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How Do I File A 2011 Tax Return

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How Do I File A 2011 Tax Return

How do i file a 2011 tax return 2. How do i file a 2011 tax return   Entertainment Table of Contents Directly-Related Test Associated TestMeetings at conventions. How do i file a 2011 tax return 50% LimitExceptions to the 50% Limit What Entertainment Expenses Are Deductible?A meal as a form of entertainment. How do i file a 2011 tax return Deduction may depend on your type of business. How do i file a 2011 tax return Exception for events that benefit charitable organizations. How do i file a 2011 tax return Food and beverages in skybox seats. How do i file a 2011 tax return What Entertainment Expenses Are Not Deductible?Out-of-pocket expenses. How do i file a 2011 tax return You may be able to deduct business-related entertainment expenses you have for entertaining a client, customer, or employee. How do i file a 2011 tax return The rules and definitions are summarized in Table 2-1 . How do i file a 2011 tax return You can deduct entertainment expenses only if they are both ordinary and necessary and meet one of the following tests. How do i file a 2011 tax return Directly-related test. How do i file a 2011 tax return Associated test. How do i file a 2011 tax return Both of these tests are explained later. How do i file a 2011 tax return An ordinary expense is one that is common and accepted in your trade or business. How do i file a 2011 tax return A necessary expense is one that is helpful and appropriate for your business. How do i file a 2011 tax return An expense does not have to be required to be considered necessary. How do i file a 2011 tax return The amount you can deduct for entertainment expenses may be limited. How do i file a 2011 tax return Generally, you can deduct only 50% of your unreimbursed entertainment expenses. How do i file a 2011 tax return This limit is discussed later under 50% Limit. How do i file a 2011 tax return Directly-Related Test To meet the directly-related test for entertainment expenses (including entertainment-related meals), you must show that: The main purpose of the combined business and entertainment was the active conduct of business, You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit at some future time. How do i file a 2011 tax return Business is generally not considered to be the main purpose when business and entertainment are combined on hunting or fishing trips, or on yachts or other pleasure boats. How do i file a 2011 tax return Even if you show that business was the main purpose, you generally cannot deduct the expenses for the use of an entertainment facility. How do i file a 2011 tax return See Entertainment facilities under What Entertainment Expenses Are Not Deductible? later in this chapter. How do i file a 2011 tax return You must consider all the facts, including the nature of the business transacted and the reasons for conducting business during the entertainment. How do i file a 2011 tax return It is not necessary to devote more time to business than to entertainment. How do i file a 2011 tax return However, if the business discussion is only incidental to the entertainment, the entertainment expenses do not meet the directly-related test. How do i file a 2011 tax return Table 2-1. How do i file a 2011 tax return When Are Entertainment Expenses Deductible? General rule You can deduct ordinary and necessary expenses to entertain a client, customer, or employee if the expenses meet the directly-related test or the associated test. How do i file a 2011 tax return Definitions Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a customer or client. How do i file a 2011 tax return An ordinary expense is one that is common and accepted in your trade or business. How do i file a 2011 tax return A necessary expense is one that is helpful and appropriate. How do i file a 2011 tax return Tests to be met Directly-related test Entertainment took place in a clear business setting, or Main purpose of entertainment was the active conduct of business, and You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit. How do i file a 2011 tax return   Associated test Entertainment is associated with your trade or business, and Entertainment is directly before or after a substantial business discussion. How do i file a 2011 tax return Other rules You cannot deduct the cost of your meal as an entertainment expense if you are claiming the meal as a travel expense. How do i file a 2011 tax return You cannot deduct expenses that are lavish or extravagant under the circumstances. How do i file a 2011 tax return You generally can deduct only 50% of your unreimbursed entertainment expenses (see 50% Limit ). How do i file a 2011 tax return You do not have to show that business income or other business benefit actually resulted from each entertainment expense. How do i file a 2011 tax return Clear business setting. How do i file a 2011 tax return   If the entertainment takes place in a clear business setting and is for your business or work, the expenses are considered directly related to your business or work. How do i file a 2011 tax return The following situations are examples of entertainment in a clear business setting. How do i file a 2011 tax return Entertainment in a hospitality room at a convention where business goodwill is created through the display or discussion of business products. How do i file a 2011 tax return Entertainment that is mainly a price rebate on the sale of your products (such as a restaurant owner providing an occasional free meal to a loyal customer). How do i file a 2011 tax return Entertainment of a clear business nature occurring under circumstances where there is no meaningful personal or social relationship between you and the persons entertained. How do i file a 2011 tax return An example is entertainment of business and civic leaders at the opening of a new hotel or play when the purpose is to get business publicity rather than to create or maintain the goodwill of the persons entertained. How do i file a 2011 tax return Expenses not considered directly related. How do i file a 2011 tax return   Entertainment expenses generally are not considered directly related if you are not there or in situations where there are substantial distractions that generally prevent you from actively conducting business. How do i file a 2011 tax return The following are examples of situations where there are substantial distractions. How do i file a 2011 tax return A meeting or discussion at a nightclub, theater, or sporting event. How do i file a 2011 tax return A meeting or discussion during what is essentially a social gathering, such as a cocktail party. How do i file a 2011 tax return A meeting with a group that includes persons who are not business associates at places such as cocktail lounges, country clubs, golf clubs, athletic clubs, or vacation resorts. How do i file a 2011 tax return Associated Test Even if your expenses do not meet the directly-related test, they may meet the associated test. How do i file a 2011 tax return To meet the associated test for entertainment expenses (including entertainment-related meals), you must show that the entertainment is: Associated with the active conduct of your trade or business, and Directly before or after a substantial business discussion (defined later). How do i file a 2011 tax return Associated with trade or business. How do i file a 2011 tax return   Generally, an expense is associated with the active conduct of your trade or business if you can show that you had a clear business purpose for having the expense. How do i file a 2011 tax return The purpose may be to get new business or to encourage the continuation of an existing business relationship. How do i file a 2011 tax return Substantial business discussion. How do i file a 2011 tax return   Whether a business discussion is substantial depends on the facts of each case. How do i file a 2011 tax return A business discussion will