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How Do I File Taxes For 2011

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How Do I File Taxes For 2011

How do i file taxes for 2011 2. How do i file taxes for 2011   Tax Shelters and Other Reportable Transactions Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Abusive Tax SheltersRules To Curb Abusive Tax Shelters Investor Reporting Penalties Whether To Invest Introduction Investments that yield tax benefits are sometimes called “tax shelters. How do i file taxes for 2011 ” In some cases, Congress has concluded that the loss of revenue is an acceptable side effect of special tax provisions designed to encourage taxpayers to make certain types of investments. How do i file taxes for 2011 In many cases, however, losses from tax shelters produce little or no benefit to society, or the tax benefits are exaggerated beyond those intended. How do i file taxes for 2011 Those cases are called “abusive tax shelters. How do i file taxes for 2011 ” An investment that is considered a tax shelter is subject to restrictions, including the requirement that it be disclosed, as discussed later. How do i file taxes for 2011 Topics - This chapter discusses: Abusive Tax Shelters , Rules To Curb Abusive Tax Shelters , Investor Reporting , Penalties , and Whether To Invest . How do i file taxes for 2011 Useful Items - You may want to see: Publication 538 Accounting Periods and Methods 556 Examination of Returns, Appeal Rights, and Claims for Refund 561 Determining the Value of Donated Property 925 Passive Activity and At-Risk Rules Form (and Instructions) 8275 Disclosure Statement 8275-R Regulation Disclosure Statement 8283 Noncash Charitable Contributions 8886 Reportable Transaction Disclosure Statement See chapter 5, How To Get Tax Help , for information about getting these publications and forms. How do i file taxes for 2011 Abusive Tax Shelters Abusive tax shelters are marketing schemes involving artificial transactions with little or no economic reality. How do i file taxes for 2011 They often make use of unrealistic allocations, inflated appraisals, losses in connection with nonrecourse loans, mismatching of income and deductions, financing techniques that do not conform to standard commercial business practices, or mischaracterization of the substance of the transaction. How do i file taxes for 2011 Despite appearances to the contrary, the taxpayer generally risks little. How do i file taxes for 2011 Abusive tax shelters commonly involve package deals designed from the start to generate losses, deductions, or credits that will be far more than present or future investment. How do i file taxes for 2011 Or, they may promise investors from the start that future inflated appraisals will enable them, for example, to reap charitable contribution deductions based on those appraisals. How do i file taxes for 2011 (But see the appraisal requirements discussed under Rules To Curb Abusive Tax Shelters , later. How do i file taxes for 2011 ) They are commonly marketed in terms of the ratio of tax deductions allegedly available to each dollar invested. How do i file taxes for 2011 This ratio (or “write-off”) is frequently said to be several times greater than one-to-one. How do i file taxes for 2011 Because there are many abusive tax shelters, it is not possible to list all the factors you should consider in determining whether an offering is an abusive tax shelter. How do i file taxes for 2011 However, you should ask the following questions, which might provide a clue to the abusive nature of the plan. How do i file taxes for 2011 Do the tax benefits far outweigh the economic benefits? Is this a transaction you would seriously consider, apart from the tax benefits, if you hoped to make a profit? Do shelter assets really exist and, if so, are they insured for less than their purchase price? Is there a nontax justification for the way profits and losses are allocated to partners? Do the facts and supporting documents make economic sense? In that connection, are there sales and resales of the tax shelter property at ever increasing prices? Does the investment plan involve a gimmick, device, or sham to hide the economic reality of the transaction? Does the promoter offer to backdate documents after the close of the year? Are you instructed to backdate checks covering your investment? Is your debt a real debt or are you assured by the promoter that you will never have to pay it? Does this transaction involve laundering United States source income through foreign corporations incorporated in a tax haven and owned by United States shareholders? Rules To Curb Abusive Tax Shelters Congress has enacted a series of income tax laws designed to halt the growth of abusive tax shelters. How do i file taxes for 2011 These provisions include the following. How do i file taxes for 2011 Disclosure of reportable transactions. How do i file taxes for 2011   You must disclose information for each reportable transaction in which you participate. How do i file taxes for 2011 See Reportable Transaction Disclosure Statement , later. How do i file taxes for 2011   Material advisors with respect to any reportable transaction must disclose information about the transaction on Form 8918, Material Advisor Disclosure Statement. How do i file taxes for 2011 To determine whether you are a material advisor to a transaction, see the Instructions for Form 8918. How do i file taxes for 2011   Material advisors will receive a reportable transaction number for the disclosed reportable transaction. How do i file taxes for 2011 They must provide this number to all persons to whom they acted as a material advisor. How do i file taxes for 2011 They must provide the number at the time the transaction is entered into. How do i file taxes for 2011 If they do not have the number at that time, they must provide it within 60 days from the date the number is mailed to them. How do i file taxes for 2011 For information on penalties for failure to disclose and failure to maintain lists, see Internal Revenue Code sections 6707, 6707A, and 6708. How do i file taxes for 2011 Requirement to maintain list. How do i file taxes for 2011   Material advisors must maintain a list of persons to whom they provide material aid, assistance, or advice on any reportable transaction. How do i file taxes for 2011 The list must be available for inspection by the IRS, and the information required to be included on the list generally must be kept for 7 years. How do i file taxes for 2011 See Regulations section 301. How do i file taxes for 2011 6112-1 for more information (including what information is required to be included on the list). How do i file taxes for 2011 Confidentiality privilege. How do i file taxes for 2011   The confidentiality privilege between you and a federally authorized tax practitioner does not apply to written communications made after October 21, 2004, regarding the promotion of your direct or indirect participation in any tax shelter. How do i file taxes for 2011 Appraisal requirement for donated property. How do i file taxes for 2011   If you claim a deduction of more than $5,000 for an item or group of similar items of donated property, you generally must get a qualified appraisal from a qualified appraiser and complete and attach section B of Form 8283 to your return. How do i file taxes for 2011 If you claim a deduction of more than $500,000 for the donated property, you generally must attach the qualified appraisal to your return. How do i file taxes for 2011 If you file electronically, see Form 8453, U. How do i file taxes for 2011 S. How do i file taxes for 2011 Individual Income Tax Transmittal for an IRS e-file Return, and its instructions. How do i file taxes for 2011 For more information about appraisals, including exceptions, see Publication 561. How do i file taxes for 2011 Passive activity loss and credit limits. How do i file taxes for 2011   The passive activity loss and credit rules limit the amount of losses and credits that can be claimed from passive activities and limit the amount that can offset nonpassive income, such as certain portfolio income from investments. How do i file taxes for 2011 For more detailed information about determining and reporting income, losses, and credits from passive activities, see Publication 925. How do i file taxes for 2011 Interest on penalties. How do i file taxes for 2011   If you are assessed an accuracy-related or civil fraud penalty (as discussed under Penalties , later), interest will be imposed on the amount of the penalty from the due date of the return (including any extensions) to the date you pay the penalty. How do i file taxes for 2011 Accounting method restriction. How do i file taxes for 2011   Tax shelters generally cannot use the cash method of accounting. How do i file taxes for 2011 Uniform capitalization rules. How do i file taxes for 2011   The uniform capitalization rules generally apply to producing property or acquiring it for resale. How do i file taxes for 2011 Under those rules, the direct cost and part of the indirect cost of the property must be capitalized or included in inventory. How do i file taxes for 2011 For more information, see Publication 538. How do i file taxes for 2011 Denial of deduction for interest on an underpayment due to a reportable transaction. How do i file taxes for 2011   You cannot deduct any interest you paid or accrued on any part of an underpayment of tax due to an understatement arising from a reportable transaction (discussed later) if the relevant facts affecting the tax treatment of the item are not adequately disclosed. How do i file taxes for 2011 This rule applies to reportable transactions entered into in tax years beginning after October 22, 2004. How do i file taxes