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

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

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

3. E-File for FREE

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

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

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

How To File Taxes For 2012

Download Form 1040xCan I File 2011 Taxes OnlineNeed 2007 Taxes1040ez Income Tax Form2010 Tax TablesIrs Gov Org1040x Mailing Address2010 Tax Form 1040xIrs 1040ez Tax Table1040x Online FreeFiling State Taxes Online For FreeHow To File Taxes As A StudentTax Preparer SoftwareE File State TaxMy1040ez ComWww H&rblockfree Tax ReturnsIrs Income Tax Forms 2010Hr Block 1040xFree E File 2011 TaxesCan You File Taxes On UnemploymentFederal Income Tax Forms 1040ezFree Efile State Tax ReturnTax Deadline1040x AmendedHow To Amend 2012 Tax ReturnWhere Can I File My State Taxes OnlineIncome Taxes 2012Where To File 2011 TaxesFiling Amended Tax Return OnlineFile Tax 1040ez Free Online1040ez Mailing AddressI Need Prior Year 1040ez Form 2010 I Caot Access Anywhere Anyone2007 TaxTaxes Supplemental Security Income SsiFree Tax PrepAmended Tax Return Form 2011How To File 2012 Taxes Late Online2012 1040a FormWhere Can I Get A 2011 Tax FormE File 2012 Tax Return

