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Free Tax Preparation For Seniors

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Free Tax Preparation For Seniors

Free tax preparation for seniors Publication 531 - Main Content Table of Contents Keeping a Daily Tip RecordElectronic tip record. Free tax preparation for seniors Reporting Tips to Your EmployerElectronic tip statement. Free tax preparation for seniors Final report. Free tax preparation for seniors Tip Rate Determination and Education Program Reporting Tips on Your Tax Return Allocated Tips How To Get Tax Help Keeping a Daily Tip Record Why keep a daily tip record. Free tax preparation for seniors   You must keep a daily tip record so you can: Report your tips accurately to your employer, Report your tips accurately on your tax return, and Prove your tip income if your return is ever questioned. Free tax preparation for seniors How to keep a daily tip record. Free tax preparation for seniors   There are two ways to keep a daily tip record. Free tax preparation for seniors You can either: Write information about your tips in a tip diary, or Keep copies of documents that show your tips, such as restaurant bills and credit or debit card charge slips. Free tax preparation for seniors You should keep your daily tip record with your tax or other personal records. Free tax preparation for seniors You must keep your records for as long as they are important for administration of the federal tax law. Free tax preparation for seniors For information on how long to keep records, see How Long to Keep Records in chapter 1 of Publication 17, Your Federal Income Tax. Free tax preparation for seniors    If you keep a tip diary, you can use Form 4070A, Employee's Daily Record of Tips. Free tax preparation for seniors To get Form 4070A, ask the Internal Revenue Service (IRS) or your employer for Publication 1244, Employee's Daily Record of Tips and Report to Employer. Free tax preparation for seniors Publication 1244 is also available at www. Free tax preparation for seniors irs. Free tax preparation for seniors gov/pub1244. Free tax preparation for seniors Publication 1244 includes a 1-year supply of Form 4070A. Free tax preparation for seniors Each day, write in the information asked for on the form. Free tax preparation for seniors A filled-in Form 4070A is shown on the following page. Free tax preparation for seniors   In addition to the information asked for on Form 4070A, you also need to keep a record of the date and value of any noncash tips you get, such as tickets, passes, or other items of value. Free tax preparation for seniors Although you do not report these tips to your employer, you must report them on your tax return. Free tax preparation for seniors   If you do not use Form 4070A, start your records by writing your name, your employer's name, and the name of the business (if it is different from your employer's name). Free tax preparation for seniors Then, each workday, write the date and the following information. Free tax preparation for seniors Cash tips you get directly from customers or from other employees. Free tax preparation for seniors Tips from credit and debit card charge customers that your employer pays you. Free tax preparation for seniors The value of any noncash tips you get, such as tickets, passes, or other items of value. Free tax preparation for seniors The amount of tips you paid out to other employees through tip pools or tip splitting, or other arrangements, and the names of the employees to whom you paid the tips. Free tax preparation for seniors Please click here for the text description of the image. Free tax preparation for seniors Sample Filled-in Form 4070A from Publication 1244 Electronic tip record. Free tax preparation for seniors   You can use an electronic system provided by your employer to record your daily tips. Free tax preparation for seniors If you do, you must receive and keep a paper copy of this record. Free tax preparation for seniors Service charges. Free tax preparation for seniors    Do not write in your tip diary the amount of any service charge that your employer adds to a customer's bill and then pays to you and treats as wages. Free tax preparation for seniors This is part of your wages, not a tip. Free tax preparation for seniors The following factors determine if you have a tip or service charge: The payment is made free from compulsion; The customer has the right to determine the amount of payment; The payment is not subject to negotiation or dictated by employer policy; and The customer generally has the right to determine who receives the payment. Free tax preparation for seniors See examples below. Free tax preparation for seniors Example 1. Free tax preparation for seniors Good Food Restaurant adds an 18% charge to the bill for parties of 6 or more customers. Free tax preparation for seniors Jane's bill for food and beverages for her party of 8 includes an amount on the tip line equal to 18% of the charges for food and beverages, and the total includes this amount. Free tax preparation for seniors Because Jane did not have an unrestricted right to determine the amount on the “tip line,” the 18% charge is considered a service charge. Free tax preparation for seniors Do not include the 18% charge in your tip diary. Free tax preparation for seniors Service charges that are paid to you are considered wages, not tips. Free tax preparation for seniors Example 2. Free tax preparation for seniors Good Food Restaurant includes sample calculations of tip amounts at the bottom of its bills for food and beverages provided to customers. Free tax preparation for seniors David's bill includes a blank “tip line,” with sample tip calculations of 15%, 18%, and 20% of the charges for food and beverages at the bottom of the bill beneath the signature line. Free tax preparation for seniors Because David is free to enter any amount on the “tip line” or leave it blank, any amount he includes is considered a tip. Free tax preparation for seniors Be sure to include this amount in your tip diary. Free tax preparation for seniors Sample Filled-in Form 4070 from Publication 1244 Please click here for the text description of the image. Free tax preparation for seniors Filled-in Form 4070 Reporting Tips to Your Employer Why report tips to your employer. Free tax preparation for seniors   You must report tips to your employer so that: Your employer can withhold federal income tax and social security, Medicare, Additional Medicare, or railroad retirement taxes, Your employer can report the correct amount of your earnings to the Social Security Administration or Railroad Retirement Board (which affects your benefits when you retire or if you become disabled, or your family's benefits if you die), and You can avoid the penalty for not reporting tips to your employer (explained later). Free tax preparation for seniors What tips to report. Free tax preparation for seniors   Report to your employer only cash, check, and debit and credit card tips you receive. Free tax preparation for seniors   If your total tips for any 1 month from any one job are less than $20, do not report the tips for that month to that employer. Free tax preparation for seniors   If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. Free tax preparation for seniors Do not report to your employer any portion of the tips you receive that you pass on to other employees. Free tax preparation for seniors However, you must report tips you receive from other employees. Free tax preparation for seniors   Do not report the value of any noncash tips, such as tickets or passes, to your employer. Free tax preparation for seniors You do not pay social security, Medicare, Additional Medicare, or railroad retirement taxes on these tips. Free tax preparation for seniors How to report. Free tax preparation