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How To Fill Out A 1040x Form

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How To Fill Out A 1040x Form

How to fill out a 1040x form 8. How to fill out a 1040x form   Amortization Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: How To Deduct Amortization Starting a BusinessBusiness Start-Up Costs Costs of Organizing a Corporation Costs of Organizing a Partnership How To Amortize Getting a Lease Section 197 IntangiblesSection 197 Intangibles Defined Assets That Are Not Section 197 Intangibles Safe Harbor for Creative Property Costs Anti-Churning Rules Incorrect Amount of Amortization Deducted Disposition of Section 197 Intangibles Reforestation Costs Geological and Geophysical Costs Pollution Control FacilitiesNew identifiable treatment facility. How to fill out a 1040x form Research and Experimental Costs Optional Write-off of Certain Tax Preferences Introduction Amortization is a method of recovering (deducting) certain capital costs over a fixed period of time. How to fill out a 1040x form It is similar to the straight line method of depreciation. How to fill out a 1040x form The various amortizable costs covered in this chapter are included in the list below. How to fill out a 1040x form However, this chapter does not discuss amortization of bond premium. How to fill out a 1040x form For information on that topic, see chapter 3 of Publication 550, Investment Income and Expenses. How to fill out a 1040x form Topics - This chapter discusses: Deducting amortization Amortizing costs of starting a business Amortizing costs of getting a lease Amortizing costs of section 197 intangibles Amortizing reforestation costs Amortizing costs of geological and geophysical costs Amortizing costs of pollution control facilities Amortizing costs of research and experimentation Amortizing costs of certain tax preferences Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 4626 Alternative Minimum Tax—Corporations 6251 Alternative Minimum Tax—Individuals See chapter 12 for information about getting publications and forms. How to fill out a 1040x form How To Deduct Amortization To deduct amortization that begins during the current tax year, complete Part VI of Form 4562 and attach it to your income tax return. How to fill out a 1040x form To report amortization from previous years, in addition to amortization that begins in the current year, list on Form 4562 each item separately. How to fill out a 1040x form For example, in 2012, you began to amortize a lease. How to fill out a 1040x form In 2013, you began to amortize a second lease. How to fill out a 1040x form Report amortization from the new lease on line 42 of your 2013 Form 4562. How to fill out a 1040x form Report amortization from the 2012 lease on line 43 of your 2013 Form 4562. How to fill out a 1040x form If you do not have any new amortizable expenses for the current year, you are not required to complete Form 4562 (unless you are claiming depreciation). How to fill out a 1040x form Report the current year's deduction for amortization that began in a prior year directly on the “Other deduction” or “Other expense line” of your return. How to fill out a 1040x form Starting a Business When you start a business, treat all eligible costs you incur before you begin operating the business as capital expenditures which are part of your basis in the business. How to fill out a 1040x form Generally, you recover costs for particular assets through depreciation deductions. How to fill out a 1040x form However, you generally cannot recover other costs until you sell the business or otherwise go out of business. How to fill out a 1040x form For a discussion on how to treat these costs, see If your attempt to go into business is unsuccessful under Capital Expenses in chapter 1. How to fill out a 1040x form For costs paid or incurred after September 8, 2008, you can deduct a limited amount of start-up and organizational costs. How to fill out a 1040x form The costs that are not deducted currently can be amortized ratably over a 180-month period. How to fill out a 1040x form The amortization period starts with the month you begin operating your active trade or business. How to fill out a 1040x form You are not required to attach a statement to make this election. How to fill out a 1040x form You can choose to forgo this election by affirmatively electing to capitalize your start-up costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. How to fill out a 1040x form Once made, the election to either amortize or capitalize start-up costs is irrevocable and applies to all start-up costs that are related to your trade or business. How to fill out a 1040x form See Regulations sections 1. How to fill out a 1040x form 195-1, 1. How to fill out a 1040x form 248-1, and 1. How to fill out a 1040x form 709-1. How to fill out a 1040x form For costs paid or incurred after October 22, 2004, and before September 9, 2008, you can elect to deduct a limited amount of business start-up and organizational costs in the year your active trade or business begins. How to fill out a 1040x form Any costs not deducted can be amortized ratably over a 180-month period, beginning with the month you begin business. How to fill out a 1040x form If the election is made, you must attach any statement required by Regulations sections 1. How to fill out a 1040x form 195-1(b), 1. How to fill out a 1040x form 248-1(c), and 1. How to fill out a 1040x form 709-1(c), as in effect before September 9, 2008. How to fill out a 1040x form Note. How to fill out a 1040x form You can apply the provisions of Regulations sections 1. How to fill out a 1040x form 195-1, 1. How to fill out a 1040x form 248-1, and 1. How to fill out a 1040x form 709-1 to all business start-up and organizational costs paid or incurred after October 22, 2004, provided the period of limitations on assessment has not expired for the year of the election. How to fill out a 1040x form Otherwise, the provisions under Regulations sections 1. How to fill out a 1040x form 195-1(b), 1. How to fill out a 1040x form 248-1(c), and 1. How to fill out a 1040x form 709-1(c), as in effect before September 9, 2008, will apply. How to fill out a 1040x form For costs paid or incurred before October 23, 2004, you can elect to amortize business start-up and organization costs over an amortization period of 60 months or more. How to fill out a 1040x form See How To Make the Election , later. How to fill out a 1040x form The cost must qualify as one of the following. How to fill out a 1040x form A business start-up cost. How to fill out a 1040x form An organizational cost for a corporation. How to fill out a 1040x form An organizational cost for a partnership. How to fill out a 1040x form Business Start-Up Costs Start-up costs are amounts paid or incurred for: (a) creating an active trade or business; or (b) investigating the creation or acquisition of an active trade or business. How to fill out a 1040x form Start-up costs include amounts paid or incurred in connection with an existing activity engaged in for profit; and for the production of income in anticipation of the activity becoming an active trade or business. How to fill out a 1040x form Qualifying costs. How to fill out a 1040x form   A start-up cost is amortizable if it meets both of the following tests. How to fill out a 1040x form It is a cost you could deduct if you paid or incurred it to operate an existing active trade or business (in the same field as the one you entered into). How to fill out a 1040x form It is a cost you pay or incur before the day your active trade or business begins. How to fill out a 1040x form   Start-up costs include amounts paid for the following: An analysis or survey of potential markets, products, labor supply, transportation facilities, etc. How to fill out a 1040x form Advertisements for the opening of the business. How to fill out a 1040x form Salaries and wages for employees who are being trained and their instructors. How to fill out a 1040x form Travel and other necessary costs for securing prospective distributors, suppliers, or customers. How to fill out a 1040x form Salaries and fees for executives and consultants, or for similar professional services. How to fill out a 1040x form Nonqualifying costs. How to fill out a 1040x form   Start-up costs do not include deductible interest, taxes, or research and experimental costs. How to fill out a 1040x form See Research and Experimental Costs , later. How to fill out a 1040x form Purchasing an active trade or business. How to fill out a 1040x form   Amortizable start-up costs for purchasing an active trade or business include only investigative costs incurred in the course of a general search for or preliminary investigation of the business. How to fill out a 1040x form These are costs that help you decide whether to purchase a business. How to fill out a 1040x form Costs you incur in an attempt to purchase a specific business are capital expenses that you cannot amortize. How to fill out a 1040x form Example. How to fill out a 1040x form On June 1st, you hired an accounting firm and a law firm to assist you in the potential purchase of XYZ, Inc. How to fill out a 1040x form They researched XYZ's industry and analyzed the financial projections of XYZ, Inc. How to fill out a 1040x form In September, the law firm prepared and submitted a letter of intent to XYZ, Inc. How to fill out a 1040x form The letter stated that a binding commitment would result only after a purchase agreement was signed. How to fill out a 1040x form The law firm and accounting firm continued to provide services including a review of XYZ's books and records and the preparation of a purchase agreement. How to fill out a 1040x form On October 22nd, you signed a purchase agreement with XYZ, Inc. How to fill out a 1040x form All amounts paid or incurred to investigate the business before October 22nd are amortizable investigative costs. How to fill out a 1040x form Amounts paid on or after that date relate to the attempt to purchase the business and therefore must be capitalized. How to fill out a 1040x form Disposition of business. How to fill out a 1040x form   If you completely dispose of your business before the end of the amortization period, you can deduct any remaining deferred start-up costs. How to fill out a 1040x form However, you can deduct these deferred start-up costs only to the extent they qualify as a loss from a business. How to fill out a 1040x form Costs of Organizing a Corporation Amounts paid to organize a corporation are the direct costs of creating the corporation. How to fill out a 1040x form Qualifying costs. How to fill out a 1040x form   To qualify as an organizational cost, it must be: For the creation of the corporation, Chargeable to a capital account (see chapter 1), Amortized over the life of the corporation if the corporation had a fixed life, and Incurred before the end of the first tax year in which the corporation is in business. How to fill out a 1040x form   A corporation using the cash method of accounting can amortize organizational costs incurred within the first tax year, even if it does not pay them in that year. How to fill out a 1040x form   Examples of organizational costs include: The cost of temporary directors. How to fill out a 1040x form The cost of organizational meetings. How to fill out a 1040x form State incorporation fees. How to fill out a 1040x form The cost of legal services. How to fill out a 1040x form Nonqualifying costs. How to fill out a 1040x form   The following items are capital expenses that cannot be amortized: Costs for issuing and selling stock or securities, such as commissions, professional fees, and printing costs. How to fill out a 1040x form Costs associated with the transfer of assets to the corporation. How to fill out a 1040x form Costs of Organizing a Partnership The costs to organize a partnership are the direct costs of creating the partnership. How to fill out a 1040x form Qualifying costs. How to fill out a 1040x form   A partnership can amortize an organizational cost only if it meets all the following tests. How to fill out a 1040x form It is for the creation of the partnership and not for starting or operating the partnership trade or business. How to fill out a 1040x form It is chargeable to a capital account (see chapter 1). How to fill out a 1040x form It could be amortized over the life of the partnership if the partnership had a fixed life. How to fill out a 1040x form It is incurred by the due date of the partnership return (excluding extensions) for the first tax year in which the partnership is in business. How to fill out a 1040x form However, if the partnership uses the cash method of accounting and pays the cost after the end of its first tax year, see Cash method partnership under How To Amortize, later. How to fill out a 1040x form It is for a type of item normally expected to benefit the partnership throughout its entire life. How to fill out a 1040x form   Organizational costs include the following fees. How to fill out a 1040x form Legal fees for services incident to the organization of the partnership, such as negotiation and preparation of the partnership agreement. How to fill out a 1040x form Accounting fees for services incident to the organization of the partnership. How to fill out a 1040x form Filing fees. How to fill out a 1040x form Nonqualifying costs. How to fill out a 1040x form   The following costs cannot be amortized. How to fill out a 1040x form The cost of acquiring assets for the partnership or transferring assets to the partnership. How to fill out a 1040x form The cost of admitting or removing partners, other than at the time the partnership is first organized. How to fill out a 1040x form The cost of making a contract concerning the operation of the partnership trade or business including a contract between a partner and the partnership. How to fill out a 1040x form The costs for issuing and marketing interests in the partnership such as brokerage, registration, and legal fees and printing costs. How to fill out a 1040x form These “syndication fees” are capital expenses that cannot be depreciated or amortized. How to fill out a 1040x form Liquidation of partnership. How to fill out a 1040x form   If a partnership is liquidated before the end of the amortization period, the unamortized amount of qualifying organizational costs can be deducted in the partnership's final tax year. How to fill out a 1040x form However, these costs can be deducted only to the extent they qualify as a loss from a business. How to fill out a 1040x form How To Amortize Deduct start-up and organizational costs in equal amounts over the applicable amortization period (discussed earlier). How to fill out a 1040x form You can choose an amortization period for start-up costs that is different from the period you choose for organizational costs, as long as both are not less than the applicable amortization period. How to fill out a 1040x form Once you choose an amortization period, you cannot change it. How to fill out a 1040x form To figure your deduction, divide your total start-up or organizational costs by the months in the amortization period. How to fill out a 1040x form The result is the amount you can deduct for each month. How to fill out a 1040x form Cash method partnership. How to fill out a 1040x form   A partnership using the cash method of accounting can deduct an organizational cost only if it has been paid by the end of the tax year. How to fill out a 1040x form However, any cost the partnership could have deducted as an organizational cost in an earlier tax year (if it had been paid that year) can be deducted in the tax year of payment. How to fill out a 1040x form How To Make the Election To elect to amortize start-up or organizational costs, you must complete and attach Form 4562 to your return for the first tax year you are in business. How to fill out a 1040x form You may also be required to attach an accompanying statement (described later) to your return. How to fill out a 1040x form For start-up or organizational costs paid or incurred after September 8, 2008, an accompanying statement is not required. How to fill out a 1040x form Generally, for start-up or organizational costs paid or incurred before September 9, 2008, and after October 22, 2004, unless you choose to apply Regulations sections 1. How to fill out a 1040x form 195-1, 1. How to fill out a 1040x form 248-1, and 1. How to fill out a 1040x form 709-1, you must also attach an accompanying statement to elect to amortize the costs. How to fill out a 1040x form If you have both start-up and organizational costs, attach a separate statement (if required) to your return for each type of cost. How to fill out a 1040x form See Starting a Business , earlier, for more information. How to fill out a 1040x form Generally, you must file the return by the due date (including any extensions). How to fill out a 1040x form However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). How to fill out a 1040x form For more information, see the instructions for Part VI of Form 4562. How to fill out a 1040x form You can choose to forgo the election to amortize by affirmatively electing to capitalize your start-up or organizational costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. How to fill out a 1040x form Note. How to fill out a 1040x form The election to either amortize or capitalize start-up or organizational costs is irrevocable and applies to all start-up and organizational costs that are related to the trade or business. How to fill out a 1040x form If