not be considered substantial unless you can show that you actively engaged in the discussion, meeting, negotiation, or other business transaction to get income or some other specific business benefit. How do i file a 2011 tax return   The meeting does not have to be for any specified length of time, but you must show that the business discussion was substantial in relation to the meal or entertainment. How do i file a 2011 tax return It is not necessary that you devote more time to business than to entertainment. How do i file a 2011 tax return You do not have to discuss business during the meal or entertainment. How do i file a 2011 tax return Meetings at conventions. How do i file a 2011 tax return   You are considered to have a substantial business discussion if you attend meetings at a convention or similar event, or at a trade or business meeting sponsored and conducted by a business or professional organization. How do i file a 2011 tax return However, your reason for attending the convention or meeting must be to further your trade or business. How do i file a 2011 tax return The organization that sponsors the convention or meeting must schedule a program of business activities that is the main activity of the convention or meeting. How do i file a 2011 tax return Directly before or after business discussion. How do i file a 2011 tax return   If the entertainment is held on the same day as the business discussion, it is considered to be held directly before or after the business discussion. How do i file a 2011 tax return   If the entertainment and the business discussion are not held on the same day, you must consider the facts of each case to see if the associated test is met. How do i file a 2011 tax return Among the facts to consider are the place, date, and duration of the business discussion. How do i file a 2011 tax return If you or your business associates are from out of town, you must also consider the dates of arrival and departure, and the reasons the entertainment and the discussion did not take place on the same day. How do i file a 2011 tax return Example. How do i file a 2011 tax return A group of business associates comes from out of town to your place of business to hold a substantial business discussion. How do i file a 2011 tax return If you entertain those business guests on the evening before the business discussion, or on the evening of the day following the business discussion, the entertainment generally is considered to be held directly before or after the discussion. How do i file a 2011 tax return The expense meets the associated test. How do i file a 2011 tax return 50% Limit In general, you can deduct only 50% of your business-related meal and entertainment expenses. How do i file a 2011 tax return (If you are subject to the Department of Transportation's “hours of service” limits, you can deduct 80% of your business-related meal and entertainment expenses. How do i file a 2011 tax return See Individuals subject to “hours of service” limits , later. How do i file a 2011 tax return ) The 50% limit applies to employees or their employers, and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed. How do i file a 2011 tax return Figure A summarizes the general rules explained in this section. How do i file a 2011 tax return The 50% limit applies to business meals or entertainment expenses you have while: Traveling away from home (whether eating alone or with others) on business, Entertaining customers at your place of business, a restaurant, or other location, or Attending a business convention or reception, business meeting, or business luncheon at a club. How do i file a 2011 tax return Included expenses. How do i file a 2011 tax return   Expenses subject to the 50% limit include: Taxes and tips relating to a business meal or entertainment activity, Cover charges for admission to a nightclub, Rent paid for a room in which you hold a dinner or cocktail party, and Amounts paid for parking at a sports arena. How do i file a 2011 tax return However, the cost of transportation to and from a business meal or a business-related entertainment activity is not subject to the 50% limit. How do i file a 2011 tax return Figure A. How do i file a 2011 tax return Does the 50% Limit Apply to Your Expenses? There are exceptions to these rules. How do i file a 2011 tax return See Exceptions to the 50% Limit . How do i file a 2011 tax return Please click here for the text description of the image. How do i file a 2011 tax return Figure A. How do i file a 2011 tax return Does the 50% limit apply to Your Expenses?TAs for Figure A are: Notice 87-23; Form 2106 instructions Application of 50% limit. How do i file a 2011 tax return   The 50% limit on meal and entertainment expenses applies if the expense is otherwise deductible and is not covered by one of the exceptions discussed later. How do i file a 2011 tax return   The 50% limit also applies to certain meal and entertainment expenses that are not business related. How do i file a 2011 tax return It applies to meal and entertainment expenses you have for the production of income, including rental or royalty income. How do i file a 2011 tax return It also applies to the cost of meals included in deductible educational expenses. How do i file a 2011 tax return When to apply the 50% limit. How do i file a 2011 tax return   You apply the 50% limit after determining the amount that would otherwise qualify for a deduction. How do i file a 2011 tax return You first have to determine the amount of meal and entertainment expenses that would be deductible under the other rules discussed in this publication. How do i file a 2011 tax return Example 1. How do i file a 2011 tax return You spend $200 for a business-related meal. How do i file a 2011 tax return If $110 of that amount is not allowable because it is lavish and extravagant, the remaining $90 is subject to the 50% limit. How do i file a 2011 tax return Your deduction cannot be more than $45 (50% × $90). How do i file a 2011 tax return Example 2. How do i file a 2011 tax return You purchase two tickets to a concert and give them to a client. How do i file a 2011 tax return You purchased the tickets through a ticket agent. How do i file a 2011 tax return You paid $200 for the two tickets, which had a face value of $80 each ($160 total). How do i file a 2011 tax return Your deduction cannot be more than $80 (50% × $160). How do i file a 2011 tax return Exceptions to the 50% Limit Generally, business-related meal and entertainment expenses are subject to the 50% limit. How do i file a 2011 tax return Figure A can help you determine if the 50% limit applies to you. How do i file a 2011 tax return Expenses not subject to 50% limit. How do i file a 2011 tax return   Your meal or entertainment expense is not subject to the 50% limit if the expense meets one of the following exceptions. How do i file a 2011 tax return 1 - Employee's reimbursed expenses. How do i file a 2011 tax return   If you are an employee, you are not subject to the 50% limit on expenses for which your employer reimburses you under an accountable plan. How do i file a 2011 tax return Accountable plans are discussed in chapter 6. How do i file a 2011 tax return 2 - Self-employed. How do i file a 2011 tax return   If you are self-employed, your deductible meal and entertainment expenses are not subject to the 50% limit if all of the following requirements are met. How do i file a 2011 tax return You have these expenses as an independent contractor. How do i file a 2011 tax return Your customer or client reimburses you or gives you an allowance for these expenses in connection with services you perform. How do i file a 2011 tax return You provide adequate records of these expenses to your customer or client. How do i file a 2011 tax return (See chapter 5 . How do i file a 2011 tax return )   In this case, your client or customer is subject to the 50% limit on the expenses. How do i file a 2011 tax return Example. How do i file a 2011 tax return You are a self-employed attorney who adequately