for seniors   If your employer does not give you any other way to report your tips, you can use Form 4070, Employee's Report of Tips to Employer. Free tax preparation for seniors Fill in the information asked for on the form, sign and date the form, and give it to your employer. Free tax preparation for seniors A sample filled-in Form 4070 is shown above. Free tax preparation for seniors To get a 1-year supply of the form, ask the IRS or your employer for Publication 1244. Free tax preparation for seniors   If you do not use Form 4070, give your employer a statement with the following information. Free tax preparation for seniors Your name, address, and social security number. Free tax preparation for seniors Your employer's name, address, and business name (if it is different from your employer's name). Free tax preparation for seniors The month (or the dates of any shorter period) in which you received tips. Free tax preparation for seniors The total tips required to be reported for that period. Free tax preparation for seniors You must sign and date the statement. Free tax preparation for seniors Be sure to keep a copy with your tax or other personal records. Free tax preparation for seniors   Your employer may require you to report your tips more than once a month. Free tax preparation for seniors However, the statement cannot cover a period of more than 1 calendar month. Free tax preparation for seniors Electronic tip statement. Free tax preparation for seniors   Your employer can have you furnish your tip statements electronically. Free tax preparation for seniors When to report. Free tax preparation for seniors   Give your report for each month to your employer by the 10th of the next month. Free tax preparation for seniors If the 10th falls on a Saturday, Sunday, or legal holiday, give your employer the report by the next day that is not a Saturday, Sunday, or legal holiday. Free tax preparation for seniors Example. Free tax preparation for seniors You must report your tips received in September 2014 by October 10, 2014. Free tax preparation for seniors Final report. Free tax preparation for seniors   If your employment ends during the month, you can report your tips when your employment ends. Free tax preparation for seniors Penalty for not reporting tips. Free tax preparation for seniors   If you do not report tips to your employer as required, you may be subject to a penalty equal to 50% of the social security, Medicare, Additional Medicare, or railroad retirement taxes you owe on the unreported tips. Free tax preparation for seniors (For information about these taxes, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, later. Free tax preparation for seniors ) The penalty amount is in addition to the taxes you owe. Free tax preparation for seniors   You can avoid this penalty if you can show reasonable cause for not reporting the tips to your employer. Free tax preparation for seniors To do so, attach a statement to your return explaining why you did not report them. Free tax preparation for seniors Giving your employer money for taxes. Free tax preparation for seniors   Your regular pay may not be enough for your employer to withhold all the taxes you owe on your regular pay plus your reported tips. Free tax preparation for seniors If this happens, you can give your employer money until the close of the calendar year to pay the rest of the taxes. Free tax preparation for seniors   If you do not give your employer enough money, your employer will apply your regular pay and any money you give to the taxes, in the following order. Free tax preparation for seniors All taxes on your regular pay. Free tax preparation for seniors Social security, Medicare, Additional Medicare, or railroad retirement taxes on your reported tips. Free tax preparation for seniors Federal, state, and local income taxes on your reported tips. Free tax preparation for seniors    Any taxes that remain unpaid can be collected by your employer from your next paycheck. Free tax preparation for seniors If withholding taxes remain uncollected at the end of the year, you may be subject to a penalty for underpayment of estimated taxes. Free tax preparation for seniors See Publication 505, Tax Withholding and Estimated Tax, for more information. Free tax preparation for seniors    Uncollected taxes. Free tax preparation for seniors You must report on your tax return any social security and Medicare taxes, or railroad retirement taxes that remained uncollected at the end of 2013. Free tax preparation for seniors These uncollected taxes will be shown on your 2013 Form W-2. Free tax preparation for seniors See Reporting uncollected social security, Medicare, Additional Medicare, or railroad retirement taxes on tips reported to your employer under Reporting Tips on Your Tax Return, later. Free tax preparation for seniors Tip Rate Determination and Education Program Your employer may participate in the Tip Rate Determination and Education Program. Free tax preparation for seniors The program was developed to help employees and employers understand and meet their tip reporting responsibilities. Free tax preparation for seniors There are two agreements under the program: the Tip Rate Determination Agreement (TRDA) and the Tip Reporting Alternative Commitment (TRAC). Free tax preparation for seniors A variation of the TRAC program, the Employer Tip Reporting Alternative Commitment, (EmTRAC) was designed to allow employers in the food and beverage industry to design and receive approval for their own TRAC programs. Free tax preparation for seniors For information on the EmTRAC program, see Notice 2001-1, which is on page 261 of Internal Revenue Bulletin 2001-2 at www. Free tax preparation for seniors irs. Free tax preparation for seniors gov/pub/irs-irbs/irb01-02. Free tax preparation for seniors pdf. Free tax preparation for seniors If you are employed in the gaming industry, your employer may participate in the Gaming Industry Tip Compliance Agreement Program. Free tax preparation for seniors See Revenue Procedure 2007-32, 2007-22 I. Free tax preparation for seniors R. Free tax preparation for seniors B. Free tax preparation for seniors 1322, available at www. Free tax preparation for seniors irs. Free tax preparation for seniors gov/pub/irs-irbs/irb07_22. Free tax preparation for seniors pdf. Free tax preparation for seniors Your employer can provide you with a copy of any applicable agreement. Free tax preparation for seniors To find out more about these agreements, visit IRS. Free tax preparation for seniors gov and enter “restaurant tip reporting” in the search box. Free tax preparation for seniors You may also call 1-800-829-4933, visit www. Free tax preparation for seniors irs. Free tax preparation for seniors gov/localcontacts for the IRS Taxpayer Assistance Center in your area, or send an email to Tip. Free tax preparation for seniors Program@irs. Free tax preparation for seniors gov and request information on this program. Free tax preparation for seniors Reporting Tips on Your Tax Return How to report tips. Free tax preparation for seniors   Report your tips with your wages on Form 1040, line 7; Form 1040A, line 7; Form 1040EZ, line 1; Form 1040NR, line 8; or Form 1040NR-EZ, line 3. Free tax preparation for seniors What tips to report. Free tax preparation for seniors   Generally, you must report all tips you received in 2013 on your tax return, including both cash tips and noncash tips. Free tax preparation for seniors Any tips you reported to your employer as required in 2013 are included in the wages shown in box 1 of your Form W-2. Free tax preparation for seniors Add to the amount in box 1 only the tips you did not report to your employer. Free tax preparation for seniors   However, any tips you received in 2013 that you reported to your employer as required after 2013 but