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Irs 1040x 2012

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Irs 1040x 2012

Irs 1040x 2012 3. Irs 1040x 2012   Claiming the Special Depreciation Allowance Table of Contents Introduction What Is Qualified Property?Qualified Reuse and Recycling Property Qualified Cellulosic Biofuel Plant Property Qualified Disaster Assistance Property Certain Qualified Property Acquired After December 31, 2007 Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance How Much Can You Deduct? How Can You Elect Not To Claim an Allowance? When Must You Recapture an Allowance? Introduction You can take a special depreciation allowance to recover part of the cost of qualified property (defined next), placed in service during the tax year. Irs 1040x 2012 The allowance applies only for the first year you place the property in service. Irs 1040x 2012 For qualified property placed in service in 2013, you can take an additional 50% special allowance. Irs 1040x 2012 The allowance is an additional deduction you can take after any section 179 deduction and before you figure regular depreciation under MACRS for the year you place the property in service. Irs 1040x 2012 This chapter explains what is qualified property. Irs 1040x 2012 It also includes rules regarding how to figure an allowance, how to elect not to claim an allowance, and when you must recapture an allowance. Irs 1040x 2012 Corporations can elect to accelerate certain minimum tax credits in lieu of claiming the special depreciation allowance for eligible qualified property. Irs 1040x 2012 See Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance , later. Irs 1040x 2012 See chapter 6 for information about getting publications and forms. Irs 1040x 2012 What Is Qualified Property? Your property is qualified property if it is one of the following. Irs 1040x 2012 Qualified reuse and recycling property. Irs 1040x 2012 Qualified cellulosic biofuel plant property. Irs 1040x 2012 Qualified disaster assistance property. Irs 1040x 2012 Certain qualified property acquired after December 31, 2007. Irs 1040x 2012 The following discussions provide information about the types of qualified property listed above for which you can take the special depreciation allowance. Irs 1040x 2012 Qualified Reuse and Recycling Property You can take a 50% special depreciation allowance for qualified reuse and recycling property. Irs 1040x 2012 Qualified reuse and recycling property is any machinery or equipment (not including buildings or real estate), along with any appurtenance, that is used exclusively to collect, distribute, or recycle qualified reuse and recyclable materials (as defined in section 168(m)(3)(B) of the Internal Revenue Code). Irs 1040x 2012 Qualified reuse and recycling property also includes software necessary to operate such equipment. Irs 1040x 2012 The property must meet the following requirements. Irs 1040x 2012 The property must be depreciated under MACRS. Irs 1040x 2012 The property must have a useful life of at least 5 years. Irs 1040x 2012 The original use of the property must begin with you after August 31, 2008. Irs 1040x 2012 You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2 ) after August 31, 2008, with no binding written contract for the acquisition in effect before September 1, 2008. Irs 1040x 2012 The property must be placed in service for use in your trade or business after August 31, 2008. Irs 1040x 2012 Excepted Property Qualified reuse and recycling property does not include any of the following. Irs 1040x 2012 Any rolling stock or other equipment used to transport reuse or recyclable materials. Irs 1040x 2012 Property required to be depreciated using the Alternative Depreciation System (ADS). Irs 1040x 2012 For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . Irs 1040x 2012 Other bonus depreciation property to which section 168(k) of the Internal Revenue Code applies. Irs 1040x 2012 Property for which you elected not to claim any special depreciation allowance (discussed later). Irs 1040x 2012 Property placed in service and disposed of in the same tax year. Irs 1040x 2012 Property converted from business use to personal use in the same tax year acquired. Irs 1040x 2012 Property converted from personal use to business use in the same or later tax year may be qualified reuse and recycling property. Irs 1040x 2012 Qualified Cellulosic Biofuel Plant Property You can take a 50% special depreciation allowance for qualified cellulosic biofuel plant property. Irs 1040x 2012 Cellulosic biofuel is any liquid fuel which is produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis. Irs 1040x 2012 Examples include bagasse (from sugar cane), corn stalks, and switchgrass. Irs 1040x 2012 The property must meet the following requirements. Irs 1040x 2012 The property is used in the United States solely to produce cellulosic biofuel. Irs 1040x 2012 The original use of the property must begin with you after December 20, 2006. Irs 1040x 2012 You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2 ) after December 20, 2006, with no binding written contract for acquisition in effect before December 21, 2006. Irs 1040x 2012 The property must be placed in service for use in your trade or business or for the production of income after October 3, 2008, and before January 3, 2013. Irs 1040x 2012 Note. Irs 1040x 2012 For property placed in service after January 2, 2013, and before January 1, 2014, you can take a 50% special depreciation allowance for qualified second generation biofuel plant property that is used solely in the United States to produce second generation biofuel (as defined in section 40(b)(6)(E)). Irs 1040x 2012 The other requirements for qualified second generation biofuel plant property to be eligible for the special depreciation allowance are identical to the requirements discussed for Qualified Cellulosic Biofuel Plant Property above. Irs 1040x 2012 Special Rules Sale-leaseback. Irs 1040x 2012   If you sold qualified cellulosic biofuel plant property you placed in service after October 3, 2008, and leased it back within 3 months after you originally placed it in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback. Irs 1040x 2012   The property will not qualify for the special allowance if the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the property before December 21, 2006. Irs 1040x 2012 Syndicated leasing transactions. Irs 1040x 2012   If qualified cellulosic biofuel plant property is originally placed in service by a lessor after October 3, 2008, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale. Irs 1040x 2012   Multiple units of property subject to the same lease will be treated as originally placed in service no earlier than the date of sale if the property is sold within 3 months after the final unit is placed in service and the period between the times the first and last units are placed in service does not exceed 12 months. Irs 1040x 2012 Excepted Property Qualified cellulosic biofuel plant property does not include any of the following. Irs 1040x 2012 Property placed in service and disposed of in the same tax year. Irs 1040x 2012 Property converted from business use to personal use in the same tax year it is acquired. Irs 1040x 2012 Property converted from personal use to business use in the same or later tax year may be qualified cellulosic biomass ethanol plant property. Irs 1040x 2012 Property required to be depreciated using the Alternative Depreciation System (ADS). Irs 1040x 2012 For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . Irs 1040x 2012 Property any portion of which is financed with the proceeds of any obligation the interest on which is exempt from tax under section 103 of the Internal Revenue Code. Irs 1040x 2012 Property for which you elected not to claim any special depreciation allowance (discussed later). Irs 1040x 2012 Property for which a deduction was taken under section 179C for certain qualified refinery property. Irs 1040x 2012 Other bonus depreciation property to which section 168(k) of the Internal Revenue Code applies. Irs 1040x 2012 Qualified Disaster Assistance Property You can take a 50% special depreciation allowance for qualified disaster assistance property placed in service in federally declared disaster areas in which the disaster occurred in 2009. Irs 1040x 2012 A list of the federally declared disaster areas is available at the FEMA website at www. Irs 1040x 2012 fema. Irs 1040x 2012 gov. Irs 1040x 2012 Your property is qualified disaster assistance