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Irs 1040nr

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Irs 1040nr

Irs 1040nr Accelerated Cost Recovery System (ACRS) Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: ACRS Defined What Can and Cannot Be Depreciated Under ACRSRecovery Property Nonrecovery Property How To Figure the DeductionUnadjusted Basis Classes of Recovery Property Recovery Periods Alternate ACRS Method (Modified Straight Line Method) ACRS Deduction in Short Tax Year DispositionsEarly dispositions of ACRS property other than 15-, 18-, or 19-year real property. Irs 1040nr Dispositions — mass asset accounts. Irs 1040nr Early dispositions — 15-year real property. Irs 1040nr Early dispositions — 18- and 19-year real property. Irs 1040nr Depreciation Recapture Topics - This chapter discusses: The definition of ACRS What can and cannot be depreciated under ACRS How to figure the deduction Dispositions Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 551 Basis of Assets 583 Starting a Business and Keeping Records Form (and Instructions) 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization The Accelerated Cost Recovery System (ACRS) applies to property first used before 1987. Irs 1040nr It is the name given to tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income. Irs 1040nr These rules are mandatory and generally apply to tangible property placed in service after 1980 and before 1987. Irs 1040nr If you placed property in service during this period, you must continue to figure your depreciation under ACRS. Irs 1040nr If you used listed property placed in service after June 18, 1984, less than 50% for business in 1995, see Predominant Use Test in chapter 3. Irs 1040nr Listed property includes cars, other means of transportation, and certain computers. Irs 1040nr Any additions or improvements placed in service after 1986, including any components of a building (such as plumbing, wiring, storm windows, etc. Irs 1040nr ), are depreciated using MACRS, discussed in chapter 3 of Publication 946. Irs 1040nr It does not matter that the underlying property is depreciated under ACRS or one of the other methods. Irs 1040nr ACRS Defined ACRS consists of accelerated depreciation methods and an alternate ACRS method that could have been elected. Irs 1040nr The alternate ACRS method used a recovery percentage based on a modified straight line method. Irs 1040nr The law prescribes fixed percentages to be uses for each class of property. Irs 1040nr Property depreciable under ACRS is called recovery property. Irs 1040nr The recovery class of property determines the recovery period. Irs 1040nr Generally, the class life of property places it in a 3-year, 5-year, 10-year, 15-year, 18-year, or 19-year recovery class. Irs 1040nr Under ACRS, the prescribed percentages are used to recover the unadjusted basis of recovery property. Irs 1040nr To figure a depreciation deduction, you multiply the prescribed percentage for the recovery class by the unadjusted basis of the recovery property. Irs 1040nr You must continue to figure your depreciation under ACRS for property placed in service after 1980 and before 1987. Irs 1040nr For property you placed in service after 1986, you must use MACRS, discussed in chapter 3 of Publication 946. Irs 1040nr What Can and Cannot Be Depreciated Under ACRS ACRS applies to most depreciable tangible property placed in service after 1980 and before 1987. Irs 1040nr It includes new or used and real or personal property. Irs 1040nr The property must be for use in a trade or business or for the production of income. Irs 1040nr Property you acquired before 1981 or after 1986 is not ACRS recovery property. Irs 1040nr For information on depreciating property acquired before 1981, see chapter 2. Irs 1040nr For information on depreciating property acquired after 1986, see chapter 3 of Publication 946. Irs 1040nr Recovery Property Recovery property under ACRS is tangible depreciable property placed in service after 1980 and before 1987. Irs 1040nr It generally includes new or used property that you acquired after 1980 and before 1987 for use in your trade or business or for the production of income. Irs 1040nr Nonrecovery Property You cannot use ACRS for property you placed in service before 1981 or after 1986. Irs 1040nr Nonrecovery property also includes: Intangible property, Property you elected to exclude from ACRS that is properly depreciated under a method of depreciation that is not based on a term of years, Certain public utility property, and Certain property acquired and excluded from ACRS because of the antichurning rules. Irs 1040nr Intangible property. Irs 1040nr   Intangible property is not depreciated under ACRS. Irs 1040nr Property depreciated under methods not expressed in a term of years. Irs 1040nr   Certain property depreciated under a method not expressed in a term of years is not depreciated under ACRS. Irs 1040nr This included any property: If you made an irrevocable election to exclude such property, and In the first year that you could have claimed depreciation, you properly used the unit-of-production method or any method of depreciation not expressed in a term of years (not including the retirement-replacement-betterment method). Irs 1040nr Public utility property. Irs 1040nr   Public utility property for which the taxpayer does not use a normalization method of accounting is excluded from ACRS and is subject to depreciation under a special rule. Irs 1040nr Additions or improvements to ACRS property after 1986. Irs 1040nr   Any additions or improvements placed in service after 1986, including any components of a building (plumbing, wiring, storm windows, etc. Irs 1040nr ) are depreciated using MACRS, discussed in chapter 3 of Publication 946. Irs 1040nr It does not matter that the underlying property is depreciated under ACRS or one of the other methods. Irs 1040nr How To Figure the Deduction After you determine that your property can be depreciated under ACRS, you are ready to figure your deduction. Irs 1040nr Because the conventions are built into the percentage table rates, you only need to know the following: The unadjusted basis of your recovery property, The classes of recovery property, The recovery periods, and Whether to use the prescribed percentages based on accelerated methods or percentages based on using the alternate ACRS method. Irs 1040nr Unadjusted Basis To figure your ACRS deduction, you multiply the unadjusted basis in your recovery property by its applicable percentage for the year. Irs 1040nr Unadjusted basis is the same amount you would use to figure gain on a sale, but it is figured without taking into account any depreciation taken in earlier years. Irs 1040nr However, reduce your original basis by the amount of amortization taken on the property and by any section 179 deduction claimed as discussed in chapter 2 of Publication 946. Irs 1040nr If you buy property, your unadjusted basis is usually its cost minus any amortized amount and minus any section 179 deduction elected. Irs 1040nr If you acquire property in some other way, such as by inheriting it, getting it as a gift, or building it yourself, you figure your unadjusted basis under other rules. Irs 1040nr See Publication 551. Irs 1040nr Classes of Recovery Property All recovery property under ACRS is in one of the following classes. Irs 1040nr The class for your property was determined when you began to depreciate it. Irs 1040nr 3-Year Property 3-year property includes automobiles, light-duty trucks (actual unloaded weight less than 13,000 pounds), and tractor units for use over-the-road. Irs 1040nr Race horses over 2 years old when placed in service are 3-year property. Irs 1040nr Any other horses over 12 years old when you placed them in service are also included in the 3-year property class. Irs 1040nr The ACRS percentages for 3-year recovery property are: Recovery Period Percentage 1st year 25% 2nd year 38% 3rd year 37% If you used the percentages above to depreciate your 3-year recovery property, your property, except for certain passenger automobiles, is fully depreciated. Irs 1040nr You cannot claim depreciation for this property after 1988. Irs 1040nr 5-Year Property 5-year property includes computers, copiers, and equipment, such as office furniture and fixtures. Irs 1040nr It also includes single purpose agricultural or horticultural structures and petroleum storage facilities (other than buildings and their structural components). Irs 1040nr The ACRS percentages for 5-year recovery property are: Recovery period Percentage 1st year 15% 2nd year 22% 3rd through 5th year 21% If you used the percentages above to depreciate your 5-year recovery property, it is fully depreciated. Irs 1040nr You cannot claim depreciation for this property after 1990. Irs 1040nr 10-Year Property 10-year property includes certain real property such as theme-park structures and certain public utility property. Irs 1040nr Manufactured homes (including mobile homes) and railroad tank cars are also 10-year property. Irs 1040nr You do not treat a building, and its structural components, as 10-year property by reason of a change in use after you placed the property in service. Irs 1040nr For example, a building (15-year real property) that was placed in service in 1981 and was converted to a theme-park structure in 1986 remains 15-year real property. Irs 1040nr The ACRS percentages for 10-year recovery property are: Recovery Period Percentage 1st year 8% 2nd year 14% 3rd year 12% 4th through 6th year 10% 7th through 10th year 9% If you used the