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How Can I File My 2012 Taxes For Free

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How can i file my 2012 taxes for free Publication 3402 - Main Content Table of Contents What is a Limited Liability Company? Classification of an LLC LLCs Classified as Partnerships LLCs Classified as Disregarded Entities LLCs Classified as Corporations Subsequent Elections How To Get More InformationInternal Revenue Service Small Business Administration Other Federal Agencies What is a Limited Liability Company? For purposes of this publication, a limited liability company (LLC) is a business entity organized in the United States under state law. How can i file my 2012 taxes for free Unlike a partnership, all of the members of an LLC have limited personal liability for its debts. How can i file my 2012 taxes for free An LLC may be classified for federal income tax purposes as a partnership, corporation, or an entity disregarded as separate from its owner by applying the rules in Regulations section 301. How can i file my 2012 taxes for free 7701-3. How can i file my 2012 taxes for free The information in this publication applies to LLCs in general, and different rules may apply to special situations, including banks, insurance companies, or nonprofit organizations that are LLCs or that own LLCs. How can i file my 2012 taxes for free Check your state's requirements and the federal tax regulations for further information. How can i file my 2012 taxes for free Classification of an LLC Default classification rules. How can i file my 2012 taxes for free   An LLC with at least two members is classified as a partnership for federal income tax purposes. How can i file my 2012 taxes for free An LLC with only one member is treated as an entity disregarded as separate from its owner for income tax purposes (but as a separate entity for purposes of employment tax and certain excise taxes). How can i file my 2012 taxes for free Also, an LLC's federal tax classification can subsequently change under certain default rules discussed later. How can i file my 2012 taxes for free Elected classification. How can i file my 2012 taxes for free   If an LLC does not choose to be classified under the above default classifications, it can elect to be classified as an association taxable as a corporation or as an S corporation. How can i file my 2012 taxes for free After an LLC has determined its federal tax classification, it can later elect to change that classification. How can i file my 2012 taxes for free For details, see Subsequent Elections, later. How can i file my 2012 taxes for free LLCs Classified as Partnerships If an LLC has at least two members and is classified as a partnership, it generally must file Form 1065, U. How can i file my 2012 taxes for free S. How can i file my 2012 taxes for free Return of Partnership Income. How can i file my 2012 taxes for free Generally, an LLC classified as a partnership is subject to the same filing and reporting requirements as partnerships. How can i file my 2012 taxes for free For certain purposes, members of an LLC are treated as limited partners in a limited partnership. How can i file my 2012 taxes for free For example, LLC members are treated as limited partners for purposes of material participation under the passive activity limitation rules (see Temporary Regulation section 1. How can i file my 2012 taxes for free 469-5T(e)). How can i file my 2012 taxes for free See the Instructions for Form 1065 for reporting rules that apply specifically to LLCs. How can i file my 2012 taxes for free Member manager. How can i file my 2012 taxes for free   Only a member manager of an LLC can sign the partnership tax return. How can i file my 2012 taxes for free And only a member manager can represent the LLC as the tax matters partner under the consolidated audit proceedings in sections 6221 through 6234. How can i file my 2012 taxes for free A member manager is any owner of an interest in the LLC who, alone or together with others, has the continuing authority to make the management decisions necessary to conduct the business for which the LLC was formed. How can i file my 2012 taxes for free If there are no elected or designated member managers, each owner is treated as a member manager. How can i file my 2012 taxes for free Change in default classification. How can i file my 2012 taxes for free   If the number of members in an LLC classified as a partnership is reduced to only one member, it becomes an entity disregarded as separate from its owner under Regulations section 301. How can i file my 2012 taxes for free 7701-3(f)(2). How can i file my 2012 taxes for free However, if the LLC has made an election to be classified as a corporation (discussed later) and that elective classification is in effect at the time of the change in membership, the default classification as a disregarded entity will not apply. How can i file my 2012 taxes for free   Other tax consequences of a change in membership, such as recognition of gain or loss, are determined by the transactions through which an interest in the LLC is acquired or disposed of. How can i file my 2012 taxes for free If a partnership that becomes a disregarded entity as a result of a decrease in the number of members makes an election to be classified as a corporation, the applicable deemed transactions discussed under Subsequent Elections, later, apply. How can i file my 2012 taxes for free Example 1. How can i file my 2012 taxes for free Ethel and Francis are members of an LLC classified as a partnership for federal tax purposes. How can i file my 2012 taxes for free Each holds an equal membership interest. How can i file my 2012 taxes for free The LLC does not hold any unrealized receivables or substantially appreciated inventory. How can i file my 2012 taxes for free Ethel sells her entire interest in the LLC to Francis for $10,000. How can i file my 2012 taxes for free After the sale, the business is continued by the LLC, which is owned solely by Francis. How can i file my 2012 taxes for free No entity classification election is made after the sale to treat the LLC as a corporation for federal tax purposes. How can i file my 2012 taxes for free The partnership terminates when Francis buys Ethel's entire interest. How can i file my 2012 taxes for free Ethel must treat the transaction as the sale of a partnership interest and must report gain or loss, if any, resulting from the sale of her partnership interest. How can i file my 2012 taxes for free For purposes of determining the tax treatment of Francis, the partnership is deemed to make a liquidating distribution of all of its assets to Ethel and Francis, and after this distribution, Francis is treated as acquiring the assets deemed to have been distributed to Ethel in liquidation of Ethel's partnership interest. How can i file my 2012 taxes for free Francis's basis in the assets attributable to Ethel's one-half interest in the partnership is $10,000, the purchase price for Ethel's partnership interest. How can i file my 2012 taxes for free Upon the termination of the partnership, Francis is considered to receive a distribution of those assets attributable to Francis's former interest in the partnership. How can i file my 2012 taxes for free Francis must recognize gain or loss, if any, on the deemed distribution of the assets to the extent required by Internal Revenue Code section 731(a). How can i file my 2012 taxes for free See Partnership Distributions in Publication 541. How can i file my 2012 taxes for free Example 2. How can i file my 2012 taxes for free George and Henrietta are members of an LLC classified as a partnership for federal tax purposes. How can i file my 2012 taxes for free Each holds an equal membership interest. How can i file my 2012 taxes for free The LLC does not hold any unrealized receivables or substantially appreciated inventory. How can i file my 2012 taxes for free George and Henrietta each sell their entire