property if it meets the following requirements. Irs 1040x 2012 The property is nonresidential real property or residential real property placed in service before January 1, 2014, in a federally declared disaster area in which the disaster occurred in 2009. Irs 1040x 2012 You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2 ) on or after the applicable disaster date, with no binding written contract for the acquisition in effect before the applicable disaster date. Irs 1040x 2012 The property must rehabilitate property damaged, or replace property destroyed or condemned, as a result of the applicable federally declared disaster. Irs 1040x 2012 The property must be similar in nature to, and located in the same county as, the rehabilitated or replaced property. Irs 1040x 2012 The original use of the property within the applicable disaster area must have begun with you on or after the applicable disaster date. Irs 1040x 2012 The property is placed in service by you on or before the date which is the last day of the fourth calendar year. Irs 1040x 2012 Substantially all (80% or more) of the use of the property must be in the active conduct of your trade or business in a federally declared disaster area, occurring in 2009. Irs 1040x 2012 It is not excepted property (explained later in Excepted Property ). Irs 1040x 2012 Special Rules Sale-leaseback. Irs 1040x 2012   If you sold qualified disaster assistance property you placed in service after the applicable disaster date and leased it back within 3 months after you originally placed it in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback. Irs 1040x 2012   The property will not qualify for the special allowance if the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the property before the applicable disaster date. Irs 1040x 2012 Syndicated leasing transactions. Irs 1040x 2012   If qualified disaster assistance property is originally placed in service by a lessor after the applicable disaster date, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale. Irs 1040x 2012   Multiple units of property subject to the same lease will be treated as originally placed in service no earlier than the date of sale if the property is sold within 3 months after the final unit is placed in service and the period between the times the first and last units are placed in service does not exceed 12 months. Irs 1040x 2012 Excepted Property Qualified disaster assistance property does not include any of the following. Irs 1040x 2012 Property required to be depreciated using the Alternative Depreciation System (ADS). Irs 1040x 2012 For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . Irs 1040x 2012 Property any portion of which is financed with the proceeds of a tax-exempt obligation under section 103 of the Internal Revenue Code. Irs 1040x 2012 Any qualified revitalization building (defined later) placed in service before January 1, 2010, for which you have elected to claim a commercial revitalization deduction for qualified revitalization expenditures. Irs 1040x 2012 Any property used in connection with any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store, the principal business of which is the sale of alcoholic beverages for consumption off premises. Irs 1040x 2012 Any property for which the special allowance under section 168(k) or section 1400N(d) of the Internal Revenue Code applies. Irs 1040x 2012 Property for which you elected not to claim any special depreciation allowance (discussed later). Irs 1040x 2012 Property placed in service and disposed of in the same tax year. Irs 1040x 2012 Property converted from business use to personal use in the same tax year acquired. Irs 1040x 2012 Property converted from personal use to business use in the same or later tax year may be qualified disaster assistance property. Irs 1040x 2012 Any gambling or animal racing property (defined later). Irs 1040x 2012 Qualified revitalization building. Irs 1040x 2012   This is a commercial building and its structural components that you placed in service in a renewal community before January 1, 2010. Irs 1040x 2012 If the building is new, the original use of the building must begin with you. Irs 1040x 2012 If the building is not new, you must substantially rehabilitate the building and then place it in service. Irs 1040x 2012 For more information, including definitions of substantially rehabilitated building and qualified revitalization expenditure, see section 1400I(b) of the Internal Revenue Code. Irs 1040x 2012 Gambling or animal racing property. Irs 1040x 2012   Gambling or animal racing property includes the following personal and real property. Irs 1040x 2012 Any equipment, furniture, software, or other property used directly in connection with gambling, the racing of animals, or the on-site viewing of such racing. Irs 1040x 2012 Any real property determined by square footage (other than any portion that is less than 100 square feet) that is dedicated to gambling, the racing of animals, or the on-site viewing of such racing. Irs 1040x 2012 Certain Qualified Property Acquired After December 31, 2007 You can take a 50% special depreciation deduction allowance for certain qualified property acquired after December 31, 2007. Irs 1040x 2012 Your property is qualified property if it meets the following requirements. Irs 1040x 2012 It is one of the following types of property. Irs 1040x 2012 Tangible property depreciated under MACRS with a recovery period of 20 years or less. Irs 1040x 2012 Water utility property. Irs 1040x 2012 Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. Irs 1040x 2012 (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. Irs 1040x 2012 ) Qualified leasehold improvement property (defined under Qualified leasehold improvement property later). Irs 1040x 2012 You must have acquired the property after December 31, 2007, with no binding written contract for the acquisition in effect before January 1, 2008. Irs 1040x 2012 The property must be placed in service for use in your trade or business or for the production of income before January 1, 2014 (before January 1, 2015, for certain property with a long production period and certain aircraft (defined next)). Irs 1040x 2012 The original use of the property must begin with you after December 31, 2007. Irs 1040x 2012 It is not excepted property (explained later in Excepted property). Irs 1040x 2012 Qualified leasehold improvement property. Irs 1040x 2012    Generally, this is any improvement to an interior part of a building that is nonresidential real property, if all the following requirements are met. Irs 1040x 2012 The improvement is made under or according to a lease by the lessee (or any sublessee) or the lessor of that part of the building. Irs 1040x 2012 That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part. Irs 1040x 2012 The improvement is placed in service more than 3 years after the date the building was first placed in service by any person. Irs 1040x 2012 The improvement is section 1250 property. Irs 1040x 2012 See chapter 3 in Publication 544, Sales and Other Dispositions of Assets, for the definition of section 1250 property. Irs 1040x 2012   However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following. Irs 1040x 2012 The enlargement of the building. Irs 1040x 2012 Any elevator or escalator. Irs 1040x 2012 Any structural component benefiting a common area. Irs 1040x 2012 The internal structural framework of the building. Irs 1040x 2012   Generally, a binding commitment to enter into a lease is treated as a lease and the parties to the commitment are treated as the lessor and lessee. Irs 1040x 2012 However, a lease between related persons is not treated as a lease. Irs 1040x 2012 Related persons. Irs 1040x 2012   For this purpose, the following are related persons. Irs 1040x 2012 Members of an affiliated group. Irs 1040x 2012 An individual and a member of his or her family, including only a spouse, child, parent, brother, sister, half-brother, half-sister, ancestor, and lineal descendant. Irs 1040x 2012 A corporation and an individual who directly or indirectly owns 80% or more of the value of the outstanding stock of that corporation. Irs 1040x 2012 Two corporations that are members of the same controlled group. Irs 1040x 2012 A trust fiduciary and a corporation if 80% or more of the value of the outstanding stock is directly or indirectly owned by or for the trust or grantor of the trust. Irs 1040x 2012 The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Irs 1040x 2012 