your business is organized as a corporation or partnership, only the corporation or partnership can elect to amortize its start-up or organizational costs. How to fill out a 1040x form A shareholder or partner cannot make this election. How to fill out a 1040x form You, as a shareholder or partner, cannot amortize any costs you incur in setting up your corporation or partnership. How to fill out a 1040x form Only the corporation or partnership can amortize these costs. How to fill out a 1040x form However, you, as an individual, can elect to amortize costs you incur to investigate an interest in an existing partnership. How to fill out a 1040x form These costs qualify as business start-up costs if you acquire the partnership interest. How to fill out a 1040x form Start-up costs election statement. How to fill out a 1040x form   If you elect to amortize your start-up costs, attach a separate statement (if required) that contains the following information. How to fill out a 1040x form A description of the business to which the start-up costs relate. How to fill out a 1040x form A description of each start-up cost incurred. How to fill out a 1040x form The month your active business began (or was acquired). How to fill out a 1040x form The number of months in your amortization period (which is generally 180 months). How to fill out a 1040x form Filing the statement early. How to fill out a 1040x form   You can elect to amortize your start-up costs by filing the statement with a return for any tax year before the year your active business begins. How to fill out a 1040x form If you file the statement early, the election becomes effective in the month of the tax year your active business begins. How to fill out a 1040x form Revised statement. How to fill out a 1040x form   You can file a revised statement to include any start-up costs not included in your original statement. How to fill out a 1040x form However, you cannot include on the revised statement any cost you previously treated on your return as a cost other than a start-up cost. How to fill out a 1040x form You can file the revised statement with a return filed after the return on which you elected to amortize your start-up costs. How to fill out a 1040x form Organizational costs election statement. How to fill out a 1040x form   If you elect to amortize your corporation's or partnership's organizational costs, attach a separate statement (if required) that contains the following information. How to fill out a 1040x form A description of each cost. How to fill out a 1040x form The amount of each cost. How to fill out a 1040x form The date each cost was incurred. How to fill out a 1040x form The month your corporation or partnership began active business (or acquired the business). How to fill out a 1040x form The number of months in your amortization period (which is generally 180 months). How to fill out a 1040x form Partnerships. How to fill out a 1040x form   The statement prepared for a cash basis partnership must also indicate the amount paid before the end of the year for each cost. How to fill out a 1040x form   You do not need to separately list any partnership organizational cost that is less than $10. How to fill out a 1040x form Instead, you can list the total amount of these costs with the dates the first and last costs were incurred. How to fill out a 1040x form   After a partnership makes the election to amortize organizational costs, it can later file an amended return to include additional organizational costs not included in the partnership's original return and statement. How to fill out a 1040x form Getting a Lease If you get a lease for business property, you may recover the cost of acquiring the lease by amortizing it over the term of the lease. How to fill out a 1040x form The term of the lease for amortization purposes generally includes all renewal options (and any other period for which you and the lessor reasonably expect the lease to be renewed). How to fill out a 1040x form However, renewal periods are not included if 75% or more of the cost of acquiring the lease is for the term of the lease remaining on the acquisition date (not including any period for which you may choose to renew, extend, or continue the lease). How to fill out a 1040x form For more information on the costs of getting a lease, see Cost of Getting a Lease in  chapter 3. How to fill out a 1040x form How to amortize. How to fill out a 1040x form   Enter your deduction in Part VI of Form 4562 if you are deducting amortization that begins during the current year, or on the appropriate line of your tax return if you are not otherwise required to file Form 4562. How to fill out a 1040x form Section 197 Intangibles Generally, you may amortize the capitalized costs of “section 197 intangibles” (defined later) ratably over a 15-year period. How to fill out a 1040x form You must amortize these costs if you hold the section 197 intangibles in connection with your trade or business or in an activity engaged in for the production of income. How to fill out a 1040x form You may not be able to amortize section 197 intangibles acquired in a transaction that did not result in a significant change in ownership or use. How to fill out a 1040x form See Anti-Churning Rules, later. How to fill out a 1040x form Your amortization deduction each year is the applicable part of the intangible's adjusted basis (for purposes of determining gain), figured by amortizing it ratably over 15 years (180 months). How to fill out a 1040x form The 15-year period begins with the later of: The month the intangible is acquired, or The month the trade or business or activity engaged in for the production of income begins. How to fill out a 1040x form You cannot deduct amortization for the month you dispose of the intangible. How to fill out a 1040x form If you pay or incur an amount that increases the basis of an amortizable section 197 intangible after the 15-year period begins, amortize it over the remainder of the 15-year period beginning with the month the basis increase occurs. How to fill out a 1040x form You are not allowed any other depreciation or amortization deduction for an amortizable section 197 intangible. How to fill out a 1040x form Tax-exempt use property subject to a lease. How to fill out a 1040x form   The amortization period for any section 197 intangible leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership), shall not be less than 125 percent of the lease term. How to fill out a 1040x form Cost attributable to other property. How to fill out a 1040x form   The rules for section 197 intangibles do not apply to any amount that is included in determining the cost of property that is not a section 197 intangible. How to fill out a 1040x form For example, if the cost of computer software is not separately stated from the cost of hardware or other tangible property and you consistently treat it as part of the cost of the hardware or other tangible property, these rules do not apply. How to fill out a 1040x form Similarly, none of the cost of acquiring real property held for the production of rental income is considered the cost of goodwill, going concern value, or any other section 197 intangible. How to fill out a 1040x form Section 197 Intangibles Defined The following assets are section 197 intangibles and must be amortized over 180 months: Goodwill; Going concern value; Workforce in place; Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers; A patent, copyright, formula, process, design, pattern, know-how, format, or similar item; A customer-based intangible; A supplier-based intangible; Any item similar to items (3) through (7); A license, permit, or other right granted by a governmental unit or agency (including issuances and renewals); A covenant not to compete entered into in connection with the acquisition of an interest in a trade or business; Any franchise, trademark, or trade name; and A contract for the use of, or a term interest in, any item in this list. How to fill out a 1040x form You cannot amortize any of the intangibles listed in items (1) through (8) that you created rather than acquired unless you created them in acquiring assets that make up a trade or business or a substantial part of a trade or business. How to fill out a 1040x form Goodwill. How to fill out a 1040x form   This is the value of a trade or business based on expected continued customer patronage due to its name, reputation, or any other factor. How to fill out a 1040x form Going concern value. How to fill out a 1040x form   This is the additional value of a trade or business that attaches to property because the property is an integral part of an ongoing business activity. How to fill out a 1040x form It includes value based on the ability of a business to continue to function and generate income even though there is a change in ownership (but does not include any other section 197 intangible). How to fill out a 1040x form It also includes value based on the immediate use or availability of an acquired trade or business, such as the use of earnings during any period in which the business would not otherwise be available or operational. How to fill out a 1040x form Workforce in place, etc. How to fill out a 1040x form   This includes the composition of a workforce (for example, its experience, education, or training). How to fill out a 1040x form It also includes the terms and conditions of employment, whether contractual or otherwise, and any other value placed on employees or any of their attributes. How to fill out a 1040x form   For example, you must amortize the part of the purchase price of a business that is for the existence of a highly skilled workforce. How to fill out a 1040x form Also, you must amortize the cost of acquiring an existing employment contract or relationship with employees or consultants. How to fill out a 1040x form Business books and records, etc. How to fill out a 1040x form   This includes the intangible value of technical manuals, training manuals or programs, data files, and accounting or inventory control systems. How to fill out a 1040x form It also includes the cost of customer lists, subscription lists, insurance expirations, patient or client files, and lists of newspaper, magazine, radio, and television advertisers. How to fill out a 1040x form Patents, copyrights, etc. How to fill out a 1040x form   This includes package design, computer software, and any interest in a film, sound recording, videotape, book, or other similar property, except as discussed later under Assets That Are Not Section 197 Intangibles . How to fill out a 1040x form Customer-based intangible. How to fill out a 1040x form   This is the composition of market, market share, and any other value resulting from the future provision of goods or services because of relationships with customers in the ordinary course of business. How to fill out a 1040x form For example, you must amortize the part of the purchase price of a business that is for the existence of the following intangibles. How to fill out a 1040x form A customer base. How to fill out a 1040x form A circulation base. How to fill out a 1040x form An undeveloped market or market growth. How to fill out a 1040x form Insurance in force. How to fill out a 1040x form A mortgage servicing contract. How to fill out a 1040x form An investment management contract. How to fill out a 1040x form Any other relationship with customers involving the future provision of goods or services. How to fill out a 1040x form   Accounts receivable or other similar rights to income for goods or services provided to customers before the acquisition of a trade or business are not section 197 intangibles. How to fill out a 1040x form Supplier-based intangible. How to fill out a 1040x form   A supplier-based intangible is the value resulting from the future acquisitions, (through contract or other relationships with suppliers in the ordinary course of business) of goods or services that you will sell or use. How to fill out a 1040x form The amount you pay or incur for supplier-based intangibles includes, for example, any portion of the purchase price of an acquired trade or business that is attributable to the existence of a favorable relationship with persons providing distribution services (such as a favorable shelf or display space or a retail outlet), or the existence of favorable supply contracts. How to fill out a 1040x form Do not include any amount required to be paid for the goods or services to honor the terms of the agreement or other relationship. How to fill out a 1040x form Also, see Assets That Are Not Section 197 Intangibles below. How to fill out a 1040x form Government-granted license, permit, etc. How to fill out a 1040x form   This is any right granted by a governmental unit or an agency or instrumentality of a governmental unit. How to fill out a 1040x form For example, you must amortize the capitalized costs of acquiring (including issuing or renewing) a liquor license, a taxicab medallion or license, or a television or radio broadcasting license. How to fill out a 1040x form Covenant not to compete. How to fill out a 1040x form   Section 197 intangibles include a covenant not to compete (or similar arrangement) entered into in connection with the acquisition of an interest in a trade or business, or a substantial portion of a trade or business. How to fill out a 1040x form An interest in a trade or business includes an interest in a partnership or a corporation engaged in a trade or business. How to fill out a 1040x form   An arrangement that requires the former owner to perform services (or to provide property or the use of property) is not similar to a covenant not to compete to the extent the amount paid under the arrangement represents reasonable compensation for those services or for that property or its use. How to fill out a 1040x form Franchise, trademark, or trade name. How to fill out a 1040x form   A franchise, trademark, or trade name is a section 197 intangible. How to fill out a 1040x form You must amortize its purchase or renewal costs, other than certain contingent payments that you can deduct currently. How to fill out a 1040x form For information on currently deductible contingent payments, see chapter 11. How to fill out a 1040x form Professional sports franchise. How to fill out a 1040x form   A franchise engaged in professional sports and any intangible assets acquired in connection with acquiring the franchise (including player contracts) is a section 197 intangible amortizable over a 15-year period. How to fill out a 1040x form Contract for the use of, or a term interest in, a section 197 intangible. How to fill out a 1040x form   Section 197 intangibles include any right under a license, contract, or other arrangement providing for the use of any section 197 intangible. How to fill out a 1040x form It also includes any term interest in any section 197 intangible, whether the interest is outright or in trust. How to fill out a 1040x form Assets That Are Not Section 197 Intangibles The following assets are not section 197 intangibles. How to fill out a 1040x form Any interest in a corporation, partnership, trust, or estate. How to fill out a 1040x form Any interest under an existing futures contract, foreign currency contract, notional principal contract, interest rate swap, or similar financial contract. How to fill out a 1040x form Any interest in land. How to fill out a 1040x form Most computer software. How to fill out a 1040x form (See Computer software , later. How to fill out a 1040x form ) Any of the following assets not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. How to fill out a 1040x form An interest in a film, sound recording, video tape, book, or similar property. How to fill out a 1040x form A right to receive tangible property or services under a contract or from a governmental agency. How to fill out a 1040x form An interest in a patent or copyright. How to fill out a 1040x form Certain rights that have a fixed duration or amount. How to fill out a 1040x form (See Rights of fixed duration or amount , later. How to fill out a 1040x form ) An interest under either of the following. How to fill out a 1040x form An existing lease or sublease of tangible property. How to fill out a 1040x form A debt that was in existence when the interest was acquired. How to fill out a 1040x form A right to service residential mortgages unless the right is acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. How to fill out a 1040x form Certain transaction costs incurred by parties to a corporate organization or reorganization in which any part of a gain or loss is not recognized. How to fill out a 1040x form Intangible property that is not amortizable under the rules for section 197 intangibles can be depreciated if it meets certain requirements. How to fill out a 1040x form You generally must use the straight line method over its useful life. How to fill out a 1040x form For certain intangibles, the depreciation period is specified in the law and regulations. How to fill out a 1040x form For example, the depreciation period for computer software that is not a section 197 intangible is generally 36 months. How to fill out a 1040x form For more information on depreciating intangible property, see Intangible Property under What Method Can You Use To Depreciate Your Property? in chapter 1 of Publication 946. How to fill out a 1040x form Computer software. How to fill out a 1040x form   Section 197 intangibles do not include the following types of computer software. How to fill out a 1040x form Software that meets all the following