accounts for meal and entertainment expenses to a client who reimburses you for these expenses. How do i file a 2011 tax return You are not subject to the directly-related or associated test, nor are you subject to the 50% limit. How do i file a 2011 tax return If the client can deduct the expenses, the client is subject to the 50% limit. How do i file a 2011 tax return If you (as an independent contractor) have expenses for meals and entertainment related to providing services for a client but do not adequately account for and seek reimbursement from the client for those expenses, you are subject to the directly-related or associated test and to the 50% limit. How do i file a 2011 tax return 3 - Advertising expenses. How do i file a 2011 tax return   You are not subject to the 50% limit if you provide meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. How do i file a 2011 tax return For example, neither the expense of sponsoring a television or radio show nor the expense of distributing free food and beverages to the general public is subject to the 50% limit. How do i file a 2011 tax return 4 - Sale of meals or entertainment. How do i file a 2011 tax return   You are not subject to the 50% limit if you actually sell meals, entertainment, goods and services, or use of facilities to the public. How do i file a 2011 tax return For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is not subject to the 50% limit. How do i file a 2011 tax return 5 - Charitable sports event. How do i file a 2011 tax return   You are not subject to the 50% limit if you pay for a package deal that includes a ticket to a qualified charitable sports event. How do i file a 2011 tax return For the conditions the sports event must meet, see Exception for events that benefit charitable organizations under What Entertainment Expenses Are Deductible?, later. How do i file a 2011 tax return Individuals subject to “hours of service” limits. How do i file a 2011 tax return   You can deduct a higher percentage of your meal expenses while traveling away from your tax home if the meals take place during or incident to any period subject to the Department of Transportation's “hours of service” limits. How do i file a 2011 tax return The percentage is 80%. How do i file a 2011 tax return   Individuals subject to the Department of Transportation's “hours of service” limits include the following persons. How do i file a 2011 tax return Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations. How do i file a 2011 tax return Interstate truck operators and bus drivers who are under Department of Transportation regulations. How do i file a 2011 tax return Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations. How do i file a 2011 tax return Certain merchant mariners who are under Coast Guard regulations. How do i file a 2011 tax return What Entertainment Expenses Are Deductible? This section explains different types of entertainment expenses you may be able to deduct. How do i file a 2011 tax return Entertainment. How do i file a 2011 tax return   Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. How do i file a 2011 tax return Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; on yachts; or on hunting, fishing, vacation, and similar trips. How do i file a 2011 tax return   Entertainment also may include meeting personal, living, or family needs of individuals, such as providing meals, a hotel suite, or a car to customers or their families. How do i file a 2011 tax return A meal as a form of entertainment. How do i file a 2011 tax return   Entertainment includes the cost of a meal you provide to a customer or client, whether the meal is a part of other entertainment or by itself. How do i file a 2011 tax return A meal expense includes the cost of food, beverages, taxes, and tips for the meal. How do i file a 2011 tax return To deduct an entertainment-related meal, you or your employee must be present when the food or beverages are provided. How do i file a 2011 tax return    You cannot claim the cost of your meal both as an entertainment expense and as a travel expense. How do i file a 2011 tax return    Meals sold in the normal course of your business are not considered entertainment. How do i file a 2011 tax return Deduction may depend on your type of business. How do i file a 2011 tax return   Your kind of business may determine if a particular activity is considered entertainment. How do i file a 2011 tax return For example, if you are a dress designer and have a fashion show to introduce your new designs to store buyers, the show generally is not considered entertainment. How do i file a 2011 tax return This is because fashion shows are typical in your business. How do i file a 2011 tax return But, if you are an appliance distributor and hold a fashion show for the spouses of your retailers, the show generally is considered entertainment. How do i file a 2011 tax return Separating costs. How do i file a 2011 tax return   If you have one expense that includes the costs of entertainment and other services (such as lodging or transportation), you must allocate that expense between the cost of entertainment and the cost of other services. How do i file a 2011 tax return You must have a reasonable basis for making this allocation. How do i file a 2011 tax return For example, you must allocate your expenses if a hotel includes entertainment in its lounge on the same bill with your room charge. How do i file a 2011 tax return Taking turns paying for meals or entertainment. How do i file a 2011 tax return   If a group of business acquaintances takes turns picking up each others' meal or entertainment checks primarily for personal reasons, without regard to whether any business purposes are served, no member of the group can deduct any part of the expense. How do i file a 2011 tax return Lavish or extravagant expenses. How do i file a 2011 tax return   You cannot deduct expenses for entertainment that are lavish or extravagant. How do i file a 2011 tax return An expense is not considered lavish or extravagant if it is reasonable considering the facts and circumstances. How do i file a 2011 tax return Expenses will not be disallowed just because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. How do i file a 2011 tax return Allocating between business and nonbusiness. How do i file a 2011 tax return   If you entertain business and nonbusiness individuals at the same event, you must divide your entertainment expenses between business and nonbusiness. How do i file a 2011 tax return You can deduct only the business part. How do i file a 2011 tax return If you cannot establish the part of the expense for each person participating, allocate the expense to each participant on a pro rata basis. How do i file a 2011 tax return Example. How do i file a 2011 tax return You entertain a group of individuals that includes yourself, three business prospects, and seven social guests. How do i file a 2011 tax return Only 4/11 of the expense qualifies as a business entertainment expense. How do i file a 2011 tax return You cannot deduct the expenses for the seven social guests because those costs are nonbusiness expenses. How do i file a 2011 tax return Trade association meetings. How do i file a 2011 tax return   You can deduct entertainment expenses that are directly related to and necessary for attending business meetings or conventions of certain exempt organizations if the expenses of your attendance are related to your active trade or business. How do i file a 2011 tax return These organizations include business leagues, chambers of commerce, real estate boards, trade associations, and professional associations. How do i file a 2011 tax return Entertainment tickets. How do i file a 2011 tax return   Generally, you cannot deduct more than the face value of an entertainment ticket, even if you paid a higher price. How do i file a 2011 tax return For example, you cannot deduct service fees you pay to ticket agencies or brokers or any amount over the face value of the tickets you pay to scalpers. How