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. Irs 1040x 2012 A tax-exempt educational or charitable organization and any person (or, if that person is an individual, a member of that person's family) who directly or indirectly controls the organization. Irs 1040x 2012 Two S corporations, and an S corporation and a regular corporation, if the same persons own 80% or more of the value of the outstanding stock of each corporation. Irs 1040x 2012 A corporation and a partnership if the same persons own both of the following. Irs 1040x 2012 80% or more of the value of the outstanding stock of the corporation. Irs 1040x 2012 80% or more of the capital or profits interest in the partnership. Irs 1040x 2012 The executor and beneficiary of any estate. Irs 1040x 2012 Long Production Period Property To be qualified property, long production period property must meet the following requirements. Irs 1040x 2012 It must meet the requirements in (2)-(5), above. Irs 1040x 2012 The property has a recovery period of at least 10 years or is transportation property. Irs 1040x 2012 Transportation property is tangible personal property used in the trade or business of transporting persons or property. Irs 1040x 2012 The property is subject to section 263A of the Internal Revenue Code. Irs 1040x 2012 The property has an estimated production period exceeding 1 year and an estimated production cost exceeding $1,000,000. Irs 1040x 2012 Noncommercial Aircraft To be qualified property, noncommercial aircraft must meet the following requirements. Irs 1040x 2012 It must meet the requirements in (2)-(5), above. Irs 1040x 2012 The aircraft must not be tangible personal property used in the trade or business of transporting persons or property (except for agricultural or firefighting purposes). Irs 1040x 2012 The aircraft must be purchased (as discussed under Property Acquired by Purchase in chapter 2 ) by a purchaser who at the time of the contract for purchase, makes a nonrefundable deposit of the lesser of 10% of the cost or $100,000. Irs 1040x 2012 The aircraft must have an estimated production period exceeding four months and a cost exceeding $200,000. Irs 1040x 2012 Special Rules Sale-leaseback. Irs 1040x 2012   If you sold qualified property you placed in service after December 31, 2007, and leased it back within 3 months after you originally placed in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback. Irs 1040x 2012   The property will not qualify for the special depreciation allowance if the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the property before January 1, 2008. Irs 1040x 2012 Syndicated leasing transactions. Irs 1040x 2012   If qualified property is originally placed in service by a lessor after December 31, 2007, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale. Irs 1040x 2012   Multiple units of property subject to the same lease will be treated as originally placed in service no earlier than the date of the last sale if the property is sold within 3 months after the final unit is placed in service and the period between the time the first and last units are placed in service does not exceed 12 months. Irs 1040x 2012 Excepted Property Qualified property does not include any of the following. Irs 1040x 2012 Property placed in service and disposed of in the same tax year. Irs 1040x 2012 Property converted from business use to personal use in the same tax year acquired. Irs 1040x 2012 Property converted from personal use to business use in the same or later tax year may be qualified property. Irs 1040x 2012 Property required to be depreciated under the Alternative Depreciation System (ADS). Irs 1040x 2012 This includes listed property used 50% or less in a qualified business use. Irs 1040x 2012 For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . Irs 1040x 2012 Qualified restaurant property (as defined in section 168(e)(7) of the Internal Revenue Code). Irs 1040x 2012 Qualified retail improvement property (as defined in section 168(e)(8) of the Internal Revenue Code). Irs 1040x 2012 Property for which you elected not to claim any special depreciation allowance (discussed later). Irs 1040x 2012 Property for which you elected to accelerate certain credits in lieu of the special depreciation allowance (discussed next). Irs 1040x 2012 Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance An election made by a corporation to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, or its first tax year ending after December 31, 2010, continues to apply to round 2 extension property (as defined in section 168(k)(4)(I)(iv)), unless the corporation made an election not to apply the section 168(k)(4) election to round 2 extension property for its first tax year ending after December 31, 2010. Irs 1040x 2012 For 2013, round 2 extension property generally is long production period and noncommercial aircraft if acquired after March 31, 2008, and placed in service after December 31, 2012, but before January 1, 2014. Irs 1040x 2012 An election made by a corporation to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, or its first tax year ending after December 31, 2010, continues to apply to round 3 extension property (as defined in section 168(k)(4)(J)(iv)), unless the corporation makes an election not to apply the section 168(k)(4) election to round 3 extension property. Irs 1040x 2012 If a corporation did not make a section 168(k)(4) election for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, or its first tax year ending after December 31, 2010, the corporation may elect for its first tax year ending after December 31, 2012, to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance for only round 3 extension property. Irs 1040x 2012 If you make an election to accelerate these credits in lieu of claiming the special depreciation allowance for eligible property, you must not take the 50% special depreciation allowance for the property and must depreciate the basis in the property under MACRS using the straight line method. Irs 1040x 2012 See Which Depreciation Method Applies in chapter 4 . Irs 1040x 2012 Once made, the election cannot be revoked without IRS consent. Irs 1040x 2012 Additional guidance. Irs 1040x 2012   For additional guidance on the election to accelerate the research or minimum tax credit in lieu of claiming the special depreciation allowance, see Rev. Irs 1040x 2012 Proc. Irs 1040x 2012 2008-65 on page 1082 of Internal Revenue Bulletin 2008-44, available at www. Irs 1040x 2012 irs. Irs 1040x 2012 gov/pub/irs-irbs/irb08-44. Irs 1040x 2012 pdf, Rev. Irs 1040x 2012 Proc. Irs 1040x 2012 2009-16 on page 449 of Internal Revenue Bulletin 2009-06, available at www. Irs 1040x 2012 irs. Irs 1040x 2012 gov/pub/irs-irbs/irb09-06. Irs 1040x 2012 pdf, and Rev. Irs 1040x 2012 Proc. Irs 1040x 2012 2009-33 on page 150 of Internal Revenue Bulletin 2009-29, available at www. Irs 1040x 2012 irs. Irs 1040x 2012 gov/pub/irs-irbs/irb09-29. Irs 1040x 2012 pdf. Irs 1040x 2012 Also, see Form 3800, General Business Credit; Form 8827, Credit for Prior Year Minimum Tax — Corporations; and related instructions. Irs 1040x 2012   Additional guidance regarding the election to accelerate the minimum tax credit in lieu of claiming the special depreciation allowance for round 2 extension property and round 3 extension property may also be available in later Internal Revenue Bulletins available at www. Irs 1040x 2012 irs. Irs 1040x 2012 gov/irb. Irs 1040x 2012 How Much Can You Deduct? Figure the special depreciation allowance by multiplying the depreciable basis of qualified reuse and recycling property, qualified cellulosic biofuel plant property, qualified disaster assistance property, and certain qualified property acquired after December 31, 2007, by 50%. Irs 1040x 2012 For qualified property other than listed property, enter the special allowance on line 14 in Part II of Form 4562. Irs 1040x 2012 For qualified property that is listed property, enter the special allowance on line 25 in Part V of Form 4562. Irs 1040x 2012 If you place qualified property in service in a short tax year, you can take the full amount of a special depreciation allowance. Irs 1040x 2012 Depreciable basis. Irs 1040x 2012   This is the property's cost or other basis multiplied by the percentage of business/investment use, reduced by the total amount of any credits and deductions allocable to the property. Irs 1040x 2012   The following are examples of some credits and deductions that reduce depreciable basis. Irs 1040x 2012 Any section 179 deduction. Irs 1040x 2012 Any