interests in the LLC to Ian, an unrelated person, in exchange for $10,000. How can i file my 2012 taxes for free After the sale, the business is continued by the LLC, which is owned solely by Ian. How can i file my 2012 taxes for free No entity classification election is made after the sale to treat the LLC as a corporation for federal tax purposes. How can i file my 2012 taxes for free The partnership terminates when Ian purchases the entire interests of George and Henrietta in the LLC. How can i file my 2012 taxes for free George and Henrietta must report gain or loss, if any, resulting from the sale of their partnership interests. How can i file my 2012 taxes for free For purposes of classifying the acquisition by Ian, the partnership is deemed to make a liquidating distribution of its assets to George and Henrietta. How can i file my 2012 taxes for free Immediately following this distribution, Ian is deemed to acquire, by purchase, all of the former partnership's assets. How can i file my 2012 taxes for free   For more details on the preceding two examples, see Revenue Ruling 99-6, 1999-6 I. How can i file my 2012 taxes for free R. How can i file my 2012 taxes for free B. How can i file my 2012 taxes for free 6. How can i file my 2012 taxes for free You can find Revenue Ruling 99-6 at www. How can i file my 2012 taxes for free irs. How can i file my 2012 taxes for free gov/pub/irs-irbs/irb99-06. How can i file my 2012 taxes for free pdf. How can i file my 2012 taxes for free LLCs Classified as Disregarded Entities If an LLC has only one member and is classified as an entity disregarded as separate from its owner, its income, deductions, gains, losses, and credits are reported on the owner's income tax return. How can i file my 2012 taxes for free For example, if the owner of the LLC is an individual, the LLC's income and expenses would be reported on the following schedules filed with the owner's Form 1040: Schedule C, Profit or Loss from Business (Sole Proprietorship); Schedule C-EZ, Net Profit From Business (Sole Proprietorship); Schedule E, Supplemental Income and Loss; or Schedule F, Profit or Loss From Farming. How can i file my 2012 taxes for free Employment tax and certain excise taxes. How can i file my 2012 taxes for free   A single-member LLC that is classified as a disregarded entity for income tax purposes is treated as a separate entity for purposes of employment tax and certain excise taxes. How can i file my 2012 taxes for free For wages paid after January 1, 2009, the single-member LLC is required to use its name and employer identification number (EIN) for reporting and payment of employment taxes. How can i file my 2012 taxes for free A single-member LLC is also required to use its name and EIN to register for excise tax activities on Form 637; pay and report excise taxes reported on Forms 720, 730, 2290, and 11-C; and claim any refunds, credits, and payments on Form 8849. How can i file my 2012 taxes for free See the employment and excise tax returns for more information. How can i file my 2012 taxes for free Self-employment tax rule for disregarded entity LLCs. How can i file my 2012 taxes for free   An individual owner of a single-member LLC classified as a disregarded entity is not an employee of the LLC. How can i file my 2012 taxes for free Instead, the owner is subject to tax on the net earnings from self-employment of the LLC which is treated in the same manner as a sole-proprietorship. How can i file my 2012 taxes for free Example 3. How can i file my 2012 taxes for free LLC is a disregarded entity owned by Irene. How can i file my 2012 taxes for free LLC has three employees (Kent, Patricia, and Tex) and pays wages. How can i file my 2012 taxes for free LLC is treated as an entity separate from its owner for purposes of employment taxes. How can i file my 2012 taxes for free For the wages paid to Kent, Patricia, and Tex, LLC is liable for income tax withholding, Federal Insurance Contributions Act (FICA) taxes, and Federal Unemployment Tax Act (FUTA) taxes. How can i file my 2012 taxes for free In addition, LLC must file under its name and EIN the applicable employment tax returns; make timely employment tax deposits; and file with the Social Security Administration and furnish to LLC's employees (Kent, Patricia, and Tex) Forms W-2, Wage and Tax Statement. How can i file my 2012 taxes for free Irene is self-employed for purposes of the self-employment tax. How can i file my 2012 taxes for free Thus, Irene is subject to self-employment tax on her net earnings from self-employment with respect to LLC's activities. How can i file my 2012 taxes for free Irene is not an employee of LLC for purposes of employment taxes. How can i file my 2012 taxes for free Because LLC is treated as a sole proprietorship of Irene for income tax purposes, Irene must report the income and expenses from LLC on her Schedule C. How can i file my 2012 taxes for free Irene will figure the tax due on her net earnings from self-employment on Schedule SE. How can i file my 2012 taxes for free Irene can also deduct one-half of her self-employment tax on line 27 of her Form 1040. How can i file my 2012 taxes for free Taxpayer identification number. How can i file my 2012 taxes for free   For all income tax purposes, a single-member LLC classified as a disregarded entity must use the owner's social security number (SSN) or EIN. How can i file my 2012 taxes for free This includes all information returns and reporting related to income tax. How can i file my 2012 taxes for free For example, if a disregarded entity LLC that is owned by an individual is required to provide a Form W-9, Request for Taxpayer Identification Number and Certification, the LLC must provide the owner's SSN or EIN, not the LLC's EIN. How can i file my 2012 taxes for free   However, most new single-member LLCs classified as a disregarded entity will need to obtain an EIN for the LLC. How can i file my 2012 taxes for free An LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed above (see Employment tax and certain excise taxes earlier). How can i file my 2012 taxes for free See Form SS-4, Application for Employer Identification Number, for information on applying for an EIN. How can i file my 2012 taxes for free Change in default classification. How can i file my 2012 taxes for free   If a single-member LLC classified as a disregarded entity for income tax purposes acquires an additional member, it becomes a partnership under Regulations section 301. How can i file my 2012 taxes for free 7701-3(f)(2). How can i file my 2012 taxes for free However, if the LLC has made an election to be classified as a corporation (discussed later) and that elective classification is in effect at the time of the change in membership, the default classification as a partnership will not apply. How can i file my 2012 taxes for free   Other tax consequences of a change in membership, such as recognition of gain or loss, are determined by the transactions through which an interest in the LLC is acquired or disposed of. How can i file my 2012 taxes for free If a disregarded entity that becomes a partnership as a result of an increase in the number of members makes an election to be classified as a corporation, the applicable deemed transactions discussed in Subsequent Elections, later, apply. How can i file my 2012 taxes for free Example 4. How can i file my 2012 taxes for free Bart, who is not related to Alain, buys 50% of Alain's interest in an LLC that is a disregarded entity for $5,000. How can i file my 2012 taxes for free Alain does not contribute any portion of the $5,000 to the LLC. How can i file my 2012 taxes for free Alain and Bart continue to operate the business of the LLC as co-owners of the LLC. How can i file my 2012 taxes for free The LLC is converted to a partnership when the new member, Bart, buys an interest in the disregarded entity from the owner, Alain. How can i file my 2012 taxes for free Bart's buying a 50% interest in Alain's ownership