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

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

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

3. E-File for FREE

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

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

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

Free Tax Estimator 2011

Tax Filing Extension Deadline 2012Free State Efile Tax ReturnFree File AllianceState EfileFree State Tax FilingHttps Taxes Hrblock ComFree Online Tax PreparationFree Military TaxesForm Ez 1040Instructions For 1040ez FormForm To Amend Tax ReturnFree State Tax Filing 2014Free E File 20112011 Income Tax2012 Irs Income Tax Forms1040ez Worksheet Line FForms For 2012 Income TaxTax Forms 2012Irs Tax ReturnFree State Tax Only E Filing2008 Tax SoftwareFile A Tax ReturnWhere Can I Get A 1040x Tax FormFree State Return Efile2012 1040 Tax FormFile 2012 Income TaxFree Turbo Tax 20091040ez On Line2011 1040aH&r Block Taxes Online FreeFilling Out 1040x OnlineFiling A Tax AmmendmentIrs Forms 1040State Tax Return Free E FileFiling State Taxes Online For FreeHelp Filling Out 1040xAmended Tax ReturnsLate File Taxes1040ez Instructions 20111040x Help

Free Tax Estimator 2011

Free tax estimator 2011 Index A Abandonment of home, Abandonment. Free tax estimator 2011 Absence, temporary, Temporary absence. Free tax estimator 2011 Abstract fees, Settlement fees or closing costs. Free tax estimator 2011 Address, change of, Reminders Adjusted basis, Adjusted Basis, Adjusted Basis Definition of, Determining Basis Worksheet 1 to figure, Determining Basis, Worksheet 1. Free tax estimator 2011 Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 1. Free tax estimator 2011 Adjusted Basis of Home Sold—Illustrated Example 3 for Emily White, Worksheet 1 Instructions. Free tax estimator 2011 Adjusted Basis of Home Sold Adoption Adjusted basis of home for credit claimed, Decreases to Basis Advertising fees, Selling expenses. Free tax estimator 2011 Amount realized, Amount Realized Appraisal fees, Settlement fees or closing costs. Free tax estimator 2011 Architect's fees, Construction. Free tax estimator 2011 Armed forces Ownership and use tests, Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Free tax estimator 2011 Assistance (see Tax help) B Back interest, Settlement fees or closing costs. Free tax estimator 2011 Basis Adjusted basis (see Adjusted basis) Determination of, Determining Basis, Adjusted Basis Other than cost, Basis Other Than Cost Building permit fees, Construction. Free tax estimator 2011 Business use of home, Business Use or Rental of Home, Use test met for business part (with no business use in year of sale). Free tax estimator 2011 C Casualties Amounts spent after to restore damaged property, Increases to Basis Deductible casualty losses, Decreases to Basis Disaster as cause of, Specific event safe harbors. Free tax estimator 2011 Insurance payments for casualty losses, Decreases to Basis Change of address, Reminders Closing costs, Settlement fees or closing costs. Free tax estimator 2011 Commissions, Selling expenses. Free tax estimator 2011 , Settlement fees or closing costs. Free tax estimator 2011 Community property Basis determination, Community property. Free tax estimator 2011 Condemnation Gain exclusion, Home destroyed or condemned. Free tax estimator 2011 Ownership and use test when previous home condemned, Previous home destroyed or condemned. Free tax estimator 2011 Condominiums As main home, Main Home Basis determination, Condominium. Free tax estimator 2011 Construction costs, Construction. Free tax estimator 2011 Built by you, Built by you. Free tax estimator 2011 Cooperative apartments As main home, Main Home Basis determination, Cooperative apartment. Free tax estimator 2011 Ownership and use tests, Cooperative apartment. Free tax estimator 2011 Cost as basis, Cost As Basis Credit reports Cost of obtaining, Settlement fees or closing costs. Free tax estimator 2011 D Date of sale, Date of sale. Free tax estimator 2011 Death Sale due to, Specific event safe harbors. Free tax estimator 2011 Spouse's death before sale, ownership and use tests, Sale of main home by surviving spouse. Free tax estimator 2011 Decreases to basis, Decreases to Basis Depreciation After May 6, 1997, Depreciation after May 6, 1997. Free tax estimator 2011 Home used for business or rental purposes, Decreases to Basis Destroyed homes Gain exclusion, Home destroyed or condemned. Free tax estimator 2011 Ownership and use test when previous home destroyed, Previous home destroyed or condemned. Free tax estimator 2011 Disabilities, individuals with Ownership and use test, Exception for individuals with a disability. Free tax estimator 2011 Disasters, Specific event safe harbors. Free tax estimator 2011 Discharge of qualified principal residence indebtedness, Adjusted Basis Divorce Home received from spouse, Home received from spouse. Free tax estimator 2011 Home transferred to spouse, Transfer to spouse. Free tax estimator 2011 Ownership and use tests, Home transferred from spouse. Free tax estimator 2011 Sale due to, Specific event safe harbors. Free tax estimator 2011 Transfers after July 18, 1984, Transfers after July 18, 1984. Free tax estimator 2011 Transfers before July 19, 1984, Transfers before July 19, 1984. Free tax estimator 2011 Use of home after divorce, Use of home after divorce. Free tax estimator 2011 Doctor's recommendation for sale, Doctor's recommendation safe harbor. Free tax estimator 2011 E Easements, Decreases to Basis Employee of the intelligence community, Employee of the intelligence community. Free tax estimator 2011 Employment Change in place of employment, Change in Place of Employment Payment by employer, when job transfer involved, Payment by employer. Free tax estimator 2011 Energy Conservation subsidies, Decreases to Basis Credit, Decreases to Basis Exclusion of gain, Excluding the Gain, Nonqualified Use Reduced maximum exclusion, Reduced Maximum Exclusion Expatriates, Expatriates. Free tax estimator 2011 F Federal mortgage subsidies Recapture of, Recapturing (Paying Back) a Federal Mortgage Subsidy Figuring gain or loss, Figuring Gain or Loss, More information. Free tax estimator 2011 Fire insurance premiums, Settlement fees or closing costs. Free tax estimator 2011 Foreclosure, Foreclosure or repossession. Free tax estimator 2011 Foreign Service, Foreign Service member. Free tax estimator 2011 Ownership and use tests, Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Free tax estimator 2011 Form 1040 Reporting sale of home, Reporting the Sale Seller-financed mortgages, Seller-financed mortgage. Free tax estimator 2011 Form 1040, Schedule A Real estate taxes, Real estate taxes. Free tax estimator 2011 Form 1040, Schedule D Reporting sale of home, Reporting the Sale Form 1099-S Proceeds from real estate transactions, Date of sale. Free tax estimator 2011 , Form 1099-S. Free tax estimator 2011 , Form 1099-S. Free tax estimator 2011 Form 2119 Sale of home, Adjusted Basis Form 6252 Installment sale income, Installment sale. Free tax estimator 2011 Form 8828 Recapture tax, How to figure and report the recapture. Free tax estimator 2011 Form 8960 Net Investment Income Tax, Net Investment Income Tax (NIIT). Free tax estimator 2011 NIIT, Net Investment Income Tax (NIIT). Free tax estimator 2011 Form 982 Discharge of indebtedness, Adjusted Basis Free tax services, Free help with your tax return. Free tax estimator 2011 Future developments, Future Developments G Gain or loss Basis determination, Determining Basis, Adjusted Basis Exclusion of gain, Excluding the Gain Exclusion of gain, nonqualified use, Nonqualified Use Gain on sale, Gain on sale. Free tax estimator 2011 Loss on sale, Loss on sale. Free tax estimator 2011 Postponed from sale of previous home before May 7, 1997, Decreases to Basis Worksheet 2 to figure, Worksheet 2. Free tax estimator 2011 Taxable Gain on Sale of Home—Completed Example 1 for Amy, Worksheet 1. Free tax estimator 2011 Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 2. Free tax estimator 2011 Taxable Gain on Sale of Home—Illustrated Example 2 for Peter and Betty Clark, Worksheet 2. Free tax estimator 2011 Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White, Worksheet 2. Free tax estimator 2011 Taxable Gain on Sale of Home Gifts Home received as, Home received as gift. Free tax estimator 2011 H Health Sale of home due to, Health Help (see Tax help) Homebuyer credit Recapture, Recapture of the post-2008 first-time homebuyer credit. Free tax estimator 2011 Houseboats As main home, Main Home I Important reminders Change of address, Reminders Home sold with undeducted points, Reminders Improvements Adjusted basis determination, Improvements. Free tax estimator 2011 Charges for, Settlement fees or closing costs. Free tax estimator 2011 Receipts and other records, Adjusted Basis Useful life of more than 1 year, Increases to Basis Increases to basis, Increases to Basis Individual taxpayer identification numbers (ITINs), Individual taxpayer identification number (ITIN). Free tax estimator 2011 Inheritance Home received as, Home acquired from a decedent who died before or after 2010. Free tax estimator 2011 Installment sales, Installment sale. Free tax estimator 2011 Involuntary conversion, Specific event safe harbors. Free tax estimator 2011 ITINs (Individual taxpayer identification numbers), Individual taxpayer identification number (ITIN). Free tax estimator 2011 J Joint owners not married, Joint owners not married. Free tax estimator 2011 Joint returns, Jointly owned home. Free tax estimator 2011 Ownership and use tests, Married Persons L Land Sale of land on which home located, Land. Free tax estimator 2011 Sale of vacant land, Vacant land. Free tax estimator 2011 Legal fees, Selling expenses. Free tax estimator 2011 , Settlement fees or closing costs. Free tax estimator 2011 , Construction. Free tax estimator 2011 Legal separation Sale due to, Specific event safe harbors. Free tax estimator 2011 Like-kind exchange, Sale of home acquired in a like-kind exchange. Free tax estimator 2011 Living expenses, Reasonable basic living expenses. Free tax estimator 2011 Loan assumption fees, Settlement fees or closing costs. Free tax estimator 2011 Loan placement fees, Selling expenses. Free tax estimator 2011 Loss (see Gain or loss) M Main home Defined, Main Home Factors used to determine, Factors used to determine main home. Free tax estimator 2011 Property used partly as, Property used partly as your main home. Free tax estimator 2011 , Property Used Partly for Business or Rental Married taxpayers (see Joint returns) Maximum exclusion, Maximum Exclusion Reduced, Reduced Maximum Exclusion Military (see Armed forces) Missing children, photographs of, Reminders Mobile homes As main home, Main Home More than one home, More than one home. Free tax estimator 2011 Mortgage fees, Settlement fees or closing costs. Free tax estimator 2011 Mortgage insurance premiums, Settlement fees or closing costs. Free tax estimator 2011 Mortgage subsidies Recapturing (paying back) federal mortgage subsidy, Recapturing (Paying Back) a Federal Mortgage Subsidy Mortgages, seller-financed, Seller-financed mortgage. Free tax estimator 2011 Moving expense, Settlement fees or closing costs. Free tax estimator 2011 Multiple births Sale due to, Specific event safe harbors. Free tax estimator 2011 N Nonqualified use, Nonqualified Use Nonresident aliens Spouse as, transfer of home to, Exception. Free tax estimator 2011 O Option to buy home, Option to buy. Free tax estimator 2011 Ownership and use tests, Ownership and Use Tests, Ownership and use tests met at different times. Free tax estimator 2011 P Partly used for business, Property Used Partly for Business or Rental Personal property Selling price of home not to include, Personal property. Free tax estimator 2011 Points, Selling expenses. Free tax estimator 2011 Home sold with undeducted points, Reminders Seller-paid, Seller-paid points. Free tax estimator 2011 Publications (see Tax help) R Real estate taxes, Settlement fees or closing costs. Free tax estimator 2011 , Real estate taxes. Free tax estimator 2011 Deducting in year of sale, Deducting Taxes in the Year of Sale Recapture of federal mortgage subsidy, Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of first-time homebuyer credit, Recapture of First-Time Homebuyer Credit Recording fees, Settlement fees or closing costs. Free tax estimator 2011 Recordkeeping, Adjusted Basis Reduced maximum exclusion, Reduced Maximum Exclusion Worksheet 3, Worksheet 3. Free tax estimator 2011 Reduced Maximum Exclusion Refinancing, Settlement fees or closing costs. Free tax estimator 2011 Relatives Sale of home to, Exception for sales to related persons. Free tax estimator 2011 Remainder interest Sale of, Sale of remainder interest. Free tax estimator 2011 Remodeling, Improvements. Free tax estimator 2011 , Exception. Free tax estimator 2011 (see also Improvements) Rental of home, Business Use or Rental of Home, Use test met for business part (with no business use in year of sale). Free tax estimator 2011 Before closing, by buyer, Settlement fees or closing costs. Free tax estimator 2011 Partial use, Property Used Partly for Business or Rental Repairs, Settlement fees or closing costs. Free tax estimator 2011 , Improvements. Free tax estimator 2011 , Repairs. Free tax estimator 2011 (see also Improvements) Reporting the sale, Reporting the Sale, Worksheet 2. Free tax estimator 2011 Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White Repossession, Foreclosure or repossession. Free tax estimator 2011 Right-of-ways, Decreases to Basis S Safe harbors Distance safe harbor, Distance safe harbor. Free tax estimator 2011 Doctor's recommendation for sale, Doctor's recommendation safe harbor. Free tax estimator 2011 Unforeseeable events, Specific event safe harbors. Free tax estimator 2011 Sales commissions, Selling expenses. Free tax estimator 2011 , Settlement fees or closing costs. Free tax estimator 2011 Sales to related persons, Exception for sales to related persons. Free tax estimator 2011 Self-employed persons Change in status causing inability to pay basic expenses, Specific event safe harbors. Free tax estimator 2011 Seller-financed mortgages, Seller-financed mortgage. Free tax estimator 2011 Seller-paid points, Seller-paid points. Free tax estimator 2011 Selling expenses, Selling expenses. Free tax estimator 2011 Selling price, Selling Price Separate returns, Separate returns. Free tax estimator 2011 Settlement fees, Settlement fees or closing costs. Free tax estimator 2011 Spouse Death of (see Surviving spouse) Divorce, transfers subsequent to (see Divorce) Survey fees, Settlement fees or closing costs. Free tax estimator 2011 Surviving spouse Basis determination, Surviving spouse. Free tax estimator 2011 Ownership and use tests, Sale of main home by surviving spouse. Free tax estimator 2011 T Tax help, How To Get Tax Help Temporary absence, Temporary absence. Free tax estimator 2011 Temporary housing, Temporary housing. Free tax estimator 2011 Title insurance, Settlement fees or closing costs. Free tax estimator 2011 Title search fees, Settlement fees or closing costs. Free tax estimator 2011 Trading homes, Trading (exchanging) homes. Free tax estimator 2011 , Home received as trade. Free tax estimator 2011 Transfer taxes, Settlement fees or closing costs. Free tax estimator 2011 , Transfer taxes. Free tax estimator 2011 Transfer to spouse, Transfer to spouse. Free tax estimator 2011 After July 18, 1984, Transfers after July 18, 1984. Free tax estimator 2011 Before July 19, 1984, Transfers before July 19, 1984. Free tax estimator 2011 TTY/TDD information, How To Get Tax Help U Unemployment, Specific event safe harbors. Free tax estimator 2011 Unforeseen circumstances, Unforeseen Circumstances Uniformed services (see Armed forces) Use tests, Ownership and Use Tests, Ownership and use tests met at different times. Free tax estimator 2011 Utilities Charges for installing, Settlement fees or closing costs. Free tax estimator 2011 Charges related to occupancy of house before closing, Settlement fees or closing costs. Free tax estimator 2011 Energy conservation subsidy, Decreases to Basis Meter and connection charges for construction, Construction. Free tax estimator 2011 V Vacant land Sale of, Vacant land. Free tax estimator 2011 W Worksheets, Worksheets. Free tax estimator 2011 Adjusted basis (Worksheet 1), Determining Basis, Worksheet 1. Free tax estimator 2011 Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 1. Free tax estimator 2011 Adjusted Basis of Home Sold—Illustrated Example 3 for Emily White, Worksheet 1 Instructions. Free tax estimator 2011 Adjusted Basis of Home Sold Gain (or loss), exclusion, and taxable gain (Worksheet 2), Worksheet 2. Free tax estimator 2011 Taxable Gain on Sale of Home—Completed Example 1 for Amy, Worksheet 1. Free tax estimator 2011 Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 2. Free tax estimator 2011 Taxable Gain on Sale of Home—Illustrated Example 2 for Peter and Betty Clark, Worksheet 2. Free tax estimator 2011 Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White, Worksheet 2. Free tax estimator 2011 Taxable Gain on Sale of Home Recordkeeping and, Adjusted Basis Reduced maximum exclusion (Worksheet 3), Worksheet 3. Free tax estimator 2011 Reduced Maximum Exclusion Prev  Up     Home   More Online Publications
Print - Click this link to Print this page

Understanding Your CP283C Notice

We charged you a penalty for filing a late or incomplete Form 8955-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits.


What you need to do

  • If you agree, send the amount due by the date on your notice to avoid interest charges.
  • If you disagree, contact us by mail or call 1-877-829-5500.

You may want to

  • Review this notice with your tax preparer.
  • Call us for assistance at the toll-free telephone number listed at the top right corner of your notice.

Answers to Common Questions

When is my Form 8955-SSA due?
Form 8955-SSA is due the last day of the seventh month following the end of your plan year.

