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Irs Amendments

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Irs Amendments

Irs amendments Publication 4492 - Main Contents Table of Contents DefinitionsHurricane Katrina Disaster Area Katrina Covered Disaster Area Gulf Opportunity (GO) Zone (Core Disaster Area) Hurricane Rita Disaster Area (Rita Covered Disaster Area) Rita GO Zone Hurricane Wilma Disaster Area Wilma Covered Disaster Area Wilma GO Zone Extended Tax Deadlines Charitable Giving IncentivesTemporary Suspension of Limits on Charitable Contributions Standard Mileage Rate for Charitable Use of Vehicles Mileage Reimbursements to Charitable Volunteers Charitable Deduction for Contributions of Food Inventory Charitable Deduction for Contributions of Book Inventories to Public Schools Casualty and Theft LossesTime limit for making election. Irs amendments Replacement Period for Nonrecognition of Gain Net Operating Losses IRAs and Other Retirement PlansDefinitions Taxation of Qualified Hurricane Distributions Repayment of Qualified Hurricane Distributions Repayment of Qualified Distributions for the Purchase or Construction of a Main Home Loans From Qualified Plans Additional Tax Relief for IndividualsEarned Income Credit and Child Tax Credit Additional Exemption for Housing Individuals Displaced by Hurricane Katrina Education Credits Recapture of Federal Mortgage Subsidy Exclusion of Certain Cancellations of Indebtedness by Reason of Hurricane Katrina Tax Relief for Temporary Relocation Additional Tax Relief for BusinessesSpecial Depreciation Allowance Increased Section 179 Deduction Work Opportunity Credit Employee Retention Credit Hurricane Katrina Housing Credit Reforestation Costs Demolition and Clean-up Costs Increase in Rehabilitation Tax Credit Request for Copy or Transcript of Tax Return How To Get Tax Help Definitions The following definitions are used throughout this publication. Irs amendments Hurricane Katrina Disaster Area The Hurricane Katrina disaster area covers the area for which the President declared a major disaster before September 14, 2005, because of Hurricane Katrina. Irs amendments The Hurricane Katrina disaster area covers the entire states of Alabama, Florida, Louisiana, and Mississippi. Irs amendments Katrina Covered Disaster Area A portion of the Hurricane Katrina disaster area has been designated by the IRS as a covered disaster area. Irs amendments The Katrina covered disaster area covers the following areas in four states. Irs amendments Alabama. Irs amendments   The counties of Baldwin, Bibb, Choctaw, Clarke, Colbert, Cullman, Greene, Hale, Jefferson, Lamar, Lauderdale, Marengo, Marion, Mobile, Monroe, Perry, Pickens, Sumter, Tuscaloosa, Washington, Wilcox, and Winston. Irs amendments Florida. Irs amendments   The counties of Bay, Broward, Collier, Escambia, Franklin, Gulf, Miami-Dade, Monroe, Okaloosa, Santa Rosa, and Walton. Irs amendments Louisiana. Irs amendments   All parishes. Irs amendments Mississippi. Irs amendments   All counties. Irs amendments Gulf Opportunity (GO) Zone (Core Disaster Area) The GO Zone (also called the core disaster area) covers the portion of the Hurricane Katrina disaster area determined by the Federal Emergency Management Agency (FEMA) to be eligible for either individual only or both individual and public assistance from the Federal Government. Irs amendments The GO Zone covers the following areas in three states. Irs amendments Alabama. Irs amendments   The counties of Baldwin, Choctaw, Clarke, Greene, Hale, Marengo, Mobile, Pickens, Sumter, Tuscaloosa, and Washington. Irs amendments Louisiana. Irs amendments   The parishes of Acadia, Ascension, Assumption, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, St. Irs amendments Bernard, St. Irs amendments Charles, St. Irs amendments Helena, St. Irs amendments James, St. Irs amendments John the Baptist, St. Irs amendments Martin, St. Irs amendments Mary, St. Irs amendments Tammany, Tangipahoa, Terrebonne, Vermilion, Washington, West Baton Rouge, and West Feliciana. Irs amendments Mississippi. Irs amendments   The counties of Adams, Amite, Attala, Choctaw, Claiborne, Clarke, Copiah, Covington, Forrest, Franklin, George, Greene, Hancock, Harrison, Hinds, Holmes, Humphreys, Jackson, Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lamar, Lauderdale, Lawrence, Leake, Lincoln, Lowndes, Madison, Marion, Neshoba, Newton, Noxubee, Oktibbeha, Pearl River, Perry, Pike, Rankin, Scott, Simpson, Smith, Stone, Walthall, Warren, Wayne, Wilkinson, Winston, and Yazoo. Irs amendments Hurricane Rita Disaster Area (Rita Covered Disaster Area) The Hurricane Rita disaster area (also designated by the IRS as the Rita covered disaster area) covers the area for which the President declared a major disaster before October 6, 2005, because of Hurricane Rita. Irs amendments This area covers the entire states of Louisiana and Texas. Irs amendments Rita GO Zone The Rita GO Zone covers the portion of the Hurricane Rita disaster area determined by FEMA to be eligible for either individual only or both individual and public assistance from the Federal Government. Irs amendments The Rita GO Zone covers the following areas in two states. Irs amendments Louisiana. Irs amendments   The parishes of Acadia, Allen, Ascension, Beauregard, Calcasieu, Cameron, Evangeline, Iberia, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Plaquemines, Sabine, St. Irs amendments Landry, St. Irs amendments Martin, St. Irs amendments Mary, St. Irs amendments Tammany, Terrebonne, Vermilion, Vernon, and West Baton Rouge. Irs amendments Texas. Irs amendments   The counties of Angelina, Brazoria, Chambers, Fort Bend, Galveston, Hardin, Harris, Jasper, Jefferson, Liberty, Montgomery, Nacogdoches, Newton, Orange, Polk, Sabine, San Augustine, San Jacinto, Shelby, Trinity, Tyler, and Walker. Irs amendments Hurricane Wilma Disaster Area The Hurricane Wilma disaster area covers the area for which the President declared a major disaster before November 14, 2005, because of Hurricane Wilma. Irs amendments The Hurricane Wilma disaster area covers the entire state of Florida. Irs amendments Wilma Covered Disaster Area A portion of the Hurricane Wilma disaster area has been designated by the IRS as a covered disaster area. Irs amendments The Wilma covered disaster area covers the following counties. Irs amendments Florida. Irs amendments   Brevard, Broward, Charlotte, Collier, DeSoto, Glades, Hardee, Hendry, Highlands, Indian River, Lee, Martin, Miami-Dade, Monroe, Okeechobee, Osceola, Palm Beach, Polk, St. Irs amendments Lucie, and Sarasota. Irs amendments Wilma GO Zone The Wilma GO Zone covers the portion of the Hurricane Wilma disaster area determined by FEMA to be eligible for either individual only or both individual and public assistance from the Federal Government. Irs amendments The Wilma GO Zone covers the following counties. Irs amendments Florida. Irs amendments   Brevard, Broward, Collier, Glades, Hendry, Indian River, Lee, Martin, Miami-Dade, Monroe, Okeechobee, Palm Beach, and St. Irs amendments Lucie. Irs amendments Extended Tax Deadlines The IRS has extended deadlines that apply to filing returns, paying taxes, and performing certain other time-sensitive acts for certain taxpayers affected by Hurricane Katrina, Rita, or Wilma, until February 28, 2006. Irs amendments The extension applies to deadlines (either an original or extended due date) that occur during the following periods. Irs amendments After August 28, 2005 (August 23, 2005, for Florida affected taxpayers), and before February 28, 2006, for taxpayers affected by Hurricane Katrina. Irs amendments After September 22, 2005, and before February 28, 2006, for taxpayers affected by Hurricane Rita. Irs amendments After October 22, 2005, and before February 28, 2006, for taxpayers affected by Hurricane Wilma. Irs amendments Affected taxpayer. Irs amendments   The following taxpayers are eligible for the extension. Irs amendments Any individual whose main home is located in a covered disaster area. Irs amendments Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. Irs amendments Any individual, business entity, or sole proprietor whose records needed to meet a postponed deadline are maintained or whose tax professional's office is in a covered disaster area. Irs amendments The main home or principal place of business does not have to be located in the covered area. Irs amendments Any individual visiting a county or parish in the Hurricane Katrina or Hurricane Rita covered disaster area that was injured or killed (and the estate of an individual killed) as a result of the hurricane or its aftermath. Irs amendments Any estate or trust whose tax records needed to meet a filing or payment deadline are maintained in a covered disaster area. Irs amendments Generally, any individual who is a worker assisting in the relief activities in a covered disaster area. Irs amendments However, a relief worker assisting in the Wilma covered disaster area is not an affected taxpayer unless the worker is affiliated with a recognized government or philanthropic organization assisting in the relief activities. Irs amendments The spouse of an affected taxpayer, solely with regard to a joint income tax return with that taxpayer. Irs amendments   To ensure correct processing, affected taxpayers should write the assigned disaster designation (for example, “Hurricane Katrina”) in red ink at the top of any forms or documents filed with the IRS. Irs amendments Affected taxpayers can also identify themselves to the IRS or ask hurricane-related questions by calling the special IRS disaster hotline at 1-866-562-5227. Irs amendments Acts extended. Irs amendments   Deadlines for performing the following acts are extended. Irs amendments Filing any return of income, estate, gift, generation-skipping transfer, excise, or employment tax. Irs amendments Paying any income, estate, gift, generation-skipping transfer, excise, or employment tax. Irs amendments This includes making estimated tax payments. Irs amendments Making certain contributions, distributions, recharacterizing contributions, or making a rollover to or from a qualified retirement plan. Irs amendments Filing certain petitions with the Tax Court. Irs amendments Filing a claim for credit or refund of any tax. Irs amendments Bringing suit upon a claim for credit or refund. Irs amendments Certain other acts described in Revenue Procedure 2005-27. Irs amendments You can find Revenue Procedure 2005-27 on page 1050 of Internal Revenue Bulletin 2005-20 at www. Irs amendments irs. Irs amendments gov/pub/irs-irbs/irb05-20. Irs amendments pdf. Irs amendments Forgiveness of interest and penalties. Irs amendments   The IRS may forgive the interest and penalties on any underpaid income, estate, gift, employment, or excise tax for the length of any extension. Irs amendments Charitable Giving Incentives Temporary Suspension of Limits on Charitable Contributions Individuals. Irs amendments   Qualified contributions are not subject to the overall limit on itemized deductions or the 50% adjusted gross income (AGI) limit. Irs amendments A qualified contribution is a charitable contribution paid in cash or by check after August 27, 2005, and before January 1, 2006, to a 50% limit organization (other than certain private foundations described in section 509(a)(3)) if you make an election to have the 50% limit not apply to these contributions. Irs amendments   Your deduction for qualified contributions is limited to your AGI minus your deduction for all other charitable contributions. Irs amendments You can carry over any contributions you are not able to deduct for 2005 because of this limit. Irs amendments In 2006, treat the carryover of your unused qualified contributions as a carryover of contributions subject to the 50% limit. Irs amendments Exception. Irs amendments   Qualified contributions do not include a contribution to a segregated fund or account for which you (or any person you appoint or designate) have or expect to have advisory privileges with respect to distributions or investments based on your contribution. Irs amendments Corporations. Irs amendments   A corporation may elect to deduct qualified cash contributions without regard to the 10% taxable income limit if the contributions were made after August 27, 2005, and before January 1, 2006, to a qualified charitable organization (other than certain private foundations described in section 509(a)(3)), for Hurricane Katrina, Rita, or Wilma relief efforts. Irs amendments The corporation's deduction for these qualified contributions is limited to 100% of taxable income (as modified for the 10% limit) minus the corporation's deduction for all other charitable contributions. Irs amendments Any qualified contributions over this limit can be carried over to the next 5 years, subject to the 10% limit. Irs amendments Partners and shareholders. Irs amendments   Each partner in a partnership and each shareholder in an S corporation makes a separate election to have the appropriate limit not apply. Irs amendments More information. Irs amendments   For more information, see Publication 526 or Publication 542, Corporations. Irs amendments Publication 526 includes a worksheet you can use to figure your deduction if any limits apply to your charitable contributions. Irs amendments Standard Mileage Rate for Charitable Use of Vehicles The following are special standard mileage rates in effect in 2005 and 2006 for the cost of operating your automobile for providing charitable services solely related to Hurricane Katrina. Irs amendments 29 cents per mile for the period August 25 through August 31, 2005. Irs amendments 34 cents per mile for the period September 1 through December 31, 2005. Irs amendments 32 cents per mile for the period January 1 through December 31, 