How To File Taxes For 2012

How to file taxes for 2012 17. How to file taxes for 2012   Individual Retirement Arrangements (IRAs) Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Traditional IRAsWho Can Open a Traditional IRA? When and How Can a Traditional IRA Be Opened? How Much Can Be Contributed? When Can Contributions Be Made? How Much Can You Deduct? Nondeductible Contributions Inherited IRAs Can You Move Retirement Plan Assets? When Can You Withdraw or Use IRA Assets? When Must You Withdraw IRA Assets? (Required Minimum Distributions) Are Distributions Taxable? What Acts Result in Penalties or Additional Taxes? Roth IRAsWhat Is a Roth IRA? When Can a Roth IRA Be Opened? Can You Contribute to a Roth IRA? Can You Move Amounts Into a Roth IRA? Are Distributions Taxable? What's New Traditional IRA contribution and deduction limit. How to file taxes for 2012  The contribution limit to your traditional IRA for 2013 will be increased to the smaller of the following amounts: $5,500, or Your taxable compensation for the year. How to file taxes for 2012 If you were age 50 or older before 2014, the most that can be contributed to your traditional IRA for 2013 will be the smaller of the following amounts: $6,500, or Your taxable compensation for the year. How to file taxes for 2012 For more information, see How Much Can Be Contributed? later. How to file taxes for 2012 Roth IRA contribution limit. How to file taxes for 2012  If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $5,500, or Your taxable compensation for the year. How to file taxes for 2012 If you were age 50 or older before 2014 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $6,500, or Your taxable compensation for the year. How to file taxes for 2012 However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. How to file taxes for 2012 For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? later. How to file taxes for 2012 Modified AGI limit for traditional IRA contributions increased. How to file taxes for 2012  For 2013, if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er), More than $59,000 but less than $69,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. How to file taxes for 2012 If you either lived with your spouse or file a joint return, and your spouse was covered by a retirement plan at work, but you were not, your deduction is phased out if your modified AGI is more than $178,000 but less than $188,000. How to file taxes for 2012 If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. How to file taxes for 2012 See How Much Can You Deduct , later. How to file taxes for 2012 Modified AGI limit for Roth IRA contributions increased. How to file taxes for 2012  For 2013, your Roth IRA contribution limit is reduced (phased out) in the following situations. How to file taxes for 2012 Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $178,000. How to file taxes for 2012 You cannot make a Roth IRA contribution if your modified AGI is $188,000 or more. How to file taxes for 2012 Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2013 and your modified AGI is at least $112,000. How to file taxes for 2012 You cannot make a Roth IRA contribution if your modified AGI is $127,000 or more. How to file taxes for 2012 Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. How to file taxes for 2012 You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. How to file taxes for 2012 See Can You Contribute to a Roth IRA , later. How to file taxes for 2012 Net Investment Income Tax. How to file taxes for 2012   For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan including IRAs (for example; 401(a), 403(a), 403(b), 408, 408A, or 457(b) plans). How to file taxes for 2012 However, these distributions are taken into account when determining the modified adjusted gross income threshold. How to file taxes for 2012 Distributions from a nonqualified retirement plan are included in net investment income. How to file taxes for 2012 See Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, and its instructions for more information. How to file taxes for 2012 Name change. How to file taxes for 2012  All spousal IRAs have been renamed Kay Bailey Hutchison Spousal IRAs. How to file taxes for 2012 There are no changes to the rules regarding these IRAs. How to file taxes for 2012 See Kay Bailey Hutchison Spousal IRA Limit , later, for more information. How to file taxes for 2012 Reminders 2014 limits. How to file taxes for 2012   You can find information about the 2014 contribution and AGI limits in Publication 590. How to file taxes for 2012 Contributions to both traditional and Roth IRAs. How to file taxes for 2012   For information on your combined contribution limit if you contribute to both traditional and Roth IRAs, see Roth IRAs and traditional IRAs under How Much Can Be Contributed? in Roth IRAs, later. How to file taxes for 2012 Statement of required minimum distribution. How to file taxes for 2012  If a minimum distribution from your IRA is required, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the required minimum distribution to you, or offer to calculate it for you. How to file taxes for 2012 The report or offer must include the date by which the amount must be distributed. How to file taxes for 2012 The report is due January 31 of the year in which the minimum distribution is required. How to file taxes for 2012 It can be provided with the year-end fair market value statement that you normally get each year. How to file taxes for 2012 No report is required for IRAs of owners who have died. How to file taxes for 2012 IRA interest. How to file taxes for 2012  Although interest earned from your IRA is generally not taxed in the year earned, it is not tax-exempt interest. How to file taxes for 2012 Tax on your traditional IRA is generally deferred until you take a distribution. How to file taxes for 2012 Do not report this interest on your tax return as tax-exempt interest. How to file taxes for 2012 Form 8606. How to file taxes for 2012   To designate contributions as nondeductible, you must file Form 8606, Nondeductible IRAs. How to file taxes for 2012 The term “50 or older” is used several times in this chapter. How to file taxes for 2012 It refers to an IRA owner who is age 50 or older by the end of the tax year. How to file taxes for 2012 Introduction An individual retirement arrangement (IRA) is a personal savings plan that gives you tax advantages for setting aside money for your retirement. How to file taxes for 2012 This chapter discusses the following topics. How to file taxes for 2012 The rules for a traditional IRA (any IRA that is not a Roth or SIMPLE IRA). How to file taxes for 2012 The Roth IRA, which features nondeductible contributions and tax-free distributions. How to file taxes for 2012 Simplified Employee Pensions (SEPs) and Savings Incentive Match Plans for Employees (SIMPLEs) are not discussed in this chapter. How to file taxes for 2012 For more information on these plans and employees' SEP IRAs and SIMPLE IRAs that are part of these plans, see Publications 560 and 590. How to file taxes for 2012 For information about contributions, deductions, withdrawals, transfers, rollovers, and other transactions, see Publication 590. How to file taxes for 2012 Useful Items - You may want to see: Publication 560 Retirement Plans for Small Business 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 5329 Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts 8606 Nondeductible IRAs Traditional IRAs In this chapter, the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. How to file taxes for 2012 ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. How to file taxes for 2012 Two advantages of a traditional IRA are: You may be able to deduct some or all of your contributions to it, depending on your circumstances, and Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. How to file taxes for 2012 Who Can Open a Traditional IRA? You can open and make contributions to a traditional IRA if: You (or, if you file a joint return, your spouse) received taxable compensation during the year, and You were not age 70½ by the end of the year. How to file taxes for 2012 What is compensation?   Generally, compensation is what you earn from working. How to file taxes for 2012 Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services. How to file taxes for 2012 The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). How to file taxes for 2012   Scholarship and fellowship payments are compensation for this purpose only if shown in box 1 of Form W-2. How to file taxes for 2012   Compensation also includes commissions and taxable alimony and separate maintenance payments. How to file taxes for 2012 Self-employment income. How to file taxes for 2012   If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of: The deduction for contributions made on your behalf to retirement plans, and The deductible part of your self-employment tax. How to file taxes for 2012   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. How to file taxes for 2012 Nontaxable combat pay. How to file taxes for 2012   For IRA purposes, if you were a member of the U. How to file taxes for 2012 S. How to file taxes for 2012 Armed Forces, your compensation includes any nontaxable combat pay you receive. How to file taxes for 2012 What is not compensation?   Compensation does not include any of the following items. How to file taxes for 2012 Earnings and profits from property, such as rental income, interest income, and dividend income. How to file taxes for 2012 Pension or annuity income. How to file taxes for 2012 Deferred compensation received (compensation payments postponed from a past year). How to file taxes for 2012 Income from a partnership for which you do not provide services that are a material income-producing factor. How to file taxes for 2012 Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. How to file taxes for 2012 Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. How to file taxes for 2012 When and How Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. How to file taxes for 2012 However, the time for making contributions for any year is limited. How to file taxes for 2012 See When Can Contributions Be Made , later. How to file taxes for 2012 You can open different kinds of IRAs with a variety of organizations. How to file taxes for 2012 You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. How to file taxes for 2012 You can also open an IRA through your stockbroker. How to file taxes for 2012 Any IRA must meet Internal Revenue Code requirements. How to file taxes for 2012 Kinds of traditional IRAs. How to file taxes for 2012   Your traditional IRA can be an individual retirement account or annuity. How to file taxes for 2012 It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. How to file taxes for 2012 How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. How to file taxes for 2012 These limits and other rules are explained below. How to file taxes for 2012 Community property laws. How to file taxes for 2012   Except as discussed later under Kay Bailey Hutchison Spousal IRA limit , each spouse figures his or her limit separately, using his or her own compensation. How to file taxes for 2012 This is the rule even in states with community property laws. How to file taxes for 2012 Brokers' commissions. How to file taxes for 2012   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. How to file taxes for 2012 Trustees' fees. How to file taxes for 2012   Trustees' administrative fees are not subject to the contribution limit. How to file taxes for 2012 Qualified reservist repayments. How to file taxes for 2012   If you are (or were) a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions you received. How to file taxes for 2012 You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. How to file taxes for 2012 To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or similar arrangement. How to file taxes for 2012   For more information, see Qualified reservist repayments under How Much Can Be Contributed? in chapter 1 of Publication 590. How to file taxes for 2012 Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. How to file taxes for 2012 (See Roth IRAs, later. How to file taxes for 2012 ) General limit. How to file taxes for 2012   For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts. How to file taxes for 2012 $5,500 ($6,500 if you are 50 or older). How to file taxes for 2012 Your taxable compensation (defined earlier) for the year. How to file taxes for 2012 This is the most that can be contributed regardless of whether the contributions are to one or more traditional IRAs or whether all or part of the contributions are nondeductible. How to file taxes for 2012 (See Nondeductible Contributions , later. How to file taxes for 2012 ) Qualified reservist repayments do not affect this limit. How to file taxes for 2012 Example 1. How to file taxes for 2012 Betty, who is 34 years old and single, earned $24,000 in 2013. How to file taxes for 2012 Her IRA contributions for 2013 are limited to $5,500. How to file taxes for 2012 Example 2. How to file taxes for 2012 John, an unmarried college student working part time, earned $3,500 in 2013. How to file taxes for 2012 His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. How to file taxes for 2012 Kay Bailey Hutchison Spousal IRA limit. How to file taxes for 2012   For 2013, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following amounts. How to file taxes for 2012 $5,500 ($6,500 if you are 50 or older). How to file taxes for 2012 The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. How to file taxes for 2012 Your spouse's IRA contribution for the year to a traditional IRA. How to file taxes for 2012 Any contribution for the year to a Roth IRA on behalf of your spouse. How to file taxes for 2012 This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $11,000 ($12,000 if only one of you is 50 or older, or $13,000 if both of you are 50 or older). How to file taxes for 2012 When Can Contributions Be Made? As soon as you open your traditional IRA, contributions can be made to it through your chosen sponsor (trustee or other administrator). How to file taxes for 2012 Contributions must be in the form of money (cash, check, or money order). How to file taxes for 2012 Property cannot be contributed. How to file taxes for 2012 Contributions must be made by due date. How to file taxes for 2012   Contributions can be made to your traditional IRA for a year at any time during the year or by the due date for filing your return for that year, not including extensions. How to file taxes for 2012 Age 70½ rule. How to file taxes for 2012   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. How to file taxes for 2012   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. How to file taxes for 2012 If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. How to file taxes for 2012 Designating year for which contribution is made. How to file taxes for 2012   If an amount is contributed to your traditional IRA between January 1 and April 15, you should tell the sponsor which year (the current year or the previous year) the contribution is for. How to file taxes for 2012 If you do not tell the sponsor which year it is for, the sponsor can assume, and report to the IRS, that the contribution is for the current year (the year the sponsor received it). How to file taxes for 2012 Filing before a contribution is made. How to file taxes for 2012   You can file your return claiming a traditional IRA contribution before the contribution is actually made. How to file taxes for 2012 Generally, the contribution must be made by the due date of your return, not including extensions. How to file taxes for 2012 Contributions not required. How to file taxes for 2012   You do not have to contribute to your traditional IRA for every tax year, even if you can. How to file taxes for 2012 How Much Can You Deduct? Generally, you can deduct the lesser of: The contributions to your traditional IRA for the year, or The general limit (or the Kay Bailey Hutchison Spousal IRA limit, if it applies). How to file taxes for 2012 However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. How to file taxes for 2012 See Limit If Covered by Employer Plan , later. How to file taxes for 2012 You may be able to claim a credit for contributions to your traditional IRA. How to file taxes for 2012 For more information, see chapter 37. How to file taxes for 2012 Trustees' fees. How to file taxes for 2012   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. How to file taxes for 2012 However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). How to file taxes for 2012 See chapter 28. How to file taxes for 2012 Brokers' commissions. How to file taxes for 2012   Brokers' commissions are part of your IRA contribution and, as such, are deductible subject to the limits. How to file taxes for 2012 Full deduction. How to file taxes for 2012   If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older in 2013). How to file taxes for 2012 100% of your compensation. How to file taxes for 2012 This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. How to file taxes for 2012 Kay Bailey Hutchison Spousal IRA. How to file taxes for 2012   In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of the following amounts. How to file taxes for 2012 $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older in 2013). How to file taxes for 2012 The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. How to file taxes for 2012 The IRA deduction for the year of the spouse with the greater compensation. How to file taxes for 2012 Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. How to file taxes for 2012 Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. How to file taxes for 2012 This limit is reduced by any contributions to a 501(c)(18) plan on behalf of the spouse with the lesser compensation. How to file taxes for 2012 Note. How to file taxes for 2012 If you were divorced or legally separated (and did not remarry) before the end of the year, you cannot deduct any contributions to your spouse's IRA. How to file taxes for 2012 After a divorce or legal separation, you can deduct only contributions to your own IRA. How to file taxes for 2012 Your deductions are subject to the rules for single individuals. How to file taxes for 2012 Covered by an employer retirement plan. How to file taxes for 2012   If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. How to file taxes for 2012 This is discussed later under Limit If Covered by Employer Plan . How to file taxes for 2012 Limits on the amount you can deduct do not affect the amount that can be contributed. How to file taxes for 2012 See Nondeductible Contributions , later. How to file taxes for 2012 Are You Covered by an Employer Plan? The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. How to file taxes for 2012 The “Retirement plan” box should be checked if you were covered. How to file taxes for 2012 Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered by an Employer Plan , later. How to file taxes for 2012 If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. How to file taxes for 2012 Federal judges. How to file taxes for 2012   For purposes of the IRA deduction, federal judges are covered by an employer retirement plan. How to file taxes for 2012 For Which Year(s) Are You Covered by an Employer Plan? Special rules apply to determine the tax years for which you are covered by an employer plan. How to file taxes for 2012 These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. How to file taxes for 2012 Tax year. How to file taxes for 2012   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. How to file taxes for 2012 For almost all people, the tax year is the calendar year. How to file taxes for 2012 Defined contribution plan. How to file taxes for 2012   Generally, you are covered by a defined contribution plan for a tax year if amounts are contributed or allocated to your account for the plan year that ends with or within that tax year. How to file taxes for 2012   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. How to file taxes for 2012 Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. How to file taxes for 2012 Defined benefit plan. How to file taxes for 2012   If you are eligible to participate in your employer's defined benefit plan for the plan year that ends within your tax year, you are covered by the plan. How to file taxes for 2012 This rule applies even if you: Declined to participate in the plan, Did not make a required contribution, or Did not perform the minimum service required to accrue a benefit for the year. How to file taxes for 2012   A defined benefit plan is any plan that is not a defined contribution plan. How to file taxes for 2012 Defined benefit plans include pension plans and annuity plans. How to file taxes for 2012 No vested interest. How to file taxes for 2012   If you accrue a benefit for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the accrual. How to file taxes for 2012 Situations in Which You Are Not Covered by an Employer Plan Unless you are covered under another employer plan, you are not covered by an employer plan if you are in one of the situations described below. How to file taxes for 2012 Social security or railroad retirement. How to file taxes for 2012   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. How to file taxes for 2012 Benefits from a previous employer's plan. How to file taxes for 2012   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. How to file taxes for 2012 Reservists. How to file taxes for 2012   If the only reason you participate in a plan is because you are a member of a reserve unit of the armed forces, you may not be covered by the plan. How to file taxes for 2012 You are not covered by the plan if both of the following conditions are met. How to file taxes for 2012 The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. How to file taxes for 2012 You did not serve more than 90 days on active duty during the year (not counting duty for training). How to file taxes for 2012 Volunteer firefighters. How to file taxes for 2012   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. How to file taxes for 2012 You are not covered by the plan if both of the following conditions are met. How to file taxes for 2012 The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. How to file taxes for 2012 Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. How to file taxes for 2012 Limit If Covered by Employer Plan If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status. How to file taxes for 2012 Your deduction begins to decrease (phase out) when your income rises above a certain amount and is eliminated altogether when it reaches a higher amount. How to file taxes for 2012 These amounts vary depending on your filing status. How to file taxes for 2012 To determine if your deduction is subject to phaseout, you must determine your modified adjusted gross income (AGI) and your filing status. How to file taxes for 2012 See Filing status and Modified adjusted gross income (AGI) , later. How to file taxes for 2012 Then use Table 17-1 or 17-2 to determine if the phaseout applies. How to file taxes for 2012 Social security recipients. How to file taxes for 2012   Instead of using Table 17-1 or Table 17-2, use the worksheets in Appendix B of Publication 590 if, for the year, all of the following apply. How to file taxes for 2012 You received social security benefits. How to file taxes for 2012 You received taxable compensation. How to file taxes for 2012 Contributions were made to your traditional IRA. How to file taxes for 2012 You or your spouse was covered by an employer retirement plan. How to file taxes for 2012 Use those worksheets to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. How to file taxes for 2012 Deduction phaseout. How to file taxes for 2012   If you were covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI as shown in Table 17-1. How to file taxes for 2012 Table 17-1. How to file taxes for 2012 Effect of Modified AGI1 on Deduction if You Are Covered by Retirement Plan at Work If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. How to file taxes for 2012 IF your filing status is. How to file taxes for 2012 . How to file taxes for 2012 . How to file taxes for 2012   AND your modified AGI is. How to file taxes for 2012 . How to file taxes for 2012 . How to file taxes for 2012   THEN you can take. How to file taxes for 2012 . How to file taxes for 2012 . How to file taxes for 2012 single   or  head of household   $59,000 or less   a full deduction. How to file taxes for 2012   more than $59,000 but less than $69,000   a partial deduction. How to file taxes for 2012   $69,000 or more   no deduction. How to file taxes for 2012 married filing jointly   or  qualifying widow(er)   $95,000 or less   a full deduction. How to file taxes for 2012   more than $95,000 but less than $115,000   a partial deduction. How to file taxes for 2012   $115,000 or more   no deduction. How to file taxes for 2012 married filing separately2   less than $10,000   a partial deduction. How to file taxes for 2012   $10,000 or more   no deduction. How to file taxes for 2012 1Modified AGI (adjusted gross income). How to file taxes for 2012 See Modified adjusted gross income (AGI) . How to file taxes for 2012 2If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” column). How to file taxes for 2012 If your spouse is covered. How to file taxes for 2012   If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 17-2. How to file taxes for 2012 Filing status. How to file taxes for 2012   Your filing status depends primarily on your marital status. How to file taxes for 2012 For this purpose, you need to know if your filing status is single or head of household, married filing jointly or qualifying widow(er), or married filing separately. How to file taxes for 2012 If you need more information on filing status, see chapter 2. How to file taxes for 2012 Lived apart from spouse. How to file taxes for 2012   If you did not live with your spouse at any time during the year and you file a separate return, your filing status, for this purpose, is single. How to file taxes for 2012 Table 17-2. How to file taxes for 2012 Effect of Modified AGI1 on Deduction if You Are NOT Covered by Retirement Plan at Work If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. How to file taxes for 2012 IF your filing status is. How to file taxes for 2012 . How to file taxes for 2012 . How to file taxes for 2012   AND your modified AGI is. How to file taxes for 2012 . How to file taxes for 2012 . How to file taxes for 2012   THEN you can take. How to file taxes for 2012 . How to file taxes for 2012 . How to file taxes for 2012 single, head of household, or qualifying widow(er)   any amount   a full deduction. How to file taxes for 2012 married filing jointly or separately with a spouse who is not covered by a plan at work   any amount   a full deduction. How to file taxes for 2012 married filing jointly with a spouse who is covered by a plan at work   $178,000 or less   a full deduction. How to file taxes for 2012   more than $178,000 but less than $188,000   a partial deduction. How to file taxes for 2012   $188,000 or more   no deduction. How to file taxes for 2012 married filing separately with a spouse who is covered by a plan at work2   less than $10,000   a partial deduction. How to file taxes for 2012   $10,000 or more   no deduction. How to file taxes for 2012 1Modified AGI (adjusted gross income). How to file taxes for 2012 See Modified adjusted gross income (AGI) . How to file taxes for 2012 2You are entitled to the full deduction if you did not live with your spouse at any time during the year. How to file taxes for 2012 Modified adjusted gross income (AGI). How to file taxes for 2012   How you figure your modified AGI depends on whether you are filing Form 1040 or Form 1040A. How to file taxes for 2012 If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Publication 590. How to file taxes for 2012 You may be able to use Worksheet 17-1 to figure your modified AGI. How to file taxes for 2012    Do not assume that your modified AGI is the same as your compensation. How to file taxes for 2012 Your modified AGI may include income in addition to your compensation (discussed earlier), such as interest, dividends, and income from IRA distributions. How to file taxes for 2012 Form 1040. How to file taxes for 2012   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following eight amounts. How to file taxes for 2012 IRA deduction. How to file taxes for 2012 Student loan interest deduction. How to file taxes for 2012 Tuition and fees deduction. How to file taxes for 2012 Domestic production activities deduction. How to file taxes for 2012 Foreign earned income exclusion. How to file taxes for 2012 Foreign housing exclusion or deduction. How to file taxes for 2012 Exclusion of qualified savings bond interest shown on Form 8815, Exclusion of Interest From Series EE and I U. How to file taxes for 2012 S. How to file taxes for 2012 Savings Bonds Issued After 1989. How to file taxes for 2012 Exclusion of employer-provided adoption benefits shown on Form 8839, Qualified Adoption Expenses. How to file taxes for 2012 This is your modified AGI. How to file taxes for 2012 Form 1040A. How to file taxes for 2012   If you file Form 1040A, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. How to file taxes for 2012 IRA deduction. How to file taxes for 2012 Student loan interest deduction. How to file taxes for 2012 Tuition and fees deduction. How to file taxes for 2012 Exclusion of qualified savings bond interest shown on Form 8815. How to file taxes for 2012 This is your modified AGI. How to file taxes for 2012 Both contributions for 2013 and distributions in 2013. How to file taxes for 2012   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. How to file taxes for 2012 You received distributions in 2013 from one or more traditional IRAs. How to file taxes for 2012 You made contributions to a traditional IRA for 2013. How to file taxes for 2012 Some of those contributions may be nondeductible contributions. How to file taxes for 2012 If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. How to file taxes for 2012 To do this, you can use Worksheet 1-5, Figuring the Taxable Part of Your IRA Distribution, in Publication 590. How to file taxes for 2012   If at least one of the above does not apply, figure your modified AGI using Worksheet 17-1, later. How to file taxes for 2012    How to figure your reduced IRA deduction. How to file taxes for 2012   You can figure your reduced IRA deduction for either Form 1040 or Form 1040A by using the worksheets in chapter 1 of Publication 590. How to file taxes for 2012 Also, the instructions for Form 1040 and Form 1040A include similar worksheets that you may be able to use instead. How to file taxes for 2012 Worksheet 17-1. How to file taxes for 2012 Figuring Your Modified AGI Use this worksheet to figure your modified adjusted gross income for traditional IRA purposes. How to file taxes for 2012 1. How to file taxes for 2012 Enter your adjusted gross income (AGI) from Form 1040, line 38, or Form 1040A, line 22, figured without taking into account the amount from Form 1040, line 32, or Form 1040A, line 17 1. How to file taxes for 2012   2. How to file taxes for 2012 Enter any student loan interest deduction from Form 1040, line 33, or Form 1040A, line 18 2. How to file taxes for 2012   3. How to file taxes for 2012 Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. How to file taxes for 2012   4. How to file taxes for 2012 Enter any domestic production activities deduction from Form 1040, line 35 4. How to file taxes for 2012   5. How to file taxes for 2012 Enter any foreign earned income and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. How to file taxes for 2012   6. How to file taxes for 2012 Enter any foreign housing deduction from Form 2555, line 50 6. How to file taxes for 2012   7. How to file taxes for 2012 Enter any excludable savings bond interest from Form 8815, line 14 7. How to file taxes for 2012   8. How to file taxes for 2012 Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. How to file taxes for 2012   9. How to file taxes for 2012 Add lines 1 through 8. How to file taxes for 2012 This is your Modified AGI for traditional IRA purposes 9. How to file taxes for 2012   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. How to file taxes for 2012 If you file Form 1040A, enter your IRA deduction on line 17. How to file taxes for 2012 You cannot deduct IRA contributions on Form 1040EZ. How to file taxes for 2012 Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. How to file taxes for 2012 The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. How to file taxes for 2012 Example. How to file taxes for 2012 Mike is 28 years old and single. How to file taxes for 2012 In 2013, he was covered by a retirement plan at work. How to file taxes for 2012 His salary was $57,312. How to file taxes for 2012 His modified AGI was $70,000. How to file taxes for 2012 Mike made a $5,500 IRA contribution for 2013. How to file taxes for 2012 Because he was covered by a retirement plan and his modified AGI was over $69,000, he cannot deduct his $5,500 IRA contribution. How to file taxes for 2012 He must designate this contribution as a nondeductible contribution by reporting it on Form 8606, as explained next. How to file taxes for 2012 Form 8606. How to file taxes for 2012   To designate contributions as nondeductible, you must file Form 8606. How to file taxes for 2012   You do not have to designate a contribution as nondeductible until you file your tax return. How to file taxes for 2012 When you file, you can even designate otherwise deductible contributions as nondeductible. How to file taxes for 2012   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. How to file taxes for 2012 A Form 8606 is not used for the year that you make a rollover from a qualified retirement plan to a traditional IRA and the rollover includes nontaxable amounts. How to file taxes for 2012 In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. How to file taxes for 2012 See Form 8606 under Distributions Fully or Partly Taxable, later. How to file taxes for 2012 Failure to report nondeductible contributions. How to file taxes for 2012   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated as deductible contributions when withdrawn. How to file taxes for 2012 All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. How to file taxes for 2012 Penalty for overstatement. How to file taxes for 2012   If you overstate the amount of nondeductible contributions on your Form 8606 for any tax year, you must pay a penalty of $100 for each overstatement, unless it was due to reasonable cause. How to file taxes for 2012 Penalty for failure to file Form 8606. How to file taxes for 2012   You will have to pay a $50 penalty if you do not file a required Form 8606, unless you can prove that the failure was due to reasonable cause. How to file taxes for 2012    Tax on earnings on nondeductible contributions. How to file taxes for 2012   As long as contributions are within the contribution limits, none of the earnings or gains on contributions (deductible or nondeductible) will be taxed until they are distributed. How to file taxes for 2012 See When Can You Withdraw or Use IRA Assets , later. How to file taxes for 2012 Cost basis. How to file taxes for 2012   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. How to file taxes for 2012 Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. How to file taxes for 2012 Inherited IRAs If you inherit a traditional IRA, you are called a beneficiary. How to file taxes for 2012 A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. How to file taxes for 2012 Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. How to file taxes for 2012 Inherited from spouse. How to file taxes for 2012   If you inherit a traditional IRA from your spouse, you generally have the following three choices. How to file taxes for 2012 You can: Treat it as your own IRA by designating yourself as the account owner. How to file taxes for 2012 Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a: Qualified employer plan, Qualified employee annuity plan (section 403(a) plan), Tax-sheltered annuity plan (section 403(b) plan), or Deferred compensation plan of a state or local government (section 457 plan). How to file taxes for 2012 Treat yourself as the beneficiary rather than treating the IRA as your own. How to file taxes for 2012 Treating it as your own. How to file taxes for 2012   You will be considered to have chosen to treat the IRA as your own if: Contributions (including rollover contributions) are made to the inherited IRA, or You do not take the required minimum distribution for a year as a beneficiary of the IRA. How to file taxes for 2012 You will only be considered to have chosen to treat the IRA as your own if: You are the sole beneficiary of the IRA, and You have an unlimited right to withdraw amounts from it. How to file taxes for 2012   However, if you receive a distribution from your deceased spouse's IRA, you can roll that distribution over into your own IRA within the 60-day time limit, as long as the distribution is not a required distribution, even if you are not the sole beneficiary of your deceased spouse's IRA. How to file taxes for 2012 Inherited from someone other than spouse. How to file taxes for 2012   If you inherit a traditional IRA from anyone other than your deceased spouse, you cannot treat the inherited IRA as your own. How to file taxes for 2012 This means that you cannot make any contributions to the IRA. How to file taxes for 2012 It also means you cannot roll over any amounts into or out of the inherited IRA. How to file taxes for 2012 However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary. How to file taxes for 2012 For more information, see the discussion of inherited IRAs under Rollover From One IRA Into Another, later. How to file taxes for 2012 Can You Move Retirement Plan Assets? You can transfer, tax free, assets (money or property) from other retirement plans (including traditional IRAs) to a traditional IRA. How to file taxes for 2012 You can make the following kinds of transfers. How to file taxes for 2012 Transfers from one trustee to another. How to file taxes for 2012 Rollovers. How to file taxes for 2012 Transfers incident to a divorce. How to file taxes for 2012 Transfers to Roth IRAs. How to file taxes for 2012   Under certain conditions, you can move assets from a traditional IRA or from a designated Roth account to a Roth IRA. How to file taxes for 2012 You can also move assets from a qualified retirement plan to a Roth IRA. How to file taxes for 2012 See Can You Move Amounts Into a Roth IRA? under Roth IRAs, later. How to file taxes for 2012 Trustee-to-Trustee Transfer A transfer of funds in your traditional IRA from one trustee directly to another, either at your request or at the trustee's request, is not a rollover. How to file taxes for 2012 Because there is no distribution to you, the transfer is tax free. How to file taxes for 2012 Because it is not a rollover, it is not affected by the 1-year waiting period required between rollovers, discussed later under Rollover From One IRA Into Another . How to file taxes for 2012 For information about direct transfers to IRAs from retirement plans other than IRAs, see Can You Move Retirement Plan Assets? in chapter 1 and Can You Move Amounts Into a Roth IRA? in chapter 2 of Publication 590. How to file taxes for 2012 Rollovers Generally, a rollover is a tax-free distribution to you of cash or other assets from one retirement plan that you contribute (roll over) to another retirement plan. How to file taxes for 2012 The contribution to the second retirement plan is called a “rollover contribution. How to file taxes for 2012 ” Note. How to file taxes for 2012 An amount rolled over tax free from one retirement plan to another is generally includible in income when it is distributed from the second plan. How to file taxes for 2012 Kinds of rollovers to a traditional IRA. How to file taxes for 2012   You can roll over amounts from the following plans into a traditional IRA: A traditional IRA, An employer's qualified retirement plan for its employees, A deferred compensation plan of a state or local government (section 457 plan), or A tax-sheltered annuity plan (section 403(b) plan). How to file taxes for 2012 Treatment of rollovers. How to file taxes for 2012   You cannot deduct a rollover contribution, but you must report the rollover distribution on your tax return as discussed later under Reporting rollovers from IRAs and under Reporting rollovers from employer plans . How to file taxes for 2012 Kinds of rollovers from a traditional IRA. How to file taxes for 2012   You may be able to roll over, tax free, a distribution from your traditional IRA into a qualified plan. How to file taxes for 2012 These plans include the federal Thrift Savings Fund (for federal employees), deferred compensation plans of state or local governments (section 457 plans), and tax-sheltered annuity plans (section 403(b) plans). How to file taxes for 2012 The part of the distribution that you can roll over is the part that would otherwise be taxable (includible in your income). How to file taxes for 2012 Qualified plans may, but are not required to, accept such rollovers. How to file taxes for 2012 Time limit for making a rollover contribution. How to file taxes for 2012   You generally must make the rollover contribution by the 60th day after the day you receive the distribution from your traditional IRA or your employer's plan. How to file taxes for 2012 The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control. How to file taxes for 2012 For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. How to file taxes for 2012 Extension of rollover period. How to file taxes for 2012   If an amount distributed to you from a traditional IRA or a qualified employer retirement plan is a frozen deposit at any time during the 60-day period allowed for a rollover, special rules extend the rollover period. How to file taxes for 2012 For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. How to file taxes for 2012 More information. How to file taxes for 2012   For more information on rollovers, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. How to file taxes for 2012 Rollover From One IRA Into Another You can withdraw, tax free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA. How to file taxes for 2012 Because this is a rollover, you cannot deduct the amount that you reinvest in an IRA. How to file taxes for 2012 Waiting period between rollovers. How to file taxes for 2012   Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. How to file taxes for 2012 You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover. How to file taxes for 2012   The 1-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA. How to file taxes for 2012 Example. How to file taxes for 2012 You have two traditional IRAs, IRA-1 and IRA-2. How to file taxes for 2012 You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). How to file taxes for 2012 You cannot, within 1 year of the distribution from IRA-1, make a tax-free rollover of any distribution from either IRA-1 or IRA-3 into another traditional IRA. How to file taxes for 2012 However, the rollover from IRA-1 into IRA-3 does not prevent you from making a tax-free rollover from IRA-2 into any other traditional IRA. How to file taxes for 2012 This is because you have not, within the last year, rolled over, tax free, any distribution from IRA-2 or made a tax-free rollover into IRA-2. How to file taxes for 2012 Exception. How to file taxes for 2012   For an exception for distributions from failed financial institutions, see Rollover From One IRA Into Another under Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. How to file taxes for 2012 Partial rollovers. How to file taxes for 2012   If you withdraw assets from a traditional IRA, you can roll over part of the withdrawal tax free and keep the rest of it. How to file taxes for 2012 The amount you keep will generally be taxable (except for the part that is a return of nondeductible contributions). How to file taxes for 2012 The amount you keep may be subject to the 10% additional tax on early distributions, discussed later under What Acts Result in Penalties or Additional Taxes? . How to file taxes for 2012 Required distributions. How to file taxes for 2012   Amounts that must be distributed during a particular year under the required distribution rules (discussed later) are not eligible for rollover treatment. How to file taxes for 2012 Inherited IRAs. How to file taxes for 2012   If you inherit a traditional IRA from your spouse, you generally can roll it over, or you can choose to make the inherited IRA your own. How to file taxes for 2012 See Treating it as your own , earlier. How to file taxes for 2012 Not inherited from spouse. How to file taxes for 2012   If you inherit a traditional IRA from someone other than your spouse, you cannot roll it over or allow it to receive a rollover contribution. How to file taxes for 2012 You must withdraw the IRA assets within a certain period. How to file taxes for 2012 For more information, see When Must You Withdraw Assets? in chapter 1 of Publication 590. How to file taxes for 2012 Reporting rollovers from IRAs. How to file taxes for 2012   Report any rollover from one traditional IRA to the same or another traditional IRA on lines 15a and 15b, Form 1040, or lines 11a and 11b, Form 1040A, as follows. How to file taxes for 2012   Enter the total amount of the distribution on Form 1040, line 15a, or Form 1040A, line 11a. How to file taxes for 2012 If the total amount on Form 1040, line 15a, or Form 1040A, line 11a, was rolled over, enter zero on Form 1040, line 15b, or Form 1040A, line 11b. How to file taxes for 2012 If the total distribution was not rolled over, enter the taxable portion of the part that was not rolled over on Form 1040, line 15b, or Form 1040A, line 11b. How to file taxes for 2012 Put “Rollover” next to Form 1040, line 15b, or Form 1040A, line 11b. How to file taxes for 2012 See your tax return instructions. How to file taxes for 2012   If you rolled over the distribution into a qualified plan (other than an IRA) or you make the rollover in 2014, attach a statement explaining what you did. How to file taxes for 2012 Rollover From Employer's Plan Into an IRA You can roll over into a traditional IRA all or part of an eligible rollover distribution you receive from your (or your deceased spouse's): Employer's qualified pension, profit-sharing, or stock bonus plan; Annuity plan; Tax-sheltered annuity plan (section 403(b) plan); or Governmental deferred compensation plan (section 457 plan). How to file taxes for 2012 A qualified plan is one that meets the requirements of the Internal Revenue Code. How to file taxes for 2012 Eligible rollover distribution. How to file taxes for 2012   Generally, an eligible rollover distribution is any distribution of all or part of the balance to your credit in a qualified retirement plan except the following. How to file taxes for 2012 A required minimum distribution (explained later under When Must You Withdraw IRA Assets? (Required Minimum Distributions) ). How to file taxes for 2012 A hardship distribution. How to file taxes for 2012 Any of a series of substantially equal periodic distributions paid at least once a year over: Your lifetime or life expectancy, The lifetimes or life expectancies of you and your beneficiary, or A period of 10 years or more. How to file taxes for 2012 Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or of excess annual additions and any allocable gains. How to file taxes for 2012 A loan treated as a distribution because it does not satisfy certain requirements either when made or later (such as upon default), unless the participant's accrued benefits are reduced (offset) to repay the loan. How to file taxes for 2012 Dividends on employer securities. How to file taxes for 2012 The cost of life insurance coverage. How to file taxes for 2012 Any nontaxable amounts that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. How to file taxes for 2012 To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. How to file taxes for 2012 See Form 8606 under Distributions Fully or Partly Taxable, later. How to file taxes for 2012 Rollover by nonspouse beneficiary. How to file taxes for 2012   A direct transfer from a deceased employee's qualified pension, profit-sharing, or stock bonus plan; annuity plan; tax-sheltered annuity (section 403(b)) plan; or governmental deferred compensation (section 457) plan to an IRA set up to receive the distribution on your behalf can be treated as an eligible rollover distribution if you are the designated beneficiary of the plan and not the employee's spouse. How to file taxes for 2012 The IRA is treated as an