Can I have the penalty removed or reduced?
We can consider reducing or removing the penalty under certain circumstances. Send a signed statement to the address shown at the top of the notice that includes the following:

  • The penalty you would like us to reconsider
  • The reason you believe we should reconsider it
  • Your name and title

Understanding your notice

Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

Notice CP283C, Page 1

Notice CP283C, Page 2

Notice CP283C, Page 3

Page Last Reviewed or Updated: 24-Dec-2013

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Free Tax Estimator 2011

Free tax estimator 2011 1. Free tax estimator 2011   Investment Income Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: General InformationSSN for joint account. Free tax estimator 2011 Custodian account for your child. Free tax estimator 2011 Penalty for failure to supply SSN. Free tax estimator 2011 Certification. Free tax estimator 2011 Underreported interest and dividends. Free tax estimator 2011 How to stop backup withholding due to underreporting. Free tax estimator 2011 How to stop backup withholding due to an incorrect identification number. Free tax estimator 2011 Reporting backup withholding. Free tax estimator 2011 Nonresident aliens. Free tax estimator 2011 Penalties. Free tax estimator 2011 Savings account with parent as trustee. Free tax estimator 2011 Interest IncomeInterest not reported on Form 1099-INT. Free tax estimator 2011 Nominees. Free tax estimator 2011 Incorrect amount. Free tax estimator 2011 Information reporting requirement. Free tax estimator 2011 Taxable Interest — General Below-Market Loans U. Free tax estimator 2011 S. Free tax estimator 2011 Savings Bonds U. Free tax estimator 2011 S. Free tax estimator 2011 Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Discount on Debt InstrumentsOriginal Issue Discount (OID) Market Discount Bonds Discount on Short-Term Obligations Election To Report All Interest as OID When To Report Interest IncomeConstructive receipt. Free tax estimator 2011 How To Report Interest IncomeSchedule B (Form 1040A or 1040). Free tax estimator 2011 Worksheet for savings bonds distributed from a retirement or profit-sharing plan. Free tax estimator 2011 File Form 1099-INT with the IRS. Free tax estimator 2011 Dividends and Other DistributionsDividends not reported on Form 1099-DIV. Free tax estimator 2011 Nominees. Free tax estimator 2011 Ordinary Dividends Capital Gain Distributions Nondividend Distributions Liquidating Distributions Distributions of Stock and Stock Rights Other Distributions How To Report Dividend IncomeElection. Free tax estimator 2011 Independent contractor. Free tax estimator 2011 Investment interest deducted. Free tax estimator 2011 Exception 1. Free tax estimator 2011 Exception 2. Free tax estimator 2011 Undistributed capital gains. Free tax estimator 2011 File Form 1099-DIV with the IRS. Free tax estimator 2011 Stripped Preferred Stock REMICs, FASITs, and Other CDOsREMICs Collateralized Debt Obligations (CDOs) FASITs S CorporationsLimit on losses and deductions. Free tax estimator 2011 Passive activity losses. Free tax estimator 2011 Form 8582. Free tax estimator 2011 Investment ClubsInvestments in name of member. Free tax estimator 2011 Tax Treatment of the Club Topics - This chapter discusses: Interest Income , Discount on Debt Instruments , When To Report Interest Income , How To Report Interest Income , Dividends and Other Distributions , How To Report Dividend Income , Stripped Preferred Stock , Real estate mortgage investment conduits (REMICs), financial asset securitization investment trusts (FASITs), and other collateralized debt obligations (CDOs) , S Corporations , and Investment Clubs . Free tax estimator 2011 Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 537 Installment Sales 590 Individual Retirement Arrangements (IRAs) 925 Passive Activity and At-Risk Rules 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends Schedule D (Form 1040) Capital Gains and Losses 1040 U. Free tax estimator 2011 S. Free tax estimator 2011 Individual Income Tax Return 1040A U. Free tax estimator 2011 S. Free tax estimator 2011 Individual Income Tax Return 1040EZ Income Tax Return for Single and Joint Filers With No Dependents 1099 General Instructions for Certain Information Returns 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 3115 Application for Change in Accounting Method 6251 Alternative Minimum Tax — Individuals 8582 Passive Activity Loss Limitations 8615 Tax for Certain Children Who Have Unearned Income 8814 Parents' Election To Report Child's Interest and Dividends 8815 Exclusion of Interest From Series EE and I U. Free tax estimator 2011 S. Free tax estimator 2011 Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. Free tax estimator 2011 S. Free tax estimator 2011 Savings Bonds Issued After 1989 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets 8960 Net Investment Income Tax—Individuals, Estates, and Trusts See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Free tax estimator 2011 General Information A few items of general interest are covered here. Free tax estimator 2011 Recordkeeping. Free tax estimator 2011 You should keep a list showing sources and investment income amounts you receive during the year. Free tax estimator 2011 Also keep the forms you receive showing your investment income (Forms 1099-INT, Interest Income, and 1099-DIV, Dividends and Distributions, for example) as an important part of your records. Free tax estimator 2011 Net investment income tax (NIIT). Free tax estimator 2011   Beginning in 2013, you may be subject to the NIIT. Free tax estimator 2011 The NIIT is a 3. Free tax estimator 2011 8% tax on the lesser of your net investment income or the amount of your modified adjusted gross income (MAGI) that is over a threshold amount based on your filing status. Free tax estimator 2011    Filing Status Threshold Amount Married filing jointly $250,000 Married filing separately $125,000 Single $200,000 Head of household (with qualifying person) $200,000 Qualifying Widow(er) with dependent child $250,000    For more information, see Form 8960 and Instructions for Form 8960. Free tax estimator 2011 Tax on unearned income of certain children. Free tax estimator 2011   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Free tax estimator 2011 This may happen if all of the following are true. Free tax estimator 2011 The child had more than $2,000 of unearned income. Free tax estimator 2011 The child is required to file a tax return. Free tax estimator 2011 The child was: Under age 18 at the end of 2013, Age 18 at the end of 2013 and did not have earned income that was more than half of the child's support, or A full-time student over age 18 and under age 24 at the end of 2013 and did not have earned income that was more than half of the child's support. Free tax estimator 2011 At least one of the child's parents was alive at the end of 2013. Free tax estimator 2011 The child does not file a joint return for 2013. Free tax estimator 2011 A child born on January 1, 1996, is considered to be age 18 at the end of 2013; a child born on January 1, 1995, is considered to be age 19 at the end of 2013; a child born on January 1, 1990, is considered to be age 24 at the end of 2013. Free tax estimator 2011   If all of these statements are true, Form 8615 must be completed and attached to the child's tax return. Free tax estimator 2011 If any of these statements is not true, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Free tax estimator 2011    However, the parent can choose to include the child's interest and dividends on the parent's return if certain requirements are met. Free tax estimator 2011 Use Form 8814 for this purpose. Free tax estimator 2011   For more information about the tax on unearned income of children and the parents' election, see Publication 929, Tax Rules for Children and Dependents. Free tax estimator 2011 Beneficiary of an estate or trust. Free tax estimator 2011   Interest, dividends, and other investment income you receive as a beneficiary of an estate or trust is generally taxable income. Free tax estimator 2011 You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Free tax estimator 2011 , from the fiduciary. Free tax estimator 2011 Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Free tax estimator 2011 Social security number (SSN). Free tax estimator 2011   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. Free tax estimator 2011 This includes payers of interest and dividends. Free tax estimator 2011 If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. Free tax estimator 2011 SSN for joint account. Free tax estimator 2011   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. Free tax estimator 2011 (For information on who owns the funds in a joint account, see Joint accounts , later. Free tax estimator 2011 ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. Free tax estimator 2011 This is because only one name and SSN can be shown on Form 1099. Free tax estimator 2011   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. Free tax estimator 2011 For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. Free tax estimator 2011 Custodian account for your child. Free tax estimator 2011   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. Free tax estimator 2011 For example, you must give your child's SSN to the payer of dividends on stock owned by your child, even though the dividends are paid to you as custodian. Free tax estimator 2011 Penalty for failure to supply SSN. Free tax estimator 2011   You will be subject to a penalty if, when required, you fail to: Include your SSN on any return, statement, or other document, Give your SSN to another person who must include it on any return, statement, or other document, or Include the SSN of another person on any return, statement, or other document. Free tax estimator 2011 The penalty is $50 for each failure up to a maximum penalty of $100,000 for any calendar year. Free tax estimator 2011   You will not be subject to this penalty if you can show that your failure to provide the SSN was due to reasonable cause and not to willful neglect. Free tax estimator 2011   If you fail to supply an SSN, you may also be subject to backup withholding. Free tax estimator 2011 Backup withholding. Free tax estimator 2011   Your investment income is generally not subject to regular withholding. Free tax estimator 2011 However, it may be subject to backup withholding to ensure that income tax is collected on the income. Free tax estimator 2011 Under backup withholding, the bank, broker, or other payer of interest, original issue discount (OID), dividends, cash patronage dividends, or royalties must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Free tax estimator 2011   Backup withholding applies if: You do not give the payer your identification number (either a social security number or an employer identification number) in the required manner, The IRS notifies the payer that you gave an incorrect identification number, The IRS notifies the payer that you are subject to backup withholding on interest or dividends because you have underreported interest or dividends on your income tax return, or You are required, but fail, to certify that you are not subject to backup withholding for the reason described in (3). Free