percentages above, you cannot claim depreciation for this property after 1995. Irs 1040nr Example. Irs 1040nr On April 21, 1986, you bought and placed in service a new mobile home for $26,000 to be used as rental property. Irs 1040nr You paid $10,000 cash and signed a note for $16,000 giving you an unadjusted basis of $26,000. Irs 1040nr On June 8, 1986, you bought and placed in service a used mobile home for use as rental property at a total cost of $11,500. Irs 1040nr The total unadjusted basis of your 10-year recovery property placed in service in 1986 was $37,500 ($26,000 + $11,500). Irs 1040nr Your ACRS deduction was $3,000 (8% × $37,500). Irs 1040nr In 1987, your ACRS deduction was $5,250 (14% × $37,500). Irs 1040nr In 1988, your ACRS deduction was $4,500 (12% × $37,500). Irs 1040nr In 1989, 1990, and 1991, your ACRS deduction was $3,750 (10% × $37,500). Irs 1040nr In 1992, 1993, 1994, and 1995 your deduction for each year is $3,375 (9% × $37,500). Irs 1040nr 15-Year Real Property 15-year real property is real property that is recovery property placed in service before March 16, 1984. Irs 1040nr It includes all real property, such as buildings, other than that designated as 5-year or 10-year property. Irs 1040nr Unlike the 3-, 5-, or 10-year classes of property, the percentages for 15-year real property depend on when you placed the property in service during your tax year. Irs 1040nr You could group 15-year real property by month and year placed in service. Irs 1040nr In Table 1, at the end of this publication in the Appendix, find the month in your tax year that you placed the property in service in your trade or business or for the production of income. Irs 1040nr You use the percentages listed under that month for each year of the recovery period to determine your depreciation deduction each year. Irs 1040nr Example. Irs 1040nr On March 5, 1984, you placed an apartment building in service in your business. Irs 1040nr It is 15-year real property. Irs 1040nr After subtracting the value of the land, your unadjusted basis in the building is $250,000. Irs 1040nr You use the calendar year as your tax year. Irs 1040nr March is the third month of your tax year. Irs 1040nr Your ACRS deduction for 1984 was $25,000 (10% × $250,000). Irs 1040nr For 1985, the percentage for the third month of the second year of the recovery period is 11%. Irs 1040nr Your deduction was $27,500 (11% × $250,000). Irs 1040nr For the third, fourth, and fifth years of the recovery period (1986, 1987, and 1988), the percentages are 9%, 8%, and 7%. Irs 1040nr For 1989 through 1992, the percentage for the third month is 6%. Irs 1040nr Your deduction each year is $15,000 (6% × $250,000). Irs 1040nr For 1993, 1994, and 1995, the percentage for the third month is 5%. Irs 1040nr Your depreciation deduction is $12,500 (5% × $250,000) for 1993, 1994, and 1995. Irs 1040nr Low-Income Housing Low-income housing that was assigned a 15-year recovery period under ACRS includes the following types of property: Federally assisted housing projects where the mortgage is insured under section 221(d)(3) or 236 of the National Housing Act, or housing financed or assisted by direct loan or tax abatement under similar provisions of state or local laws. Irs 1040nr Low-income rental housing for which a depreciation deduction for rehabilitation expenditures is allowed. Irs 1040nr Low-income rental housing held for occupancy by families or individuals eligible to receive subsidies under section 8 of the United States Housing Act of 1937, as amended, or under the provisions of state or local laws that authorize similar subsidies for low-income families. Irs 1040nr Housing financed or assisted by direct loan or insured under Title V of the Housing Act of 1949. Irs 1040nr The ACRS percentages for low-income housing real property, like the regular 15-year real property percentages, depend on when you placed the property in service. Irs 1040nr Find the month in your tax year in Table 2 or 3 at the end of this publication in the Appendix that you first placed the property in service as rental housing. Irs 1040nr Use the percentages listed under that month for each year of the recovery period. Irs 1040nr Table 2 shows percentages for low-income housing placed in service before May 9, 1985. Irs 1040nr Table 3 shows percentages for low-income housing placed in service after May 8, 1985, and before 1987. Irs 1040nr Example. Irs 1040nr In May 1986, you acquired and placed in service a house that qualified as low-income rental housing under item 3) of the above listing. Irs 1040nr You use the calendar year as your tax year. Irs 1040nr You use Table C–3 because the property was placed in service after May 8, 1985. Irs 1040nr Your unadjusted basis for the property, not including the land, was $59,000. Irs 1040nr Your deduction for 1986 through 2001 is shown in the following table. Irs 1040nr Year Rate Deduction 1986 8. Irs 1040nr 9% $5,251 1987 12. Irs 1040nr 1% 7,139 1988 10. Irs 1040nr 5% 6,195 1989 9. Irs 1040nr 1% 5,369 1990 7. Irs 1040nr 9% 4,661 1991 6. Irs 1040nr 9% 4,071 1992 5. Irs 1040nr 9% 3,481 1993 5. Irs 1040nr 2% 3,068 1994 4. Irs 1040nr 6% 2,714 1995 4. Irs 1040nr 6% 2,714 1996 4. Irs 1040nr 6% 2,714 1997 4. Irs 1040nr 6% 2,714 1998 4. Irs 1040nr 6% 2,714 1999 4. Irs 1040nr 5% 2,655 2000 4. Irs 1040nr 5% 2,655 2001 1. Irs 1040nr 5% 885 18-Year Real Property 18-year real property is real property that is recovery property placed in service after March 15, 1984, and before May 9, 1985. Irs 1040nr It includes real property, such as buildings, other than that designated as 5-year, 10-year, 15-year real property, or low-income housing. Irs 1040nr The ACRS percentages for 18-year real property depend on when you placed the property in service in your trade or business or for the production of income during your tax year. Irs 1040nr There are also tables for 18-year real property in the Appendix. Irs 1040nr Table 4 shows the percentages for 18-year real property you placed in service after June 22, 1984, and before May 9, 1985. Irs 1040nr Table 5 is for 18-year real property placed in service after March 15, 1984, and before June 23, 1984. Irs 1040nr Find the month in your tax year that you placed the property in service in a trade or business or for the production of income. Irs 1040nr Use the percentages listed under that month for each year of the recovery period. Irs 1040nr Example. Irs 1040nr On April 28, 1985, you bought and placed in service a rental house. Irs 1040nr The house, not including the land, cost $95,000. Irs 1040nr This is your unadjusted basis for the house. Irs 1040nr You use the calendar year as your tax year. Irs 1040nr Because the house was placed in service after June 22, 1984, and before May 9, 1985, it is 18-year real property. Irs 1040nr You use Table 4 to figure your deduction for the house. Irs 1040nr April is the fourth month of your tax year. Irs 1040nr Your deduction for 1985 through 2003 is shown in the following table. Irs 1040nr Year Rate Deduction 1985 7. Irs 1040nr 0% $6,650 1986 9. Irs 1040nr 0% 8,550 1987 8. Irs 1040nr 0% 7,600 1988 7. Irs 1040nr 0% 6,650 1989 7. Irs 1040nr 0% 6,650 1990 6. Irs 1040nr 0% 5,700 1991 5. Irs 1040nr 0% 4,750 1992 5. Irs 1040nr 0% 4,750 1993 5. Irs 1040nr 0% 4,750 1994 5. Irs 1040nr 0% 4,750 1995 5. Irs 1040nr 0% 4,750 1996 5. Irs 1040nr 0% 4,750 1997 5. Irs 1040nr 0% 4,750 1998 4. Irs 1040nr 0% 3,800 1999 4. Irs 1040nr 0% 3,800 2000 4. Irs 1040nr 0% 3,800 2001 4. Irs 1040nr 0% 3,800 2002 4. Irs 1040nr 0% 3,800 2003 1. Irs 1040nr 0% 950 19-Year Real Property 19-year real property is real property that is recovery property placed in service after May 8, 1985, and before 1987. Irs 1040nr It includes all real property, other than that designated as 5-year, 10-year, 15-year, or 18-year real property, or low-income housing. Irs 1040nr The ACRS percentages for 19-year real property depend on when you placed the property in service in a trade or business or for the production of income during your tax year. Irs 1040nr Table 6 shows the percentages for 19-year real property. Irs 1040nr You find the month in your tax year that you placed the property in service. Irs 1040nr You use the percentages listed under that month for each year of the recovery period. Irs 1040nr Recovery Periods Each item of recovery property is assigned to a class of property. Irs 1040nr The classes of recovery property establish the recovery periods over which the unadjusted basis of items in a class is recovered. Irs 1040nr The classes of property are: 3-Year property 5-Year property 10-Year property 15-Year real property Low-income housing 18-Year real property 19-Year real property Alternate ACRS Method (Modified Straight Line Method) ACRS provides an alternate ACRS method that could be elected. Irs 1040nr This alternate ACRS method uses a recovery percentage based on a modified straight line method. Irs 1040nr This alternate ACRS method generally uses percentages other than those from the tables. Irs 1040nr If you elected the alternate ACRS method, you determine the recovery period by using the following schedule. Irs 1040nr This schedule is for other than 18- and 19-year real property and low-income housing: In the case of: You could have elected a recovery period of: 3-year property 3, 5, or 12 years 5-year property 5, 12, or 25 years 15-year real property 15, 35, or 45 years Percentages. Irs 1040nr   The straight-line percentages for the alternate ACRS method are: Recovery Period Percentage 5 years 20. Irs 1040nr 00% 10 years 10. Irs 1040nr 00% 12 years 8. Irs 1040nr 333% 15 years 6. Irs 1040nr 