interest in the LLC is treated as Bart's buying a 50% interest in each of the LLC's assets, which are treated as owned directly by Alain for federal income tax purposes. How can i file my 2012 taxes for free Immediately thereafter, Alain and Bart are treated as contributing their respective interests in those assets to a partnership in exchange for ownership interests in the partnership. How can i file my 2012 taxes for free Alain recognizes gain or loss from the deemed sale to Bart of the 50% interest in the assets. How can i file my 2012 taxes for free Neither Alain nor Bart recognizes any gain or loss as a result of the deemed contribution of the assets to the partnership. How can i file my 2012 taxes for free Example 5. How can i file my 2012 taxes for free Charles, who is not related to Danielle, contributes $10,000 to an LLC owned by Danielle for a 50% ownership interest in the LLC. How can i file my 2012 taxes for free The LLC uses all of the contributed cash in its business. How can i file my 2012 taxes for free Charles and Danielle continue to operate the business of the LLC as co-owners of the LLC. How can i file my 2012 taxes for free The LLC is converted from a disregarded entity to a partnership when Charles contributes cash to the LLC. How can i file my 2012 taxes for free Charles's contribution is treated as a contribution to a partnership in exchange for an ownership interest in the partnership. How can i file my 2012 taxes for free Danielle is treated as contributing all of the assets of the LLC to the partnership in exchange for a partnership interest. How can i file my 2012 taxes for free Neither Charles nor Danielle recognizes gain or loss as a result of the conversion of the disregarded entity to a partnership. How can i file my 2012 taxes for free   For more details on the preceding two examples, see Revenue Ruling 99-5, 1999-6 I. How can i file my 2012 taxes for free R. How can i file my 2012 taxes for free B. How can i file my 2012 taxes for free 8. How can i file my 2012 taxes for free You can find Revenue Ruling 99-5 at www. How can i file my 2012 taxes for free irs. How can i file my 2012 taxes for free gov/pub/irs-irbs/irb99-06. How can i file my 2012 taxes for free pdf. How can i file my 2012 taxes for free LLCs Classified as Corporations An LLC with either a single member or more than one member can elect to be classified as a corporation rather than be classified as a partnership or disregarded entity under the default rules discussed earlier. How can i file my 2012 taxes for free File Form 8832, Entity Classification Election, to elect classification as a C corporation. How can i file my 2012 taxes for free File Form 2553, Election by a Small Business Corporation, to elect classification as an S corporation. How can i file my 2012 taxes for free LLCs electing classification as an S corporation are not required to file Form 8832 to elect classification as a corporation before filing Form 2553. How can i file my 2012 taxes for free By filing Form 2553, an LLC is deemed to have elected classification as a corporation in addition to the S corporation classification. How can i file my 2012 taxes for free If the LLC elects to be classified as a corporation by filing Form 8832, a copy of the LLC's Form 8832 must be attached to the federal income tax return of each direct and indirect owner of the LLC for the tax year of the owner that includes the date on which the election took effect. How can i file my 2012 taxes for free Example 6. How can i file my 2012 taxes for free Classification as a corporation without an S election. How can i file my 2012 taxes for free Wanda and Sylvester are members of an LLC. How can i file my 2012 taxes for free They agree that the LLC should be classified as a corporation but do not want to elect to have the LLC be treated as an S corporation. How can i file my 2012 taxes for free The LLC must file Form 8832. How can i file my 2012 taxes for free Example 7. How can i file my 2012 taxes for free Classification as a corporation with an S election. How can i file my 2012 taxes for free Evelyn and Carol are members of an LLC. How can i file my 2012 taxes for free They agree that the LLC should be classified as an S corporation. How can i file my 2012 taxes for free The LLC must file Form 2553 instead of Form 8832. How can i file my 2012 taxes for free If the LLC is classified as a corporation, it must file a corporation income tax return. How can i file my 2012 taxes for free If it is a C corporation, it is taxed on its taxable income and distributions to the members are includible in the members' gross income to the extent of the corporation's earnings and profits (double taxation). How can i file my 2012 taxes for free If it is an S corporation, the corporation is generally not subject to any income tax and the income, deductions, gains, losses, and credits of the corporation “pass through” to the members. How can i file my 2012 taxes for free Corporations generally file either: Form 1120, U. How can i file my 2012 taxes for free S. How can i file my 2012 taxes for free Corporation Income Tax Return; or Form 1120S, U. How can i file my 2012 taxes for free S. How can i file my 2012 taxes for free Income Tax Return for an S Corporation. How can i file my 2012 taxes for free For more information on the income taxation of corporations and their shareholders, see Publication 542, Corporations. How can i file my 2012 taxes for free For more information on the income taxation of S corporations and their shareholders, see the Instructions for Form 1120S, U. How can i file my 2012 taxes for free S. How can i file my 2012 taxes for free Income Tax Return for an S Corporation. How can i file my 2012 taxes for free Subsequent Elections An LLC can elect to change its classification. How can i file my 2012 taxes for free Generally, once an LLC has elected to change its classification, it cannot elect again to change it classification during the 60 months after the effective date of the election. How can i file my 2012 taxes for free An election by a newly formed LLC that is effective on the date of formation is not considered a change for purposes of this limitation. How can i file my 2012 taxes for free For more information and exceptions, see Regulations section 301. How can i file my 2012 taxes for free 7701-3(c) and the Form 8832 instructions. How can i file my 2012 taxes for free An election to change classification can have significant tax consequences based on the following transactions that are deemed to occur as a result of the election. How can i file my 2012 taxes for free Partnership to corporation. How can i file my 2012 taxes for free   An election to change classification from a partnership to a corporation will be treated as if the partnership contributed all of its assets and liabilities to the corporation in exchange for stock and the partnership then immediately liquidated by distributing the stock to its partners. How can i file my 2012 taxes for free   For more information, see Partnership Distributions in Publication 541 and Property Exchanged for Stock in Publication 542. How can i file my 2012 taxes for free Corporation to partnership. How can i file my 2012 taxes for free   An election to change classification from a corporation to a partnership will be treated as if the corporation distributed all of its assets and liabilities to its shareholders in liquidation and the shareholders then immediately contributed all of the distributed assets and liabilities to a new partnership. How can i file my 2012 taxes for free   For more information, see Contribution of Property in Publication 541 and Distributions to Shareholders in Publication 542. How can i file my 2012 taxes for free Corporation to disregarded entity. How can i file my 2012 taxes for free   An election to change classification from a corporation to a disregarded entity will be treated as if the corporation distributed all of its assets and liabilities to its single owner in liquidation. How can i file my 2012 taxes for free   For more information, see Distributions to Shareholders in Publication 542. How can i file my 2012 taxes for free Disregarded entity to corporation. How can i file my 2012 taxes for free   An election to change classification from a disregarded entity to a corporation will be treated as if the owner of the disregarded entity contributed all of the assets and liabilities to the corporation in exchange for stock. How can i file my 2012 taxes for free   For more information, see Property Exchanged for Stock in Publication 542. How can i file my 2012 taxes for free How To Get More Information This section describes the help the IRS and other federal agencies offer to taxpayers who operate their own businesses. How can i file my 2012 taxes for free Internal Revenue Service You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. How can i file my 2012 taxes for free By selecting the method that is best for you, you will have quick and easy access to tax help. 