tax estimator 2011 Certification. Free tax estimator 2011   For new accounts paying interest or dividends, you must certify under penalties of perjury that your SSN is correct and that you are not subject to backup withholding. Free tax estimator 2011 Your payer will give you a Form W-9, Request for Taxpayer Identification Number and Certification, or similar form, to make this certification. Free tax estimator 2011 If you fail to make this certification, backup withholding may begin immediately on your new account or investment. Free tax estimator 2011 Underreported interest and dividends. Free tax estimator 2011   You will be considered to have underreported your interest and dividends if the IRS has determined for a tax year that: You failed to include any part of a reportable interest or dividend payment required to be shown on your return, or You were required to file a return and to include a reportable interest or dividend payment on that return, but you failed to file the return. Free tax estimator 2011 How to stop backup withholding due to underreporting. Free tax estimator 2011   If you have been notified that you underreported interest or dividends, you can request a determination from the IRS to prevent backup withholding from starting or to stop backup withholding once it has begun. Free tax estimator 2011 You must show that at least one of the following situations applies. Free tax estimator 2011 No underreporting occurred. Free tax estimator 2011 You have a bona fide dispute with the IRS about whether underreporting occurred. Free tax estimator 2011 Backup withholding will cause or is causing an undue hardship, and it is unlikely that you will underreport interest and dividends in the future. Free tax estimator 2011 You have corrected the underreporting by filing a return if you did not previously file one and by paying all taxes, penalties, and interest due for any underreported interest or dividend payments. Free tax estimator 2011   If the IRS determines that backup withholding should stop, it will provide you with a certification and will notify the payers who were sent notices earlier. Free tax estimator 2011 How to stop backup withholding due to an incorrect identification number. Free tax estimator 2011   If you have been notified by a payer that you are subject to backup withholding because you have provided an incorrect SSN or employer identification number, you can stop it by following the instructions the payer gives you. Free tax estimator 2011 Reporting backup withholding. Free tax estimator 2011   If backup withholding is deducted from your interest or dividend income or other reportable payment, the bank or other business must give you an information return for the year (for example, a Form 1099-INT) indicating the amount withheld. Free tax estimator 2011 The information return will show any backup withholding as “Federal income tax withheld. Free tax estimator 2011 ” Nonresident aliens. Free tax estimator 2011    Generally, payments made to nonresident aliens are not subject to backup withholding. Free tax estimator 2011 You can use Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, to certify exempt status. Free tax estimator 2011 However, this does not exempt you from the 30% (or lower treaty) withholding rate that may apply to your investment income. Free tax estimator 2011 For information on the 30% rate, see Publication 519, U. Free tax estimator 2011 S. Free tax estimator 2011 Tax Guide for Aliens. Free tax estimator 2011 Penalties. Free tax estimator 2011   There are civil and criminal penalties for giving false information to avoid backup withholding. Free tax estimator 2011 The civil penalty is $500. Free tax estimator 2011 The criminal penalty, upon conviction, is a fine of up to $1,000, or imprisonment of up to 1 year, or both. Free tax estimator 2011 Where to report investment income. Free tax estimator 2011   Table 1-1 gives an overview of the forms and schedules to use to report some common types of investment income. Free tax estimator 2011 But see the rest of this publication for detailed information about reporting investment income. Free tax estimator 2011 Joint accounts. Free tax estimator 2011   If two or more persons hold property (such as a savings account, bond, or stock) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest or dividends from the property is determined by local law. Free tax estimator 2011 Community property states. Free tax estimator 2011   If you are married and receive a distribution that is community income, one-half of the distribution is generally considered to be received by each spouse. Free tax estimator 2011 If you file separate returns, you must each report one-half of any taxable distribution. Free tax estimator 2011 See Publication 555, Community Property, for more information on community income. Free tax estimator 2011   If the distribution is not considered community property and you and your spouse file separate returns, each of you must report your separate taxable distributions. Free tax estimator 2011 Example. Free tax estimator 2011 You and your spouse have a joint money market account. Free tax estimator 2011 Under state law, half the income from the account belongs to you, and half belongs to your spouse. Free tax estimator 2011 If you file separate returns, you each report half the income. Free tax estimator 2011 Income from property given to a child. Free tax estimator 2011   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. Free tax estimator 2011   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. Free tax estimator 2011 Savings account with parent as trustee. Free tax estimator 2011   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. Free tax estimator 2011 The savings account legally belongs to the child. Free tax estimator 2011 The parents are not legally permitted to use any of the funds to support the child. Free tax estimator 2011 Table 1-1. Free tax estimator 2011 Where To Report Common Types of Investment Income (For detailed information about reporting investment income, see the rest of this publication, especially How To Report Interest Income and How To Report Dividend Income in chapter 1. Free tax estimator 2011 ) Type of Income If you file Form 1040, report on . Free tax estimator 2011 . Free tax estimator 2011 . Free tax estimator 2011 If you can file Form 1040A, report on . Free tax estimator 2011 . Free tax estimator 2011 . Free tax estimator 2011 If you can file Form 1040EZ, report on . Free tax estimator 2011 . Free tax estimator 2011 . Free tax estimator 2011 Tax-exempt interest (Form 1099-INT, box 8) Line 8b Line 8b Space to the left of line 2 (enter “TEI” and the amount) Taxable interest that totals $1,500 or less Line 8a (You may need to file Schedule B as well. Free tax estimator 2011 ) Line 8a (You may need to file Schedule B as well. Free tax estimator 2011 ) Line 2 Taxable interest that totals more than $1,500 Line 8a; also use Schedule B, line 1 Line 8a; also use Schedule B, line 1   Savings bond interest you will exclude because of higher education expenses Schedule B; also use Form 8815 Schedule B; also use Form 8815   Ordinary dividends that total $1,500 or less Line 9a (You may need to file Schedule B as well. Free tax estimator 2011 ) Line 9a (You may need to file Schedule B as well. Free tax estimator 2011 )   Ordinary dividends that total more than $1,500 Line 9a; also use Schedule B, line 5 Line 9a; also use Schedule B, line 5   Qualified dividends (if you do not have to file Schedule D) Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 2 Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 2   Qualified dividends (if you have to file Schedule D) Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet, line 2 You cannot use Form 1040A    You cannot use Form 1040EZ Capital gain distributions (if you do not have to file Schedule D) Line 13; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 3 Line 10; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 3   Capital gain distributions (if you have to file Schedule D) Schedule D, line 13; also use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet     Section 1250, 1202, or collectibles gain (Form 1099-DIV, box 2b, 2c, or 2d) Form 8949 and Schedule D     Nondividend distributions (Form 1099-DIV, box 3) Generally not reported*     Undistributed capital gains (Form 2439, boxes 1a - 1d) Schedule D     Gain or loss from sales of stocks or bonds Line 13; also use Form 8949, Schedule D, and the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet You cannot use Form 1040A   Gain or loss from exchanges of like-kind investment property Line 13; also use Schedule D, Form 8824, and the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet     *Report any amounts in excess of your basis in your mutual fund shares on Form 8949. Free tax estimator 2011 Use Part II if you held the shares more than 1 year. Free tax estimator 2011 Use Part I if you held your mutual fund shares 1 year or less. Free tax estimator 2011 For details on Form 8949, see Reporting Capital Gains and Losses in chapter 4, and the Instructions for Form 8949. Free tax estimator 2011 Accuracy-related penalty. Free tax estimator 2011   An accuracy-related penalty of 20% can be charged for underpayments of tax due to negligence or disregard of rules or regulations or substantial understatement of tax. Free tax estimator 2011 For information on the penalty and any interest that applies, see Penalties in chapter 2. Free tax estimator 2011 Interest Income This section discusses the tax treatment of different types of interest income. Free tax estimator 2011 In general, any interest that you receive or that is credited to your account and can be withdrawn is taxable income. Free tax estimator 2011 (It does not have to be entered in your passbook. Free tax estimator 2011 ) Exceptions to this rule are discussed later. Free tax estimator 2011 Form 1099-INT. Free tax estimator 2011   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. Free tax estimator 2011 This form shows you the interest you received during the year. Free tax estimator 2011 Keep this form for your records. Free tax estimator 2011 You do not have to attach it to your tax return. Free tax estimator 2011   Report on your tax return the total interest income you receive for the tax year. Free tax estimator 2011 Interest not reported on Form 1099-INT. Free tax estimator 2011   Even if you do not receive Form 1099-INT, you must still report all of your interest income. Free tax estimator 2011 For example, you may receive distributive shares of interest from partnerships or S corporations. Free tax estimator 2011 This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Free tax estimator 2011 , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Free tax estimator 2011 Nominees. Free tax estimator 2011   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. Free tax estimator 2011   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on Nominee distributions , later, under How To Report Interest Income. Free tax estimator 2011 Incorrect amount. Free tax estimator 2011   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Free tax estimator 2011 The new Form 1099-INT you receive will be marked “Corrected. Free tax estimator 2011 ” Form 1099-OID. Free tax estimator 2011   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. Free