requirements. How to fill out a 1040x form It is, or has been, readily available for purchase by the general public. How to fill out a 1040x form It is subject to a nonexclusive license. How to fill out a 1040x form It has not been substantially modified. How to fill out a 1040x form This requirement is considered met if the cost of all modifications is not more than the greater of 25% of the price of the publicly available unmodified software or $2,000. How to fill out a 1040x form Software that is not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. How to fill out a 1040x form Computer software defined. How to fill out a 1040x form   Computer software includes all programs designed to cause a computer to perform a desired function. How to fill out a 1040x form It also includes any database or similar item that is in the public domain and is incidental to the operation of qualifying software. How to fill out a 1040x form Rights of fixed duration or amount. How to fill out a 1040x form   Section 197 intangibles do not include any right under a contract or from a governmental agency if the right is acquired in the ordinary course of a trade or business (or in an activity engaged in for the production of income) but not as part of a purchase of a trade or business and either: Has a fixed life of less than 15 years, or Is of a fixed amount that, except for the rules for section 197 intangibles, would be recovered under a method similar to the unit-of-production method of cost recovery. How to fill out a 1040x form However, this does not apply to the following intangibles. How to fill out a 1040x form Goodwill. How to fill out a 1040x form Going concern value. How to fill out a 1040x form A covenant not to compete. How to fill out a 1040x form A franchise, trademark, or trade name. How to fill out a 1040x form A customer-related information base, customer-based intangible, or similar item. How to fill out a 1040x form Safe Harbor for Creative Property Costs If you are engaged in the trade or business of film production, you may be able to amortize the creative property costs for properties not set for production within 3 years of the first capitalized transaction. How to fill out a 1040x form You may amortize these costs ratably over a 15-year period beginning on the first day of the second half of the tax year in which you properly write off the costs for financial accounting purposes. How to fill out a 1040x form If, during the 15-year period, you dispose of the creative property rights, you must continue to amortize the costs over the remainder of the 15-year period. How to fill out a 1040x form Creative property costs include costs paid or incurred to acquire and develop screenplays, scripts, story outlines, motion picture production rights to books and plays, and other similar properties for purposes of potential future film development, production, and exploitation. How to fill out a 1040x form Amortize these costs using the rules of Revenue Procedure 2004-36. How to fill out a 1040x form For more information, see Revenue Procedure 2004-36, 2004-24 I. How to fill out a 1040x form R. How to fill out a 1040x form B. How to fill out a 1040x form 1063, available at  www. How to fill out a 1040x form irs. How to fill out a 1040x form gov/irb/2004-24_IRB/ar16. How to fill out a 1040x form html. How to fill out a 1040x form A change in the treatment of creative property costs is a change in method of accounting. How to fill out a 1040x form Anti-Churning Rules Anti-churning rules prevent you from amortizing most section 197 intangibles if the transaction in which you acquired them did not result in a significant change in ownership or use. How to fill out a 1040x form These rules apply to goodwill and going concern value, and to any other section 197 intangible that is not otherwise depreciable or amortizable. How to fill out a 1040x form Under the anti-churning rules, you cannot use 15-year amortization for the intangible if any of the following conditions apply. How to fill out a 1040x form You or a related person (defined later) held or used the intangible at any time from July 25, 1991, through August 10, 1993. How to fill out a 1040x form You acquired the intangible from a person who held it at any time during the period in (1) and, as part of the transaction, the user did not change. How to fill out a 1040x form You granted the right to use the intangible to a person (or a person related to that person) who held or used it at any time during the period in (1). How to fill out a 1040x form This applies only if the transaction in which you granted the right and the transaction in which you acquired the intangible are part of a series of related transactions. How to fill out a 1040x form See Related person , later, for more information. How to fill out a 1040x form Exceptions. How to fill out a 1040x form   The anti-churning rules do not apply in the following situations. How to fill out a 1040x form You acquired the intangible from a decedent and its basis was stepped up to its fair market value. How to fill out a 1040x form The intangible was amortizable as a section 197 intangible by the seller or transferor you acquired it from. How to fill out a 1040x form This exception does not apply if the transaction in which you acquired the intangible and the transaction in which the seller or transferor acquired it are part of a series of related transactions. How to fill out a 1040x form The gain-recognition exception, discussed later, applies. How to fill out a 1040x form Related person. How to fill out a 1040x form   For purposes of the anti-churning rules, the following are related persons. How to fill out a 1040x form An individual and his or her brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. How to fill out a 1040x form ), and lineal descendants (children, grandchildren, etc. How to fill out a 1040x form ). How to fill out a 1040x form A corporation and an individual who owns, directly or indirectly, more than 20% of the value of the corporation's outstanding stock. How to fill out a 1040x form Two corporations that are members of the same controlled group as defined in section 1563(a) of the Internal Revenue Code, except that “more than 20%” is substituted for “at least 80%” in that definition and the determination is made without regard to subsections (a)(4) and (e)(3)(C) of section 1563. How to fill out a 1040x form (For an exception, see section 1. How to fill out a 1040x form 197-2(h)(6)(iv) of the regulations. How to fill out a 1040x form ) A trust fiduciary and a corporation if more than 20% of the value of the corporation's outstanding stock is owned, directly or indirectly, by or for the trust or grantor of the trust. How to fill out a 1040x form The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. How to fill out a 1040x form The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. How to fill out a 1040x form The executor and beneficiary of an estate. How to fill out a 1040x form A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization (or whose family members control it). How to fill out a 1040x form A corporation and a partnership if the same persons own more than 20% of the value of the outstanding stock of the corporation and more than 20% of the capital or profits interest in the partnership. How to fill out a 1040x form Two S corporations, and an S corporation and a regular corporation, if the same persons own more than 20% of the value of the outstanding stock of each corporation. How to fill out a 1040x form Two partnerships if the same persons own, directly or indirectly, more than 20% of the capital or profits interests in both partnerships. How to fill out a 1040x form A partnership and a person who owns, directly or indirectly, more than 20% of the capital or profits interests in the partnership. How to fill out a 1040x form Two persons who are engaged in trades or businesses under common control (as described in section 41(f)(1) of the Internal Revenue Code). How to fill out a 1040x form When to determine relationship. How to fill out a 1040x form   Persons are treated as related if the relationship existed at the following time. How to fill out a 1040x form In the case of a single transaction, immediately before or immediately after the transaction in which the intangible was acquired. How to fill out a 1040x form In the case of a series of related transactions (or a series of transactions that comprise a qualified stock purchase under section 338(d)(3) of the Internal Revenue Code), immediately before the earliest transaction or immediately after the last transaction. How to fill out a 1040x form Ownership of stock. How to fill out a 1040x form   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. How to fill out a 1040x form Rule 1. How to fill out a 1040x form   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. How to fill out a 1040x form Rule 2. How to fill out a 1040x form   An individual is considered to own the stock directly or indirectly owned by or for his or her family. How to fill out a 1040x form Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. How to fill out a 1040x form Rule 3. How to fill out a 1040x form   An individual owning (other than by applying Rule 2) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. How to fill out a 1040x form Rule 4. How to fill out a 1040x form   For purposes of applying Rule 1, 2, or 3, treat stock constructively owned by a person under Rule 1 as actually owned by that person. How to fill out a 1040x form Do not treat stock constructively owned by an individual under Rule 2 or 3 as owned by the individual for reapplying Rule 2 or 3 to make another person the constructive owner of the stock. How to fill out a 1040x form Gain-recognition exception. How to fill out a 1040x form   This exception to the anti-churning rules applies if the person you acquired the intangible from (the transferor) meets both of the following requirements. How to fill out a 1040x form That person would not be related to you (as described under Related person , earlier) if the 20% test for ownership of stock and partnership interests were replaced by a 50% test. How to fill out a 1040x form That person chose to recognize gain on the disposition of the intangible and pay income tax on the gain at the highest tax rate. How to fill out a 1040x form See chapter 2 in Publication 544 for information on making this choice. How to fill out a 1040x form   If this exception applies, the anti-churning rules apply only to the amount of your adjusted basis in the intangible that is more than the gain recognized by the transferor. How to fill out a 1040x form Notification. How to fill out a 1040x form   If the person you acquired the intangible from chooses to recognize gain under the rules for this exception, that person must notify you in writing by the due date of the return on which the choice is made. How to fill out a 1040x form Anti-abuse rule. How to fill out a 1040x form   You cannot amortize any section 197 intangible acquired in a transaction for which the principal purpose was either of the following. How to fill out a 1040x form To avoid the requirement that the intangible be acquired after August 10, 1993. How to fill out a 1040x form To avoid any of the anti-churning rules. How to fill out a 1040x form More information. How to fill out a 1040x form   For more information about the anti-churning rules, including additional rules for partnerships, see Regulations section 1. How to fill out a 1040x form 197-2(h). How to fill out a 1040x form Incorrect Amount of Amortization Deducted If you later discover that you deducted an incorrect amount for amortization for a section 197 intangible in any year, you may be able to make a correction for that year by filing an amended return. How to fill out a 1040x form See Amended Return , next. How to fill out a 1040x form If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amortization. How to fill out a 1040x form See Changing Your Accounting Method , later. How to fill out a 1040x form Amended Return If you deducted an incorrect amount for amortization, you can file an amended return to correct the following. How to fill out a 1040x form A mathematical error made in any year. How to fill out a 1040x form A posting error made in any year. How to fill out a 1040x form An amortization deduction for a section 197 intangible for which you have not adopted a method of accounting. How to fill out a 1040x form When to file. How to fill out a 1040x form   If an amended return is allowed, you must file it by the later of the following dates. How to fill out a 1040x form 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. How to fill out a 1040x form (A return filed early is considered filed on the due date. How to fill out a 1040x form ) 2 years from the time you paid your tax for that year. How to fill out a 1040x form Changing Your Accounting Method Generally, you must get IRS approval to change your method of accounting. How to fill out a 1040x form File Form 3115, Application for Change in Accounting Method, to request a change to a permissible method of accounting for amortization. How to fill out a 1040x form The following are examples of a change in method of accounting for amortization. How to fill out a 1040x form A change in the amortization method, period of recovery, or convention of an amortizable asset. How to fill out a 1040x form A change in the accounting for amortizable assets from a single asset account to a multiple asset account (pooling), or vice versa. How to fill out a 1040x form A change in the accounting for amortizable assets from one type of multiple asset account to a different type of multiple asset account. How to fill out a 1040x form Changes in amortization that are not a change in method of accounting include the following: A change in computing amortization in the tax year in which your use of the asset changes. How to fill out a 1040x form An adjustment in the useful life of an amortizable asset. How to fill out a 1040x form Generally, the making of a late amortization election or the revocation of a timely valid amortization election. How to fill out a 1040x form Any change in the placed-in-service date of an amortizable asset. How to fill out a 1040x form See Regulations section 1. How to fill out a 1040x form 446-1(e)(2)(ii)(a) for more information and examples. How to fill out a 1040x form Automatic approval. How to fill out a 1040x form   In some instances, you may be able to get automatic approval from the IRS to change your method of accounting for amortization. How to fill out a 1040x form For a list of automatic accounting method changes, see the Instructions for Form 3115. How to fill out a 1040x form Also see the Instructions for Form 3115 for more information on getting approval, automatic approval procedures, and a list of exceptions to the automatic approval process. How to fill out a 1040x form For more information, see Revenue Procedure 2006-12, as modified by Revenue Procedure 2006-37, and Revenue Procedure 2008-52, as amplified, clarified, and modified by Revenue Procedure 2009-39, as clarified and modified by Revenue Procedure 2011-14, as modified and amplified by Revenue Procedure 2011-22, as modified by Revenue Procedure 2012-39, or any successor. How to fill out a 1040x form See Revenue Procedure 2006-12, 2006-3 I. How to fill out a 1040x form R. How to fill out a 1040x form B. How to fill out a 1040x form 310, available at  www. How to fill out a 1040x form irs. How to fill out a 1040x form gov/irb/2006-03_IRB/ar14. How to fill out a 1040x form html. How to fill out a 1040x form  See Revenue Procedure 2006-37, 2006-38 I. How to fill out a 1040x form R. How to fill out a 1040x form B. How to fill out a 1040x form 499, available at  www. How to fill out a 1040x form irs. How to fill out a 1040x form gov/irb/2006-38_IRB/ar10. How to fill out a 1040x form html. How to fill out a 1040x form  See Revenue Procedure 2008-52, 2008-36 I. How to fill out a 1040x form R. How to fill out a 1040x form B. How to fill out a 1040x form 587, available at www. How to fill out a 1040x form irs. How to fill out a 1040x form gov/irb/2008-36_IRB/ar09. How to fill out a 1040x form html. How to fill out a 1040x form  See Revenue Procedure 2009-39, 2009-38 I. How to fill out a 1040x form R. How to fill out a 1040x form B. How to fill out a 1040x form 371, available at  www. How to fill out a 1040x form irs. How to fill out a 1040x form gov/irb/2009-38_IRB/ar08. How to fill out a 1040x form html. How to fill out a 1040x form  See Revenue Procedure 2011-14, 2011-4 I. How to fill out a 1040x form R. How to fill out a 1040x form B. How to fill out a 1040x form 330, available at  www. How to fill out a 1040x form irs. How to fill out a 1040x form gov/irb/2011-04_IRB/ar08. How to fill out a 1040x form html. How to fill out a 1040x form  See Revenue Procedure 2011-22, 2011-18 I. How to fill out a 1040x form R. How to fill out a 1040x form B. How to fill out a 1040x form 737, available at  www. How to fill out a 1040x form irs. How to fill out a 1040x form gov/irb/2011-18_IRB/ar08. How to fill out a 1040x form html. How to fill out a 1040x form Also, see Revenue Procedure 2012-39, 2012-41 I. How to fill out a 1040x form R. How to fill out a 1040x form B. How to fill out a 1040x form 470 available at www. How to fill out a 1040x form irs. How to fill out a 1040x form gov/irb/2012-41_IRB/index. How to fill out a 1040x form html. How to fill out a 1040x form Disposition of Section 197 Intangibles A section 197 intangible is treated as depreciable property used in your trade or business. How to fill out a 