do i file a 2011 tax return Exception for events that benefit charitable organizations. How do i file a 2011 tax return   Different rules apply when the cost of a ticket to a sports event benefits a charitable organization. How do i file a 2011 tax return You can take into account the full cost you pay for the ticket, even if it is more than the face value, if all of the following conditions apply. How do i file a 2011 tax return The event's main purpose is to benefit a qualified charitable organization. How do i file a 2011 tax return The entire net proceeds go to the charity. How do i file a 2011 tax return The event uses volunteers to perform substantially all the event's work. How do i file a 2011 tax return    The 50% limit on entertainment does not apply to any expense for a package deal that includes a ticket to such a charitable sports event. How do i file a 2011 tax return Example 1. How do i file a 2011 tax return You purchase tickets to a golf tournament organized by the local volunteer fire company. How do i file a 2011 tax return All net proceeds will be used to buy new fire equipment. How do i file a 2011 tax return The volunteers will run the tournament. How do i file a 2011 tax return You can deduct the entire cost of the tickets as a business expense if they otherwise qualify as an entertainment expense. How do i file a 2011 tax return Example 2. How do i file a 2011 tax return You purchase tickets to a college football game through a ticket broker. How do i file a 2011 tax return After having a business discussion, you take a client to the game. How do i file a 2011 tax return Net proceeds from the game go to colleges that qualify as charitable organizations. How do i file a 2011 tax return However, since the colleges also pay individuals to perform services, such as coaching and recruiting, you can only use the face value of the tickets in determining your business deduction. How do i file a 2011 tax return Skyboxes and other private luxury boxes. How do i file a 2011 tax return   If you rent a skybox or other private luxury box for more than one event at the same sports arena, you generally cannot deduct more than the price of a nonluxury box seat ticket. How do i file a 2011 tax return   To determine whether a skybox has been rented for more than one event, count each game or other performance as one event. How do i file a 2011 tax return For example, renting a skybox for a series of playoff games is considered renting it for more than one event. How do i file a 2011 tax return All skyboxes you rent in the same arena, along with any rentals by related parties, are considered in making this determination. How do i file a 2011 tax return   Related parties include: Family members (spouses, ancestors, and lineal descendants), Parties who have made a reciprocal arrangement involving the sharing of skyboxes, Related corporations, A partnership and its principal partners, and A corporation and a partnership with common ownership. How do i file a 2011 tax return Example. How do i file a 2011 tax return You pay $3,000 to rent a 10-seat skybox at Team Stadium for three baseball games. How do i file a 2011 tax return The cost of regular nonluxury box seats at each event is $30 a seat. How do i file a 2011 tax return You can deduct (subject to the 50% limit) $900 ((10 seats × $30 each) × 3 events). How do i file a 2011 tax return Food and beverages in skybox seats. How do i file a 2011 tax return   If expenses for food and beverages are separately stated, you can deduct these expenses in addition to the amounts allowable for the skybox, subject to the requirements and limits that apply. How do i file a 2011 tax return The amounts separately stated for food and beverages must be reasonable. How do i file a 2011 tax return You cannot inflate the charges for food and beverages to avoid the limited deduction for skybox rentals. How do i file a 2011 tax return What Entertainment Expenses Are Not Deductible? This section explains different types of entertainment expenses you generally may not be able to deduct. How do i file a 2011 tax return Club dues and membership fees. How do i file a 2011 tax return   You cannot deduct dues (including initiation fees) for membership in any club organized for: Business, Pleasure, Recreation, or Other social purpose. How do i file a 2011 tax return This rule applies to any membership organization if one of its principal purposes is either: To conduct entertainment activities for members or their guests, or To provide members or their guests with access to entertainment facilities, discussed later. How do i file a 2011 tax return   The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. How do i file a 2011 tax return You cannot deduct dues paid to: Country clubs, Golf and athletic clubs, Airline clubs, Hotel clubs, and Clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. How do i file a 2011 tax return Entertainment facilities. How do i file a 2011 tax return   Generally, you cannot deduct any expense for the use of an entertainment facility. How do i file a 2011 tax return This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection. How do i file a 2011 tax return   An entertainment facility is any property you own, rent, or use for entertainment. How do i file a 2011 tax return Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, car, airplane, apartment, hotel suite, or home in a vacation resort. How do i file a 2011 tax return Out-of-pocket expenses. How do i file a 2011 tax return   You can deduct out-of-pocket expenses, such as for food and beverages, catering, gas, and fishing bait, that you provided during entertainment at a facility. How do i file a 2011 tax return These are not expenses for the use of an entertainment facility. How do i file a 2011 tax return However, these expenses are subject to the directly-related and associated tests and to the 50% limit , all discussed earlier. How do i file a 2011 tax return Expenses for spouses. How do i file a 2011 tax return   You generally cannot deduct the cost of entertainment for your spouse or for the spouse of a customer. How do i file a 2011 tax return However, you can deduct these costs if you can show you had a clear business purpose, rather than a personal or social purpose, for providing the entertainment. How do i file a 2011 tax return Example. How do i file a 2011 tax return You entertain a customer. How do i file a 2011 tax return The cost is an ordinary and necessary business expense and is allowed under the entertainment rules. How do i file a 2011 tax return The customer's spouse joins you because it is impractical to entertain the customer without the spouse. How do i file a 2011 tax return You can deduct the cost of entertaining the customer's spouse. How do i file a 2011 tax return If your spouse joins the party because the customer's spouse is present, the cost of the entertainment for your spouse is also deductible. How do i file a 2011 tax return Gift or entertainment. How do i file a 2011 tax return   Any item that might be considered either a gift or entertainment generally will be considered entertainment. How do i file a 2011 tax return However, if you give a customer packaged food or beverages that you intend the customer to use at a later date, treat it as a gift. How do i file a 2011 tax return   If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. How do i file a 2011 tax return You can treat the tickets as either a gift or entertainment, whichever is to your advantage. How do i file a 2011 tax return   You can change your treatment of the tickets at a later date by filing an amended return. How do i file a 2011 tax return Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. How do i file a 2011 tax return   If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. How do i file a 2011 tax return You cannot choose, in this case, to treat the tickets as a gift. How do i file a 2011 tax return Prev  Up  Next   Home   More Online Publications
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Understanding your CP2501 Notice