for 2011 Authority for Disallowance of Tax Benefits The IRS has published guidance concluding that the claimed tax benefits of various abusive tax shelters should be disallowed. How do i file taxes for 2011 The guidance is the conclusion of the IRS on how the law is applied to a particular set of facts. How do i file taxes for 2011 Guidance is published in the Internal Revenue Bulletin for taxpayers' information and also for use by IRS officials. How do i file taxes for 2011 So, if your return is examined and an abusive tax shelter is identified and challenged, published guidance dealing with that type of shelter, which disallows certain claimed tax shelter benefits, could serve as the basis for the examining official's challenge of the tax benefits you claimed. How do i file taxes for 2011 In such a case, the examiner will not compromise even if you or your representative believes you have authority for the positions taken on your tax return. How do i file taxes for 2011 The courts have generally been unsympathetic to taxpayers involved in abusive tax shelter schemes and have ruled in favor of the IRS in the majority of the cases in which these shelters have been challenged. How do i file taxes for 2011 Investor Reporting You may be required to file a reportable transaction disclosure statement. How do i file taxes for 2011 Reportable Transaction Disclosure Statement Use Form 8886 to disclose information for each reportable transaction (discussed later) in which you participated. How do i file taxes for 2011 Generally, you must attach Form 8886 to your return for each tax year in which you participated in the transaction. How do i file taxes for 2011 Under certain circumstances, a transaction must be disclosed within 90 days of the transaction being identified as a listed transaction or a transaction of interest (discussed later). How do i file taxes for 2011 In addition, for the first year Form 8886 is attached to your return, you must send a copy of the form to: Internal Revenue Service OTSA Mail Stop 4915 1973 North Rulon White Blvd. How do i file taxes for 2011  Ogden, UT 84404 If you file your return electronically, the copy sent to OTSA must show exactly the same information, word for word, provided with the electronically filed return and it must be provided on the official IRS Form 8886 or an exact copy of the form. How do i file taxes for 2011 If you use a computer-generated or substitute Form 8886, it must be an exact copy of the official IRS form. How do i file taxes for 2011 If you fail to file Form 8886 as required or fail to include any required information on the form, you may have to pay a penalty. How do i file taxes for 2011 See Penalty for failure to disclose a reportable transaction , later under Penalties. How do i file taxes for 2011 The following discussion briefly describes reportable transactions. How do i file taxes for 2011 For more details, see the Instructions for Form 8886. How do i file taxes for 2011 Reportable transaction. How do i file taxes for 2011   A reportable transaction is any of the following. How do i file taxes for 2011 A listed transaction. How do i file taxes for 2011 A confidential transaction. How do i file taxes for 2011 A transaction with contractual protection. How do i file taxes for 2011 A loss transaction. How do i file taxes for 2011 A transaction of interest entered into after November 1, 2006. How do i file taxes for 2011 Note. How do i file taxes for 2011 Transactions with a brief asset holding period were removed from the definition of reportable transaction for transactions entered into after August 2, 2007. How do i file taxes for 2011 Listed transaction. How do i file taxes for 2011   A listed transaction is the same as, or substantially similar to, one of the types of transactions the IRS has determined to be a tax-avoidance transaction. How do i file taxes for 2011 These transactions have been identified in notices, regulations, and other published guidance issued by the IRS. How do i file taxes for 2011 For a list of existing guidance, see Notice 2009-59 in Internal Revenue Bulletin 2009-31, available at www. How do i file taxes for 2011 irs. How do i file taxes for 2011 gov/irb/2009-31_IRB/ar07. How do i file taxes for 2011 html. How do i file taxes for 2011 Confidential transaction. How do i file taxes for 2011   A confidential transaction is offered to you under conditions of confidentiality and for which you have paid an advisor a minimum fee. How do i file taxes for 2011 A transaction is offered under conditions of confidentiality if the advisor who is paid the fee places a limit on your disclosure of the tax treatment or tax structure of the transaction and the limit protects the confidentiality of the advisor's tax strategies. How do i file taxes for 2011 The transaction is treated as confidential even if the conditions of confidentiality are not legally binding on you. How do i file taxes for 2011 Transaction with contractual protection. How do i file taxes for 2011   Generally, a transaction with contractual protection is one in which you or a related party has the right to a full or partial refund of fees if all or part of the intended tax consequences of the transaction are not sustained, or a transaction for which the fees are contingent on your realizing the tax benefits from the transaction. How do i file taxes for 2011 For information on exceptions, see Revenue Procedure 2007-20 in Internal Revenue Bulletin 2007-7, available at www. How do i file taxes for 2011 irs. How do i file taxes for 2011 gov/irb/2007-07_IRB/ar15. How do i file taxes for 2011 html. How do i file taxes for 2011 Loss transaction. How do i file taxes for 2011   For individuals, a loss transaction is one that results in a deductible loss if the gross amount of the loss is at least $2 million in a single tax year or $4 million in any combination of tax years. How do i file taxes for 2011 A loss from a foreign currency transaction under Internal Revenue Code section 988 is a loss transaction if the gross amount of the loss is at least $50,000 in a single tax year, whether or not the loss flows through from an S corporation or partnership. How do i file taxes for 2011   Certain losses (such as losses from casualties, thefts, and condemnations) are excepted from this category and do not have to be reported on Form 8886. How do i file taxes for 2011 For information on other exceptions, see Revenue Procedure 2004-66 in Internal Revenue Bulletin 2004-50, as modified and superseded by Revenue Procedure 2013-11, (or future published guidance) available at www. How do i file taxes for 2011 irs. How do i file taxes for 2011 gov/irb/2004-50_IRB/ar11. How do i file taxes for 2011 html. How do i file taxes for 2011 Transaction of interest. How do i file taxes for 2011   A transaction of interest is a transaction entered into after November 1, 2006, that is the same as, or substantially similar to, one of the types of transactions that the IRS has identified by notice, regulation, or other form of published guidance as a transaction of interest. How do i file taxes for 2011 The IRS has identified the following transactions of interest. How do i file taxes for 2011 “Toggling” grantor trusts as described in Notice 2007-73, 2007-36 I. How do i file taxes for 2011 R. How do i file taxes for 2011 B. How do i file taxes for 2011 545, available at www. How do i file taxes for 2011 irs. How do i file taxes for 2011 gov/irb/2007-36_IRB/ar20. How do i file taxes for 2011 html. How do i file taxes for 2011 Certain transactions involving contributions of a successor member interest in a limited liability company as described in Notice 2007-72, 2007-36 I. How do i file taxes for 2011 R. How do i file taxes for 2011 B. How do i file taxes for 2011 544, available at www. How do i file taxes for 2011 irs. How do i file taxes for 2011 gov/irb/2007-36_IRB/ar19. How do i file taxes for 2011 html. How do i file taxes for 2011 Certain transactions involving the sale or other disposition of all interests in a charitable remainder trust and claiming little or no taxable gain as described in Notice 2008-99, 2008-47 I. How do i file taxes for 2011 R. How do i file taxes for 2011 B. How do i file taxes for 2011 1194, available at www. How do i file taxes for 2011 irs. How do i file taxes for 2011 gov/irb/2008-47_IRB/ar11. How do i file taxes for 2011 html. How do i file taxes for 2011 Certain transactions involving a U. How do i file taxes for 2011 S. How do i file taxes for 2011 taxpayer owning controlled foreign corporations (CFCs) that hold stock of a lower-tier CFC through a domestic partnership to avoid reporting income as described in Notice 2009-7, 2009-3 I. How do i file taxes for 2011 R. How do i file taxes for 2011 B. How do i file taxes for 2011 312, available at www. How do i file taxes for 2011 irs. How do i file taxes for 2011 gov/irb/2009-03_IRB/ar10. How do i file taxes for 2011 html. How do i file taxes for 2011   For updates to this list, go to www. How do i file taxes for 2011 irs. How do i file taxes for 2011 gov/Businesses/Corporations/Abusive-Tax-Shelters-and-Transactions. How do i file taxes for 2011 Penalties Investing in an abusive tax shelter may lead to substantial expenses. How do i file taxes for 2011 First, the promoter generally charges a substantial fee. How do i file taxes for 2011 If your return is examined by the IRS and a tax deficiency is determined, you will be faced with payment of more tax, interest on the underpayment, possibly a 20%, 30%, or even 40% accuracy-related penalty, or a 75% civil fraud penalty. How do i file taxes for 2011 You may also be subject to the penalty for failure to pay tax. How do i file taxes for 2011 These penalties are explained in the following paragraphs. How do i file taxes for 2011 Accuracy-related