1040x form If you held the intangible for more than 1 year, any gain on its disposition, up to the amount of allowable amortization, is ordinary income (section 1245 gain). How to fill out a 1040x form If multiple section 197 intangibles are disposed of in a single transaction or a series of related transactions, treat all of the section 197 intangibles as if they were a single asset for purposes of determining the amount of gain that is ordinary income. How to fill out a 1040x form Any remaining gain, or any loss, is a section 1231 gain or loss. How to fill out a 1040x form If you held the intangible 1 year or less, any gain or loss on its disposition is an ordinary gain or loss. How to fill out a 1040x form For more information on ordinary or capital gain or loss on business property, see chapter 3 in Publication 544. How to fill out a 1040x form Nondeductible loss. How to fill out a 1040x form   You cannot deduct any loss on the disposition or worthlessness of a section 197 intangible that you acquired in the same transaction (or series of related transactions) as other section 197 intangibles you still have. How to fill out a 1040x form Instead, increase the adjusted basis of each remaining amortizable section 197 intangible by a proportionate part of the nondeductible loss. How to fill out a 1040x form Figure the increase by multiplying the nondeductible loss on the disposition of the intangible by the following fraction. How to fill out a 1040x form The numerator is the adjusted basis of each remaining intangible on the date of the disposition. How to fill out a 1040x form The denominator is the total adjusted bases of all remaining amortizable section 197 intangibles on the date of the disposition. How to fill out a 1040x form Covenant not to compete. How to fill out a 1040x form   A covenant not to compete, or similar arrangement, is not considered disposed of or worthless before you dispose of your entire interest in the trade or business for which you entered into the covenant. How to fill out a 1040x form Nonrecognition transfers. How to fill out a 1040x form   If you acquire a section 197 intangible in a nonrecognition transfer, you are treated as the transferor with respect to the part of your adjusted basis in the intangible that is not more than the transferor's adjusted basis. How to fill out a 1040x form You amortize this part of the adjusted basis over the intangible's remaining amortization period in the hands of the transferor. How to fill out a 1040x form Nonrecognition transfers include transfers to a corporation, partnership contributions and distributions, like-kind exchanges, and involuntary conversions. How to fill out a 1040x form   In a like-kind exchange or involuntary conversion of a section 197 intangible, you must continue to amortize the part of your adjusted basis in the acquired intangible that is not more than your adjusted basis in the exchanged or converted intangible over the remaining amortization period of the exchanged or converted intangible. How to fill out a 1040x form Amortize over a new 15-year period the part of your adjusted basis in the acquired intangible that is more than your adjusted basis in the exchanged or converted intangible. How to fill out a 1040x form Example. How to fill out a 1040x form You own a section 197 intangible you have amortized for 4 full years. How to fill out a 1040x form It has a remaining unamortized basis of $30,000. How to fill out a 1040x form You exchange the asset plus $10,000 for a like-kind section 197 intangible. How to fill out a 1040x form The nonrecognition provisions of like-kind exchanges apply. How to fill out a 1040x form You amortize $30,000 of the $40,000 adjusted basis of the acquired intangible over the 11 years remaining in the original 15-year amortization period for the transferred asset. How to fill out a 1040x form You amortize the other $10,000 of adjusted basis over a new 15-year period. How to fill out a 1040x form For more information, see Regulations section 1. How to fill out a 1040x form 197-2(g). How to fill out a 1040x form Reforestation Costs You can elect to deduct a limited amount of reforestation costs paid or incurred during the tax year. How to fill out a 1040x form See Reforestation Costs in chapter 7. How to fill out a 1040x form You can elect to amortize the qualifying costs that are not deducted currently over an 84-month period. How to fill out a 1040x form There is no limit on the amount of your amortization deduction for reforestation costs paid or incurred during the tax year. How to fill out a 1040x form The election to amortize reforestation costs incurred by a partnership, S corporation, or estate must be made by the partnership, corporation, or estate. How to fill out a 1040x form A partner, shareholder, or beneficiary cannot make that election. How to fill out a 1040x form A partner's or shareholder's share of amortizable costs is figured under the general rules for allocating items of income, loss, deduction, etc. How to fill out a 1040x form , of a partnership or S corporation. How to fill out a 1040x form The amortizable costs of an estate are divided between the estate and the income beneficiary based on the income of the estate allocable to each. How to fill out a 1040x form Qualifying costs. How to fill out a 1040x form   Reforestation costs are the direct costs of planting or seeding for forestation or reforestation. How to fill out a 1040x form Qualifying costs include only those costs you must capitalize and include in the adjusted basis of the property. How to fill out a 1040x form They include costs for the following items. How to fill out a 1040x form Site preparation. How to fill out a 1040x form Seeds or seedlings. How to fill out a 1040x form Labor. How to fill out a 1040x form Tools. How to fill out a 1040x form Depreciation on equipment used in planting and seeding. How to fill out a 1040x form Qualifying costs do not include costs for which the government reimburses you under a cost-sharing program, unless you include the reimbursement in your income. How to fill out a 1040x form Qualified timber property. How to fill out a 1040x form   Qualified timber property is property that contains trees in significant commercial quantities. How to fill out a 1040x form It can be a woodlot or other site that you own or lease. How to fill out a 1040x form The property qualifies only if it meets all of the following requirements. How to fill out a 1040x form It is located in the United States. How to fill out a 1040x form It is held for the growing and cutting of timber you will either use in, or sell for use in, the commercial production of timber products. How to fill out a 1040x form It consists of at least one acre planted with tree seedlings in the manner normally used in forestation or reforestation. How to fill out a 1040x form Qualified timber property does not include property on which you have planted shelter belts or ornamental trees, such as Christmas trees. How to fill out a 1040x form Amortization period. How to fill out a 1040x form   The 84-month amortization period starts on the first day of the first month of the second half of the tax year you incur the costs (July 1 for a calendar year taxpayer), regardless of the month you actually incur the costs. How to fill out a 1040x form You can claim amortization deductions for no more than 6 months of the first and last (eighth) tax years of the period. How to fill out a 1040x form Life tenant and remainderman. How to fill out a 1040x form   If one person holds the property for life with the remainder going to another person, the life tenant is entitled to the full amortization for qualifying reforestation costs incurred by the life tenant. How to fill out a 1040x form Any remainder interest in the property is ignored for amortization purposes. How to fill out a 1040x form Recapture. How to fill out a 1040x form   If you dispose of qualified timber property within 10 years after the tax year you incur qualifying reforestation expenses, report any gain as ordinary income up to the amortization you took. How to fill out a 1040x form See chapter 3 of Publication 544 for more information. How to fill out a 1040x form How to make the election. How to fill out a 1040x form   To elect to amortize qualifying reforestation costs, complete Part VI of Form 4562 and attach a statement that contains the following information. How to fill out a 1040x form A description of the costs and the dates you incurred them. How to fill out a 1040x form A description of the type of timber being grown and the purpose for which it is grown. How to fill out a 1040x form Attach a separate statement for each property for which you amortize reforestation costs. How to fill out a 1040x form   Generally, you must make the election on a timely filed return (including extensions) for the tax year in which you incurred the costs. How to fill out a 1040x form However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). How to fill out a 1040x form Attach Form 4562 and the statement to the amended return and write “Filed pursuant to section 301. How to fill out a 1040x form 9100-2” on Form 4562. How to fill out a 1040x form File the amended return at the same address you filed the original return. How to fill out a 1040x form Revoking the election. How to fill out a 1040x form   You must get IRS approval to revoke your election to amortize qualifying reforestation costs. How to fill out a 1040x form Your application to revoke the election must include your name, address, the years for which your election was in effect, and your reason for revoking it. How to fill out a 1040x form Please provide your daytime telephone number (optional), in case we need to contact you. How to fill out a 1040x form You, or your duly authorized representative, must sign the application and file it at least 90 days before the due date (without extensions) for filing your income tax return for the first tax year for which your election is to end. How to fill out a 1040x form    Send the application to: Internal Revenue Service Associate Chief Counsel Passthroughs and Special Industries CC:PSI:6 1111 Constitution Ave. How to fill out a 1040x form NW, IR-5300 Washington, DC 20224 Geological and Geophysical Costs You can amortize the cost of geological and geophysical expenses paid or incurred in connection with oil and gas exploration or development within the United States. How to fill out a 1040x form These costs can be amortized ratably over a 24-month period beginning on the mid-point of the tax year in which the expenses were paid or incurred. How to fill out a 1040x form For major integrated oil companies (as defined in section 167(h)(5)), these costs must be amortized ratably over a 5-year period for costs paid or incurred after May 17, 2006 (a 7-year period for costs paid or incurred after December 19, 2007). How to fill out a 1040x form If you retire or abandon the property during the amortization period, no amortization deduction is allowed in the year of retirement or abandonment. How to fill out a 1040x form Pollution Control Facilities You can elect to amortize the cost of a certified pollution control facility over 60 months. How to fill out a 1040x form However, see Atmospheric pollution control facilities for an exception. How to fill out a 1040x form The cost of a pollution control facility that is not eligible for amortization can be depreciated under the regular rules for depreciation. How to fill out a 1040x form Also, you can claim a special depreciation allowance on a certified pollution control facility that is qualified property even if you elect to amortize its cost. How to fill out a 1040x form You must reduce its cost (amortizable basis) by the amount of any special allowance you claim. How to fill out a 1040x form See chapter 3 of Publication 946. How to fill out a 1040x form A certified pollution control facility is a new identifiable treatment facility used in connection with a plant or other property in operation before 1976, to reduce or control water or atmospheric pollution or contamination. How to fill out a 1040x form The facility must do so by removing, changing, disposing, storing, or preventing the creation or emission of pollutants, contaminants, wastes, or heat. How to fill out a 1040x form The facility must be certified by state and federal certifying authorities. How to fill out a 1040x form The facility must not significantly increase the output or capacity, extend the useful life, or reduce the total operating costs of the plant or other property. How to fill out a 1040x form Also, it must not significantly change the nature of the manufacturing or production process or facility. How to fill out a 1040x form The federal certifying authority will not certify your property to the extent it appears you will recover (over the property's useful life) all or part of its cost from the profit based on its operation (such as through sales of recovered wastes). How to fill out a 1040x form The federal certifying authority will describe the nature of the potential cost recovery. How to fill out a 1040x form You must then reduce the amortizable basis of the facility by this potential recovery. How to fill out a 1040x form New identifiable treatment facility. How to fill out a 1040x form   A new identifiable treatment facility is tangible depreciable property that is identifiable as a treatment facility. How to fill out a 1040x form It does not include a building and its structural components unless the building is exclusively a treatment facility. How to fill out a 1040x form Atmospheric pollution control facilities. How to fill out a 1040x form   Certain atmospheric pollution control facilities can be amortized over 84 months. How to fill out a 1040x form To qualify, the following must apply. How to fill out a 1040x form The facility must be acquired and placed in service after April 11, 2005. How to fill out a 1040x form If acquired, the original use must begin with you after April 11, 2005. How to fill out a 1040x form The facility must be used in connection with an electric generation plant or other property placed in operation after December 31, 1975, that is primarily coal fired. How to fill out a 1040x form If you construct, reconstruct, or erect the facility, only the basis attributable to the construction, reconstruction, or erection completed after April 11, 2005, qualifies. How to fill out a 1040x form Basis reduction for corporations. How to fill out a 1040x form   A corporation must reduce the amortizable basis of a pollution control facility by 20% before figuring the amortization deduction. How to fill out a 1040x form More information. How to fill out a 1040x form   For more information on the amortization of pollution control facilities, see Code sections 169 and 291(c) and the related regulations. How to fill out a 1040x form Research and Experimental Costs You can elect to amortize your research and experimental costs, deduct them as current business expenses, or write them off over a 10-year period (see Optional write-off method below). How to fill out a 1040x form If you elect to amortize these costs, deduct them in equal amounts over 60 months or more. How to fill out a 1040x form The amortization period begins the month you first receive an economic benefit from the costs. How to fill out a 1040x form For a definition of “research and experimental costs” and information on deducting them as current business expenses, see chapter 7. How to fill out a 1040x form Optional write-off method. How to fill out a 1040x form   Rather than amortize these costs or deduct them as a current expense, you have the option of deducting (writing off) research and experimental costs ratably over a 10-year period beginning with the tax year in which you incurred the costs. How to fill out a 1040x form For more information, see Optional Write-off of Certain Tax Preferences , later, and section 59(e) of the Internal Revenue Code. How to fill out a 1040x form Costs you can amortize. How to fill out a 1040x form   You can amortize costs chargeable to a capital account (see chapter 1) if you meet both of the following requirements. How to fill out a 1040x form You paid or incurred the costs in your trade or business. How to fill out a 1040x form You are not deducting the costs currently. How to fill out a 1040x form How to make the election. How to fill out a 1040x form   To elect to amortize research and experimental costs, complete Part VI of Form 4562 and attach it to your income tax return. How to fill out a 1040x form Generally, you must file the return by the due date (including extensions). How to fill out a 1040x form However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). How to fill out a 1040x form Attach Form 4562 to the amended return and write “Filed pursuant to section 301. How to fill out a 1040x form 9100-2” on Form 4562. How to fill out a 1040x form File the amended return at the same address you filed the original return. How to fill out a 1040x form   Your election is binding for the year it is made and for all later years unless you obtain approval from the IRS to change to a different method. How to fill out a 1040x form Optional Write-off of Certain Tax Preferences You can elect to amortize certain tax preference items over an optional period beginning in the tax year in which you incurred the costs. How to fill out a 1040x form If you make this election, there is no AMT adjustment. How to fill out a 1040x form The applicable costs and the optional recovery periods are as follows: Circulation costs — 3 years, Intangible drilling and development costs — 60 months, Mining exploration and development costs — 10 years, and Research and experimental costs — 10 years. How to fill out a 1040x form How to make the election. How to fill out a 1040x form   To elect to amortize qualifying costs over the optional recovery period, complete Part VI of Form 4562 and attach a statement containing the following information to your return for the tax year in which the election begins: Your name, address, and taxpayer identification number; and The type of cost and the specific amount of the cost for which you are making the election. How to fill out a 1040x form   Generally, the election must be made on a timely filed return (including extensions) for the tax year in which you incurred the costs. How to fill out a 1040x form However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). How to fill out a 1040x form Attach Form 4562 to the amended return and write “Filed pursuant to section 301. How to fill out a 1040x form 9100-2” on Form 4562. How to fill out a 1040x form File the amended return at the same address you filed the original return. How to fill out a 1040x form Revoking the election. How to fill out a 1040x form   You must obtain consent from the IRS to revoke your election. How to fill out a 1040x form Your request to revoke the election must be submitted to the IRS in the form of a letter ruling before the end of the tax year in which the optional recovery period ends. How to fill out a 1040x form The request must contain all of the information necessary to demonstrate the rare and unusual circumstances that would justify granting revocation. How to fill out a 1040x form If the request for revocation is approved, any unamortized costs are deductible in the year the revocation is effective. How to fill out a 1040x form Prev  Up  Next   Home   More Online Publications