You need to contact us. We've received information not reported on your tax return.


What you need to do

  • Read your notice carefully — it explains the information we received.
  • Complete the notice's response form whether or not the information is right or wrong.

You may want to...

  • Contact the business or person reporting the information if it is wrong. Ask them to correct it.
  • Order a transcript of your return.
  • Make sure your earlier returns don't have the same mistake.
  • Fill out the section on the response form to allow someone (such as an accountant) to contact us on your behalf.
  • Contact us with any unanswered questions you have.
  • Keep a copy of your notice for your files.

Answers to Common Questions

Is the notice a bill?
No. It informs you about the information we've received.

What do I need to do?
Complete the notice's response form.

What do I do if the information is wrong?
The response form has instructions on what to do if the new information is wrong. You also may want to contact whoever reported the information and ask them to correct it.

I want to check a copy of my original return. I don't have one. How can I get one?
You can order a transcript of your return. You also can get one by completing and sending us a Form 4506-T, Request for Transcript of Tax Return.

I don't want a transcript of my return. I want a copy. How can I get one?
Did an accountant or some other person prepare your return? You could ask them for a copy.

I can't get a copy of my return from a tax preparer. How else can I get a copy of it?
You can get a copy of your return by completing and sending us a Form 4506, Request for Copy of Tax Return. We charge a fee for return requests.

The information is wrong because someone else is using my name and Social Security number. What can I do?
You can visit our Identity theft information to find out more about what you can do. You also should call us and let us know.

Why did it take you so long to contact me about this matter?
Our computer systems match the information you report on your tax return with information reported by employers, banks, businesses, and others. This matching takes several months to complete.


Tips for next year

You can avoid future problems by:

  • keeping accurate and full records
  • waiting until you get all of your income statements to file your tax return
  • checking the records you get from your employer, mortgage company, bank, or other sources of income (W-2s, 1098s, 1099s, etc.) to make sure they're correct
  • including all your income on your tax return
  • following the instructions on how to report income, expenses and deductions
  • filing an amended tax return for any information you receive after you've filed your return

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about how to file electronically.