tax estimator 2011 For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. Free tax estimator 2011 Exempt-interest dividends. Free tax estimator 2011   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. Free tax estimator 2011 (However, see Information reporting requirement , next. Free tax estimator 2011 ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Free tax estimator 2011 You do not reduce your basis for distributions that are exempt-interest dividends. Free tax estimator 2011 Information reporting requirement. Free tax estimator 2011   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. Free tax estimator 2011 This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. Free tax estimator 2011 See How To Report Interest Income , later. Free tax estimator 2011 Note. Free tax estimator 2011 Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Free tax estimator 2011 The exempt-interest dividends subject to the alternative minimum tax are shown in box 11 of Form 1099-DIV. Free tax estimator 2011 See Form 6251 and its instructions for more information about this tax. Free tax estimator 2011 Private activity bonds are discussed later under State or Local Government Obligations. Free tax estimator 2011 Interest on VA dividends. Free tax estimator 2011   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. Free tax estimator 2011 This includes interest paid on dividends on converted United States Government Life Insurance policies and on National Service Life Insurance policies. Free tax estimator 2011 Individual retirement arrangements (IRAs). Free tax estimator 2011   Interest on a Roth IRA generally is not taxable. Free tax estimator 2011 Interest on a traditional IRA is tax deferred. Free tax estimator 2011 You generally do not include it in your income until you make withdrawals from the IRA. Free tax estimator 2011 See Publication 590 for more information. Free tax estimator 2011 Taxable Interest — General Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. Free tax estimator 2011 The following are some sources of taxable interest. Free tax estimator 2011 Dividends that are actually interest. Free tax estimator 2011   Certain distributions commonly called dividends are actually interest. Free tax estimator 2011 You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. Free tax estimator 2011  The “dividends” will be shown as interest income on Form 1099-INT. Free tax estimator 2011 Money market funds. Free tax estimator 2011   Money market funds are offered by nonbank financial institutions such as mutual funds and stock brokerage houses, and pay dividends. Free tax estimator 2011 Generally, amounts you receive from money market funds should be reported as dividends, not as interest. Free tax estimator 2011 Certificates of deposit and other deferred interest accounts. Free tax estimator 2011   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. Free tax estimator 2011 You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. Free tax estimator 2011 The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. Free tax estimator 2011 If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. Free tax estimator 2011 Interest subject to penalty for early withdrawal. Free tax estimator 2011   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. Free tax estimator 2011 You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. Free tax estimator 2011 See Penalty on early withdrawal of savings under How To Report Interest Income, later, for more information on how to report the interest and deduct the penalty. Free tax estimator 2011 Money borrowed to invest in certificate of deposit. Free tax estimator 2011   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. Free tax estimator 2011 You must report the total interest you earn on the certificate in your income. Free tax estimator 2011 If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. Free tax estimator 2011 See Interest Expenses in chapter 3. Free tax estimator 2011 Example. Free tax estimator 2011 You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. Free tax estimator 2011 The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. Free tax estimator 2011 The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. Free tax estimator 2011 The bank also gives you a statement showing that you paid $310 interest for 2013. Free tax estimator 2011 You must include the $575 in your income. Free tax estimator 2011 If you itemize your deductions on Schedule A (Form 1040), Itemized Deductions, you can deduct $310, subject to the net investment income limit. Free tax estimator 2011 Gift for opening account. Free tax estimator 2011   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. Free tax estimator 2011   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. Free tax estimator 2011 For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. Free tax estimator 2011 The value is determined by the cost to the financial institution. Free tax estimator 2011 Example. Free tax estimator 2011 You open a savings account at your local bank and deposit $800. Free tax estimator 2011 The account earns $20 interest. Free tax estimator 2011 You also receive a $15 calculator. Free tax estimator 2011 If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. Free tax estimator 2011 You must report $35 interest income on your tax return. Free tax estimator 2011 Interest on insurance dividends. Free tax estimator 2011   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. Free tax estimator 2011 However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. Free tax estimator 2011 Prepaid insurance premiums. Free tax estimator 2011   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. Free tax estimator 2011 U. Free tax estimator 2011 S. Free tax estimator 2011 obligations. Free tax estimator 2011   Interest on U. Free tax estimator 2011 S. Free tax estimator 2011 obligations, such as U. Free tax estimator 2011 S. Free tax estimator 2011 Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. Free tax estimator 2011 Interest on tax refunds. Free tax estimator 2011   Interest you receive on tax refunds is taxable income. Free tax estimator 2011 Interest on condemnation award. Free tax estimator 2011   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. Free tax estimator 2011 Installment sale payments. Free tax estimator 2011   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. Free tax estimator 2011 That interest is taxable when you receive it. Free tax estimator 2011 If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. Free tax estimator 2011 See Unstated Interest and Original Issue Discount (OID) in Publication 537. Free tax estimator 2011 Interest on annuity contract. Free tax estimator 2011   Accumulated interest on an annuity contract you sell before its maturity date is taxable. Free tax estimator 2011 Usurious interest. Free tax estimator 2011   Usurious interest is interest charged at an illegal rate. Free tax estimator 2011 This is taxable as interest unless state law automatically changes it to a payment on the principal. Free tax estimator 2011 Interest income on frozen deposits. Free tax estimator 2011   Exclude from your gross income interest on frozen deposits. Free tax estimator 2011 A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state in which the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. Free tax estimator 2011   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). Free tax estimator 2011 If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income for information about reporting this interest income exclusion on your tax return. Free tax estimator 2011   The interest you exclude is treated as credited to your account in the following year. Free tax estimator 2011 You must include it in income in the year you can withdraw it. Free tax estimator 2011 Example. Free tax estimator 2011 $100 of interest was credited on your frozen deposit during the year. Free tax estimator 2011 You withdrew $80 but could not withdraw any more as of the end of the year. Free tax estimator 2011 You must include $80 in your income and exclude $20 from your income for the year. Free tax estimator 2011 You must include the $20 in your income for the year you can withdraw it. Free tax estimator 2011 Bonds traded flat. Free tax estimator 2011    If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. Free tax estimator 2011 The defaulted or unpaid interest is not income and is not taxable as interest if paid later. Free tax estimator 2011 When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. Free tax estimator 2011 Interest that accrues after the date of purchase, however, is taxable interest income for the year received or accrued. Free tax estimator 2011 See Bonds Sold Between Interest Dates , later in this chapter. Free tax estimator 2011 Below-Market Loans If you make a below-market gift or demand loan, you must report as interest income any forgone interest (defined later) from that loan. Free tax estimator 2011 The below-market loan rules and exceptions are described in this section. Free tax estimator 2011 For more information, see section 7872 of the Internal Revenue Code and its regulations. Free tax estimator 2011 If you receive a below-market loan, you may be able to deduct the forgone interest as well as any interest you actually paid, but not if it is personal interest. Free tax estimator 2011 Loans subject to the rules. Free tax estimator 2011   The rules for below-market loans apply to: Gift loans, Pay-related loans, Corporation-shareholder loans, Tax avoidance loans, and Certain loans made to qualified continuing care facilities under a continuing care contract. Free tax estimator 2011 A pay-related loan is any below-market loan between an employer and an employee or between an independent contractor and a person for whom the contractor provides services. Free tax estimator 2011 A tax avoidance loan is any below-market loan where the avoidance of federal tax is one of the main purposes of the interest arrangement. Free tax estimator 2011 Forgone interest. Free tax estimator 2011   For any period, forgone interest is: The amount of interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. Free tax estimator 2011 Applicable federal rate. Free tax estimator 2011   Applicable federal rates are published by the IRS each month in the Internal Revenue Bulletin. Free tax estimator 2011 Some IRS offices have these bulletins available for research. Free tax estimator 2011 See chapter 5, How To Get Tax Help , for other ways to get this information. Free tax estimator 2011 Rules for below-market loans. Free tax estimator 2011   The rules that apply to a below-market loan depend on whether the loan is a gift loan, demand loan, or term loan. Free tax estimator 2011 Gift and demand loans. Free tax estimator 2011   A gift loan is any below-market loan where the forgone interest is in the nature of a gift. Free tax estimator 2011   A demand loan is a loan payable in full at any time upon demand by the lender. Free tax estimator 2011 A demand loan is a below-market loan if no interest is charged or if interest is charged at a rate below the applicable federal rate. Free tax estimator 2011   A demand loan or gift loan that is a below-market loan is generally treated as an arm's-length transaction in which the lender is treated as having made: A loan