine value if the other property is reasonably similar to the donated property. Free online tax preparation Sales of Comparable Properties The sales prices of properties similar to the donated property are often important in determining the FMV. Free online tax preparation The weight to be given to each sale depends on the following. Free online tax preparation The degree of similarity between the property sold and the donated property. Free online tax preparation The time of the sale—whether it was close to the valuation date. Free online tax preparation The circumstances of the sale—whether it was at arm's-length with a knowledgeable buyer and seller, with neither having to act. Free online tax preparation The conditions of the market in which the sale was made—whether unusually inflated or deflated. Free online tax preparation The comparable sales method of valuing real estate is explained later under Valuation of Various Kinds of Property. Free online tax preparation Example 1. Free online tax preparation Mary Black, who is not a book dealer, paid a promoter $10,000 for 500 copies of a single edition of a modern translation of the Bible. Free online tax preparation The promoter had claimed that the price was considerably less than the “retail” price, and gave her a statement that the books had a total retail value of $30,000. Free online tax preparation The promoter advised her that if she kept the Bibles for more than 1 year and then gave them to a qualified organization, she could claim a charitable deduction for the “retail” price of $30,000. Free online tax preparation Thirteen months later she gave all the Bibles to a church that she selected from a list provided by the promoter. Free online tax preparation At the time of her donation, wholesale dealers were selling similar quantities of Bibles to the general public for $10,000. Free online tax preparation The FMV of the Bibles is $10,000, the price at which similar quantities of Bibles were being sold to others at the time of the contribution. Free online tax preparation Example 2. Free online tax preparation The facts are the same as in Example 1, except that the promoter gave Mary Black a second option. Free online tax preparation The promoter said that if Mary wanted a charitable deduction within 1 year of the purchase, she could buy the 500 Bibles at the “retail” price of $30,000, paying only $10,000 in cash and giving a promissory note for the remaining $20,000. Free online tax preparation The principal and interest on the note would not be due for 12 years. Free online tax preparation According to the promoter, Mary could then, within 1 year of the purchase, give the Bibles to a qualified organization and claim the full $30,000 retail price as a charitable contribution. Free online tax preparation She purchased the Bibles under the second option and, 3 months later, gave them to a church, which will use the books for church purposes. Free online tax preparation At the time of the gift, the promoter was selling similar lots of Bibles for either $10,000 or $30,000. Free online tax preparation The difference between the two prices was solely at the discretion of the buyer. Free online tax preparation The promoter was a willing seller for $10,000. Free online tax preparation Therefore, the value of Mary's contribution of the Bibles is $10,000, the amount at which similar lots of Bibles could be purchased from the promoter by members of the general public. Free online tax preparation Replacement Cost The cost of buying, building, or manufacturing property similar to the donated item should be considered in determining FMV. Free online tax preparation However, there must be a reasonable relationship between the replacement cost and the FMV. Free online tax preparation The replacement cost is the amount it would cost to replace the donated item on the valuation date. Free online tax preparation Often there is no relationship between the replacement cost and the FMV. Free online tax preparation If the supply of the donated property is more or less than the demand for it, the replacement cost becomes less important. Free online tax preparation To determine the replacement cost of the donated property, find the “estimated replacement cost new. Free online tax preparation ” Then subtract from this figure an amount for depreciation due to the physical condition and obsolescence of the donated property. Free online tax preparation You should be able to show the relationship between the depreciated replacement cost and the FMV, as well as how you arrived at the “estimated replacement cost new. Free online tax preparation ” Opinions of Experts Generally, the weight given to an expert's opinion on matters such as the authenticity of a coin or a work of art, or the most profitable and best use of a piece of real estate, depends on the knowledge and competence of the expert and the thoroughness with which the opinion is supported by experience and facts. Free online tax preparation For an expert's opinion to deserve much weight, the facts must support the opinion. Free online tax preparation For additional information, see Appraisals, later. Free online tax preparation Table 1. Free online tax preparation Factors That Affect FMV IF the factor you are considering is. Free online tax preparation . Free online tax preparation . Free online tax preparation THEN you should ask these questions. Free online tax preparation . Free online tax preparation . Free online tax preparation     cost or selling price Was the purchase or sale of the property reasonably close to the date of contribution? Was any increase or decrease in value, as compared to your cost, at a reasonable rate? Do the terms of purchase or sale limit what can be done with the property? Was there an arm's-length offer to buy the property close to the valuation date?     sales of comparable properties How similar is the property sold to the property donated? How close is the date of sale to the valuation date? Was the sale at arm's-length? What was the condition of the market at the time of sale?     replacement cost What would it cost to replace the donated property? Is there a reasonable relationship between replacement cost and FMV? Is the supply of the donated property more or less than the demand for it?     opinions of experts Is the expert knowledgeable and competent? Is the opinion thorough and supported by facts and experience? Problems in Determining Fair Market Value There are a number of problems in determining the FMV of donated property. Free online tax preparation Unusual Market Conditions The sale price of the property itself in an arm's-length transaction in an open market is often the best evidence of its value. Free online tax preparation When you rely on sales of comparable property, the sales must have been made in an open market. Free online tax preparation If those sales were made in a market that was artificially supported or stimulated so as not to be truly representative, the prices at which the sales were made will not indicate the FMV. Free online tax preparation For example, liquidation sale prices usually do not indicate the FMV. Free online tax preparation Also, sales of stock under unusual circumstances, such as sales of small lots, forced sales, and sales in a restricted market, may not represent the FMV. Free online tax preparation Selection of Comparable Sales Using sales of comparable property is an important method for determining the FMV of donated property. Free online tax preparation However, the amount of weight given to a sale depends on the degree of similarity between the comparable and the donated properties. Free online tax preparation The degree of similarity must be close enough so that this selling price would have been given consideration by reasonably well-informed buyers or sellers of the property. Free online tax preparation Example. Free online tax preparation You give a rare, old book to your former college. Free online tax preparation The book is a third edition and is in poor condition because of a missing back cover. Free online tax preparation You discover that there was a sale for $300, near the valuation date, of a first edition of the book that was in good condition. Free online tax preparation Although the contents are the same, the books are not at all similar because of the different editions and their physical condition. Free online tax preparation Little consideration would be given to the selling price of the $300 property by knowledgeable buyers or sellers. Free online tax preparation Future Events You may not consider unexpected events happening after your donation