deduction for removal of barriers to the disabled and the elderly. Irs 1040x 2012 Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. Irs 1040x 2012 Basis adjustment to investment credit property under section 50(c) of the Internal Revenue Code. Irs 1040x 2012   For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. Irs 1040x 2012   For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property in chapter 1 . Irs 1040x 2012 For a discussion of business/investment use, see Partial business or investment use under Property Used in Your Business or Income-Producing Activity in chapter 1 . Irs 1040x 2012 Depreciating the remaining cost. Irs 1040x 2012   After you figure your special depreciation allowance for your qualified property, you can use the remaining cost to figure your regular MACRS depreciation deduction (discussed in chapter 4 . Irs 1040x 2012 Therefore, you must reduce the depreciable basis of the property by the special depreciation allowance before figuring your regular MACRS depreciation deduction. Irs 1040x 2012 Example. Irs 1040x 2012 On November 1, 2013, Tom Brown bought and placed in service in his business qualified property that cost $450,000. Irs 1040x 2012 He did not elect to claim a section 179 deduction. Irs 1040x 2012 He deducts 50% of the cost ($225,000) as a special depreciation allowance for 2013. Irs 1040x 2012 He uses the remaining $225,000 of cost to figure his regular MACRS depreciation deduction for 2013 and later years. Irs 1040x 2012 Like-kind exchanges and involuntary conversions. Irs 1040x 2012   If you acquire qualified property in a like-kind exchange or involuntary conversion, the carryover basis of the acquired property is eligible for a special depreciation allowance. Irs 1040x 2012 After you figure your special allowance, you can use the remaining carryover basis to figure your regular MACRS depreciation deduction. Irs 1040x 2012 In the year you claim the allowance (the year you place in service the property received in the exchange or dispose of involuntarily converted property), you must reduce the carryover basis of the property by the allowance before figuring your regular MACRS depreciation deduction. Irs 1040x 2012 See Figuring the Deduction for Property Acquired in a Nontaxable Exchange , in chapter 4 under How Is the Depreciation Deduction Figured . Irs 1040x 2012 The excess basis (the part of the acquired property's basis that exceeds its carryover basis) is also eligible for a special depreciation allowance. Irs 1040x 2012 How Can You Elect Not To Claim an Allowance? You can elect, for any class of property, not to deduct any special allowances for all property in such class placed in service during the tax year. Irs 1040x 2012 To make an election, attach a statement to your return indicating what election you are making and the class of property for which you are making the election. Irs 1040x 2012 When to make election. Irs 1040x 2012   Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. Irs 1040x 2012   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 original return (not including extensions). Irs 1040x 2012 Attach the election statement to the amended return. Irs 1040x 2012 On the amended return, write “Filed pursuant to section 301. Irs 1040x 2012 9100-2. Irs 1040x 2012 ” Revoking an election. Irs 1040x 2012   Once you elect not to deduct a special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. Irs 1040x 2012 A request to revoke the election is a request for a letter ruling. Irs 1040x 2012 If you elect not to have any special allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation. Irs 1040x 2012 When Must You Recapture an Allowance? When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. Irs 1040x 2012 See When Do You Recapture MACRS Depreciation in chapter 4 or more information. Irs 1040x 2012 Recapture of allowance deducted for qualified GO Zone property. Irs 1040x 2012   If, in any year after the year you claim the special depreciation allowance for qualified GO Zone property (including specified GO Zone extension property), the property ceases to be used in the GO Zone, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. Irs 1040x 2012 For additional guidance, see Notice 2008-25 on page 484 of Internal Revenue Bulletin 2008-9. Irs 1040x 2012 Qualified cellulosic biomass ethanol plant property and qualified cellulosic biofuel plant property. Irs 1040x 2012   If, in any year after the year you claim the special depreciation allowance for any qualified cellulosic biomass ethanol plant property or qualified biofuel plant property, the property ceases to be qualified cellulosic biomass ethanol plant property or qualified biofuel plant property, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. Irs 1040x 2012 Recapture of allowance for qualified Recovery Assistance property. Irs 1040x 2012   If, in any year after the year you claim the special depreciation allowance for qualified Recovery Assistance property, the property ceases to be used in the Kansas disaster area, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. Irs 1040x 2012 For additional guidance, see Notice 2008-67 on page 307 of Internal Revenue Bulletin 2008-32. Irs 1040x 2012 Recapture of allowance for qualified disaster assistance property. Irs 1040x 2012   If, in any year after the year you claim the special depreciation allowance for qualified disaster assistance property, the property ceases to be used in the applicable disaster area, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. Irs 1040x 2012   For additional guidance, see Notice 2008-67 on page 307 of Internal Revenue Bulletin 2008-32. Irs 1040x 2012 Prev  Up  Next   Home   More Online Publications
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The Irs 1040x 2012

Irs 1040x 2012 4. Irs 1040x 2012   Filing U. Irs 1040x 2012 S. Irs 1040x 2012 Tax Returns Table of Contents Who Must FileFiling Requirement if Possession Income Is Excluded When To FileExtension of Time To File Where To File Special Rules for Completing Your U. Irs 1040x 2012 S. Irs 1040x 2012 Tax ReturnU. Irs 1040x 2012 S. Irs 1040x 2012 Armed Forces. Irs 1040x 2012 Deductions if Possession Income Is Excluded Foreign Tax Credit if Possession Income Is Excluded Self-Employment Tax Additional Medicare Tax Net Investment Income Tax Paying Your TaxesEstimated Tax Double TaxationCompetent Authority Assistance The information in chapter 3 will tell you if a U. Irs 1040x 2012 S. Irs 1040x 2012 income tax return is required for your situation. Irs 1040x 2012 If a U. Irs 1040x 2012 S. Irs 1040x 2012 return is required, your next step is to see if you meet the filing requirements. Irs 1040x 2012 If you do meet the filing requirements, the information presented in this chapter will help you understand the special procedures involved. Irs 1040x 2012 This chapter discusses: Filing requirements, When to file your return, Where to send your return, How to adjust your deductions and credits if you are excluding income from American Samoa or Puerto Rico, How to make estimated tax payments and pay self-employment tax, and How to request assistance in resolving instances of double taxation. Irs 1040x 2012 Who Must File If you are not required to file a possession tax return that includes your worldwide income, you must generally file a U. Irs 1040x 2012 S. Irs 1040x 2012 income tax return if your gross income is at least the amount shown in Table 4-1, later, for your filing status and age. Irs 1040x 2012 If you were a bona fide resident of American Samoa or Puerto Rico and are able to exclude your possession income from your U. Irs 1040x 2012 S. Irs 1040x 2012 tax return, your filing requirement may be less than the amount in Table 4-1. Irs 1040x 2012 For details, see the information under Filing Requirement if Possession Income Is Excluded , later. Irs 1040x 2012 Some individuals (such as those who can be claimed as a dependent on another person's return or who owe certain taxes, such as self-employment tax) must file a tax return even though the gross income is less than the amount shown in Table 4-1 for their filing status and age. Irs 1040x 2012 For more information, see the Form 1040 instructions. Irs 1040x 2012 Filing Requirement if Possession Income Is Excluded If you were a bona fide resident of American Samoa or Puerto Rico and qualify to exclude possession income on your U. Irs 1040x 2012 S. Irs 1040x 2012 tax return, you must determine your adjusted filing requirement. Irs 1040x 2012 Generally, your filing requirement is based on the total of your (and your