before January 11, 2014, are not included in the wages shown in box 1 of your 2013 Form W-2. Free tax preparation for seniors Do not include the amount of these tips on your 2013 tax return. Free tax preparation for seniors Instead, include them on your 2014 tax return. Free tax preparation for seniors Tips you received in 2012 that you reported to your employer as required after 2012 but before January 11, 2013, are included in the wages shown in box 1 of your 2013 Form W-2. Free tax preparation for seniors Although these tips were received in 2012, you must report them on your 2013 tax return. Free tax preparation for seniors   If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. Free tax preparation for seniors Do not report on your income tax return any portion of the tips you receive that you pass on to other employees. Free tax preparation for seniors However, you must report tips you receive from other employees. Free tax preparation for seniors    If you received $20 or more in cash and charge tips in a month and did not report all of those tips to your employer, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer, later. Free tax preparation for seniors    If you did not keep a daily tip record as required and an amount is shown in box 8 of your Form W-2, see Allocated Tips, later. Free tax preparation for seniors   If you kept a daily tip record and reported tips to your employer as required under the rules explained earlier, add the following tips to the amount in box 1 of your Form W-2. Free tax preparation for seniors Cash and charge tips you received that totaled less than $20 for any month. Free tax preparation for seniors The value of noncash tips, such as tickets, passes, or other items of value. Free tax preparation for seniors Example. Free tax preparation for seniors Ben Smith began working at the Blue Ocean Restaurant (his only employer in 2013) on June 30 and received $10,000 in wages during the year. Free tax preparation for seniors Ben kept a daily tip record showing that his tips for June were $18 and his tips for the rest of the year totaled $7,000. Free tax preparation for seniors He was not required to report his June tips to his employer, but he reported all of the rest of his tips to his employer as required. Free tax preparation for seniors Ben's Form W-2 from Blue Ocean Restaurant shows $17,000 ($10,000 wages + $7,000 reported tips) in box 1. Free tax preparation for seniors He adds the $18 unreported tips to that amount and reports $17,018 as wages on his tax return. Free tax preparation for seniors Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer. Free tax preparation for seniors    If you received $20 or more in cash and charge tips in a month from any one job and did not report all of those tips to your employer, you must report the social security, Medicare, and Additional Medicare taxes on the unreported tips as additional tax on your return. Free tax preparation for seniors To report these taxes, you must file a return even if you would not otherwise have to file. Free tax preparation for seniors You must use Form 1040, Form 1040NR, Form 1040NR-EZ, Form 1040-SS, or 1040-PR (as appropriate) for this purpose. Free tax preparation for seniors (You cannot file Form 1040EZ or Form 1040A. Free tax preparation for seniors )    Use Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to figure social security and Medicare taxes. Free tax preparation for seniors Enter the tax on your return as instructed, and attach the completed Form 4137 to your return. Free tax preparation for seniors Use Form 8959 to figure Additional Medicare Tax. Free tax preparation for seniors If you are subject to the Railroad Retirement Tax Act, you cannot use Form 4137 to pay railroad retirement tax on unreported tips. Free tax preparation for seniors To get railroad retirement credit, you must report tips to your employer. Free tax preparation for seniors Reporting uncollected social security, Medicare, Additional Medicare, or railroad retirement taxes on tips reported to your employer. Free tax preparation for seniors    You may have uncollected taxes if your regular pay was not enough for your employer to withhold all the taxes you owe and you did not give your employer enough money to pay the rest of the taxes. Free tax preparation for seniors For more information, see Giving your employer money for taxes , under Reporting Tips to Your Employer, earlier. Free tax preparation for seniors   If your employer could not collect all the social security and Medicare taxes, or railroad retirement taxes you owe on tips reported for 2013, the uncollected taxes will be shown in box 12 of your Form W-2 (codes A and B). Free tax preparation for seniors You must report these amounts as additional tax on your return. Free tax preparation for seniors   If you worked in the U. Free tax preparation for seniors S. Free tax preparation for seniors possessions and received Form W-2AS, Form W-2CM, Form W-2GU, or Form W-2VI, any uncollected taxes on tips will be shown in box 12 with codes A and B. Free tax preparation for seniors If you received Form 499R-2/W-2PR, any uncollected taxes will be shown in boxes 22 and 23. Free tax preparation for seniors Unlike the uncollected portion of the regular (1. Free tax preparation for seniors 45%) Medicare tax, the uncollected Additional Medicare Tax is not reported on Form W-2. Free tax preparation for seniors   To report these uncollected taxes, you must file a return even if you would not otherwise have to file. Free tax preparation for seniors You can report these taxes on Form 1040, in the space next to line 60; Form 1040NR, line 59; Form 1040-SS, Part I, line 6; or Form 1040-PR, Part I, line 6. Free tax preparation for seniors See the instructions for the appropriate form and line number indicated, and Form 8959. Free tax preparation for seniors (You cannot file Form 1040A, Form 1040EZ, or Form 1040NR-EZ. Free tax preparation for seniors ) Self-employed persons. Free tax preparation for seniors    If you receive tips as a self-employed person, you should report these tips as income on Schedule C or C-EZ. Free tax preparation for seniors See Publication 334, Tax Guide for Small Business, for more information on reporting business income. Free tax preparation for seniors Allocated Tips If your employer allocated tips to you, they are shown separately in box 8 of your Form W-2. Free tax preparation for seniors They are not included in box 1 with your wages and reported tips. Free tax preparation for seniors If box 8 is blank, this discussion does not apply to you. Free tax preparation for seniors What are allocated tips. Free tax preparation for seniors   These are tips that your employer assigned to you in addition to the tips you reported to your employer for the year. Free tax preparation for seniors Your employer will have done this only if: You worked in an establishment (restaurant, cocktail lounge, or similar business) that must allocate tips to employees, and The tips you reported to your employer were less than your share of 8% of food and drink sales. Free tax preparation for seniors No income, social security, Medicare, Additional Medicare, or railroad retirement taxes are withheld on allocated tips. Free tax preparation for seniors How were your allocated tips figured. Free tax preparation for seniors   The tips allocated to you are your share of an amount figured by subtracting the reported tips of all employees from 8% (or an approved lower rate) of food and drink sales (other than carryout sales and sales with a service charge of 10% or more). Free tax preparation for seniors Your share of that amount was figured using either a method provided by an employer-employee agreement or a method provided by IRS regulations based on employees' sales or hours worked. Free tax preparation for seniors For information