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How can i file my 2012 taxes for free You can file Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), or ask an IRS employee to complete it on your behalf. How can i file my 2012 taxes for free For more information, go to www. How can i file my 2012 taxes for free irs. How can i file my 2012 taxes for free gov/advocate. How can i file my 2012 taxes for free Low Income Taxpayer Clinics (LITCs). How can i file my 2012 taxes for free   LITCs are independent organizations that provide low income taxpayers with representation in federal tax controversies with the IRS for free or for a nominal charge. How can i file my 2012 taxes for free The clinics also provide tax education and outreach for taxpayers with limited English proficiency or who speak English as a second language. How can i file my 2012 taxes for free Publication 4134, Low Income Taxpayer Clinic List, provides information on clinics in your area. 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How can i file my 2012 taxes for free Have your 2009 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. How can i file my 2012 taxes for free Refunds are sent out weekly on Fridays. How can i file my 2012 taxes for free If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. How can i file my 2012 taxes for free Evaluating the quality of our telephone services. How can i file my 2012 taxes for free To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. How can i file my 2012 taxes for free One method is for a second IRS representative to listen in on or record random telephone calls. How can i file my 2012 taxes for free Another is to ask some callers to complete a short survey at the end of the call. 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How can i file my 2012 taxes for free You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. How can i file my 2012 taxes for free An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. How can i file my 2012 taxes for free 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 Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. How can i file my 2012 taxes for free No appointment is necessary—just walk in. How can i file my 2012 taxes for free If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. How can i file my 2012 taxes for free A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. How can i file my 2012 taxes for free If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. How can i file my 2012 taxes for free All other issues will be handled without an appointment. How can i file my 2012 taxes for free To find the number of your local office, go to www. How can i file my 2012 taxes for free irs. How can i file my 2012 taxes for free gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. How can i file my 2012 taxes for free Mail. How can i file my 2012 taxes for free You can send your order for forms, instructions, and publications to the address below. How can i file my 2012 taxes for free You should receive a response within 10 days after your request is received. How can i file my 2012 taxes for free Internal Revenue Service1201 N. How can i file my 2012 taxes for free Mitsubishi MotorwayBloomington, IL 61705–6613 DVD for tax products. How can i file my 2012 taxes for free You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. How can i file my 2012 taxes for free Prior-year forms, instructions, and publications. How can i file my 2012 taxes for free Tax Map: an electronic research tool and finding aid. How can i file my 2012 taxes for free Tax law frequently asked questions. How can i file my 2012 taxes for free Tax Topics from the IRS telephone response system. How can i file my 2012 taxes for free Internal Revenue Code—Title 26 of the U. How can i file my 2012 taxes for free S. How can i file my 2012 taxes for free Code. How can i file my 2012 taxes for free Fill-in, print, and save features for most tax forms. How can i file my 2012 taxes for free Internal Revenue Bulletins. How can i file my 2012 taxes for free Toll-free and email technical support. How can i file my 2012 taxes for free Two releases during the year. How can i file my 2012 taxes for free – The first release will ship the beginning of January. How can i file my 2012 taxes for free – The final release will ship the beginning of March. How can i file my 2012 taxes for free Purchase the DVD from National Technical Information Service (NTIS) at www. How can i file my 2012 taxes for free irs. How can i file my 2012 taxes for free gov/cdorders for $30 (no handling fee) or call 1-877-CDFORMS (1-877-233-6767) toll free to buy the DVD for $30 (plus a $6 handling fee). How can i file my 2012 taxes for free Small Business Administration The Small Business Administration (SBA) offers training and educational programs, counseling services, financial programs, and contract assistance for small business owners. How can i file my 2012 taxes for free The SBA also has publications and videos on a variety of business topics. How can i file my 2012 taxes for free The following briefly describes assistance provided by the SBA. How can i file my 2012 taxes for free Small Business Development Centers (SBDCs). How can i file my 2012 taxes for free   SBDCs provide counseling, training, and technical services to current and prospective small business owners who cannot afford the services of a private consultant. How can i file my 2012 taxes for free Help is available when beginning, improving, or expanding a small business. How can i file my 2012 taxes for free Business Information Centers (BICs). How can i file my 2012 taxes for free   BICs offer a small business reference library, management video tapes, and computer technology to help plan a business. How can i file my 2012 taxes for free BICs also offer one-on-one assistance. How can i file my 2012 taxes for free Individuals who are in business or are interested in starting a business can use BICs as often as they wish at no charge. How can i file my 2012 taxes for free Service Corps of Retired Executives (SCORE). How can i file my 2012 taxes for free   SCORE provides small business counseling and training to current and prospective small business owners. How can i file my 2012 taxes for free SCORE is made up of current and former business people who offer their expertise and knowledge to help people start, manage, and expand a small business. How can i file my 2012 taxes for free SCORE also offers a variety of small business workshops. How can i file my 2012 taxes for free    Internet. How can i file my 2012 taxes for free You can visit the SBA website at www. How can i file my 2012 taxes for free sba. How can i file my 2012 taxes for free gov. How can i file my 2012 taxes for free While visiting the SBA website, you can find a variety of information of interest to small business owners. How can i file my 2012 taxes for free    Phone. How can i file my 2012 taxes for free Call the SBA Answer Desk at 1-800-UASK-SBA (1-800-827-5722) for general information about programs available to assist small business owners. How can i file my 2012 taxes for free    Walk-in. How can i file my 2012 taxes for free You can walk in to a Small Business Development Center or Business Information Center to request assistance with your small business. How can i file my 2012 taxes for free To find the location nearest you, visit the SBA website or call the SBA Answer Desk. How can i file my 2012 taxes for free Other Federal Agencies Other federal agencies also publish publications and pamphlets to assist small businesses. How can i file my 2012 taxes for free Most of these are available from the Superintendent of Documents at the Government Printing Office. How can i file my 2012 taxes for free You can get information and order these publications and pamphlets in several ways. How can i file my 2012 taxes for free Internet. How can i file my 2012 taxes for free You can visit the GPO website at www. How can i file my 2012 taxes for free access. How can i file my 2012 taxes for free gpo. How can i file my 2012 taxes for free gov. How can i file my 2012 taxes for free Mail. How can i file my 2012 taxes for free Write to the GPO at the following address. How can i file my 2012 taxes for free Superintendent of DocumentsU. How can i file my 2012 taxes for free S. How can i file my 2012 taxes for free Government Printing OfficeP. How can i file my 2012 taxes for free O. How can i file my 2012 taxes for free Box 979050St. How can i file my 2012 taxes for free Louis, MO 63917-9000 Phone. How can i file my 2012 taxes for free Call the GPO toll-free at 1-866-512-1800 or at 202-512-1800 from the Washington, DC area. How can i file my 2012 taxes for free Prev  Up  Next   Home   More Online Publications
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The How Can I File My 2012 Taxes For Free

How can i file my 2012 taxes for free 4. How can i file my 2012 taxes for free   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. How can i file my 2012 taxes for free However, the information shown on the filled-in forms is not from any actual person or scenario. How can i file my 2012 taxes for free Example 1—Mortgage loan modification. How can i file my 2012 taxes for free    In 2007, Nancy Oak bought a main home for $435,000. How can i file my 2012 taxes for free Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. How can i file my 2012 taxes for free The loan was secured by the home. How can i file my 2012 taxes for free The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. How can i file my 2012 taxes for free In 2008, Nancy took out a second mortgage loan (also a recourse debt) in the amount of $30,000 that was used to substantially improve her kitchen. How can i file my 2012 taxes for free    In 2011, when the outstanding principal of the first and second mortgage loans was $440,000, Nancy refinanced the two recourse loans into one recourse loan in the amount of $475,000. How can i file my 2012 taxes for free The FMV of Nancy's home at the time of the refinancing was $500,000. How can i file my 2012 taxes for free Nancy used the additional $35,000 debt ($475,000 new mortgage loan minus $440,000 outstanding principal of Nancy's first and second mortgage loans immediately before the refinancing) to pay off personal credit cards and to pay college tuition for her son. How can i file my 2012 taxes for free After the refinancing, Nancy has qualified principal residence indebtedness in the amount of $440,000 because the refinanced debt is qualified principal residence indebtedness only to the extent the amount of debt is not more than the old mortgage principal just before the refinancing. How can i file my 2012 taxes for free   In 2013, Nancy was unable to make her mortgage loan payments. How can i file my 2012 taxes for free On August 31, 2013, when the outstanding balance of her refinanced mortgage loan was still $475,000 and the FMV of the property was $425,000, Nancy's bank agreed to a loan modification (a “workout”) that resulted in a $40,000 reduction in the principal balance of her loan. How can i file my 2012 taxes for free Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. How can i file my 2012 taxes for free   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. How can i file my 2012 taxes for free Identifiable event code "F" appears in box 6. How can i file my 2012 taxes for free This box shows the reason the creditor has filed Form 1099-C. How can i file my 2012 taxes for free To determine if she must include the canceled debt in her income, Nancy must determine whether she meets any of the exceptions or exclusions that apply to canceled debts. How can i file my 2012 taxes for free Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. How can i file my 2012 taxes for free   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. How can i file my 2012 taxes for free Although Nancy has $440,000 of qualified principal residence indebtedness, part of her loan ($35,000) was not qualified principal residence indebtedness because it was used to pay off personal credit cards and college tuition for her son. How can i file my 2012 taxes for free Applying the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent the amount canceled is more than the amount of the debt (immediately before the cancellation) that is not qualified principal residence indebtedness. How can i file my 2012 taxes for free Thus, Nancy can exclude only $5,000 of the canceled debt as qualified principal residence indebtedness ($40,000 amount canceled minus $35,000 nonqualified debt). How can i file my 2012 taxes for free   Because Nancy does not meet any other exception or exclusion, she checks only the box on line 1e of Form 982 and enters $5,000 on line 2. How can i file my 2012 taxes for free Nancy must also enter $5,000 on line 10b and reduce the basis of her main home by the $5,000 she excluded from income, bringing the adjusted basis in her home to $460,000 ($435,000 purchase price plus $30,000 substantial improvement minus $5,000). How can i file my 2012 taxes for free Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. How can i file my 2012 taxes for free You can see Nancy's Form 1099-C and a portion of her Form 1040 below. How can i file my 2012 taxes for free Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. How can i file my 2012 taxes for free Please click the link to view the image. How can i file my 2012 taxes for free Form 1099-C, Cancellation of Debt Nancy's 2013 Form 1040 This image is too large to be displayed in the current screen. How can i file my 2012 taxes for free Please click the link to view the image. How can i file my 2012 taxes for free Form 1040, U. How can i file my 2012 taxes for free S. How can i file my 2012 taxes for free Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. How can i file my 2012 taxes for free Please click the link to view the image. How can i file my 2012 taxes for free Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. How can i file my 2012 taxes for free    In 2005, John and Mary Elm bought a main home for $335,000. How can i file my 2012 taxes for free John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. How can i file my 2012 taxes for free The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. How can i file my 2012 taxes for free   John and Mary became unable to make their mortgage loan payments and on March 1, 2013, when the outstanding balance of the mortgage loan was $315,000 and the FMV of the property was $290,000, the bank foreclosed on the property and simultaneously canceled the remaining mortgage debt. How can i file my 2012 taxes for free Immediately before the foreclosure, John and Mary's only other assets and liabilities were a checking account with a balance of $6,000, retirement savings of $13,000, and credit card debt of $5,500. How can i file my 2012 taxes for free   John and Mary received a 2013 Form 1099-C showing canceled debt of $25,000 in box 2 ($315,000 outstanding balance