2006. Irs amendments Mileage Reimbursements to Charitable Volunteers You can exclude from income amounts you receive as mileage reimbursements for the use of a private passenger automobile for the benefit of a qualified charitable organization in providing relief related to Hurricane Katrina during the period beginning on August 25, 2005, and ending on December 31, 2006. Irs amendments You cannot claim a deduction or credit for amounts you receive as a mileage reimbursement. Irs amendments You must keep records of miles driven, time, place (or use), and purpose of the mileage. Irs amendments The amount you can exclude from income cannot exceed the standard business mileage rate (shown below) for expenses incurred during the following periods. Irs amendments 40. Irs amendments 5 cents per mile for the period August 25 through August 31, 2005. Irs amendments 48. Irs amendments 5 cents per mile for the period September 1 through December 31, 2005. Irs amendments 44. Irs amendments 5 cents per mile for the period January 1 through December 31, 2006. Irs amendments Charitable Deduction for Contributions of Food Inventory Any taxpayer engaged in a trade or business is eligible to claim a deduction for a contribution of “apparently wholesome food” inventory to a qualified charitable organization described in section 501(c)(3) (except for private nonoperating foundations) after August 27, 2005, and before January 1, 2006. Irs amendments “Apparently wholesome food” is food that meets all quality and labeling standards imposed by federal, state, and local laws and regulations even though the food may not be readily marketable due to appearance, age, freshness, grade, size, surplus, or other conditions. Irs amendments The deduction is equal to the lesser of: The basis of the donated food plus one-half of the gain that would have been realized if the donated food had been sold at fair market value on the date of the donation, or Two times the basis of the donated food. Irs amendments The taxpayer must receive written certification from the donee stating: The donated food is related to the purpose or function of the donee's basis for exemption under section 501(c)(3) and is to be used solely for the care of the ill, the needy, or infants; and The food was not given in exchange for money, other property, or services. Irs amendments For a taxpayer other than a C corporation, the deduction is limited to 10% of the taxpayer's total net income from all trades or businesses from which the food contributions were made (figured without regard to the deduction for charitable contributions). Irs amendments For example, if a taxpayer is a sole proprietor, a shareholder in an S corporation, and a partner in a partnership, and each made a contribution of apparently wholesome food inventory, the taxpayer's deduction is limited to 10% of the taxpayer's total net income from the sole proprietorship, S corporation, and partnership (figured without regard to the deduction for charitable contributions). Irs amendments Charitable Deduction for Contributions of Book Inventories to Public Schools A corporation (other than an S corporation) may be allowed a charitable deduction for a qualified book contribution made after August 27, 2005, and before January 1, 2006, to a public school that: Provides elementary or secondary education (kindergarten through grade 12), and Normally maintains a regular faculty and curriculum and has a regular enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. Irs amendments . Irs amendments The deduction is equal to the lesser of: The basis of the donated books plus one-half of the gain that would have been realized if the donated books had been sold at fair market value on the date of the donation, or Two times the basis of the donated books. Irs amendments The corporation must receive written certification from the school stating that the donated books are suitable for the organization's educational programs and will be used for such programs. Irs amendments Casualty and Theft Losses The following paragraphs explain changes to casualty and theft losses that were caused by Hurricane Katrina, Rita, or Wilma. Irs amendments For more information, see Publication 547. Irs amendments Limits on personal casualty or theft losses caused by Hurricane Katrina, Rita, or Wilma. Irs amendments   The following losses to personal use property are not subject to the $100 or 10% of adjusted gross income limits. Irs amendments Losses that arose in the Hurricane Katrina disaster area after August 24, 2005, and that were caused by Hurricane Katrina. Irs amendments Losses that arose in the Hurricane Rita disaster area after September 22, 2005, and that were caused by Hurricane Rita. Irs amendments Losses that arose in the Hurricane Wilma disaster area after October 22, 2005, and that were caused by Hurricane Wilma. Irs amendments Qualifying losses include losses from flooding or other casualty, and from theft, that arose in the hurricane disaster area and that were caused by the hurricane. Irs amendments Special instructions for individuals who elect to claim a Hurricane Katrina, Rita, or Wilma casualty or theft loss for 2004. Irs amendments   Casualty and theft losses are generally deductible only in the year the casualty occurred or theft was discovered. Irs amendments However, Hurricane Katrina, Rita, and Wilma are Presidentially declared disasters. Irs amendments Therefore, you can elect to deduct losses from these hurricanes on your tax return for the previous year. Irs amendments If you make this election, use the following additional instructions to complete your forms. Irs amendments   Individuals filing or amending their 2004 tax return whose only casualty or theft losses to personal use property claimed on that return were caused by Hurricane Katrina, Rita, or Wilma should write “Hurricane Katrina,” “Hurricane Rita,” or “Hurricane Wilma” at the top of Form 1040 or 1040X. Irs amendments They must also complete and attach the 2004 Form 4684 and write “Hurricane Katrina,”“Hurricane Rita,” or “Hurricane Wilma” on the dotted line next to line 11 and enter -0- on lines 11 and 17. Irs amendments   Individuals filing or amending their 2004 tax return who also have casualty or theft losses to personal use property not related to Hurricane Katrina, Rita, or Wilma should disregard the caution directing taxpayers to use only one Form 4684, located above line 13, and complete lines 13 through 18 on two Forms 4684. Irs amendments The Form 1040 or 1040X and the first Form 4684 should be prepared as explained above for Hurricane Katrina, Rita, or Wilma losses only. Irs amendments The second Form 4684 should be prepared in the normal manner for all gains and non-Hurricane Katrina, Rita or Wilma losses. Irs amendments If both Forms 4684 have a loss on line 18, they should carry the combined losses from that line to Schedule A (Form 1040), line 19. Irs amendments If there is a gain on line 15 of the second Form 4684, disregard the instruction to enter it on Schedule D (Form 1040), and instead enter on Schedule A (Form 1040), line 19, the excess of the loss from the first Form 4684 over the gain on line 15 of the second Form 4684. Irs amendments , Time limit for making election. Irs amendments   You must make this election to claim your casualty or theft loss in 2004 by the later of the following dates. Irs amendments The due date (without extensions) for filing your 2005 income tax return. Irs amendments The due date (with extensions) for filing your 2004 income tax return. Irs amendments Example. Irs amendments If you are a calendar year individual taxpayer, you have until April 17, 2006, to amend your 2004 tax return to claim a casualty or theft loss that occurred during 2005. Irs amendments Replacement Period for Nonrecognition of Gain Generally, an involuntary conversion occurs when property is damaged, destroyed, stolen, seized, requisitioned, or condemned, and you receive other property or money in payment, such as insurance or a condemnation award. Irs amendments Generally, you do not have to report a gain (if any) if you replace the property within 2 years (4 years for a main home in a Presidentially declared disaster area). Irs amendments However, for property that was involuntarily converted after August 24, 2005, as a result of Hurricane Katrina, a 5-year replacement period applies if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. Irs amendments For more information, see the Instructions for Form 4684. Irs amendments Net Operating Losses Qualified GO Zone loss. Irs amendments   Generally, you can carry a net operating loss (NOL) back to the 2 tax years before the NOL year. Irs amendments However, the portion of an NOL that is a qualified GO Zone loss can be carried back to the 5 tax years before the NOL year. Irs amendments In addition, the 90% limit on the alternative tax NOL deduction (ATNOLD) does not apply to such portion of the ATNOLD. Irs amendments   A qualified GO Zone loss is the smaller of: The excess of the NOL for the year over the specified liability loss for the year to which a 10-year carryback applies, or The total of the following deductions (to the extent they are taken into account in computing the NOL for the tax year): Qualified GO Zone casualty loss (as defined below), Moving expenses paid or incurred after August 27, 2005, and before January 1, 2008, for the employment of an individual whose main home was in the GO Zone before August 28, 2005, who was unable to remain in that home because of Hurricane Katrina, and whose main job location (after the move) is in the GO Zone, Temporary housing expenses paid or incurred after August 27, 2005, and before January 1, 2008, to house employees of the taxpayer whose main job location is in the GO Zone, Depreciation or amortization allowable for any qualified GO Zone property (even if you elected not to claim the special GO Zone depreciation allowance for such property) for the year placed in service, and Repair expenses (including expenses for the removal of debris) paid or incurred after August 27, 2005, and before January 1, 2008, for any damage from Hurricane Katrina to property located in the GO Zone. Irs amendments Qualified GO Zone casualty loss. Irs amendments   A qualified GO Zone casualty loss is any deductible section 1231 loss of property located in the GO Zone if the loss was caused by Hurricane Katrina. Irs amendments For this purpose, the amount of the loss is reduced by any recognized gain from an involuntary conversion caused by Hurricane Katrina of property located in the GO Zone. Irs amendments Any such loss taken into account in figuring your qualified GO Zone loss is not eligible for the election to be treated as having occurred in the previous tax year. Irs amendments 5-year NOL carryback of certain timber losses. Irs amendments   Generally, you can carry the portion of an NOL due to income and deductions attributable to a farming business back to the 5 tax years before the NOL year. Irs amendments You can treat income and deductions attributable to qualified timber property as attributable to a farming business if any portion of the property is located in the GO Zone, Rita GO Zone, or Wilma GO Zone, and the income and deductions are allocable to the part of your tax year which is after the applicable date below. Irs amendments August 27, 2005, if any portion of the property is located in the GO Zone. Irs amendments September 22, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone). Irs amendments October 22, 2005, if any portion of the property is located in the Wilma GO Zone (but not in the GO Zone or the RITA GO Zone). Irs amendments   These rules will not apply after 2006. Irs amendments   However, these rules apply only to a timber producer who: Held qualified timber property (defined in Publication 535, Business Expenses) on the applicable date below: August 28, 2005, if any portion of the property is located in the GO Zone, September 23, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone), or October 23, 2005, if any portion of the property is located in the Wilma GO Zone (but not in the GO Zone or the Rita GO Zone); Is not a corporation with stock publicly traded on an established securities market; Is not a real estate investment trust; and Did not hold more than 500 acres of qualified timber property on the applicable date above. Irs amendments More information. Irs amendments   For more information on NOLs, see Publication 536 or Publication 542, Corporations. Irs amendments IRAs and Other Retirement Plans New rules provide for tax-favored withdrawals, repayments, and loans from certain retirement plans for taxpayers who suffered economic losses as a result of Hurricane Katrina, Rita, or Wilma. Irs amendments Definitions Qualified hurricane distribution. Irs amendments   A qualified hurricane distribution is any distribution you received from an eligible retirement plan if all of the following apply. Irs amendments The distribution was made: After August 24, 2005, and before January 1, 2007, for Hurricane Katrina; After September 22, 2005, and before January 1, 2007, for Hurricane Rita; or After October 22, 2005, and before January 1, 2007, for Hurricane Wilma. Irs amendments Your main home was located in a hurricane disaster area listed below on the date shown for that area. Irs amendments August 28, 2005, for the Hurricane Katrina disaster area. Irs amendments September 23, 2005, for the Hurricane Rita disaster area. Irs amendments October 23, 2005, for the Hurricane Wilma disaster area. Irs amendments You sustained an economic loss because of Hurricane Katrina, Rita, or Wilma and your main home was in that hurricane disaster area on the date shown in (2) above for that hurricane. Irs amendments Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. Irs amendments   