penalties. How do i file taxes for 2011   An accuracy-related penalty of 20% can be imposed for underpayments of tax due to: Negligence or disregard of rules or regulations, Substantial understatement of tax, Substantial valuation misstatement (increased to 40% for gross valuation misstatement), Transaction lacking economic substance (increased to 40% for undisclosed transaction lacking economic substance), or Undisclosed foreign financial asset understatement (40% in all cases). How do i file taxes for 2011 Except for a transaction lacking economic substance, this penalty will not be imposed if you can show you had reasonable cause for any understatement of tax and that you acted in good faith. How do i file taxes for 2011 Your failure to disclose a reportable transaction is a strong indication that you failed to act in good faith. How do i file taxes for 2011   If you are charged an accuracy-related penalty, interest will be imposed on the amount of the penalty from the due date of the return (including extensions) to the date you pay the penalty. How do i file taxes for 2011   The 20% penalties do not apply to any underpayment attributable to a reportable transaction understatement subject to an accuracy-related penalty (discussed later). How do i file taxes for 2011 Negligence or disregard of rules or regulations. How do i file taxes for 2011   The penalty for negligence or disregard of rules or regulations is imposed only on the part of the underpayment due to negligence or disregard of rules or regulations. How do i file taxes for 2011 The penalty will not be charged if you can show you had reasonable cause for understating your tax and that you acted in good faith. How do i file taxes for 2011    Negligence includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code. How do i file taxes for 2011 It also includes any failure to keep adequate books and records. How do i file taxes for 2011 A return position that has a reasonable basis is not negligence. How do i file taxes for 2011   Disregard includes any careless, reckless, or intentional disregard of rules or regulations. How do i file taxes for 2011   The penalty for disregard of rules and regulations can be avoided if all the following are true. How do i file taxes for 2011 You keep adequate books and records. How do i file taxes for 2011 You have a reasonable basis for your position on the tax issue. How do i file taxes for 2011 You make an adequate disclosure of your position. How do i file taxes for 2011 Use Form 8275 to make your disclosure and attach it to your return. How do i file taxes for 2011 To disclose a position contrary to a regulation, use Form 8275-R. How do i file taxes for 2011 Use Form 8886 to disclose a reportable transaction (discussed earlier). How do i file taxes for 2011 Substantial understatement of tax. How do i file taxes for 2011   An understatement is considered to be substantial if it is more than the greater of: 10% of the tax required to be shown on the return, or $5,000. How do i file taxes for 2011 An “understatement” is the amount of tax required to be shown on your return for a tax year minus the amount of tax shown on the return, reduced by any rebates. How do i file taxes for 2011 The term “rebate” generally means a decrease in the tax shown on your original return as the result of your filing an amended return or claim for refund. How do i file taxes for 2011   For items other than tax shelters, you can file Form 8275 or Form 8275-R to disclose items that could cause a substantial understatement of income tax. How do i file taxes for 2011 In that way, you can avoid the substantial understatement penalty if you have a reasonable basis for your position on the tax issue. How do i file taxes for 2011 Disclosure of the tax shelter item on a tax return does not reduce the amount of the understatement. How do i file taxes for 2011   Also, the understatement penalty will not be imposed if you can show there was reasonable cause for the underpayment caused by the understatement and that you acted in good faith. How do i file taxes for 2011 An important factor in establishing reasonable cause and good faith will be the extent of your effort to determine your proper tax liability under the law. How do i file taxes for 2011 Substantial valuation misstatement. How do i file taxes for 2011   In general, you are liable for a 20% penalty for a substantial valuation misstatement if all the following are true. How do i file taxes for 2011 The value or adjusted basis of any property claimed on the return is 150% or more of the correct amount. How do i file taxes for 2011 You underpaid your tax by more than $5,000 because of the misstatement. How do i file taxes for 2011 You cannot establish that you had reasonable cause for the underpayment and that you acted in good faith. How do i file taxes for 2011   You may be assessed a penalty of 40% for a gross valuation misstatement. How do i file taxes for 2011 If you misstate the value or the adjusted basis of property by 200% or more of the amount determined to be correct, you will be assessed a penalty of 40%, instead of 20%, of the amount you underpaid because of the gross valuation misstatement. How do i file taxes for 2011 The penalty rate is also 40% if the property's correct value or adjusted basis is zero. How do i file taxes for 2011 Transaction lacking economic substance. How do i file taxes for 2011   The economic substance doctrine only applies to an individual that entered into a transaction in connection with a trade or business or an activity engaged in for the production of income. How do i file taxes for 2011 For transactions entered into after March 30, 2010, a transaction has economic substance for you as an individual taxpayer only if: The transaction changes your economic position in a meaningful way (apart from federal income tax effects), or You have a substantial purpose (apart from federal income tax effects) for entering into the transaction. How do i file taxes for 2011   For purposes of determining whether economic substance exists, a transaction's profit potential will only be taken into account if the present value of the reasonably expected pre-tax profit from the transaction is substantial compared to the present value of the expected net tax benefits that would be allowed if the transaction were respected. How do i file taxes for 2011   If any part of your underpayment is due to any disallowance of claimed tax benefits by reason of a transaction lacking economic substance or failing to meet the requirements of any similar rule of law, that part of your underpayment will be subject to the 20% accuracy-related penalty even if you had a reasonable cause and acted in good faith concerning that part. How do i file taxes for 2011   Additionally, the penalty increases to 40% if you do not adequately disclose on your return or in a statement attached to your return the relevant facts affecting the tax treatment of a transaction that lacks economic substance. How do i file taxes for 2011 Relevant facts include any facts affecting the tax treatment of the transaction. How do i file taxes for 2011    Any excessive amount of an erroneous claim for an income tax refund or credit (other than a refund or credit related to the earned income credit) that results from a transaction found to be lacking economic substance will not be treated as having a reasonable basis and could be subject to a 20% penalty. How do i file taxes for 2011 Undisclosed foreign financial asset understatement. How do i file taxes for 2011   For tax years beginning after March 18, 2010, you may be liable for a 40% penalty for an understatement of your tax liability due to an undisclosed foreign financial asset. How do i file taxes for 2011 An undisclosed foreign financial asset is any asset for which an information return, required to be provided under Internal Revenue Code section 6038, 6038B, 6038D, 6046A, or 6048 for any taxable year, is not provided. How do i file taxes for 2011 The penalty applies to any part of an underpayment related to the following undisclosed foreign financial assets. How do i file taxes for 2011 Any foreign business you control, reportable on Form 5471, Information Return of U. How do i file taxes for 2011 S. How do i file taxes for 2011 Persons With Respect To Certain Foreign Corporations, or Form 8865, Return of U. How do i file taxes for 2011 S. How do i file taxes for 2011 Persons With Respect to Certain Foreign Partnerships. How do i file taxes for 2011 Certain transfers of property to a foreign corporation or partnership, reportable on Form 926, Return by a U. How do i file taxes for 2011 S. How do i file taxes for 2011 Transferor of Property to a Foreign Corporation, or certain distributions to a foreign person, reportable on Form 8865. How do i file taxes for 2011 Your ownership interest in certain foreign financial assets, temporarily reportable on Form 8275 or 8275-R. How do i file taxes for 2011    Instead of, or in addition to, Form 8275 or 8275-R, you may have to file Form 8938, Statement of Specified Foreign Financial Assets, with your tax return. How do i file taxes for 2011 See the Instructions for Form 8938 for details. How do i file taxes for 2011    Your acquisition, disposition, or substantial change in ownership interest in a foreign partnership, reportable on Form 8865. How do i file taxes for 2011 Creation or transfer of money or property to certain foreign trusts, reportable on Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. How do i file taxes for 2011 Penalty for incorrect appraisals. How do i file taxes for 2011   The person who prepares an appraisal of the value of property may have to pay a penalty if: He or she knows, or reasonably should have known, that the appraisal would be used in connection