about the exact allocation method used, ask your employer. Free tax preparation for seniors Must you report your allocated tips on your tax return. Free tax preparation for seniors   You must report tips you received in 2013 (including both cash and noncash tips) on your tax return as explained in What tips to report , earlier. Free tax preparation for seniors Any tips you reported to your employer in 2013 as required (explained under Reporting Tips to Your Employer , earlier) are included in the wages shown in box 1 of your Form W-2. Free tax preparation for seniors Add to the amount in box 1 only the tips you did not report to your employer as required. Free tax preparation for seniors This should include any allocated tips shown in box 8 on your Form(s) W-2, unless you have adequate records to show that you received less tips in the year than the allocated amount. Free tax preparation for seniors   See What tips to report under Reporting Tips on Your Tax Return, and Keeping a Daily Tip Record , earlier. Free tax preparation for seniors How to report allocated tips. Free tax preparation for seniors   If you received any tips in 2013 that you did not report to your employer as required (including allocated tips that you are required to report on your tax return), add these tips to the amount in box 1 of your Form(s) W-2 and report this amount as wages on Form 1040, line 7; Form 1040NR, line 8; or Form 1040NR-EZ, line 3. Free tax preparation for seniors (You cannot file Form 1040A or Form 1040EZ). Free tax preparation for seniors    Because social security, Medicare, or Additional Medicare taxes were not withheld from the allocated tips, you must report those taxes as additional tax on your return. Free tax preparation for seniors Complete Form 4137 and include the allocated tips on line 1 of the form as provided in its instructions. Free tax preparation for seniors See Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, earlier. Free tax preparation for seniors How to request an approved lower rate. Free tax preparation for seniors   Your employer can use a tip rate lower than 8% (but not lower than 2%) to figure allocated tips only if the IRS approves the lower rate. Free tax preparation for seniors Either the employer or the employees can request approval of a lower rate by filing a petition with the IRS. Free tax preparation for seniors The petition must include specific information about the establishment that will justify the lower rate. Free tax preparation for seniors A user fee must be paid with the petition. Free tax preparation for seniors    An employee petition can be filed only with the consent of a majority of the directly tipped employees (waiters, bartenders, and others who receive tips directly from customers). Free tax preparation for seniors The petition must state the total number of directly tipped employees and the number of employees consenting to the petition. Free tax preparation for seniors Employees filing the petition must promptly notify the employer, and the employer must promptly give the IRS a copy of all Forms 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, filed for the establishment for the previous 3 years. Free tax preparation for seniors   For more information about how to file a petition and what information to include, see Allocation of Tips in the Instructions for Form 8027. Free tax preparation for seniors How To Get Tax Help Go online, use a smart phone, call or walk in to an office near you. Free tax preparation for seniors Whether it's help with a tax issue, preparing your tax return or picking up a free publication or form, get the help you need the way you want it. Free tax preparation for seniors Free help with your tax return. Free tax preparation for seniors   Free help in preparing your return is available nationwide from IRS-certified volunteers. Free tax preparation for seniors The Volunteer Income Tax Assistance (VITA) program is designed to help low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers. Free tax preparation for seniors The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Free tax preparation for seniors Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Free tax preparation for seniors Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. Free tax preparation for seniors To find the nearest VITA or TCE site, visit IRS. Free tax preparation for seniors gov or call 1-800-906-9887. Free tax preparation for seniors   As part of the TCE program, AARP offers the Tax-Aide counseling program. Free tax preparation for seniors To find the nearest AARP Tax-Aide site, visit AARP's website at www. Free tax preparation for seniors aarp. Free tax preparation for seniors org/money/taxaide or call 1-888-227-7669. Free tax preparation for seniors   For more information on these programs, go to IRS. Free tax preparation for seniors gov and enter “VITA” in the search box. Free tax preparation for seniors Internet. Free tax preparation for seniors IRS. Free tax preparation for seniors gov and IRS2Go are ready when you are — every day, every night, 24 hours a day, 7 days a week. Free tax preparation for seniors Apply for an Employer Identification Number (EIN). Free tax preparation for seniors Go to IRS. Free tax preparation for seniors gov and enter Apply for an EIN in the search box. Free tax preparation for seniors Request an Electronic Filing PIN by going to IRS. Free tax preparation for seniors gov and entering Electronic Filing PIN in the search box. Free tax preparation for seniors Check the status of your 2013 refund with Where's My Refund? Go to IRS. Free tax preparation for seniors gov or the IRS2Go app, and click on Where's My Refund? You'll get a personalized refund date as soon as the IRS processes your tax return and approves your refund. Free tax preparation for seniors If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Free tax preparation for seniors Check the status of your amended return. Free tax preparation for seniors Go to IRS. Free tax preparation for seniors gov and enter Where's My Amended Return in the search box. Free tax preparation for seniors Download forms, instructions, and publications, including some accessible versions. Free tax preparation for seniors Order free transcripts of your tax returns or tax account using the Order a Transcript tool on IRS. Free tax preparation for seniors gov or IRS2Go. Free tax preparation for seniors Tax return and tax account transcripts are generally available for the current year and past three years. Free tax preparation for seniors Figure your income tax withholding with the IRS Withholding Calculator on IRS. Free tax preparation for seniors gov. Free tax preparation for seniors Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Free tax preparation for seniors Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Free tax preparation for seniors gov. Free tax preparation for seniors Locate the nearest Taxpayer Assistance Center using the Office Locator tool on IRS. Free tax preparation for seniors gov or IRS2Go. Free tax preparation for seniors Stop by most business days for face-to-face tax help, no appointment necessary — just walk in. Free tax preparation for seniors An employee can explain IRS letters, request adjustments to your tax account or help you set up a payment plan. Free tax preparation for seniors Before you visit, check the Office Locator for the address, phone number, hours of operation and the services provided. Free tax preparation for seniors If you have an ongoing tax account problem or a special need, such as a disability, you can request an appointment. Free tax preparation for seniors Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Free tax preparation for seniors Locate the nearest volunteer help site with the VITA Locator Tool on IRS. Free tax preparation for seniors gov. Free tax preparation