spouse's if filing a joint return) personal exemption(s) plus your standard deduction. Irs 1040x 2012 Personal exemption. Irs 1040x 2012   When figuring your filing requirement, your personal exemption is allowed in full. Irs 1040x 2012 Do not reduce it for this purpose. Irs 1040x 2012 Do not include exemptions for your dependents. Irs 1040x 2012 Allowable standard deduction. Irs 1040x 2012   Unless your filing status is married filing separately, the minimum income level at which you must file a return is based, in part, on the standard deduction for your filing status and age. Irs 1040x 2012 Because the standard deduction applies to all types of income, it must be divided between your excluded income and income from other sources. Irs 1040x 2012 Multiply the regular standard deduction for your filing status and age (this is zero if you are married filing a separate return; all others, see Form 1040 instructions) by the following fraction:      Gross income subject to U. Irs 1040x 2012 S. Irs 1040x 2012 income tax     Gross income from all sources (including excluded possession income)   Example. Irs 1040x 2012 Barbara Spruce, a U. Irs 1040x 2012 S. Irs 1040x 2012 citizen, is single, under 65, and a bona fide resident of American Samoa. Irs 1040x 2012 During 2013, she received $20,000 of income from American Samoa sources (qualifies for exclusion) and $8,000 of income from sources outside the possession (subject to U. Irs 1040x 2012 S. Irs 1040x 2012 income tax). Irs 1040x 2012 Her allowable standard deduction for 2013 is figured as follows:   $8,000 $28,000 × $6,100 (regular standard deduction) = $1,743   Adjusted filing requirement. Irs 1040x 2012   Figure your adjusted filing requirement by adding the amount of your allowable standard deduction to the amount of your personal exemption. Irs 1040x 2012 You must file a U. Irs 1040x 2012 S. Irs 1040x 2012 income tax return if your gross income is at least the amount shown on line 3 of the following worksheet. Irs 1040x 2012    1. Irs 1040x 2012 Enter the allowable standard deduction you figured earlier under Allowable standard deduction . Irs 1040x 2012 If your filing status is married filing separately, enter -0-   2. Irs 1040x 2012 Personal exemption. Irs 1040x 2012 If your filing status is married filing jointly, enter $7,800; if someone can claim you as a dependent, enter -0-; otherwise, enter $3,900   3. Irs 1040x 2012 Add lines 1 and 2. Irs 1040x 2012 You must file a U. Irs 1040x 2012 S. Irs 1040x 2012 income tax return if your gross income from sources outside the relevant possession is at least this amount   Table 4-1. Irs 1040x 2012 2013 Filing Requirements Chart for Most Taxpayers IF your filing status is. Irs 1040x 2012 . Irs 1040x 2012 . Irs 1040x 2012 AND at the end of 2013 you were*. Irs 1040x 2012 . Irs 1040x 2012 . Irs 1040x 2012 THEN file a return if your gross income** was at least. Irs 1040x 2012 . Irs 1040x 2012 . Irs 1040x 2012 single under 65 $10,000 65 or older $11,500 married filing jointly*** under 65 (both spouses) $20,000 65 or older (one spouse) $21,200 65 or older (both spouses) $22,400 married filing separately any age $3,900 head of household under 65 $12,850 65 or older $14,350 qualifying widow(er)  with dependent child under 65 $16,100 65 or older $17,300 * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Irs 1040x 2012 ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States (even if you can exclude part or all of it). Irs 1040x 2012 Do not include social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time during 2013, or (b) one-half of your social security benefits plus your other gross income is more than $25,000 ($32,000 if married filing jointly). Irs 1040x 2012 If (a) or (b) applies, see the instructions for Form 1040 or Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure the taxable part of social security benefits you must include in gross income. Irs 1040x 2012 *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900 you must file a return regardless of your age. Irs 1040x 2012 Example 1. Irs 1040x 2012 James and Joan Thompson, one over 65, are U. Irs 1040x 2012 S. Irs 1040x 2012 citizens and bona fide residents of Puerto Rico during the entire tax year. Irs 1040x 2012 They file a joint income tax return. Irs 1040x 2012 During 2013, they received $35,000 of income from Puerto Rico sources (qualifies for exclusion) and $6,000 of income from sources outside Puerto Rico (subject to U. Irs 1040x 2012 S. Irs 1040x 2012 income tax). Irs 1040x 2012 Their allowable standard deduction for 2013 is figured as follows:   $6,000 $41,000 × $13,400 ( standard deduction for 65 or older (one spouse) ) = $1,961   The Thompsons do not have to file a U. Irs 1040x 2012 S. Irs 1040x 2012 income tax return because their gross income subject to U. Irs 1040x 2012 S. Irs 1040x 2012 tax ($6,000) is less than their allowable standard deduction plus their personal exemptions ($1,961+ $7,800= $9,761). Irs 1040x 2012 Example 2. Irs 1040x 2012 Barbara Spruce (see Example under Allowable standard deduction, earlier), however, must file a U. Irs 1040x 2012 S. Irs 1040x 2012 income tax return because her gross income subject to U. Irs 1040x 2012 S. Irs 1040x 2012 tax ($8,000) is more than her allowable standard deduction plus her personal exemption ($1,743 + $3,900 = $5,643). Irs 1040x 2012 If you must file a U. Irs 1040x 2012 S. Irs 1040x 2012 income tax return, you may be able to file a paperless return using IRS e-file. Irs 1040x 2012 See your form instructions or visit our website at IRS. Irs 1040x 2012 gov. Irs 1040x 2012 When To File If you file on a calendar year basis, the due date for filing your U. Irs 1040x 2012 S. Irs 1040x 2012 income tax return is April 15 following the end of your tax year. Irs 1040x 2012 If you use a fiscal year (a year ending on the last day of a month other than December), the due date is the 15th day of the 4th month after the end of your fiscal year. Irs 1040x 2012 If any due date falls on a Saturday, Sunday, or legal holiday, your tax return is due on the next business day. Irs 1040x 2012 For your 2013 tax return, the due date is April 15, 2014. Irs 1040x 2012 If you mail your federal tax return, it is considered timely if it bears an official postmark dated on or before the due date, including any extensions. Irs 1040x 2012 If you use a private delivery service designated by the IRS, generally the postmark date is the date the private delivery service records in its database or marks on the mailing label. Irs 1040x 2012 See your form instructions for a list of designated private delivery services. Irs 1040x 2012 Extension of Time To File You can get an extension of time to file your U. Irs 1040x 2012 S. Irs 1040x 2012 income tax return. Irs 1040x 2012 Special rules apply for those living outside the United States. Irs 1040x 2012 Automatic 6-Month Extension If you cannot file your 2013 return by the due date, you can get an automatic 6-month extension of time to file. Irs 1040x 2012 Example. Irs 1040x 2012 If your return must be filed by April 15, 2014, you will have until October 15, 2014, to file. Irs 1040x 2012 Although you are not required to make a payment of the tax you estimate as due, Form 4868 does not extend the time to pay taxes. Irs 1040x 2012 If you do not pay the amount due by the regular due date (generally April 15), you will owe interest on any unpaid tax from the original due date to the date you pay the tax. Irs 1040x 2012 You may also be charged penalties (see the Instructions for Form 4868). Irs 1040x 2012 How to get the automatic extension. Irs 1040x 2012   You can get the automatic 6-month extension if you do one of the following by the due date for filing your return. Irs 1040x 2012 E-file Form 4868 using your personal computer or a tax professional. Irs 1040x 2012 E-file and pay by credit or debit card. Irs 1040x 2012 Your payment must be at least $1. Irs 1040x 2012 You may pay by phone or over the Internet. Irs 1040x 2012 Do not file Form 4868. Irs 1040x 2012 File a paper Form 4868. Irs 1040x 2012 If you are a fiscal year taxpayer, you must file a paper Form 4868. Irs 1040x 2012 See Form 4868 for information on getting an extension using these options. Irs 1040x 2012 When to file. Irs 1040x 2012   You must request the automatic extension by the due date for your return. Irs 1040x 2012 You can file your return any time before the 6-month extension period ends. Irs 1040x 2012 When you file your return. Irs 1040x 2012   Enter any payment you made related to the extension of time to file on Form 