with a return or claim for refund; and The claimed value of the property on a return or claim for refund based on that appraisal results in a substantial valuation misstatement or a gross valuation misstatement as discussed earlier. How do i file taxes for 2011 For details on the penalty amount and exceptions, see Publication 561. How do i file taxes for 2011 Penalty for failure to disclose a reportable transaction. How do i file taxes for 2011   If you fail to include any required information regarding a reportable transaction (discussed earlier) on a return or statement, you may have to pay a penalty of 75% of the decrease in tax shown on your return as a result of such transaction (or that would have resulted if the transaction were respected for federal tax purposes). How do i file taxes for 2011 For an individual, the minimum penalty is $5,000 and the maximum is $10,000 (or $100,000 for a listed transaction). How do i file taxes for 2011 This penalty is in addition to any other penalty that may be imposed. How do i file taxes for 2011   The IRS may rescind or abate the penalty for failing to disclose a reportable transaction under certain limited circumstances but cannot rescind the penalty for failing to disclose a listed transaction. How do i file taxes for 2011 For information on rescission, see Revenue Procedure 2007-21 in Internal Revenue Bulletin 2007-9 available at www. How do i file taxes for 2011 irs. How do i file taxes for 2011 gov/irb/2007-09_IRB/ar12. How do i file taxes for 2011 html. How do i file taxes for 2011 Accuracy-related penalty for a reportable transaction understatement. How do i file taxes for 2011   If you have a reportable transaction understatement, you may have to pay a penalty equal to 20% of the amount of that understatement. How do i file taxes for 2011 This applies to any item due to a listed transaction or other reportable transaction with a significant purpose of avoiding or evading federal income tax. How do i file taxes for 2011 The penalty is 30% rather than 20% for the part of any reportable transaction understatement if the transaction was not properly disclosed. How do i file taxes for 2011 You may not have to pay the 20% penalty if you meet the strengthened reasonable cause and good faith exception. How do i file taxes for 2011 The reasonable cause and good faith exception does not apply to any part of a reportable transaction understatement attributable to one or more transactions that lack economic substance. How do i file taxes for 2011   This penalty does not apply to the part of an understatement on which the fraud penalty, gross valuation misstatement penalty, or penalty for nondisclosure of noneconomic substance transactions is imposed. How do i file taxes for 2011 Civil fraud penalty. How do i file taxes for 2011   If any underpayment of tax on your return is due to fraud, a penalty of 75% of the underpayment will be added to your tax. How do i file taxes for 2011 Joint return. How do i file taxes for 2011   The fraud penalty on a joint return applies to a spouse only if some part of the underpayment is due to the fraud of that spouse. How do i file taxes for 2011 Failure to pay tax. How do i file taxes for 2011   If a deficiency is assessed and is not paid within 10 days of the demand for payment, an investor can be penalized with up to a 25% addition to tax if the failure to pay continues. How do i file taxes for 2011 Whether To Invest In light of the adverse tax consequences and the substantial amount of penalties and interest that will result if the claimed tax benefits are disallowed, you should consider tax shelter investments carefully and seek competent legal and financial advice. How do i file taxes for 2011 Prev  Up  Next   Home   More Online Publications
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Statement by IRS Commissioner John Koskinen on The Fiscal Year 2015 Budget

The Fiscal Year 2015 Budget proposal is a critical step forward in order for us to improve vital taxpayer services and enforcement efforts. Funding the IRS at this level will be a good investment for the nation, helping taxpayers get the service they need and strengthening compliance efforts in key areas, including identity theft, refund fraud and offshore compliance. Every dollar invested in IRS enforcement provides a strong return on investment in revenue collection, plus an added protection in deterring potential fraud. It also halts the decline in key enforcement personnel, and allows the agency to again invest in necessary basic infrastructure and training. In the meantime, we continue looking for more efficiencies to get the most out of every dollar of the budget.

 

The Fiscal Year 2015 Budget will put a stop to significant declines in taxpayer service over the past four years. We are doing everything we can to maximize our services with our current resources, and IRS employees are working hard to minimize delays and deliver as much service as possible. However, it’s clear we need to do more to help taxpayers, and the proposed seven percent increase for taxpayer services will be a big help.

 

Budget In Brief Fiscal Year 2015

Page Last Reviewed or Updated: 04-Mar-2014

The How Do I File Taxes For 2011

How do i file taxes for 2011 21. How do i file taxes for 2011   Medical and Dental Expenses Table of Contents What's New Introduction Useful Items - You may want to see: What Are Medical Expenses? What Expenses Can You Include This Year?Community property states. How do i file taxes for 2011 How Much of the Expenses Can You Deduct? Whose Medical Expenses Can You Include?Yourself Spouse Dependent Decedent What Medical Expenses Are Includible?Insurance Premiums Meals and Lodging Transportation Disabled Dependent Care Expenses How Do You Treat Reimbursements?Insurance Reimbursement Damages for Personal Injuries How Do You Figure and Report the Deduction on Your Tax Return?What Tax Form Do You Use? Impairment-Related Work Expenses Health Insurance Costs for Self-Employed Persons What's New Medical and dental expenses. How do i file taxes for 2011  Beginning January 1, 2013, you can deduct only the part of your medical and dental expenses that exceed 10% of your adjusted gross income (AGI) (7. How do i file taxes for 2011 5% if either you or your spouse is age 65 or older). How do i file taxes for 2011 Standard mileage rate. How do i file taxes for 2011  The standard mileage rate allowed for operating expenses for a car when you use it for medical reasons is 24 cents per mile. How do i file taxes for 2011 See Transportation under What Medical Expenses Are Includible. How do i file taxes for 2011 Introduction This chapter will help you determine the following. How do i file taxes for 2011 What medical expenses are. How do i file taxes for 2011 What expenses you can include this year. How do i file taxes for 2011 How much of the expenses you can deduct. How do i file taxes for 2011 Whose medical expenses you can include. How do i file taxes for 2011 What medical expenses are includible. How do i file taxes for 2011 How to treat reimbursements. How do i file taxes for 2011 How to report the deduction on your tax return. How do i file taxes for 2011 How to report impairment-related work expenses. How do i file taxes for 2011 How to report health insurance costs if you are self-employed. How do i file taxes for 2011 Useful Items - You may want to see: Publications 502 Medical and Dental Expenses 969 Health Savings Accounts and Other Tax-Favored Health Plans Form (and Instructions) Schedule A (Form 1040) Itemized Deductions What Are Medical Expenses? Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. How do i file taxes for 2011 These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. How do i file taxes for 2011 They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. How do i file taxes for 2011 Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. How do i file taxes for 2011 They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation. How do i file taxes for 2011 Medical expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for transportation to get medical care. How do i file taxes for 2011 Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract. How do i file taxes for 2011 What Expenses Can You Include This Year? You can include only the medical and dental expenses you paid this year, regardless of when the services were provided. How do i file taxes for 2011 If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. How do i file taxes for 2011 If you use a “pay-by-phone” or “online” account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. How do i file taxes for 2011 If you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged. How do i file taxes for 2011 Separate returns. How do i file taxes for 2011   If you and your spouse live in a noncommunity property state and file separate returns, each of you can include only the medical expenses each actually paid. How do i file taxes for 2011 Any medical expenses paid out of a joint checking account in which you and your spouse have the same interest are considered to have been paid equally by each of you, unless you can show otherwise. How do i file taxes for 2011 Community property states. How do i file taxes for 2011   If you and your spouse live in a community property state and file separate returns, or are registered domestic partners in Nevada, Washington, or California, any medical expenses paid out of community funds are divided equally. How do i file taxes for 2011 Each of you should include half the expenses. How do i file taxes for 2011 If medical expenses are paid out of the separate funds of one individual, only the individual who paid the medical expenses can include them. How do i file taxes for 2011 If you live in a community property state, and