If (1) through (3) above apply, you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a qualified hurricane distribution, regardless of whether the distribution was made on account of Hurricane Katrina, Rita, or Wilma. Irs amendments Qualified hurricane distributions are permitted without regard to your need or the actual amount of your economic loss. Irs amendments   The total of your qualified hurricane distributions from all plans is limited to $100,000. Irs amendments If you have distributions in excess of $100,000 from more than one type of plan, such as a 401(k) plan and an IRA, you may allocate the $100,000 limit among the plans any way you choose. Irs amendments   A reduction or offset (after August 24, 2005, for Katrina; after September 22, 2005, for Rita; or after October 22, 2005, for Wilma) of your account balance in an eligible retirement plan in order to repay a loan can also be designated as a qualified hurricane distribution. Irs amendments Eligible retirement plan. Irs amendments   An eligible retirement plan can be any of the following. Irs amendments A qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan). Irs amendments A qualified annuity plan. Irs amendments A tax-sheltered annuity contract. Irs amendments A governmental section 457 deferred compensation plan. Irs amendments A traditional, SEP, SIMPLE, or Roth IRA. Irs amendments Main home. Irs amendments   Generally, your main home is the home where you live most of the time. Irs amendments A temporary absence due to special circumstances, such as illness, education, business, military service, evacuation, or vacation, will not change your main home. Irs amendments Taxation of Qualified Hurricane Distributions Qualified hurricane distributions are included in income in equal amounts over three years. Irs amendments However, if you elect, you can include the entire distribution in your income in the year it was received. Irs amendments Qualified hurricane distributions are not subject to the additional 10% tax (or the additional 25% tax for certain distributions from SIMPLE IRAs) on early distributions from qualified retirement plans (including IRAs). Irs amendments However, any distributions you receive in excess of the $100,000 qualified hurricane distribution limit may be subject to the additional tax on early distributions. Irs amendments For more information, see Form 8915. Irs amendments Repayment of Qualified Hurricane Distributions If you choose, you generally can repay any portion of a qualified hurricane distribution that is eligible for tax-free rollover treatment to an eligible retirement plan. Irs amendments Also, you can repay a qualified hurricane distribution made on account of a hardship from a retirement plan. Irs amendments However, see Exceptions below for qualified hurricane distributions you cannot repay. Irs amendments You have three years from the day after the date you received the distribution to make a repayment. Irs amendments Amounts that are repaid are treated as a qualified rollover and are not included in income. Irs amendments Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. Irs amendments See Form 8915 for more information on how to report repayments. Irs amendments Exceptions. Irs amendments   You cannot repay the following types of distributions. Irs amendments Qualified hurricane distributions received as a beneficiary (other than a surviving spouse). Irs amendments Required minimum distributions. Irs amendments Periodic payments (other than from an IRA) that are for: A period of 10 years or more, Your life or life expectancy, or The joint lives or joint life expectancies of you and your beneficiary. Irs amendments Repayment of Qualified Distributions for the Purchase or Construction of a Main Home If you received a qualified distribution to purchase or construct a main home in the Hurricane Katrina, Rita, or Wilma disaster area, you can repay that distribution before March 1, 2006, to an eligible retirement plan after August 24, 2005 (Katrina); after September 22, 2005 (Rita); or after October 22, 2005 (Wilma). Irs amendments For this purpose, an eligible retirement plan is any plan, annuity, or IRA to which a qualified rollover can be made. Irs amendments To be a qualified distribution, the distribution must meet all of the following requirements. Irs amendments The distribution is a hardship distribution from a 401(k) plan, a hardship distribution from a tax-sheltered annuity contract, or a qualified first-time homebuyer distribution from an IRA. Irs amendments The distribution was received in 2005 after February 28 and before: August 29 for Hurricane Katrina; September 24 for Hurricane Rita; or October 24 for Hurricane Wilma. Irs amendments The distribution was to be used to purchase or construct a main home in the Hurricane Katrina, Rita, or Wilma disaster area that was not purchased or constructed because of Hurricane Katrina, Rita, or Wilma. Irs amendments Amounts that are repaid before March 1, 2006, are treated as a qualified rollover and are not included in income. Irs amendments Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. Irs amendments A qualified distribution not repaid before March 1, 2006, may be taxable for 2005 and subject to the additional 10% tax (or the additional 25% tax for certain SIMPLE IRAs) on early distributions. Irs amendments You must file Form 8915 if you received a qualified distribution that you repaid, in whole or in part, before March 1, 2006. Irs amendments Loans From Qualified Plans The following benefits are available to qualified individuals. Irs amendments Increases to the limits for distributions treated as loans from employer plans. Irs amendments A 1-year suspension for payments due on plan loans. Irs amendments Qualified individual. Irs amendments   You are a qualified individual if any of the following apply. Irs amendments Your main home on August 28, 2005, was located in the Hurricane Katrina disaster area and you had an economic loss because of Hurricane Katrina. Irs amendments Your main home on September 23, 2005, was located in the Hurricane Rita disaster area and you had an economic loss because of Hurricane Rita. Irs amendments Your main home on October 23, 2005, was located in the Hurricane Wilma disaster area and you had an economic loss because of Hurricane Wilma. Irs amendments Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. Irs amendments Limits on plan loans. Irs amendments   The $50,000 limit for distributions treated as plan loans is increased to $100,000. Irs amendments In addition, the limit based on 50% of your vested accrued benefit is increased to 100% of that benefit. Irs amendments The higher limits apply only to loans received during the following period. Irs amendments If your main home was located in the Hurricane Katrina disaster area, the period began on September 24, 2005, and ends on December 31, 2006. Irs amendments If your main home was located in the Hurricane Rita or Wilma disaster area, the period began on December 21, 2005, and ends on December 31, 2006. Irs amendments If you are a qualified individual based on Hurricane Katrina and another hurricane, use the period based on Hurricane Katrina. Irs amendments One-year suspension of loan payments. Irs amendments   Payments on plan loans due before 2007 may be suspended for 1 year by the plan administrator. Irs amendments To qualify for the suspension, the due date for any loan payment must occur during the period beginning on: August 28, 2005, if your main home was located in the Hurricane Katrina disaster area. Irs amendments September 23, 2005, if your main home was located in the Hurricane Rita disaster area. Irs amendments October 23, 2005, if your main home was located in the Hurricane Wilma disaster area. Irs amendments If you are a qualified individual based on more than one hurricane, use the period with the earliest beginning date. Irs amendments Additional Tax Relief for Individuals Earned Income Credit and Child Tax Credit You can elect to use your 2004 earned income to figure your earned income credit (EIC) and additional child tax credit for 2005 if: Your 2005 earned income is less than your 2004 earned income, and At least one of the following statements is true. Irs amendments Your main home on August 25, 2005, was in the Gulf Opportunity (GO) Zone. Irs amendments Your main home on August 25, 2005, was in the Hurricane Katrina disaster area and you were displaced from that home because of Hurricane Katrina. Irs amendments Your main home on September 23, 2005, was in the Rita GO Zone. Irs amendments Your main home on September 23, 2005, was in the Hurricane Rita disaster area and you were displaced from that home because of Hurricane Rita. Irs amendments Your main home on October 23, 2005, was in the Wilma GO Zone. Irs amendments Your main home on October 23, 2005, was in the Hurricane Wilma disaster area and you were displaced from that home because of Hurricane Wilma. Irs amendments Earned income. Irs amendments    For the purpose of this election, your earned income for both the EIC and the additional child tax credit is the amount of earned income used to figure your EIC, even if you did not take the EIC and even if that amount is different than your earned income for the additional child tax credit. Irs amendments If you are claiming only the additional child tax credit, you must figure the amount of your earned income for EIC purposes to determine your eligibility to make the election and the amount of the credit. Irs amendments Joint returns. Irs amendments   If you file a joint return, you qualify to make this election even if only one spouse meets the requirements. Irs amendments If you make the election, your 2004 earned income is the sum of your 2004 earned income and your spouse's 2004 earned income. Irs amendments Making the election. Irs amendments   If you make the election to use your 2004 earned income, the election applies for figuring both the EIC and the additional child tax credit. Irs amendments However, you can make the election for the additional child tax credit even if you do not take the EIC. Irs amendments   Electing to use your 2004 earned income may increase or decrease your EIC. Irs amendments Take the following steps to decide whether to make the election. Irs amendments Figure your 2005 EIC using your 2004 earned income. Irs amendments Figure your 2005 additional child tax credit using your 2004 earned income for EIC purposes. Irs amendments Add the results of (1) and (2). Irs amendments Figure your 2005 EIC using your 2005 earned income. Irs amendments Figure your 2005 additional child tax credit using your 2005 earned income for additional child tax credit purposes. Irs amendments Add the results of (4) and (5). Irs amendments Compare the results of (3) and (6). Irs amendments If (3) is larger than (6), it is to your benefit to make the election. Irs amendments If (3) is equal to or smaller than (6), making the election will not help you. Irs amendments   If you elect to use your 2004 earned income and you are claiming the EIC, enter “PYEI” and the amount of your 2004 earned income on the dotted line next to line 66a of Form 1040, on the line next to line 41a of Form 1040A, or in the space to the left of line 8a of Form 1040EZ. Irs amendments   If you elect to use your 2004 earned income and you are claiming the additional child tax credit, enter your 2004 earned income for EIC purposes (even if you did not claim the EIC) on Form 8812, Additional Child Tax Credit, line 4a, and check the box on that line. Irs amendments   Because Form 8812 was released before the GO Zone legislation was enacted, the instructions refer only to individuals whose main home was in the Hurricane Katrina disaster area. Irs amendments When completing Form 8812, line 4a, use the above rules to determine your eligibility to make the election (instead of the Form 8812 instructions). Irs amendments Getting your 2004 tax return information. Irs amendments   If you do not have your 2004 tax records, you can get the amount of earned income used to figure your 2004 EIC by calling 1-866-562-5227. Irs amendments You can also get this information by visiting the IRS website at www. Irs amendments irs. Irs amendments gov. Irs amendments   If you prefer to figure your 2004 earned income yourself, copies or transcripts of your filed and processed tax returns can help you reconstruct your tax records. Irs amendments See Request for Copy or Transcript of Tax Return on page 16. Irs amendments Additional Exemption for Housing Individuals Displaced by Hurricane Katrina You may be able to claim an additional exemption amount of $500 for providing housing in your main home for each individual displaced by Hurricane Katrina. Irs amendments The additional exemption amount is claimed on new Form 8914. Irs amendments The additional exemption amount is allowable once per taxpayer for a specific individual in 2005 or 2006, but not in both years. Irs amendments The maximum additional exemption amount you can claim for all displaced individuals is $2,000 ($1,000 if married filing separately). Irs amendments The additional exemption amount you claim for displaced individuals in 2005 will reduce the $2,000 maximum for 2006. Irs amendments If two or more taxpayers share the same main home, only one taxpayer in that main home can claim the additional exemption amount for a specific displaced individual. Irs amendments If married filing separately, only one spouse may claim the additional exemption amount for a specific displaced individual. Irs amendments In order for you to be considered to have provided housing, you must have a legal interest in the main home (that is, own or rent the home). Irs amendments To qualify as a displaced individual, the individual: Must have had his or her main home in the