minus $290,000 FMV) and an FMV of $290,000 in box 7. How can i file my 2012 taxes for free Identifiable event code "D" appears in box 6. How can i file my 2012 taxes for free This box shows the reason the creditor has filed Form 1099-C. How can i file my 2012 taxes for free In order to determine if John and Mary must include the canceled debt in income, they must first determine whether they meet any of the exceptions or exclusions that apply to canceled debts. How can i file my 2012 taxes for free In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. How can i file my 2012 taxes for free Their sample Form 1099-C is shown on this page. How can i file my 2012 taxes for free   John and Mary complete the insolvency worksheet and determine that they were insolvent immediately before the cancellation because at that time their liabilities exceeded the FMV of their assets by $11,500 ($320,500 total liabilities minus $309,000 FMV of total assets). How can i file my 2012 taxes for free However, because the entire debt canceled is qualified principal residence indebtedness, the insolvency exclusion only applies if John and Mary elect to apply the insolvency exclusion instead of the qualified principal residence exclusion. How can i file my 2012 taxes for free   John and Mary do not elect to apply the insolvency exclusion instead of the qualified principal residence exclusion because under the insolvency exclusion their exclusion would be limited to the amount by which they were insolvent ($11,500). How can i file my 2012 taxes for free Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. How can i file my 2012 taxes for free Under the qualified principal residence exclusion, the amount that John and Mary can exclude is not limited because their qualified principal residence indebtedness is not more than $2 million and no portion of the loan was nonqualified debt. How can i file my 2012 taxes for free As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. How can i file my 2012 taxes for free Because John and Mary no longer own the home due to the foreclosure, John and Mary have no remaining basis in the home at the time of the debt cancellation. How can i file my 2012 taxes for free Thus, John and Mary leave line 10b of Form 982 blank. How can i file my 2012 taxes for free   John and Mary must also determine whether they have a gain or loss from the foreclosure. How can i file my 2012 taxes for free John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. How can i file my 2012 taxes for free Because this loss relates to their home, it is a nondeductible loss. How can i file my 2012 taxes for free   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. How can i file my 2012 taxes for free John and Mary's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. How can i file my 2012 taxes for free Please click the link to view the image. How can i file my 2012 taxes for free Form 1099-C, Cancellation of Debt Table 1-1. How can i file my 2012 taxes for free Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. How can i file my 2012 taxes for free Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). How can i file my 2012 taxes for free Otherwise, go to Part 2. How can i file my 2012 taxes for free 1. How can i file my 2012 taxes for free Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $315,000. How can i file my 2012 taxes for free 00 2. How can i file my 2012 taxes for free Enter the fair market value of the transferred property $290,000. How can i file my 2012 taxes for free 00 3. How can i file my 2012 taxes for free Ordinary income from the cancellation of debt upon foreclosure or repossession. How can i file my 2012 taxes for free * Subtract line 2 from line 1. How can i file my 2012 taxes for free If less than zero, enter zero. How can i file my 2012 taxes for free Next, go to Part 2 $ 25,000. How can i file my 2012 taxes for free 00 Part 2. How can i file my 2012 taxes for free Gain or loss from foreclosure or repossession. How can i file my 2012 taxes for free   4. How can i file my 2012 taxes for free Enter the smaller of line 1 or line 2. How can i file my 2012 taxes for free If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property $290,000. How can i file my 2012 taxes for free 00 5. How can i file my 2012 taxes for free Enter any proceeds you received from the foreclosure sale   6. How can i file my 2012 taxes for free Add line 4 and line 5 $290,000. How can i file my 2012 taxes for free 00 7. How can i file my 2012 taxes for free Enter the adjusted basis of the transferred property $335,000. How can i file my 2012 taxes for free 00 8. How can i file my 2012 taxes for free Gain or loss from foreclosure or repossession. How can i file my 2012 taxes for free Subtract line 7 from line 6 ($ 45,000. How can i file my 2012 taxes for free 00) * The income may not be taxable. How can i file my 2012 taxes for free See chapter 1 for more details. How can i file my 2012 taxes for free Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. How can i file my 2012 taxes for free Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. How can i file my 2012 taxes for free Credit card debt $ 5,500 2. How can i file my 2012 taxes for free Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 315,000 3. How can i file my 2012 taxes for free Car and other vehicle loans $ 4. How can i file my 2012 taxes for free Medical bills owed $ 5. How can i file my 2012 taxes for free Student loans $ 6. How can i file my 2012 taxes for free Accrued or past-due mortgage interest $ 7. How can i file my 2012 taxes for free Accrued or past-due real estate taxes $ 8. How can i file my 2012 taxes for free Accrued or past-due utilities (water, gas, electric) $ 9. How can i file my 2012 taxes for free Accrued or past-due child care costs $ 10. How can i file my 2012 taxes for free Federal or state income taxes remaining due (for prior tax years) $ 11. How can i file my 2012 taxes for free Judgments $ 12. How can i file my 2012 taxes for free Business debts (including those owed as a sole proprietor or partner) $ 13. How can i file my 2012 taxes for free Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. How can i file my 2012 taxes for free Other liabilities (debts) not included above $ 15. How can i file my 2012 taxes for free Total liabilities immediately before the cancellation. How can i file my 2012 taxes for free Add lines 1 through 14. How can i file my 2012 taxes for free $ 320,500 Part II. How can i file my 2012 taxes for free Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. How can i file my 2012 taxes for free Cash and bank account balances $ 6,000 17. How can i file my 2012 taxes for free Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 290,000 18. How can i file my 2012 taxes for free Cars and other vehicles $ 19. How can i file my 2012 taxes for free Computers $ 20. How can i file my 2012 taxes for free Household goods and furnishings (for example, appliances, electronics, furniture, etc. How can i file my 2012 taxes for free ) $ 21. How can i file my 2012 taxes for free Tools $ 22. How can i file my 2012 taxes for free Jewelry $ 23. How can i file my 2012 taxes for free Clothing $ 24. How can i file my 2012 taxes for free Books $ 25. How can i file my 2012 taxes for free Stocks and bonds $ 26. How can i file my 2012 taxes for free Investments in coins, stamps, paintings, or other collectibles $ 27. How can i file my 2012 taxes for free Firearms, sports, photographic, and other hobby equipment $ 28. How can i file my 2012 taxes for free Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. How can i file my 2012 taxes for free Interest in a pension plan $ 30. How can i file my 2012 taxes for free Interest in education accounts $ 31. How can i file my 2012 taxes for free Cash value of life insurance $ 32. How can i file my 2012 taxes for free Security deposits with landlords, utilities, and others $ 33. How can i file my 2012 taxes for free Interests in partnerships $ 34. How can i file my 2012 taxes