inherited IRA. How to file taxes for 2012 For more information about inherited IRAs, see Inherited IRAs , earlier. How to file taxes for 2012 Reporting rollovers from employer plans. How to file taxes for 2012    Enter the total distribution (before income tax or other deductions were withheld) on Form 1040, line 16a, or Form 1040A, line 12a. How to file taxes for 2012 This amount should be shown in box 1 of Form 1099-R. How to file taxes for 2012 From this amount, subtract any contributions (usually shown in box 5 of Form 1099-R) that were taxable to you when made. How to file taxes for 2012 From that result, subtract the amount that was rolled over either directly or within 60 days of receiving the distribution. How to file taxes for 2012 Enter the remaining amount, even if zero, on Form 1040, line 16b, or Form 1040A, line 12b. How to file taxes for 2012 Also, enter "Rollover" next to Form 1040, line 16b, or Form 1040A, line 12b. How to file taxes for 2012 Transfers Incident to Divorce If an interest in a traditional IRA is transferred from your spouse or former spouse to you by a divorce or separate maintenance decree or a written document related to such a decree, the interest in the IRA, starting from the date of the transfer, is treated as your IRA. How to file taxes for 2012 The transfer is tax free. How to file taxes for 2012 For detailed information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. How to file taxes for 2012 Converting From Any Traditional IRA to a Roth IRA Allowable conversions. How to file taxes for 2012   You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. How to file taxes for 2012 The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. How to file taxes for 2012 If properly (and timely) rolled over, the 10% additional tax on early distributions will not apply. How to file taxes for 2012 However, a part or all of the conversion contribution from your traditional IRA is included in your gross income. How to file taxes for 2012 Required distributions. How to file taxes for 2012   You cannot convert amounts that must be distributed from your traditional IRA for a particular year (including the calendar year in which you reach age 70½) under the required distribution rules (discussed later). How to file taxes for 2012 Income. How to file taxes for 2012   You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you had not converted them into a Roth IRA. How to file taxes for 2012 These amounts are normally included in income on your return for the year that you converted them from a traditional IRA to a Roth IRA. How to file taxes for 2012   You do not include in gross income any part of a distribution from a traditional IRA that is a return of your basis, as discussed later. How to file taxes for 2012   You must file Form 8606 to report 2013 conversions from traditional, SEP, or SIMPLE IRAs to a Roth IRA in 2013 (unless you recharacterized the entire amount) and to figure the amount to include in income. How to file taxes for 2012   If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. How to file taxes for 2012 See chapter 4. How to file taxes for 2012 Recharacterizations You may be able to treat a contribution made to one type of IRA as having been made to a different type of IRA. How to file taxes for 2012 This is called recharacterizing the contribution. How to file taxes for 2012 See Can You Move Retirement Plan Assets? in chapter 1 of Publication 590 for more detailed information. How to file taxes for 2012 How to recharacterize a contribution. How to file taxes for 2012   To recharacterize a contribution, you generally must have the contribution transferred from the first IRA (the one to which it was made) to the second IRA in a trustee-to-trustee transfer. How to file taxes for 2012 If the transfer is made by the due date (including extensions) for your tax return for the year during which the contribution was made, you can elect to treat the contribution as having been originally made to the second IRA instead of to the first IRA. How to file taxes for 2012 If you recharacterize your contribution, you must do all three of the following. How to file taxes for 2012 Include in the transfer any net income allocable to the contribution. How to file taxes for 2012 If there was a loss, the net income you must transfer may be a negative amount. How to file taxes for 2012 Report the recharacterization on your tax return for the year during which the contribution was made. How to file taxes for 2012 Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA. How to file taxes for 2012 No deduction allowed. How to file taxes for 2012   You cannot deduct the contribution to the first IRA. How to file taxes for 2012 Any net income you transfer with the recharacterized contribution is treated as earned in the second IRA. How to file taxes for 2012 Required notifications. How to file taxes for 2012   To recharacterize a contribution, you must notify both the trustee of the first IRA (the one to which the contribution was actually made) and the trustee of the second IRA (the one to which the contribution is being moved) that you have elected to treat the contribution as having been made to the second IRA rather than the first. How to file taxes for 2012 You must make the notifications by the date of the transfer. How to file taxes for 2012 Only one notification is required if both IRAs are maintained by the same trustee. How to file taxes for 2012 The notification(s) must include all of the following information. How to file taxes for 2012 The type and amount of the contribution to the first IRA that is to be recharacterized. How to file taxes for 2012 The date on which the contribution was made to the first IRA and the year for which it was made. How to file taxes for 2012 A direction to the trustee of the first IRA to transfer in a trustee-to-trustee transfer the amount of the contribution and any net income (or loss) allocable to the contribution to the trustee of the second IRA. How to file taxes for 2012 The name of the trustee of the first IRA and the name of the trustee of the second IRA. How to file taxes for 2012 Any additional information needed to make the transfer. How to file taxes for 2012 Reporting a recharacterization. How to file taxes for 2012   If you elect to recharacterize a contribution to one IRA as a contribution to another IRA, you must report the recharacterization on your tax return as directed by Form 8606 and its instructions. How to file taxes for 2012 You must treat the contribution as having been made to the second IRA. How to file taxes for 2012 When Can You Withdraw or Use IRA Assets? There are rules limiting use of your IRA assets and distributions from it. How to file taxes for 2012 Violation of the rules generally results in additional taxes in the year of violation. How to file taxes for 2012 See What Acts Result in Penalties or Additional Taxes , later. How to file taxes for 2012 Contributions returned before the due date of return. How to file taxes for 2012   If you made IRA contributions in 2013, you can withdraw them tax free by the due date of your return. How to file taxes for 2012 If you have an extension of time to file your return, you can withdraw them tax free by the extended due date. How to file taxes for 2012 You can do this if, for each contribution you withdraw, both of the following conditions apply. How to file taxes for 2012 You did not take a deduction for the contribution. How to file taxes for 2012 You withdraw any interest or other income earned on the contribution. How to file taxes for 2012 You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. How to file taxes for 2012 If there was a loss, the net income earned on the contribution may be a negative amount. How to file taxes for 2012 Note. How to file taxes for 2012 To calculate the amount you must withdraw, see Worksheet 1-4 under When Can You Withdraw or Use Assets? in chapter 1 of Publication 590. How to file taxes for 2012 Earnings includible in income. How to file taxes for 2012   You must include in income any earnings on the contributions you withdraw. How to file taxes for 2012 Include the earnings in income for the year in which you made the contributions, not in the year in which you withdraw them. How to file taxes for 2012 Generally, except for any part of a withdrawal that is a return of nondeductible contributions (basis), any withdrawal of your contributions after the due date (or extended due date) of your return will be treated as a taxable distribution. How to file taxes for 2012 Excess contributions can also be recovered tax free as discussed under What Acts Result in Penalties or Additional Taxes?, later. How to file taxes for 2012    Early distributions tax. How to file taxes for 2012   The 10% additional tax on distributions made before you reach age 59½ does not apply to these tax-free withdrawals of your contributions. How to file taxes for 2012 However, the distribution of interest or other income must be reported on Form 5329 and, unless the distribution qualifies as an exception to the age 59½ rule, it will be subject to this tax. How to file taxes for 2012 When Must You Withdraw IRA Assets? (Required Minimum Distributions) You cannot keep funds in a traditional IRA indefinitely. How to file taxes for 2012 Eventually they must be distributed. How to file taxes for 2012 If there are no distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the amount not distributed as required. How to file taxes for 2012 See Excess Accumulations (Insufficient Distributions) , later. How to file taxes for 2012 The requirements for distributing IRA funds differ depending on whether you are the IRA owner or the beneficiary of a decedent's IRA. How to file taxes for 2012 Required minimum distribution. How to file taxes for 2012   The amount that must be distributed each year is referred to as the required minimum distribution. How to file taxes for 2012 Required distributions not eligible for rollover. How to file taxes for 2012   Amounts that must be distributed (required minimum distributions) during a particular year are not eligible for rollover treatment. How to file taxes for 2012 IRA owners. How to file taxes for 2012   If you are the owner of a traditional IRA, you must generally start receiving distributions from your IRA by April 1 of the year following the year in which you reach age 70½. How to file taxes for 2012 April 1 of the year following the year in which you reach age 70½ is referred to as the required beginning date. How to file taxes for 2012 Distributions by the required beginning date. How to file taxes for 2012   You must receive at least a minimum amount for each year starting with the year you reach age 70½ (your 70½ year). How to file taxes for 2012 If you do not (or did not) receive that minimum amount in your 70½ year, then you must receive distributions for your 70½ year by April 1 of the next year. How to file taxes for 2012   If an IRA owner dies after reaching age 70½, but before April 1 of the next year, no minimum distribution is required because death occurred before the required beginning date. How to file taxes for 2012 Even if you begin receiving distributions before you attain age 70½, you must begin calculating and receiving required minimum distributions by your required beginning date. How to file taxes for 2012 Distributions after the required beginning date. How to file taxes for 2012   The required minimum distribution for any year after the year you turn 70½ must be made by December 31 of that later year. How to file taxes for 2012    Beneficiaries. How to file taxes for 2012   If you are the beneficiary of a decedent's traditional IRA, the requirements for distributions from that IRA generally depend on whether the IRA owner died before or after the required beginning date for distributions. How to file taxes for 2012 More information. How to file taxes for 2012   For more information, including how to figure your minimum required distribution each year and how to figure your required distribution if you are a beneficiary of a decedent's IRA, see When Must You Withdraw Assets? in chapter 1 of Publication 590. How to file taxes for 2012 Are Distributions Taxable? In general, distributions from a traditional IRA are taxable in the year you receive them. How to file taxes for 2012 Exceptions. How to file taxes for 2012   Exceptions to distributions from traditional IRAs being taxable in the year you receive them are: Rollovers, Qualified charitable distributions (QCD), discussed later, Tax-free withdrawals of contributions, discussed earlier, and The return of nondeductible contributions, discussed later under Distributions Fully or Partly Taxable . How to file taxes for 2012    Although a conversion of a traditional IRA is considered a rollover for Roth IRA purposes, it is not an exception to the rule that distributions from a traditional IRA are taxable in the year you receive them. How to file taxes for 2012 Conversion distributions are includible in your gross income subject to this rule and the special rules for conversions explained in Converting From Any Traditional IRA Into a Roth IRA under Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. How to file taxes for 2012 Qualified charitable distributions (QCD). How to file taxes for 2012   A QCD is generally a nontaxable distribution made directly by the trustee of your IRA to an organization eligible to receive tax-deductible contributions. How to file taxes for 2012 Special rules apply if you made a qualified charitable distribution in January 2013 that you elected to treat as made in 2012. How to file taxes for 2012 See Qualified Charitable Distributions in Publication 590 for more information. How to file taxes for 2012 Ordinary income. How to file taxes for 2012   Distributions from traditional IRAs that you include in income are taxed as ordinary income. How to file taxes for 2012 No special treatment. How to file taxes for 2012   In figuring your tax, you cannot use the 10-year tax option or capital gain treatment that applies to lump-sum distributions from qualified retirement plans. How to file taxes for 2012 Distributions Fully or Partly Taxable Distributions from your traditional IRA may be fully or partly taxable, depending on whether your IRA includes any nondeductible contributions. How to file taxes for 2012 Fully taxable. How to file taxes for 2012   If only deductible contributions were made to your traditional IRA (or IRAs, if you have more than one), you have no basis in your IRA. How to file taxes for 2012 Because you have no basis in your IRA, any distributions are fully taxable when received. How to file taxes for 2012 See Reporting taxable distributions on your return , later. How to file taxes for 2012 Partly taxable. How to file taxes for 2012    If you made nondeductible contributions or rolled over any after-tax amounts to any of your traditional IRAs, you have a cost basis (investment in the contract) equal to the amount of those contributions. How to file taxes for 2012 These nondeductible contributions are not taxed when they are distributed to you. How to file taxes for 2012 They are a return of your investment in your IRA. How to file taxes for 2012   Only the part of the distribution that represents nondeductible contributions and rolled over after-tax amounts (your cost basis) is tax free. How to file taxes for 2012 If nondeductible contributions have been made or after-tax amounts have been rolled over to your IRA, distributions consist partly of nondeductible contributions (basis) and partly of deductible contributions, earnings, and gains (if there are any). How to file taxes for 2012 Until all of your basis has been distributed, each distribution is partly nontaxable and partly taxable. How to file taxes for 2012 Form 8606. How to file taxes for 2012   You must complete Form 8606 and attach it to your return if you receive a distribution from a traditional IRA and have ever made nondeductible contributions or rolled over after-tax amounts to any of your traditional IRAs. How to file taxes for 2012 Using the form, you will figure the nontaxable distributions for 2013 and your total IRA basis for 2013 and earlier years. How to file taxes for 2012 Note. How to file taxes for 2012 If you are required to file Form 8606, but you are not required to file an income tax return, you still must file Form 8606. How to file taxes for 2012 Send it to the IRS at the time and place you would otherwise file an income tax return. How to file taxes for 2012 Distributions reported on Form 1099-R. How to file taxes for 2012   If you receive a distribution from your traditional IRA, you will receive Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. How to file taxes for 2012 , or a similar statement. How to file taxes for 2012 IRA distributions are shown in boxes 1 and 2a of Form 1099-R. How to file taxes for 2012 A number or letter code in box 7 tells you what type of distribution you received from your IRA. How to file taxes for 2012 Withholding. How to file taxes for 2012   Federal income tax is withheld from distributions from traditional IRAs unless you choose not to have tax withheld. How to file taxes for 2012 See chapter 4. How to file taxes for 2012 IRA distributions delivered outside the United States. How to file taxes for 2012   In general, if you are a U. How to file taxes for 2012 S. How to file taxes for 2012 citizen or resident alien and your home address is outside the United States or its possessions, you cannot choose exemption from withholding on distributions from your traditional IRA. How to file taxes for 2012 Reporting taxable distributions on your return. How to file taxes for 2012    Report fully taxable distributions, including early distributions on Form 1040, line 15b, or Form 1040A, line 11b (no entry is required on Form 1040, line 15a, or Form 1040A, line 11a). How to file taxes for 2012 If only part of the distribution is taxable, enter the total amount on Form 1040, line 15a, or Form 1040A, line 11a, and the taxable part on Form 1040, line 15b, or Form 1040A, line 11b. How to file taxes for 2012 You cannot report distributions on Form 1040EZ. How to file taxes for 2012 What Acts Result in Penalties or Additional Taxes? The tax advantages of using traditional IRAs for retirement savings can be offset by additional taxes and penalties if you do not follow the rules. How to file taxes for 2012 There are additions to the regular tax for using your IRA funds in prohibited transactions. How to file taxes for 2012 There are also additional taxes for the following activities. How to file taxes for 2012 Investing in collectibles. How to file taxes for 2012 Making excess contributions. How to file taxes for 2012 Taking early distributions. How to file taxes for 2012 Allowing excess amounts to accumulate (failing to take required distributions). How to file taxes for 2012 There are penalties for overstating the amount of nondeductible contributions and for failure to file a Form 8606, if required. How to file taxes for 2012 Prohibited Transactions Generally, a prohibited transaction is any improper use of your traditional IRA by you, your beneficiary, or any disqualified person. How to file taxes for 2012 Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendent, and any spouse of a lineal descendent). How to file taxes for 2012 The following are examples of prohibited transactions with a traditional IRA. How to file taxes for 2012 Borrowing money from it. How to file taxes for 2012 Selling property to it. How to file taxes for 2012 Receiving unreasonable compensation for managing it. How to file taxes for 2012 Using it as security for a loan. How to file taxes for 2012 Buying property for personal use (present or future) with IRA funds. How to file taxes for 2012 Effect on an IRA account. How to file taxes for 2012   Generally, if you or your beneficiary engages in a prohibited transaction in connection with your traditional IRA account at any time during the year, the account stops being an IRA as of the first day of that year. How to file taxes for 2012 Effect on you or your beneficiary. How to file taxes for 2012   If your account stops being an IRA because you or your beneficiary engaged in a prohibited transaction, the account is treated as distributing all its assets to you at their fair market values on the first day of the year. How to file taxes for 2012 If the total of those values is more than your basis in the IRA, you will have a taxable gain that is includible in your income. How to file taxes for 2012 For information on figuring your gain and reporting it in income, see Are Distributions Taxable , earlier. How to file taxes for 2012 The distribution may be subject to additional taxes or penalties. How to file taxes for 2012 Taxes on prohibited transactions. How to file taxes for 2012   If someone other than the owner or beneficiary of a traditional IRA engages in a prohibited transaction, that person may be liable for certain taxes. How to file taxes for 2012 In general, there is a 15% tax on the amount of the prohibited transaction and a 100% additional tax if the transaction is not corrected. How to file taxes for 2012 More information. How to file taxes for 2012   For more information on prohibited transactions, see What Acts Result in Penalties or Additional Taxes? in chapter 1 of Publication 590. How to file taxes for 2012 Investment in Collectibles If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. How to file taxes for 2012 You may have to pay the 10% additional tax on early distributions, discussed later. How to file taxes for 2012 Collectibles. How to file taxes for 2012   These include: Artworks, Rugs, Antiques, Metals, Gems, Stamps, Coins, Alcoholic beverages, and Certain other tangible personal property. How to file taxes for 2012 Exception. How to file taxes for 2012    Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U. How to file taxes for 2012 S. How to file taxes for 2012 gold coins, or one-ounce silver coins minted by the Treasury Department. How to file taxes for 2012 It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion. How to file taxes for 2012 Excess Contributions Generally, an excess contribution is the amount contributed to your traditional IRA(s) for the year that is more than the smaller of: The maximum deductible amount for the year. How to file taxes for 2012 For 2013, this is $5,500 ($6,500 if you are 50 or older), or Your taxable compensation for the year. How to file taxes for 2012 Tax on excess contributions. How to file taxes for 2012   In general, if the excess contributions for a year are not withdrawn by the date your return for the year is due (including extensions), you are subject to a 6% tax. How to file taxes for 2012 You must pay the 6% tax each year on excess amounts that remain in your traditional IRA at the end of your tax year. How to file taxes for 2012 The tax cannot be more than 6% of the combined value of all your IRAs as of the end of your tax year. How to file taxes for 2012 Excess contributions withdrawn by due date of return. How to file taxes for 2012   You will not have to pay the 6% tax if you withdraw an excess contribution made during a tax year and you also withdraw interest or other income earned on the excess contribution. How to file taxes for 2012 You must complete your withdrawal by the date your tax return for that year is due, including extensions. How to file taxes for 2012 How to treat withdrawn contributions. How to file taxes for 2012   Do not include in your gross income an excess contribution that you withdraw from your traditional IRA before your tax return is due if both the following conditions are met. How to file taxes for 2012 No deduction was allowed for the excess contribution. How to file taxes for 2012 You withdraw the interest or other income earned on the excess contribution. How to file taxes for 2012 You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. How to file taxes for 2012 If there was a loss, the net income you must withdraw may be a negative amount. How to file taxes for 2012 How to treat withdrawn interest or other income. How to file taxes for 2012   You must include in your gross income the interest or other income that was earned on the excess contribution. How to file taxes for 2012 Report it on your return for the year in which the excess contribution was made. How to file taxes for 2012 Your withdrawal of interest or other income may be subject to an additional 10% tax on early distributions, discus
Print - Click this link to Print this page