to the borrower in exchange for a note that requires the payment of interest at the applicable federal rate, and An additional payment to the borrower in an amount equal to the forgone interest. Free tax estimator 2011 The borrower is generally treated as transferring the additional payment back to the lender as interest. Free tax estimator 2011 The lender must report that amount as interest income. Free tax estimator 2011   The lender's additional payment to the borrower is treated as a gift, dividend, contribution to capital, pay for services, or other payment, depending on the substance of the transaction. Free tax estimator 2011 The borrower may have to report this payment as taxable income, depending on its classification. Free tax estimator 2011 These transfers are considered to occur annually, generally on December 31. Free tax estimator 2011 Term loans. Free tax estimator 2011   A term loan is any loan that is not a demand loan. Free tax estimator 2011 A term loan is a below-market loan if the amount of the loan is more than the present value of all payments due under the loan. Free tax estimator 2011   A lender who makes a below-market term loan other than a gift loan is treated as transferring an additional lump-sum cash payment to the borrower (as a dividend, contribution to capital, etc. Free tax estimator 2011 ) on the date the loan is made. Free tax estimator 2011 The amount of this payment is the amount of the loan minus the present value, at the applicable federal rate, of all payments due under the loan. Free tax estimator 2011 An equal amount is treated as original issue discount (OID). Free tax estimator 2011 The lender must report the annual part of the OID as interest income. Free tax estimator 2011 The borrower may be able to deduct the OID as interest expense. Free tax estimator 2011 See Original Issue Discount (OID) , later. Free tax estimator 2011 Exceptions to the below-market loan rules. Free tax estimator 2011   Exceptions to the below-market loan rules are discussed here. Free tax estimator 2011 Exception for loans of $10,000 or less. Free tax estimator 2011   The rules for below-market loans do not apply to any day on which the total outstanding amount of loans between the borrower and lender is $10,000 or less. Free tax estimator 2011 This exception applies only to: Gift loans between individuals if the gift loan is not directly used to buy or carry income-producing assets, and Pay-related loans or corporation-shareholder loans if the avoidance of federal tax is not a principal purpose of the interest arrangement. Free tax estimator 2011 This exception does not apply to a term loan described in (2) earlier that previously has been subject to the below-market loan rules. Free tax estimator 2011 Those rules will continue to apply even if the outstanding balance is reduced to $10,000 or less. Free tax estimator 2011 Exception for loans to continuing care facilities. Free tax estimator 2011   Loans to qualified continuing care facilities under continuing care contracts are not subject to the rules for below-market loans for the calendar year if the lender or the lender's spouse is age 62 or older at the end of the year. Free tax estimator 2011 For the definitions of qualified continuing care facility and continuing care contract, see Internal Revenue Code section 7872(h). Free tax estimator 2011 Exception for loans without significant tax effect. Free tax estimator 2011   Loans are excluded from the below-market loan rules if their interest arrangements do not have a significant effect on the federal tax liability of the borrower or the lender. Free tax estimator 2011 These loans include: Loans made available by the lender to the general public on the same terms and conditions that are consistent with the lender's customary business practice; Loans subsidized by a federal, state, or municipal government that are made available under a program of general application to the public; Certain employee-relocation loans; Certain loans from a foreign person, unless the interest income would be effectively connected with the conduct of a U. Free tax estimator 2011 S. Free tax estimator 2011 trade or business and would not be exempt from U. Free tax estimator 2011 S. Free tax estimator 2011 tax under an income tax treaty; Gift loans to a charitable organization, contributions to which are deductible, if the total outstanding amount of loans between the organization and lender is $250,000 or less at all times during the tax year; and Other loans on which the interest arrangement can be shown to have no significant effect on the federal tax liability of the lender or the borrower. Free tax estimator 2011 For a loan described in (6) above, all the facts and circumstances are used to determine if the interest arrangement has a significant effect on the federal tax liability of the lender or borrower. Free tax estimator 2011 Some factors to be considered are: Whether items of income and deduction generated by the loan offset each other; The amount of these items; The cost to you of complying with the below-market loan rules, if they were to apply; and Any reasons other than taxes for structuring the transaction as a below-market loan. Free tax estimator 2011 If you structure a transaction to meet this exception and one of the principal purposes of that structure is the avoidance of federal tax, the loan will be considered a tax-avoidance loan, and this exception will not apply. Free tax estimator 2011 Limit on forgone interest for gift loans of $100,000 or less. Free tax estimator 2011   For gift loans between individuals, if the outstanding loans between the lender and borrower total $100,000 or less, the forgone interest to be included in income by the lender and deducted by the borrower is limited to the amount of the borrower's net investment income for the year. Free tax estimator 2011 If the borrower's net investment income is $1,000 or less, it is treated as zero. Free tax estimator 2011 This limit does not apply to a loan if the avoidance of federal tax is one of the main purposes of the interest arrangement. Free tax estimator 2011 Effective dates. Free tax estimator 2011    These rules apply to term loans made after June 6, 1984, and to demand loans outstanding after that date. Free tax estimator 2011 U. Free tax estimator 2011 S. Free tax estimator 2011 Savings Bonds This section provides tax information on U. Free tax estimator 2011 S. Free tax estimator 2011 savings bonds. Free tax estimator 2011 It explains how to report the interest income on these bonds and how to treat transfers of these bonds. Free tax estimator 2011 U. Free tax estimator 2011 S. Free tax estimator 2011 savings bonds currently offered to individuals include Series EE bonds and Series I bonds. Free tax estimator 2011 For other information on U. Free tax estimator 2011 S. Free tax estimator 2011 savings bonds, write to:  For Series HH/H: Bureau of the Fiscal Service Division of Customer Assistance P. Free tax estimator 2011 O. Free tax estimator 2011 Box 2186 Parkersburg, WV 26106-2186  For Series EE and I paper savings bonds: Bureau of the Fiscal Service Division of Customer Assistance P. Free tax estimator 2011 O. Free tax estimator 2011 Box 7012 Parkersburg, WV 26106-7012  For Series EE and I electronic bonds: Bureau of the Fiscal Service  Division of Customer Assistance P. Free tax estimator 2011 O. Free tax estimator 2011 Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. Free tax estimator 2011 treasurydirect. Free tax estimator 2011 gov/indiv/indiv. Free tax estimator 2011 htm. Free tax estimator 2011 Accrual method taxpayers. Free tax estimator 2011   If you use an accrual method of accounting, you must report interest on U. Free tax estimator 2011 S. Free tax estimator 2011 savings bonds each year as it accrues. Free tax estimator 2011 You cannot postpone reporting interest until you receive it or until the bonds mature. Free tax estimator 2011 Cash method taxpayers. Free tax estimator 2011   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. Free tax estimator 2011 S. Free tax estimator 2011 savings bonds when you receive it. Free tax estimator 2011 But see Reporting options for cash method taxpayers , later. Free tax estimator 2011 Series HH bonds. Free tax estimator 2011   These bonds were issued at face value. Free tax estimator 2011 Interest is paid twice a year by direct deposit to your bank account. Free tax estimator 2011 If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. Free tax estimator 2011   Series HH bonds were first offered in 1980 and last offered in August 2004. Free tax estimator 2011 Before 1980, series H bonds were issued. Free tax estimator 2011 Series H bonds are treated the same as series HH bonds. Free tax estimator 2011 If you are a cash method taxpayer, you must report the interest when you receive it. Free tax estimator 2011   Series H bonds have a maturity period of 30 years. Free tax estimator 2011 Series HH bonds mature in 20 years. Free tax estimator 2011 The last series H bonds matured in 2009. Free tax estimator 2011 The last series HH bonds will mature in 2024. Free tax estimator 2011 Series EE and series I bonds. Free tax estimator 2011   Interest on these bonds is payable when you redeem the bonds. Free tax estimator 2011 The difference between the purchase price and the redemption value is taxable interest. Free tax estimator 2011 Series EE bonds. Free tax estimator 2011   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. Free tax estimator 2011 Before July 1980, series E bonds were issued. Free tax estimator 2011 The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. Free tax estimator 2011 Paper series EE and series E bonds are issued at a discount. Free tax estimator 2011 The face value is payable to you at maturity. Free tax estimator 2011 Electronic series EE bonds are issued at their face value. Free tax estimator 2011 The face value plus accrued interest is payable to you at maturity. Free tax estimator 2011 As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. Free tax estimator 2011    Owners of paper series EE bonds can convert them to electronic bonds. Free tax estimator 2011 These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). Free tax estimator 2011 Series I bonds. Free tax estimator 2011   Series I bonds were first offered in 1998. Free tax estimator 2011 These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. Free tax estimator 2011 The face value plus all accrued interest is payable to you at maturity. Free tax estimator 2011 Reporting options for cash method taxpayers. Free tax estimator 2011   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. Free tax estimator 2011 Method 1. Free tax estimator 2011 Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year in which they mature. Free tax estimator 2011 (However, see Savings bonds traded , later. Free tax estimator 2011 )  Note. Free tax estimator 2011 Series EE bonds issued in 1983 matured in 2013. Free tax estimator 2011 If you have used method 1, you generally must report the interest on these bonds on your 2013 return. Free tax estimator 2011 The last series E bonds were issued in 1980 and matured in 2010. Free tax estimator 2011 If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. Free tax estimator 2011 Method 2. Free tax estimator 2011 Choose to report the increase in redemption value