667% 25 years 4. Irs 1040nr 00% 35 years 2. Irs 1040nr 857%   You apply the percentage to the unadjusted basis(defined earlier) of the property to figure your ACRS deduction. Irs 1040nr There are tables for 18- and 19-year real property later in this publication in the Appendix. Irs 1040nr For 15-year real property, see 15-year real property, later. Irs 1040nr 3-, 5-, and 10-year property. Irs 1040nr   If you elected to use an alternate recovery percentage, you have to use the same recovery percentage for all property in that class that you placed in service in that tax year. Irs 1040nr This applies throughout the recovery period you selected. Irs 1040nr Half-year convention. Irs 1040nr   If you elected the alternate method, only a half-year of depreciation was deducted for the year you placed the property in service. Irs 1040nr This applied regardless of when in the tax year you placed the property in service. Irs 1040nr For each of the remaining years in the recovery period, you take a full year's deduction. Irs 1040nr If you hold the property for the entire recovery period, a half-year of depreciation is allowable for the year following the end of the recovery period. Irs 1040nr Example. Irs 1040nr You operate a small upholstery business. Irs 1040nr On March 19, 1986, you bought and placed in service a $13,000 light-duty panel truck to be used in your business and a $500 electric saw. Irs 1040nr You elected to use the alternate ACRS method. Irs 1040nr You did not elect to take a section 179 deduction. Irs 1040nr You decided to recover the cost of the truck, which is 3-year recovery property, over 5 years. Irs 1040nr The saw is 5-year property, but you decided to recover its cost over 12 years. Irs 1040nr For 1986, your ACRS deduction reflected the half-year convention. Irs 1040nr In the first year, you deducted half of the amount determined for a full year. Irs 1040nr Your ACRS deduction for 1986 is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600 Half-year convention -½ of $2,600= $1,300. Irs 1040nr 00     Electric saw   12 years straight line = 8. Irs 1040nr 333% 8. Irs 1040nr 333% ÷ $500 = $41. Irs 1040nr 67 Half-year convention -½ of $41. Irs 1040nr 67= 20. Irs 1040nr 84 Total ACRS deduction for 1986 $1,320. Irs 1040nr 84       You take a full year of depreciation for both the truck and the saw for the years 1987 through 1990. Irs 1040nr Your ACRS deduction for each of those years is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600     Electric saw     12 years straight line = 8. Irs 1040nr 333% 8. Irs 1040nr 333% ÷ $500 = $41. Irs 1040nr 67 Total annual ACRS deduction for 1987 through 1990 $2,641. Irs 1040nr 67       In 1991, you take a half-year of depreciation for the truck and a full year of depreciation for the saw. Irs 1040nr Your ACRS deduction for 1991 is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600 Half-year convention -½ of $2,600= $1,300. Irs 1040nr 00     Electric saw   12 years straight line = 8. Irs 1040nr 333% 8. Irs 1040nr 333% ÷ $500 = $41. Irs 1040nr 67 Total ACRS deduction for 1991 $1,341. Irs 1040nr 67       The truck is fully depreciated after 1991. Irs 1040nr You take a full year of depreciation for the saw for the years 1992 through 1997. Irs 1040nr Your ACRS deduction for each of those years is as follows: Electric saw     12 years straight line = 8. Irs 1040nr 333% 8. Irs 1040nr 333% ÷ $500 = $41. Irs 1040nr 67 Total annual ACRS deduction for 1992 through 1997 $41. Irs 1040nr 67       You take a half-year of depreciation for the saw for 1998. Irs 1040nr Your ACRS deduction for 1998 is as follows: Electric saw   12 years straight line = 8. Irs 1040nr 333% 8. Irs 1040nr 333% ÷ $500 = $41. Irs 1040nr 67 Half-year convention -½ of $41. Irs 1040nr 67= 20. Irs 1040nr 84 Total ACRS deduction for 1998 $20. Irs 1040nr 84       The saw is fully depreciated after 1998. Irs 1040nr 15-year real property. Irs 1040nr   Under ACRS, you could also elect to use the alternate ACRS method for 15-year real property. Irs 1040nr The alternate ACRS method allows you to depreciate your 15-year real property using the straight line ACRS method over the alternate recovery periods of 15, 35, or 45 years. Irs 1040nr If you selected a 15-year recovery period, you use the percentage (6. Irs 1040nr 667%) from the schedule above. Irs 1040nr You prorate this percentage for the number of months the property was in service in the first year. Irs 1040nr If you selected a 35- or 45-year recovery period, you use either Table 11 or 15. Irs 1040nr Alternate periods for 18-year real property. Irs 1040nr   For 18-year real property, the alternate recovery periods are 18, 35, or 45 years. Irs 1040nr The percentages for 18-year real property under the alternate method are in Tables 7, 8, 10, 11, 14, and 15 in the Appendix. Irs 1040nr There are two tables for each alternate recovery period. Irs 1040nr One table shows the percentage for property placed in service after June 22, 1984. Irs 1040nr The other table has the percentages for property placed in service after March 15, 1984, and before June 23, 1984. Irs 1040nr Alternate periods for 19-year real property. Irs 1040nr   For 19-year real property, the alternate recovery periods are 19, 35, or 45 years. Irs 1040nr If you selected a 19-year recovery period, use Table 9 to determine your deduction. Irs 1040nr If you select a 35- or 45-year recovery period, use either Table 13 or 14. Irs 1040nr Example. Irs 1040nr You placed in service an apartment building on August 3, 1986. Irs 1040nr The building is 19-year real property. Irs 1040nr The sales contract allocated $300,000 to the building and $100,000 to the land. Irs 1040nr You use the calendar year as your tax year. Irs 1040nr You chose the alternate ACRS method over a recovery period of 35 years. Irs 1040nr For 1986, you figure your ACRS deduction usingTable 13. Irs 1040nr August is the eighth month of your tax year. Irs 1040nr The percentage from Table 13 for the eighth month is 1. Irs 1040nr 1%. Irs 1040nr Your deduction was $3,300 ($300,000 ÷ 1. Irs 1040nr 1%). Irs 1040nr The deduction rate from ACRS Table 13 for years 2 through 20 is 2. Irs 1040nr 9% so that your deduction in 1987 through 2005 is $8,700 ($300,000 ÷ 2. Irs 1040nr 9%). Irs 1040nr Alternate periods for low-income housing. Irs 1040nr   For low-income housing, the alternate recovery periods are 15, 35, or 45 years. Irs 1040nr If you selected a 15-year period for this property, use 6. Irs 1040nr 667% as the percentage. Irs 1040nr If you selected a 35- or 45-year period, use either Table 11, 12, or 15. Irs 1040nr Election. Irs 1040nr   You had to make the election to use the alternate ACRS method by the return due date (including extensions) for the tax year you placed the property in service. Irs 1040nr Revocation of election. Irs 1040nr   Your election to use an alternate ACRS method, once made, can be changed only with the consent of the Commissioner. Irs 1040nr The Commissioner grants consent only in extraordinary circumstances. Irs 1040nr Any request for a revocation will be considered a request for a ruling. Irs 1040nr ACRS Deduction in Short Tax Year For a tax year that is less than 12 months, the ACRS deduction is prorated on a 12-month basis. Irs 1040nr Figure the amount of the ACRS deduction for a short tax year as follows: First, you figure the ACRS deduction for a full year. Irs 1040nr You figure this by multiplying the unadjusted basis by the recovery percentage. Irs 1040nr You then multiply the ACRS deduction determined for a full tax year by a fraction. Irs 1040nr The numerator (top number) of the fraction is the number of months in the short tax year and the denominator (bottom number) is 12. Irs 1040nr For example, a corporation placed in service in June 1986 an item of 3-year property with an unadjusted basis of $10,000. Irs 1040nr The corporation files a tax return, because of a change in its accounting period, for the 6-month short tax year ending June 30, 1986. Irs 1040nr The full year's ACRS deduction for this item is $2,500 ($10,000 ÷ 25%), the first year percentage from the 3-year table. Irs 1040nr The ACRS deduction for the short tax year is $1,250 ($2,500 ÷ 6/12). Irs 1040nr You use the full ACRS percentages during the remaining years of the recovery period. Irs 1040nr For the first tax year after the recovery period, the unrecovered basis will be deductible. Irs 1040nr Exception. Irs 1040nr   For the tax year in which you placed 15-, 18-, or 19-year real property in service or in the tax year you dispose of it, you compute the ACRS deduction for the number of months that the property is in service during that tax year. Irs 1040nr You compute the number of months using either a full month or mid-month convention. Irs 1040nr This is true regardless of the number of months in the tax year and the recovery period and method used. Irs 1040nr Dispositions A disposition is the permanent withdrawal of property from use in your trade or business or in the production of income. Irs 1040nr You can make a withdrawal by sale, exchange, retirement, abandonment, or destruction. Irs 1040nr You generally recognize gain or loss on the disposition of an asset by sale. Irs 1040nr However, nonrecognition rules can allow you to postpone some gain. Irs 1040nr See Publication 544. Irs 1040nr If you physically abandon property, you can deduct as a loss the adjusted basis of the asset at the time of its abandonment. Irs 1040nr Your intent must be to discard the asset so that you will not use it again or retrieve it for sale, exchange, or other disposition. Irs 1040nr Early dispositions. Irs 1040nr   