Hurricane Katrina disaster area on August 28, 2005, and he or she must have been displaced from that home. Irs amendments If the individual's main home was located outside the core disaster area, that home must have been damaged by Hurricane Katrina or the individual must have been evacuated from that home because of Hurricane Katrina, Must have been provided housing in your main home for a period of at least 60 consecutive days ending in the tax year in which the exemption is claimed, and Cannot be your spouse or dependent. Irs amendments You cannot claim the additional exemption amount if you received rent (or any other amount) from any source for providing the housing. Irs amendments You are permitted to receive payments or reimbursements that do not relate to normal housing costs, including the following. Irs amendments Food, clothing, or personal items consumed or used by the displaced individual. Irs amendments Reimbursement for the cost of any long distance telephone calls made by the displaced individual. Irs amendments Reimbursement for the cost of gasoline for the displaced individual's use of your vehicle. Irs amendments However, you cannot claim the additional exemption amount if you received any reimbursement for the extra costs of heat, electricity, or water used by the displaced individual. Irs amendments Also, you must report on Form 8914 the displaced individual's social security number or individual taxpayer identification number to claim an additional exemption amount. Irs amendments For more information, see Form 8914. Irs amendments Education Credits The education credits have been expanded for students attending an eligible educational institution located in the Gulf Opportunity Zone (GOZ students) for any tax year beginning in 2005 or 2006. Irs amendments The Hope credit for a GOZ student is increased to 100% of the first $2,000 in qualified education expenses and 50% of the next $2,000 of qualified education expenses for a maximum credit of $3,000 per student. Irs amendments The lifetime learning credit rate for a GOZ student is increased from 20% to 40%. Irs amendments The definition of qualified education expenses for a GOZ student also has been expanded. Irs amendments In addition to tuition and fees required for the student's enrollment or attendance at an eligible educational institution, qualified education expenses for a GOZ student include the following. Irs amendments Books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. Irs amendments For a special needs student, expenses that are necessary for that person's enrollment or attendance at an eligible educational institution. Irs amendments For a student who is at least a half-time student, the reasonable costs of room and board, but only to the extent that the costs are not more than the greater of the following two amounts. Irs amendments The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Irs amendments The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Irs amendments You will need to contact the eligible educational institution for qualified room and board costs. Irs amendments For more information, see Form 8863. Irs amendments Recapture of Federal Mortgage Subsidy Generally, if you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. Irs amendments However, you do not have to recapture any benefit if your mortgage loan was a qualified home improvement loan of not more than $15,000. Irs amendments This amount is increased to $150,000 if the loan was provided before 2011 and was used to: Repair damage caused by Hurricane Katrina to a residence in the Hurricane Katrina disaster area, or Alter, repair, or improve an existing owner-occupied residence in the GO Zone, Rita GO Zone, or Wilma GO Zone. Irs amendments Exclusion of Certain Cancellations of Indebtedness by Reason of Hurricane Katrina Generally, discharges of nonbusiness debts (such as mortgages) made after August 24, 2005, and before January 1, 2007, are excluded from income for individuals whose main home was in the Hurricane Katrina disaster area on August 25, 2005. Irs amendments If the individual's main home was located outside the core disaster area, the individual also must have had an economic loss because of Hurricane Katrina. Irs amendments Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. Irs amendments This relief does not apply to any debt secured by real property located outside the Hurricane Katrina disaster area. Irs amendments You may also have to reduce certain tax attributes by the amount excluded. Irs amendments For more information, see Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment). Irs amendments Tax Relief for Temporary Relocation Under the Gulf Opportunity Zone Act of 2005, the IRS may adjust the internal revenue laws to ensure that taxpayers do not lose a deduction or credit or experience a change of filing status in 2005 or 2006 as a result of a temporary relocation caused by Hurricane Katrina, Rita, or Wilma. Irs amendments However, any such adjustment must ensure that an individual is not taken into account by more than one taxpayer for the same tax benefit. Irs amendments The IRS has exercised this authority as follows. Irs amendments In determining whether you furnished over one-half of the cost of maintaining a household, you can exclude from total household costs any assistance received from the government or charitable organizations because you were temporarily relocated as a result of Hurricane Katrina, Rita, or Wilma. Irs amendments In determining whether you provided more than one-half of an individual's support, you can disregard any assistance received from the government or charitable organizations because you were temporarily relocated as a result of Hurricane Katrina, Rita, or Wilma. Irs amendments You can treat as a student an individual who enrolled in school before August 25, 2005, and who is unable to attend classes because of Hurricane Katrina, for each month of the enrollment period that individual is prevented by Hurricane Katrina from attending school as planned. Irs amendments You can treat as a student an individual who enrolled in school before September 23, 2005, and who is unable to attend classes because of Hurricane Rita, for each month of the enrollment period that individual is prevented by Hurricane Rita from attending school as planned. Irs amendments You can treat as a student an individual who enrolled in school before October 23, 2005, and who is unable to attend classes because of Hurricane Wilma, for each month of the enrollment period that individual is prevented by Hurricane Wilma from attending school as planned. Irs amendments Additional Tax Relief for Businesses Special Depreciation Allowance You can take a special depreciation allowance for qualified Gulf Opportunity (GO) Zone property (as defined below) you place in service after August 27, 2005. Irs amendments The allowance is an additional deduction of 50% of the property's depreciable basis (after any section 179 deduction and before figuring your regular depreciation deduction). Irs amendments The special allowance applies only for the first year the property is placed in service. Irs amendments The allowance is deductible for both the regular tax and the alternative minimum tax (AMT). Irs amendments There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. Irs amendments You can elect not to deduct the special GO Zone depreciation allowance for qualified property. Irs amendments If you make this election for any property, it applies to all property in the same class placed in service during the year. Irs amendments Qualified GO Zone property. Irs amendments   Property that qualifies for the special GO Zone depreciation allowance includes the following. Irs amendments Tangible property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. Irs amendments Water utility property. Irs amendments 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 amendments (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. Irs amendments ) Qualified leasehold improvement property. Irs amendments Nonresidential real property and residential rental property. Irs amendments   For more information on this property, see Publication 946. Irs amendments Other tests to be met. Irs amendments   To be qualified GO Zone property, the property must also meet all of the following tests. Irs amendments You must have acquired the property, by purchase, after August 27, 2005, but only if no binding written contract for the acquisition was in effect before August 28, 2005. Irs amendments The property must be placed in service before 2008 (2009 in the case of nonresidential real property and residential rental property). Irs amendments Substantially all of the use of the property must be in the GO Zone and in the active conduct of your trade or business in the GO Zone. Irs amendments The original use of the property in the GO Zone must begin with you after August 27, 2005. Irs amendments Used property can be qualified GO Zone property if it has not previously been used within the GO Zone. Irs amendments Also, additional capital expenditures you incurred after August 27, 2005, to recondition or rebuild your property meet the original use test if the original use of the property in the GO Zone began with you. Irs amendments Excepted property. Irs amendments   Qualified GO Zone property does not include any of the following. Irs amendments Property required to be depreciated using the Alternative Depreciation System (ADS). Irs amendments Property any portion of which is financed with the proceeds of a tax-exempt obligation under section 103. Irs amendments Property for which you are claiming a commercial revitalization deduction. Irs amendments 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 amendments Any gambling or animal racing property (as defined below). Irs amendments Property in the same class as that for which you elected not to claim the special GO Zone depreciation allowance. Irs amendments   Gambling or animal racing property is: 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, and The portion of any real property (determined by square footage) that is dedicated to gambling, the racing of animals, or the on-site viewing of such racing, unless this portion is less than 100 square feet. Irs amendments Recapture of special allowance. Irs amendments   If, in any year after the year you claim the special allowance, the property ceases to be qualified GO Zone property, you may have to recapture as ordinary income any excess benefit you received from claiming the special allowance. Irs amendments Increased Section 179 Deduction An increased section 179 deduction is allowable for qualified section 179 Gulf Opportunity (GO) Zone property (as defined later) placed in service in the GO Zone. Irs amendments Increased dollar limit. Irs amendments   The limit on the section 179 deduction ($105,000 for 2005, $108,000 for 2006) for qualified section 179 GO Zone property acquired after August 27, 2005, is increased by the smaller of: $100,000, or The cost of qualified section 179 GO Zone property placed in service during the year (including such property placed in service by your spouse, even if you are filing a separate return). Irs amendments   The amount for which you can make the election is reduced if the cost of all qualified section 179 GO Zone property you placed in service during the year exceeds $420,000 for 2005 ($430,000 for 2006) increased by the smaller of: $600,000, or The cost of qualified section 179 GO Zone property placed in service during the year. Irs amendments Qualified section 179 GO Zone property. Irs amendments   Qualified section 179 GO Zone property is section 179 property that is qualified GO Zone property (explained earlier under Special Depreciation Allowance). Irs amendments Section 179 property does not include nonresidential real property or residential rental property. Irs amendments For more information, including the requirements that must be met for property to qualify for the section 179 deduction, see chapter 2 of Publication 946. Irs amendments Work Opportunity Credit For the work opportunity credit, the definition of “targeted group employee” has been expanded to include a Hurricane Katrina employee. Irs amendments Hurricane Katrina employee. Irs amendments   A Hurricane Katrina employee is: A person who, on August 28, 2005, had a main home in the core disaster area and, within a two-year period beginning on that date, is hired to perform services principally in the core disaster area; or A person who, on August 28, 2005, had a main home in the core disaster area, was displaced from that main home as a result of Hurricane Katrina, and was hired during the period beginning on August 28, 2005, and ending on December 31, 2005. Irs amendments Qualified wages. Irs amendments   Generally, qualified wages do not include wages you paid to a targeted group employee who worked for you previously. Irs amendments However, wages will qualify if: You paid them to an employee who is a Hurricane Katrina employee, The employee was not in your employment on August 28, 2005, and This is your first hire of the employee as a Hurricane Katrina employee after August 28, 2005. Irs amendments   For more information, see Form 5884. Irs amendments Certification requirements. Irs amendments   An employee must provide to the employer reasonable evidence that he or she is a Hurricane Katrina employee. Irs amendments An employer may accept a completed Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity and Welfare-to-Work Credits, as such evidence. Irs amendments The certification requirements described in Form 8850 do not apply to a Hurricane Katrina employee. Irs amendments Do not send any Forms 8850 that have only box 1 checked to the state employment security agency. Irs