for free Value of investment in a business $ 35. How can i file my 2012 taxes for free Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. How can i file my 2012 taxes for free Other assets not included above $ 37. How can i file my 2012 taxes for free FMV of total assets immediately before the cancellation. How can i file my 2012 taxes for free Add lines 16 through 36. How can i file my 2012 taxes for free $ 309,000 Part III. How can i file my 2012 taxes for free Insolvency 38. How can i file my 2012 taxes for free Amount of Insolvency. How can i file my 2012 taxes for free Subtract line 37 from line 15. How can i file my 2012 taxes for free If zero or less, you are not insolvent. How can i file my 2012 taxes for free $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. How can i file my 2012 taxes for free Please click the link to view the image. How can i file my 2012 taxes for free Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)          Example 3—Mortgage loan foreclosure with debt exceeding $2 million limit. How can i file my 2012 taxes for free    In 2011, Kathy and Frank Willow got married and entered into a contract with Hive Construction Corporation to build a house for $3,000,000 to be used as their main home. How can i file my 2012 taxes for free Kathy and Frank made a $400,000 down payment and took out a $2,600,000 mortgage to finance the remaining cost of the house. How can i file my 2012 taxes for free Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. How can i file my 2012 taxes for free   In November 2013, when the outstanding principal balance on the mortgage loan was $2,500,000, the FMV of the property fell to $1,750,000 and Kathy and Frank abandoned the property by permanently moving out. How can i file my 2012 taxes for free The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. How can i file my 2012 taxes for free On December 26, 2013, the lender canceled the remaining debt. How can i file my 2012 taxes for free Kathy and Frank have no tax attributes other than basis of personal-use property. How can i file my 2012 taxes for free   The lender issued a 2013 Form 1099-C to Kathy and Frank showing canceled debt of $750,000 in box 2 (the remaining balance on the $2,500,000 mortgage debt after application of the foreclosure sale proceeds) and $1,750,000 in box 7 (FMV of the property). How can i file my 2012 taxes for free Identifiable event code "D" appears in box 6. How can i file my 2012 taxes for free This box shows the reason the creditor has filed Form 1099-C. How can i file my 2012 taxes for free Although Kathy and Frank abandoned the property, the lender did not need to also file a Form 1099-A because the lender canceled the debt in connection with the foreclosure in the same calendar year. How can i file my 2012 taxes for free Kathy and Frank are filing a joint return for 2013. How can i file my 2012 taxes for free   Because the foreclosure occurred prior to the debt cancellation, Kathy and Frank first calculate their gain or loss from the foreclosure using Table 1-1. How can i file my 2012 taxes for free Because Kathy and Frank remained personally liable for the $750,000 debt remaining after the foreclosure ($2,500,000 outstanding debt immediately before the foreclosure minus $1,750,000 satisfied through the sale of the home), Kathy and Frank enter $1,750,000 on line 1 of Table 1-1 ($2,500,000 outstanding debt immediately before the foreclosure minus the $750,000 for which they remained liable). How can i file my 2012 taxes for free Completing Table 1-1, Kathy and Frank find that they have no ordinary income from the cancellation of debt upon foreclosure and that they have a $1,250,000 loss. How can i file my 2012 taxes for free Because this loss relates to their home, it is a nondeductible loss. How can i file my 2012 taxes for free   Because the lender later canceled the remaining amount of the debt, Kathy and Frank must also determine whether that canceled debt is taxable. How can i file my 2012 taxes for free Immediately before the cancellation, Kathy and Frank had $15,000 in a savings account, household furnishings with an FMV of $17,000, a car with an FMV of $10,000, and $18,000 in credit card debt. How can i file my 2012 taxes for free Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. How can i file my 2012 taxes for free The household furnishings originally cost $30,000. How can i file my 2012 taxes for free The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. How can i file my 2012 taxes for free Kathy and Frank had no adjustments to the cost basis of the car. How can i file my 2012 taxes for free Kathy and Frank had no other assets or liabilities at the time of the cancellation. How can i file my 2012 taxes for free Kathy and Frank complete the insolvency worksheet to calculate that they were insolvent to the extent of $726,000 immediately before the cancellation ($768,000 of total liabilities minus $42,000 FMV of total assets). How can i file my 2012 taxes for free   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. How can i file my 2012 taxes for free Kathy and Frank also owned the same car at that time (still with an FMV of $10,000 and basis of $16,000) and the same household furnishings (still with an FMV of $17,000 and a basis of $30,000). How can i file my 2012 taxes for free Kathy and Frank had no other assets or liabilities at that time. How can i file my 2012 taxes for free Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. How can i file my 2012 taxes for free   Because the canceled debt is qualified principal residence indebtedness, the insolvency exclusion does not apply unless Kathy and Frank elect to apply the insolvency exclusion instead of the qualified principal residence indebtedness exclusion. How can i file my 2012 taxes for free The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. How can i file my 2012 taxes for free The remaining $500,000 ($2,500,000 outstanding mortgage loan minus $2,000,000 limit on qualified principal residence indebtedness) is not qualified principal residence indebtedness. How can i file my 2012 taxes for free Because only a part of the loan is qualified principal residence indebtedness, Kathy and Frank must apply the ordering rule to the canceled debt. How can i file my 2012 taxes for free Under the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent that the amount canceled ($750,000) exceeds the amount of the loan (immediately before the cancellation) that is not qualified principal residence indebtedness ($500,000). How can i file my 2012 taxes for free This means that Kathy and Frank can only exclude $250,000 ($750,000 amount canceled minus $500,000 nonqualified debt) under the qualified principal residence indebtedness exclusion. How can i file my 2012 taxes for free   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. How can i file my 2012 taxes for free Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. How can i file my 2012 taxes for free Kathy and Frank can exclude the remaining $500,000 canceled debt under the insolvency exclusion because they were insolvent immediately before the cancellation to the extent of $726,000. How can i file my 2012 taxes for free Thus, Kathy and Frank check the boxes on lines 1b and 1e of Form 982 and enter $750,000 on line 2 ($250,000 excluded under the qualified principal residence indebtedness exclusion plus $500,000 excluded under the insolvency exclusion). How can i file my 2012 taxes for free   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. How can i file my 2012 taxes for free Because Kathy and Frank no longer own the home due to the foreclosure, Kathy and Frank have no remaining basis in the home at the time of the debt cancellation. How can i file my 2012 taxes for free Thus, Kathy and Frank leave line 10b of Form 982 blank. How can i file my 2012 taxes for free However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. How can i file my 2012 taxes for free As a result, Kathy and Frank must reduce the basis of