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How to fill out a 1040x form Publication 939 - Main Content Table of Contents General Information Taxation of Periodic PaymentsInvestment in the Contract Expected Return Computation Under the General Rule How To Use Actuarial TablesUnisex Annuity Tables Special Elections Worksheets for Determining Taxable Annuity Actuarial Tables Requesting a Ruling on Taxation of Annuity How To Get Tax HelpLow Income Taxpayer Clinics General Information Some of the terms used in this publication are defined in the following paragraphs. How to fill out a 1040x form A pension is generally a series of payments made to you after you retire from work. How to fill out a 1040x form Pension payments are made regularly and are for past services with an employer. How to fill out a 1040x form An annuity is a series of payments under a contract. How to fill out a 1040x form You can buy the contract alone or you can buy it with the help of your employer. How to fill out a 1040x form Annuity payments are made regularly for more than one full year. How to fill out a 1040x form Note. How to fill out a 1040x form Distributions from pensions and annuities follow the same rules as outlined in this publication unless otherwise noted. How to fill out a 1040x form Types of pensions and annuities. How to fill out a 1040x form   Particular types of pensions and annuities include: Fixed period annuities. How to fill out a 1040x form You receive definite amounts at regular intervals for a definite length of time. How to fill out a 1040x form Annuities for a single life. How to fill out a 1040x form You receive definite amounts at regular intervals for life. How to fill out a 1040x form The payments end at death. How to fill out a 1040x form Joint and survivor annuities. How to fill out a 1040x form The first annuitant receives a definite amount at regular intervals for life. How to fill out a 1040x form After he or she dies, a second annuitant receives a definite amount at regular intervals for life. How to fill out a 1040x form The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. How to fill out a 1040x form Variable annuities. How to fill out a 1040x form You receive payments that may vary in amount for a definite length of time or for life. How to fill out a 1040x form The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds or cost-of-living indexes. How to fill out a 1040x form Disability pensions. How to fill out a 1040x form You are under minimum retirement age and receive payments because you retired on disability. How to fill out a 1040x form If, at the time of your retirement, you were permanently and totally disabled, you may be eligible for the credit for the elderly or the disabled discussed in Publication 524. How to fill out a 1040x form If your annuity starting date is after November 18, 1996, the General Rule cannot be used for the following qualified plans. How to fill out a 1040x form A qualified employee plan is an employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries. How to fill out a 1040x form This plan must meet Internal Revenue Code requirements. How to fill out a 1040x form It qualifies for special tax benefits, including tax deferral for employer contributions and rollover distributions. How to fill out a 1040x form However, you must use the General Rule if you were 75 or over and the annuity payments are guaranteed for more than 5 years. How to fill out a 1040x form A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. How to fill out a 1040x form A tax-sheltered annuity is a special annuity plan or contract purchased for an employee of a public school or tax-exempt organization. How to fill out a 1040x form   The General Rule is used to figure the tax treatment of various types of pensions and annuities, including nonqualified employee plans. How to fill out a 1040x form A nonqualified employee plan is an employer's plan that does not meet Internal Revenue Code requirements. How to fill out a 1040x form It does not qualify for most of the tax benefits of a qualified plan. How to fill out a 1040x form Annuity worksheets. How to fill out a 1040x form   The worksheets found near the end of the text of this publication may be useful to you in figuring the taxable part of your annuity. How to fill out a 1040x form Request for a ruling. How to fill out a 1040x form   If you are unable to determine the income tax treatment of your pension or annuity, you may ask the Internal Revenue Service to figure the taxable part of your annuity payments. How to fill out a 1040x form This is treated as a request for a ruling. How to fill out a 1040x form See Requesting a Ruling on Taxation of Annuity near the end of this publication. How to fill out a 1040x form Withholding tax and estimated tax. How to fill out a 1040x form   Your pension or annuity is subject to federal income tax withholding unless you choose not to have tax withheld. How to fill out a 1040x form If you choose not to have tax withheld from your pension or annuity, or if you do not have enough income tax withheld, you may have to make estimated tax payments. How to fill out a 1040x form Taxation of Periodic Payments This section explains how the periodic payments you receive under a pension or annuity plan are taxed under the General Rule. How to fill out a 1040x form Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). How to fill out a 1040x form These payments are also known as amounts received as an annuity. How to fill out a 1040x form If you receive an amount from your plan that is a nonperiodic payment (amount not received as an annuity), see Taxation of Nonperiodic Payments in Publication 575. How to fill out a 1040x form In general, you can recover your net cost of the pension or annuity tax free over the period you are to receive the payments. How to fill out a 1040x form The amount of each payment that is more than the part that represents your net cost is taxable. How to fill out a 1040x form Under the General Rule, the part of each annuity payment that represents your net cost is in the same proportion that your investment in the contract is to your expected return. How to fill out a 1040x form These terms are explained in the following discussions. How to fill out a 1040x form Investment in the Contract In figuring how much of your pension or annuity is taxable under the General Rule, you must figure your investment in the contract. How to fill out a 1040x form First, find your net cost of the contract as of the annuity starting date (defined later). How to fill out a 1040x form To find this amount, you must first figure the total premiums, contributions, or other amounts paid. How to fill out a 1040x form This includes the amounts your employer contributed if you were required to include these amounts in income. How to fill out a 1040x form It also includes amounts you actually contributed (except amounts for health and accident benefits and deductible voluntary employee contributions). How to fill out a 1040x form From this total cost you subtract: Any refunded premiums, rebates, dividends, or unrepaid loans (any of which were not included in your income) that you received by the later of the annuity starting date or the date on which you received your first payment. How to fill out a 1040x form Any additional premiums paid for double indemnity or disability benefits. How to fill out a 1040x form Any other tax-free amounts you received under the contract or plan before the later of the dates in (1). How to fill out a 1040x form The annuity starting date   is the later of the first day of the first period for which you receive payment under the contract or the date on which the obligation under the contract becomes fixed. How to fill out a 1040x form Example. How to fill out a 1040x form On January 1 you completed all your payments required under an annuity contract providing for monthly payments starting on August 1, for the period beginning July 1. How to fill out a 1040x form The annuity starting date is July 1. How to fill out a 1040x form This is the date you use in figuring your investment in the contract and your expected return (discussed later). How to fill out a 1040x form Adjustments If any of the following items apply, adjust (add or subtract) your total cost to find your net cost. How to fill out a 1040x form Foreign employment. How to fill out a 1040x form   If you worked abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludible from your gross income had they been paid directly to you as compensation. How to fill out a 1040x form The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (without regard to the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer on your behalf if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) if the contributions would be excludible from your gross income had they been paid directly to you. How to fill out a 1040x form Foreign employment contributions while a nonresident alien. How to fill out a 1040x form   In determining your cost, special rules apply if you are a U. How to fill out a 1040x form S. How to fill out a 1040x form citizen or resident alien who received distributions from a plan to which contributions were made while you were a nonresident alien. How to fill out a 1040x form Your contributions and your employer's contributions are not included in your cost if the contributions: Were made based on compensation which was for services performed outside the United States which you were a nonresident alien, and Were not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if they had been paid as cash compensation when the services were performed. How to fill out a 1040x form Death benefit exclusion. How to fill out a 1040x form   If you are the beneficiary of a deceased employee (or former employee), who died before August 21, 1996, you may qualify for a death benefit exclusion of up to $5,000. How to fill out a 1040x form The beneficiary of a deceased employee who died after August 20, 1996, will not qualify for the death benefit exclusion. How to fill out a 1040x form How to adjust your total cost. How to fill out a 1040x form   If you are eligible, treat the amount of any allowable death benefit exclusion as additional cost paid by the employee. How to fill out a 1040x form Add it to the cost or unrecovered cost of the annuity at the annuity starting date. How to fill out a 1040x form See Example 3 under Computation Under General Rule for an illustration of the adjustment to the cost of the contract. How to fill out a 1040x form Net cost. How to fill out a 1040x form   Your total cost plus certain adjustments and minus other amounts already recovered before the annuity starting date is your net cost. How to fill out a 1040x form This is the unrecovered investment in the contract as of the annuity starting date. How to fill out a 1040x form If your annuity starting date is after 1986, this is the maximum amount that you may recover tax free under the contract. How to fill out a 1040x form Refund feature. How to fill out a 1040x form   Adjustment for the value of the refund feature is only applicable when you report your pension or annuity under the General Rule. How to fill out a 1040x form Your annuity contract has a refund feature if: The expected return ( discussed later) of an annuity depends entirely or partly on the life of one or more individuals, The contract provides that payments will be made to a beneficiary or the estate of an annuitant on or after the death of the annuitant if a stated amount or a stated number of payments has not been paid to the annuitant or annuitants before death, and The payments are a refund of the amount you paid for the annuity contract. How to fill out a 1040x form   If your annuity has a refund feature, you must reduce your net cost of the contract by the value of the refund feature (figured using Table III or VII at the end of this publication, also see How To Use Actuarial Tables , later) to find the investment in the contract. How to fill out a 1040x form Zero value of refund feature. How to fill out a 1040x form   For a joint and survivor annuity, the value of the refund feature is zero if: Both annuitants are age 74 or younger, The payments are guaranteed for less than 2½ years, and The survivor's annuity is at least 50% of the first annuitant's annuity. How to fill out a 1040x form   For a single-life annuity without survivor benefit, the value of the refund feature is zero if: The payments are guaranteed for less than 2½ years, and The annuitant is: Age 57 or younger (if using the new (unisex) annuity tables), Age 42 or younger (if male and using the old annuity tables), or Age 47 or younger (if female and using the old annuity tables). How to fill out a 1040x form   If you do not meet these requirements, you will have to figure the value of the refund feature, as explained in the following discussion. How to fill out a 1040x form Examples. How to fill out a 1040x form The first example shows how to figure the value of the refund feature when there is only one beneficiary. How to fill out a 1040x form Example 2 shows how to figure the value of the refund feature when the contract provides, in addition to a whole life annuity, one or more temporary life annuities for the lives of children. How to fill out a 1040x form In both examples, the taxpayer elects to use Tables V through VIII. How to fill out a 1040x form If you need the value of the refund feature for a joint and survivor annuity, write to the Internal Revenue Service as explained under Requesting a Ruling on Taxation of Annuity near the end of this publication. How to fill out a 1040x form Example 1. How to fill out a 1040x form At age 65, Barbara bought for $21,053 an annuity with a refund feature. How to fill out a 1040x form She will get $100 a month for life. How to fill out a 1040x form Barbara's contract provides that if she does not live long enough to recover the full $21,053, similar payments will be made to her surviving beneficiary until a total of $21,053 has been paid under the contract. How to fill out a 1040x form In this case, the contract cost and the total guaranteed return are the same ($21,053). How to fill out a 1040x form Barbara's investment in the contract is figured as follows: Net cost $21,053 Amount to be received annually $1,200   Number of years for which payment is guaranteed ($21,053 divided by $1,200) 17. How to fill out a 1040x form 54   Rounded to nearest whole number of years 18   Percentage from Actuarial Table VII for age 65 with 18 years of guaranteed payments 15%   Value of the refund feature (rounded to the nearest dollar)—15% of $21,053 3,158 Investment in the contract, adjusted for value of refund feature $17,895       If the total guaranteed return were less than the $21,053 net cost of the contract, Barbara would apply the appropriate percentage from the tables to the lesser amount. How to fill out a 1040x form For example, if the contract guaranteed the $100 monthly payments for 17 years to Barbara's estate or beneficiary if she were to die before receiving all the payments for that period, the total guaranteed return would be $20,400 ($100 × 12 × 17 years). How to fill out a 1040x form In this case, the value of the refund feature would be $2,856 (14% of $20,400) and Barbara's investment in the contract would be $18,197 ($21,053 minus $2,856) instead of $17,895. How to fill out a 1040x form Example 2. How to fill out a 1040x form John died while still employed. How to fill out a 1040x form His widow, Eleanor, age 48, receives $171 a month for the rest of her life. How to fill out a 1040x form John's son, Elmer, age 9, receives $50 a month until he reaches age 18. How to fill out a 1040x form John's contributions to the retirement fund totaled $7,559. How to fill out a 1040x form 45, with interest