Page Last Reviewed or Updated: 28-Feb-2014

How to get help

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

The How Do I File A 2011 Tax Return

How do i file a 2011 tax return 8. How do i file a 2011 tax return   Distributions and Rollovers Table of Contents DistributionsMinimum Required Distributions No Special 10-Year Tax Option Transfer of Interest in 403(b) ContractAfter-tax contributions. How do i file a 2011 tax return Permissive service credit. How do i file a 2011 tax return Tax-Free RolloversHardship exception to rollover rules. How do i file a 2011 tax return Eligible retirement plans. How do i file a 2011 tax return Nonqualifying distributions. How do i file a 2011 tax return Second rollover. How do i file a 2011 tax return Gift Tax Distributions Permissible distributions. How do i file a 2011 tax return   Generally, a distribution cannot be made from a 403(b) account until the employee: Reaches age 59½, Has a severance from employment, Dies, Becomes disabled, In the case of elective deferrals, encounters financial hardship, or Has a qualified reservist distribution. How do i file a 2011 tax return In most cases, the payments you receive or that are made available to you under your 403(b) account are taxable in full as ordinary income. How do i file a 2011 tax return In general, the same tax rules apply to distributions from 403(b) plans that apply to distributions from other retirement plans. How do i file a 2011 tax return These rules are explained in Publication 575. How do i file a 2011 tax return Publication 575 also discusses the additional tax on early distributions from retirement plans. How do i file a 2011 tax return Retired public safety officers. How do i file a 2011 tax return   If you are an eligible retired public safety officer, distributions of up to $3,000, made directly from your 403(b) plan to pay accident, health, or long-term care insurance, are not included in your taxable income. How do i file a 2011 tax return The premiums can be for you, your spouse, or your dependents. How do i file a 2011 tax return   A public safety officer is a law enforcement officer, fire fighter, chaplain, or member of a rescue squad or ambulance crew. How do i file a 2011 tax return   For additional information, see Publication 575. How do i file a 2011 tax return Distribution for active reservist. How do i file a 2011 tax return   The 10% penalty for early withdrawals will not apply to a qualified reservist distribution attributable to elective deferrals from a 403(b) plan. How do i file a 2011 tax return A qualified reservist distribution is a distribution that is made: To an individual who is a reservist or national guardsman and who was ordered or called to active duty for a period in excess of 179 days or for an indefinite period; and During the period beginning on the date of the order or call to duty and ending at the close of the active duty period. How do i file a 2011 tax return Minimum Required Distributions You must receive all, or at least a certain minimum, of your interest accruing after 1986 in the 403(b) plan by April 1 of the calendar year following the later of the calendar year in which you become age 70½, or the calendar year in which you retire. How do i file a 2011 tax return Check with your employer, plan administrator, or provider to find out whether this rule also applies to pre-1987 accruals. How do i file a 2011 tax return If not, a minimum amount of these accruals must begin to be distributed by the later of the end of the calendar year in which you reach age 75 or April 1 of the calendar year following retirement. How do i file a 2011 tax return For each year thereafter, the minimum distribution must be made by the last day of the year. How do i file a 2011 tax return If you do not receive the required minimum distribution, you are subject to a nondeductible 50% excise tax on the difference between the required minimum distribution and the amount actually distributed. How do i file a 2011 tax return No Special 10-Year Tax Option A distribution from a 403(b) plan does not qualify as a lump-sum distribution. How do i file a 2011 tax return This means you cannot use the special 10-year tax option to calculate the taxable portion of a 403(b) distribution. How do i file a 2011 tax return For more information, see Publication 575. How do i file a 2011 tax return Transfer of Interest in 403(b) Contract Contract exchanges. How do i file a 2011 tax return   If you transfer all or part of your interest from a 403(b) contract to another 403(b) contract (held in the same plan), the transfer is tax free, and is referred to as a contract exchange. How do i file a 2011 tax return This was previously known as a 90-24 transfer. How do i file a 2011 tax return A contract exchange is similar to a 90-24 transfer with one major difference. How do i file a 2011 tax return Previously, you were able to accomplish the transfer without your employer’s involvement. How do i file a 2011 tax return After September 24, 2007, all such transfers are accomplished through a contract exchange requiring your employer’s involvement. How do i file a 2011 tax return In addition, the plan must provide for the exchange and the transferred interest must be subject to the same or stricter distribution restrictions. How do i file a 2011 tax return Finally, your accumulated benefit after the exchange must be equal to what it was before the exchange. How do i file a 2011 tax return   Transfers that do not satisfy this rule are plan distributions and are generally taxable as ordinary income. How do i file a 2011 tax return Plan-to-plan transfers. How do i file a 2011 tax return   You may also transfer part or all of your interest from a 403(b) plan to another 403(b) plan if you are an employee of (or were formerly employed by) the employer of the plan to which you would like to transfer. How do i file a 2011 tax return Both the initial plan and the receiving plan must provide for transfers. How do i file a 2011 tax return Your accumulated benefit after the transfer must be at least equal to what it was before the transfer. How do i file a 2011 tax return The new plan’s restrictions on distributions must be the same or stricter than those of the original plan. How do i file a 2011 tax return Tax-free transfers for certain cash distributions. How do i file a 2011 tax return   A tax-free transfer may also apply to a cash distribution of your 403(b) account from an insurance company that is subject to a rehabilitation, conservatorship, insolvency, or similar state proceeding. How do i file a 2011 tax return To receive tax-free treatment, you must do all of the following: Withdraw all the cash to which you are entitled in full settlement of your contract rights or, if less, the maximum permitted by the state. How do i file a 2011 tax return Reinvest the cash distribution in a single policy or contract issued by another insurance company or in a single custodial account subject to the same or stricter distribution restrictions as the original contract not later than 60 days after you receive the cash distribution. How do i file a 2011 tax return Assign all future distribution rights to the new contract or account for investment in that contract or account if you received an amount that is less than what you are entitled to because of state restrictions. How do i file a 2011 tax return   In addition to the preceding requirements, you must provide the new insurer with a written statement containing all of the following information: The gross amount of cash distributed under the old contract. How do i file a 2011 tax return The amount of cash reinvested in the new contract. How do i file a 2011 tax return Your investment in the old contract on the date you receive your first cash distribution. How do i file a 2011 tax return   Also, you must attach the following items to your timely filed income tax return in the year you