for seniors Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Free tax preparation for seniors The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. Free tax preparation for seniors Most VITA and TCE sites offer free electronic filing and some provide IRS-certified volunteers who can help prepare your tax return. Free tax preparation for seniors AARP offers the Tax-Aide counseling program as part of the TCE program. Free tax preparation for seniors Visit AARP's website to find the nearest Tax-Aide location. Free tax preparation for seniors Research your tax questions. Free tax preparation for seniors Search publications and instructions by topic or keyword. Free tax preparation for seniors Read the Internal Revenue Code, regulations, or other official guidance. Free tax preparation for seniors Read Internal Revenue Bulletins. Free tax preparation for seniors Sign up to receive local and national tax news by email. Free tax preparation for seniors Phone. Free tax preparation for seniors You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Free tax preparation for seniors Download the free IRS2Go mobile app from the iTunes app store or from Google Play. Free tax preparation for seniors Use it to watch the IRS YouTube channel, get IRS news as soon as it's released to the public, order transcripts of your tax returns or tax account, check your refund status, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Free tax preparation for seniors Call to locate the nearest volunteer help site, 1-800-906-9887. Free tax preparation for seniors Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Free tax preparation for seniors The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. Free tax preparation for seniors Most VITA and TCE sites offer free electronic filing. Free tax preparation for seniors Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Free tax preparation for seniors Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Free tax preparation for seniors Call to check the status of your 2013 refund, 1-800-829-1954 or 1-800-829-4477. Free tax preparation for seniors The automated Where's My Refund? information is available 24 hours a day, 7 days a week. Free tax preparation for seniors If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Free tax preparation for seniors Before you call, have your 2013 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Free tax preparation for seniors Where's My Refund? can give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. Free tax preparation for seniors Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. Free tax preparation for seniors Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. Free tax preparation for seniors Call to order forms, instructions and publications, 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions and publications, and prior-year forms and instructions (limited to 5 years). Free tax preparation for seniors You should receive your order within 10 business days. Free tax preparation for seniors Call to order transcripts of your tax returns or tax account, 1-800-908-9946. Free tax preparation for seniors Follow the prompts to provide your Social Security Number or Individual Taxpayer Identification Number, date of birth, street address and ZIP code. Free tax preparation for seniors Call for TeleTax topics, 1-800-829-4477, to listen to pre-recorded messages covering various tax topics. Free tax preparation for seniors Call to ask tax questions, 1-800-829-1040. Free tax preparation for seniors Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Free tax preparation for seniors The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Free tax preparation for seniors These individuals can also contact the IRS through relay services such as the Federal Relay Service available at www. Free tax preparation for seniors gsa. Free tax preparation for seniors gov/fedrelay. Free tax preparation for seniors Walk-in. Free tax preparation for seniors You can find a selection of forms, publications and services — in-person, face-to-face. Free tax preparation for seniors Products. Free tax preparation for seniors You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Free tax preparation for seniors Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Free tax preparation for seniors Services. Free tax preparation for seniors You can walk in to your local TAC most business days for personal, face-to-face tax help. Free tax preparation for seniors An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Free tax preparation for seniors If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local TAC where you can talk with an IRS representative face-to-face. Free tax preparation for seniors No appointment is necessary—just walk in. Free tax preparation for seniors Before visiting, check www. Free tax preparation for seniors irs. Free tax preparation for seniors gov/localcontacts for hours of operation and services provided. Free tax preparation for seniors Mail. Free tax preparation for seniors You can send your order for forms, instructions, and publications to the address below. Free tax preparation for seniors You should receive a response within 10 business days after your request is received. Free tax preparation for seniors  Internal Revenue Service 1201 N. Free tax preparation for seniors Mitsubishi Motorway Bloomington, IL 61705-6613 The Taxpayer Advocate Service Is Here to Help You. Free tax preparation for seniors   The Taxpayer Advocate Service (TAS) is your voice at the IRS. Free tax preparation for seniors Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Free tax preparation for seniors What can TAS do for you?   We can offer you free help with IRS problems that you can't resolve on your own. Free tax preparation for seniors We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. Free tax preparation for seniors You face (or your business is facing) an immediate threat of adverse action. Free tax preparation for seniors You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Free tax preparation for seniors   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. Free tax preparation for seniors Here's why we can help: TAS is an independent organization within the IRS. Free tax preparation for seniors Our advocates know how to work with the IRS. Free tax preparation for seniors Our services are free and tailored to meet your needs. Free tax preparation for seniors We have offices in every state, the District of Columbia, and Puerto Rico. Free tax preparation for seniors How can you reach us?   If you think TAS can help you, call your local advocate, whose number is in your local directory and at www. Free tax preparation for seniors irs. Free tax preparation for seniors gov/advocate, or call us toll-free at 1-877-777-4778. Free tax preparation for seniors How else does TAS help taxpayers?   TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Free tax preparation for seniors If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. Free tax preparation for seniors irs. Free tax preparation for seniors gov/sams. Free tax preparation for seniors Low Income Taxpayer Clinics. Free tax preparation for seniors   Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. Free tax preparation for seniors Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Free tax preparation for seniors Visit www. Free tax preparation for seniors TaxpayerAdvocate. Free tax preparation for seniors irs. Free tax preparation for seniors gov or see IRS Publication 4134, Low Income Taxpayer Clinic List. Free tax preparation for seniors Prev  Up  Next   Home   More Online Publications
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Tax Relief for Victims of Freedom and Noble Wildfires in Oklahoma

OK-2012-09, Aug. 23, 2012

Updated 9/27/2012 to include Noble Wildfire and include Cleveland County.