on those contributions of $1,602. How to fill out a 1040x form 53. How to fill out a 1040x form The guarantee or total refund feature of the contract is $9,161. How to fill out a 1040x form 98 ($7,559. How to fill out a 1040x form 45 plus $1,602. How to fill out a 1040x form 53). How to fill out a 1040x form The adjustment in the investment in the contract is figured as follows: A) Expected return:*       1) Widow's expected return:         Annual annuity ($171 × 12) $2,052       Multiplied by factor from Table V         (nearest age 48) 34. How to fill out a 1040x form 9 $71,614. How to fill out a 1040x form 80   2) Child's expected return:         Annual annuity ($50 × 12) $600       Multiplied by factor from         Table VIII (nearest age 9         for term of 9 years) 9. How to fill out a 1040x form 0 5,400. How to fill out a 1040x form 00   3) Total expected return   $77,014. How to fill out a 1040x form 80 B) Adjustment for refund feature:       1) Contributions (net cost) $7,559. How to fill out a 1040x form 45   2) Guaranteed amount (contributions of $7,559. How to fill out a 1040x form 45 plus interest of $1,602. How to fill out a 1040x form 53) $9,161. How to fill out a 1040x form 98   3) Minus: Expected return under child's (temporary life) annuity (A(2)) 5,400. How to fill out a 1040x form 00   4) Net guaranteed amount $3,761. How to fill out a 1040x form 98   5) Multiple from Table VII (nearest age 48 for 2 years duration (recovery of $3,761. How to fill out a 1040x form 98 at $171 a month to nearest whole year)) 0%   6) Adjustment required for value of refund feature rounded to the nearest whole dollar  (0% × $3,761. How to fill out a 1040x form 98, the smaller of B(3) or B(6)) 0 *Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. How to fill out a 1040x form See the discussion of expected return, later in this publication. How to fill out a 1040x form Free IRS help. How to fill out a 1040x form   If you need to request assistance to figure the value of the refund feature, see Requesting a Ruling on Taxation of Annuity near the end of this publication. How to fill out a 1040x form Expected Return Your expected return is the total amount you and other eligible annuitants can expect to receive under the contract. How to fill out a 1040x form The following discussions explain how to figure the expected return with each type of annuity. How to fill out a 1040x form A person's age, for purposes of figuring the expected return, is the age at the birthday nearest to the annuity starting date. How to fill out a 1040x form Fixed period annuity. How to fill out a 1040x form   If you will get annuity payments for a fixed number of years, without regard to your life expectancy, you must figure your expected return based on that fixed number of years. How to fill out a 1040x form It is the total amount you will get beginning at the annuity starting date. How to fill out a 1040x form You will receive specific periodic payments for a definite period of time, such as a fixed number of months (but not less than 13). How to fill out a 1040x form To figure your expected return, multiply the fixed number of months for which payments are to be made by the amount of the payment specified for each period. How to fill out a 1040x form Single life annuity. How to fill out a 1040x form   If you are to get annuity payments for the rest of your life, find your expected return as follows. How to fill out a 1040x form You must multiply the amount of the annual payment by a multiple based on your life expectancy as of the annuity starting date. How to fill out a 1040x form These multiples are set out in actuarial Tables I and V near the end of this publication (see How To Use Actuarial Tables , later). How to fill out a 1040x form   You may need to adjust these multiples if the payments are made quarterly, semiannually, or annually. How to fill out a 1040x form See Adjustments to Tables I, II, V, VI, and VIA following Table I. How to fill out a 1040x form Example. How to fill out a 1040x form Henry bought an annuity contract that will give him an annuity of $500 a month for his life. How to fill out a 1040x form If at the annuity starting date Henry's nearest birthday is 66, the expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table V, age 66 × 19. How to fill out a 1040x form 2 Expected return $115,200 If the payments were to be made to Henry quarterly and the first payment was made one full month after the annuity starting date, Henry would adjust the 19. How to fill out a 1040x form 2 multiple by +. How to fill out a 1040x form 1. How to fill out a 1040x form His expected return would then be $115,800 ($6,000 × 19. How to fill out a 1040x form 3). How to fill out a 1040x form Annuity for shorter of life or specified period. How to fill out a 1040x form   With this type of annuity, you are to get annuity payments either for the rest of your life or until the end of a specified period, whichever period is shorter. How to fill out a 1040x form To figure your expected return, multiply the amount of your annual payment by a multiple in Table IV or VIII for temporary life annuities. How to fill out a 1040x form Find the proper multiple based on your sex (if using Table IV), your age at the annuity starting date, and the nearest whole number of years in the specified period. How to fill out a 1040x form Example. How to fill out a 1040x form Harriet purchased an annuity this year that will pay her $200 each month for five years or until she dies, whichever period is shorter. How to fill out a 1040x form She was age 65 at her birthday nearest the annuity starting date. How to fill out a 1040x form She figures the expected return as follows: Annual payment ($200 × 12 months) $2,400 Multiple shown in Table VIII, age 65, 5-year term × 4. How to fill out a 1040x form 9 Expected return $11,760 She uses Table VIII (not Table IV) because all her contributions were made after June 30, 1986. How to fill out a 1040x form See Special Elections, later. How to fill out a 1040x form Joint and survivor annuities. How to fill out a 1040x form   If you have an annuity that pays you a periodic income for life and after your death provides an identical lifetime periodic income to your spouse (or some other person), you figure the expected return based on your combined life expectancies. How to fill out a 1040x form To figure the expected return, multiply the annual payment by a multiple in Table II or VI based on your joint life expectancies. How to fill out a 1040x form If your payments are made quarterly, semiannually, or annually, you may need to adjust these multiples. How to fill out a 1040x form See Adjustments to Tables I, II, V, VI, and VIA following Table I near the end of this publication. How to fill out a 1040x form Example. How to fill out a 1040x form John bought a joint and survivor annuity providing payments of $500 a month for his life, and, after his death, $500 a month for the remainder of his wife's life. How to fill out a 1040x form At John's annuity starting date, his age at his nearest birthday is 70 and his wife's at her nearest birthday is 67. How to fill out a 1040x form The expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table VI, ages 67 and 70 × 22. How to fill out a 1040x form 0 Expected return $132,000 Different payments to survivor. How to fill out a 1040x form   If your contract provides that payments to a survivor annuitant will be different from the amount you receive, you must use a computation which accounts for both the joint lives of the annuitants and the life of the survivor. How to fill out a 1040x form Example 1. How to fill out a 1040x form Gerald bought a contract providing for payments to him of $500 a month for life and, after his death, payments to his wife, Mary, of $350 a month for life. How to fill out a 1040x form If, at the annuity starting date, Gerald's nearest birthday is 70 and Mary's is 67, the expected return under the contract is figured as follows: Combined multiple for Gerald and Mary, ages 70 and 67 (from Table VI)   22. How to fill out a 1040x form 0 Multiple for Gerald, age 70 (from Table V)   16. How to fill out a 1040x form 0 Difference: Multiple applicable to Mary   6. How to fill out a 1040x form 0 Gerald's annual payment ($500 × 12) $6,000   Gerald's multiple 16. How to fill out a 1040x form 0   Gerald's expected return   $96,000 Mary's annual payment ($350 × 12) $4,200   Mary's multiple 6. How to fill out a 1040x form 0   Mary's expected return   25,200 Total expected return under the contract   $121,200 Example 2. How to fill out a 1040x form Your husband died while still employed. How to fill out a 1040x form Under the terms of his employer's retirement plan, you are entitled to get an immediate annuity of $400 a month for the rest of your life or until you remarry. How to fill out a 1040x form Your daughters, Marie and Jean, are each entitled to immediate temporary life annuities of $150 a month until they reach age 18. How to fill out a 1040x form You were 50 years old at the annuity starting date. How to fill out a 1040x form Marie was 16 and Jean was 14. How to fill out a 1040x form Using the multiples shown in Tables V and VIII at the end of this publication, the total expected return on the annuity starting date is $169,680, figured as follows: Widow, age 50 (multiple from Table V—33. How to fill out a 1040x form 1 × $4,800 annual payment) $158,880 Marie, age 16 for 2 years duration (multiple from Table VIII—2. How to fill out a 1040x form 0 × $1,800 annual payment) 3,600 Jean, age 14 for 4 years duration (multiple from Table VIII—4. How to fill out a 1040x form 0 × $1,800 annual payment) 7,200 Total expected return $169,680 No computation of expected return is made based on your husband's age at the date of death because he died before the annuity starting date. How to fill out a 1040x form Computation Under the General Rule Note. How to fill out a 1040x form Variable annuities use a different computation for determining the exclusion amounts. How to fill out a 1040x form See Variable annuities later. How to fill out a 1040x form Under the General Rule, you figure the taxable part of your annuity by using the following steps: Step 1. How to fill out a 1040x form   Figure the amount of your investment in the contract, including any adjustments for the refund feature and the death benefit exclusion, if applicable. How to fill out a 1040x form See Death benefit exclusion , earlier. How to fill out a 1040x form Step 2. How to fill out a 1040x form   Figure your expected return. How to fill out a 1040x form Step 3. How to fill out a 1040x form   Divide Step 1 by Step 2 and round to three decimal places. How to fill out a 1040x form This will give you the exclusion percentage. How to fill out a 1040x form Step 4. How to fill out a 1040x form   Multiply the exclusion percentage by the first regular periodic payment. How to fill out a 1040x form The result is the tax-free part of each pension or annuity payment. How to fill out a 1040x form   The tax-free part remains the same even if the total payment increases due to variation in the annuity amount such as cost of living increases, or you outlive the life expectancy factor used. How to fill out a 1040x form However, if your annuity starting date is after 1986, the total amount of annuity income that is tax free over the years cannot exceed your net cost. How to fill out a 1040x form   Each annuitant applies the same exclusion percentage to his or her initial payment called for in the contract. How to fill out a 1040x form Step 5. How to fill out a 1040x form   Multiply the tax-free part of each payment (step 4) by the number of payments received during the year. How to fill out a 1040x form This will give you the tax-free part of the total payment for the year. How to fill out a 1040x form    In the first year of your annuity, your first payment or part of your first payment may be for a fraction of the payment period. How to fill out a 1040x form This fractional amount is multiplied by your exclusion percentage to get the tax-free part. How to fill out a 1040x form Step 6. How to fill out a 1040x form   Subtract the tax-free part from the total payment you received. How to fill out a 1040x form The rest is the taxable part of your pension or annuity. How to fill out a 1040x form Example 1. How to fill out a 1040x form You purchased an annuity with an investment in the contract of $10,800. How to fill out a 1040x form Under its terms, the annuity will pay you $100 a month for life. How to fill out a 1040x form The multiple for your age (age 65) is 20. How to fill out a 1040x form 0 as shown in Table V. How to fill out a 1040x form Your expected return is $24,000 (20 × 12 × $100). How to fill out a 1040x form Your cost of $10,800, divided by your expected return of $24,000, equals 45. How to fill out a 1040x form 0%. How to fill out a 1040x form This is the percentage you will not have to include in income. How to fill out a 1040x form Each year, until your net cost is recovered, $540 (45% of $1,200) will be tax free and you will include $660 ($1,200 − $540) in your income. How to fill out a 1040x form If you had received only six payments of $100 ($600) during the year, your exclusion would have been $270 (45% of $100 × 6 payments). How to fill out a 1040x form Example 2. How to fill out a 1040x form Gerald bought a joint and survivor annuity. How to fill out a 1040x form Gerald's investment in the contract is $62,712 and the expected return is $121,200. How to fill out a 1040x form The exclusion percentage is 51. How to fill out a 1040x form 7% ($62,712 ÷ $121,200). How to fill out a 1040x form Gerald will receive $500 a month ($6,000 a year). How to fill out a 1040x form Each year, until his net cost is recovered, $3,102 (51. How to fill out a 1040x form 7% of his total payments received of $6,000) will be tax free and $2,898 ($6,000 − $3,102) will be included in his income. How to fill out a 1040x form If Gerald dies, his wife will receive $350 a month ($4,200 a year). How to fill out a 1040x form If Gerald had not recovered all of his net cost before his death, his wife will use the same exclusion percentage (51. How to fill out a 1040x form 7%). How to fill out a 1040x form Each year, until the entire net cost is recovered, his wife will receive $2,171. How to fill out a 1040x form 40 (51. How to fill out a 1040x form 7% of her payments received of $4,200) tax free. How to fill out a 1040x form She will include $2,028. How to fill out a 1040x form 60 ($4,200 − $2,171. How to fill out a 1040x form 40) in her income tax return. How to fill out a 1040x form Example 3. How to fill out a 1040x form Using the same facts as Example 2 under Different payments to survivor, you are to receive an annual annuity of $4,800 until you die or remarry. How to fill out a 1040x form Your two daughters each receive annual annuities of $1,800 until they reach age 18. How to fill out a 1040x form Your husband contributed $25,576 to the plan. How to fill out a 1040x form You are eligible for the $5,000 death benefit exclusion because your husband died before August 21, 1996. How to fill out a 1040x form Adjusted Investment in the Contract Contributions $25,576 Plus: Death benefit exclusion 5,000 Adjusted investment in the contract $30,576 The total expected return, as previously figured (in Example 2 under Different payments to survivor), is $169,680. How to fill out a 1040x form The exclusion percentage of 18. How to fill out a 1040x form 0% ($30,576 ÷ $169,680) applies to the annuity payments you and each of your daughters receive. How to fill out a 1040x form Each full year $864 (18. How to fill out a 1040x form 0% × $4,800) will be tax free to you, and you must include $3,936 in your income tax return. How to fill out a 1040x form Each year, until age 18, $324 (18. How to fill out a 1040x form 0% × $1,800) of each of your daughters' payments will be tax free and each must include the balance, $1,476, as income on her own income tax return. How to fill out a 1040x form Part-year payments. How to fill out a 1040x form   If you receive payments for only part of a year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments received during the year. How to fill out a 1040x form   If you receive amounts during the year that represent 12 payments, one for each month in that year, and an amount that represents payments for months in a prior year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments the amounts received represent. How to fill out a 1040x form For instance, if you received amounts during the year that represent the 12 payments for that year plus an amount that represents three payments for a prior year, multiply that amount by the 15 (12 + 3) payments received that the year. How to fill out a 1040x form   If you received a fractional payment, follow Step 5, discussed earlier. How to fill out a 1040x form This gives you the tax-free part of your total payment. How to fill out a 1040x form Example. How to fill out a 1040x form On September 28, Mary bought an annuity contract for $22,050 that will give her $125 a month for life, beginning October 30. How to fill out a 1040x form The applicable multiple from Table V is 23. How to fill out a 1040x form 3 (age 61). How to fill out a 1040x form Her expected return is $34,950 ($125 × 12 × 23. How to fill out a 1040x form 3). How to fill out a 1040x form Mary's investment in the contract of $22,050, divided by her expected return of $34,950, equals 63. How to fill out a 1040x form 1%. How to fill out a 1040x form Each payment received will consist of 63. How to fill out a 1040x form 1% return of cost and 