of property in making the valuation. Free online tax preparation You may consider only the facts known at the time of the gift, and those that could be reasonably expected at the time of the gift. Free online tax preparation Example. Free online tax preparation You give farmland to a qualified charity. Free online tax preparation The transfer provides that your mother will have the right to all income and full use of the property for her life. Free online tax preparation Even though your mother dies 1 week after the transfer, the value of the property on the date it is given is its present value, subject to the life interest as estimated from actuarial tables. Free online tax preparation You may not take a higher deduction because the charity received full use and possession of the land only 1 week after the transfer. Free online tax preparation Using Past Events to Predict the Future A common error is to rely too much on past events that do not fairly reflect the probable future earnings and FMV. Free online tax preparation Example. Free online tax preparation You give all your rights in a successful patent to your favorite charity. Free online tax preparation Your records show that before the valuation date there were three stages in the patent's history of earnings. Free online tax preparation First, there was rapid growth in earnings when the invention was introduced. Free online tax preparation Then, there was a period of high earnings when the invention was being exploited. Free online tax preparation Finally, there was a decline in earnings when competing inventions were introduced. Free online tax preparation The entire history of earnings may be relevant in estimating the future earnings. Free online tax preparation However, the appraiser must not rely too much on the stage of rapid growth in earnings, or of high earnings. Free online tax preparation The market conditions at those times do not represent the condition of the market at the valuation date. Free online tax preparation What is most significant is the trend of decline in earnings up to the valuation date. Free online tax preparation For more information about donations of patents, see Patents, later. Free online tax preparation Valuation of Various Kinds of Property This section contains information on determining the FMV of ordinary kinds of donated property. Free online tax preparation For information on appraisals, see Appraisals, later. Free online tax preparation Household Goods The FMV of used household goods, such as furniture, appliances, and linens, is usually much lower than the price paid when new. Free online tax preparation Such used property may have little or no market value because of its worn condition. Free online tax preparation It may be out of style or no longer useful. Free online tax preparation You cannot take a deduction for household goods donated after August 17, 2006, unless they are in good used condition or better. Free online tax preparation A household good that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. Free online tax preparation See Deduction over $500 for certain clothing or household items, later. Free online tax preparation If the property is valuable because it is old or unique, see the discussion under Paintings, Antiques, and Other Objects of Art. Free online tax preparation Used Clothing Used clothing and other personal items are usually worth far less than the price you paid for them. Free online tax preparation Valuation of items of clothing does not lend itself to fixed formulas or methods. Free online tax preparation The price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops, is an indication of the value. Free online tax preparation You cannot take a deduction for clothing donated after August 17, 2006, unless it is in good used condition or better. Free online tax preparation An item of clothing that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. Free online tax preparation See Deduction over $500 for certain clothing or household items, later. Free online tax preparation For valuable furs or very expensive gowns, a Form 8283 may have to be sent with your tax return. Free online tax preparation Jewelry and Gems Jewelry and gems are of such a specialized nature that it is almost always necessary to get an appraisal by a specialized jewelry appraiser. Free online tax preparation The appraisal should describe, among other things, the style of the jewelry, the cut and setting of the gem, and whether it is now in fashion. Free online tax preparation If not in fashion, the possibility of having the property redesigned, recut, or reset should be reported in the appraisal. Free online tax preparation The stone's coloring, weight, cut, brilliance, and flaws should be reported and analyzed. Free online tax preparation Sentimental personal value has no effect on FMV. Free online tax preparation But if the jewelry was owned by a famous person, its value might increase. Free online tax preparation Paintings, Antiques, and Other Objects of Art Your deduction for contributions of paintings, antiques, and other objects of art, should be supported by a written appraisal from a qualified and reputable source, unless the deduction is $5,000 or less. Free online tax preparation Examples of information that should be included in appraisals of art objects—paintings in particular—are found later under Qualified Appraisal. Free online tax preparation Art valued at $20,000 or more. Free online tax preparation   If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the signed appraisal to your return. Free online tax preparation For individual objects valued at $20,000 or more, a photograph of a size and quality fully showing the object, preferably an 8 x 10 inch color photograph or a color transparency no smaller than 4 x 5 inches, must be provided upon request. Free online tax preparation Art valued at $50,000 or more. Free online tax preparation   If you donate an item of art that has been appraised at $50,000 or more, you can request a Statement of Value for that item from the IRS. Free online tax preparation You must request the statement before filing the tax return that reports the donation. Free online tax preparation Your request must include the following. Free online tax preparation A copy of a qualified appraisal of the item. Free online tax preparation See Qualified Appraisal, later. Free online tax preparation A $2,500 check or money order payable to the Internal Revenue Service for the user fee that applies to your request regarding one, two, or three items of art. Free online tax preparation Add $250 for each item in excess of three. Free online tax preparation A completed Form 8283, Section B. Free online tax preparation The location of the IRS territory that has examination responsibility for your return. Free online tax preparation If your request lacks essential information, you will be notified and given 30 days to provide the missing information. Free online tax preparation   Send your request to: Internal Revenue Service Attention: Art Appraisal (C:AP:ART) P. Free online tax preparation O. Free online tax preparation Box 27720 McPherson Station Washington, DC 20038 Refunds. Free online tax preparation   You can withdraw your request for a Statement of Value at any time before it is issued. Free online tax preparation However, the IRS will not refund the user fee if you do. Free online tax preparation   If the IRS declines to issue a Statement of Value in the interest of efficient tax administration, the IRS will refund the user fee. Free online tax preparation Authenticity. Free online tax preparation   The authenticity of the donated art must be determined by the appraiser. Free online tax preparation Physical condition. Free online tax preparation   Important items in the valuation of antiques and art are physical condition and extent of restoration. Free online tax preparation These have a significant effect on the value and must be fully reported in an appraisal. Free online tax preparation An antique in damaged condition, or lacking the “original brasses,” may be worth much less than a similar piece in excellent condition. Free online tax preparation Art appraisers. Free online tax preparation   More weight will usually be given to an appraisal prepared by an individual specializing in the kind and price range of the art being appraised. Free online tax preparation Certain art dealers or appraisers specialize, for example, in old masters, modern art, bronze sculpture, etc. Free online tax preparation Their opinions on the authenticity and desirability of such art would usually be given