as interest each year. Free tax estimator 2011  You must use the same method for all series EE, series E, and series I bonds you own. Free tax estimator 2011 If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. Free tax estimator 2011 If you plan to cash your bonds in the same year you will pay for higher educational expenses, you may want to use method 1 because you may be able to exclude the interest from your income. Free tax estimator 2011 To learn how, see Education Savings Bond Program, later. Free tax estimator 2011 Change from method 1. Free tax estimator 2011   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. Free tax estimator 2011 In the year of change, you must report all interest accrued to date and not previously reported for all your bonds. Free tax estimator 2011   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. Free tax estimator 2011 Change from method 2. Free tax estimator 2011   To change from method 2 to method 1, you must request permission from the IRS. Free tax estimator 2011 Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. Free tax estimator 2011 You have typed or printed the following number at the top: “131. Free tax estimator 2011 ” It includes your name and social security number under “131. Free tax estimator 2011 ” It includes the year of change (both the beginning and ending dates). Free tax estimator 2011 It identifies the savings bonds for which you are requesting this change. Free tax estimator 2011 It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest; and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. Free tax estimator 2011   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). Free tax estimator 2011   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. Free tax estimator 2011 On the statement, type or print “Filed pursuant to section 301. Free tax estimator 2011 9100-2. Free tax estimator 2011 ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). Free tax estimator 2011    By the date you file the original statement with your return, you must also send a signed copy to the address below. Free tax estimator 2011    Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. Free tax estimator 2011 O. Free tax estimator 2011 Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. Free tax estimator 2011 Internal Revenue Service Attention: CC:IT&A  (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW Washington, DC 20224    Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115. Free tax estimator 2011 In that case, follow the form instructions for an automatic change. Free tax estimator 2011 No user fee is required. Free tax estimator 2011 Co-owners. Free tax estimator 2011   If a U. Free tax estimator 2011 S. Free tax estimator 2011 savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. Free tax estimator 2011 One co-owner's funds used. Free tax estimator 2011   If you used your funds to buy the bond, you must pay the tax on the interest. Free tax estimator 2011 This is true even if you let the other co-owner redeem the bond and keep all the proceeds. Free tax estimator 2011 Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. Free tax estimator 2011 The co-owner who redeemed the bond is a “nominee. Free tax estimator 2011 ” See Nominee distributions under How To Report Interest Income, later, for more information about how a person who is a nominee reports interest income belonging to another person. Free tax estimator 2011 Both co-owners' funds used. Free tax estimator 2011   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. Free tax estimator 2011 Community property. Free tax estimator 2011   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. Free tax estimator 2011 If you file separate returns, each of you generally must report one-half of the bond interest. Free tax estimator 2011 For more information about community property, see Publication 555. Free tax estimator 2011 Table 1-2. Free tax estimator 2011   These rules are also shown in Table 1-2. Free tax estimator 2011 Child as only owner. Free tax estimator 2011   Interest on U. Free tax estimator 2011 S. Free tax estimator 2011 savings bonds bought for and registered only in the name of your child is income to your child, even if you paid for the bonds and are named as beneficiary. Free tax estimator 2011 If the bonds are series EE, series E, or series I bonds, the interest on the bonds is income to your child in the earlier of the year the bonds are cashed or disposed of or the year the bonds mature, unless your child chooses to report the interest income each year. Free tax estimator 2011 Choice to report interest each year. Free tax estimator 2011   The choice to report the accrued interest each year can be made either by your child or by you for your child. Free tax estimator 2011 This choice is made by filing an income tax return that shows all the interest earned to date, and by stating on the return that your child chooses to report the interest each year. Free tax estimator 2011 Either you or your child should keep a copy of this return. Free tax estimator 2011   Unless your child is otherwise required to file a tax return for any year after making this choice, your child does not have to file a return only to report the annual accrual of U. Free tax estimator 2011 S. Free tax estimator 2011 savings bond interest under this choice. Free tax estimator 2011 However, see Tax on unearned income of certain children , earlier, under General Information. Free tax estimator 2011 Neither you nor your child can change the way you report the interest unless you request permission from the IRS, as discussed earlier under Change from method 2 . Free tax estimator 2011 Ownership transferred. Free tax estimator 2011   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. Free tax estimator 2011 But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. Free tax estimator 2011   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. Free tax estimator 2011 Example. Free tax estimator 2011 You bought series EE bonds entirely with your own funds. Free tax estimator 2011 You did not choose to report the accrued interest each year. Free tax estimator 2011 Later, you transfer the bonds to your former spouse under a divorce agreement. Free tax estimator 2011 You must include the deferred accrued interest, from the date of the original issue of the bonds to the date of transfer, in your income in the year of transfer. Free tax estimator 2011 Your former spouse includes in income the interest on the bonds from the date of transfer to the date of redemption. Free tax estimator 2011 Table 1-2. Free tax estimator 2011 Who Pays the Tax on U. Free tax estimator 2011 S. Free tax estimator 2011 Savings Bond Interest IF . Free tax estimator 2011 . Free tax estimator 2011 . Free tax estimator 2011 THEN the interest must be reported by . Free tax estimator 2011 . Free tax estimator 2011 . Free tax estimator 2011 you buy a bond in your name and the name of another person as co-owners, using only your own funds you. Free tax estimator 2011 you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. Free tax estimator 2011 you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. Free tax estimator 2011 you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. Free tax estimator 2011 If you file separate returns, both you and your spouse generally report one-half of the interest. Free tax estimator 2011 Purchased jointly. Free tax estimator 2011   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. Free tax estimator 2011 The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. Free tax estimator 2011 This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. Free tax estimator 2011   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. Free tax estimator 2011 But the new co-owner will report only his or her share of the interest earned after the transfer. Free tax estimator 2011   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. Free tax estimator 2011 Example 1. Free tax estimator 2011 You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. Free tax estimator 2011 The bond was issued to you and your spouse as co-owners. Free tax estimator 2011 You both postpone reporting interest on the bond. Free tax estimator 2011 You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Free tax estimator 2011 At that time neither you nor your spouse has to report the interest earned to the date of reissue. Free tax estimator 2011 Example 2. Free tax estimator 2011 You bought a $1,000 series EE savings bond entirely with your own funds. Free tax estimator 2011 The bond was issued to you and your spouse as co-owners. Free tax estimator 2011 You both postponed reporting interest on the bond. Free tax estimator 2011 You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Free tax estimator 2011 You must report half the interest earned to the date of reissue. Free tax estimator 2011 Transfer to a trust. Free tax estimator 2011   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. Free tax estimator 2011 However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. Free tax estimator 2011 You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. Free tax estimator 2011   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. Free tax estimator 2011 See Savings bonds traded , later. Free tax estimator 2011 Decedents. Free tax estimator 2011   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. Free tax estimator 2011 Decedent who reported interest each year. Free tax estimator 2011   If the bonds transferred because of death were owned by a person who used an accrual method, or who used the cash method and had chosen to report the interest each year, the interest earned in the year of death up to the date of death must be reported on that person's final return. Free tax estimator 2011 The person who acquires the bonds includes in income only interest earned after the date of death. Free tax estimator 2011 Decedent who postponed reporting interest. Free tax estimator 2011   If the transferred bonds were owned by a decedent who had used the cash method and had not chosen to report the interest each year, and who had bought the bonds entirely with his or her own funds, all interest earned before death must be reported in one of the following ways. Free tax estimator 2011 The surviving spouse or personal representative (executor, administrator, etc. Free tax estimator 2011 ) who files the final income tax return of the decedent can choose to include on that return all interest earned on the bonds before the decedent's death. Free tax estimator 2011 The person who acquires the bonds then includes in income only interest earned after the date of death. Free tax estimator 2011 If the choice in (1) is not made, the interest earned up to the date of death is income in respect of the decedent and should not be included in the decedent's final return. Free tax estimator 2011 All interest earned both before and after the decedent's death (except any part reported by the estate on its income tax return) is income to the person who acquires the bonds. Free tax estimator 2011 If that person uses the cash method and does not choose to report the interest each year, he or she can postpone reporting it until the year the bonds are cashed or disposed of or the year they mature, whichever is earlier. Free tax estimator 2011 In the year