The disposal of an asset before the end of its specified recovery period, is referred to as an early disposition. Irs 1040nr When an early disposition occurs, the depreciation deduction in the year of disposition depends on the class of property involved. Irs 1040nr Early dispositions of ACRS property other than 15-, 18-, or 19-year real property. Irs 1040nr   Generally, you get no ACRS deduction for the tax year in which you dispose of or retire recovery property, except for 15-, 18-, and 19-year real property. Irs 1040nr This means there is no depreciation deduction under ACRS in the year you dispose of or retire any of your 3-, 5-, or 10-year recovery property. Irs 1040nr Dispositions — mass asset accounts. Irs 1040nr   The law provides a special rule to avoid the calculation of gain on the disposition of assets from mass asset accounts. Irs 1040nr A mass asset account includes items usually minor in value in relation to the group, numerous in quantity, impractical to separately identify, and not usually accounted for on a separate basis, but on a total dollar value. Irs 1040nr Examples of mass assets include minor items of office, plant, and store furniture and fixtures. Irs 1040nr   Under the special rule, if you elected to use a mass asset account, you recognize gain to the extent of the proceeds from the disposition of the asset. Irs 1040nr You leave the unadjusted basis of the property in the account until recovered in future years. Irs 1040nr If you did this, include the total proceeds realized from the disposition in income on the tax return for the year of disposition. Irs 1040nr Early dispositions — 15-year real property. Irs 1040nr   If you dispose of 15-year real property, you base your ACRS deduction for the year of disposition on the number of months in use. Irs 1040nr You use a full-month convention. Irs 1040nr For a disposition at any time during a particular month before the end of the recovery period, no deduction is allowed for the month of disposition. Irs 1040nr This applies whether you use the regular ACRS method or elected the alternate ACRS method. Irs 1040nr Example. Irs 1040nr You purchased and placed in service a rental house on March 2, 1984, for $98,000 (not including the cost of land). Irs 1040nr You file your return based on a calendar year. Irs 1040nr Your rate from Table 1 for the third month is 10%. Irs 1040nr Your ACRS deduction for 1984 was $9,800 ($98. Irs 1040nr 000 ÷ 10%). Irs 1040nr For 1985 through 1988, you figured your ACRS deductions using 11%, 9%, 8%, and 7% ÷ $98,000. Irs 1040nr For 1989 through 1992, you figured your ACRS deductions using 6% for each year. Irs 1040nr The deduction each year was $98,000 ÷ 6%. Irs 1040nr For 1993 and 1994, the ACRS deduction is ($98,000 ÷ 5%) $4,900 for each year. Irs 1040nr You sell the house on June 1, 1995. Irs 1040nr You figure your ACRS deduction for 1995 for the full year and then prorate that amount for the months of use. Irs 1040nr The full ACRS deduction for 1995 is $4,900 ($98,000 ÷ 5%). Irs 1040nr You then prorate this amount to the 5 months in 1995 during which it was rented. Irs 1040nr Your ACRS deduction for 1995 is $2,042 ($4,900 ÷ 5/12). Irs 1040nr Early dispositions — 18- and 19-year real property. Irs 1040nr   If you dispose of 18- or 19-year real property, you base your ACRS deduction for the year of disposition on the number of months in use. Irs 1040nr For 18-year property placed in service before June 23, 1984, use a full-month convention on a disposition. Irs 1040nr For 18-year property placed in service after June 22, 1984, and for 19-year property, determine the number of months in use by using the mid-month convention. Irs 1040nr Under the mid-month convention,treat real property disposed of any time during a month as disposed of in the middle of that month. Irs 1040nr Count the month of disposition as half a month of use. Irs 1040nr Example. Irs 1040nr You purchased and placed in service a rental house on July 2, 1984, for $100,000 (not including the cost of land). Irs 1040nr You file your return based on a calendar year. Irs 1040nr Your rate from Table 4 for the seventh month is 4%. Irs 1040nr You figured your ACRS deduction for 1984 was $4,000 ($100,000 ÷ 4%). Irs 1040nr In 1985 through 1994, your ACRS deductions were 9%, 8%, 8%, 7%, 6%, 6%, 5%, 5%, and 5% ÷ $100,000. Irs 1040nr You sell the house on September 24, 1995. Irs 1040nr Figure your ACRS deduction for 1995 for the months of use. Irs 1040nr The full ACRS deduction for 1995 is $5,000 ($100,000 ÷ 5%). Irs 1040nr Prorate this amount for the 8. Irs 1040nr 5 months in 1995 that you held the property. Irs 1040nr Under the mid-month convention, you count September as half a month. Irs 1040nr Your ACRS deduction for 1995 is $3,542 ($5,000 ÷ 8. Irs 1040nr 5/12). Irs 1040nr Depreciation Recapture If you dispose of property depreciated under ACRS that is section 1245 recovery property, you will generally recognize gain or loss. Irs 1040nr Gain recognized on a disposition is ordinary income to the extent of prior depreciation deductions taken. Irs 1040nr This recapture rule applies to all personal property in the 3-year, 5-year, and 10-year classes. Irs 1040nr You recapture gain on manufactured homes and theme park structures in the 10-year class as section 1245 property. Irs 1040nr Section 1245 property generally includes all personal property. Irs 1040nr See Section 1245 property in chapter 4 of Publication 544 for more information. Irs 1040nr You treat dispositions of section 1250 real property on which you have a gain as section 1245 recovery property. Irs 1040nr You recognize gain on this property as ordinary income to the extent of prior depreciation deductions taken. Irs 1040nr Section 1250 property includes most real property. Irs 1040nr See Section 1250 property in chapter 4 of Publication 544 for more information. Irs 1040nr This rule applies to all section 1250 real property except the following property: Any 15-, 18-, or 19-year real property that is residential rental property. Irs 1040nr Any 15-, 18-, or 19-year real property that you elected to depreciate using the alternate ACRS method. Irs 1040nr Any 15-, 18-, or 19-year real property that is subsidized low-income housing. Irs 1040nr For these recapture rules, you treat the section 179 deduction and 50% of the investment credit that reduced your basis as depreciation. Irs 1040nr See Publication 544 for further discussion of dispositions of section 1245 and 1250 property. Irs 1040nr Prev  Up  Next   Home   More Online Publications
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Page Last Reviewed or Updated: 28-Mar-2014


 

The Irs 1040nr

Irs 1040nr 4. Irs 1040nr   Underpayment Penalty for 2013 Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: General RuleFarmers and fishermen. Irs 1040nr Higher income taxpayers. Irs 1040nr Minimum required for higher income taxpayers. Irs 1040nr Estate or trust payments of estimated tax. Irs 1040nr Lowering or eliminating the penalty. Irs 1040nr ExceptionsLess Than $1,000 Due No Tax Liability Last Year Figuring Your Required Annual Payment (Part I) Short Method for Figuring the Penalty (Part III) Regular Method for Figuring the Penalty (Part IV)Figuring Your Underpayment (Part IV, Section A) Worksheet for Form 2210, Part IV, Section B—Figuring the Penalty Annualized Income Installment Method (Schedule AI) Farmers and Fishermen Waiver of PenaltyFarmers and fishermen. Irs 1040nr Introduction If you did not pay enough tax, either through withholding or by making timely estimated tax payments, you will have underpaid your estimated tax and may have to pay a penalty. Irs 1040nr You may understand this chapter better if you can refer to a copy of your latest federal income tax return. Irs 1040nr No penalty. Irs 1040nr   Generally, you will not have to pay a penalty for 2013 if any of the following apply. Irs 1040nr The total of your withholding and timely estimated tax payments was at least as much as your 2012 tax. Irs 1040nr (See Special rules for certain individuals for higher income taxpayers and farmers and fishermen. Irs 1040nr ) The tax balance due on your 2013 return is no more than 10% of your total 2013 tax, and you paid all required estimated tax payments on time. Irs 1040nr Your total tax for 2013 (defined later) minus your withholding is less than $1,000. Irs 1040nr You did not have a tax liability for 2012. Irs 1040nr You did not have any withholding taxes and your current year tax (less any household employment taxes) is less than $1,000. Irs 1040nr IRS can figure the penalty for you. Irs 1040nr   If you think you owe the penalty, but you do not want to figure it yourself when you file your tax return, you may not have to. Irs 1040nr Generally, the IRS will figure the penalty for you and send you a bill. Irs 1040nr   You only need to figure your penalty in the following three situations. Irs 1040nr You are requesting a waiver of part, but not all, of the penalty. Irs 1040nr You are using the annualized income installment method to figure the penalty. Irs 1040nr You are treating the federal income tax withheld from your income as paid on the dates actually withheld. Irs 1040nr However, if these situations do not apply to you, and you think you can lower or eliminate your penalty, complete Form 2210 or Form 2210-F and attach it to your return. Irs 1040nr See Form 2210 , later. Irs 1040nr Topics - This chapter discusses: The general rule for the underpayment penalty, Special rules for certain individuals, Exceptions to the underpayment penalty, How to figure your underpayment and the amount of your