amendments Instead, the employer should keep these Forms 8850 with the employer's other records. Irs amendments For more information, see Form 8850 and its instructions. Irs amendments Employee Retention Credit An eligible employer who conducted an active trade or business in the Gulf Opportunity (GO) Zone, the Rita GO Zone, or the Wilma GO Zone can claim the employee retention credit. Irs amendments The credit is 40% of qualified wages for each eligible employee (up to a maximum of $6,000 in qualified wages per employee). Irs amendments Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). Irs amendments Use Form 5884-A to claim the credit. Irs amendments See the following rules and definitions for each hurricane. Irs amendments Employers affected by Hurricane Katrina. Irs amendments   The following definitions apply to employers affected by Hurricane Katrina. Irs amendments Eligible employer. Irs amendments   For this purpose, an eligible employer is any employer who conducted an active trade or business on August 28, 2005, in the GO Zone and whose trade or business was inoperable on any day after August 28, 2005, and before January 1, 2006, because of damage caused by Hurricane Katrina. Irs amendments Eligible employee. Irs amendments   For this purpose, an eligible employee is an employee whose principal place of employment on August 28, 2005, with such eligible employer was in the GO Zone. Irs amendments An employee is not an eligible employee for purposes of Hurricane Katrina if the employee is treated as an eligible employee for the work opportunity credit. Irs amendments Employers affected by Hurricane Rita. Irs amendments   The following definitions apply to employers affected by Hurricane Rita. Irs amendments Eligible employer. Irs amendments   For this purpose, an eligible employer is any employer who conducted an active trade or business on September 23, 2005, in the Rita GO Zone and whose trade or business was inoperable on any day after September 23, 2005, and before January 1, 2006, because of damage caused by Hurricane Rita. Irs amendments Eligible employee. Irs amendments   For this purpose, an eligible employee is an employee whose principal place of employment on September 23, 2005, with such eligible employer was in the Rita GO Zone. Irs amendments An employee is not an eligible employee for purposes of Hurricane Rita if the employee is treated as an eligible employee for the work opportunity credit or the Hurricane Katrina employee retention credit. Irs amendments Employers affected by Hurricane Wilma. Irs amendments   The following definitions apply to employers affected by Hurricane Wilma. Irs amendments Eligible employer. Irs amendments   For this purpose, an eligible employer is any employer who conducted an active trade or business on October 23, 2005, in the Wilma GO Zone and whose trade or business was inoperable on any day after October 23, 2005, and before January 1, 2006, because of damage caused by Hurricane Wilma. Irs amendments Eligible employee. Irs amendments   For this purpose, an eligible employee is an employee whose principal place of employment on October 23, 2005, with such eligible employer was in the Wilma GO Zone. Irs amendments An employee is not an eligible employee for purposes of Hurricane Wilma if the employee is treated as an eligible employee for the work opportunity credit or the Hurricane Katrina or Rita employee retention credit. Irs amendments Qualified wages. Irs amendments   Qualified wages are wages you paid or incurred before January 1, 2006, (up to $6,000 per employee) for an eligible employee beginning on the date your trade or business first became inoperable at the employee's principal place of employment immediately before the applicable hurricane, and ending on the date your trade or business resumed significant operations at that place. Irs amendments In addition, the wages must have been paid or incurred after the following date. Irs amendments August 28, 2005, for Hurricane Katrina. Irs amendments September 23, 2005, for Hurricane Rita. Irs amendments October 23, 2005, for Hurricane Wilma. Irs amendments    This includes wages paid even if the employee performed no services, performed services at a place of employment other than the principal place of employment, or performed services at the principal place of employment before significant operations resumed. Irs amendments    Wages qualifying for the credit generally have the same meaning as wages subject to the Federal Unemployment Tax Act (FUTA). Irs amendments Qualified wages also include amounts you paid for medical or hospitalization expenses in connection with sickness or accident disability. Irs amendments Qualified wages for any employee must be reduced by the amount of any work supplementation payment you received under the Social Security Act. Irs amendments   For agricultural employees, if the work performed by any employee during more than half of any pay period qualified under FUTA as agricultural labor, that employee's wages subject to social security and Medicare taxes are qualified wages. Irs amendments For a special rule that applies to railroad employees, see section 51(h)(1)(B). Irs amendments   Qualified wages do not include the following. Irs amendments Wages paid to your dependent or a related individual. Irs amendments See section 51(i)(1). Irs amendments Wages paid to any employee during the period for which you received payment for the employee from a federally funded on-the-job training program. Irs amendments Wages for services of replacement workers during a strike or lockout. Irs amendments   For more information, see Form 5884-A. Irs amendments Hurricane Katrina Housing Credit An employer who conducted an active trade or business in the Gulf Opportunity (GO) Zone can claim the Hurricane Katrina housing credit. Irs amendments The credit is equal to 30% of the value (up to $600 per month per employee) of in-kind lodging furnished to a qualified employee (and the employee's spouse or dependents) from January 1, 2006, through July 1, 2006. Irs amendments The value of the lodging is excluded from the income of the qualified employee but is treated as wages for purposes of taxes imposed under the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA). Irs amendments Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). Irs amendments The employer must use Form 5884-A to claim the credit. Irs amendments A qualified employee is an individual who had a main home in the GO Zone on August 28, 2005, and who performs substantially all employment services in the GO Zone for the employer furnishing the lodging. Irs amendments The employee cannot be your dependent or a related individual. Irs amendments See section 51(i)(1). Irs amendments For more information, see Form 5884-A. Irs amendments Reforestation Costs You may be able to elect to deduct a limited amount of reforestation costs for each qualified timber property. Irs amendments The deduction for any tax year generally is limited to $10,000 ($5,000 if married filing separately, $0 for a trust). Irs amendments However, this limit is increased if you paid or incurred reforestation costs after the applicable date below and any portion of the qualified timber property is located in one of the following areas. Irs amendments August 27, 2005, if any portion of the property is located in the GO Zone. Irs amendments September 22, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone). Irs amendments October 22, 2005, if any portion of the property is located in the Wilma GO Zone. Irs amendments The limit for each qualified timber property is increased by the smaller of: $10,000 ($5,000 if married filing separately, $0 for a trust), or The amount of reforestation costs you paid or incurred after the applicable date for the qualified timber property, any portion of which is located in the zone described above. Irs amendments The increase in the limit applies only to costs paid or incurred before 2008. Irs amendments However, these rules do not apply to any timber producer who: Held more than 500 acres of qualified timber property at any time during the tax year, Is a corporation with stock publicly traded on an established securities market, or Is a real estate investment trust. Irs amendments For more information about the election to deduct reforestation costs, see chapter 8 in Publication 535, Business Expenses. Irs amendments Demolition and Clean-up Costs You can elect to deduct 50% of any qualified GO Zone clean-up costs for the tax year in which the costs are paid or incurred, instead of capitalizing them. Irs amendments Qualified GO Zone clean-up costs are any amounts paid or incurred after August 27, 2005, and before January 1, 2008, for the removal of debris from, or the demolition of structures on, real property located in the GO Zone that is: Held by you for use in a trade or business or for the production of income, or Inventory or other property held primarily for sale to customers in the ordinary course of your trade or business. Irs amendments Increase in Rehabilitation Tax Credit The rehabilitation credit is increased for qualified rehabilitation expenditures paid or incurred after August 27, 2005, and before January 1, 2009, on buildings located in the GO Zone as follows. Irs amendments For pre-1936 buildings (other than certified historic structures), the credit percentage is increased from 10% to 13%. Irs amendments For certified historic structures, the credit percentage is increased from 20% to 26%. Irs amendments For more information, see Form 3468, Investment Credit. Irs amendments Request for Copy or Transcript of Tax Return Request for copy of tax return. Irs amendments   You can use Form 4506 to order a copy of your tax return. Irs amendments Generally, there is a $39. Irs amendments 00 fee for requesting each copy of a tax return. Irs amendments If your main home, principal place of business, or tax records are located in a Presidentially declared disaster area, the fee will be waived if the assigned disaster designation (for example, “Hurricane Katrina”) is written in red across the top of the form when filed. Irs amendments Request for transcript of tax return. Irs amendments   You can use Form 4506-T to order a free transcript of your tax return. Irs amendments A transcript provides most of the line entries from a tax return and usually contains the information that a third party requires. Irs amendments You can also call 1-800-829-1040 to order a transcript. Irs amendments How To Get Tax Help Special IRS assistance. Irs amendments   The IRS is providing special help for those affected by Hurricane Katrina, Rita, or Wilma, as well as survivors and personal representatives of the victims. Irs amendments We have set up a special toll-free number for people who may have trouble filing or paying their taxes because they were affected by Hurricane Katrina, Rita, or Wilma, or who have other tax issues related to the hurricanes. Irs amendments Call 1-866-562-5227 Monday through Friday In English-7 a. Irs amendments m. Irs amendments to 10 p. Irs amendments m. Irs amendments local time In Spanish-8 a. Irs amendments m. Irs amendments to 9:30 p. Irs amendments m. Irs amendments local time   The IRS website at www. Irs amendments irs. Irs amendments gov has notices and other tax relief information. Irs amendments Check it periodically for any new guidance. Irs amendments Other help from the IRS. Irs amendments   You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. Irs amendments By selecting the method that is best for you, you will have quick and easy access to tax help. Irs amendments Contacting your Taxpayer Advocate. Irs amendments   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. Irs amendments   The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. Irs amendments While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review. Irs amendments   To contact your Taxpayer Advocate: Call the Taxpayer Advocate toll free at 1-877-777-4778. Irs amendments Call, write, or fax the Taxpayer Advocate office in your area. Irs amendments Call 1-800-829-4059 if you are a TTY/TDD user. Irs amendments Visit www. Irs amendments irs. Irs amendments gov/advocate. Irs amendments   For more information, see Publication 1546, How To Get Help With Unresolved Tax Problems (now available in Chinese, Korean, Russian, and Vietnamese, in addition to English and Spanish). Irs amendments Free tax services. Irs amendments   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. Irs amendments It contains a list of free tax publications and an index of tax topics. Irs amendments It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. Irs amendments Internet. Irs amendments You can access the IRS website 24 hours a day, 7 days a week, at www. Irs amendments irs. Irs amendments gov to: E-file your return. Irs amendments Find out about commercial tax preparation and e-file services available free to eligible taxpayers. Irs amendments Check the status of your refund. Irs amendments Click on Where's My Refund. Irs amendments Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). Irs amendments Have your tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund. Irs amendments Download forms, instructions, and publications. Irs amendments Order IRS products online. Irs amendments Research your tax questions online. Irs amendments Search publications online by topic or keyword. Irs amendments View Internal Revenue Bulletins (IRBs) published in the last few years. Irs amendments Figure your withholdin
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These tables below were originally published in the IRS Data Book, which is IRS Publication 55B, and are complied by various divisions throughout the IRS. The IRS's fiscal year runs from October 1 to September 30.