are not filing a joint return, see Publication 555, Community Property. How do i file taxes for 2011 How Much of the Expenses Can You Deduct? Generally, you can deduct on Schedule A (Form 1040) only the amount of your medical and dental expenses that is more than 10% of your AGI (7. How do i file taxes for 2011 5% of your AGI if either you or your spouse is age 65 or older)(Form 1040, line 38). How do i file taxes for 2011 Example. How do i file taxes for 2011 You are unmarried and under age 65 and your AGI is $40,000, 10% of which is $4,000. How do i file taxes for 2011 You paid medical expenses of $2,500. How do i file taxes for 2011 You cannot deduct any of your medical expenses because they are not more than 10% of your AGI. How do i file taxes for 2011 Whose Medical Expenses Can You Include? You can generally include medical expenses you pay for yourself, as well as those you pay for someone who was your spouse or your dependent either when the services were provided or when you paid for them. How do i file taxes for 2011 There are different rules for decedents and for individuals who are the subject of multiple support agreements. How do i file taxes for 2011 See Support claimed under a multiple support agreement , later. How do i file taxes for 2011 Yourself You can include medical expenses you paid for yourself. How do i file taxes for 2011 Spouse You can include medical expenses you paid for your spouse. How do i file taxes for 2011 To include these expenses, you must have been married either at the time your spouse received the medical services or at the time you paid the medical expenses. How do i file taxes for 2011 Example 1. How do i file taxes for 2011 Mary received medical treatment before she married Bill. How do i file taxes for 2011 Bill paid for the treatment after they married. How do i file taxes for 2011 Bill can include these expenses in figuring his medical expense deduction even if Bill and Mary file separate returns. How do i file taxes for 2011 If Mary had paid the expenses, Bill could not include Mary's expenses in his separate return. How do i file taxes for 2011 Mary would include the amounts she paid during the year in her separate return. How do i file taxes for 2011 If they filed a joint return, the medical expenses both paid during the year would be used to figure their medical expense deduction. How do i file taxes for 2011 Example 2. How do i file taxes for 2011 This year, John paid medical expenses for his wife Louise, who died last year. How do i file taxes for 2011 John married Belle this year and they file a joint return. How do i file taxes for 2011 Because John was married to Louise when she received the medical services, he can include those expenses in figuring his medical expense deduction for this year. How do i file taxes for 2011 Dependent You can include medical expenses you paid for your dependent. How do i file taxes for 2011 For you to include these expenses, the person must have been your dependent either at the time the medical services were provided or at the time you paid the expenses. How do i file taxes for 2011 A person generally qualifies as your dependent for purposes of the medical expense deduction if both of the following requirements are met. How do i file taxes for 2011 The person was a qualifying child (defined later) or a qualifying relative (defined later), and The person was a U. How do i file taxes for 2011 S. How do i file taxes for 2011 citizen or national, or a resident of the United States, Canada, or Mexico. How do i file taxes for 2011 If your qualifying child was adopted, see Exception for adopted child , next. How do i file taxes for 2011 You can include medical expenses you paid for an individual that would have been your dependent except that: He or she received gross income of $3,900 or more in 2013, He or she filed a joint return for 2013, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. How do i file taxes for 2011 Exception for adopted child. How do i file taxes for 2011   If you are a U. How do i file taxes for 2011 S. How do i file taxes for 2011 citizen or U. How do i file taxes for 2011 S. How do i file taxes for 2011 national and your adopted child lived with you as a member of your household for 2013, that child does not have to be a U. How do i file taxes for 2011 S. How do i file taxes for 2011 citizen or national or a resident of the United States, Canada, or Mexico. How do i file taxes for 2011 Qualifying Child A qualifying child is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a full-time student, and younger than you (or your spouse, if filing jointly), or Any age and permanently and totally disabled, Lived with you for more than half of 2013, Did not provide over half of his or her own support for 2013, and Did not file a joint return, or, if he or she did, it was only to claim a refund. How do i file taxes for 2011 Adopted child. How do i file taxes for 2011   A legally adopted child is treated as your own child. How do i file taxes for 2011 This includes a child lawfully placed with you for legal adoption. How do i file taxes for 2011   You can include medical expenses that you paid for a child before adoption if the child qualified as your dependent when the medical services were provided or when the expenses were paid. How do i file taxes for 2011   If you pay back an adoption agency or other persons for medical expenses they paid under an agreement with you, you are treated as having paid those expenses provided you clearly substantiate that the payment is directly attributable to the medical care of the child. How do i file taxes for 2011   But if you pay the agency or other person for medical care that was provided and paid for before adoption negotiations began, you cannot include them as medical expenses. How do i file taxes for 2011    You may be able to take an adoption credit for other expenses related to an adoption. How do i file taxes for 2011 See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. How do i file taxes for 2011 Child of divorced or separated parents. How do i file taxes for 2011   For purposes of the medical and dental expenses deduction, a child of divorced or separated parents can be treated as a dependent of both parents. How do i file taxes for 2011 Each parent can include the medical expenses he or she pays for the child, even if the other parent claims the child's dependency exemption, if: The child is in the custody of one or both parents for more than half the year, The child receives over half of his or her support during the year from his or her parents, and The child's parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Live apart at all times during the last 6 months of the year. How do i file taxes for 2011 This does not apply if the child's exemption is being claimed under a multiple support agreement (discussed later). How do i file taxes for 2011 Qualifying Relative A qualifying relative is a person: Who is your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), Brother, sister, half brother, half sister, or a son or daughter of either of them, Father, mother, or an ancestor or sibling of either of them (for example, your grandmother, grandfather, aunt, or uncle), Stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, or Any other person (other than your spouse) who lived with you all year as a member of your household if your relationship did not violate local law, Who was not a qualifying child (see Qualifying Child earlier) of any other person for 2013, and For whom you provided over half of the support in 2013. How do i file taxes for 2011 But see Child of divorced or separated parents , earlier, and Support claimed under a multiple support agreement, next. How do i file taxes for 2011 Support claimed under a multiple support agreement. How do i file taxes for 2011   If you are considered to have provided more than half of a qualifying relative's support under a multiple support agreement, you can include medical expenses you pay for that person. How do i file taxes for 2011 A multiple support agreement is used when two or more people provide more than half of a person's support, but no one alone provides more than half. How do i file taxes for 2011   Any medical expenses paid by others who joined you in the agreement cannot be included as medical expenses by anyone. How do i file taxes for 2011 However, you can include the entire unreimbursed amount you paid for medical expenses. How do i file taxes for 2011 Example. How do i file taxes for 2011 You and your three brothers each provide one-fourth of your mother's total support. How do i file taxes for 2011 Under a multiple support agreement, you treat your mother as your dependent. How do i file taxes for 2011 You paid all of her medical expenses. How do i file taxes for 2011 Your brothers reimbursed you for three-fourths of these expenses. How do i file taxes for 2011 In figuring your medical expense deduction, you can include only one-fourth of your mother's medical expenses. How do i file taxes for 2011 Your brothers cannot include any part of the expenses. How do i file taxes for 2011 However, if you and your brothers share the nonmedical support items and you separately pay all of your mother's medical expenses, you can include the unreimbursed amount you paid for her medical expenses in your medical expenses. How do i file taxes for 2011 Decedent Medical expenses paid before death by the decedent are included in figuring any deduction for medical and dental expenses on the decedent's final income tax return. How do i file taxes for 2011 This includes expenses for the decedent's spouse and dependents as well as for the decedent. How do i file taxes for 2011 The survivor or personal representative of a decedent can choose to treat certain expenses paid by the decedent's estate for the decedent's medical care as paid by the decedent at the time the medical services were provided. How do i file taxes for 2011 The expenses must be paid within the 1-year period beginning with the day after the date of death. How do i file taxes for 2011 If you are the survivor or personal representative making this choice, you must attach a statement to the decedent's Form 1040 (or the decedent's amended return, Form 1040X) saying that the expenses have not been and will not be claimed on the estate tax return. How do i file taxes for 2011 Qualified medical expenses paid before death by the decedent are not deductible if paid with a tax-free distribution from any Archer MSA, Medicare Advantage MSA, or health savings account. How do i file taxes for 2011 Amended returns and claims for refund are discussed in chapter 1. How do i file taxes for 2011 What if you pay medical expenses of a deceased spouse or dependent?   