more weight than the opinions of more generalized art dealers or appraisers. Free online tax preparation They can report more recent comparable sales to support their opinion. Free online tax preparation   To identify and locate experts on unique, specialized items or collections, you may wish to use the current Official Museum Directory of the American Association of Museums. Free online tax preparation It lists museums both by state and by category. Free online tax preparation   To help you locate a qualified appraiser for your donation, you may wish to ask an art historian at a nearby college or the director or curator of a local museum. Free online tax preparation The Yellow Pages often list specialized art and antique dealers, auctioneers, and art appraisers. Free online tax preparation You may be able to find a qualified appraiser on the Internet. Free online tax preparation You may also contact associations of dealers for guidance. Free online tax preparation Collections Since many kinds of hobby collections may be the subject of a charitable donation, it is not possible to discuss all of the possible collectibles in this publication. Free online tax preparation Most common are rare books, autographs, sports memorabilia, dolls, manuscripts, stamps, coins, guns, phonograph records, and natural history items. Free online tax preparation Many of the elements of valuation that apply to paintings and other objects of art, discussed earlier, also apply to miscellaneous collections. Free online tax preparation Reference material. Free online tax preparation   Publications available to help you determine the value of many kinds of collections include catalogs, dealers' price lists, and specialized hobby periodicals. Free online tax preparation When using one of these price guides, you must use the current edition at the date of contribution. Free online tax preparation However, these sources are not always reliable indicators of FMV and should be supported by other evidence. Free online tax preparation   For example, a dealer may sell an item for much less than is shown on a price list, particularly after the item has remained unsold for a long time. Free online tax preparation The price an item sold for in an auction may have been the result of a rigged sale or a mere bidding duel. Free online tax preparation The appraiser must analyze the reference material, and recognize and make adjustments for misleading entries. Free online tax preparation If you are donating a valuable collection, you should get an appraisal. Free online tax preparation If your donation appears to be of little value, you may be able to make a satisfactory valuation using reference materials available at a state, city, college, or museum library. Free online tax preparation Stamp collections. Free online tax preparation   Most libraries have catalogs or other books that report the publisher's estimate of values. Free online tax preparation Generally, two price levels are shown for each stamp: the price postmarked and the price not postmarked. Free online tax preparation Stamp dealers generally know the value of their merchandise and are able to prepare satisfactory appraisals of valuable collections. Free online tax preparation Coin collections. Free online tax preparation   Many catalogs and other reference materials show the writer's or publisher's opinion of the value of coins on or near the date of the publication. Free online tax preparation Like many other collectors' items, the value of a coin depends on the demand for it, its age, and its rarity. Free online tax preparation Another important factor is the coin's condition. Free online tax preparation For example, there is a great difference in the value of a coin that is in mint condition and a similar coin that is only in good condition. Free online tax preparation   Catalogs usually establish a category for coins, based on their physical condition—mint or uncirculated, extremely fine, very fine, fine, very good, good, fair, or poor—with a different valuation for each category. Free online tax preparation Books. Free online tax preparation   The value of books is usually determined by selecting comparable sales and adjusting the prices according to the differences between the comparable sales and the item being evaluated. Free online tax preparation This is difficult to do and, except for a collection of little value, should be done by a specialized appraiser. Free online tax preparation Within the general category of literary property, there are dealers who specialize in certain areas, such as Americana, foreign imports, Bibles, and scientific books. Free online tax preparation Modest value of collection. Free online tax preparation   If the collection you are donating is of modest value, not requiring a written appraisal, the following information may help you in determining the FMV. Free online tax preparation   A book that is very old, or very rare, is not necessarily valuable. Free online tax preparation There are many books that are very old or rare, but that have little or no market value. Free online tax preparation Condition of book. Free online tax preparation   The condition of a book may have a great influence on its value. Free online tax preparation Collectors are interested in items that are in fine, or at least good, condition. Free online tax preparation When a book has a missing page, a loose binding, tears, stains, or is otherwise in poor condition, its value is greatly lowered. Free online tax preparation Other factors. Free online tax preparation   Some other factors in the valuation of a book are the kind of binding (leather, cloth, paper), page edges, and illustrations (drawings and photographs). Free online tax preparation Collectors usually want first editions of books. Free online tax preparation However, because of changes or additions, other editions are sometimes worth as much as, or more than, the first edition. Free online tax preparation Manuscripts, autographs, diaries, and similar items. Free online tax preparation   When these items are handwritten, or at least signed by famous people, they are often in demand and are valuable. Free online tax preparation The writings of unknowns also may be of value if they are of unusual historical or literary importance. Free online tax preparation Determining the value of such material is difficult. Free online tax preparation For example, there may be a great difference in value between two diaries that were kept by a famous person—one kept during childhood and the other during a later period in his or her life. Free online tax preparation The appraiser determines a value in these cases by applying knowledge and judgment to such factors as comparable sales and conditions. Free online tax preparation Signatures. Free online tax preparation   Signatures, or sets of signatures, that were cut from letters or other papers usually have little or no value. Free online tax preparation But complete sets of the signatures of U. Free online tax preparation S. Free online tax preparation presidents are in demand. Free online tax preparation Cars, Boats, and Aircraft If you donate a car, a boat, or an aircraft to a charitable organization, its FMV must be determined. Free online tax preparation Certain commercial firms and trade organizations publish monthly or seasonal guides for different regions of the country, containing complete dealer sale prices or dealer average prices for recent model years. Free online tax preparation Prices are reported for each make, model, and year. Free online tax preparation These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. Free online tax preparation The prices are not “official,” and these publications are not considered an appraisal of any specific donated property. Free online tax preparation But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. Free online tax preparation These publications are sometimes available from public libraries or at a bank, credit union, or finance company. Free online tax preparation You can also find pricing information about used cars on the Internet. Free online tax preparation An acceptable measure of the FMV of a donated car, boat, or airplane is an amount not in excess of the price listed in a used vehicle pricing guide for a private party sale, not the dealer retail value, of a similar vehicle. Free online tax preparation However, the FMV may be less than that amount if the vehicle has engine trouble, body damage, high mileage, or any type of excessive wear. Free online tax preparation The FMV of a donated vehicle is the same as the price listed in a used vehicle