1040, line 68. Irs 1040x 2012 If you file Form 1040A, U. Irs 1040x 2012 S. Irs 1040x 2012 Individual Income Tax Return, or Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, include that payment in your total payments on Form 1040A, line 41, or Form 1040EZ, line 9. Irs 1040x 2012 Also enter “Form 4868” and the amount paid in the space to the left of the entry space for line 41 or line 9. Irs 1040x 2012 You cannot ask the Internal Revenue Service to figure your tax if you use the extension of time to file. Irs 1040x 2012 Individuals Outside the United States and Puerto Rico You are allowed an automatic 2-month extension (until June 16, 2014, if you use the calendar year) to file your 2013 return and pay any federal income tax due if: You are a U. Irs 1040x 2012 S. Irs 1040x 2012 citizen or resident, and On the due date of your return: You are living outside of the United States and Puerto Rico, and your main place of business or post of duty is outside the United States and Puerto Rico, or You are in military or naval service on duty outside the United States and Puerto Rico. Irs 1040x 2012 However, if you pay the tax due after the regular due date (generally April 15), interest will be charged from April 15 until the date the tax is paid. Irs 1040x 2012 If you serve in a combat zone or qualified hazardous duty area, you may be eligible for a longer extension of time to file. Irs 1040x 2012 For more information, see Publication 3, Armed Forces' Tax Guide. Irs 1040x 2012 Married taxpayers. Irs 1040x 2012   If you file a joint return, only one spouse has to qualify for this automatic extension. Irs 1040x 2012 However, if you and your spouse file separate returns, this automatic extension applies only to the spouse who qualifies. Irs 1040x 2012 How to get the extension. Irs 1040x 2012   To use this special automatic extension, you must attach a statement to your return explaining what situation qualified you for the extension. Irs 1040x 2012 (See the situations listed under (2), earlier. Irs 1040x 2012 ) Extension beyond 2 months. Irs 1040x 2012   If you cannot file your 2013 return within the automatic 2-month extension period, you can get an additional 4-month extension, for a total of 6 months. Irs 1040x 2012 File Form 4868 by the end of the automatic extension period (June 16, 2014 for calendar year taxpayers). Irs 1040x 2012 Be sure to check the box on Form 4868, line 8, if appropriate. Irs 1040x 2012   In addition to this 6-month extension, taxpayers who are out of the country (as defined under (2) earlier) can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). Irs 1040x 2012   To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. Irs 1040x 2012 Send the letter by the extended due date (October 15 for calendar year taxpayers) to:  Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA   You will not receive any notification from the IRS unless your request is denied for being untimely. Irs 1040x 2012 Where To File Use the addresses listed below if you have to file Form 1040 with the United States and you are excluding possession income from American Samoa or Puerto Rico. Irs 1040x 2012 If you are not including a check or a money order, send your U. Irs 1040x 2012 S. Irs 1040x 2012 tax return and all attachments to:   Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA If you are including a check or a money order, send your U. Irs 1040x 2012 S. Irs 1040x 2012 tax return and all attachments to:  Internal Revenue Service P. Irs 1040x 2012 O. Irs 1040x 2012 Box 1303 Charlotte, NC 28201-1303 USA Also send your U. Irs 1040x 2012 S. Irs 1040x 2012 return to these addresses if you are attaching Form 5074 or Form 8689. Irs 1040x 2012 If you are not in either of the above categories, send your return to the address shown in the Form 1040 instructions for the possession or state in which you reside. Irs 1040x 2012 Special Rules for Completing Your U. Irs 1040x 2012 S. Irs 1040x 2012 Tax Return If you are not excluding possession income from your U. Irs 1040x 2012 S. Irs 1040x 2012 tax return, follow the instructions for the specific forms you file. Irs 1040x 2012 However, you may not qualify to claim the earned income credit (EIC). Irs 1040x 2012 Earned income credit. Irs 1040x 2012   Even if you maintain a household in one of the possessions discussed in this publication that is your main home and the home of your qualifying child, you cannot claim the earned income credit on your U. Irs 1040x 2012 S. Irs 1040x 2012 tax return. Irs 1040x 2012 This credit is available only if you maintain the household in the United States or you are serving on extended active duty in the U. Irs 1040x 2012 S. Irs 1040x 2012 Armed Forces. Irs 1040x 2012 U. Irs 1040x 2012 S. Irs 1040x 2012 Armed Forces. Irs 1040x 2012   U. Irs 1040x 2012 S. Irs 1040x 2012 military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. Irs 1040x 2012 Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. Irs 1040x 2012 Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. Irs 1040x 2012 Income from American Samoa or Puerto Rico excluded. Irs 1040x 2012   You will not be allowed to take deductions and credits that apply to the excluded income. Irs 1040x 2012 The additional information you need follows. Irs 1040x 2012 Deductions if Possession Income Is Excluded Deductions that specifically apply to your excluded possession income, such as employee business expenses, are not allowable on your U. Irs 1040x 2012 S. Irs 1040x 2012 income tax return. Irs 1040x 2012 Deductions that do not specifically apply to any particular type of income must be divided between your excluded income from sources in the relevant possession and income from all other sources to find the part that you can deduct on your U. Irs 1040x 2012 S. Irs 1040x 2012 tax return. Irs 1040x 2012 Examples of such deductions are alimony payments, the standard deduction, and certain itemized deductions (such as medical expenses, charitable contributions, real estate taxes, and mortgage interest on your home). Irs 1040x 2012 Figuring the deduction. Irs 1040x 2012   To find the part of a deduction that is allowable, multiply the deduction by the following fraction. Irs 1040x 2012   Gross income subject to U. Irs 1040x 2012 S. Irs 1040x 2012 income tax     Gross income from all sources (including excluded possession income)   Adjustments to Income Your adjusted gross income equals your gross income minus certain deductions (adjustments). Irs 1040x 2012 Moving expense deduction. Irs 1040x 2012   Generally, expenses of a move to a possession are directly attributable to wages, salaries, and other earned income from that possession. Irs 1040x 2012 Likewise, the expenses of a move back to the United States are generally attributable to U. Irs 1040x 2012 S. Irs 1040x 2012 earned income. Irs 1040x 2012   If you are claiming expenses for a move to a relevant possession, how and where you will deduct the expenses depends on your status as a bona fide resident and if any of your possession income is excluded on your U. Irs 1040x 2012 S. Irs 1040x 2012 tax return. Irs 1040x 2012 For more information, see Moving expense deduction in chapter 3 under the name of the relevant possession. Irs 1040x 2012   If you are claiming expenses for a move from a U. Irs 1040x 2012 S. Irs 1040x 2012 possession to the United States, use Form 3903 to figure your deductible expenses and enter the amount on Form 1040, line 26. Irs 1040x 2012 For purposes of deducting moving expenses, the possessions are considered part of the United States. Irs 1040x 2012 See Publication 521, Moving Expenses, for information about what expenses are deductible. Irs 1040x 2012 Self-employment tax deduction. Irs 1040x 2012   Generally, if you are reporting self-employment income on your U. Irs 1040x 2012 S. Irs 1040x 2012 return, you can include the deductible part of your self-employment tax on Form 1040, line 27. Irs 1040x 2012 This is an income tax deduction only; it is not a deduction in figuring net earnings from self-employment (for self-employment tax). Irs 1040x 2012   However, if you are a bona fide resident of American Samoa or Puerto Rico and you exclude all of your self-employment income from gross income, you cannot take the deduction on Form 1040, line 27, because the deduction is related to excluded income. Irs 1040x 2012   If only part of your self-employment income is excluded, the part of the deduction that is based on the nonexcluded income is allowed. Irs 1040x 2012 This would happen if, for instance, you have two businesses and only the income from