If you paid medical expenses for your deceased spouse or dependent, include them as medical expenses on your Form 1040 in the year paid, whether they are paid before or after the decedent's death. How do i file taxes for 2011 The expenses can be included if the person was your spouse or dependent either at the time the medical services were provided or at the time you paid the expenses. How do i file taxes for 2011 What Medical Expenses Are Includible? Use Table 21-1, later, as a guide to determine which medical and dental expenses you can include on Schedule A (Form 1040). How do i file taxes for 2011 This table does not include all possible medical expenses. How do i file taxes for 2011 To determine if an expense not listed can be included in figuring your medical expense deduction, see What Are Medical Expenses , earlier. How do i file taxes for 2011 Insurance Premiums You can include in medical expenses insurance premiums you pay for policies that cover medical care. How do i file taxes for 2011 Medical care policies can provide payment for treatment that includes: Hospitalization, surgical services, X-rays, Prescription drugs and insulin, Dental care, Replacement of lost or damaged contact lenses, and Long-term care (subject to additional limitations). How do i file taxes for 2011 See Qualified Long-Term Care Insurance Contracts in Publication 502. How do i file taxes for 2011 If you have a policy that provides payments for other than medical care, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. How do i file taxes for 2011 The cost of the medical part must be separately stated in the insurance contract or given to you in a separate statement. How do i file taxes for 2011 Note. How do i file taxes for 2011 When figuring the amount of insurance premiums you can include in medical expenses on Schedule A, do not include any health coverage tax credit advance payments shown in box 1 of Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. How do i file taxes for 2011 Also, do not include insurance premiums attributable to a nondependent child under age 27 if your premiums increased as a result of adding this child to your policy. How do i file taxes for 2011 Employer-sponsored health insurance plan. How do i file taxes for 2011   Do not include in your medical and dental expenses any insurance premiums paid by an employer-sponsored health insurance plan unless the premiums are included in box 1 of your Form W-2. How do i file taxes for 2011 Also, do not include any other medical and dental expenses paid by the plan unless the amount paid is included in box 1 of your Form W-2. How do i file taxes for 2011 Example. How do i file taxes for 2011 You are a federal employee participating in the premium conversion plan of the Federal Employee Health Benefits (FEHB) program. How do i file taxes for 2011 Your share of the FEHB premium is paid by making a pre-tax reduction in your salary. How do i file taxes for 2011 Because you are an employee whose insurance premiums are paid with money that is never included in your gross income, you cannot deduct the premiums paid with that money. How do i file taxes for 2011 Long-term care services. How do i file taxes for 2011   Contributions made by your employer to provide coverage for qualified long-term care services under a flexible spending or similar arrangement must be included in your income. How do i file taxes for 2011 This amount will be reported as wages in box 1 of your Form W-2. How do i file taxes for 2011 Health reimbursement arrangement (HRA). How do i file taxes for 2011   If you have medical expenses that are reimbursed by a health reimbursement arrangement, you cannot include those expenses in your medical expenses. How do i file taxes for 2011 This is because an HRA is funded solely by the employer. How do i file taxes for 2011 Retired public safety officers. How do i file taxes for 2011   If you are a retired public safety officer, do not include as medical expenses any health or long-term care premiums that you elected to have paid with tax-free distributions from your retirement plan. How do i file taxes for 2011 This applies only to distributions that would otherwise be included in income. How do i file taxes for 2011 Medicare A. How do i file taxes for 2011   If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare A. How do i file taxes for 2011 The payroll tax paid for Medicare A is not a medical expense. How do i file taxes for 2011   If you are not covered under social security (or were not a government employee who paid Medicare tax), you can voluntarily enroll in Medicare A. How do i file taxes for 2011 In this situation you can include the premiums you paid for Medicare A as a medical expense. How do i file taxes for 2011 Medicare B. How do i file taxes for 2011   Medicare B is supplemental medical insurance. How do i file taxes for 2011 Premiums you pay for Medicare B are a medical expense. How do i file taxes for 2011 Check the information you received from the Social Security Administration to find out your premium. How do i file taxes for 2011 Medicare D. How do i file taxes for 2011    Medicare D is a voluntary prescription drug insurance program for persons with Medicare A or B. How do i file taxes for 2011 You can include as a medical expense premiums you pay for Medicare D. How do i file taxes for 2011 Prepaid insurance premiums. How do i file taxes for 2011   Premiums you pay before you are age 65 for insurance for medical care for yourself, your spouse, or your dependents after you reach age 65 are medical care expenses in the year paid if they are: Payable in equal yearly installments, or more often, and Payable for at least 10 years, or until you reach age 65 (but not for less than 5 years). How do i file taxes for 2011 Unused sick leave used to pay premiums. How do i file taxes for 2011   You must include in gross income cash payments you receive at the time of retirement for unused sick leave. How do i file taxes for 2011 You also must include in gross income the value of unused sick leave that, at your option, your employer applies to the cost of your continuing participation in your employer's health plan after you retire. How do i file taxes for 2011 You can include this cost of continuing participation in the health plan as a medical expense. How do i file taxes for 2011   If you participate in a health plan where your employer automatically applies the value of unused sick leave to the cost of your continuing participation in the health plan (and you do not have the option to receive cash), do not include the value of the unused sick leave in gross income. How do i file taxes for 2011 You cannot include this cost of continuing participation in that health plan as a medical expense. How do i file taxes for 2011 Table 21-1. How do i file taxes for 2011 Medical and Dental Expenses Checklist. How do i file taxes for 2011 See Publication 502 for more information about these and other expenses. How do i file taxes for 2011 You can include: You cannot include: Bandages Birth control pills prescribed by your doctor Body scan Braille books Breast pump and supplies Capital expenses for equipment or improvements to your home needed for medical care (see the worksheet in Publication 502) Diagnostic devices Expenses of an organ donor Eye surgery—to promote the correct function of the eye Fertility enhancement, certain procedures Guide dogs or other animals aiding the blind, deaf, and disabled Hospital services fees (lab work, therapy, nursing services, surgery, etc. How do i file taxes for 2011 ) Lead-based paint removal Legal abortion Legal operation to prevent having children such as a vasectomy or tubal ligation Long-term care contracts, qualified Meals and lodging provided by a hospital during medical treatment Medical services fees (from doctors, dentists, surgeons, specialists, and other medical practitioners) Medicare Part D premiums Medical and hospital insurance premiums Nursing services Oxygen equipment and oxygen Part of life-care fee paid to retirement home designated for medical care Physical examination Pregnancy test kit Prescription medicines (prescribed by a doctor) and insulin Psychiatric and psychological treatment Social security tax, Medicare tax, FUTA, and state employment tax for worker providing medical care (see Wages for nursing services, below) Special items (artificial limbs, false teeth, eye-glasses, contact lenses, hearing aids, crutches, wheelchair, etc. How do i file taxes for 2011 ) Special education for mentally or physically disabled persons Stop-smoking programs Transportation for needed medical care Treatment at a drug or alcohol center (includes meals and lodging provided by the center) Wages for nursing services Weight-loss, certain expenses for obesity Baby sitting and childcare Bottled water Contributions to Archer MSAs (see Publication 969) Diaper service Expenses for your general health (even if following your doctor's advice) such as— —Health club dues —Household help (even if recommended by a doctor) —Social activities, such as dancing or swimming lessons —Trip for general health improvement Flexible spending account reimbursements for medical expenses (if contributions were on a pre-tax basis) Funeral, burial, or cremation expenses Health savings account payments for medical expenses Illegal operation, treatment, or medicine Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc. How do i file taxes for 2011 Maternity clothes Medical insurance included in a car insurance policy covering all persons injured in or by your car Medicine you buy without a prescription Nursing care for a healthy baby Prescription drugs you brought in (or ordered shipped) from another country, in most cases Nutritional supplements, vitamins, herbal supplements, “natural medicines,” etc. How do i file taxes for 2011 , unless recommended by a medical practitioner as a treatment for a specific medical condition diagnosed by a physician Surgery for purely cosmetic reasons Toothpaste, toiletries, cosmetics, etc. How do i file taxes for 2011 Teeth whitening Weight-loss expenses not for the treatment of obesity or other disease Meals and Lodging You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if a principal reason for being there is to get medical care. How do i file taxes for 2011 See Nursing home , later. How do i file taxes for 2011 You may be able to include in medical expenses the cost of lodging not provided in a hospital or similar institution. How do i file taxes for 2011 You can include the cost of such lodging while away from home if all of the following requirements are met. How do i file taxes for 2011 The lodging is primarily for and essential to medical care. How do i file taxes for 2011 The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital. How do i file taxes for 2011 The lodging is not lavish or extravagant under the circumstances. How do i file taxes for 2011 There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. How do i file taxes for 2011 The amount you include in medical expenses for lodging cannot be more than $50 for each night for each person. How do i file taxes for 2011 You can include lodging for a person traveling with the person receiving the medical care. How do i file taxes for 2011 For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. How do i file taxes for 2011 Meals are not included. How do i file taxes for 2011 Nursing home. How do i file taxes for 2011   You can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. How do i file taxes for 2011 This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care. How do i file taxes for 2011   Do not include the cost of meals and lodging if the reason for being in the home is personal. How do i file taxes for 2011 You can, however, include in medical expenses the part of the cost that is for medical or nursing care. How do i file taxes for 2011 Transportation Include in medical expenses amounts paid for transportation primarily for, and essential to, medical care. How do i file taxes for 2011 You can include: Bus, taxi, train, or plane fares, or ambulance service, Transportation expenses of a parent who must go with a child who needs medical care, Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone, and Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment. How do i file taxes for 2011 Car expenses. How do i file taxes for 2011   You can include out-of-pocket expenses, such as the cost of gas and oil, when you use your car for medical reasons. How do i file taxes for 2011 You cannot include depreciation, insurance, general repair, or maintenance expenses. How do i file taxes for 2011   If you do not want to use your actual expenses for 2013, you can use the standard medical mileage rate of 24 cents per mile. How do i file taxes for 2011    You can also include parking fees and tolls. How do i file taxes for 2011 You can add these fees and tolls to your medical expenses whether you use actual expenses or use the standard mileage rate. How do i file taxes for 2011 Example. How do i file taxes for 2011 In 2013, Bill Jones drove 2,800 miles for medical reasons. How do i file taxes for 2011 He spent $500 for gas, $30 for oil, and $100 for tolls and parking. How do i file taxes for 2011 He wants to figure the amount he can include in medical expenses both ways to see which gives him the greater deduction. How do i file taxes for 2011 He figures the actual expenses first. How do i file taxes for 2011 He adds the $500 for gas, the $30 for oil, and the $100 for tolls and parking for a total of $630. How do i file taxes for 2011 He then figures the standard mileage amount. How do i file taxes for 2011 He multiplies 2,800 miles by 24 cents a mile for a total of $672. How do i file taxes for 2011 He then adds the $100 tolls and parking for a total of $772. How do i file taxes for 2011 Bill includes the $772 of car expenses with his other medical expenses for the year because the $772 is more than the $630 he figured using actual expenses. How do i file taxes for 2011 Transportation expenses you cannot include. How do i file taxes for 2011   You cannot include in medical expenses the cost of transportation in the following situations. How do i file taxes for 2011 Going to and from work, even if your condition requires an unusual means of transportation. How do i file taxes for 2011 Travel for purely personal reasons to another city for an operation or other medical care. How do i file taxes for 2011 Travel that is merely for the general improvement of one's health. How do i file taxes for 2011 The costs of operating a specially equipped car for other than medical reasons. How do i file taxes for 2011 Disabled Dependent Care Expenses Some disabled dependent care expenses may qualify as either: Medical expenses, or Work-related expenses for purposes of taking a credit for dependent care. How do i file taxes for 2011 (See chapter 32 and Publication 503, Child and Dependent Care Expenses. How do i file taxes for 2011 ) You can choose to apply them either way as long as you do not use the same expenses to claim both a credit and a medical expense deduction. How do i file taxes for 2011 How Do You Treat Reimbursements? You can include in medical expenses only those amounts paid during the taxable year for which you received no insurance or other reimbursement. How do i file taxes for 2011 Insurance Reimbursement You must reduce your total medical expenses for the year by all reimbursements for medical expenses that you receive from insurance or other sources during the year. How do i file taxes for 2011 This includes payments from Medicare. How do i file taxes for 2011 Even if a policy provides reimbursement for only certain specific medical expenses, you must use amounts you receive from that policy to reduce your total medical expenses, including those it does not reimburse. How do i file taxes for 2011 Example. How do i file taxes for 2011 You have insurance policies that cover your hospital and doctors' bills but not your nursing bills. How do i file taxes for 2011 The insurance you receive for the hospital and doctors' bills is more than their charges. How do i file taxes for 2011 In figuring your medical deduction, you must reduce the total amount you spent for medical care by the total amount of insurance you received, even if the policies do not cover some of your medical expenses. How do i file taxes for 2011 Health reimbursement arrangement (HRA). How do i file taxes for 2011   A health reimbursement arrangement is an employer-funded plan that reimburses employees for medical care expenses and allows unused amounts to be carried forward. How do i file taxes for 2011 An HRA is funded solely by the employer and the reimbursements for medical expenses, up to a maximum dollar amount for a coverage period, are not included in your income. How do i file taxes for 2011 Other reimbursements. How do i file taxes for 2011   Generally, you do not reduce medical expenses by payments you receive for: Permanent loss or loss of use of a member or function of the body (loss of limb, sight, hearing, etc. How do i file taxes for 2011 ) or disfigurement to the extent the payment is based on the nature of the injury without regard to the amount of time lost from work, or Loss of earnings. How do i file taxes for 2011   You must, however, reduce your medical expenses by any part of these payments that is designated for medical costs. How do i file taxes for 2011 See How Do You Figure and Report the Deduction on Your Tax Return , later. How do i file taxes for 2011   For how to treat damages received for personal injury or sickness, see Damages for Personal Injuries , later. How do i file taxes for 2011 You do not have a medical deduction if you are reimbursed for all of your medical expenses for the year. How do i file taxes for 2011 Excess reimbursement. How do i file taxes for 2011   If you are reimbursed more than your medical expenses, you may have to include the excess in income. How do i file taxes for 2011 You may want to use Figure 21-A to help you decide if any of your reimbursement is taxable. How do i file taxes for 2011 Premiums paid by you. How do i file taxes for 2011   If you pay either the entire premium for your medical insurance or all of the costs of a plan similar to medical insurance and your insurance payments or other reimbursements are more than your total medical expenses for the year, you have an excess reimbursement. How do i file taxes for 2011 Generally, you do not include the excess reimbursement in your gross income. How do i file taxes for 2011 Premiums paid by you and your employer. How do i file taxes for 