pricing guide for a private party sale only if the guide lists a sales price for a vehicle that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated vehicle. Free online tax preparation Example. Free online tax preparation You donate a used car in poor condition to a local high school for use by students studying car repair. Free online tax preparation A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. Free online tax preparation However, the guide shows the price for a private party sale of the car is only $750. Free online tax preparation The FMV of the car is considered to be no more than $750. Free online tax preparation Boats. Free online tax preparation   Except for inexpensive small boats, the valuation of boats should be based on an appraisal by a marine surveyor because the physical condition is so critical to the value. Free online tax preparation More information. Free online tax preparation   Your deduction for a donated car, boat, or airplane generally is limited to the gross proceeds from its sale by the qualified organization. Free online tax preparation This rule applies if the claimed value of the donated vehicle is more than $500. Free online tax preparation In certain cases, you can deduct the vehicle's FMV. Free online tax preparation For details, see Publication 526. Free online tax preparation Inventory If you donate any inventory item to a charitable organization, the amount of your deductible contribution generally is the FMV of the item, minus any gain you would have realized if you had sold the item at its FMV on the date of the gift. Free online tax preparation For more information, see Publication 526. Free online tax preparation Patents To determine the FMV of a patent, you must take into account, among other factors: Whether the patented technology has been made obsolete by other technology; Any restrictions on the donee's use of, or ability to transfer, the patented technology; and The length of time remaining before the patent expires. Free online tax preparation However, your deduction for a donation of a patent or other intellectual property is its FMV, minus any gain you would have realized if you had sold the property at its FMV on the date of the gift. Free online tax preparation Generally, this means your deduction is the lesser of the property's FMV or its basis. Free online tax preparation For details, see Publication 526. Free online tax preparation Stocks and Bonds The value of stocks and bonds is the FMV of a share or bond on the valuation date. Free online tax preparation See Date of contribution, earlier, under What Is Fair Market Value (FMV). Free online tax preparation Selling prices on valuation date. Free online tax preparation   If there is an active market for the contributed stocks or bonds on a stock exchange, in an over-the-counter market, or elsewhere, the FMV of each share or bond is the average price between the highest and lowest quoted selling prices on the valuation date. Free online tax preparation For example, if the highest selling price for a share was $11, and the lowest $9, the average price is $10. Free online tax preparation You get the average price by adding $11 and $9 and dividing the sum by 2. Free online tax preparation No sales on valuation date. Free online tax preparation   If there were no sales on the valuation date, but there were sales within a reasonable period before and after the valuation date, you determine FMV by taking the average price between the highest and lowest sales prices on the nearest date before and on the nearest date after the valuation date. Free online tax preparation Then you weight these averages in inverse order by the respective number of trading days between the selling dates and the valuation date. Free online tax preparation Example. Free online tax preparation   On the day you gave stock to a qualified organization, there were no sales of the stock. Free online tax preparation Sales of the stock nearest the valuation date took place two trading days before the valuation date at an average selling price of $10 and three trading days after the valuation date at an average selling price of $15. Free online tax preparation The FMV on the valuation date was $12, figured as follows: [(3 x $10) + (2 x $15)] ÷ 5 = $12 Listings on more than one stock exchange. Free online tax preparation   Stocks or bonds listed on more than one stock exchange are valued based on the prices of the exchange on which they are principally dealt. Free online tax preparation This applies if these prices are published in a generally available listing or publication of general circulation. Free online tax preparation If this is not applicable, and the stocks or bonds are reported on a composite listing of combined exchanges in a publication of general circulation, use the composite list. Free online tax preparation See also Unavailable prices or closely held corporation, later. Free online tax preparation Bid and asked prices on valuation date. Free online tax preparation   If there were no sales within a reasonable period before and after the valuation date, the FMV is the average price between the bona fide bid and asked prices on the valuation date. Free online tax preparation Example. Free online tax preparation Although there were no sales of Blue Corporation stock on the valuation date, bona fide bid and asked prices were available on that date of $14 and $16, respectively. Free online tax preparation The FMV is $15, the average price between the bid and asked prices. Free online tax preparation No prices on valuation date. Free online tax preparation   If there were no prices available on the valuation date, you determine FMV by taking the average prices between the bona fide bid and asked prices on the closest trading date before and after the valuation date. Free online tax preparation Both dates must be within a reasonable period. Free online tax preparation Then you weight these averages in inverse order by the respective number of trading days between the bid and asked dates and the valuation date. Free online tax preparation Example. Free online tax preparation On the day you gave stock to a qualified organization, no prices were available. Free online tax preparation Bona fide bid and asked prices 3 days before the valuation date were $10 and 2 days after the valuation date were $15. Free online tax preparation The FMV on the valuation date is $13, figured as follows: [(2 x $10) + (3 x $15)] ÷ 5 = $13 Prices only before or after valuation date, but not both. Free online tax preparation   If no selling prices or bona fide bid and asked prices are available on a date within a reasonable period before the valuation date, but are available on a date within a reasonable period after the valuation date, or vice versa, then the average price between the highest and lowest of such available prices may be treated as the value. Free online tax preparation Large blocks of stock. Free online tax preparation   When a large block of stock is put on the market, it may lower the selling price of the stock if the supply is greater than the demand. Free online tax preparation On the other hand, market forces may exist that will afford higher prices for large blocks of stock. Free online tax preparation Because of the many factors to be considered, determining the value of large blocks of stock usually requires the help of experts specializing in underwriting large quantities of securities, or in trading in the securities of the industry of which the particular company is a part. Free online tax preparation Unavailable prices or closely held corporation. Free online tax preparation   If selling prices or bid and asked prices are not available, or if securities of a closely held corporation are involved, determine the FMV by considering the following factors. Free online tax preparation For bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors. Free online tax preparation For shares of stock, the company's net worth, prospective earning power and dividend-paying capacity, and other relevant factors. Free online tax preparation Other factors. Free online tax preparation   Other relevant factors include: The nature and history of the business, especially its recent history, The goodwill of the business, The economic outlook in the particular industry, The company's position in the industry, its competitors, and its management, and The value of securities of corporations engaged in the same or similar business. Free online tax preparation For preferred stock, the most important factors are its yield, dividend coverage, and protection of its liquidation