one of them is excludable. Irs 1040x 2012   For purposes of the deduction only, figure the self-employment tax on the nonexcluded income by multiplying your total self-employment tax (from Schedule SE (Form 1040)), Self-Employment Tax) by the following fraction. Irs 1040x 2012   Self-employment income subject to U. Irs 1040x 2012 S. Irs 1040x 2012 income tax     Total self-employment income (including excluded possession income)   The result is your self-employment tax on nonexcluded income. Irs 1040x 2012 Include the deductible part of this amount on Form 1040, line 27. Irs 1040x 2012 Individual retirement arrangement (IRA) deduction. Irs 1040x 2012   Do not take excluded income into account when figuring your deductible IRA contribution. Irs 1040x 2012 Standard Deduction The standard deduction is composed of the regular standard deduction amount and the additional standard deduction for taxpayers who are blind or age 65 or over. Irs 1040x 2012 To find the amount you can claim on Form 1040, line 40, first figure your full standard deduction according to the Instructions for Form 1040. Irs 1040x 2012 Then multiply your full standard deduction by the following fraction. Irs 1040x 2012   Gross income subject to U. Irs 1040x 2012 S. Irs 1040x 2012 income tax     Gross income from all sources (including excluded possession income)   In the space above line 40, enter “Standard deduction modified due to income excluded under section 931 (if American Samoa) or section 933 (if Puerto Rico). Irs 1040x 2012 ” This calculation may not be the same as the one you used to determine if you need to file a U. Irs 1040x 2012 S. Irs 1040x 2012 tax return. Irs 1040x 2012 Itemized Deductions Most itemized deductions do not apply to a particular type of income. Irs 1040x 2012 However, itemized deductions can be divided into three categories. Irs 1040x 2012 Those that apply specifically to excluded income, such as employee business expenses, are not deductible. Irs 1040x 2012 Those that apply specifically to income subject to U. Irs 1040x 2012 S. Irs 1040x 2012 income tax, which might also be employee business expenses, are fully allowable under the Instructions for Schedule A (Form 1040), Itemized Deductions. Irs 1040x 2012 Those that do not apply to specific income must be allocated between your gross income subject to U. Irs 1040x 2012 S. Irs 1040x 2012 income tax and your total gross income from all sources. Irs 1040x 2012 The example given later shows how to figure the deductible part of each type of expense that is not related to specific income. Irs 1040x 2012 Example. Irs 1040x 2012 In 2013, you and your spouse are both under 65 and U. Irs 1040x 2012 S. Irs 1040x 2012 citizens who are bona fide residents of Puerto Rico during the entire tax year. Irs 1040x 2012 You file a joint income tax return. Irs 1040x 2012 During 2013, you earned $20,000 from Puerto Rican sources (excluded from U. Irs 1040x 2012 S. Irs 1040x 2012 gross income) and your spouse earned $60,000 from the U. Irs 1040x 2012 S. Irs 1040x 2012 Government. Irs 1040x 2012 You have $16,000 of itemized deductions that do not apply to any specific type of income. Irs 1040x 2012 These are medical expenses of $4,000, real estate taxes of $5,000, home mortgage interest of $6,000, and charitable contributions of $1,000 (cash contributions). Irs 1040x 2012 You determine the amount of each deduction that you can claim on your Schedule A (Form 1040), Itemized Deductions, by multiplying the deduction by the fraction shown under Figuring the deduction , earlier under Deductions if Possession Income is Excluded. Irs 1040x 2012   Medical Expenses   $60,000$80,000 × $4,000 = $3,000  (enter on line 1  of Schedule A)     Real Estate Taxes   $60,000$80,000 × $5,000 = $3,750  (enter on line 6  of Schedule A)     Home Mortgage Interest   $60,000$80,000 × $6,000 = $4,500  (enter on line 10 or 11 of  Schedule A)     Charitable Contributions (cash contributions)   $60,000$80,000 × $1,000 = $750  (enter on line 16 of Schedule A)   Enter on Schedule A (Form 1040) only the allowable portion of each deduction. Irs 1040x 2012 Overall limitation on itemized deductions. Irs 1040x 2012   If your adjusted gross income (discussed earlier) is over $300,000 if married filing jointly or qualifying widow(er); $275,000 if head of household; $250,000 if single; or $150,000 if married filing separately; see the Itemized Deductions Worksheet in the Instructions for Schedule A (Form 1040), to figure your itemized deductions. Irs 1040x 2012 Personal Exemptions Personal exemptions are allowed in full even if excluding possession income. Irs 1040x 2012 However, depending upon your adjusted gross income and filing status, the amount you can deduct may be reduced. Irs 1040x 2012 See the Deduction for Exemptions Worksheet—Line 42 in the instructions for Form 1040. Irs 1040x 2012 Foreign Tax Credit if Possession Income Is Excluded If you must report American Samoa or Puerto Rico source income on your U. Irs 1040x 2012 S. Irs 1040x 2012 tax return, you can claim a foreign tax credit for income taxes paid to the possession on that income. Irs 1040x 2012 However, you cannot claim a foreign tax credit for taxes paid on possession income that is excluded on your U. Irs 1040x 2012 S. Irs 1040x 2012 tax return. Irs 1040x 2012 The foreign tax credit is generally figured on Form 1116. Irs 1040x 2012 If you have income, such as U. Irs 1040x 2012 S. Irs 1040x 2012 Government wages, that is not excludable, and you also have possession source income that is excludable, you must figure the credit by reducing your foreign taxes paid or accrued by the taxes based on the excluded income. Irs 1040x 2012 You make this reduction for each separate income category. Irs 1040x 2012 To find the amount of this reduction, use the following formula for each income category. Irs 1040x 2012 Excluded income from possession sources less deductible expenses based on that income x Tax paid or accrued to the possession = Reduction in foreign taxes Total income subject to possession tax less deductible expenses based on that income Enter the amount of the reduction on Form 1116, line 12. Irs 1040x 2012 For more information on the foreign tax credit, see Publication 514. Irs 1040x 2012 Example. Irs 1040x 2012 Jason and Lynn Reddy are U. Irs 1040x 2012 S. Irs 1040x 2012 citizens who were bona fide residents of Puerto Rico during all of 2013. Irs 1040x 2012 They file a joint tax return. Irs 1040x 2012 The following table shows their excludable and taxable income for U. Irs 1040x 2012 S. Irs 1040x 2012 federal income tax purposes. Irs 1040x 2012   Taxable   Excludable Jason's wages from  U. Irs 1040x 2012 S. Irs 1040x 2012 Government $25,000     Lynn's wages from Puerto Rico  corp. Irs 1040x 2012     $15,000 Dividend from Puerto Rico corp. Irs 1040x 2012 doing business in Puerto Rico     200 Dividend from U. Irs 1040x 2012 S. Irs 1040x 2012  corp. Irs 1040x 2012 doing business  in U. Irs 1040x 2012 S. Irs 1040x 2012 * 1,000     Totals $26,000   $15,200 * Income from sources outside Puerto Rico is taxable. Irs 1040x 2012   Jason and Lynn must file 2013 income tax returns with both Puerto Rico and the United States. Irs 1040x 2012 They have gross income of $26,000 for U. Irs 1040x 2012 S. Irs 1040x 2012 tax purposes. Irs 1040x 2012 They paid taxes to Puerto Rico of $4,000 ($3,980 on their wages and $20 on the dividend from the Puerto Rico corporation). Irs 1040x 2012 They figure their foreign tax credit on two Forms 1116, which they must attach to their U. Irs 1040x 2012 S. Irs 1040x 2012 return. Irs 1040x 2012 They fill out one Form 1116 for wages and one Form 1116 for the dividend. Irs 1040x 2012 Jason and Lynn figure the Puerto Rico taxes on excluded income as follows. Irs 1040x 2012   Wages: ($15,000 ÷ $40,000) × $3,980 = $1,493   Dividend: ($200 ÷ $200) × $20 = $20 They enter $1,493 on Form 1116, line 12, for wages and $20 on the second Form 1116, line 12, for the dividend. Irs 1040x 2012 Self-Employment Tax Self-employment tax includes both social security and Medicare taxes for individuals who are self-employed. Irs 1040x 2012 A U. Irs 1040x 2012 S. Irs 1040x 2012 citizen or resident alien who is self-employed must pay self-employment tax on net self-employment earnings of $400 or more. Irs 1040x 2012 This rule applies whether or not the earnings are excludable from gross income (or whether or not a U. Irs 1040x 2012 S. Irs 1040x 2012 income tax return must otherwise be filed). Irs 1040x 2012 Bona fide residents of the possessions discussed in this publication are