36. How to fill out a 1040x form 9% taxable income, until her net cost of the contract is fully recovered. How to fill out a 1040x form During the first year, Mary received three payments of $125, or $375, of which $236. How to fill out a 1040x form 63 (63. How to fill out a 1040x form 1% × $375) is a return of cost. How to fill out a 1040x form The remaining $138. How to fill out a 1040x form 37 is included in income. How to fill out a 1040x form Increase in annuity payments. How to fill out a 1040x form   The tax-free amount remains the same as the amount figured at the annuity starting date, even if the payment increases. How to fill out a 1040x form All increases in the installment payments are fully taxable. How to fill out a 1040x form   However, if your annuity payments are scheduled to increase at a definite date in the future you must figure the expected return for that annuity using the method described in section 1. How to fill out a 1040x form 72-5(a)(5) of the regulations. How to fill out a 1040x form Example. How to fill out a 1040x form Joe's wife died while she was still employed and, as her beneficiary, he began receiving an annuity of $147 per month. How to fill out a 1040x form In figuring the taxable part, Joe elects to use Tables V through VIII. How to fill out a 1040x form The cost of the contract was $7,938, consisting of the sum of his wife's net contributions, adjusted for any refund feature. How to fill out a 1040x form His expected return as of the annuity starting date is $35,280 (age 65, multiple of 20. How to fill out a 1040x form 0 × $1,764 annual payment). How to fill out a 1040x form The exclusion percentage is $7,938 ÷ $35,280, or 22. How to fill out a 1040x form 5%. How to fill out a 1040x form During the year he received 11 monthly payments of $147, or $1,617. How to fill out a 1040x form Of this amount, 22. How to fill out a 1040x form 5% × $147 × 11 ($363. How to fill out a 1040x form 83) is tax free as a return of cost and the balance of $1,253. How to fill out a 1040x form 17 is taxable. How to fill out a 1040x form Later, because of a cost-of-living increase, his annuity payment was increased to $166 per month, or $1,992 a year (12 × $166). How to fill out a 1040x form The tax-free part is still only 22. How to fill out a 1040x form 5% of the annuity payments as of the annuity starting date (22. How to fill out a 1040x form 5% × $147 × 12 = $396. How to fill out a 1040x form 90 for a full year). How to fill out a 1040x form The increase of $228 ($1,992 − $1,764 (12 × $147)) is fully taxable. How to fill out a 1040x form Variable annuities. How to fill out a 1040x form   For variable annuity payments, figure the amount of each payment that is tax free by dividing your investment in the contract (adjusted for any refund feature) by the total number of periodic payments you expect to get under the contract. How to fill out a 1040x form   If the annuity is for a definite period, you determine the total number of payments by multiplying the number of payments to be made each year by the number of years you will receive payments. How to fill out a 1040x form If the annuity is for life, you determine the total number of payments by using a multiple from the appropriate actuarial table. How to fill out a 1040x form Example. How to fill out a 1040x form Frank purchased a variable annuity at age 65. How to fill out a 1040x form The total cost of the contract was $12,000. How to fill out a 1040x form The annuity starting date is January 1 of the year of purchase. How to fill out a 1040x form His annuity will be paid, starting July 1, in variable annual installments for his life. How to fill out a 1040x form The tax-free amount of each payment, until he has recovered his cost of his contract, is: Investment in the contract $12,000 Number of expected annual payments (multiple for age 65 from Table V) 20 Tax-free amount of each payment ($12,000 ÷ 20) $600 If Frank's first payment is $920, he includes only $320 ($920 − $600) in his gross income. How to fill out a 1040x form   If the tax-free amount for a year is more than the payments you receive in that year, you may choose, when you receive the next payment, to refigure the tax-free part. How to fill out a 1040x form Divide the amount of the periodic tax-free part that is more than the payment you received by the remaining number of payments you expect. How to fill out a 1040x form The result is added to the previously figured periodic tax-free part. How to fill out a 1040x form The sum is the amount of each future payment that will be tax free. How to fill out a 1040x form Example. How to fill out a 1040x form Using the facts of the previous example about Frank, assume that after Frank's $920 payment, he received $500 in the following year, and $1,200 in the year after that. How to fill out a 1040x form Frank does not pay tax on the $500 (second year) payment because $600 of each annual pension payment is tax free. How to fill out a 1040x form Since the $500 payment is less than the $600 annual tax-free amount, he may choose to refigure his tax-free part when he receives his $1,200 (third year) payment, as follows: Amount tax free in second year $600. How to fill out a 1040x form 00 Amount received in second year 500. How to fill out a 1040x form 00 Difference $100. How to fill out a 1040x form 00 Number of remaining payments after the first 2 payments (age 67, from Table V) 18. How to fill out a 1040x form 4 Amount to be added to previously determined annual tax-free part ($100 ÷ 18. How to fill out a 1040x form 4) $5. How to fill out a 1040x form 43 Revised annual tax-free part for third and later years ($600 + $5. How to fill out a 1040x form 43) $605. How to fill out a 1040x form 43 Amount taxable in third year ($1,200 − $605. How to fill out a 1040x form 43) $594. How to fill out a 1040x form 57 If you choose to refigure your tax-free amount,   you must file a statement with your income tax return stating that you are refiguring the tax-free amount in accordance with the rules of section 1. How to fill out a 1040x form 72–4(d)(3) of the Income Tax Regulations. How to fill out a 1040x form The statement must also show the following information: The annuity starting date and your age on that date. How to fill out a 1040x form The first day of the first period for which you received an annuity payment in the current year. How to fill out a 1040x form Your investment in the contract as originally figured. How to fill out a 1040x form The total of all amounts received tax free under the annuity from the annuity starting date through the first day of the first period for which you received an annuity payment in the current tax year. How to fill out a 1040x form Exclusion Limits Your annuity starting date determines the total amount of annuity income that you can exclude from income over the years. How to fill out a 1040x form Exclusion limited to net cost. How to fill out a 1040x form   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a return of your cost cannot exceed your net cost (figured without any reduction for a refund feature). How to fill out a 1040x form This is the unrecovered investment in the contract as of the annuity starting date. How to fill out a 1040x form   If your annuity starting date is after July 1, 1986, any unrecovered net cost at your (or last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. How to fill out a 1040x form This deduction is not subject to the 2%-of-adjusted-gross-income limit. How to fill out a 1040x form Example 1. How to fill out a 1040x form Your annuity starting date is after 1986. How to fill out a 1040x form Your total cost is $12,500, and your net cost is $10,000, taking into account certain adjustments. How to fill out a 1040x form There is no refund feature. How to fill out a 1040x form Your monthly annuity payment is $833. How to fill out a 1040x form 33. How to fill out a 1040x form Your exclusion ratio is 12% and you exclude $100 a month. How to fill out a 1040x form Your exclusion ends after 100 months, when you have excluded your net cost of $10,000. How to fill out a 1040x form Thereafter, your annuity payments are fully taxable. How to fill out a 1040x form Example 2. How to fill out a 1040x form The facts are the same as in Example 1, except that there is a refund feature, and you die after 5 years with no surviving annuitant. How to fill out a 1040x form The adjustment for the refund feature is $1,000, so the investment in the contract is $9,000. How to fill out a 1040x form The exclusion ratio is 10. How to fill out a 1040x form 8%, and your monthly exclusion is $90. How to fill out a 1040x form After 5 years (60 months), you have recovered tax free only $5,400 ($90 x 60). How to fill out a 1040x form An itemized deduction for the unrecovered net cost of $4,600 ($10,000 net cost minus $5,400) may be taken on your final income tax return. How to fill out a 1040x form Your unrecovered investment is determined without regard to the refund feature adjustment, discussed earlier, under Adjustments. How to fill out a 1040x form Exclusion not limited to net cost. How to fill out a 1040x form   If your annuity starting date was before 1987, you could continue to take your monthly exclusion for as long as you receive your annuity. How to fill out a 1040x form If you choose a joint and survivor annuity, your survivor continues to take the survivor's exclusion figured as of the annuity starting date. How to fill out a 1040x form The total exclusion may be more than your investment in the contract. How to fill out a 1040x form How To Use Actuarial Tables In figuring, under the General Rule, the taxable part of your annuity payments that you are to get for the rest of your life (rather than for a fixed number of years), you must use one or more of the actuarial tables in this publication. How to fill out a 1040x form Unisex Annuity Tables Effective July 1, 1986, the Internal Revenue Service adopted new annuity Tables V through VIII, in which your sex is not considered when determining the applicable factor. How to fill out a 1040x form These tables correspond to the old Tables I through IV. How to fill out a 1040x form In general, Tables V through VIII must be used if you made contributions to the retirement plan after June 30, 1986. How to fill out a 1040x form If you made no contributions to the plan after June 30, 1986, generally you must use only Tables I through IV. How to fill out a 1040x form However, if you received an annuity payment after June 30, 1986, you may elect to use Tables V through VIII (see Annuity received after June 30, 1986, later). How to fill out a 1040x form Special Elections Although you generally must use Tables V through VIII if you made contributions to the retirement plan after June 30, 1986, and Tables I through IV if you made no contributions after June 30, 1986, you can make the following special elections to select which tables to use. How to fill out a 1040x form Contributions made both before July 1986 and after June 1986. How to fill out a 1040x form   If you made contributions to the retirement plan both before July 1986 and after June 1986, you may elect to use Tables I through IV for the pre-July 1986 cost of the contract, and Tables V through VIII for the post-June 1986 cost. How to fill out a 1040x form (See the examples below. How to fill out a 1040x form )    Making the election. How to fill out a 1040x form Attach this statement to your income tax return for the first year in which you receive an annuity:    “I elect to apply the provisions of paragraph (d) of section 1. How to fill out a 1040x form 72–6 of the Income Tax Regulations. How to fill out a 1040x form ”   The statement must also include your name, address, social security number, and the amount of the pre-July 1986 investment in the contract. How to fill out a 1040x form   If your investment in the contract includes post-June 1986 contributions to the plan, and you do not make the election to use Tables I through IV and Tables V through VIII, then you can only use Tables V through VIII in figuring the taxable part of your annuity. How to fill out a 1040x form You must also use Tables V through VIII if you are unable or do not wish to determine the portions of your contributions which were made before July 1, 1986, and after June 30, 1986. How to fill out a 1040x form    Advantages of election. How to fill out a 1040x form In general, a lesser amount of each annual annuity payment is taxable if you separately figure your exclusion ratio for pre-July 1986 and post-June 1986 contributions. How to fill out a 1040x form    If you intend to make this election, save your records that substantiate your pre-July 1986 and post-June 1986 contributions. How to fill out a 1040x form If the death benefit exclusion applies (see discussion, earlier), you do not have to apportion it between the pre-July 1986 and the post-June 1986 investment in the contract. How to fill out a 1040x form   The following examples illustrate the separate computations required if you elect to use Tables I through IV for your pre-July 1986 investment in the contract and Tables V through VIII for your post-June 1986 investment in the contract. How to fill out a 1040x form Example 1. How to fill out a 1040x form Bill, who is single, contributed $42,000 to the retirement plan and will receive an annual annuity of $24,000 for life. How to fill out a 1040x form Payment of the $42,000 contribution is guaranteed under a refund feature. How to fill out a 1040x form Bill is 55 years old as of the annuity starting date. How to fill out a 1040x form For figuring the taxable part of Bill's annuity, he chose to make separate computations for his pre-July 1986 investment in the contract of $41,300, and for his post-June 1986 investment in the contract of $700. How to fill out a 1040x form       Pre- July 1986   Post- June 1986 A. How to fill out a 1040x form Adjustment for refund feature         1) Net cost $41,300   $700   2) Annual annuity—$24,000  ($41,300/$42,000 × $24,000) $23,600       ($700/$42,000 × $24,000)     $400   3) Guarantee under contract $41,300   $700   4) No. How to fill out a 1040x form of years payments  guaranteed (rounded), A(3) ÷ A(2) 2   2   5) Applicable percentage from  Tables III and VII 1%   0%   6) Adjustment for value of refund  feature, A(5) × smaller of A(1)  or A(3) $413   $0 B. How to fill out a 1040x form Investment in the contract         1) Net cost $41,300   $700   2) Minus: Amount in A(6) 413   0   3) Investment in the contract $40,887   $700 C. How to fill out a 1040x form Expected return         1) Annual annuity receivable $24,000   $24,000   2) Multiples from Tables I and V 21. How to fill out a 1040x form 7   28. How to fill out a 1040x form 6   3) Expected return, C(1) × C(2) $520,800   $686,400 D. How to fill out a 1040x form Tax-free part of annuity         1) Exclusion ratio as decimal,  B(3) ÷ C(3) . How to fill out a 1040x form 079   . How to fill out a 1040x form 001   2) Tax-free part, C(1) × D(1) $1,896   $24 The tax-free part of Bill's total annuity is $1,920 ($1,896 plus $24). How to fill out a 1040x form The taxable part of his annuity is $22,080 ($24,000 minus $1,920). How to fill out a 1040x form If the annuity starting date is after 1986, the exclusion over the years cannot exceed the net cost (figured without any reduction for a refund feature). How to fill out a 1040x form Example 2. How to fill out a 1040x form Al is age 62 at his nearest birthday to the annuity starting date. How to fill out a 1040x form Al's wife is age 60 at her nearest birthday to the annuity starting date. How to fill out a 1040x form The joint and survivor annuity pays $1,000 per month to Al for life, and $500 per month to Al's surviving wife after his death. How to fill out a 1040x form The pre-July 1986 investment in the contract is $53,100 and the post-June 1986 investment in the contract is $7,000. How to fill out a 1040x form Al makes the election described in Example 1 . How to fill out a 1040x form For purposes of this example, assume the refund feature adjustment is zero. How to fill out a 1040x form If an adjustment is required, IRS will figure the amount. How to fill out a 1040x form See Requesting a Ruling on Taxation of Annuity near the end of this publication. How to fill out a 1040x form       Pre-  July 1986   Post-  June 1986 A. How to fill out a 1040x form Adjustment for refund feature         1) Net cost $53,100   $7,000   2) Annual annuity—$12,000  ($53,100/$60,100 × $12,000) $10,602       ($7,000/$60,100 × $12,000)     $1,398   3) Guaranteed under the contract $53,100   $7,000   4) Number of years guaranteed,  rounded, A(3) ÷ A(2) 5   5   5) Applicable percentages 0%   0%   6) Refund feature adjustment, A(5) × smaller of A(1) or A(3) 0   0 B. How to fill out a 1040x form Investment in the contract         1) Net cost $53,100   $7,000   2) Refund feature adjustment 0   0   3) Investment in the contract adjusted for refund feature $53,100   $7,000 C. How to fill out a 1040x form Expected return         1) Multiple for both annuitants from Tables II and VI 25. How to fill out a 1040x form 4   28. How to fill out a 1040x form 8   2) Multiple for first annuitant from Tables I and V 16. How to fill out a 1040x form 9   22. How to fill out a 1040x form 5   3) Multiple applicable to surviving annuitant, subtract C(2) from C(1) 8. How to fill out a 1040x form 5   6. How to fill out a 1040x form 3   4) Annual annuity to surviving annuitant $6,000   $6,000   5) Portion of expected return for surviving annuitant, C(4) × C(3) $51,000   $37,800   6) Annual annuity to first annuitant $12,000   $12,000   7) Plus: Portion of