IRS Reminds Taxpayers about Direct Deposit and Split Refunds

 

IR-2014-37, March 27, 2014

WASHINGTON — For 57 million Americans, the refund check is no longer in the mail; it’s already in the bank.

So far this year, the Internal Revenue Service has issued direct-deposit refunds valued at more than $170 billion, as a growing number of taxpayers are choosing the speed and convenience of direct deposit, rather than receiving a paper check. So far this year, almost 85 percent of all refunds have been directly deposited into taxpayers’ bank accounts.

Taxpayers can have their refunds directly deposited when they e-file or by including their account information on their paper tax return..

Banks, mutual funds, brokerage firms and credit unions are all eligible to receive direct deposits. Before making this choice, however, taxpayers should make sure the financial institution accepts direct deposits for the type of account chosen.

Taxpayers also have the option and flexibility of splitting refund deposits among two or three different accounts or financial institutions. For instance, a refund could be split between a savings account, a checking account or an Individual Retirement Arrangement (IRA). Taxpayers can split their refunds when they e-file or by filing Form 8888, Direct Deposit of Refund to More Than One Account.

A taxpayer's refund should only be deposited directly into accounts that are in the taxpayer's own name; the taxpayer's spouse's name or both if it's a joint account.

Those who choose direct deposit get their refunds at least a week sooner, and direct deposit eliminates the chance of a lost, stolen or undeliverable refund.

[The filing season statistics table follows.]

Follow the IRS on New Media
Subscribe to IRS Newswire

2014 FILING SEASON STATISTICS

Cumulative statistics comparing 3/22/13 and 3/21/14

Individual Income Tax Returns:

2013

2014

% Change

Total Receipts

82,413,000

82,852,000

0.5

Total Processed

77,102,000

81,149,000

5.2

 

 

 

 

E-filing Receipts:

 

 

 

TOTAL           

74,420,000

75,610,000

1.6

Tax Professionals

44,524,000

43,953,000

-1.3

Self-prepared

29,896,000

31,657,000

5.9

 

 

 

 

Web Usage:

 

 

 

Visits to IRS.gov

234,237,695

209,074,699

-10.7

 

 

 

 

Total Refunds:

 

 

 

Number

66,429,000

67,383,000

1.4

Amount

$187.788

Billion

$193.543

Billion

3.1

Average refund

$2,827

$2,872

1.6

 

 

 

 

Direct Deposit Refunds:

 

 

 

Number

56,985,000

57,101,000

0.2

Amount

$170.127

Billion

$170.187

Billion

0.04

Average refund

$2,985

$2,980

-0.2

 