2011   If both you and your employer contribute to your medical insurance plan and your employer's contributions are not included in your gross income, you must include in your gross income the part of your excess reimbursement that is from your employer's contribution. How do i file taxes for 2011   See Publication 502 to figure the amount of the excess reimbursement you must include in gross income. How do i file taxes for 2011 Reimbursement in a later year. How do i file taxes for 2011   If you are reimbursed in a later year for medical expenses you deducted in an earlier year, you generally must report the reimbursement as income up to the amount you previously deducted as medical expenses. How do i file taxes for 2011   However, do not report as income the amount of reimbursement you received up to the amount of your medical deductions that did not reduce your tax for the earlier year. How do i file taxes for 2011 For more information about the recovery of an amount that you claimed as an itemized deduction in an earlier year, see Itemized Deduction Recoveries in chapter 12. How do i file taxes for 2011 Figure 21-A. How do i file taxes for 2011 Is Your Excess Medical Reimbursement Taxable? Please click here for the text description of the image. How do i file taxes for 2011 Figure 21-A. How do i file taxes for 2011 Is Your Excess Medical Reimbursement Taxable? Medical expenses not deducted. How do i file taxes for 2011   If you did not deduct a medical expense in the year you paid it because your medical expenses were not more than 10% of your AGI (7. How do i file taxes for 2011 5% of your AGI if either you or your spouse was age 65 or older), or because you did not itemize deductions, do not include the reimbursement up to the amount of the expense in income. How do i file taxes for 2011 However, if the reimbursement is more than the expense, see Excess reimbursement , earlier. How do i file taxes for 2011 Example. How do i file taxes for 2011 For 2013, you were unmarried and under age 65 and you had medical expenses of $500. How do i file taxes for 2011 You cannot deduct the $500 because it is less than 10% of your AGI. How do i file taxes for 2011 If, in a later year, you are reimbursed for any of the $500 in medical expenses, you do not include the amount reimbursed in your gross income. How do i file taxes for 2011 Damages for Personal Injuries If you receive an amount in settlement of a personal injury suit, part of that award may be for medical expenses that you deducted in an earlier year. How do i file taxes for 2011 If it is, you must include that part in your income in the year you receive it to the extent it reduced your taxable income in the earlier year. How do i file taxes for 2011 See Reimbursement in a Later Year , discussed under How Do You Treat Reimbursements, earlier. How do i file taxes for 2011 Future medical expenses. How do i file taxes for 2011   If you receive an amount in settlement of a damage suit for personal injuries, part of that award may be for future medical expenses. How do i file taxes for 2011 If it is, you must reduce any future medical expenses for these injuries until the amount you received has been completely used. How do i file taxes for 2011 How Do You Figure and Report the Deduction on Your Tax Return? Once you have determined which medical expenses you can include, you figure and report the deduction on your tax return. How do i file taxes for 2011 What Tax Form Do You Use? You figure your medical expense deduction on Schedule A (Form 1040). How do i file taxes for 2011 You cannot claim medical expenses on Form 1040A or Form 1040EZ. How do i file taxes for 2011 If you need more information on itemized deductions or you are not sure if you can itemize, see chapter 20. How do i file taxes for 2011 Enter the amount you paid for medical and dental expenses on Schedule A (Form 1040). How do i file taxes for 2011 This should be your expenses that were not reimbursed by insurance or any other sources. How do i file taxes for 2011 Generally, you can deduct only the amount of your medical and dental expenses that is more than 10% of your AGI (7. How do i file taxes for 2011 5% if either you or your spouse was age 65 or older) shown on line 38, Form 1040. How do i file taxes for 2011 Impairment-Related Work Expenses If you are a person with a disability, you can take a business deduction for expenses that are necessary for you to be able to work. How do i file taxes for 2011 If you take a business deduction for impairment-related work expenses, do not take a medical deduction for the same expenses. How do i file taxes for 2011 You have a disability if you have: A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed, or A physical or mental impairment (for example, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working. How do i file taxes for 2011 Impairment-related expenses defined. How do i file taxes for 2011   Impairment-related expenses are those ordinary and necessary business expenses that are: Necessary for you to do your work satisfactorily, For goods and services not required or used, other than incidentally, in your personal activities, and Not specifically covered under other income tax laws. How do i file taxes for 2011 Where to report. How do i file taxes for 2011   If you are self-employed, deduct the business expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. How do i file taxes for 2011   If you are an employee, complete Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses. How do i file taxes for 2011 Enter on Schedule A (Form 1040), that part of the amount on Form 2106, or Form 2106-EZ, that is related to your impairment. How do i file taxes for 2011 Enter the amount that is unrelated to your impairment also on Schedule A (Form 1040). How do i file taxes for 2011 Your impairment-related work expenses are not subject to the 2%-of-adjusted-gross-income limit that applies to other employee business expenses. How do i file taxes for 2011 Example. How do i file taxes for 2011 You are blind. How do i file taxes for 2011 You must use a reader to do your work. How do i file taxes for 2011 You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. How do i file taxes for 2011 The reader's services are only for your work. How do i file taxes for 2011 You can deduct your expenses for the reader as business expenses. How do i file taxes for 2011 Health Insurance Costs for Self-Employed Persons If you were self-employed and had a net profit for the year, you may be able to deduct, as an adjustment to income, amounts paid for medical and qualified long-term care insurance on behalf of yourself, your spouse, your dependents, and, your children who were under age 27 at the end of 2013. How do i file taxes for 2011 For this purpose, you were self-employed if you were a general partner (or a limited partner receiving guaranteed payments) or you received wages from an S corporation in which you were more than a 2% shareholder. How do i file taxes for 2011 The insurance plan must be established under your trade or business and the deduction cannot be more than your earned income from that trade or business. How do i file taxes for 2011 You cannot deduct payments for medical insurance for any month in which you were eligible to participate in a health plan subsidized by your employer, your spouse's employer, or, an employer of your dependent or your child under age 27 at the end of 2013. How do i file taxes for 2011 You cannot deduct payments for a qualified long-term care insurance contract for any month in which you were eligible to participate in a long-term care insurance plan subsidized by your employer or your spouse's employer. How do i file taxes for 2011 If you qualify to take the deduction, use the Self-Employed Health Insurance Deduction Worksheet in the Form 1040 instructions to figure the amount you can deduct. How do i file taxes for 2011 But if any of the following applies, do not use that worksheet. How do i file taxes for 2011 You had more than one source of income subject to self-employment tax. How do i file taxes for 2011 You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. How do i file taxes for 2011 You are using amounts paid for qualified long-term care insurance to figure the deduction. How do i file taxes for 2011 If you cannot use the worksheet in the Form 1040 instructions, use the worksheet in Publication 535, Business Expenses, to figure your deduction. How do i file taxes for 2011 Note. How do i file taxes for 2011 When figuring the amount you can deduct for insurance premiums, do not include any advance payments shown on Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. How do i file taxes for 2011 If you are claiming the health coverage tax credit, subtract the amount shown on Form 8885, from the total insurance premiums you paid. How do i file taxes for 2011 Do not include amounts paid for health insurance coverage with retirement plan distributions that were tax-free because you are a retired public safety officer. How do i file taxes for 2011 Where to report. How do i file taxes for 2011    You take this deduction on Form 1040. How do i file taxes for 2011 If you itemize your deductions and do not claim 100% of your self-employed health insurance on Form 1040, you can generally include any remaining premiums with all other medical expenses on Schedule A (Form 1040), subject to the 10% limit (7. How do i file taxes for 2011 5% if either you or your spouse was age 65 or older). How do i file taxes for 2011 See Self-Employed Health Insurance Deduction in chapter 6 of Publication 535, Business Expenses, and Medical and Dental Expenses in the Instructions for Schedule A (Form 1040), for more information. How do i file taxes for 2011 Prev  Up  Next   Home   More Online Publications