penalty on Form 2210, and How to ask the IRS to waive the penalty. Irs 1040nr Useful Items - You may want to see: Form (and Instructions) 2210 Underpayment of Estimated Tax by Individuals, Estates, and Trusts 2210-F Underpayment of Estimated Tax by Farmers and Fishermen See chapter 5 for information about getting these forms. Irs 1040nr General Rule In general, you may owe a penalty for 2013 if the total of your withholding and timely estimated tax payments did not equal at least the smaller of: 90% of your 2013 tax, or 100% of your 2012 tax. Irs 1040nr (Your 2012 tax return must cover a 12-month period. Irs 1040nr ) Your 2013 tax, for this purpose, is defined under Total tax for 2013 , later. Irs 1040nr Special rules for certain individuals. Irs 1040nr   There are special rules for farmers and fishermen and certain higher income taxpayers. Irs 1040nr Farmers and fishermen. Irs 1040nr   If at least two-thirds of your gross income for 2012 or 2013 is from farming or fishing, substitute  662/3% for 90% in (1) above. Irs 1040nr   See Farmers and Fishermen , later. Irs 1040nr Higher income taxpayers. Irs 1040nr   If your AGI for 2012 was more than $150,000 ($75,000 if your 2013 filing status is married filing a separate return), substitute 110% for 100% in (2) under General Rule . Irs 1040nr This rule does not apply to farmers or fishermen. Irs 1040nr   For 2012, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4. Irs 1040nr Penalty figured separately for each period. Irs 1040nr   Because the penalty is figured separately for each payment period, you may owe a penalty for an earlier payment period even if you later paid enough to make up the underpayment. Irs 1040nr This is true even if you are due a refund when you file your income tax return. Irs 1040nr Example. Irs 1040nr You did not make estimated tax payments for 2013 because you thought you had enough tax withheld from your wages. Irs 1040nr Early in January 2014, you made an estimate of your total 2013 tax. Irs 1040nr Then you realized that your withholding was $2,000 less than the amount needed to avoid a penalty for underpayment of estimated tax. Irs 1040nr On January 10, you made an estimated tax payment of $3,000, which is the difference between your withholding and your estimate of your total tax. Irs 1040nr Your final return shows your total tax to be $50 less than your estimate, so you are due a refund. Irs 1040nr You do not owe a penalty for your payment due January 15, 2014. Irs 1040nr However, you may owe a penalty through January 10, 2014, the day you made the $3,000 payment, for your underpayments for the earlier payment periods. Irs 1040nr Minimum required each period. Irs 1040nr   You will owe a penalty for any 2013 payment period for which your estimated tax payment plus your withholding for the period and overpayments applied from previous periods was less than the smaller of: 22. Irs 1040nr 5% of your 2013 tax, or 25% of your 2012 tax. Irs 1040nr (Your 2012 tax return must cover a 12-month period. Irs 1040nr ) Minimum required for higher income taxpayers. Irs 1040nr   If you are subject to the rule for higher income taxpayers, discussed above, substitute 27. Irs 1040nr 5% for 25% in (2) under General Rule . Irs 1040nr When penalty is charged. Irs 1040nr   If you miss a payment or you paid less than the minimum required in a period, you may be charged an underpayment penalty from the date the amount was due to the date the payment is made. Irs 1040nr If a payment is mailed, the date of the U. Irs 1040nr S. Irs 1040nr postmark is considered the date of payment. Irs 1040nr   If a payment is made electronically, the date the payment is shown on your payment account (checking, savings, etc. Irs 1040nr ) is considered to be the date of payment. Irs 1040nr Estate or trust payments of estimated tax. Irs 1040nr   If you have estimated taxes credited to you from an estate or trust (Schedule K-1 (Form 1041)), treat the payment as made by you on January 15, 2014. Irs 1040nr Amended returns. Irs 1040nr    If you file an amended return by the due date of your original return, use the tax shown on your amended return to figure your required estimated tax payments. Irs 1040nr If you file an amended return after the due date of the original return, use the tax shown on the original return. Irs 1040nr   However, if you and your spouse file a joint return after the due date to replace separate returns you originally filed by the due date, use the tax shown on the joint return to figure your required estimated tax payments. Irs 1040nr This rule applies only if both original separate returns were filed on time. Irs 1040nr 2012 separate returns and 2013 joint return. Irs 1040nr    If you file a joint return with your spouse for 2013, but you filed separate returns for 2012, your 2012 tax is the total of the tax shown on your separate returns. Irs 1040nr You filed a separate return if you filed as single, head of household, or married filing separately. Irs 1040nr 2012 joint return and 2013 separate returns. Irs 1040nr    If you file a separate return for 2013, but you filed a joint return with your spouse for 2012, your 2012 tax is your share of the tax on the joint return. Irs 1040nr You are filing a separate return if you file as single, head of household, or married filing separately. Irs 1040nr   To figure your share of the taxes on a joint return, first figure the tax both you and your spouse would have paid had you filed separate returns for 2012 using the same filing status as for 2013. Irs 1040nr Then multiply the tax on the joint return by the following fraction. Irs 1040nr   The tax you would have paid had you filed a separate return   The total tax you and your spouse would have paid had you filed separate returns Example. Irs 1040nr Lisa and Paul filed a joint return for 2012 showing taxable income of $49,000 and a tax of $6,484. Irs 1040nr Of the $49,000 taxable income, $41,000 was Lisa's and the rest was Paul's. Irs 1040nr For 2013, they file married filing separately. Irs 1040nr Lisa figures her share of the tax on the 2012 joint return as follows. Irs 1040nr 2012 tax on $41,000 based on a separate return $ 6,286 2012 tax on $8,000 based on a  separate return 803 Total $ 7,089 Lisa's percentage of total tax  ($6,286 ÷ $ 7,089) 88. Irs 1040nr 67% Lisa's part of tax on joint return ($6,484 × 88. Irs 1040nr 67%) $ 5,749 Form 2210. Irs 1040nr   In most cases, you do not need to file Form 2210. Irs 1040nr The IRS will figure the penalty for you and send you a bill. Irs 1040nr If you want us to figure the penalty for you, leave the penalty line on your return blank. Irs 1040nr Do not file Form 2210. Irs 1040nr   To determine if you should file Form 2210, see Part II of Form 2210. Irs 1040nr If you decide to figure your penalty, complete Part I, Part II, and either Part III or Part IV of the form and the Penalty Worksheet in the Instructions for Form 2210. Irs 1040nr If you use Form 2210, you cannot file Form 1040EZ. Irs 1040nr   On Form 1040, enter the amount of your penalty on line 77. Irs 1040nr If you owe tax on line 76, add the penalty to your tax due and show your total payment on line 76. Irs 1040nr If you are due a refund, subtract the penalty from the overpayment and enter the result on line 73. Irs 1040nr   On Form 1040A, enter the amount of your penalty on line 46. Irs 1040nr If you owe tax on line 45, add the penalty to your tax due and show your total payment on line 45. Irs 1040nr If you are due a refund, subtract the penalty from the overpayment and enter the result on line 42. Irs 1040nr Lowering or eliminating the penalty. Irs 1040nr    You may be able to lower or eliminate your penalty if you file Form 2210. Irs 1040nr You must file Form 2210 with your return if any of the following applies. Irs 1040nr You request a waiver. Irs 1040nr See Waiver of Penalty , later. Irs 1040nr You use the annualized income installment method. Irs 1040nr See the explanation of this method under Annualized Income Installment Method (Schedule AI) . Irs 1040nr You use your actual withholding for each payment period for estimated tax purposes. Irs 1040nr See Actual withholding method under Figuring Your Underpayment (Part IV, Section A). Irs 1040nr You base any of your required installments on the tax shown on your 2012 return and you filed or are filing a joint return for either 2012 or 2013, but not for both years. Irs 1040nr Exceptions Generally, you do not have to pay an underpayment penalty if either: Your total tax is less than $1,000, or You had no tax liability last year. Irs 1040nr Less Than $1,000 Due You do not owe a penalty if the total tax shown on your return minus the amount you paid through withholding (including excess social security and tier 1 railroad retirement (RRTA) tax withholding) is less than $1,000. Irs 1040nr Total tax for 2013. Irs 1040nr   For 2013, your total tax on Form 1040 is the amount on line 61 reduced by the following. Irs 1040nr    Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). Irs 1040nr Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans. Irs 1040nr The following write-ins on line 60: Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance, Tax on excess golden parachute payments, Excise tax on insider stock compensation from an expatriated corporation, Look-back interest due under section 167(g), Look-back interest due under section 460(b), Recapture of federal mortgage subsidy, and Additional tax on advance payments of health coverage tax credit when not eligible. Irs 1040nr Any refundable credit amounts listed on lines 64a, 65, 66, 70, and any credit from Form 8885 