OKLAHOMA CITY — Victims of the Freedom and Noble Wildfires that began on Aug. 3, 2012, in parts of Oklahoma may qualify for tax relief from the Internal Revenue Service.

The President has declared Creek and Cleveland counties a federal disaster area. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 3, and on or before Oct. 2, have been postponed to Oct. 2, 2012. This includes the quarterly estimated tax payment due on Sept. 17, 2012.

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Aug. 3, and on or before Aug. 20, as long as the deposits are made by Aug. 20, 2012.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

Covered Disaster Area

The counties listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and is entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Oct. 2 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Aug. 3 and on or before Oct. 2.

The IRS also gives affected taxpayers until Oct. 2 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Aug. 3 and on or before Oct. 2.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Aug. 3 and on or before Aug. 20 provided the taxpayer makes these deposits by Aug. 20.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “OKLAHOMA/FREEDOM WILDFIRE” or "OKLAHOMA/NOBLE WILDFIRE" at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, IRS.gov, or order them by calling 1-800-TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1-800-829-1040.

Page Last Reviewed or Updated: 14-Aug-2013

The Free Tax Preparation For Seniors

Free tax preparation for seniors 3. Free tax preparation for seniors   Rent Expense Table of Contents Introduction Topics - This chapter discusses: RentConditional sales contract. Free tax preparation for seniors Leveraged leases. Free tax preparation for seniors Leveraged leases of limited-use property. Free tax preparation for seniors Taxes on Leased Property Cost of Getting a Lease Improvements by Lessee Capitalizing Rent Expenses Introduction This chapter discusses the tax treatment of rent or lease payments you make for property you use in your business but do not own. Free tax preparation for seniors It also discusses how to treat other kinds of payments you make that are related to your use of this property. Free tax preparation for seniors These include payments you make for taxes on the property. Free tax preparation for seniors Topics - This chapter discusses: The definition of rent Taxes on leased property The cost of getting a lease Improvements by the lessee Capitalizing rent expenses Rent Rent is any amount you pay for the use of property you do not own. Free tax preparation for seniors In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. Free tax preparation for seniors If you have or will receive equity in or title to the property, the rent is not deductible. Free tax preparation for seniors Unreasonable rent. Free tax preparation for seniors   You cannot take a rental deduction for unreasonable rent. Free tax preparation for seniors Ordinarily, the issue of reasonableness arises only if you and the lessor are related. Free tax preparation for seniors Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. Free tax preparation for seniors Rent is not unreasonable just because it is figured as a percentage of gross sales. Free tax preparation for seniors For examples of related persons, see Related persons in chapter 2, Publication 544. Free tax preparation for seniors Rent on your home. Free tax preparation for seniors   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. Free tax preparation for seniors You must meet the requirements for business use of your home. Free tax preparation for seniors For more information, see Business use of your home in chapter 1. Free tax preparation for seniors Rent paid in advance. Free tax preparation for seniors   Generally, rent paid in your trade or business is deductible in the year paid or accrued. Free tax preparation for seniors If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. Free tax preparation for seniors You can deduct the rest of your payment only over the period to which it applies. Free tax preparation for seniors Example 1. Free tax preparation for seniors You are a calendar year taxpayer and you leased a building for 5 years beginning July 1. Free tax preparation for seniors Your rent is $12,000 per year. Free tax preparation for seniors You paid the first year's rent ($12,000) on June 30. Free tax preparation for seniors You can deduct only $6,000 (6/12 × $12,000) for the rent that applies to the first year. Free tax preparation for seniors Example 2. Free tax preparation for seniors You are a calendar year taxpayer. Free tax preparation for seniors Last January you leased property for 3 years for $6,000 a year. Free tax preparation for seniors You paid the full $18,000 (3 × $6,000) during the first year of the lease. Free tax preparation for seniors Each year you can deduct only $6,000, the part of the lease that applies to that year. Free tax preparation for seniors Canceling a lease. Free tax preparation for seniors   You generally can deduct as rent an amount you pay to cancel a business lease. Free tax preparation for seniors Lease or purchase. Free tax preparation for seniors   There may be instances in which you must determine whether your payments are for rent or for the purchase of the property. Free tax preparation for seniors You must first determine whether your agreement is a lease or a conditional sales contract. Free tax preparation for seniors Payments made under a conditional sales contract are not deductible as rent expense. Free tax preparation for seniors Conditional sales contract. Free tax preparation for seniors   Whether an agreement is a conditional sales contract depends on the intent of the parties. Free tax preparation for seniors Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. Free tax preparation for seniors No single test, or special combination of tests, always applies. Free tax preparation for seniors However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. Free tax preparation for seniors The agreement applies part of each payment toward an equity interest you will receive. Free tax preparation for seniors You get title to the property after you make a stated amount of required payments. Free tax preparation for seniors The amount you must pay to use the property for a short time is a large part of the amount you would pay to get title to the property. Free tax preparation for seniors You pay much more than the current fair rental value of the property. Free tax preparation for seniors You have an option to buy the property at a nominal price compared to the value of the property when you may exercise the option. Free tax preparation for seniors Determine this value when you make the agreement. Free tax preparation for seniors You have an option to buy the property at a nominal price compared to the total amount you have to pay under the agreement. Free tax preparation for seniors The agreement designates part of the payments as interest, or that part is easy to recognize as interest. Free tax preparation for seniors Leveraged leases. Free tax preparation for seniors   Leveraged lease transactions may not be considered leases. Free tax preparation for seniors Leveraged leases generally involve three parties: a lessor, a lessee, and a lender to the lessor. Free tax preparation for seniors Usually the lease term covers a large part of the useful life of the leased property, and the lessee's payments to the lessor are enough to cover the lessor's payments to the lender. Free tax preparation for seniors   If you plan to take part in what appears to be a leveraged lease, you may want to get an advance ruling. Free tax preparation for seniors Revenue Procedure 2001-28 on page 1156 of Internal Revenue Bulletin 2001-19 contains the guidelines the IRS will use to determine if a leveraged lease is a lease for federal income tax