receive the first distribution of cash. How do i file a 2011 tax return A copy of the statement you gave the new insurer. How do i file a 2011 tax return A statement that includes: The words ELECTION UNDER REV. How do i file a 2011 tax return PROC. How do i file a 2011 tax return 92-44, The name of the company that issued the new contract, and The new policy number. How do i file a 2011 tax return Direct trustee-to-trustee transfer. How do i file a 2011 tax return   If you make a direct trustee-to-trustee transfer, from your governmental 403(b) account to a defined benefit governmental plan, it may not be includible in gross income. How do i file a 2011 tax return   The transfer amount is not includible in gross income if it is made to: Purchase permissive service credits, or Repay contributions and earnings that were previously refunded under a forfeiture of service credit under the plan, or under another plan maintained by a state or local government employer within the same state. How do i file a 2011 tax return After-tax contributions. How do i file a 2011 tax return   For distributions beginning after December 31, 2006, after-tax contributions can be rolled over between a 403(b) plan and a defined benefit plan, IRA, or a defined contribution plan. How do i file a 2011 tax return If the rollover is to or from a 403(b) plan, it must occur through a direct trustee-to-trustee transfer. How do i file a 2011 tax return Permissive service credit. How do i file a 2011 tax return   A permissive service credit is credit for a period of service recognized by a defined benefit governmental plan only if you voluntarily contribute to the plan an amount that does not exceed the amount necessary to fund the benefit attributable to the period of service and the amount contributed is in addition to the regular employee contribution, if any, under the plan. How do i file a 2011 tax return   A permissive service credit may also include service credit for up to 5 years where there is no performance of service, or service credited to provide an increased benefit for service credit which a participant is receiving under the plan. How do i file a 2011 tax return   Check with your plan administrator as to the type and extent of service that may be purchased by this transfer. How do i file a 2011 tax return Tax-Free Rollovers You can generally roll over tax free all or any part of a distribution from a 403(b) plan to a traditional IRA or a non-Roth eligible retirement plan, except for any nonqualifying distributions, described later. How do i file a 2011 tax return You may also roll over any part of a distribution from a 403(b) plan by converting it through a direct rollover, described below, to a Roth IRA. How do i file a 2011 tax return Conversion amounts are generally includible in your taxable income in the year of the distribution from your 403(b) account. How do i file a 2011 tax return See Publication 590 for more information about conversion into a Roth IRA. How do i file a 2011 tax return Note. How do i file a 2011 tax return A participant is required to roll over distribution amounts received within 60 days in order for the amount to be treated as nontaxable. How do i file a 2011 tax return Distribution amounts that are rolled over within the 60 days are not subject to the 10% early distribution penalty. How do i file a 2011 tax return Rollovers to and from 403(b) plans. How do i file a 2011 tax return   You can generally roll over tax free all or any part of a distribution from an eligible retirement plan to a 403(b) plan. How do i file a 2011 tax return Beginning January 1, 2008, distributions from tax-qualified retirement plans and tax-sheltered annuities can be converted by making a direct rollover into a Roth IRA subject to the restrictions that currently apply to rollovers from a traditional IRA into a Roth IRA. How do i file a 2011 tax return Converted amounts are generally includible in your taxable income in the year of the distribution from your 403(b) account. How do i file a 2011 tax return See Publication 590 for more information on conversion into a Roth IRA. How do i file a 2011 tax return   If a distribution includes both pre-tax contributions and after-tax contributions, the portion of the distribution that is rolled over is treated as consisting first of pre-tax amounts (contributions and earnings that would be includible in income if no rollover occurred). How do i file a 2011 tax return This means that if you roll over an amount that is at least as much as the pre-tax portion of the distribution, you do not have to include any of the distribution in income. How do i file a 2011 tax return   For more information on rollovers and eligible retirement plans, see Publication 575. How do i file a 2011 tax return If you roll over money or other property from a 403(b) plan to an eligible retirement plan, see Publication 575 for information about possible effects on later distributions from the eligible retirement plan. How do i file a 2011 tax return Hardship exception to rollover rules. How do i file a 2011 tax return   The IRS may waive the 60-day rollover period if the failure to waive such requirement would be against equity or good conscience, including cases of casualty, disaster, or other events beyond the reasonable control of an individual. How do i file a 2011 tax return   To obtain a hardship exception, you must apply to the IRS for a waiver of the 60-day rollover requirement. How do i file a 2011 tax return You apply for the waiver by following the general instructions used in requesting a letter ruling. How do i file a 2011 tax return These instructions are stated in Revenue Procedure 2013-4, 2013-1 I. How do i file a 2011 tax return R. How do i file a 2011 tax return B. How do i file a 2011 tax return 126 available at www. How do i file a 2011 tax return irs. How do i file a 2011 tax return gov/irb/2013-01_IRB/ar09. How do i file a 2011 tax return html, or see the latest annual update. How do i file a 2011 tax return You must also pay a user fee with the application. How do i file a 2011 tax return The user fee for a rollover that is less than $50,000 is $500. How do i file a 2011 tax return For rollovers that are $50,000 or more, see Revenue Procedure 2013-8, 2013-1 I. How do i file a 2011 tax return R. How do i file a 2011 tax return B. How do i file a 2011 tax return 237 available at www. How do i file a 2011 tax return irs. How do i file a 2011 tax return gov/irb/2013-01_IRB/ar13. How do i file a 2011 tax return html, or see the latest annual update. How do i file a 2011 tax return   In determining whether to grant a waiver, the IRS will consider all relevant facts and circumstances, including: Whether errors were made by the financial institution; Whether you were unable to complete the rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country, or postal error; Whether you used the amount distributed (for example, in the case of payment by check, whether you cashed the check); and How much time has passed since the date of distribution. How do i file a 2011 tax return   For additional information on rollovers, see Publication 590. How do i file a 2011 tax return Eligible retirement plans. How do i file a 2011 tax return   The following are considered eligible retirement plans. How do i file a 2011 tax return Individual retirement arrangements. How do i file a 2011 tax return Roth IRA. How do i file a 2011 tax return 403(b) plans. How do i file a 2011 tax return Government eligible 457 plans. How do i file a 2011 tax return Qualified retirement plans. How do i file a 2011 tax return  If the distribution is from a designated Roth account, then the only eligible retirement plan is another designated Roth account or a Roth IRA. How do i file a 2011 tax return Nonqualifying distributions. How do i file a 2011 tax return   You cannot roll over tax free: Minimum required distributions (generally required to