considered U. Irs 1040x 2012 S. Irs 1040x 2012 residents for this purpose and are subject to the self-employment tax. Irs 1040x 2012 Forms to file. Irs 1040x 2012   If you have net self-employment income and are subject to self-employment tax, file one of the following with the United States. Irs 1040x 2012 If you are required to file Form 1040 with the United States, complete Schedule SE (Form 1040) and attach it to your Form 1040. Irs 1040x 2012 If you are not required to file Form 1040 with the United States and you are a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI, file Form 1040-SS. Irs 1040x 2012 If you are a resident of Puerto Rico, you can file the Spanish-language Form 1040-PR instead. Irs 1040x 2012 Do not file forms 1040-SS or 1040-PR with Form 1040. Irs 1040x 2012 If you are required to pay Additional Medicare Tax (discussed later) on your self-employment income, attach Form 8959, Additional Medicare Tax to Form 1040, Form 1040-SS, or Form 1040-PR, as applicable. Irs 1040x 2012 Chapter 11 Bankruptcy cases. Irs 1040x 2012   While you are a debtor in a chapter 11 bankruptcy case, your net profit or loss from self-employment will be included on the income tax return (Form 1041, U. Irs 1040x 2012 S. Irs 1040x 2012 Income Tax Return for Estates and Trusts) of the bankruptcy estate. Irs 1040x 2012 However, you—not the bankruptcy estate—are responsible for paying self-employment tax on your net earnings from self-employment. Irs 1040x 2012   Use Schedule SE (Form 1040), Form 1040-SS, or Form 1040-PR, as determined above, to figure your correct amount of self-employment tax. Irs 1040x 2012   For other reporting requirements, see Chapter 11 Bankruptcy Cases in the Instructions for Form 1040. Irs 1040x 2012 Additional Medicare Tax Beginning in 2013, a 0. Irs 1040x 2012 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 if single, head of household, or qualifying widow(er). Irs 1040x 2012 Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Irs 1040x 2012 A self-employment loss should not be considered for purposes of this tax. Irs 1040x 2012 RRTA compensation should be separately compared to the threshold. Irs 1040x 2012 Your employer is responsible for withholding the 0. Irs 1040x 2012 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000. Irs 1040x 2012 You should consider this withholding, if applicable, in determining whether you need to make estimated tax payments. Irs 1040x 2012 There are no special rules for U. Irs 1040x 2012 S. Irs 1040x 2012 citizens and nonresident aliens living abroad for purposes of this provision. Irs 1040x 2012 Wages, RRTA compensation, and self-employment income that are subject to Medicare tax will also be subject to Additional Medicare Tax if in excess of the applicable threshold. Irs 1040x 2012 For more information, see Form 8959, Additional Medicare Tax, and its instructions or visit www. Irs 1040x 2012 irs. Irs 1040x 2012 gov and enter the following words in the search box: Additional Medicare Tax. Irs 1040x 2012 You cannot include the Additional Medicare Tax as a deductible part of your self-employment tax. Irs 1040x 2012 Net Investment Income Tax Beginning in 2013, the Net Investment Income Tax (NIIT) imposes a 3. Irs 1040x 2012 8% tax on the lesser of an individual’s net investment income or the excess of the individual’s modified adjusted gross income over a specified threshold amount. Irs 1040x 2012 Bona fide residents of Puerto Rico and American Samoa who may have a federal income tax return filing obligation may be liable for the NIIT if the taxpayer’s modified adjusted gross income from non-territory sources exceeds a specified threshold amount. Irs 1040x 2012 The NIIT does not apply to any individual who is a nonresident alien with respect to the United States. Irs 1040x 2012 Bona fide residents must take into account any additional tax liability associated with the NIIT when calculating your estimated tax payments. Irs 1040x 2012 Forms to file. Irs 1040x 2012   If you are a bona fide resident of American Samoa and Puerto Rico and you are required to pay the NIIT, you must file Form 1040 with the United States and attach Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts. Irs 1040x 2012 For more information, see Form 8960 and its instructions. Irs 1040x 2012 Paying Your Taxes You may find that not all of your income tax has been paid through withholding by either the United States or the possession. Irs 1040x 2012 This is often true if you have income that is not subject to withholding, such as self-employment, interest, or rental income. Irs 1040x 2012 In this situation, you may need to make estimated tax payments. Irs 1040x 2012 Estimated Tax If your estimated income tax obligation is to the United States, use the worksheet in the Form 1040-ES package to figure your estimated tax, including self-employment tax. Irs 1040x 2012 Include the Additional Medicare Tax and Net Investment Income Tax if applicable. Irs 1040x 2012 If you are paying by check or money order, use the payment vouchers in the Form 1040-ES package. Irs 1040x 2012 Or, you can make your payments electronically and not have to file any paper forms. Irs 1040x 2012 See the Form 1040-ES instructions for information on making payments. Irs 1040x 2012 Double Taxation Mutual agreement procedures exist to settle issues where there is inconsistent tax treatment between the IRS and the taxing authorities of the following possessions. Irs 1040x 2012 American Samoa. Irs 1040x 2012 The Commonwealth of Puerto Rico. Irs 1040x 2012 The Commonwealth of the Northern Mariana Islands. Irs 1040x 2012 Guam. Irs 1040x 2012 The U. Irs 1040x 2012 S. Irs 1040x 2012 Virgin Islands. Irs 1040x 2012 These issues usually involve allocations of income, deductions, credits, or allowances between related persons; determinations of residency; and determinations of the source of income and related expenses. Irs 1040x 2012 Competent Authority Assistance The tax coordination agreements between the United States and the possession tax departments contain provisions allowing the competent authorities of the United States and the relevant possession to resolve, by mutual agreement, inconsistent tax treatment by the two jurisdictions. Irs 1040x 2012 How to make your request. Irs 1040x 2012   Your request for competent authority assistance must include all the information listed in Revenue Procedure 2006-23, 2006-20 I. Irs 1040x 2012 R. Irs 1040x 2012 B. Irs 1040x 2012 900 available at www. Irs 1040x 2012 irs. Irs 1040x 2012 gov/pub/irs-irbs/irb06-49. Irs 1040x 2012 pdf. Irs 1040x 2012    Also, see Notice 2013-78, which provides proposed updates to the procedures for requesting U. Irs 1040x 2012 S. Irs 1040x 2012 competent authority assistance under tax treaties. Irs 1040x 2012 As noted, an update to Revenue Procedure 2006-23 will be published in the future. Irs 1040x 2012   Your request must be in the form of a letter addressed to the Deputy Commissioner (International) LB&I. Irs 1040x 2012 It must contain a statement that competent authority assistance is requested under the mutual agreement procedure with the possession. Irs 1040x 2012 You (or a person having authority to sign your federal return) must sign and date the request. Irs 1040x 2012    Send your written request for U. Irs 1040x 2012 S. Irs 1040x 2012 assistance under this procedure to:   Deputy Commissioner (International) Large Business and International Division Internal Revenue Service 1111 Constitution Avenue, N. Irs 1040x 2012 W. Irs 1040x 2012  Routing: M4-365 Washington, DC 20224 (Attention: TAIT) Nonresident aliens generally must present their initial request for assistance to the relevant possession tax agency. Irs 1040x 2012 Credit or Refund In addition to the tax assistance request, if you seek a credit or refund of any overpayment of U. Irs 1040x 2012 S. Irs 1040x 2012 tax paid on the income in question, you should file a claim on Form 1040X, Amended U. Irs 1040x 2012 S. Irs 1040x 2012 Individual Income Tax Return. Irs 1040x 2012 Indicate on the form that a request for assistance under the mutual agreement procedure with the possession has been filed. Irs 1040x 2012 Attach a copy of the request to the form. Irs 1040x 2012 Also, you should take whatever steps must be taken under the possession tax code to prevent the expiration of the statutory period for filing a claim for credit or refund of a possession tax. Irs 1040x 2012 See Revenue Procedure 2006-54 (or its successor), section 9, for complete information. Irs 1040x 2012 Prev  Up  Next   Home   More Online Publications