purposes. Free tax preparation for seniors Revenue Procedure 2001-29 on page 1160 of the same Internal Revenue Bulletin provides the information required to be furnished in a request for an advance ruling on a leveraged lease transaction. Free tax preparation for seniors Internal Revenue Bulletin 2001-19 is available at www. Free tax preparation for seniors irs. Free tax preparation for seniors gov/pub/irs-irbs/irb01-19. Free tax preparation for seniors pdf. Free tax preparation for seniors   In general, Revenue Procedure 2001-28 provides that, for advance ruling purposes only, the IRS will consider the lessor in a leveraged lease transaction to be the owner of the property and the transaction to be a valid lease if all the factors in the revenue procedure are met, including the following. Free tax preparation for seniors The lessor must maintain a minimum unconditional “at risk” equity investment in the property (at least 20% of the cost of the property) during the entire lease term. Free tax preparation for seniors The lessee may not have a contractual right to buy the property from the lessor at less than fair market value when the right is exercised. Free tax preparation for seniors The lessee may not invest in the property, except as provided by Revenue Procedure 2001-28. Free tax preparation for seniors The lessee may not lend any money to the lessor to buy the property or guarantee the loan used by the lessor to buy the property. Free tax preparation for seniors The lessor must show that it expects to receive a profit apart from the tax deductions, allowances, credits, and other tax attributes. Free tax preparation for seniors   The IRS may charge you a user fee for issuing a tax ruling. Free tax preparation for seniors For more information, see Revenue Procedure 2014-1 available at  www. Free tax preparation for seniors irs. Free tax preparation for seniors gov/irb/2014-1_IRB/ar05. Free tax preparation for seniors html. Free tax preparation for seniors Leveraged leases of limited-use property. Free tax preparation for seniors   The IRS will not issue advance rulings on leveraged leases of so-called limited-use property. Free tax preparation for seniors Limited-use property is property not expected to be either useful to or usable by a lessor at the end of the lease term except for continued leasing or transfer to a lessee. Free tax preparation for seniors See Revenue Procedure 2001-28 for examples of limited-use property and property that is not limited-use property. Free tax preparation for seniors Leases over $250,000. Free tax preparation for seniors   Special rules are provided for certain leases of tangible property. Free tax preparation for seniors The rules apply if the lease calls for total payments of more than $250,000 and any of the following apply. Free tax preparation for seniors Rents increase during the lease. Free tax preparation for seniors Rents decrease during the lease. Free tax preparation for seniors Rents are deferred (rent is payable after the end of the calendar year following the calendar year in which the use occurs and the rent is allocated). Free tax preparation for seniors Rents are prepaid (rent is payable before the end of the calendar year preceding the calendar year in which the use occurs and the rent is allocated). Free tax preparation for seniors These rules do not apply if your lease specifies equal amounts of rent for each month in the lease term and all rent payments are due in the calendar year to which the rent relates (or in the preceding or following calendar year). Free tax preparation for seniors   Generally, if the special rules apply, you must use an accrual method of accounting (and time value of money principles) for your rental expenses, regardless of your overall method of accounting. Free tax preparation for seniors In addition, in certain cases in which the IRS has determined that a lease was designed to achieve tax avoidance, you must take rent and stated or imputed interest into account under a constant rental accrual method in which the rent is treated as accruing ratably over the entire lease term. Free tax preparation for seniors For details, see section 467 of the Internal Revenue Code. Free tax preparation for seniors Taxes on Leased Property If you lease business property, you can deduct as additional rent any taxes you have to pay to or for the lessor. Free tax preparation for seniors When you can deduct these taxes as additional rent depends on your accounting method. Free tax preparation for seniors Cash method. Free tax preparation for seniors   If you use the cash method of accounting, you can deduct the taxes as additional rent only for the tax year in which you pay them. Free tax preparation for seniors Accrual method. Free tax preparation for seniors   If you use an accrual method of accounting, you can deduct taxes as additional rent for the tax year in which you can determine all the following. Free tax preparation for seniors That you have a liability for taxes on the leased property. Free tax preparation for seniors How much the liability is. Free tax preparation for seniors That economic performance occurred. Free tax preparation for seniors   The liability and amount of taxes are determined by state or local law and the lease agreement. Free tax preparation for seniors Economic performance occurs as you use the property. Free tax preparation for seniors Example 1. Free tax preparation for seniors Oak Corporation is a calendar year taxpayer that uses an accrual method of accounting. Free tax preparation for seniors Oak leases land for use in its business. Free tax preparation for seniors Under state law, owners of real property become liable (incur a lien on the property) for real estate taxes for the year on January 1 of that year. Free tax preparation for seniors However, they do not have to pay these taxes until July 1 of the next year (18 months later) when tax bills are issued. Free tax preparation for seniors Under the terms of the lease, Oak becomes liable for the real estate taxes in the later year when the tax bills are issued. Free tax preparation for seniors If the lease ends before the tax bill for a year is issued, Oak is not liable for the taxes for that year. Free tax preparation for seniors Oak cannot deduct the real estate taxes as rent until the tax bill is issued. Free tax preparation for seniors This is when Oak's liability under the lease becomes fixed. Free tax preparation for seniors Example 2. Free tax preparation for seniors The facts are the same as in Example 1 except that, according to the terms of the lease, Oak becomes liable for the real estate taxes when the owner of the property becomes liable for them. Free tax preparation for seniors As a result, Oak will deduct the real estate taxes as rent on its tax return for the earlier year. Free tax preparation for seniors This is the year in which Oak's liability under the lease becomes fixed. Free tax preparation for seniors Cost of Getting a Lease You may either enter into a new lease with the lessor of the property or get an existing lease from another lessee. Free tax preparation for seniors Very often when you get an existing lease from another lessee, you must pay the previous lessee money to get the lease, besides having to pay the rent on the lease. Free tax preparation for seniors If you get an existing lease on property or equipment for your business, you generally must amortize any amount you pay to get that lease over the remaining term of the lease. Free tax preparation for seniors For example, if you pay $10,000 to get a lease and there are 10 years remaining on the lease with no option to renew, you can deduct $1,000 each year. Free tax preparation for seniors The cost of getting an existing lease of tangible property is not subject to the amortization rules for section 197 intangibles discussed in chapter 8. Free tax preparation for seniors Option to renew. Free