preference. Free online tax preparation   You should keep complete financial and other information on which the valuation is based. Free online tax preparation This includes copies of reports of examinations of the company made by accountants, engineers, or any technical experts on or close to the valuation date. Free online tax preparation Restricted securities. Free online tax preparation   Some classes of stock cannot be traded publicly because of restrictions imposed by the Securities and Exchange Commission, or by the corporate charter or a trust agreement. Free online tax preparation These restricted securities usually trade at a discount in relation to freely traded securities. Free online tax preparation   To arrive at the FMV of restricted securities, factors that you must consider include the resale provisions found in the restriction agreements, the relative negotiating strengths of the buyer and seller, and the market experience of freely traded securities of the same class as the restricted securities. Free online tax preparation Real Estate Because each piece of real estate is unique and its valuation is complicated, a detailed appraisal by a professional appraiser is necessary. Free online tax preparation The appraiser must be thoroughly trained in the application of appraisal principles and theory. Free online tax preparation In some instances the opinions of equally qualified appraisers may carry unequal weight, such as when one appraiser has a better knowledge of local conditions. Free online tax preparation The appraisal report must contain a complete description of the property, such as street address, legal description, and lot and block number, as well as physical features, condition, and dimensions. Free online tax preparation The use to which the property is put, zoning and permitted uses, and its potential use for other higher and better uses are also relevant. Free online tax preparation In general, there are three main approaches to the valuation of real estate. Free online tax preparation An appraisal may require the combined use of two or three methods rather than one method only. Free online tax preparation 1. Free online tax preparation Comparable Sales The comparable sales method compares the donated property with several similar properties that have been sold. Free online tax preparation The selling prices, after adjustments for differences in date of sale, size, condition, and location, would then indicate the estimated FMV of the donated property. Free online tax preparation If the comparable sales method is used to determine the value of unimproved real property (land without significant buildings, structures, or any other improvements that add to its value), the appraiser should consider the following factors when comparing the potential comparable property and the donated property: Location, size, and zoning or use restrictions, Accessibility and road frontage, and available utilities and water rights, Riparian rights (right of access to and use of the water by owners of land on the bank of a river) and existing easements, rights-of-way, leases, etc. Free online tax preparation , Soil characteristics, vegetative cover, and status of mineral rights, and Other factors affecting value. Free online tax preparation For each comparable sale, the appraisal must include the names of the buyer and seller, the deed book and page number, the date of sale and selling price, a property description, the amount and terms of mortgages, property surveys, the assessed value, the tax rate, and the assessor's appraised FMV. Free online tax preparation The comparable selling prices must be adjusted to account for differences between the sale property and the donated property. Free online tax preparation Because differences of opinion may arise between appraisers as to the degree of comparability and the amount of the adjustment considered necessary for comparison purposes, an appraiser should document each item of adjustment. Free online tax preparation Only comparable sales having the least adjustments in terms of items and/or total dollar adjustments should be considered as comparable to the donated property. Free online tax preparation 2. Free online tax preparation Capitalization of Income This method capitalizes the net income from the property at a rate that represents a fair return on the particular investment at the particular time, considering the risks involved. Free online tax preparation The key elements are the determination of the income to be capitalized and the rate of capitalization. Free online tax preparation 3. Free online tax preparation Replacement Cost New or Reproduction Cost Minus Observed Depreciation This method, used alone, usually does not result in a determination of FMV. Free online tax preparation Instead, it generally tends to set the upper limit of value, particularly in periods of rising costs, because it is reasonable to assume that an informed buyer will not pay more for the real estate than it would cost to reproduce a similar property. Free online tax preparation Of course, this reasoning does not apply if a similar property cannot be created because of location, unusual construction, or some other reason. Free online tax preparation Generally, this method serves to support the value determined from other methods. Free online tax preparation When the replacement cost method is applied to improved realty, the land and improvements are valued separately. Free online tax preparation The replacement cost of a building is figured by considering the materials, the quality of workmanship, and the number of square feet or cubic feet in the building. Free online tax preparation This cost represents the total cost of labor and material, overhead, and profit. Free online tax preparation After the replacement cost has been figured, consideration must be given to the following factors: Physical deterioration—the wear and tear on the building itself, Functional obsolescence—usually in older buildings with, for example, inadequate lighting, plumbing, or heating, small rooms, or a poor floor plan, and Economic obsolescence—outside forces causing the whole area to become less desirable. Free online tax preparation Interest in a Business The FMV of any interest in a business, whether a sole proprietorship or a partnership, is the amount that a willing buyer would pay for the interest to a willing seller after consideration of all relevant factors. Free online tax preparation The relevant factors to be considered in valuing the business are: The FMV of the assets of the business, The demonstrated earnings capacity of the business, based on a review of past and current earnings, and The other factors used in evaluating corporate stock, if they apply. Free online tax preparation The value of the goodwill of the business should also be taken into consideration. Free online tax preparation You should keep complete financial and other information on which you base the valuation. Free online tax preparation This includes copies of reports of examinations of the business made by accountants, engineers, or any technical experts on or close to the valuation date. Free online tax preparation Annuities, Interests for Life or Terms of Years, Remainders, and Reversions The value of these kinds of property is their present value, except in the case of annuities under contracts issued by companies regularly engaged in their sale. Free online tax preparation The valuation of these commercial annuity contracts and of insurance policies is discussed later under Certain Life Insurance and Annuity Contracts. Free online tax preparation To determine present value, you must know the applicable interest rate and use actuarial tables. Free online tax preparation Interest rate. Free online tax preparation   The applicable interest rate varies. Free online tax preparation It is announced monthly in a news release and published in the Internal Revenue Bulletin as a Revenue Ruling. Free online tax preparation The interest rate to use is under the heading “Rate Under Section 7520” for a given month and year. Free online tax preparation You can call the IRS office at 1-800-829-1040 to obtain this rate. Free online tax preparation Actuarial tables. Free online tax preparation   You need to refer to actuarial tables to determine a qualified interest in the form of an annuity, any interest for life or a term of years, or any remainder interest to a charitable organization. Free online tax preparation   Use the valuation tables set forth in IRS Publications 1457, Actuarial Values (Book Aleph), and 1458, Actuarial Values (Book