expected return for first annuitant, C(6) × C(2) $202,800   $270,000   8) Expected return for both annuitants, C(5) + C(7) $253,800   $307,800 D. How to fill out a 1040x form Tax-free part of annuity         1) Exclusion ratio as a decimal, B(3) ÷ C(8) . How to fill out a 1040x form 209   . How to fill out a 1040x form 023   2) Retiree's tax-free part of annuity, C(6) × D(1) $2,508   $276   3) Survivor's tax-free part of annuity, C(4) × D(1) $1,254   $138 The tax-free part of Al's total annuity is $2,784 ($2,508 + $276). How to fill out a 1040x form The taxable part of his annuity is $9,216 ($12,000 − $2,784). How to fill out a 1040x form The exclusion over the years cannot exceed the net cost of the contract (figured without any reduction for a refund feature) if the annuity starting date is after 1986. How to fill out a 1040x form After Al's death, his widow will apply the same exclusion percentages (20. How to fill out a 1040x form 9% and 2. How to fill out a 1040x form 3%) to her annual annuity of $6,000 to figure the tax-free part of her annuity. How to fill out a 1040x form Annuity received after June 30, 1986. How to fill out a 1040x form   If you receive an annuity payment after June 30, 1986, (regardless of your annuity starting date), you may elect to treat the entire cost of the contract as post-June 1986 cost (even if you made no post-June 1986 contributions to the plan) and use Tables V through VIII. How to fill out a 1040x form Once made, you cannot revoke the election, which will apply to all payments during the year and in any later year. How to fill out a 1040x form    Make the election by attaching the following statement to your income tax return. How to fill out a 1040x form    “I elect, under section 1. How to fill out a 1040x form 72–9 of the Income Tax Regulations, to treat my entire cost of the contract as a post-June 1986 cost of the plan. How to fill out a 1040x form ”   The statement must also include your name, address, and social security number. How to fill out a 1040x form   You should also indicate you are making this election if you are unable or do not wish to determine the parts of your contributions which were made before July 1, 1986, and after June 30, 1986. How to fill out a 1040x form Disqualifying form of payment or settlement. How to fill out a 1040x form   If your annuity starting date is after June 30, 1986, and the contract provides for a disqualifying form of payment or settlement, such as an option to receive a lump sum in full discharge of the obligation under the contract, the entire investment in the contract is treated as post-June 1986 investment in the contract. How to fill out a 1040x form See regulations section 1. How to fill out a 1040x form 72–6(d)(3) for additional examples of disqualifying forms of payment or settlement. How to fill out a 1040x form You can find the Income Tax Regulations in many libraries and at Internal Revenue Service Offices. How to fill out a 1040x form Worksheets for Determining Taxable Annuity Worksheets I and II. How to fill out a 1040x form   Worksheets I and II follow for determining your taxable annuity under Regulations Section 1. How to fill out a 1040x form 72–6(d)(6) Election. How to fill out a 1040x form Worksheet I For Determining Taxable Annuity Under Regulations Section 1. How to fill out a 1040x form 72-6(d)(6) Election For Single Annuitant With No Survivor Annuity               Pre-July 1986   Post-June 1986 A. How to fill out a 1040x form   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. How to fill out a 1040x form )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)   Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages* from Tables III and VII                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. How to fill out a 1040x form If not, the IRS will calculate the refund feature percentage. How to fill out a 1040x form             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. How to fill out a 1040x form   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund feature:                   B(1) minus B(2)                             C. How to fill out a 1040x form   Expected Return             1)   Annual Annuity:                   12 times monthly annuity**             2)   Expected return multiples from Tables I and V             3)     Expected return:                   C(1) times C(2)                             D. How to fill out a 1040x form   Tax-Free Part of Annuity             1)     Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(3)             2)     Tax-free part of annuity:                   C(1) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. How to fill out a 1040x form     Worksheet II For Determining Taxable Annuity Under Regulations Section 1. How to fill out a 1040x form 72-6(d)(6) Election For Joint and Survivor Annuity               Pre-July 1986   Post-June 1986 A. How to fill out a 1040x form   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. How to fill out a 1040x form )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)     Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages*                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. How to fill out a 1040x form If not, the IRS will calculate the refund feature percentage. How to fill out a 1040x form             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. How to fill out a 1040x form   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund future:                   B(1) minus B(2)                             C. How to fill out a 1040x form   Expected Return             1)   Multiples for both annuitants, Tables II and VI             2)   Multiple for retiree. How to fill out a 1040x form Tables I and VI             3)   Multiple for survivor:                   C(1) minus C(2)             4)   Annual annuity to survivor:                   12 times potential monthly rate for survivor**             5)   Expected return for survivor:                   C(3) times C(4)             6)   Annual annuity to retiree:                   12 times monthly rate for retiree**             7)   Expected return for retiree:                   C(2) times C(6)             8)   Total expected return:                   C(5) plus C(7)                             D. How to fill out a 1040x form   Tax-Free Part of Annuity             1)   Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(8)             2)   Retiree's tax-free part of annuity:                   C(6) times D(1)             3)   Survivor's tax-free part of annuity, if surviving after death of retiree:                   C(4) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. How to fill out a 1040x form   Actuarial Tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial Tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial Tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Please click here for the text description of the image. How to fill out a 1040x form Actuarial tables Requesting a Ruling on Taxation of Annuity If you are a retiree, or the survivor of an employee or retiree, you may ask the Internal Revenue Service to help you determine the taxation of your annuity. How to fill out a 1040x form If you make this request, you are asking for a ruling. How to fill out a 1040x form User fee. How to fill out a 1040x form   Under the law in effect at the time this publication went to print, the IRS must charge a user fee for all ruling requests. How to fill out a 1040x form You should call the IRS for the proper fee. How to fill out a 1040x form A request solely for the value of the refund feature is not treated as a ruling request and requires no fee. How to fill out a 1040x form Send your request to:     Internal Revenue Service  Attention: EP Letter Rulings P. How to fill out a 1040x form O. How to fill out a 1040x form Box 27063 McPherson Station Washington, DC 20038 The user fee is allowed as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit. How to fill out a 1040x form When to make the request. How to fill out a 1040x form   Please note that requests sent between February 1 and April 15 may experience some delay. How to fill out a 1040x form We process requests in the order received, and we will reply to your request as soon as we can process it. How to fill out a 1040x form If you do not receive your ruling by the required filing date, you may use Form 4868, Application for Automatic Extension of Time To File U. How to fill out a 1040x form S. How to fill out a 1040x form Individual Income Tax Return, to get an extension of time to file. How to fill out a 1040x form Information you must furnish. How to fill out a 1040x form   You must furnish the information listed below so the IRS can comply with your request. How to fill out a 1040x form Failure to furnish the information will result in a delay in processing your request. How to fill out a 1040x form Please send only copies of the following documents, as the IRS retains all material sent for its records: A letter explaining the question(s) you wish to have resolved or the information you need from the ruling. How to fill out a 1040x form Copies of any documents showing distributions, annuity rates, and annuity options available to you. How to fill out a 1040x form A copy of any Form 1099–R you received since your annuity began. How to fill out a 1040x form A statement indicating whether you have filed your return for the year for which you are making the request. How to fill out a 1040x form If you have requested an extension of time to file that return, please indicate the extension date. How to fill out a 1040x form Your daytime phone number. How to fill out a 1040x form Your current mailing address. How to fill out a 1040x form A power of attorney if someone other than you, an attorney, a certified public accountant, or an enrolled agent is signing this request. How to fill out a 1040x form Form 2848, Power of Attorney and Declaration of Representative, may be used for this purpose. How to fill out a 1040x form A completed Tax Information Sheet (or facsimile) shown on the next page. How to fill out a 1040x form Sign and date the Disclosure and Perjury Statement (or facsimile) at the end of the tax information sheet. How to fill out a 1040x form This statement must be signed by the retiree or the survivor annuitant. How to fill out a 1040x form It cannot be signed by a representative. How to fill out a 1040x form Tax Information Sheet Please click here for the text description of the image. How to fill out a 1040x form Tax Information Sheet Please click here for the text description of the image. How to fill out a 1040x form Tax Information Sheet (continued) How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. How to fill out a 1040x form Free help with your tax return. How to fill out a 1040x form   You can get free help preparing your return nationwide from IRS-certified volunteers. How to fill out a 1040x form The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. How to fill out a 1040x form The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. How to fill out a 1040x form Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. How to fill out a 1040x form In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. How to fill out a 1040x form To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. How to fill out a 1040x form gov, download the IRS2Go app, or call 1-800-906-9887. How to fill out a 1040x form   As part of the TCE program, AARP offers the Tax-Aide counseling program. How to fill out a 1040x form To find the nearest AARP Tax-Aide site, visit AARP's website at www. How to fill out a 1040x form aarp. How to fill out a 1040x form org/money/taxaide or call 1-888-227-7669. How to fill out a 1040x form For more information on these programs, go to IRS. How to fill out a 1040x form gov and enter “VITA” in the search box. How to fill out a 1040x form Internet. How to fill out a 1040x form    IRS. How to fill out a 1040x form gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. How to fill out a 1040x form Download the free IRS2Go app from the iTunes app store or from Google Play. How to fill out a 1040x form Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. How to fill out a 1040x form Check the status of your 2013 refund with the Where's My Refund? application on IRS. How to fill out a 1040x form gov or download the IRS2Go app and select the Refund Status option. How to fill out a 1040x form The IRS issues more than 9 out of 10 refunds in less than 21 days. How to fill out a 1040x form Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. How to fill out a 1040x form You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. How to fill out a 1040x form The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. How to fill out a 1040x form Use the Interactive Tax Assistant (ITA) to research your tax questions. How to fill out a 1040x form No need to wait on the phone or stand in line. How to fill out a 1040x form The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. How to fill out a 1040x form When you reach the response screen, you can print the entire interview and the final response for your records. How to fill out a 1040x form New subject areas are added on a regular basis. How to fill out a 1040x form  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. How to fill out a 1040x form gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. How to fill out a 1040x form You can use the IRS Tax Map, to search publications and instructions by topic or keyword. How to fill out a 1040x form The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. How to fill out a 1040x form When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. How to fill out a 1040x form Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. How to fill out a 1040x form You can also ask the IRS to mail a return or an account transcript to you. How to fill out a 1040x form Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. How to fill out a 1040x form gov or by calling 1-800-908-9946. How to fill out a 1040x form Tax return and tax account transcripts are generally available for the current year and the past three years. How to fill out a 1040x form Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. How to fill out a 1040x form Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. How to fill out a 1040x form If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. How to fill out a 1040x form Check the status of your amended return using Where's My Amended Return? Go to IRS. How to fill out a 1040x form gov and enter Where's My Amended Return? in the search box. How to fill out a 1040x form You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. How to fill out a 1040x form It can take up to 3 weeks from the date you mailed it to show up in our system. How to fill out a 1040x form Make a payment using one of several safe and convenient electronic payment options available on IRS. How to fill out a 1040x form gov. How to fill out a 1040x form Select the Payment tab on the front page of IRS. How to fill out a 1040x form gov for more information. How to fill out a 1040x form Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. How to fill out a 1040x form Figure your income tax withholding with the IRS Withholding Calculator on IRS. How to fill out a 1040x form gov. How to fill out a 1040x form Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. How to fill out a 1040x form Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. How to fill out a 1040x form gov. How to fill out a 1040x form Request an Electronic Filing PIN by going to IRS. How to fill out a 1040x form gov and entering Electronic Filing PIN in the search box. How to fill out a 1040x form Download forms, instructions and publications, including accessible versions for people with disabilities. How to fill out a 1040x form Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. How to fill out a 1040x form gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. How to fill out a 1040x form An employee can answer questions about your tax account or help you set up a payment plan. How to fill out a 1040x form Before you visit, check the Office Locator on IRS. How to fill out a 1040x form gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. How to fill out a 1040x form If you have a special need, such as a disability, you can request an appointment. How to fill out a 1040x form Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. How to fill out a 1040x form Apply for an Employer Identification Number (EIN). How to fill out a 1040x form Go to IRS. How to fill out a 1040x form gov and enter Apply for an EIN in the search box. How to fill out a 1040x form Read the Internal Revenue Code, regulations, or other official guidance. How to fill out a 1040x form Read Internal Revenue Bulletins. How to fill out a 1040x form Sign up to receive local and national tax news and more by email. How to fill out a 1040x form Just click on “subscriptions” above the search box on IRS. How to fill out a 1040x form gov and choose from a variety of options. How to fill out a 1040x form    Phone. How to fill out a 1040x form You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. How to fill out a 1040x form Download the free IRS2Go app from the iTunes app store or from Google Play. How to fill out a 1040x form Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. How to fill out a 1040x form gov, or download the IRS2Go app. How to fill out a 1040x form Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. How to fill out a 1040x form The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. How to fill out a 1040x form Mos