property they own based on the amount of canceled debt they are excluding from income under the insolvency rules. How can i file my 2012 taxes for free Because Kathy and Frank have no tax attributes other than basis of personal-use property to reduce, Kathy and Frank figure the amount they must include on line 10a of Form 982 by taking the smallest of: The $46,000 bases of their personal-use property held at the beginning of 2014 ($16,000 basis in the car plus $30,000 basis in household furnishings), The $500,000 of the nonbusiness debt (other than qualified principal residence indebtedness) that they are excluding from income on line 2 of Form 982, or The $43,000 excess of the total bases of the property and the amount of money they held immediately after the cancellation over their total liabilities immediately after the cancellation ($15,000 in savings account plus $30,000 basis in household furnishings plus $16,000 adjusted basis in car minus $18,000 credit card debt). How can i file my 2012 taxes for free Kathy and Frank enter $43,000 on Form 982, line 10a and reduce their bases in the car and the household furnishings in proportion to the total adjusted bases in all their property. How can i file my 2012 taxes for free Kathy and Frank reduce the basis in the car by $14,956. How can i file my 2012 taxes for free 52 ($43,000 x $16,000/$46,000). How can i file my 2012 taxes for free And they reduce the basis in the household furnishings by $28,043. How can i file my 2012 taxes for free 48 ($43,000 x $30,000/$46,000). How can i file my 2012 taxes for free   Following are Kathy and Frank's sample forms and worksheets. How can i file my 2012 taxes for free Frank and Kathy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. How can i file my 2012 taxes for free Please click the link to view the image. How can i file my 2012 taxes for free Form 1099-C, Cancellation of Debt Table 1-1. How can i file my 2012 taxes for free Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. How can i file my 2012 taxes for free Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). How can i file my 2012 taxes for free Otherwise, go to Part 2. How can i file my 2012 taxes for free 1. How can i file my 2012 taxes for free Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $1,750,000. How can i file my 2012 taxes for free 00 2. How can i file my 2012 taxes for free Enter the fair market value of the transferred property $1,750,000. How can i file my 2012 taxes for free 00 3. How can i file my 2012 taxes for free Ordinary income from the cancellation of debt upon foreclosure or repossession. How can i file my 2012 taxes for free * Subtract line 2 from line 1. How can i file my 2012 taxes for free If less than zero, enter zero. How can i file my 2012 taxes for free Next, go to Part 2 $0. How can i file my 2012 taxes for free 00 Part 2. How can i file my 2012 taxes for free Gain or loss from foreclosure or repossession. How can i file my 2012 taxes for free   4. How can i file my 2012 taxes for free Enter the smaller of line 1 or line 2. How can i file my 2012 taxes for free If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property. How can i file my 2012 taxes for free $1,750,000. How can i file my 2012 taxes for free 00 5. How can i file my 2012 taxes for free Enter any proceeds you received from the foreclosure sale   6. How can i file my 2012 taxes for free Add line 4 and line 5 $1,750,000. How can i file my 2012 taxes for free 00 7. How can i file my 2012 taxes for free Enter the adjusted basis of the transferred property $3,000,000. How can i file my 2012 taxes for free 00 8. How can i file my 2012 taxes for free Gain or loss from foreclosure or repossession. How can i file my 2012 taxes for free Subtract line 7 from line 6 ($1,250,000. How can i file my 2012 taxes for free 00) * The income may not be taxable. How can i file my 2012 taxes for free See chapter 1 for more details. How can i file my 2012 taxes for free    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. How can i file my 2012 taxes for free Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. How can i file my 2012 taxes for free Credit card debt $ 18,000 2. How can i file my 2012 taxes for free Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 750,000 3. How can i file my 2012 taxes for free Car and other vehicle loans $ 4. How can i file my 2012 taxes for free Medical bills owed $ 5. How can i file my 2012 taxes for free Student loans $ 6. How can i file my 2012 taxes for free Accrued or past-due mortgage interest $ 7. How can i file my 2012 taxes for free Accrued or past-due real estate taxes $ 8. How can i file my 2012 taxes for free Accrued or past-due utilities (water, gas, electric) $ 9. How can i file my 2012 taxes for free Accrued or past-due child care costs $ 10. How can i file my 2012 taxes for free Federal or state income taxes remaining due (for prior tax years) $ 11. How can i file my 2012 taxes for free Judgments $ 12. How can i file my 2012 taxes for free Business debts (including those owed as a sole proprietor or partner) $ 13. How can i file my 2012 taxes for free Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. How can i file my 2012 taxes for free Other liabilities (debts) not included above $ 15. How can i file my 2012 taxes for free Total liabilities immediately before the cancellation. How can i file my 2012 taxes for free Add lines 1 through 14. How can i file my 2012 taxes for free $ 768,000 Part II. How can i file my 2012 taxes for free Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. How can i file my 2012 taxes for free Cash and bank account balances $ 15,000 17. How can i file my 2012 taxes for free Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 18. How can i file my 2012 taxes for free Cars and other vehicles $ 10,000 19. How can i file my 2012 taxes for free Computers $ 20. How can i file my 2012 taxes for free Household goods and furnishings (for example, appliances, electronics, furniture, etc. How can i file my 2012 taxes for free ) $ 17,000 21. How can i file my 2012 taxes for free Tools $ 22. How can i file my 2012 taxes for free Jewelry $ 23. How can i file my 2012 taxes for free Clothing $ 24. How can i file my 2012 taxes for free Books $ 25. How can i file my 2012 taxes for free Stocks and bonds $ 26. How can i file my 2012 taxes for free Investments in coins, stamps, paintings, or other collectibles $ 27. How can i file my 2012 taxes for free Firearms, sports, photographic, and other hobby equipment $ 28. How can i file my 2012 taxes for free Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. How can i file my 2012 taxes for free Interest in a pension plan $ 30. How can i file my 2012 taxes for free Interest in education accounts $ 31. How can i file my 2012 taxes for free Cash value of life insurance $ 32. How can i file my 2012 taxes for free Security deposits with landlords, utilities, and others $ 33. How can i file my 2012 taxes for free Interests in partnerships $ 34. How can i file my 2012 taxes for free Value of investment in a business $ 35. How can i file my 2012 taxes for free Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. How can i file my 2012 taxes for free Other assets not included above $ 37. How can i file my 2012 taxes for free FMV of total assets immediately before the cancellation. How can i file my 2012 taxes for free Add lines 16 through 36. How can i file my 2012 taxes for free $ 42,000 Part III. How can i file my 2012 taxes for free Insolvency 38. How can i file my 2012 taxes for free Amount of Insolvency. How can i file my 2012 taxes for free Subtract line 37 from line 15. How can i file my 2012 taxes for free If zero or less, you are not insolvent. How can i file my 2012 taxes for free $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. How can i file my 2012 taxes for free Please click the link to view the image. How can i file my 2012 taxes for free Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Prev  Up  Next   Home   More Online Publications