Page Last Reviewed or Updated: 27-Mar-2014

The How To File Taxes For 2012

How to file taxes for 2012 Publication 925 - Main Content Table of Contents Passive Activity LimitsWho Must Use These Rules? Passive Activity Loss Passive Activity Credit Publicly Traded Partnership Excess Farm Loss Passive Activities Activities That Are Not Passive Activities Passive Activity Income and Deductions Grouping Your Activities Recharacterization of Passive Income Dispositions How To Report Your Passive Activity Loss Comprehensive ExampleGeneral Information At-Risk LimitsWho Is Affected? Activities Covered by the At-Risk Rules At-Risk Amounts Amounts Not At Risk Reductions of Amounts At Risk Recapture Rule How To Get Tax HelpLow Income Taxpayer Clinics Passive Activity Limits Who Must Use These Rules? The passive activity rules apply to: Individuals, Estates, Trusts (other than grantor trusts), Personal service corporations, and Closely held corporations. How to file taxes for 2012 Even though the rules do not apply to grantor trusts, partnerships, and S corporations directly, they do apply to the owners of these entities. How to file taxes for 2012 For information about personal service corporations and closely held corporations, including definitions and how the passive activity rules apply to these corporations, see Form 8810 and its instructions. How to file taxes for 2012 Before applying the passive activity limits, you must first determine the amount of the deductions disallowed under the basis, excess farm loss, or at-risk rules. How to file taxes for 2012 See Passive Activity Deductions, later. How to file taxes for 2012 Passive Activity Loss Generally, the passive activity loss for the tax year is not allowed. How to file taxes for 2012 However, there is a special allowance under which some or all of your passive activity loss may be allowed. How to file taxes for 2012 See Special $25,000 allowance , later. How to file taxes for 2012 Definition of passive activity loss. How to file taxes for 2012    Generally, your passive activity loss for the tax year is the excess of your passive activity deductions over your passive activity gross income. How to file taxes for 2012 See Passive Activity Income and Deductions , later. How to file taxes for 2012   For a closely held corporation, the passive activity loss is the excess of passive activity deductions over the sum of passive activity gross income and net active income. How to file taxes for 2012 For details on net active income, see the Instructions for Form 8810. How to file taxes for 2012 For the definition of passive activity gross income, see Passive Activity Income , later. How to file taxes for 2012 For the definition of passive activity deductions, see Passive Activity Deductions , later. How to file taxes for 2012 Identification of Disallowed Passive Activity Deductions If all or a part of your passive activity loss is disallowed for the tax year, you may need to allocate the disallowed passive activity loss among different passive activities and among different deductions within a passive activity. How to file taxes for 2012 Allocation of disallowed passive activity loss among activities. How to file taxes for 2012   If all or any part of your passive activity loss is disallowed for the tax year, a ratable portion of the loss (if any) from each of your passive activities is disallowed. How to file taxes for 2012 The ratable portion of a loss from an activity is computed by multiplying the passive activity loss that is disallowed for the tax year by the fraction obtained by dividing: The loss from the activity for the tax year; by The sum of the losses for the tax year from all activities having losses for the tax year. How to file taxes for 2012 Use Worksheet 5 of Form 8582 to figure the ratable portion of the loss from each activity that is disallowed. How to file taxes for 2012 Loss from an activity. How to file taxes for 2012   The term “loss from an activity” means: The amount by which the passive activity deductions (defined later) from the activity for the tax year exceed the passive activity gross income (defined later) from the activity for the tax year; reduced by Any part of such amount that is allowed under the Special $25,000 Allowance , later. How to file taxes for 2012   If your passive activity gross income from significant participation passive activities (defined later) for the tax year is more than your passive activity deductions from those activities for the tax year, those activities shall be treated, solely for purposes of figuring your loss from the activity, as a single activity that does not have a loss for such taxable year. How to file taxes for 2012 See Significant Participation Passive Activities , later. How to file taxes for 2012 Example. How to file taxes for 2012 John Pine holds interests in three passive activities, A, B, and C. How to file taxes for 2012 The gross income and deductions from these activities for the taxable year are as follows:   A B C Total Gross income $7,000 $4,000 $12,000 $23,000 Deductions (16,000) (20,000) (8,000) (44,000)           Net income (loss) ($9,000) ($16,000) $4,000 ($21,000)   John Pine’s $21,000 passive activity loss for the taxable year is disallowed. How to file taxes for 2012 Therefore, a ratable portion of the losses from activities A and B is disallowed. How to file taxes for 2012 He figures the disallowed portion of each loss as follows: A: $21,000 x $9,000/$25,000 $7,560 B: $21,000 x $16,000/$25,000 13,440     Total $21,000 Allocation within loss activities. How to file taxes for 2012   If all or any part of your loss from an activity is disallowed under Allocation of disallowed passive activity loss among activities for the tax year, a ratable portion of each of your passive activity deductions (defined later), other than an excluded deduction (defined below) from such activity is disallowed. How to file taxes for 2012 The ratable portion of a passive activity deduction is the amount of the disallowed portion of the loss from the activity for the tax year multiplied by the fraction obtained by dividing: The amount of such deduction; by The sum of all of your passive activity deductions (other than excluded deductions) from that activity from the tax year. How to file taxes for 2012 Excluded deductions. How to file taxes for 2012    “Excluded deduction” means any passive activity deduction that is taken into account in computing your net income from an item of property for a taxable year in which an amount of the taxpayer's gross income from such item of property is treated as not from a passive activity. How to file taxes for 2012 See Recharacterization of Passive Income , later. How to file taxes for 2012 Separately identified deductions. How to file taxes for 2012   In identifying the deductions from an activity that are disallowed, you do not need to account separately for a deduction unless such deduction may, if separately taken into account, result in an income tax liability for any tax year different from that which would result were such deduction not taken into account separately. How to file taxes for 2012   Use Form 8582, Worksheet 7, for any activity if you have passive activity deductions for that activity that must be separately identified. How to file taxes for 2012   Deductions that must be accounted for separately include (but are not limited to) the following deductions. How to file taxes for 2012 Deductions that arise in a rental real estate activity in tax years in which you actively participate in such activity. How to file taxes for 2012 See Active participation , later. How to file taxes for 2012 Deductions that arise in a rental real estate activity in tax years in which you do not actively participate in such activity. How to file taxes for 2012 See Active participation , later. How to file taxes for 2012 Losses from sales or exchanges of capital assets. How to file taxes for 2012 Section 1231 losses. How to file taxes for 2012 See Section 1231 Gains and Losses in Publication 544, Sales and Other Disposition of Assets, for more information. How to file taxes for 2012 Carryover of Disallowed Deductions In the case of an activity with respect to which any deductions or credits are disallowed for a taxable year (the loss activity), the disallowed deductions are allocated among your activities for the next tax year in a manner that reasonably reflects the extent to which each activity continues the loss activity. How to file taxes for 2012 The disallowed deductions or credits allocated to an activity under the preceding sentence are treated as deductions or credits from the activity for the next tax year. How to file taxes for 2012 For more information, see Regulations section 1. How to file taxes for 2012 469-1(f)(4). How to file taxes for 2012 Passive Activity Credit Generally, the passive activity credit for the tax year is disallowed. How to file taxes for 2012 The passive activity credit is the amount by which the sum of all your credits subject to the passive activity rules exceed your regular tax liability allocable to all passive activities for the tax year. How to file taxes for 2012 Credits that are included in figuring the general business credit are subject to the passive activity rules. How to file taxes for 2012 See the Instructions for Form 8582-CR for more information. How to file taxes for 2012 Publicly Traded Partnership You must apply the rules in this part separately to your income or loss from a passive activity held through a publicly traded partnership (PTP). How to file taxes for 2012 You also must apply the limit on passive activity credits separately to your credits from a passive activity held through a PTP. How to file taxes for 2012 You can offset deductions from passive activities of a PTP only against income or gain from passive activities of the same PTP. How to file taxes for 2012 Likewise, you can offset credits from passive activities of a PTP only against the tax on the net passive income from the same PTP. How to file taxes for 2012 This separate treatment rule also applies to a regulated investment company holding an interest in a PTP for the items attributable to that interest. How to file taxes for 2012 For more information on how to apply the passive activity loss rules to PTPs, and on how to apply the limit on passive activity credits to PTPs, see Publicly Traded Partnerships (PTPs) in the Instructions for Forms 8582 and 8582-CR, respectively. How to file taxes for 2012 Excess Farm Loss If you receive an applicable subsidy for any tax year and you have an excess farm loss for the tax year, special rules apply. How to file taxes for 2012 These rules do not apply to C corporations. How to file taxes for 2012 For information, see the Instructions for Schedule F (Form 1040), Profit or Loss From Farming. How to file taxes for 2012 Passive Activities There are two kinds of passive activities. How to file taxes for 2012 Trade or business activities in which you do not materially participate during the year. How to file taxes for 2012 Rental activities, even if you do materially participate in them, unless you are a real estate professional. How to file taxes for 2012 Material participation in a trade or business is discussed later, under Activities That Are Not Passive Activities . How to file taxes for 2012 Treatment of former passive activities. How to file taxes for 2012   A former passive activity is an activity that was a passive activity in any earlier tax year, but is not a passive activity in the current tax year. How to file taxes for 2012 You can deduct a prior year's unallowed loss from the activity up to the amount of your current year net income from the activity. How to file taxes for 2012 Treat any remaining prior year unallowed loss like you treat any other passive loss. How to file taxes for 2012   In addition, any prior year unallowed passive activity credits from a former passive activity offset the allocable part of your current year tax liability. How to file taxes for 2012 The allocable part of your current year tax liability is that part of this year's tax liability that is allocable to the current year net income from the former passive activity. How to file taxes for 2012 You figure this after you reduce your net income from the activity by any prior year unallowed loss from that activity (but not below zero). How to file taxes for 2012 Trade or Business Activities A trade or business activity is an activity that: Involves the conduct of a trade or business (that is, deductions would be allowable under section 162 of the Internal Revenue Code if other limitations, such as the passive activity rules, did not apply), Is conducted in anticipation of starting a trade or business, or Involves research or experimental expenditures that are deductible under Internal Revenue Code section 174 (or that would be deductible if you chose to deduct rather than capitalize them). How to file taxes for 2012 A trade or business activity does not include a rental activity or the rental of property that is incidental to an activity of holding the property for investment. How to file taxes for 2012 You generally report trade or business activities on Schedule C, C-EZ, F, or in Part II or III of Schedule E. How to file taxes for 2012 Rental Activities A rental activity is a passive activity even if you materially participated in that activity, unless you materially participated as a real estate professional. How to file taxes for 2012 See Real Estate Professional under Activities That Are Not Passive Activities, later. How to file taxes for 2012 An activity is a rental activity if tangible property (real or personal) is used by customers or held for use by customers, and the gross income (or expected gross income) from the activity represents amounts paid (or to be paid) mainly for the use of the property. How to file taxes for 2012 It does not matter whether the use is under a lease, a service contract, or some other arrangement. How to file taxes for 2012 Exceptions. How to file taxes for 2012   Your activity is not a rental activity if any of the following apply. How to file taxes for 2012 The average period of customer use of the property is 7 days or less. How to file taxes for 2012 You figure the average period of customer use by dividing the total number of days in all rental periods by the number of rentals during the tax year. How to file taxes for 2012 If the activity involves renting more than one class of property, multiply the average period of customer use of each class by a fraction. How to file taxes for 2012 The numerator of the fraction is the gross rental income from that class of property and the denominator is the activity's total gross rental income. How to file taxes for 2012 The activity's average period of customer use will equal the sum of the amounts for each class. How to file taxes for 2012 The average period of customer use of the property, as figured in (1) above, is 30 days or less and you provide significant personal services with the rentals. How to file taxes for 2012 Significant personal services include only services performed by individuals. How to file taxes for 2012 To determine if personal services are significant, all relevant facts and circumstances are taken into consideration, including the frequency of the services, the type and amount of labor required to perform the services, and the value of the services relative to the amount charged for use of the property. How to file taxes for 2012 Significant personal services do not include the following. How to file taxes for 2012 Services needed to permit the lawful use of the property, Services to repair or improve property that would extend its useful life for a period substantially longer than the average rental, and Services that are similar to those commonly provided with long-term rentals of real estate, such as cleaning and maintenance of common areas or routine repairs. How to file taxes for 2012 You provide extraordinary personal services in making the rental property available for customer use. How to file taxes for 2012 Services are extraordinary personal services if they are performed by individuals and the customers' use of the property is incidental to their receipt of the services. How to file taxes for 2012 The rental is incidental to a nonrental activity. How to file taxes for 2012 The rental of property is incidental to an activity of holding property for investment if the main purpose of holding the property is to realize a gain from its appreciation and the gross rental income from the property is less than 2% of the smaller of the property's unadjusted basis or fair market value. How to file taxes for 2012 The unadjusted basis of property is its cost not reduced by depreciation or any other basis adjustment. How to file taxes for 2012 The rental of property is incidental to a trade or business activity if all of the following apply. How to file taxes for 2012 You own an interest in the trade or business activity during the year. How to file taxes for 2012 The rental property was used mainly in that trade or business activity during the current year, or during at least 2 of the 5 preceding tax years. How to file taxes for 2012 Your gross rental income from the property is less than 2% of the smaller of its unadjusted basis or fair market value. How to file taxes for 2012 Lodging provided to an employee or the employee's spouse or dependents is incidental to the activity or activities in which the employee performs services if the lodging is furnished for the employer's convenience. How to file taxes for 2012 You customarily make the rental property available during defined business hours for nonexclusive use by various customers. How to file taxes for 2012 You provide the property for use in a nonrental activity in your capacity as an owner of an interest in the partnership, S corporation, or joint venture conducting that activity. How to file taxes for 2012    If you meet any of the exceptions listed above, see the instructions for Form 8582 for information about how to report any income or loss from the activity. How to file taxes for 2012 Special $25,000 allowance. How to file taxes for 2012   If you or your spouse actively participated in a passive rental real estate activity, the amount of the passive activity loss that is disallowed is decreased and you therefore can deduct up to $25,000 of loss from the activity from your nonpassive income. How to file taxes for 2012 This special allowance is an exception to the general rule disallowing the passive activity loss. How to file taxes for 2012 Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. How to file taxes for 2012   If you are married, filing a separate return, and lived apart from your spouse for the entire tax year, your special allowance cannot be more than $12,500. How to file taxes for 2012 If you lived with your spouse at any time during the year and are filing a separate return, you cannot use the special allowance to reduce your nonpassive income or tax on nonpassive income. How to file taxes for 2012   The maximum special allowance is reduced if your modified adjusted gross income exceeds certain amounts. How to file taxes for 2012 See Phaseout rule , later. How to file taxes for 2012 Example. How to file taxes for 2012 Kate, a single taxpayer, has $70,000 in wages, $15,000 income from a limited partnership, a $26,000 loss from rental real estate activities in which she actively participated, and is not subject to the modified adjusted gross income phaseout rule. How to file taxes for 2012 She can use $15,000 of her $26,000 loss to offset her $15,000 passive income from the partnership. How to file taxes for 2012 She actively participated in her rental real estate activities, so she can use the remaining $11,000 rental real estate loss to offset $11,000 of her nonpassive income (wages). How to file taxes for 2012 Commercial revitalization deduction (CRD). How to file taxes for 2012   The special allowance must first be applied to losses from rental real estate activities figured without the CRD. How to file taxes for 2012 Any remaining part of the special allowance is available for the CRD from the rental real estate activities and is not subject to the active participation rules or the phaseout based on modified adjusted gross income. How to file taxes for 2012 You cannot claim a CRD for a building placed in service after December 31, 2009. How to file taxes for 2012 Active participation. How to file taxes for 2012   Active participation is not the same as material participation (defined later). How to file taxes for 2012 Active participation is a less stringent standard than material participation. How to file taxes for 2012 For example, you may be treated as actively participating if you make management decisions in a significant and bona fide sense. How to file taxes for 2012 Management decisions that count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions. How to file taxes for 2012   Only individuals can actively participate in rental real estate activities. How to file taxes for 2012 However, a decedent's estate is treated as actively participating for its tax years ending less than 2 years after the decedent's death, if the decedent would have satisfied the active participation requirement for the activity for the tax year the decedent died. How to file taxes for 2012   A decedent's qualified revocable trust can also be treated as actively participating if both the trustee and the executor (if any) of the estate choose to treat the trust as part of the estate. How to file taxes for 2012 The choice applies to tax years ending after the decedent's death and before: 2 years after the decedent's death if no estate tax return is required, or 6 months after the estate tax liability is finally determined if an estate tax return is required. How to file taxes for 2012   The choice is irrevocable and cannot be made later than the due date for the estate's first income tax return (including any extensions). How to file taxes for 2012   Limited partners are not treated as actively participating in a partnership's rental real estate activities. How to file taxes for 2012   You are not treated as actively participating in a rental real estate activity unless your interest in the activity (including your spouse's interest) was at least 10% (by value) of all interests in the activity throughout the year. How to file taxes for 2012   Active participation is not required to take the low-income housing credit, the rehabilitation investment credit, or CRD from rental real estate activities. How to file taxes for 2012 Example. How to file taxes for 2012 Mike, a single taxpayer, had the following income and loss during the tax year: Salary $42,300 Dividends 300 Interest 1,400 Rental loss (4,000) The rental loss came from a house Mike owned. How to file taxes for 2012 He advertised and rented the house to the current tenant himself. How to file taxes for 2012 He also collected the rents and did the repairs or hired someone to do them. How to file taxes for 2012 Even though the rental loss is a loss from a passive activity, Mike can use the entire $4,000 loss to offset his other income because he actively participated. How to file taxes for 2012 Phaseout rule. How to file taxes for 2012   The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that is more than $100,000 ($50,000 if you are married filing separately). How to file taxes for 2012 If your modified adjusted gross income is $150,000 or more ($75,000 or more if you are married filing separately), you generally cannot use the special allowance. How to file taxes for 2012    Modified adjusted gross income for this purpose is your adjusted gross income figured without the following. How to file taxes for 2012 Taxable social security and tier 1 railroad retirement benefits. How to file taxes for 2012 Deductible contributions to individual retirement accounts (IRAs) and section 501(c)(18) pension plans. How to file taxes for 2012 The exclusion from income of interest from qualified U. How to file taxes for 2012 S. How to file taxes for 2012 savings bonds used to pay qualified higher education expenses. How to file taxes for 2012 The exclusion from income of amounts received from an employer's adoption assistance program. How to file taxes for 2012 Passive activity income or loss included on Form 8582. How to file taxes for 2012 Any rental real estate loss allowed because you materially participated in the rental activity as a Real Estate Professional (as discussed later, under Activities That Are Not Passive Activities). How to file taxes for 2012 Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the instructions for Form 8582). How to file taxes for 2012 The deduction for the employer-equivalent portion of self-employment tax. How to file taxes for 2012 The deduction for domestic production activities. How to file taxes for 2012 The deduction allowed for interest on student loans. How to file taxes for 2012 The deduction for qualified tuition and related expenses. How to file taxes for 2012 Example. How to file taxes for 2012 During 2013, John was unmarried and was not a real estate professional. How to file taxes for 2012 For 2013, he had $120,000 in salary and a $31,000 loss from his rental real estate activities in which he actively participated. How to file taxes for 2012 His modified adjusted gross income is $120,000. How to file taxes for 2012 When he files his 2013 return, he can deduct only $15,000 of his passive activity loss. How to file taxes for 2012 He must carry over the remaining $16,000 