Enforcing Laws

Examination Coverage

Examination Coverage: Recommended and Average Recommended Additional Tax After Examination
by Type and Size of Return and Fiscal Year

Returns Examined by Type of Return and Internal Revenue Region, District, and Service Center and Fiscal Year
1999     1998     1997      1996     1995

•  Additional Tax and Penalties Recommended After Examination
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The Irs Amendments

Irs amendments Publication 929 - Main Content Table of Contents Part 1. Irs amendments Rules for All Dependents Filing RequirementsEarned Income Only Unearned Income Only Both Earned and Unearned Income Other Filing Requirements Should a Return Be Filed Even If Not Required? Responsibility for Child's ReturnThird party designee. Irs amendments Designated as representative. Irs amendments IRS notice. Irs amendments Standard DeductionStandard Deduction of Zero Dependent's Own Exemption Withholding From WagesExceptions. Irs amendments Part 2. Irs amendments Tax on Unearned Income of Certain ChildrenWhich Parent's Return To Use Parent's Election To Report Child's Interest and DividendsEffect of Making the Election Figuring Child's Income Figuring Additional Tax Tax for Certain Children Who Have Unearned IncomeProviding Parental Information (Form 8615, Lines A–C) Step 1. Irs amendments Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. Irs amendments Figuring a Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. Irs amendments Figuring the Child's Tax (Form 8615, Part III) Alternative Minimum Tax Illustrated Example Part 1. Irs amendments Rules for All Dependents This part of the publication discusses the filing requirements for dependents, who is responsible for a child's return, how to figure a dependent's standard deduction and exemption (if any), and whether a dependent can claim exemption from federal income tax withholding. Irs amendments Filing Requirements Whether a dependent has to file a return generally depends on the amount of the dependent's earned and unearned income and whether the dependent is married, is age 65 or older, or is blind. Irs amendments A dependent may have to file a return even if his or her income is less than the amount that would normally require a return. Irs amendments See Other Filing Requirements, later. Irs amendments The following sections apply to dependents with: Earned income only, Unearned income only, and Both earned and unearned income. Irs amendments  To find out whether a dependent must file, read the section that applies, or use Table 1. Irs amendments Earned Income Only A dependent whose gross income is only earned income must file a return if the gross income is more than the amount listed in the following table. Irs amendments Marital Status Amount Single   Under 65 and not blind $6,100 Either 65 or older or blind $7,600 65 or older and blind $9,100 Married*   Under 65 and not blind $6,100 Either 65 or older or blind $7,300 65 or older and blind $8,500 *If a dependent's spouse itemizes deductions on a separate return, the dependent must file a return if the dependent has $5 or more of gross income (earned and/or unearned). Irs amendments Example. Irs amendments William is 16. Irs amendments His mother claims an exemption for him on her income tax return. Irs amendments He worked part time on weekends during the school year and full time during the summer. Irs amendments He earned $7,000 in wages. Irs amendments He did not have any unearned income. Irs amendments He must file a tax return because he has earned income only and his gross income is more than $6,100. Irs amendments If he is blind, he does not have to file a return because his gross income is not more than $7,600. Irs amendments Unearned Income Only A dependent whose gross income is only unearned income must file a return if the gross income is more than the amount listed in the following table. Irs amendments Marital Status Amount Single   Under 65 and not blind $1,000 Either 65 or older or blind $2,500 65 or older and blind $4,000 Married*   Under 65 and not blind $1,000 Either 65 or older or blind $2,200 65 or older and blind $3,400 *If a dependent's spouse itemizes deductions on a separate return, the dependent must file a return if the dependent has $5 or more of gross income (earned and/or unearned). Irs amendments Example. Irs amendments Sarah is 18 and single. Irs amendments Her parents can claim an exemption for her on their income tax return. Irs amendments She received $1,970 of taxable interest and dividend income. Irs amendments She did not work during the year. Irs amendments She must file a tax return because she has unearned income only and her gross income is more than $1,000. Irs amendments If she is blind, she does not have to file a return because she has unearned income only and her gross income is not more than $2,500. Irs amendments Election to report child's unearned income on parent's return. Irs amendments   A parent of a child under age 19 (or under age 24 if a full-time student) may be able to elect to include the child's interest and dividend income on the parent's return. Irs amendments See Parent's Election To Report Child's Interest and Dividends in Part 2. Irs amendments If the parent makes this election, the child does not have to file a return. Irs amendments Both Earned and Unearned Income A dependent who has both earned and unearned income generally must file a return if the dependent's gross income is more than line 5 of the following worksheet. Irs amendments Filing Requirement Worksheet for Most Dependents 1. Irs amendments Enter dependent's earned income plus $350     2. Irs amendments Minimum amount   $1,000 3. Irs amendments Compare lines 1 and 2. Irs amendments Enter the larger amount     4. Irs amendments Maximum amount   6,100 5. Irs amendments Compare lines 3 and 4. Irs amendments Enter the smaller amount     6. Irs amendments Enter the dependent's gross income. Irs amendments If line 6 is more than line 5, the dependent must file an income tax return. Irs amendments If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. Irs amendments       Table 1. Irs amendments 2013 Filing Requirements for Dependents If your parent (or someone else) can claim you as a dependent, use this table to see if you must file a return. Irs amendments   See the definitions of “dependent,”“earned income,”“unearned income,” and “gross income” in the Glossary. Irs amendments   Single dependents—Were you either age 65 or older or blind?     No. Irs amendments You must file a return if any of the following apply. Irs amendments       Your unearned income was over $1,000. Irs amendments Your earned income was over $6,100. Irs amendments Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. Irs amendments         Yes. Irs amendments You must file a return if any of the following apply. Irs amendments     Your unearned income was over $2,500 ($4,000 if 65 or older and blind), Your earned income was over $7,600 ($9,100 if 65 or older and blind), Your gross income was more than the larger of—       $2,500 ($4,000 if 65 or older and blind), or Your earned income (up to $5,750) plus $1,850 ($3,350 if 65 or older and blind). Irs amendments       Married dependents—Were you either age 65 or older or blind?     No. Irs amendments You must file a return if any of the following apply. Irs amendments       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Irs amendments Your unearned income was over $1,000. Irs amendments Your earned income was over $6,100. Irs amendments Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. Irs amendments       Yes. Irs amendments You must file a return if any of the following apply. Irs amendments       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Irs amendments Your unearned income was over $2,200 ($3,400 if 65 or older and blind), Your earned income was over $7,300 ($8,500 if 65 or older and blind), Your gross income was more than the larger of—       $2,200 ($3,400 if 65 or older and blind), or Your earned income (up to $5,750) plus $1,550 ($2,750 if 65 or older and blind). Irs amendments       Example 1. Irs amendments Joe is 20, single, not blind, and a full-time college student. Irs amendments He does not provide more than half of his own support, and his parents claim an exemption for him on their income tax return. Irs amendments He received $200 taxable interest income and earned $2,750 from a part-time job. Irs amendments He does not have to file a tax return because his gross income of $2,950 ($200 interest plus $2,750 in wages) is not more than $3,100, the amount on line 5 of his filled-in Filing Requirement Worksheet for Most Dependents (shown next). Irs amendments Filled-in Example 1 Filing Requirement Worksheet  for Most Dependents 1. Irs amendments Enter dependent's earned income plus $350   $ 3,100 2. Irs amendments Minimum amount   1,000 3. Irs amendments Compare lines 1 and 2. Irs amendments Enter the larger amount   3,100 4. Irs amendments Maximum amount   6,100 5. Irs amendments Compare lines 3 and 4. Irs amendments Enter the smaller amount   3,100 6. Irs amendments Enter the dependent's gross income. Irs amendments If line 6 is more than line 5, the dependent must file an income tax return. Irs amendments If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. Irs amendments   $ 2,950   Example 2. Irs amendments The facts are the same as in Example 1 except that Joe had $600 taxable interest income. Irs amendments He must file a tax return because his gross income of $3,350 ($600 interest plus $2,750 wages) is more than $3,100, the amount on line 5 of his filled-in worksheet (shown next). Irs amendments Filled-in Example 2 Filing Requirement Worksheet for Most Dependents 1. Irs amendments Enter dependent's earned income plus $350   $ 3,100 2. Irs amendments Minimum amount   1,000 3. Irs amendments Compare lines 1 and 2. Irs amendments Enter the larger amount   3,100 4. Irs amendments Maximum amount   6,100 5. Irs amendments Compare lines 3 and 4. Irs amendments Enter the smaller amount   3,100 6. Irs amendments Enter the dependent's gross income. Irs amendments If line 6 is more than line 5, the dependent must file an income tax return. Irs amendments If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. Irs amendments   $ 3,350   Age 65 or older or blind. Irs amendments A dependent who is age 65 or older or blind must file a return if his or her gross income is more than line 7 of the following worksheet. Irs amendments Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. Irs amendments Enter dependent's earned income plus $350     2. Irs amendments Minimum amount   $1,000 3. Irs amendments Compare lines 1 and 2. Irs amendments Enter the larger amount     4. Irs amendments Maximum amount   6,100 5. Irs amendments Compare lines 3 and 4. Irs amendments Enter the smaller amount     6. Irs amendments Enter the amount from the following table that applies to the dependent       Marital Status Amount     Single         Either 65 or older or blind $1,500       65 or older and blind $3,000     Married         Either 65 or older or blind $1,200       65 or older and blind $2,400   7. Irs amendments Add lines 5 and 6. Irs amendments Enter the total     8. Irs amendments Enter the dependent's gross income. Irs amendments If line 8 is more than line 7, the dependent must file an income tax return. Irs amendments If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 8 is $5 or more     Example 3. Irs amendments The facts are the same as in Example 2 except that Joe is also blind. Irs amendments He does not have to file a return because his gross income of $3,350 is not more than $4,600, the amount on line 7 of his filled-in Filing Requirement Worksheet for Dependents Who Are Age 65 or Older or Blind (shown next). Irs amendments   Filled-in Example 3 Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. Irs amendments Enter dependent's earned income plus $350   $3,100 2. Irs amendments Minimum amount   1,000 3. Irs amendments Compare lines 1 and 2. Irs amendments Enter the larger amount   3,100 4. Irs amendments Maximum amount   6,100 5. Irs amendments Compare lines 3 and 4. Irs amendments Enter the smaller amount   3,100 6. Irs amendments Enter the amount from the following table that applies to the dependent   1,500   Marital Status Amount     Single         Either 65 or older or blind $1,500       65 or older and blind $3,000     Married         Either 65 or older or blind $1,200       65 or older and blind $2,400   7. Irs amendments Add lines 5 and 6. Irs amendments Enter the total   4,600 8. Irs amendments Enter the dependent's gross income. Irs amendments If line 8 is more than line 7, the dependent must file an income tax return. Irs amendments If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 8 is $5 or more   $3,350 Other Filing Requirements Some dependents may have to file a tax return even if their income is less than the amount that would normally require them to file a return. Irs amendments A dependent must file a tax return if he or she owes any other taxes, such as: Social security and Medicare taxes on tips not reported to his or her employer or on wages received from an employer who did not withhold these taxes, Uncollected social security and Medicare or railroad retirement taxes on tips reported to his or her employer or on group-term life insurance, Alternative minimum tax, Additional tax on a health savings account from Form 8889, Part III, Recapture taxes, such as the tax from recapture of an education credit, or Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax-favored account. Irs amendments But if the dependent is filing a return only because of this tax, the dependent can file Form 5329 by itself. Irs amendments A dependent must also file a tax return if he or she: Had wages of $108. Irs amendments 28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes, or Had net earnings from self-employment of at least $400. Irs amendments Spouse itemizes. Irs amendments   A dependent must file a return if the dependent's spouse itemizes deductions on a separate return and the dependent has $5 or more of gross income (earned and/or unearned). Irs amendments Should a Return Be Filed Even If Not Required? Even if a dependent does not meet any of the filing requirements discussed earlier, he or she should file a tax return if either of the following applies. Irs amendments Income tax was withheld from his or her income. Irs amendments He or she qualifies for the earned income credit, additional child tax credit, health coverage tax credit, or refundable American opportunity education credit. Irs amendments See the tax return instructions to find out who qualifies for these credits. Irs amendments  By filing a return, the dependent can get a refund. Irs amendments Responsibility for Child's Return Generally, a child is responsible for filing his or her own tax return and for paying any tax, penalties, or interest on that return. Irs amendments If a child cannot file his or her own return for any reason, such as age, the child's parent, guardian, or other legally responsible person must file it for the child. Irs amendments Signing the child's return. Irs amendments   If the child cannot sign his or her return, a parent or guardian must sign the child's name followed by the words “By (signature), parent (or guardian) for minor child. Irs amendments ” Authority of parent or guardian. Irs amendments   A parent or guardian who signs a return on a child's behalf can deal with the IRS on all matters connected with the return. Irs amendments   In general, a parent or guardian who does not sign the child's return can only provide information concerning the child's return and pay the child's tax. Irs amendments That parent or guardian is not entitled to receive information from the IRS or legally bind the child to a tax liability arising from the return. Irs amendments Third party designee. Irs amendments   A child's parent or guardian who does not sign the child's