begin at age 70½), Substantially equal payments over your life or life expectancy, Substantially equal payments over the joint lives or life expectancies of your beneficiary and you, Substantially equal payments for a period of 10 years or more, Hardship distributions, or Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or excess annual additions and any allocable gains. How do i file a 2011 tax return Rollover of nontaxable amounts. How do i file a 2011 tax return    You may be able to roll over the nontaxable part of a distribution (such as your after-tax contributions) made to another eligible retirement plan, traditional IRA, or Roth IRA. How do i file a 2011 tax return The transfer must be made either through a direct rollover to an eligible plan that separately accounts for the taxable and nontaxable parts of the rollover or through a rollover to a traditional IRA or Roth IRA. How do i file a 2011 tax return   If you roll over only part of a distribution that includes both taxable and nontaxable amounts, the amount you roll over is treated as coming first from the taxable part of the distribution. How do i file a 2011 tax return Direct rollovers of 403(b) plan distributions. How do i file a 2011 tax return   You have the option of having your 403(b) plan make the rollover directly to a traditional IRA, Roth IRA, or new plan. How do i file a 2011 tax return Before you receive a distribution, your plan will give you information on this. How do i file a 2011 tax return It is generally to your advantage to choose this option because your plan will not withhold tax on the distribution if you choose it. How do i file a 2011 tax return Distribution received by you. How do i file a 2011 tax return   If you receive a distribution that qualifies to be rolled over, you can roll over all or any part of the distribution. How do i file a 2011 tax return Generally, you will receive only 80% of the distribution because 20% must be withheld. How do i file a 2011 tax return If you roll over only the 80% you receive, you must pay tax on the 20% you did not roll over. How do i file a 2011 tax return You can replace the 20% that was withheld with other money within the 60-day period to make a 100% rollover. How do i file a 2011 tax return Voluntary deductible contributions. How do i file a 2011 tax return   For tax years 1982 through 1986, employees could make deductible contributions to a 403(b) plan under the individual retirement arrangement (IRA) rules instead of deducting contributions to a traditional IRA. How do i file a 2011 tax return   If you made voluntary deductible contributions to a 403(b) plan under these traditional IRA rules, the distribution of all or part of the accumulated deductible contributions may be rolled over if it otherwise qualifies as a distribution you can roll over. How do i file a 2011 tax return Accumulated deductible contributions are the deductible contributions: Plus Income allocable to the contributions, Gain allocable to the contributions, and Minus Expenses and losses allocable to the contributions, and Distributions from the contributions, income, or gain. How do i file a 2011 tax return Excess employer contributions. How do i file a 2011 tax return   The portion of a distribution from a 403(b) plan transferred to a traditional IRA that was previously included in income as excess employer contributions (discussed earlier) is not an eligible rollover distribution. How do i file a 2011 tax return   Its transfer does not affect the rollover treatment of the eligible portion of the transferred amounts. How do i file a 2011 tax return However, the ineligible portion is subject to the traditional IRA contribution limits and may create an excess IRA contribution subject to a 6% excise tax (see chapter 1 of Publication 590). How do i file a 2011 tax return Qualified domestic relations order. How do i file a 2011 tax return   You may be able to roll over tax free all or any part of an eligible rollover distribution from a 403(b) plan that you receive under a qualified domestic relations order (QDRO). How do i file a 2011 tax return If you receive the interest in the 403(b) plan as an employee's spouse or former spouse under a QDRO, all of the rollover rules apply to you as if you were the employee. How do i file a 2011 tax return You can roll over your interest in the plan to a traditional IRA or another 403(b) plan. How do i file a 2011 tax return For more information on the treatment of an interest received under a QDRO, see Publication 575. How do i file a 2011 tax return Spouses of deceased employees. How do i file a 2011 tax return   If you are the spouse of a deceased employee, you can roll over the qualifying distribution attributable to the employee. How do i file a 2011 tax return You can make the rollover to any eligible retirement plan. How do i file a 2011 tax return   After you roll money and other property over from a 403(b) plan to an eligible retirement plan, and you take a distribution from that plan, you will not be eligible to receive the capital gain treatment or the special averaging treatment for the distribution. How do i file a 2011 tax return Second rollover. How do i file a 2011 tax return   If you roll over a qualifying distribution to a traditional IRA, you can, if certain conditions are satisfied, later roll the distribution into another 403(b) plan. How do i file a 2011 tax return For more information, see IRA as a holding account (conduit IRA) for rollovers to other eligible plans in chapter 1 of Publication 590. How do i file a 2011 tax return Nonspouse beneficiary. How do i file a 2011 tax return   A nonspouse beneficiary may make a direct rollover of a distribution from a 403(b) plan of a deceased participant if the rollover is a direct transfer to an inherited IRA established to receive the distribution. How do i file a 2011 tax return If the rollover is a direct trustee-to-trustee transfer to an IRA established to receive the distribution: The transfer will be treated as an eligible rollover distribution. How do i file a 2011 tax return The IRA will be considered an inherited account. How do i file a 2011 tax return The required minimum distribution rules that apply in instances where the participant dies before the entire interest is distributed will apply to the transferred IRA. How do i file a 2011 tax return    For more information on IRAs, see Publication 590. How do i file a 2011 tax return Frozen deposits. How do i file a 2011 tax return   The 60-day period usually allowed for completing a rollover is extended for any time that the amount distributed is a frozen deposit in a financial institution. How do i file a 2011 tax return The 60-day period cannot end earlier than 10 days after the deposit ceases to be a frozen deposit. How do i file a 2011 tax return   A frozen deposit is any deposit that on any day during the 60-day period cannot be withdrawn because: The financial institution is bankrupt or insolvent, or The state where the institution is located has placed limits on withdrawals because one or more banks in the state are (or are about to be) bankrupt or insolvent. How do i file a 2011 tax return Gift Tax If, by choosing or not choosing an election, or option, you provide an annuity for your beneficiary at or after your death, you may have made a taxable gift equal to the value of the annuity. How do i file a 2011 tax return Joint and survivor annuity. How do i file a 2011 tax return   If the gift is an interest in a joint and survivor annuity where only you and your spouse have the right to receive payments, the gift will generally be treated as qualifying for the unlimited marital deduction. How do i file a 2011 tax return More information. How do i file a 2011 tax return   For information on the gift tax, see Publication 559, Survivors, Executors, and Administrators. How do i file a 2011 tax return Prev  Up  Next   Home   More Online Publications