passive activity loss to 2014. How to file taxes for 2012 He figures his deduction and carryover as follows: Adjusted gross income, modified as required $120,000       Minus amount not subject to phaseout 100,000 Amount subject to phaseout rule $20,000 Multiply by 50% × 50% Required reduction to special allowance $10,000 Maximum special allowance $25,000 Minus required reduction (see above) 10,000 Adjusted special allowance $15,000 Passive loss from rental real estate $31,000 Deduction allowable/Adjusted  special allowance (see above) 15,000       Amount that must be carried forward $16,000 Exceptions to the phaseout rules. How to file taxes for 2012   A higher phaseout range applies to rehabilitation investment credits from rental real estate activities. How to file taxes for 2012 For those credits, the phaseout of the $25,000 special allowance starts when your modified adjusted gross income exceeds $200,000 ($100,000 if you are a married individual filing a separate return and living apart at all times during the year). How to file taxes for 2012   There is no phaseout of the $25,000 special allowance for low-income housing credits or for the CRD. How to file taxes for 2012 Ordering rules. How to file taxes for 2012   If you have more than one of the exceptions to the phaseout rules in the same tax year, you must apply the $25,000 phaseout against your passive activity losses and credits in the following order. How to file taxes for 2012 The portion of passive activity losses not attributable to the CRD. How to file taxes for 2012 The portion of passive activity losses attributable to the CRD. How to file taxes for 2012 The portion of passive activity credits attributable to credits other than the rehabilitation and low-income housing credits. How to file taxes for 2012 The portion of passive activity credits attributable to the rehabilitation credit. How to file taxes for 2012 The portion of passive activity credits attributable to the low-income housing credit. How to file taxes for 2012 Activities That Are Not Passive Activities The following are not passive activities. How to file taxes for 2012 Trade or business activities in which you materially participated for the tax year. How to file taxes for 2012 A working interest in an oil or gas well which you hold directly or through an entity that does not limit your liability (such as a general partner interest in a partnership). How to file taxes for 2012 It does not matter whether you materially participated in the activity for the tax year. How to file taxes for 2012 However, if your liability was limited for part of the year (for example, you converted your general partner interest to a limited partner interest during the year) and you had a net loss from the well for the year, some of your income and deductions from the working interest may be treated as passive activity gross income and passive activity deductions. How to file taxes for 2012  See Temporary Regulations section 1. How to file taxes for 2012 469-1T(e)(4)(ii). How to file taxes for 2012 The rental of a dwelling unit that you also used for personal purposes during the year for more than the greater of 14 days or 10% of the number of days during the year that the home was rented at a fair rental. How to file taxes for 2012 An activity of trading personal property for the account of those who own interests in the activity. How to file taxes for 2012 See Temporary Regulations section 1. How to file taxes for 2012 469-1T(e)(6). How to file taxes for 2012 Rental real estate activities in which you materially participated as a real estate professional. How to file taxes for 2012 See Real Estate Professional , later. How to file taxes for 2012 You should not enter income and losses from these activities on Form 8582. How to file taxes for 2012 Instead, enter them on the forms or schedules you would normally use. How to file taxes for 2012 Material Participation A trade or business activity is not a passive activity if you materially participated in the activity. How to file taxes for 2012 Material participation tests. How to file taxes for 2012    You materially participated in a trade or business activity for a tax year if you satisfy any of the following tests. How to file taxes for 2012 You participated in the activity for more than 500 hours. How to file taxes for 2012 Your participation was substantially all the participation in the activity of all individuals for the tax year, including the participation of individuals who did not own any interest in the activity. How to file taxes for 2012 You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other individual (including individuals who did not own any interest in the activity) for the year. How to file taxes for 2012 The activity is a significant participation activity, and you participated in all significant participation activities for more than 500 hours. How to file taxes for 2012 A significant participation activity is any trade or business activity in which you participated for more than 100 hours during the year and in which you did not materially participate under any of the material participation tests, other than this test. How to file taxes for 2012 See Significant Participation Passive Activities , under Recharacterization of Passive Income, later. How to file taxes for 2012 You materially participated in the activity for any 5 (whether or not consecutive) of the 10 immediately preceding tax years. How to file taxes for 2012 The activity is a personal service activity in which you materially participated for any 3 (whether or not consecutive) preceding tax years. How to file taxes for 2012 An activity is a personal service activity if it involves the performance of personal services in the fields of health (including veterinary services), law, engineering, architecture, accounting, actuarial science, performing arts, consulting, or any other trade or business in which capital is not a material income-producing factor. How to file taxes for 2012 Based on all the facts and circumstances, you participated in the activity on a regular, continuous, and substantial basis during the year. How to file taxes for 2012   You did not materially participate in the activity under test (7) if you participated in the activity for 100 hours or less during the year. How to file taxes for 2012 Your participation in managing the activity does not count in determining whether you materially participated under this test if: Any person other than you received compensation for managing the activity, or Any individual spent more hours during the tax year managing the activity than you did (regardless of whether the individual was compensated for the management services). How to file taxes for 2012 Participation. How to file taxes for 2012   In general, any work you do in connection with an activity in which you own an interest is treated as participation in the activity. How to file taxes for 2012 Work not usually performed by owners. How to file taxes for 2012   You do not treat the work you do in connection with an activity as participation in the activity if both of the following are true. How to file taxes for 2012 The work is not work that is customarily done by the owner of that type of activity. How to file taxes for 2012 One of your main reasons for doing the work is to avoid the disallowance of any loss or credit from the activity under the passive activity rules. How to file taxes for 2012 Participation as an investor. How to file taxes for 2012   You do not treat the work you do in your capacity as an investor in an activity as participation unless you are directly involved in the day-to-day management or operations of the activity. How to file taxes for 2012 Work you do as an investor includes: Studying and reviewing financial statements or reports on operations of the activity, Preparing or compiling summaries or analyses of the finances or operations of the activity for your own use, and Monitoring the finances or operations of the activity in a nonmanagerial capacity. How to file taxes for 2012 Spouse's participation. How to file taxes for 2012   Your participation in an activity includes your spouse's participation. How to file taxes for 2012 This applies even if your spouse did not own any interest in the activity and you and your spouse do not file a joint return for the year. How to file taxes for 2012 Proof of participation. How to file taxes for 2012 You can use any reasonable method to prove your participation in an activity for the year. How to file taxes for 2012 You do not have to keep contemporaneous daily time reports, logs, or similar documents if you can establish your participation in some other way. How to file taxes for 2012 For example, you can show the services you performed and the approximate number of hours spent by using an appointment book, calendar, or narrative summary. How to file taxes for 2012 Limited partners. How to file taxes for 2012   If you owned an activity as a limited partner, you generally are not treated as materially participating in the activity. How to file taxes for 2012 However, you are treated as materially participating in the activity if you met test (1), (5), or (6) under Material participation tests , discussed earlier, for the tax year. How to file taxes for 2012   You are not treated as a limited partner, however, if you also were a general partner in the partnership at all times during the partnership's tax year ending with or within your tax year (or, if shorter, during that part of the partnership's tax year in which you directly or indirectly owned your limited partner interest). How to file taxes for 2012 Retired or disabled farmer and surviving spouse of a farmer. How to file taxes for 2012   If you are a retired or disabled farmer, you are treated as materially participating in a farming activity if you materially participated for 5 or more of the 8 years before your retirement or disability. How to file taxes for 2012 Similarly, if you are a surviving spouse of a farmer, you are treated as materially participating in a farming activity if the real property used in the activity meets the estate tax rules for special valuation of farm property passed from a qualifying decedent, and you actively manage the farm. How to file taxes for 2012 Corporations. How to file taxes for 2012   A closely held corporation or a personal service corporation is treated as materially participating in an activity only if one or more shareholders holding more than 50% by value of the outstanding stock of the corporation materially participate in the activity. How to file taxes for 2012   A closely held corporation can also satisfy the material participation standard by meeting the first two requirements for the qualifying business exception from the at-risk limits. How to file taxes for 2012 See Special exception for qualified corporations under Activities Covered by the At-Risk Rules, later. How to file taxes for 2012 Real Estate Professional Generally, rental activities are passive activities even if you materially participated in them. How to file taxes for 2012 However, if you qualified as a real estate professional, rental real estate activities in which you materially participated are not passive activities. How to file taxes for 2012 For this purpose, each interest you have in a rental real estate activity is a separate activity, unless you choose to treat all interests in rental real estate activities as one activity. How to file taxes for 2012 See the Instructions for Schedule E (Form 1040), Supplemental Income and Loss, for information about making this choice. How to file taxes for 2012 If you qualified as a real estate professional for 2013, report income or losses from rental real estate activities in which you materially participated as nonpassive income or losses, and complete line 43 of Schedule E (Form 1040). How to file taxes for 2012 If you also have an unallowed loss from these activities from an earlier year when you did not qualify, see Treatment of former passive activities under Passive Activities, earlier. How to file taxes for 2012 Qualifications. How to file taxes for 2012   You qualified as a real estate professional for the year if you met both of the following requirements. How to file taxes for 2012 More than half of the personal services you performed in all trades or businesses during the tax year were performed in real property trades or businesses in which you materially participated. How to file taxes for 2012 You performed more than 750 hours of services during the tax year in real property trades or businesses in which you materially participated. How to file taxes for 2012   Do not count personal services you performed as an employee in real property trades or businesses unless you were a 5% owner of your employer. How to file taxes for 2012 You were a 5% owner if you owned (or are considered to have owned) more than 5% of your employer's outstanding stock, outstanding voting stock, or capital or profits interest. How to file taxes for 2012   If you file a joint return, do not count your spouse's personal services to determine whether you met the preceding requirements. How to file taxes for 2012 However, you can count your spouse's participation in an activity in determining if you materially participated. How to file taxes for 2012 Real property trades or businesses. How to file taxes for 2012   A real property trade or business is a trade or business that does any of the following with real property. How to file taxes for 2012 Develops or redevelops it. How to file taxes for 2012 Constructs or reconstructs it. How to file taxes for 2012 Acquires it. How to file taxes for 2012 Converts it. How to file taxes for 2012 Rents or leases it. How to file taxes for 2012 Operates or manages it. How to file taxes for 2012 Brokers it. How to file taxes for 2012 Closely held corporations. How to file taxes for 2012   A closely held corporation can qualify as a real estate professional if more than 50% of the gross receipts for its tax year came from real property trades or businesses in which it materially participated. How to file taxes for 2012 Passive Activity Income and Deductions In figuring your net income or loss from a passive activity, take into account only passive activity income and passive activity deductions. How to file taxes for 2012 Self-charged interest. How to file taxes for 2012   Certain self-charged interest income or deductions may be treated as passive activity gross income or passive activity deductions if the loan proceeds are used in a passive activity. How to file taxes for 2012   Generally, self-charged interest income and deductions result from loans between you and a partnership or S corporation in which you had a direct or indirect ownership interest. How to file taxes for 2012 This includes both loans you made to the partnership or S corporation and loans the partnership or S corporation made to you. How to file taxes for 2012   It also includes loans from one partnership or S corporation to another partnership or S corporation if each owner in the borrowing entity has the same proportional ownership interest in the lending entity. How to file taxes for 2012    Exception. How to file taxes for 2012 The self-charged interest rules do not apply to your interest in a partnership or S corporation if the entity made an election under Regulations section 1. How to file taxes for 2012 469-7(g) to avoid the application of these rules. How to file taxes for 2012 For more details on the self-charged interest rules, see Regulations section 1. How to file taxes for 2012 469-7. How to file taxes for 2012 Passive Activity Income Passive activity income includes all income from passive activities and generally includes gain from disposition of an interest in a passive activity or property used in a passive activity. How to file taxes for 2012 Passive activity income does not include the following items. How to file taxes for 2012 Income from an activity that is not a passive activity. How to file taxes for 2012 These activities are discussed under Activities That Are Not Passive Activities , earlier. How to file taxes for 2012 Portfolio income. How to file taxes for 2012 This includes interest, dividends, annuities, and royalties not derived in the ordinary course of a trade or business. How to file taxes for 2012 It includes gain or loss from the disposition of property that produces these types of income or that is held for investment. How to file taxes for 2012 The exclusion for portfolio income does not apply to self-charged interest treated as passive activity income. How to file taxes for 2012 For more information on self-charged interest, see Self-charged interest , earlier. How to file taxes for 2012 Personal service income. How to file taxes for 2012 This includes salaries, wages, commissions, self-employment income from trade or business activities in which you materially participated, deferred compensation, taxable social security and other retirement benefits, and payments from partnerships to partners for personal services. How to file taxes for 2012 Income from positive section 481 adjustments allocated to activities other than passive activities. How to file taxes for 2012 (Section 481 adjustments are adjustments that must be made due to changes in your accounting method. How to file taxes for 2012 ) Income or gain from investments of working capital. How to file taxes for 2012 Income from an oil or gas property if you treated any loss from a working interest in the property for any tax year beginning after 1986 as a nonpassive loss, as discussed in item (2) under Activities That Are Not Passive Activities , earlier. How to file taxes for 2012 This also applies to income from other oil and gas property the basis of which is determined wholly or partly by the basis of the property in the preceding sentence. How to file taxes for 2012 Any income from intangible property, such as a patent, copyright, or literary, musical, or artistic composition, if your personal efforts significantly contributed to the creation of the property. How to file taxes for 2012 Any other income that must be treated as nonpassive income. How to file taxes for 2012 See Recharacterization of Passive Income , later. How to file taxes for 2012 Overall gain from any interest in a publicly traded partnership. How to file taxes for 2012 See Publicly Traded Partnerships (PTPs) in the instructions for Form 8582. How to file taxes for 2012 State, local, and foreign income tax refunds. How to file taxes for 2012 Income from a covenant not to compete. How to file taxes for 2012 Reimbursement of a casualty or theft loss included in gross income to recover all or part of a prior year loss deduction, if the loss deduction was not a passive activity deduction. How to file taxes for 2012 Alaska Permanent Fund dividends. How to file taxes for 2012 Cancellation of debt income, if at the time the debt is discharged the debt is not allocated to passive activities under the interest expense allocation rules. How to file taxes for 2012 See chapter 4 of Publication 535, Business Expenses, for information about the rules for allocating interest. How to file taxes for 2012 Disposition of property interests. How to file taxes for 2012   Gain on the disposition of an interest in property generally is passive activity income if, at the time of the disposition, the property was used in an activity that was a passive activity in the year of disposition. How to file taxes for 2012 The gain generally is not passive activity income if, at the time of disposition, the property was used in an activity that was not a passive activity in the year of disposition. How to file taxes for 2012 An exception to this general rule may apply if you previously used the property in a different activity. How to file taxes for 2012 Exception for more than one use in the preceding 12 months. How to file taxes for 2012   If you used the property in more than one activity during the 12-month period before its disposition, you must allocate the gain between the activities on a basis that reasonably reflects the property's use during that period. How to file taxes for 2012 Any gain allocated to a passive activity is passive activity income. How to file taxes for 2012   For this purpose, an allocation of the gain solely to the activity in which the property was mainly used during that period reasonably reflects the property's use if the fair market value of your interest in the property is not more than the lesser of: $10,000, or 10% of the total of the fair market value of your interest in the property and the fair market value of all other property used in that activity immediately before the disposition. How to file taxes for 2012 Exception for substantially appreciated property. How to file taxes for 2012   The gain is passive activity income if the fair market value of the property at disposition was more than 120% of its adjusted basis and either of the following conditions applies. How to file taxes for 2012 You used the property in a passive activity for 20% of the time you held your interest in the property. How to file taxes for 2012 You used the property in a passive activity for the entire 24-month period before its disposition. How to file taxes for 2012 If neither condition applies, the gain is not passive activity income. How to file taxes for 2012 However, it is treated as portfolio income only if you held the property for investment for more than half of the time you held it in nonpassive activities. How to file taxes for 2012   For this purpose, treat property you held through a corporation (other than an S corporation) or other entity whose owners receive only portfolio income as property held in a nonpassive activity and as property held for investment. How to file taxes for 2012 Also, treat the date you agree to transfer your interest for a fixed or determinable amount as the disposition date. How to file taxes for 2012   If you used the property in more than one activity during the 12-month period before its disposition, this exception applies only to the part of the gain allocated to a passive activity under the rules described in the preceding discussion. How to file taxes for 2012 Disposition of property converted to inventory. How to file taxes for 2012   If you disposed of property that you had converted to inventory from its use in another activity (for example, you sold condominium units you previously held for use in a rental activity), a special rule may apply. How to file taxes for 2012 Under this rule, you disregard the property's use as inventory and treat it as if it were still used in that other activity at the time of disposition. How to file taxes for 2012 This rule applies only if you meet all of the following conditions. How to file taxes for 2012 At the time of disposition, you held your interest in the property in a dealing activity (an activity that involves holding the property or similar property mainly for sale to customers in the ordinary course of a trade or business). How to file taxes for 2012 Your other activities included a nondealing activity (an activity that does not involve holding similar property for sale to customers in the ordinary course of a trade or business) in which you used the property for more than 80% of the period you held it. How to file taxes for 2012 You did not acquire or hold your interest in the property for the main purpose of selling it to customers in the ordinary course of a trade or business. How to file taxes for 2012 Passive Activity Deductions Generally, a deduction is a passive activity deduction for a taxable year if and only if such deduction either: Arises in connection with the conduct of an activity that is a passive activity for the tax year; or Is treated as a deduction from an activity for the tax year because it was disallowed by the passive activity rules in the preceding year and carried forward to the tax year. How to file taxes for 2012 For purposes of item (1), above, an item of deduction arises in the taxable year in which the item would be allowable as a deduction under the taxpayer's method of accounting if taxable income for all taxable years were determined without regard to the passive activity rules and without regard to the basis, excess farm loss, and at-risk limits. How to file taxes for 2012 See Coordination with other limitations on deductions that apply before the passive activity rules , later. How to file taxes for 2012 Passive activity deductions generally include losses from dispositions of property used in a passive activity at the time of the disposition and losses from a disposition of less than your entire interest in a passive activity. How to file taxes for 2012 Exceptions. How to file taxes for 2012   Passive activity deductions do not include the following items. How to file taxes for 2012 Deductions for expenses (other than interest expense) that are clearly and directly allocable to portfolio income. How to file taxes for 2012 Qualified home mortgage interest, capitalized interest expenses, and other interest expenses (other than self-charged interest) properly allocable to passive activities. How to file taxes for 2012 For more information on self-charged interest, see Self-charged interest under Passive Activity Income and Deductions, earlier. How to file taxes for 2012 Losses from dispositions of property that produce portfolio income or property held for investment. How to file taxes for 2012 State, local, and foreign income taxes. How to file taxes for 2012 Miscellaneous itemized deductions that may be disallowed