that person reports the interest, he or she can claim a deduction for any federal estate tax paid on the part of the interest included in the decedent's estate. Free tax estimator 2011 For more information on income in respect of a decedent, see Publication 559, Survivors, Executors, and Administrators. Free tax estimator 2011 Example 1. Free tax estimator 2011 Your uncle, a cash method taxpayer, died and left you a $1,000 series EE bond. Free tax estimator 2011 He had bought the bond for $500 and had not chosen to report the interest each year. Free tax estimator 2011 At the date of death, interest of $200 had accrued on the bond, and its value of $700 was included in your uncle's estate. Free tax estimator 2011 Your uncle's executor chose not to include the $200 accrued interest in your uncle's final income tax return. Free tax estimator 2011 The $200 is income in respect of the decedent. Free tax estimator 2011 You are a cash method taxpayer and do not choose to report the interest each year as it is earned. Free tax estimator 2011 If you cash the bond when it reaches maturity value of $1,000, you report $500 interest income—the difference between maturity value of $1,000 and the original cost of $500. Free tax estimator 2011 For that year, you can deduct (as a miscellaneous itemized deduction not subject to the 2%-of-adjusted-gross-income limit) any federal estate tax paid because the $200 interest was included in your uncle's estate. Free tax estimator 2011 Example 2. Free tax estimator 2011 If, in Example 1 , the executor had chosen to include the $200 accrued interest in your uncle's final return, you would report only $300 as interest when you cashed the bond at maturity. Free tax estimator 2011 $300 is the interest earned after your uncle's death. Free tax estimator 2011 Example 3. Free tax estimator 2011 If, in Example 1 , you make or have made the choice to report the increase in redemption value as interest each year, you include in gross income for the year you acquire the bond all of the unreported increase in value of all series E, series EE, and series I bonds you hold, including the $200 on the bond you inherited from your uncle. Free tax estimator 2011 Example 4. Free tax estimator 2011 When your aunt died, she owned series HH bonds that she had acquired in a trade for series EE bonds. Free tax estimator 2011 You were the beneficiary of these bonds. Free tax estimator 2011 Your aunt used the cash method and did not choose to report the interest on the series EE bonds each year as it accrued. Free tax estimator 2011 Your aunt's executor chose not to include any interest earned before your aunt's death on her final return. Free tax estimator 2011 The income in respect of the decedent is the sum of the unreported interest on the series EE bonds and the interest, if any, payable on the series HH bonds but not received as of the date of your aunt's death. Free tax estimator 2011 You must report any interest received during the year as income on your return. Free tax estimator 2011 The part of the interest payable but not received before your aunt's death is income in respect of the decedent and may qualify for the estate tax deduction. Free tax estimator 2011 For information on when to report the interest on the series EE bonds traded, see Savings bonds traded , later. Free tax estimator 2011 Savings bonds distributed from a retirement or profit-sharing plan. Free tax estimator 2011   If you acquire a U. Free tax estimator 2011 S. Free tax estimator 2011 savings bond in a taxable distribution from a retirement or profit-sharing plan, your income for the year of distribution includes the bond's redemption value (its cost plus the interest accrued before the distribution). Free tax estimator 2011 When you redeem the bond (whether in the year of distribution or later), your interest income includes only the interest accrued after the bond was distributed. Free tax estimator 2011 To figure the interest reported as a taxable distribution and your interest income when you redeem the bond, see Worksheet for savings bonds distributed from a retirement or profit-sharing plan under How To Report Interest Income, later. Free tax estimator 2011 Savings bonds traded. Free tax estimator 2011   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. Free tax estimator 2011 (You cannot trade series I bonds for series HH bonds. Free tax estimator 2011 After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. Free tax estimator 2011 ) Any cash you received is income up to the amount of the interest earned on the bonds traded. Free tax estimator 2011 When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. Free tax estimator 2011 Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. Free tax estimator 2011 Example. Free tax estimator 2011 You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. Free tax estimator 2011 You reported the $223 as taxable income on your tax return. Free tax estimator 2011 At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. Free tax estimator 2011 You hold the series HH bonds until maturity, when you receive $2,500. Free tax estimator 2011 You must report $300 as interest income in the year of maturity. Free tax estimator 2011 This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). Free tax estimator 2011 (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. Free tax estimator 2011 ) Choice to report interest in year of trade. Free tax estimator 2011   You could have chosen to treat all of the previously unreported accrued interest on series EE or series E bonds traded for series HH bonds as income in the year of the trade. Free tax estimator 2011 If you made this choice, it is treated as a change from method 1. Free tax estimator 2011 See Change from method 1 under Series EE and series I bonds, earlier. Free tax estimator 2011 Form 1099-INT for U. Free tax estimator 2011 S. Free tax estimator 2011 savings bond interest. Free tax estimator 2011   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. Free tax estimator 2011 Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. Free tax estimator 2011 However, your Form 1099-INT may show more interest than you have to include on your income tax return. Free tax estimator 2011 For example, this may happen if any of the following are true. Free tax estimator 2011 You chose to report the increase in the redemption value of the bond each year. Free tax estimator 2011 The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. Free tax estimator 2011 You received the bond from a decedent. Free tax estimator 2011 The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. Free tax estimator 2011 Ownership of the bond was transferred. Free tax estimator 2011 The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. Free tax estimator 2011 You were named as a co-owner, and the other co-owner contributed funds to buy the bond. Free tax estimator 2011 The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. Free tax estimator 2011 (See Co-owners , earlier in this section, for more information about the reporting requirements. Free tax estimator 2011 ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. Free tax estimator 2011 The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. Free tax estimator 2011 (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Free tax estimator 2011 , for the year of distribution. Free tax estimator 2011 )   For more information on including the correct amount of interest on your return, see U. Free tax estimator 2011 S. Free tax estimator 2011 savings bond interest previously reported or Nominee distributions under How To Report Interest Income, later. Free tax estimator 2011    Interest on U. Free tax estimator 2011 S. Free tax estimator 2011 savings bonds is exempt from state and local taxes. Free tax estimator 2011 The Form 1099-INT you receive will indicate the amount that is for U. Free tax estimator 2011 S. Free tax estimator 2011 savings bonds interest in box 3. Free tax estimator 2011 Do not include this income on your state or local income tax return. Free tax estimator 2011 Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. Free tax estimator 2011 S. Free tax estimator 2011 savings bonds during the year if you pay qualified higher educational expenses during the same year. Free tax estimator 2011 This exclusion is known as the Education Savings Bond Program. Free tax estimator 2011 You do not qualify for this exclusion if your filing status is married filing separately. Free tax estimator 2011 Form 8815. Free tax estimator 2011   Use Form 8815 to figure your exclusion. Free tax estimator 2011 Attach the form to your Form 1040 or Form 1040A. Free tax estimator 2011 Qualified U. Free tax estimator 2011 S. Free tax estimator 2011 savings bonds. Free tax estimator 2011   A qualified U. Free tax estimator 2011 S. Free tax estimator 2011 savings bond is a series EE bond issued after 1989 or a series I bond. Free tax estimator 2011 The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). Free tax estimator 2011 You must be at least 24 years old before the bond's issue date. Free tax estimator 2011 For example, a bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child. Free tax estimator 2011    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. Free tax estimator 2011 Beneficiary. Free tax estimator 2011   You can designate any individual (including a child) as a beneficiary of the bond. Free tax estimator 2011 Verification by IRS. Free tax estimator 2011   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of Treasury. Free tax estimator 2011 Qualified expenses. Free tax estimator 2011   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. Free tax estimator 2011   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. Free tax estimator 2011 For information about these programs, see Publication 970, Tax Benefits for Education. Free tax estimator 2011   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. Free tax estimator 2011 Eligible educational institutions. Free tax estimator 2011   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the Department of Education. Free tax estimator 2011 Reduction for certain benefits. Free tax estimator 2011   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. Free tax estimator 2011 Tax-free part of scholarships and fellowships. Free tax estimator 2011 Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. Free tax estimator 2011 Expenses used to figure the tax-free portion of distributions from a qualified tuition program. Free tax estimator 2011 Any tax-free payments (other than gifts or inheritances) received as educational assistance, such as: Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. Free tax estimator 2011 Any expense used in figuring the American Opportunity and lifetime learning credits. Free tax estimator 2011 For information about these benefits, see Publication 970. Free tax estimator 2011 Amount excludable. Free tax estimator 2011   If the total proceeds (interest and principal) from the qualified U. Free tax estimator 2011 S. Free tax estimator 2011 savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. Free tax estimator 2011 If the proceeds are more than the expenses, you may be able to exclude only part of the interest. Free tax estimator 2011   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. Free tax estimator 2011 The numer