Beth). Free online tax preparation Both of these publications provide tables containing actuarial factors to be used in determining the present value of an annuity, an interest for life or for a term of years, or a remainder or reversionary interest. Free online tax preparation For qualified charitable transfers, you can use the factor for the month in which you made the contribution or for either of the 2 months preceding that month. Free online tax preparation   Publication 1457 also contains actuarial factors for computing the value of a remainder interest in a charitable remainder annuity trust and a pooled income fund. Free online tax preparation Publication 1458 contains the factors for valuing the remainder interest in a charitable remainder unitrust. Free online tax preparation You can download Publications 1457 and 1458 from www. Free online tax preparation irs. Free online tax preparation gov. Free online tax preparation In addition, they are available for purchase via the website of the U. Free online tax preparation S. Free online tax preparation Government Printing Office, by phone at (202) 512-1800, or by mail from the: Superintendent of Documents P. Free online tax preparation O. Free online tax preparation Box 371954 Pittsburgh, PA 15250-7954 Tables containing actuarial factors for transfers to pooled income funds may also be found in Income Tax Regulation 1. Free online tax preparation 642(c)-6(e)(6), transfers to charitable remainder unitrusts in Regulation 1. Free online tax preparation 664-4(e), and other transfers in Regulation 20. Free online tax preparation 2031-7(d)(6). Free online tax preparation Special factors. Free online tax preparation   If you need a special factor for an actual transaction, you can request a letter ruling. Free online tax preparation Be sure to include the date of birth of each person the duration of whose life may affect the value of the interest. Free online tax preparation Also include copies of the relevant instruments. Free online tax preparation IRS charges a user fee for providing special factors. Free online tax preparation   For more information about requesting a ruling, see Revenue Procedure 2006-1 (or annual update), 2006-1 I. Free online tax preparation R. Free online tax preparation B. Free online tax preparation 1. Free online tax preparation Revenue Procedure 2006-1 is available at www. Free online tax preparation irs. Free online tax preparation gov/irb/2006-01_IRB/ar06. Free online tax preparation html. Free online tax preparation   For information on the circumstances under which a charitable deduction may be allowed for the donation of a partial interest in property not in trust, see Partial Interest in Property Not in Trust, later. Free online tax preparation Certain Life Insurance and Annuity Contracts The value of an annuity contract or a life insurance policy issued by a company regularly engaged in the sale of such contracts or policies is the amount that company would charge for a comparable contract. Free online tax preparation But if the donee of a life insurance policy may reasonably be expected to cash the policy rather than hold it as an investment, then the FMV is the cash surrender value rather than the replacement cost. Free online tax preparation If an annuity is payable under a combination annuity contract and life insurance policy (for example, a retirement income policy with a death benefit) and there was no insurance element when it was transferred to the charity, the policy is treated as an annuity contract. Free online tax preparation Partial Interest in Property Not in Trust Generally, no deduction is allowed for a charitable contribution, not made in trust, of less than your entire interest in property. Free online tax preparation However, this does not apply to a transfer of less than your entire interest if it is a transfer of: A remainder interest in your personal residence or farm, An undivided part of your entire interest in property, or A qualified conservation contribution. Free online tax preparation Remainder Interest in Real Property The amount of the deduction for a donation of a remainder interest in real property is the FMV of the remainder interest at the time of the contribution. Free online tax preparation To determine this value, you must know the FMV of the property on the date of the contribution. Free online tax preparation Multiply this value by the appropriate factor. Free online tax preparation Publications 1457 and 1458 contain these factors. Free online tax preparation You must make an adjustment for depreciation or depletion using the factors shown in Publication 1459, Actuarial Values (Book Gimel). Free online tax preparation You can use the factors for the month in which you made the contribution or for either of the two months preceding that month. Free online tax preparation See the earlier discussion on Annuities, Interests for Life or Terms of Years, Remainders, and Reversions. Free online tax preparation You can download Publication 1459 from www. Free online tax preparation irs. Free online tax preparation gov. Free online tax preparation For this purpose, the term “depreciable property” means any property subject to wear and tear or obsolescence, even if not used in a trade or business or for the production of income. Free online tax preparation If the remainder interest includes both depreciable and nondepreciable property, for example a house and land, the FMV must be allocated between each kind of property at the time of the contribution. Free online tax preparation This rule also applies to a gift of a remainder interest that includes property that is part depletable and part not depletable. Free online tax preparation Take into account depreciation or depletion only for the property that is subject to depreciation or depletion. Free online tax preparation For more information, see section 1. Free online tax preparation 170A-12 of the Income Tax Regulations. Free online tax preparation Undivided Part of Your Entire Interest A contribution of an undivided part of your entire interest in property must consist of a part of each and every substantial interest or right you own in the property. Free online tax preparation It must extend over the entire term of your interest in the property. Free online tax preparation For example, you are entitled to the income from certain property for your life (life estate) and you contribute 20% of that life estate to a qualified organization. Free online tax preparation You can claim a deduction for the contribution if you do not have any other interest in the property. Free online tax preparation To figure the value of a contribution involving a partial interest, see Publication 1457. Free online tax preparation If the only interest you own in real property is a remainder interest and you transfer part of that interest to a qualified organization, see the previous discussion on valuation of a remainder interest in real property. Free online tax preparation Qualified Conservation Contribution A qualified conservation contribution is a contribution of a qualified real property interest to a qualified organization to be used only for conservation purposes. Free online tax preparation Qualified organization. Free online tax preparation   For purposes of a qualified conservation contribution, a qualified organization is: A governmental unit, A publicly supported charitable, religious, scientific, literary, educational, etc. Free online tax preparation , organization, or An organization that is controlled by, and operated for the exclusive benefit of, a governmental unit or a publicly supported charity. Free online tax preparation The organization also must have a commitment to protect the conservation purposes of the donation and must have the resources to enforce the restrictions. Free online tax preparation Conservation purposes. Free online tax preparation   Your contribution must be made only for one of the following conservation purposes. Free online tax preparation Preserving land areas for outdoor recreation by, or for the education of, the general public. Free online tax preparation Protecting a relatively natural habitat of fish, wildlife, or plants, or a similar ecosystem. Free online tax preparation Preserving open space, including farmland and forest land, if it yields a significant public benefit. Free online tax preparation It must be either for the scenic enjoyment of the general public or under a clearly defined federal, state, or local governmental conservation policy. Free online tax preparation Preserving a historically important land area or a certified historic