included on line 71. Irs 1040nr   If you filed Form 1040A, your 2013 total tax is the amount on line 35 reduced by any refundable credits on lines 38a, 39, and 40. Irs 1040nr   If you filed Form 1040EZ, your 2013 total tax is the amount on line 10 reduced by the amount on line 8a. Irs 1040nr Note. Irs 1040nr When figuring the amount on line 60, include household employment taxes only if you had federal income tax withheld from your income or you would owe the penalty even if you did not include those taxes. Irs 1040nr Paid through withholding. Irs 1040nr    For 2013, the amount you paid through withholding on Form 1040 is the amount on line 62 plus any excess social security or tier 1 RRTA tax withholding on line 69. Irs 1040nr Add to that any write-in amount on line 72 identified as “Form 8689. Irs 1040nr ” On Form 1040A, the amount you paid through withholding is the amount on line 36 plus any excess social security or tier 1 RRTA tax withholding included on line 41. Irs 1040nr On Form 1040EZ, it is the amount on line 7. Irs 1040nr No Tax Liability Last Year You do not owe a penalty if you had no tax liability last year and you were a U. Irs 1040nr S. Irs 1040nr citizen or resident for the whole year. Irs 1040nr For this rule to apply, your tax year must have included all 12 months of the year. Irs 1040nr You had no tax liability for 2012 if your total tax was zero or you were not required to file an income tax return. Irs 1040nr Example. Irs 1040nr Ray, who is single and 22 years old, was unemployed for a few months during 2012. Irs 1040nr He earned $6,700 in wages before he was laid off, and he received $1,400 in unemployment compensation afterwards. Irs 1040nr He had no other income. Irs 1040nr Even though he had gross income of $8,100, he did not have to pay income tax because his gross income was less than the filing requirement for a single person under age 65 ($9,750 for 2012). Irs 1040nr He filed a return only to have his withheld income tax refunded to him. Irs 1040nr In 2013, Ray began regular work as an independent contractor. Irs 1040nr Ray made no estimated tax payments in 2013. Irs 1040nr Even though he did owe tax at the end of the year, Ray does not owe the underpayment penalty for 2013 because he had no tax liability in 2012. Irs 1040nr Total tax for 2012. Irs 1040nr   For 2012, your total tax on Form 1040 is the amount on line 61 reduced by the following. Irs 1040nr    Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). Irs 1040nr Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans. Irs 1040nr The following write-ins on line 60: Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance, Tax on excess golden parachute payments, Excise tax on insider stock compensation from an expatriated corporation, Look-back interest due under section 167(g), Look-back interest due under section 460(b), Recapture of federal mortgage subsidy, and Additional tax on advance payments of health coverage tax credit when not eligible. Irs 1040nr Any refundable credit amounts listed on lines 64a, 65, 66, 70, and credits from Forms 8801 (line 27 only), and 8885 included on line 71. Irs 1040nr   If you filed Form 1040A, your 2012 total tax is the amount on line 35 reduced by any refundable credits on lines 38a, 39, and 40. Irs 1040nr   If you filed Form 1040EZ, your 2012 total tax is the amount on line 11 reduced by the amount on line 8a. Irs 1040nr Figuring Your Required Annual Payment (Part I) Figure your required annual payment in Part I of Form 2210, following the line-by-line instructions. Irs 1040nr If you rounded the entries on your tax return to whole dollars, you can round on Form 2210. Irs 1040nr Example. Irs 1040nr The tax on Lori Lane's 2012 return was $12,400. Irs 1040nr Her AGI was not more than $150,000 for either 2012 or 2013. Irs 1040nr The tax on her 2013 return (Form 1040, line 55) is $13,044. Irs 1040nr Line 56 (self-employment tax) is $8,902. Irs 1040nr Her 2013 total tax is $21,946. Irs 1040nr For 2013, Lori had $1,600 income tax withheld and made four equal estimated tax payments ($1,000 each). Irs 1040nr 90% of her 2013 tax is $19,751. Irs 1040nr Because she paid less than her 2012 tax ($12,400) and less than 90% of her 2013 tax ($19,751), and does not meet an exception, Lori knows that she owes a penalty for underpayment of estimated tax. Irs 1040nr The IRS will figure the penalty for Lori, but she decides to figure it herself on Form 2210 and pay it with her taxes when she files her tax return. Irs 1040nr Lori's required annual payment is $12,400 (100% of 2012 tax) because that is smaller than 90% of her 2013 tax. Irs 1040nr Different 2012 filing status. Irs 1040nr    If you file a separate return for 2013, but you filed a joint return with your spouse for 2012, see 2012 joint return and 2013 separate returns , earlier, to figure the amount to enter as your 2012 tax on line 8 of Form 2210. Irs 1040nr Short Method for Figuring the Penalty (Part III) You may be able to use the short method in Part III of Form 2210 to figure your penalty for underpayment of estimated tax. Irs 1040nr If you qualify to use this method, it will result in the same penalty amount as the regular method. Irs 1040nr However, either the annualized income installment method or the actual withholding method, explained later, may result in a smaller penalty. Irs 1040nr You can use the short method only if you meet one of the following requirements. Irs 1040nr You made no estimated tax payments for 2013 (it does not matter whether you had income tax withholding). Irs 1040nr You paid the same amount of estimated tax on each of the four payment due dates. Irs 1040nr If you do not meet either requirement, figure your penalty using the regular method in Part IV of Form 2210 and the Penalty Worksheet in the instructions. Irs 1040nr Note. Irs 1040nr If any payment was made before the due date, you can use the short method, but the penalty may be less if you use the regular method. Irs 1040nr However, if the payment was only a few days early, the difference is likely to be small. Irs 1040nr You cannot use the short method if any of the following apply. Irs 1040nr You made any estimated tax payments late. Irs 1040nr You checked box C or D in Part II of Form 2210. Irs 1040nr You are filing Form 1040NR or 1040NR-EZ and you did not receive wages as an employee subject to U. Irs 1040nr S. Irs 1040nr income tax withholding. Irs 1040nr If you use the short method, you cannot use the annualized income installment method to figure your underpayment for each payment period. Irs 1040nr Also, you cannot use your actual withholding during each period to figure your payments for each period. Irs 1040nr These methods, which may give you a smaller penalty amount, are explained under Figuring Your Underpayment (Part IV, Section A). Irs 1040nr Complete Part III of Form 2210 following the line-by-line instructions in the Instructions for Form 2210. Irs 1040nr Regular Method for Figuring the Penalty (Part IV) You can use the regular method in Part IV of Form 2210 to figure your penalty for underpayment of estimated tax if you paid one or more estimated tax payments earlier than the due date. Irs 1040nr You must use the regular method in Part IV of Form 2210 to figure your penalty for underpayment of estimated tax if any of the following apply to you. Irs 1040nr You paid one or more estimated tax payments on a date after the due date. Irs 1040nr You paid at least one, but less than four, installments of estimated tax. Irs 1040nr You paid estimated tax payments in un- equal amounts. Irs 1040nr You use the annualized income installment method to figure your underpayment for each payment period. Irs 1040nr You use your actual withholding during each payment period to figure your payments. Irs 1040nr Under the regular method, figure your underpayment for each payment period in Section A, then figure your penalty using the Penalty Worksheet in the Instructions for Form 2210. Irs 1040nr Enter the results on line 27 of Section B. Irs 1040nr Figuring Your Underpayment (Part IV, Section A) Figure your underpayment of estimated tax for each payment period in Section A following the line-by-line instructions in the Instructions for Form 2210. Irs 1040nr Complete lines 20 through 26 of the first column before going to line 20 of the next column. Irs 1040nr Required installments—line 18. Irs 1040nr   Your required payment for each payment period (line 18) is usually one-fourth of your required annual payment (Part I, line 9). Irs 1040nr This method—the regular method—is the one to use if you received your income evenly throughout the year. Irs 1040nr   However, if you did not receive your income evenly throughout the year, you may be able to lower or eliminate your penalty by figuring your underpayment using the annualized income installment method. Irs 1040nr First complete Schedule AI (Form 2210), then enter the amounts from line 25 of that schedule on line 18 of Form 2210, Part IV. Irs 1040nr See Annualized Income Installment Method (Schedule AI), later. Irs 1040nr Payments made—line 19. Irs 1040nr   Enter in each column the total of: Your estimated tax paid after the due date for the previous column and by the due date shown at the top of the column, and One-fourth of your withholding. Irs 1040nr For special rules for figuring your payments, see Form 2210 instructions for line 19. Irs 1040nr   If you file Form 1040, your withholding is the amount on line 62, plus any excess social security or tier 1 RRTA tax withholding on line 69. Irs 1040nr If you file Form 1040A, your withholding is the amount on line 36 plus any