return may be authorized, as a third party designee, to discuss the processing of the return with the IRS as well as provide information concerning the return. Irs amendments The child or the person signing the return on the child's behalf must check the “Yes” box in the “Third Party Designee” area of the return and name the parent or guardian as the designee. Irs amendments   If designated, a parent or guardian can respond to certain IRS notices and receive information about the processing of the return and the status of a refund or payment. Irs amendments This designation does not authorize the parent or guardian to receive any refund check, bind the child to any tax liability, or otherwise represent the child before the IRS. Irs amendments See the return instructions for more information. Irs amendments Designated as representative. Irs amendments   A parent or guardian who does not sign the child's return may be designated as the child's representative by the child or the person signing the return on the child's behalf. Irs amendments Form 2848, Power of Attorney and Declaration of Representative, is used to designate a child's representative. Irs amendments See Publication 947, Practice Before the IRS and Power of Attorney, for more information. Irs amendments   If designated, a parent or guardian can receive information about the child's return but cannot legally bind the child to a tax liability unless authorized to do so by the law of the state in which the child lives. Irs amendments IRS notice. Irs amendments   If you or the child receives a notice from the IRS concerning the child's return or tax liability, you should immediately inform the IRS that the notice concerns a child. Irs amendments The notice will show who to contact. Irs amendments The IRS will try to resolve the matter with the parent(s) or guardian(s) of the child consistent with their authority. Irs amendments Child's earnings. Irs amendments   For federal income tax purposes, amounts a child earns by performing services are included in the gross income of the child and not the gross income of the parent. Irs amendments This is true even if, under state law, the parent has the right to the earnings and may actually have received them. Irs amendments If the child does not pay the tax due on this income, the parent may be liable for the tax. Irs amendments Child's expenses. Irs amendments   Deductions for payments that are made out of a child's earnings are the child's, even if the payments are made by the parent. Irs amendments Example. Irs amendments You made payments on your child's behalf that are deductible as a business expense and a charitable contribution. Irs amendments You made the payments out of your child's earnings. Irs amendments These items can be deducted only on the child's return. Irs amendments Standard Deduction The standard deduction for an individual who can be claimed as a dependent on another person's tax return is generally limited to the larger of: $1,000, or The individual's earned income plus $350, but not more than the regular standard deduction (generally $6,100). Irs amendments However, the standard deduction may be higher for a dependent who: Is 65 or older, or Is blind. Irs amendments Certain dependents cannot claim any standard deduction. Irs amendments See Standard Deduction of Zero , later. Irs amendments Worksheet 1. Irs amendments   Use Worksheet 1 to figure the dependent's standard deduction. Irs amendments Worksheet 1. Irs amendments Standard Deduction Worksheet for Dependents Use this worksheet only if someone else can claim you (or your spouse, if filing jointly) as a dependent. Irs amendments If you were 65 or older and/or blind, check the correct number of boxes below. Irs amendments Put the total number of boxes checked in box c and go to line 1. Irs amendments a. Irs amendments You 65 or older   Blind   b. Irs amendments Your spouse, if claiming  spouse's exemption 65 or older   Blind   c. Irs amendments Total boxes checked         1. Irs amendments Enter your earned income (defined below) plus $350. Irs amendments If none, enter -0-. Irs amendments 1. Irs amendments     2. Irs amendments Minimum amount. Irs amendments   2. Irs amendments $1,000   3. Irs amendments Compare lines 1 and 2. Irs amendments Enter the larger of the two amounts here. Irs amendments 3. Irs amendments     4. Irs amendments Enter on line 4 the amount shown below for your filing status. Irs amendments       Single or Married filing separately—$6,100 Married filing jointly—$12,200 Head of household—$8,950 4. Irs amendments     5. Irs amendments Standard deduction. Irs amendments         a. Irs amendments Compare lines 3 and 4. Irs amendments Enter the smaller amount here. Irs amendments If under 65 and not blind, stop here. Irs amendments This is your standard deduction. Irs amendments Otherwise, go on to line 5b. Irs amendments 5a. Irs amendments     b. Irs amendments If 65 or older or blind, multiply $1,500 ($1,200 if married) by the number in box c above. Irs amendments Enter the result here. Irs amendments 5b. Irs amendments     c. Irs amendments Add lines 5a and 5b. Irs amendments This is your standard deduction for 2013. Irs amendments 5c. Irs amendments     Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. Irs amendments It also includes any amount received as a scholarship that you must include in income. Irs amendments   Example 1. Irs amendments Michael is single, age 15, and not blind. Irs amendments His parents can claim him as a dependent on their tax return. Irs amendments He has taxable interest income of $800 and wages of $150. Irs amendments He enters $500 (his earned income plus $350) on line 1 of Worksheet 1. Irs amendments On line 3, he enters $1,000, the larger of $500 or $1,000. Irs amendments Michael enters $6,100 on line 4. Irs amendments On line 5a, he enters $1,000, the smaller of $1,000 or $6,100. Irs amendments His standard deduction is $1,000. Irs amendments Example 2. Irs amendments Judy, a full-time student, is single, age 22, and not blind. Irs amendments Her parents can claim her as a dependent on their tax return. Irs amendments She has dividend income of $275 and wages of $2,500. Irs amendments She enters $2,850 (her earned income plus $350) on line 1 of Worksheet 1. Irs amendments On line 3, she enters $2,850, the larger of $2,850 or $1,000. Irs amendments She enters $6,100 on line 4. Irs amendments On line 5a, she enters $2,850 (the smaller of $2,850 or $6,100) as her standard deduction. Irs amendments Example 3. Irs amendments Amy, who is single, is claimed as a dependent on her parents' tax return. Irs amendments She is 18 years old and blind. Irs amendments She has taxable interest income of $1,000 and wages of $2,000. Irs amendments She enters $2,350 (her earned income plus $350) on line 1 of Worksheet 1. Irs amendments She enters $2,350 (the larger of $2,350 or $1,000) on line 3, $6,100 on line 4, and $2,350 (the smaller of $2,350 or $6,100) on line 5a. Irs amendments Because Amy is blind, she checks the box for blindness and enters “1” in box c at the top of Worksheet 1. Irs amendments She enters $1,500 (the number in box c times $1,500) on line 5b. Irs amendments Her standard deduction on line 5c is $3,850 ($2,350 + $1,500). Irs amendments Standard Deduction of Zero The standard deduction for the following dependents is zero. Irs amendments A married dependent filing a separate return whose spouse itemizes deductions. Irs amendments A dependent who files a return for a period of less than 12 months due to a change in his or her annual accounting period. Irs amendments A nonresident or dual-status alien dependent, unless the dependent is married to a U. Irs amendments S. Irs amendments citizen or resident alien at the end of the year and chooses to be treated as a U. Irs amendments S. Irs amendments resident for the year. Irs amendments See Publication 519, U. Irs amendments S. Irs amendments Tax Guide for Aliens, for information on making this choice. Irs amendments Example. Irs amendments Jennifer, who is a dependent of her parents, is entitled to file a joint return with her husband. Irs amendments However, her husband elects to file a separate return and itemize his deductions. Irs amendments Because he itemizes, Jennifer's standard deduction on her return is zero. Irs amendments She can, however, itemize any of her allowable deductions. Irs amendments Dependent's Own Exemption A person who can be claimed as a dependent on another taxpayer's return cannot claim his or her own exemption. Irs amendments This is true even if the other taxpayer does not actually claim the exemption. Irs amendments Example. Irs amendments James and Barbara can claim their child, Ben, as a dependent on their return. Irs amendments Ben is a college student who works during the summer and must file a tax return. Irs amendments Ben cannot claim his own exemption on his return. Irs amendments This is true even if James and Barbara do not claim him as a dependent on their return. Irs amendments Withholding From Wages Employers generally withhold federal income tax, social security tax, and Medicare tax from an employee's wages. Irs amendments If the employee claims exemption from withholding on Form W-4, the employer will not withhold federal income tax. Irs amendments The exemption from withholding does not apply to social security and Medicare taxes. Irs amendments Conditions for exemption from withholding. Irs amendments   An employee can claim exemption from withholding for 2014 only if he or she meets both of the following conditions. Irs amendments For 2013, the employee had a right to a refund of all federal income tax withheld because he or she had no tax liability. Irs amendments For 2014, the employee expects a refund of all federal income tax withheld because he or she expects to have no tax liability. Irs amendments Dependents. Irs amendments   An employee who is a dependent ordinarily cannot claim exemption from withholding if both of the following are true. Irs amendments The employee's gross income will be more than $1,000, the minimum standard deduction for 2014. Irs amendments The employee's unearned income will be more than $350. Irs amendments Exceptions. Irs amendments   An employee may be able to claim exemption from withholding even if the employee is a dependent, if the employee: Is age 65 or older, Is blind, or Will claim on his or her 2014 tax return: Adjustments to income, Tax credits, or Itemized deductions. Irs amendments The above exceptions do not apply to supplemental wages greater than $1,000,000. Irs amendments For more information, see Exemption From Withholding in chapter 1 of Publication 505. Irs amendments Example. Irs amendments Guy is 17 and a student. Irs amendments During the summer he works part time at a grocery store. Irs amendments He expects to earn about $1,200 this year. Irs amendments He also worked at the store last summer and received a refund of all his withheld income tax because he did not have a tax liability. Irs amendments The only other income he expects during the year is $375 interest on a savings account. Irs amendments He expects that his parents will be able to claim him as a dependent on their tax return. Irs amendments He is not blind and will not claim adjustments to income, itemized deductions, a higher standard deduction, or tax credits on his return. Irs amendments Guy cannot claim exemption from withholding when he fills out Form W-4 because his parents will be able to claim him as a dependent, his gross income will be more than $1,000 (the minimum standard deduction amount) and his unearned income will be more than $350. Irs amendments Claiming exemption from withholding. Irs amendments    To claim exemption from withholding, an employee must enter “Exempt” in the space provided on Form W-4, line 7. Irs amendments The employee must complete the rest of the form, as explained in the form instructions, and give it to his or her employer. Irs amendments Renewing an exemption from withholding. Irs amendments   An exemption from withholding is good for only one year. Irs amendments An employee must file a new Form W-4 by February 15 each year to continue the exemption. Irs amendments Part 2. Irs amendments Tax on Unearned Income of Certain Children The two rules that follow may affect the tax on the unearned income of certain children. Irs amendments If the child's interest and dividend income (including capital gain distributions) total less than $10,000, the child's parent may be able to choose to include that income on the parent's return rather than file a return for the child. Irs amendments (See Parent's Election To Report Child's Interest and Dividends , later. Irs amendments ) If the child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. Irs amendments (See Tax for Certain Children Who Have Unearned Income , later. Irs amendments ) For these rules, the term “child” includes a legally adopted child and a stepchild. Irs amendments These rules apply whether or not the child is a dependent. Irs amendments These rules do not apply if neither of the child's parents were living at the end of the year. Irs amendments Which Parent's Return To Use If a child's parents are married to each other and file a joint return, use the joint return to figure the tax on the child's unearned income. Irs amendments The tax rate and other return information from that return are used to figure the child's tax as explained later under Tax for Certain Children Who Have Unearned Income . Irs amendments Parents Who Do Not File a Joint Return For parents who do not file a joint return, the following discussions explain which parent's tax return must be used to figure the tax. Irs amendments Only the parent whose tax return is used can make the election described under Parent's Election To Report Child's Interest and Dividends . Irs amendments Parents are married. Irs amendments   If the child's parents file separate returns, use the return of the parent with the greater taxable income. Irs amendments Parents not living together. Irs amendments   If the child's parents are married to each other but not living together, and the parent with whom the child lives (the custodial parent) is considered unmarried, use the return of the custodial parent. Irs amendments If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. Irs amendments   For an explanation of when a married person living apart from his or her spouse is considered unmarried, see Head of Household in Publication 501. Irs amendments Parents are divorced. Irs amendments   If the child's parents are divorced or legally separated, and the parent who had custody of the child for the greater part of the year (the custodial parent) has not remarried, use the return of the custodial parent. Irs amendments Custodial parent remarried. Irs amendments   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. Irs amendments Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. Irs amendments Do not use the return of the noncustodial parent. Irs amendments   If the custodial parent and the stepparent are married, but file separate returns, use the return of the one with the greater taxable income. Irs amendments If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. Irs amendments Parents never married. Irs amendments   If a child's parents have never been married to each other, but lived together all year, use the return of the parent with the greater taxable income. Irs amendments If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. Irs amendments Widowed parent remarried. Irs amendments   If a widow or widower remarries, the new spouse is treated as the child's other parent. Irs amendments The rules explained earlier under Custodial parent remarried apply. Irs amendments Parent's Election To Report Child's Interest and Dividends You may be able to elect to include your child's interest and dividend income (including capital gain distributions) on your tax return. Irs amendments If you do, your