because of the 2%-of-adjusted-gross-income limit. How to file taxes for 2012 Charitable contribution deductions. How to file taxes for 2012 Net operating loss deductions. How to file taxes for 2012 Percentage depletion carryovers for oil and gas wells. How to file taxes for 2012 Capital loss carrybacks and carryovers. How to file taxes for 2012 Items of deduction from a passive activity that are disallowed under the limits on deductions that apply before the passive activity rules. How to file taxes for 2012 See Coordination with other limitations on deductions that apply before the passive activity rules , later. How to file taxes for 2012 Deductions and losses that would have been allowed for tax years beginning before 1987 but for basis or at-risk limits. How to file taxes for 2012 Net negative section 481 adjustments allocated to activities other than passive activities. How to file taxes for 2012 (Section 481 adjustments are adjustments required due to changes in accounting methods. How to file taxes for 2012 ) Casualty and theft losses, unless losses similar in cause and severity recur regularly in the activity. How to file taxes for 2012 The deduction for the employer-equivalent portion of self-employment tax. How to file taxes for 2012 Coordination with other limitations on deductions that apply before the passive activity rules. How to file taxes for 2012   An item of deduction from a passive activity that is disallowed for a tax year under the basis or at-risk limitations is not a passive activity deduction for the tax year. How to file taxes for 2012 The following sections provide rules for figuring the extent to which items of deduction from a passive activity are disallowed for a tax year under the basis or at-risk limitations. How to file taxes for 2012 Proration of deductions disallowed under basis limitations. How to file taxes for 2012   If any amount of your distributive share of a partnership's loss for the tax year is disallowed under the basis limitation, a ratable portion of your distributive share of each item of deduction or loss of the partnership is disallowed for the tax year. How to file taxes for 2012 For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of your distributive share of partnership loss that is disallowed for the taxable year; by The sum of your distributive shares of all items of deduction and loss of the partnership for the tax year. How to file taxes for 2012   If any amount of your pro rata share of an S corporation's loss for the tax year is disallowed under the basis limitation, a ratable portion of your pro rata share of each item of deduction or loss of the S corporation is disallowed for the tax year. How to file taxes for 2012 For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of your share of S corporation loss that is disallowed for the tax year; by The sum of your pro rata shares of all items of deduction and loss of the corporation for the tax year. How to file taxes for 2012 Proration of deductions disallowed under at-risk limitation. How to file taxes for 2012   If any amount of your loss from an activity (as defined in Activities Covered by the At-Risk Rules , later) is disallowed under the at-risk rules for the tax year, a ratable portion of each item of deduction or loss from the activity is disallowed for the tax year. How to file taxes for 2012 For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of the loss from the activity that is disallowed for the tax year; by The sum of all deductions from the activity for the taxable year. How to file taxes for 2012 Coordination of basis and at-risk limitations. How to file taxes for 2012   The portion of any item of deduction or loss that is disallowed for the tax year under the basis limitations is not taken into account for the taxable year in determining the loss from an activity (as defined in Activities Covered by the At-Risk Rules , later) for purposes of applying the at-risk rules. How to file taxes for 2012 Separately identified items of deduction and loss. How to file taxes for 2012   In identifying the items of deduction and loss from an activity that are not disallowed under the basis and at-risk limitations (and that therefore may be treated as passive activity deductions), you need not account separately for any item of deduction or loss unless such item may, if separately taken into account, result in an income tax liability different from that which would result were such item of deduction or loss taken into account separately. How to file taxes for 2012   Items of deduction or loss that must be accounted for separately include (but are not limited to) items of deduction or loss that: Are attributable to separate activities. How to file taxes for 2012 See Grouping Your Activities , later. How to file taxes for 2012 Arise in a rental real estate activity in tax years in which you actively participate in such activity; Arise in a rental real estate activity in taxable years in which you do not actively participate in such activity; Arose in a taxable year beginning before 1987 and were not allowed for such taxable year under the basis or at-risk limitations; Are taken into account under section 613A(d) (relating to limitations on certain depletion deductions); Are taken into account under section 1211 (relating to the limitation on capital losses); Are taken into account under section 1231 (relating to property used in a trade or business and involuntary conversions). How to file taxes for 2012 See Section 1231 Gains and Losses in Publication 544 for more information. How to file taxes for 2012 Are attributable to pre-enactment interests in activities. How to file taxes for 2012 See Regulations section 1. How to file taxes for 2012 469-11T(c). How to file taxes for 2012 Grouping Your Activities You can treat one or more trade or business activities, or rental activities, as a single activity if those activities form an appropriate economic unit for measuring gain or loss under the passive activity rules. How to file taxes for 2012 Grouping is important for a number of reasons. How to file taxes for 2012 If you group two activities into one larger activity, you need only show material participation in the activity as a whole. How to file taxes for 2012 But if the two activities are separate, you must show material participation in each one. How to file taxes for 2012 On the other hand, if you group two activities into one larger activity and you dispose of one of the two, then you have disposed of only part of your entire interest in the activity. How to file taxes for 2012 But if the two activities are separate and you dispose of one of them, then you have disposed of your entire interest in that activity. How to file taxes for 2012 Grouping can also be important in determining whether you meet the 10% ownership requirement for actively participating in a rental real estate activity. How to file taxes for 2012 Appropriate Economic Units Generally, to determine if activities form an appropriate economic unit, you must consider all the relevant facts and circumstances. How to file taxes for 2012 You can use any reasonable method of applying the relevant facts and circumstances in grouping activities. How to file taxes for 2012 The following factors have the greatest weight in determining whether activities form an appropriate economic unit. How to file taxes for 2012 All of the factors do not have to apply to treat more than one activity as a single activity. How to file taxes for 2012 The factors that you should consider are: The similarities and differences in the types of trades or businesses, The extent of common control, The extent of common ownership, The geographical location, and The interdependencies between or among activities, which may include the extent to which the activities: Buy or sell goods between or among themselves, Involve products or services that are generally provided together, Have the same customers, Have the same employees, or Use a single set of books and records to account for the activities. How to file taxes for 2012 Example 1. How to file taxes for 2012 John Jackson owns a bakery and a movie theater at a shopping mall in Baltimore and a bakery and movie theater in Philadelphia. How to file taxes for 2012 Based on all the relevant facts and circumstances, there may be more than one reasonable method for grouping John's activities. How to file taxes for 2012 For example, John may be able to group the movie theaters and the bakeries into: One activity, A movie theater activity and a bakery activity, A Baltimore activity and a Philadelphia activity, or Four separate activities. How to file taxes for 2012 Example 2. How to file taxes for 2012 Betty is a partner in ABC partnership, which sells nonfood items to grocery stores. How to file taxes for 2012 Betty is also a partner in DEF (a trucking business). How to file taxes for 2012 ABC and DEF are under common control. How to file taxes for 2012 The main part of DEF's business is transporting goods for ABC. How to file taxes for 2012 DEF is the only trucking business in which Betty is involved. How to file taxes for 2012 Based on the rules of this section, Betty treats ABC's wholesale activity and DEF's trucking activity as a single activity. How to file taxes for 2012 Consistency and disclosure requirement. How to file taxes for 2012   Generally, when you group activities into appropriate economic units, you may not regroup those activities in a later tax year. How to file taxes for 2012 You must meet any disclosure requirements of the IRS when you first group your activities and when you add or dispose of any activities in your groupings. How to file taxes for 2012   However, if the original grouping is clearly inappropriate or there is a material change in the facts and circumstances that makes the original grouping clearly inappropriate, you must regroup the activities and comply with any disclosure requirements of the IRS. How to file taxes for 2012   See Disclosure Requirement , later. How to file taxes for 2012 Regrouping by the IRS. How to file taxes for 2012   If any of the activities resulting from your grouping is not an appropriate economic unit and one of the primary purposes of your grouping (or failure to regroup) is to avoid the passive activity rules, the IRS may regroup your activities. How to file taxes for 2012 Rental activities. How to file taxes for 2012   In general, you cannot group a rental activity with a trade or business activity. How to file taxes for 2012 However, you can group them together if the activities form an appropriate economic unit and: The rental activity is insubstantial in relation to the trade or business activity, The trade or business activity is insubstantial in relation to the rental activity, or Each owner of the trade or business activity has the same ownership interest in the rental activity, in which case the part of the rental activity that involves the rental of items of property for use in the trade or business activity may be grouped with the trade or business activity. How to file taxes for 2012 Example. How to file taxes for 2012 Herbert and Wilma are married and file a joint return. How to file taxes for 2012 Healthy Food, an S corporation, is a grocery store business. How to file taxes for 2012 Herbert is Healthy Food's only shareholder. How to file taxes for 2012 Plum Tower, an S corporation, owns and rents out the building. How to file taxes for 2012 Wilma is Plum Tower's only shareholder. How to file taxes for 2012 Plum Tower rents part of its building to Healthy Food. How to file taxes for 2012 Plum Tower's grocery store rental business and Healthy Food's grocery business are not insubstantial in relation to each other. How to file taxes for 2012 Herbert and Wilma file a joint return, so they are treated as one taxpayer for purposes of the passive activity rules. How to file taxes for 2012 The same owner (Herbert and Wilma) owns both Healthy Food and Plum Tower with the same ownership interest (100% in each). How to file taxes for 2012 If the grouping forms an appropriate economic unit, as discussed earlier, Herbert and Wilma can group Plum Tower's grocery store rental and Healthy Food's grocery business into a single trade or business activity. How to file taxes for 2012 Grouping of real and personal property rentals. How to file taxes for 2012   In general, you cannot treat an activity involving the rental of real property and an activity involving the rental of personal property as a single activity. How to file taxes for 2012 However, you can treat them as a single activity if you provide the personal property in connection with the real property or the real property in connection with the personal property. How to file taxes for 2012 Certain activities may not be grouped. How to file taxes for 2012   In general, if you own an interest as a limited partner or a limited entrepreneur in one of the following activities, you may not group that activity with any other activity in another type of business. How to file taxes for 2012 Holding, producing, or distributing motion picture films or video tapes. How to file taxes for 2012 Farming. How to file taxes for 2012 Leasing any section 1245 property (as defined in section 1245(a)(3) of the Internal Revenue Code). How to file taxes for 2012 For a list of section 1245 property, see Section 1245 property under Activities Covered by the At-Risk Rules , later. How to file taxes for 2012 Exploring for, or exploiting, oil and gas resources. How to file taxes for 2012 Exploring for, or exploiting, geothermal deposits. How to file taxes for 2012   If you own an interest as a limited partner or a limited entrepreneur in an activity described in the list above, you may group that activity with another activity in the same type of business if the grouping forms an appropriate economic unit as discussed earlier. How to file taxes for 2012 Limited entrepreneur. How to file taxes for 2012   A limited entrepreneur is a person who: Has an interest in an enterprise other than as a limited partner, and Does not actively participate in the management of the enterprise. How to file taxes for 2012 Activities conducted through another entity. How to file taxes for 2012   A personal service corporation, closely held corporation, partnership, or S corporation must group its activities using the rules discussed in this section. How to file taxes for 2012 Once the entity groups its activities, you, as the partner or shareholder of the entity, may group those activities (following the rules of this section): With each other, With activities conducted directly by you, or With activities conducted through other entities. How to file taxes for 2012    You may not treat activities grouped together by the entity as separate activities. How to file taxes for 2012 Personal service and closely held corporations. How to file taxes for 2012   You may group an activity conducted through a personal service or closely held corporation with your other activities only to determine whether you materially or significantly participated in those other activities. How to file taxes for 2012 See Material Participation , earlier, and Significant Participation Passive Activities , later. How to file taxes for 2012 Publicly traded partnership (PTP). How to file taxes for 2012   You may not group activities conducted through a PTP with any other activity, including an activity conducted through another PTP. How to file taxes for 2012 Partial dispositions. How to file taxes for 2012   If you dispose of substantially all of an activity during your tax year, you may treat the part disposed of as a separate activity. How to file taxes for 2012 However, you can do this only if you can show with reasonable certainty: The amount of deductions and credits disallowed in prior years under the passive activity rules that is allocable to the part of the activity disposed of, and The amount of gross income and any other deductions and credits for the current tax year that is allocable to the part of the activity disposed of. How to file taxes for 2012 Disclosure Requirement For tax years beginning after January 24, 2010, the following disclosure requirements for groupings apply. How to file taxes for 2012 You are required to report certain changes to your groupings that occur during the tax year to the IRS. How to file taxes for 2012 If you fail to report these changes, each trade or business activity or rental activity will be treated as a separate activity. How to file taxes for 2012 You will be considered to have made a timely disclosure if you filed all affected income tax returns consistent with the claimed grouping and make the required disclosure on the income tax return for the year in which you first discovered the failure to disclose. How to file taxes for 2012 If the IRS discovered the failure to disclose, you must have reasonable cause for not making the required disclosure. How to file taxes for 2012 New grouping. How to file taxes for 2012   You must file a written statement with your original income tax return for the first tax year in which two or more activities are originally grouped into a single activity. How to file taxes for 2012 The statement must provide the names, addresses, and employer identification numbers (EINs), if applicable, for the activities being grouped as a single activity. How to file taxes for 2012 In addition, the statement must contain a declaration that the grouped activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. How to file taxes for 2012 Addition to an existing grouping. How to file taxes for 2012   You must file a written statement with your original income tax return for the tax year in which you add a new activity to an existing group. How to file taxes for 2012 The statement must provide the name, address, and EIN, if applicable, for the activity that is being added and for the activities in the existing group. How to file taxes for 2012 In addition, the statement must contain a declaration that the activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. How to file taxes for 2012 Regrouping. How to file taxes for 2012   You must file a written statement with your original income tax return for the tax year in which you regroup the activities. How to file taxes for 2012 The statement must provide the names, addresses, and EINs, if applicable, for the activities that are being regrouped. How to file taxes for 2012 If two or more activities are being regrouped into a single activity, the statement must contain a declaration that the regrouped activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. How to file taxes for 2012 In addition, the statement must contain an explanation of the material change in the facts and circumstances that made the original grouping clearly inappropriate. How to file taxes for 2012 Groupings by partnerships and S corporations. How to file taxes for 2012   Partnerships and S corporations are not subject to the rules for new grouping, addition to an existing grouping, or regrouping. How to file taxes for 2012 Instead, they must comply with the disclosure instructions for grouping activities provided in their Form 1065, U. How to file taxes for 2012 S. How to file taxes for 2012 Return of Partnership Income, or Form 1120S, U. How to file taxes for 2012 S. How to file taxes for 2012 Income Tax Return for an S Corporation, whichever is applicable. How to file taxes for 2012   The partner or shareholder is not required to make a separate disclosure of the groupings disclosed by the entity unless the partner or shareholder: Groups together any of the activities that the entity does not group together, Groups the entity's activities with activities conducted directly by the partner or shareholder, or Groups an entity's activities with activities conducted through another entity. How to file taxes for 2012   A partner or shareholder may not treat activities grouped together by the entity as separate activities. How to file taxes for 2012 Recharacterization of Passive Income Net income from the following passive activities may have to be recharacterized and excluded from passive activity income. How to file taxes for 2012 Significant participation passive activities, Rental of property when less than 30% of the unadjusted basis of the property is subject to depreciation, Equity-financed lending activities, Rental of property incidental to development activities, Rental of property to nonpassive activities, and Licensing of intangible property by  pass-through entities. How to file taxes for 2012 If you are engaged in or have an interest in one of these activities during the tax year (either directly or through a partnership or an S corporation), combine the income and losses from the activity to determine if you have a net loss or net income from that activity. How to file taxes for 2012 If the result is a net loss, treat the income and losses the same as any other income or losses from that type of passive activity (trade or business activity or rental activity). How to file taxes for 2012 If the result is net income, do not enter any of the income or losses from the activity or property on Form 8582 or its worksheets. How to file taxes for 2012 Instead, enter income or losses on the form and schedules you normally use. How to file taxes for 2012 However, see Significant Participation Passive Activities , later, if the activity is a significant participation passive activity and you also have a net loss from a different significant participation passive activity. How to file taxes for 2012 Limit on recharacterized passive income. How to file taxes for 2012   The total amount that you treat as nonpassive income under the rules described later in this discussion for significant participation passive activities, rental of nondepreciable property, and equity-financed lending activities cannot exceed the greatest amount that you treat as nonpassive income under any one of these rules. How to file taxes for 2012 Investment income and investment expense. How to file taxes for 2012   To figure your investment interest expense limitation on Form 4952, treat as investment income any net passive income recharacterized as nonpassive income from rental of nondepreciable property, equity-financed lending activity, or licensing of intangible property by a pass-through entity. How to file taxes for 2012 Significant Participation Passive Activities A significant participation passive activity is any trade or business activity in which you participated for more than 100 hours during the tax year but did not materially participate. How to file taxes for 2012 If your gross income from all significant participation passive activities is more than your deductions from those activities, a part of your net income from each significant participation passive activity is treated as nonpassive income. How to file taxes for 2012 Corporations. How to file taxes for 2012   An activity of a personal service corporation or closely held corporation is a significant participation passive activity if both of the following statements are true. How to file taxes for 2012 The corporation is not treated as materially participating in the activity for the year. How to file taxes for 2012 One or more individuals, each of whom is treated as significantly participating in the activity, directly or indirectly hold (in total) more than 50% (by value) of the corporation's outstanding stock. How to file taxes for 2012 Worksheet A. How to file taxes for 2012   Complete Worksheet A. How to file taxes for 2012 Significant Participation Passive Activities , below, if you have income or losses from any significant participation activity. How to file taxes for 2012 Begin by entering the name of each activity in the left column. How to file taxes for 2012 Column (a). How to file taxes for 2012   Enter the number of hours you participated in each activity and total the column. How to file taxes for 2012   If the total is more than 500, do not complete Worksheet A or B. How to file taxes for 2012 None of the activities are passive activities because you satisfy test 4 for material participation. How to file taxes for 2012 (See Material participation tests , earlier. How to file taxes for 2012 ) Report all the income and losses from these activities on the forms and schedules you normally use. How to file taxes for 2012 Do not include the income and losses on Form 8582. How to file taxes for 2012 Column (b). How to file taxes for 2012   Enter the net loss, if any, from the activity. How to file taxes for 2012 Net loss from an activity means either: The activity's current year net loss (if any) plus prior year unallowed losses (if any), or The excess of prior year unallowed losses over the current year net income (if any). How to file taxes for 2012 Enter -0- here if the prior year unallowed loss is the same as the current year net income. How to file taxes for 2012 Column (c). How to file taxes for 2012   Enter net income (if any) from the activity. How to file taxes for 2012 Net income means the excess of the current year's net income from the activity over any prior year unallowed losses from the activity. How to file taxes for 2012 Column (d). How to file taxes for 2012   Combine amounts in the Totals row for columns (b) and (c) and enter the total net income or net loss in the Totals row of column (d). How to file taxes for 2012 If column (d) is a net loss, skip Worksheet B, Significant Participation Activities With Net Income. How to file taxes for 2012 Include the income and losses in Worksheet 3 of Form 8582 (or Worksheet 2 in the Form 88