excess social security or tier 1 RRTA tax withholding included in line 41. Irs 1040nr Actual withholding method. Irs 1040nr    Instead of using one-fourth of your withholding for each quarter, you can choose to use the amounts actually withheld by each due date. Irs 1040nr You can make this choice separately for the tax withheld from your wages and for all other withholding. Irs 1040nr This includes any excess social security and tier 1 RRTA tax withheld. Irs 1040nr   Using your actual withholding may result in a smaller penalty if most of your withholding occurred early in the year. Irs 1040nr   If you use your actual withholding, you must check box D in Form 2210, Part II. Irs 1040nr Then complete Form 2210 using the regular method (Part IV) and file it with your return. Irs 1040nr Worksheet for Form 2210, Part IV, Section B—Figuring the Penalty Figure the amount of your penalty for Section B using the Penalty Worksheet in the Form 2210 instructions. Irs 1040nr The penalty is imposed on each underpayment amount shown on Form 2210, Section A, line 25, for the number of days that it remained unpaid. Irs 1040nr For 2013, there are four rate periods—April 16 through June 30, July 1 through September 30, October 1 through December 31, and January 1, 2014 through April 15, 2014. Irs 1040nr A 3% rate applies to all four periods. Irs 1040nr Payments. Irs 1040nr    Before completing the Penalty Worksheet, it may be helpful to make a list of the payments you made and income tax withheld after the due date (or the last day payments could be made on time) for the earliest payment period an underpayment occurred. Irs 1040nr For example, if you had an underpayment for the first payment period, list your payments after April 15, 2013. Irs 1040nr You can use the table in the Form 2210 instructions to make your list. Irs 1040nr Follow those instructions for listing income tax withheld and payments made with your return. Irs 1040nr Use the list to determine when each underpayment was paid. Irs 1040nr   If you mail your estimated tax payments, use the date of the U. Irs 1040nr S. Irs 1040nr postmark as the date of payment. Irs 1040nr Line 1b. Irs 1040nr   Apply the payments listed to underpayment balance in the first column until it is fully paid. Irs 1040nr Apply payments in the order made. Irs 1040nr Figuring the penalty. Irs 1040nr   If an underpayment was paid in two or more payments on different dates, you must figure the penalty separately for each payment. Irs 1040nr On line 3 of the Penalty Worksheet enter the number of days between the due date (line 2) and the date of each payment on line 1b. Irs 1040nr On line 4 figure the penalty for the amount of each payment applied on line 1b or the amount remaining unpaid. Irs 1040nr If no payments are applied, figure the penalty on the amount on line 1a. Irs 1040nr Aid for counting days. Irs 1040nr    Table 4-1 provides a simple method for counting the number of days between a due date and a payment date. Irs 1040nr Find the number for the date the payment was due by going across to the column of the month the payment was due and moving down the column to the due date. Irs 1040nr In the same manner, find the number for the date the payment was made. Irs 1040nr Subtract the due date “number” from the payment date “number. Irs 1040nr ”   For example, if a payment was due on June 15 (61), but was not paid until September 1 (139), the payment was 78 (139 – 61) days late. Irs 1040nr Table 4-1. Irs 1040nr Calendar To Determine the Number of Days a Payment Is Late Instructions. Irs 1040nr Use this table with Form 2210 if you are completing Part IV, Section B. Irs 1040nr First, find the number for the payment due date by going across to the column of the month the payment was due and moving down the column to the due date. Irs 1040nr Then, in the same manner, find the number for the date the payment was made. Irs 1040nr Finally, subtract the due date number from the payment date number. Irs 1040nr The result is the number of days the payment is late. Irs 1040nr Example. Irs 1040nr The payment due date is June 15 (61). Irs 1040nr The payment was made on November 4 (203). Irs 1040nr The payment is 142 days late (203 – 61). Irs 1040nr Tax Year 2013 Day of 2013 2013 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 Month April May June July Aug. Irs 1040nr Sept. Irs 1040nr Oct. Irs 1040nr Nov. Irs 1040nr Dec. Irs 1040nr Jan. Irs 1040nr Feb. Irs 1040nr Mar. Irs 1040nr Apr. Irs 1040nr 1   16 47 77 108 139 169 200 230 261 292 320 351 2   17 48 78 109 140 170 201 231 262 293 321 352 3   18 49 79 110 141 171 202 232 263 294 322 353 4   19 50 80 111 142 172 203 233 264 295 323 354 5   20 51 81 112 143 173 204 234 265 296 324 355 6   21 52 82 113 144 174 205 235 266 297 325 356 7   22 53 83 114 145 175 206 236 267 298 326 357 8   23 54 84 115 146 176 207 237 268 299 327 358 9   24 55 85 116 147 177 208 238 269 300 328 359 10   25 56 86 117 148 178 209 239 270 301 329 360 11   26 57 87 118 149 179 210 240 271 302 330 361 12   27 58 88 119 150 180 211 241 272 303 331 362 13   28 59 89 120 151 181 212 242 273 304 332 363 14   29 60 90 121 152 182 213 243 274 305 333 364 15 0 30 61 91 122 153 183 214 244 275 306 334 365 16 1 31 62 92 123 154 184 215 245 276 307 335   17 2 32 63 93 124 155 185 216 246 277 308 336   18 3 33 64 94 125 156 186 217 247 278 309 337   19 4 34 65 95 126 157 187 218 248 279 310 338   20 5 35 66 96 127 158 188 219 249 280 311 339   21 6 36 67 97 128 159 189 220 250 281 312 340   22 7 37 68 98 129 160 190 221 251 282 313 341   23 8 38 69 99 130 161 191 222 252 283 314 342   24 9 39 70 100 131 162 192 223 253 284 315 343   25 10 40 71 101 132 163 193 224 254 285 316 344   26 11 41 72 102 133 164 194 225 255 286 317 345   27 12 42 73 103 134 165 195 226 256 287 318 346   28 13 43 74 104 135 166 196 227 257 288 319 347   29 14 44 75 105 136 167 197 228 258 289   348   30 15 45 76 106 137 168 198 229 259 290   349   31   46   107 138   199   260 291   350   Annualized Income Installment Method (Schedule AI) If you did not receive your income evenly throughout the year (for example, your income from a shop you operated at a marina was much larger in the summer than it was during the rest of the year), you may be able to lower or eliminate your penalty by figuring your underpayment using the annualized income installment method. Irs 1040nr Under this method, your required installment (Part IV, line 18) for one or more payment periods may be less than one-fourth of your required annual payment. Irs 1040nr To figure your underpayment using this method, complete Form 2210, Schedule AI. Irs 1040nr Schedule AI annualizes your tax at the end of each payment period based on your income, deductions, and other items relating to events that occurred from the beginning of the tax year through the end of the period. Irs 1040nr If you use the annualized income installment method, you must check box C in Part II of Form 2210. Irs 1040nr Also, you must attach Form 2210 and Schedule AI to your return. Irs 1040nr If you use Schedule AI for any payment due date, you must use it for all payment due dates. Irs 1040nr Completing Schedule AI. Irs 1040nr   Follow the Form 2210 instructions to complete Schedule AI. Irs 1040nr For each period shown on Schedule AI, figure your income and deductions based on your method of accounting. Irs 1040nr If you use the cash method of accounting (used by most people), include all income actually or constructively received during the period and all deductions actually paid during the period. Irs 1040nr Note. Irs 1040nr Each period includes amounts from the previous period(s). Irs 1040nr Period (a) includes items for January 1 through March 31. Irs 1040nr Period (b) includes items for January 1 through May 31. Irs 1040nr Period (c) includes items for January 1 through August 31. Irs 1040nr Period (d) includes items for the entire year. Irs 1040nr Farmers and Fishermen If you are a farmer or fisherman, the following special rules for underpayment of estimated tax apply to you. Irs 1040nr The penalty for underpaying your 2013 estimated tax will not apply if you file your return and pay all the tax due by March 3, 2014. Irs 1040nr If you are a fiscal year taxpayer, the penalty will not apply if you file your return and pay the tax due by the first day of the third month after the end of your tax year. Irs 1040nr Any penalty you owe for underpaying your 2013 estimated tax will be figured from one payment due date, January 15, 2014. Irs 1040nr The underpayment penalty for 2013 is figured on the difference between the amount of 2013 withholding plus estimated tax paid by the due date and the smaller of: 662/3% (rather than 90%) of your 2013 tax, or 100% of the tax shown on your 2012 return. Irs 1040nr Even if these special rules apply to you, you will not owe the penalty if you meet either of the two conditions discussed under Exceptions . Irs 1040nr See Who Must Pay Estimated Tax in chapter 2 for the definition of a farmer or fisherman who is eligible for these special rules. Irs 1040nr Form 2210-F. Irs 1040nr   Use Form 2210-F to figure any underpayment penalty. Irs 1040nr Do not attach it to your return unless you check a box in Part I. Irs 1040nr However, if none of the boxes apply to you and you owe a penalty, you do not need to attach Form 2210-F. Irs 1040nr Enter the amount from line 16 on Form 1040, line 77 and add the penalty to any balance due on your return or subtract it from your refund. Irs 1040nr Keep your filled-in Form 2210-F for your records. Irs 1040nr    If none of the boxes on Form 2210-F apply to you and you owe a