structure. Free online tax preparation There must be some visual public access to the property. Free online tax preparation Factors used in determining the type and amount of public access required include the historical significance of the property, the remoteness or accessibility of the site, and the extent to which intrusions on the privacy of individuals living on the property would be unreasonable. Free online tax preparation Building in registered historic district. Free online tax preparation   A contribution after July 25, 2006, of a qualified real property interest that is an easement or other restriction on the exterior of a building in a registered historic district is deductible only if it meets all of the following three conditions. Free online tax preparation The restriction must preserve the entire exterior of the building and must prohibit any change to the exterior of the building that is inconsistent with its historical character. Free online tax preparation You and the organization receiving the contribution must enter into a written agreement certifying, that the organization is a qualified organization and that it has the resources and commitment to maintain the property as donated. Free online tax preparation If you make the contribution in a tax year beginning after August 17, 2006, you must include with your return: A qualified appraisal, Photographs of the building's entire exterior, and A description of all restrictions on development of the building, such as zoning laws and restrictive covenants. Free online tax preparation   If you make this type of contribution after February 12, 2007, and claim a deduction of more than $10,000, your deduction will not be allowed unless you pay a $500 filing fee. Free online tax preparation See Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13), and its instructions. Free online tax preparation Qualified real property interest. Free online tax preparation   This is any of the following interests in real property. Free online tax preparation Your entire interest in real estate other than a mineral interest (subsurface oil, gas, or other minerals, and the right of access to these minerals). Free online tax preparation A remainder interest. Free online tax preparation A restriction (granted in perpetuity) on the use that may be made of the real property. Free online tax preparation Valuation. Free online tax preparation   A qualified real property interest described in (1) should be valued in a manner that is consistent with the type of interest transferred. Free online tax preparation If you transferred all the interest in the property, the FMV of the property is the amount of the contribution. Free online tax preparation If you do not transfer the mineral interest, the FMV of the surface rights in the property is the amount of the contribution. Free online tax preparation   If you owned only a remainder interest or an income interest (life estate), see Undivided Part of Your Entire Interest, earlier. Free online tax preparation If you owned the entire property but transferred only a remainder interest (item (2)), see Remainder Interest in Real Property, earlier. Free online tax preparation   In determining the value of restrictions, you should take into account the selling price in arm's-length transactions of other properties that have comparable restrictions. Free online tax preparation If there are no comparable sales, the restrictions are valued indirectly as the difference between the FMVs of the property involved before and after the grant of the restriction. Free online tax preparation   The FMV of the property before contribution of the restriction should take into account not only current use but the likelihood that the property, without the restriction, would be developed. Free online tax preparation You should also consider any zoning, conservation, or historical preservation laws that would restrict development. Free online tax preparation Granting an easement may increase, rather than reduce, the value of property, and in such a situation no deduction would be allowed. Free online tax preparation Example. Free online tax preparation   You own 10 acres of farmland. Free online tax preparation Similar land in the area has an FMV of $2,000 an acre. Free online tax preparation However, land in the general area that is restricted solely to farm use has an FMV of $1,500 an acre. Free online tax preparation Your county wants to preserve open space and prevent further development in your area. Free online tax preparation   You grant to the county an enforceable open space easement in perpetuity on 8 of the 10 acres, restricting its use to farmland. Free online tax preparation The value of this easement is $4,000, determined as follows: FMV of the property before granting easement:   $2,000 × 10 acres $20,000 FMV of the property after granting easement:   $1,500 × 8 acres $12,000   $2,000 × 2 acres 4,000 16,000 Value of easement   $4,000   If you later transfer in fee your remaining interest in the 8 acres to another qualified organization, the FMV of your remaining interest is the FMV of the 8 acres reduced by the FMV of the easement granted to the first organization. Free online tax preparation More information. Free online tax preparation   For more information about qualified conservation contributions, see Publication 526. Free online tax preparation Appraisals Appraisals are not necessary for items of property for which you claim a deduction of $5,000 or less. Free online tax preparation (There is one exception, described next, for certain clothing and household items. Free online tax preparation ) However, you generally will need an appraisal for donated property for which you claim a deduction of more than $5,000. Free online tax preparation There are exceptions. Free online tax preparation See Deductions of More Than $5,000, later. Free online tax preparation The weight given an appraisal depends on the completeness of the report, the qualifications of the appraiser, and the appraiser's demonstrated knowledge of the donated property. Free online tax preparation An appraisal must give all the facts on which to base an intelligent judgment of the value of the property. Free online tax preparation The appraisal will not be given much weight if: All the factors that apply are not considered, The opinion is not supported with facts, such as purchase price and comparable sales, or The opinion is not consistent with known facts. Free online tax preparation The appraiser's opinion is never more valid than the facts on which it is based; without these facts it is simply a guess. Free online tax preparation The opinion of a person claiming to be an expert is not binding on the Internal Revenue Service. Free online tax preparation All facts associated with the donation must be considered. Free online tax preparation Deduction over $500 for certain clothing or household items. Free online tax preparation   You must include with your return a qualified appraisal of any single item of clothing or any household item that is not in good used condition or better, that you donated after August 17, 2006, and for which you deduct more than $500. Free online tax preparation See Household Goods and Used Clothing, earlier. Free online tax preparation Cost of appraisals. Free online tax preparation   You may not take a charitable contribution deduction for fees you pay for appraisals of your donated property. Free online tax preparation However, these fees may qualify as a miscellaneous deduction, subject to the 2% limit, on Schedule A (Form 1040) if paid to determine the amount allowable as a charitable contribution. Free online tax preparation Deductions of More Than $5,000 Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser, and you must attach Section B of Form 8283 to your tax return. Free online tax preparation There are exceptions, discussed later. Free online tax preparation You should keep the appraiser's report with your written records. Free online tax preparation Records are discussed in Publication 526. Free online tax preparation The phrase “similar items” means property of the same generic category or type (whether or not donated to the same donee), such as stamp collections, coin collections, lithographs, paintings, photographs, books, nonpublicly traded stock, nonpublicly traded securities other than nonpublicly traded stock, land, buildings, clothing, jewelry, furniture, electronic equipment, household appliances, toys, everyday kitchenware, china, crystal, or silver. Free online tax preparation For example, if you give books to three schools and you deduct $2,000, $2,500, and $900, respectively, your claimed deduction is more than $5,000 for these books. Free online tax preparation You must get a qualified appraisal of the books and for each school you must attach a fully completed Form 8283, Section B, to your tax return. Free online tax preparation Exceptions. Free online tax preparation   You do not need an appraisal if the property is: Nonpublicly traded stock of $10,000 or less, A vehicle (including a car, boat, or airplane) for which your deduction is limited to the gross proceeds from its sale, Qualified intellectual property, such as a patent, Certain publicly traded securities described next, Inventory and other property donated by a corporation that are “qualified contributions” for the care of the ill, the needy, or infants, within the meaning of section 170(e)(3)(A) of the Internal Revenue Code, or Stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business. Free online tax preparation   Although an appraisal is not required for the types of property just listed, you must provide certain information about a donation of any of these types of property on Form 8283. Free online tax preparation Publicly traded securities. Free online tax preparation   Even if your claimed deduction is more than $5,000, neither a qualified appraisal nor Section B of Form 8283 is required for publicly traded securities that are: Listed on a stock exchange in which quotations are published on a daily basis, Regularly traded in a national or regional over-the-counter market for which published quotations are available, or Shares of an open-end investment company (mutual fund) for which quotations are published on a daily basis in a newspaper of general circulation throughout the United States. Free online tax preparation Publicly traded securities that meet these requirements must be reported on Form 8283, Section A. Free online tax preparation   A qualified appraisal is not required, but Form 8283, Section B, Parts I and IV, must be completed, for an issue of a security that does not meet the requirements just listed but does meet these requirements: The issue is regularly traded during the computation period (defined later) in a market for which there is an “interdealer quotation system” (defined later), The issuer or agent computes the “average trading price” (defined later) for the same issue for the computation period, The average trading price and total volume of the issue during the computation period are published in a newspaper of general circulation throughout the United States, not later than the last day of the month following the end of the calendar quarter in which the computation period ends, The issuer or agent keeps books and records that list for each transaction during the computation period the date of settlement of the transaction, the name and address of the broker or dealer making the market in which the transaction occurred, and the trading price and volume, and The issuer or agent permits the Internal Revenue Service to review the books and records described in item (4) with respect to transactions during the computation period upon receiving reasonable notice. Free online tax preparation   An interdealer quotation system is any system of general circulation to brokers and dealers that regularly disseminates quotations of obligations by two or more identified brokers or dealers who are not related to either the issuer or agent who computes the average trading price of the security. Free online tax preparation A quotation sheet prepared and distributed by a broker or dealer in the regular course of business and containing only quotations of that broker or dealer is not an interdealer quotation system. Free online tax preparation   The average trading price is the average price of all transactions (weighted by volume), other than original issue or redemption transactions, conducted through a United States office of a broker or dealer who maintains a market in the issue of the security during the computation period. Free online tax preparation Bid and asked quotations are not taken into account. Free online tax preparation   The computation period is weekly during October through December and monthly during January through September. Free online tax preparation The weekly computation periods during October through December begin with the first Monday in October and end with the first Sunday following the last Monday in December. Free online tax preparation Nonpublicly traded stock. Free online tax preparation   If you contribute nonpublicly traded stock, for which you claim a deduction of $10,000 or less, a qualified appraisal is not required. Free online tax preparation However, you must attach Form 8283 to your tax return, with Section B, Parts I and IV, completed. Free online tax preparation Deductions of More Than $500,000 If you claim a deduction of more than $500,000 for a donation of property, you must attach a qualified appraisal of the property to your return. Free online tax preparation This does not apply to contributions of cash, inventory, publicly traded stock, or intellectual property. Free online tax preparation If you do not attach the appraisal, you cannot deduct your contribution, unless your failure to attach the appraisal is due to reasonable cause and not to willful neglect. Free online tax preparation Qualified Appraisal Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser. Free online tax preparation You must also complete Form 8283, Section B, and attach it to your tax return. Free online tax preparation See Deductions of More Than $5,000, earlier. Free online tax preparation A qualified appraisal is an appraisal document that: Is made, signed, and dated by a qualified appraiser (defined later) in accordance with generally accepted appraisal standards, Meets the relevant requirements of Regulations section 1. Free online tax preparation 170A-13(c)(3) and Notice 2006-96, 2006-46 I. Free online tax preparation R. Free online tax preparation B. Free online tax preparation 902 (available at www. Free online tax preparation irs. Free online tax preparation gov/irb/2006-46_IRB/ar13. Free online tax preparation html), Relates to an appraisal made not earlier than 60 days before the date of contribution of the appraised property, Does not involve a prohibited appraisal fee, and Includes certain information (covered later). Free online tax preparation You must receive the qualified appraisal before the due date, including extensions, of the return on which a charitable contribution deduction is first claimed for the donated property. Free online tax preparation If the deduction is first claimed on an amended return, the qualified appraisal must be received before the date on which the amended return is filed. Free online tax preparation Form 8283, Section B, must be attached to your tax return. Free online tax preparation Generally, you do not need to attach the qualified appraisal itself, but you should keep a copy as long as it may be relevant under the tax law. Free online tax preparation There are four exceptions. Free online tax preparation If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the appraisal. Free online tax preparation See Paintings, Antiques, and Other Objects of Art, earlier. Free online tax preparation If you claim a deduction of more than $500,000 for a donation of property, you must attach the appraisal. Free online tax preparation See Deductions of More Than $500,000, earlier. Free online tax preparation If you claim a deduction of more than $500 for an article of clothing, or a household item, that is not in good used condition or better, that you donated after August 17, 2006, you must attach the appraisal. Free online tax preparation See Deduction over $500 for certain clothing or household items, earlier. Free online tax preparation If you claim a deduction in a tax year beginning after August 17, 2006, for an easement or other restriction on the exterior of a building in a historic district, you must attach the appraisal. Free online tax preparation See Building in registered historic district, earlier. Free online tax preparation Prohibited appraisal fee. Free online tax preparation   Generally, no part of the fee arrangement for a qualified appraisal can be based on a percentage of the appraised value of the property. Free online tax preparation If a fee arrangement is based on what is allowed as a deduction, after Internal Revenue Service examination or otherwise, it is treated as a fee based on a percentage of appraised value. Free online tax preparation However, appraisals are not disqualified when an otherwise prohi