tax preparation for seniors   The term of the lease for amortization includes all renewal options plus any other period for which you and the lessor reasonably expect the lease to be renewed. Free tax preparation for seniors However, this applies only if less than 75% of the cost of getting the lease is for the term remaining on the purchase date (not including any period for which you may choose to renew, extend, or continue the lease). Free tax preparation for seniors Allocate the lease cost to the original term and any option term based on the facts and circumstances. Free tax preparation for seniors In some cases, it may be appropriate to make the allocation using a present value computation. Free tax preparation for seniors For more information, see Regulations section 1. Free tax preparation for seniors 178-1(b)(5). Free tax preparation for seniors Example 1. Free tax preparation for seniors You paid $10,000 to get a lease with 20 years remaining on it and two options to renew for 5 years each. Free tax preparation for seniors Of this cost, you paid $7,000 for the original lease and $3,000 for the renewal options. Free tax preparation for seniors Because $7,000 is less than 75% of the total $10,000 cost of the lease (or $7,500), you must amortize the $10,000 over 30 years. Free tax preparation for seniors That is the remaining life of your present lease plus the periods for renewal. Free tax preparation for seniors Example 2. Free tax preparation for seniors The facts are the same as in Example 1, except that you paid $8,000 for the original lease and $2,000 for the renewal options. Free tax preparation for seniors You can amortize the entire $10,000 over the 20-year remaining life of the original lease. Free tax preparation for seniors The $8,000 cost of getting the original lease was not less than 75% of the total cost of the lease (or $7,500). Free tax preparation for seniors Cost of a modification agreement. Free tax preparation for seniors   You may have to pay an additional “rent” amount over part of the lease period to change certain provisions in your lease. Free tax preparation for seniors You must capitalize these payments and amortize them over the remaining period of the lease. Free tax preparation for seniors You cannot deduct the payments as additional rent, even if they are described as rent in the agreement. Free tax preparation for seniors Example. Free tax preparation for seniors You are a calendar year taxpayer and sign a 20-year lease to rent part of a building starting on January 1. Free tax preparation for seniors However, before you occupy it, you decide that you really need less space. Free tax preparation for seniors The lessor agrees to reduce your rent from $7,000 to $6,000 per year and to release the excess space from the original lease. Free tax preparation for seniors In exchange, you agree to pay an additional rent amount of $3,000, payable in 60 monthly installments of $50 each. Free tax preparation for seniors   You must capitalize the $3,000 and amortize it over the 20-year term of the lease. Free tax preparation for seniors Your amortization deduction each year will be $150 ($3,000 ÷ 20). Free tax preparation for seniors You cannot deduct the $600 (12 × $50) that you will pay during each of the first 5 years as rent. Free tax preparation for seniors Commissions, bonuses, and fees. Free tax preparation for seniors   Commissions, bonuses, fees, and other amounts you pay to get a lease on property you use in your business are capital costs. Free tax preparation for seniors You must amortize these costs over the term of the lease. Free tax preparation for seniors Loss on merchandise and fixtures. Free tax preparation for seniors   If you sell at a loss merchandise and fixtures that you bought solely to get a lease, the loss is a cost of getting the lease. Free tax preparation for seniors You must capitalize the loss and amortize it over the remaining term of the lease. Free tax preparation for seniors Improvements by Lessee If you add buildings or make other permanent improvements to leased property, depreciate the cost of the improvements using the modified accelerated cost recovery system (MACRS). Free tax preparation for seniors Depreciate the property over its appropriate recovery period. Free tax preparation for seniors You cannot amortize the cost over the remaining term of the lease. Free tax preparation for seniors If you do not keep the improvements when you end the lease, figure your gain or loss based on your adjusted basis in the improvements at that time. Free tax preparation for seniors For more information, see the discussion of MACRS in Publication 946, How To Depreciate Property. Free tax preparation for seniors Assignment of a lease. Free tax preparation for seniors   If a long-term lessee who makes permanent improvements to land later assigns all lease rights to you for money and you pay the rent required by the lease, the amount you pay for the assignment is a capital investment. Free tax preparation for seniors If the rental value of the leased land increased since the lease began, part of your capital investment is for that increase in the rental value. Free tax preparation for seniors The rest is for your investment in the permanent improvements. Free tax preparation for seniors   The part that is for the increased rental value of the land is a cost of getting a lease, and you amortize it over the remaining term of the lease. Free tax preparation for seniors You can depreciate the part that is for your investment in the improvements over the recovery period of the property as discussed earlier, without regard to the lease term. Free tax preparation for seniors Capitalizing Rent Expenses Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Free tax preparation for seniors Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Free tax preparation for seniors You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Free tax preparation for seniors Indirect costs include amounts incurred for renting or leasing equipment, facilities, or land. Free tax preparation for seniors Uniform capitalization rules. Free tax preparation for seniors   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Free tax preparation for seniors Produce real property or tangible personal property. Free tax preparation for seniors For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Free tax preparation for seniors Acquire property for resale. Free tax preparation for seniors However, these rules do not apply to the following property. Free tax preparation for seniors Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. Free tax preparation for seniors Property you produce if you meet either of the following conditions. Free tax preparation for seniors Your indirect costs of producing the property are $200,000 or less. Free tax preparation for seniors You use the cash method of accounting and do not account for inventories. Free tax preparation for seniors Example 1. Free tax preparation for seniors You rent construction equipment to build a storage facility. Free tax preparation for seniors If you are subject to the uniform capitalization rules, you must capitalize as part of the cost of the building the rent you paid for the equipment. Free tax preparation for seniors You recover your cost by claiming a deduction for depreciation on the building. Free tax preparation for seniors Example 2. Free tax preparation for seniors You rent space in a facility to conduct your business of manufacturing tools. Free tax preparation for seniors If you are subject to the uniform capitalization rules, you must include the rent you paid to occupy the facility in the cost of the tools you produce. Free tax preparation for seniors More information. Free tax preparation for seniors   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. Free tax preparation for seniors Prev  Up  Next   Home   More Online Publications