penalty, the IRS can figure your penalty and send you a bill. Irs 1040nr Waiver of Penalty The IRS can waive the penalty for underpayment if either of the following applies. Irs 1040nr You did not make a payment because of a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty. Irs 1040nr You retired (after reaching age 62) or became disabled in 2012 or 2013 and both the following requirements are met. Irs 1040nr You had a reasonable cause for not making the payment. Irs 1040nr Your underpayment was not due to willful neglect. Irs 1040nr How to request a waiver. Irs 1040nr   To request a waiver, see the Instructions for Form 2210. Irs 1040nr Farmers and fishermen. Irs 1040nr   To request a waiver, see the Instructions for Form 2210-F. Irs 1040nr Federally declared disaster. Irs 1040nr   Certain estimated tax payment deadlines for taxpayers who reside or have a business in a federally declared disaster area are postponed for a period during and after the disaster. Irs 1040nr During the processing of your tax return, the IRS automatically identifies taxpayers located in a covered disaster area (by county or parish) and applies the appropriate penalty relief. Irs 1040nr Do not file Form 2210 or 2210-F if your underpayment was due to a federally declared disaster. Irs 1040nr If you still owe a penalty after the automatic waiver is applied, we will send you a bill. Irs 1040nr   Individuals, estates, and trusts not in a covered disaster area but whose books, records, or tax professionals' offices are in a covered area are also entitled to relief. Irs 1040nr Also eligible are relief workers affiliated with a recognized government or charitable organization assisting in the relief activities in a covered disaster area. Irs 1040nr If you meet either of these eligibility requirements, you must call the IRS disaster hotline at 1-866-562-5227 and identify yourself as eligible for this relief. Irs 1040nr   Details on the applicable disaster postponement period can be found at IRS. Irs 1040nr gov. Irs 1040nr Enter Tax Relief in Disaster Situations. Irs 1040nr Select the federally declared disaster that affected you. Irs 1040nr    Worksheet 4-1. Irs 1040nr 2013 Form 2210, Schedule AI—Line 12 Qualified Dividends and Capital Gain Tax Worksheet Note. Irs 1040nr To figure the annualized entries for lines 2, 3, and 5 below, multiply the expected amount for the period by the  annualization amount on line 2 of Schedule AI for the same period. Irs 1040nr                   1. Irs 1040nr Enter line 11 of your Schedule AI, or line 3 from Worksheet 4-2 1. Irs 1040nr       2. Irs 1040nr Enter your annualized qualified dividends for the period 2. Irs 1040nr           3. Irs 1040nr Are you filing Schedule D?               □ Yes. Irs 1040nr Enter the smaller of your annualized amount from line 15 or line 16 of Schedule D. Irs 1040nr If either line 15 or line 16 is blank or a loss, enter -0-. Irs 1040nr 3. Irs 1040nr             □ No. Irs 1040nr Enter your annualized capital gain distributions from Form 1040, line 13             4. Irs 1040nr Add lines 2 and 3   4. Irs 1040nr           5. Irs 1040nr If you are claiming investment interest expense on Form 4952, enter your annualized amount from line 4g of that form. Irs 1040nr Otherwise, enter -0-   5. Irs 1040nr           6. Irs 1040nr Subtract line 5 from line 4. Irs 1040nr If zero or less, enter -0- 6. Irs 1040nr       7. Irs 1040nr Subtract line 6 from line 1. Irs 1040nr If zero or less, enter -0- 7. Irs 1040nr       8. Irs 1040nr Enter: $36,900 if single or married filing separately, $73,800 if married filing jointly or qualifying widow(er), $49,400 if head of household. Irs 1040nr 8. Irs 1040nr       9. Irs 1040nr Enter the smaller of line 1 or line 8 9. Irs 1040nr       10. Irs 1040nr Enter the smaller of line 7 or line 9 10. Irs 1040nr       11. Irs 1040nr Subtract line 10 from line 9. Irs 1040nr This amount is taxed at 0% 11. Irs 1040nr       12. Irs 1040nr Enter the smaller of line 1 or line 6 12. Irs 1040nr       13. Irs 1040nr Enter the amount from line 11 13. Irs 1040nr       14. Irs 1040nr Subtract line 13 from line 12 14. Irs 1040nr       15. Irs 1040nr Multiply line 14 by 15% (. Irs 1040nr 15) 15. Irs 1040nr   16. Irs 1040nr Figure the tax on the amount on line 7. Irs 1040nr If the amount on line 7 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. Irs 1040nr If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 16. Irs 1040nr   17. Irs 1040nr Add lines 15 and 16 17. Irs 1040nr   18. Irs 1040nr Figure the tax on the amount on line 1. Irs 1040nr If the amount on line 1 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. Irs 1040nr If the amount on line 1 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 18. Irs 1040nr   19. Irs 1040nr Tax on all taxable income. Irs 1040nr Enter the smaller of line 17 or line 18. Irs 1040nr Also enter this amount on line 12 of Schedule AI in the appropriate column. Irs 1040nr However, if you are using this worksheet to figure the tax on the amount on line 3 of Worksheet 4-2, enter the amount from line 19 on Worksheet 4-2, line 4 19. Irs 1040nr   Worksheet 4-2. Irs 1040nr 2013 Form 2210, Schedule AI—Line 12 Foreign Earned Income Tax Worksheet Before you begin:If Schedule AI, line 11, is zero for the period, do not complete this worksheet. Irs 1040nr             1. Irs 1040nr Enter the amount from line 11 of Schedule AI for the period 1. Irs 1040nr   2. Irs 1040nr Enter the annualized amount* of foreign earned income and housing amount excluded or deducted (from  Form 2555, lines 45 and 50, or Form 2555-EZ, line 18) in figuring the amount entered for the period on line 1  of Schedule AI 2. Irs 1040nr   3. Irs 1040nr Add lines 1 and 2 3. Irs 1040nr   4. Irs 1040nr Tax on the amount on line 3. Irs 1040nr Use the Tax Table, Tax Computation Worksheet, Form 8615**, Qualified Dividends and Capital Gain Tax Worksheet***, or Schedule D Tax Worksheet***, whichever applies. Irs 1040nr See the 2013 Instructions for Form 1040, line 44, to find out which tax computation method to use. Irs 1040nr (Note. Irs 1040nr You do not have to use the same method for each period on Schedule AI. Irs 1040nr ) 4. Irs 1040nr   5. Irs 1040nr Tax on the amount on line 2. Irs 1040nr If the amount on line 2 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. Irs 1040nr If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 5. Irs 1040nr   6. Irs 1040nr Subtract line 5 from line 4. Irs 1040nr Enter the result here and on line 12 of Schedule AI. Irs 1040nr If zero or less,  enter -0- 6. Irs 1040nr             * To figure the annualized amount for line 2, multiply the exclusion or deduction for the period by the annualization amount on line 2 of Schedule AI for the same period. Irs 1040nr     ** If you use Form 8615 to figure the tax on line 4 above, enter the amount from line 3 above on line 4 of Form 8615. Irs 1040nr If the child's parent files Form 2555 or 2555-EZ, enter the amounts from lines 3 and 4 of the parent's Foreign Earned Income Tax Worksheet on lines 6 and 10, respectively, of Form 8615. Irs 1040nr Complete the rest of Form 8615 according to its instructions. Irs 1040nr Then complete lines 5 and 6 above. Irs 1040nr     *** Enter the amount from line 3 above on line 1 of the Qualified Dividends and Capital Gain Tax Worksheet (or Worksheet 4-1 in this chapter) or the Schedule D Tax Worksheet, whichever worksheet you use to figure the tax on line 4 above. Irs 1040nr Complete that worksheet through line 6 (line 10 if you use the Schedule D Tax Worksheet). Irs 1040nr Next, determine if you have a capital gain excess. Irs 1040nr     Figuring capital gain excess. Irs 1040nr To find out if you have a capital gain excess for the appropriate period, subtract line 11 of Schedule AI from line 6 of Worksheet 4-1 or your Qualified Dividends and Capital Gain Tax Worksheet (line 10 of your Schedule D Tax Worksheet). Irs 1040nr If the result is more than zero, that amount is your capital gain excess. Irs 1040nr     No capital gain excess. Irs 1040nr If you do not have a capital gain excess, complete the rest of Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or the Schedule D Tax Worksheet according to the worksheet's instructions. Irs 1040nr Then complete lines 5 and 6 above. Irs 1040nr     Capital gain excess. Irs 1040nr If you have a capital gain excess, complete a second Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or Schedule D Tax Worksheet (whichever applies) as instructed above but in its entirety and with the following additional modifications. Irs 1040nr Then complete lines 5 and 6 above. Irs 1040nr     Make the modifications below only for purposes of filling out Worksheet 4-2 above. Irs 1040nr     a. Irs 1040nr Reduce (but not below zero) the amount you otherwise would enter on line 3 of your Worksheet 4-1, line 3 of your Qualified Dividends and Capital Gain Tax Worksheet, or line 9 of your Schedule D Tax Worksheet by your capital gain excess. Irs 1040nr     b. Irs 1040nr Reduce (but not below zero) the amount you otherwise would enter on line 2 of your Worksheet 4-1, line 2 of your Qualified Dividends and Capital Gain Tax Worksheet, or line 6 of your Schedule D Tax Worksheet by any of your capital gain excess not used in (a) above. Irs 1040nr     c. Irs 1040nr Reduce (but not below zero) the amount on your Schedule D (Form 1040), line 18, by your capital gain excess. Irs 1040nr     d. Irs 1040nr Include your capital gain excess as a loss on line 16 of your Unrecaptured Section 1250 Gain Worksheet in the 2013 Instructions for Schedule D (Form 1040). Irs 1040nr   Prev  Up  Next   Home   More Online Publications