child will not have to file a return. Irs amendments You can make this election only if all the following conditions are met. Irs amendments Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. Irs amendments Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). Irs amendments The child's gross income was less than $10,000. Irs amendments The child is required to file a return unless you make this election. Irs amendments The child does not file a joint return for the year. Irs amendments No estimated tax payment was made for the year, and no overpayment from the previous year (or from any amended return) was applied to this year under your child's name and social security number. Irs amendments No federal income tax was withheld from your child's income under the backup withholding rules. Irs amendments You are the parent whose return must be used when applying the special tax rules for children. Irs amendments (See Which Parent's Return To Use , earlier. Irs amendments ) These conditions are also shown in Figure 1. Irs amendments Certain January 1 birthdays. Irs amendments   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. Irs amendments You cannot make this election for such a child unless the child was a full-time student. Irs amendments   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. Irs amendments You cannot make this election for such a child. Irs amendments How to make the election. Irs amendments    Make the election by attaching Form 8814 to your Form 1040 or Form 1040NR. Irs amendments (If you make this election, you cannot file Form 1040A or Form 1040EZ. Irs amendments ) Attach a separate Form 8814 for each child for whom you make the election. Irs amendments You can make the election for one or more children and not for others. Irs amendments Effect of Making the Election The federal income tax on your child's income may be more if you make the Form 8814 election. Irs amendments Rate may be higher. Irs amendments   If your child received qualified dividends or capital gain distributions, you may pay up to $100 more tax if you make this election instead of filing a separate tax return for the child. Irs amendments This is because the tax rate on the child's income between $1,000 and $2,000 is 10% if you make this election. Irs amendments However, if you file a separate return for the child, the tax rate may be as low as 0% (zero percent) because of the preferential tax rates for qualified dividends and capital gain distributions. Irs amendments Deductions you cannot take. Irs amendments   By making the Form 8814 election, you cannot take any of the following deductions that the child would be entitled to on his or her return. Irs amendments The additional standard deduction if the child is blind. Irs amendments The deduction for a penalty on an early withdrawal of your child's savings. Irs amendments Itemized deductions (such as your child's investment expenses or charitable contributions). Irs amendments Figure 1. Irs amendments Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. Irs amendments Figure 1. Irs amendments Can You Include Your Child's Income On Your Tax Return? Deductible investment interest. Irs amendments   If you use Form 8814, your child's unearned income is considered your unearned income. Irs amendments To figure the limit on your deductible investment interest, add the child's unearned income to yours. Irs amendments However, if your child received qualified dividends, capital gain distributions, or Alaska Permanent Fund dividends, see chapter 3 of Publication 550 for information about how to figure the limit. Irs amendments Alternative minimum tax. Irs amendments    If your child received tax-exempt interest (or exempt-interest dividends paid by a regulated investment company) from certain private activity bonds, you must determine if that interest is a tax preference item for alternative minimum tax (AMT) purposes. Irs amendments If it is, you must include it with your own tax preference items when figuring your AMT. Irs amendments See Form 6251, Alternative Minimum Tax—Individuals, and its instructions for details. Irs amendments Reduced deductions or credits. Irs amendments   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return, including the following. Irs amendments Deduction for contributions to a traditional individual retirement arrangement (IRA). Irs amendments Deduction for student loan interest. Irs amendments Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. Irs amendments Credit for child and dependent care expenses. Irs amendments Child tax credit. Irs amendments Education tax credits. Irs amendments Earned income credit. Irs amendments Penalty for underpayment of estimated tax. Irs amendments   If you make this election for 2013 and did not have enough tax withheld or pay enough estimated tax to cover the tax you owe, you may be subject to a penalty. Irs amendments If you plan to make this election for 2014, you may need to increase your federal income tax withholding or your estimated tax payments to avoid the penalty. Irs amendments Get Publication 505 for more information. Irs amendments Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. Irs amendments Only the amount over $2,000 is added to your income. Irs amendments The amount over $2,000 is shown on Form 8814, line 6. Irs amendments Unless the child's income includes qualified dividends or capital gain distributions (discussed next), the same amount is shown on Form 8814, line 12. Irs amendments Include the amount from Form 8814, line 12, on Form 1040 or Form 1040NR, line 21. Irs amendments If you file more than one Form 8814, include the total amounts from line 12 of all your Forms 8814 on Form 1040 or Form 1040NR, line 21. Irs amendments On the dotted line next to line 21, enter “Form 8814” and the total of the Form 8814, line 12 amounts. Irs amendments Note. Irs amendments The tax on the first $2,000 is figured on Form 8814, Part II. Irs amendments See Figuring Additional Tax , later. Irs amendments Qualified dividends. Irs amendments   Enter on Form 8814, line 2a, any ordinary dividends your child received. Irs amendments This amount may include qualified dividends. Irs amendments Qualified dividends are those dividends reported on Form 1040, line 9b, or Form 1040NR, line 10b, and are eligible for lower tax rates that apply to a net capital gain. Irs amendments For detailed information about qualified dividends, see Publication 550. Irs amendments   If your child received qualified dividends, the amount of these dividends that is added to your income must be reported on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. Irs amendments You do not include these dividends on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. Irs amendments   Enter the child's qualified dividends on Form 8814, line 2b. Irs amendments But do not include this amount on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. Irs amendments Instead, include the amount from Form 8814, line 9, on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. Irs amendments (The amount on Form 8814, line 9, may be less than the amount on Form 8814, line 2b, because lines 7 through 12 of the form divide the $2,000 base amount on Form 8814, line 5, between the child's qualified dividends, capital gain distributions, and other interest and dividend income, reducing each of those amounts. Irs amendments ) Capital gain distributions. Irs amendments   Enter on Form 8814, line 3, any capital gain distributions your child received. Irs amendments The amount of these distributions that is added to your income must be reported on Schedule D (Form 1040), line 13, or, if you are not required to file Schedule D, on Form 1040, line 13, or Form 1040NR, line 14. Irs amendments You do not include it on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. Irs amendments   Include the amount from Form 8814, line 10, on Schedule D, line 13; Form 1040, line 13; or Form 1040NR, line 14, whichever applies. Irs amendments (The amount on Form 8814, line 10, may be less than the amount on Form 8814, line 3, because lines 7 through 12 of the form divide the $2,000 base amount on Form 8814, line 5, between the child's qualified dividends, capital gain distributions, and other interest and dividend income, reducing each of those amounts. Irs amendments ) Collectibles (28% rate) gain. Irs amendments    If any of the child's capital gain distributions are reported on Form 1099-DIV as collectibles (28% rate) gain, you must determine how much to also include on line 4 of the 28% Rate Gain Worksheet, in the instructions for Schedule D, line 18. Irs amendments Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Irs amendments The numerator is the part of the child's total capital gain distribution that is collectibles (28% rate) gain. Irs amendments The denominator is the child's total capital gain distribution. Irs amendments Enter the result on line 4 of the 28% Rate Gain Worksheet. Irs amendments Unrecaptured section 1250 gain. Irs amendments   If any of the child's capital gain distributions are reported on Form 1099-DIV as unrecaptured section 1250 gain, you must determine how much to include on line 11 of the Unrecaptured Section 1250 Gain Worksheet in the instructions for Schedule D, line 19. Irs amendments Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Irs amendments The numerator is the part of the child's total capital gain distribution that is unrecaptured section 1250 gain. Irs amendments The denominator is the child's total capital gain distribution. Irs amendments Enter the result on the Unrecaptured Section 1250 Gain Worksheet, line 11. Irs amendments Section 1202 gain. Irs amendments   If any of the child's capital gain distributions are reported as section 1202 gain (gain on qualified small business stock) on Form 1099-DIV, part or all of that gain may be eligible for the section 1202 exclusion. Irs amendments (For information about the exclusion, see chapter 4 of Publication 550. Irs amendments ) To figure that part, multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Irs amendments The numerator is the part of the child's total capital gain distribution that is section 1202 gain. Irs amendments The denominator is the child's total capital gain distribution. Irs amendments Your section 1202 exclusion is generally 50% of the result, but may be subject to a limit. Irs amendments In some cases, the exclusion is more than 50%. Irs amendments See the instructions for Schedule D for details and information on how to report the exclusion amount. Irs amendments Example. Irs amendments Fred is 6 years old. Irs amendments In 2013, he received dividend income of $2,100, which included $1,575 of ordinary dividends and a $525 capital gain distribution from a mutual fund. Irs amendments (None of the distributions were reported on Form 1099-DIV as unrecaptured section 1250 gain, section 1202 gain, or collectibles (28% rate) gain. Irs amendments ) All of the ordinary dividends are qualified dividends. Irs amendments He has no other income and is not subject to backup withholding. Irs amendments No estimated tax payments were made under his name and social security number. Irs amendments Fred's parents elect to include Fred's income on their tax return instead of filing a return for him. Irs amendments They figure the amount to report on Form 1040, lines 9a and 9b, the amount to report on their Schedule D, line 13, and the amount to report on Form 1040, line 21, as follows. Irs amendments They leave lines 1a and 1b of Form 8814 blank because Fred does not have any interest income. Irs amendments They enter his ordinary dividends of $1,575 on lines 2a and 2b because all of Fred's ordinary dividends are qualified dividends. Irs amendments They enter the amount of Fred's capital gain distributions, $525, on line 3. Irs amendments Next, they add the amounts on lines 1a, 2a, and 3 and enter the result, $2,100, on line 4. Irs amendments They subtract the base amount on line 5, $2,000, from the amount on line 4, $2,100, and enter the result, $100, on line 6. Irs amendments This is the total amount from Form 8814 to be reported on their return. Irs amendments Next, they figure how much of this amount is qualified dividends and how much is capital gain distributions. Irs amendments They divide the amount on line 2b, $1,575, by the amount on line 4, $2,100. Irs amendments They enter the result, . Irs amendments 75, on line 7. Irs amendments They divide the amount on line 3, $525, by the amount on line 4, $2,100. Irs amendments They enter the result, . Irs amendments 25, on line 8. Irs amendments They multiply the amount on line 6, $100, by the decimal on line 7, . Irs amendments 75, and enter the result, $75, on line 9. Irs amendments They multiply the amount on line 6, $100, by the decimal on line 8, . Irs amendments 25, and enter the result, $25, on line 10. Irs amendments They include the amount from line 9, $75, on lines 9a and 9b of their Form 1040 and enter “Form 8814 – $75” on the dotted lines next to lines 9a and 9b. Irs amendments They include the amount from line 10, $25, on line 13 of their Schedule D (Form 1040) and enter “Form 8814 – $25” on the dotted line next to Schedule D, line 13. Irs amendments They enter $100 ($75 + $25) on line 11 and -0- ($100 – $100) on line 12. Irs amendments Because the amount on line 12 is -0-, they do not include any amount from Form 8814 on their Form 1040, line 21. Irs amendments Figuring Additional Tax Use Form 8814, Part II, to figure the tax on the $2,000 of your child's interest and dividends that you do not include in your income. Irs amendments This tax is added to the tax figured on your income. Irs amendments This additional tax is the smaller of: 10% x (your child's gross income − $1,000), or $100. Irs amendments Include the amount from line 15 of all your Forms 8814 in the total on Form 1040, line 44, or Form 1040NR, line 42. Irs amendments Check box a on Form 1040, line 44, or Form 1040NR, line 42. Irs amendments Tax for Certain Children Who Have Unearned Income If a child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. Irs amendments If the parent does not or cannot choose to include the child's income on the parent's return, use Form 8615 to figure the child's tax. Irs amendments Attach the completed form to the child's Form 1040, Form 1040A, or Form 1040NR. Irs amendments When Form 8615 must be filed. Irs amendments   Form 8615 must be filed for a child if all of the following statements are true. Irs amendments The child's unearned income was more than $2,000. Irs amendments The child is required to file a return for 2013. Irs amendments The child either: Was under age 18 at the end of the year, Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or Was over age 18 and under age 24 at the end of the year, was a full-time student, and did not have earned income that was more than half of his or her support. Irs amendments At least one of the child's parents was alive at the end of 2013. Irs amendments The child does not file a joint return for 2013. Irs amendments These conditions are also shown in Figure 2. Irs amendments Certain January 1 birthdays. Irs amendments   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. Irs amendments IF a child was born on. Irs amendments . Irs amendments . Irs amendments THEN, at the end of 2013, the child is considered to be. Irs amendments . Irs amendments . Irs amendments January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. Irs amendments The child meets condition 3 only if the child did not have earned income that was more than half of the child's support. Irs amendments  **This child meets condition 3 only if the child was a full-time student who did not have earned income that was more than half of the child's support. Irs amendments  ***Do not use Form 8615 for this child. Irs amendments Figure 2. Irs amendments Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. Irs amendments Figure 2. Irs amendments Do You Have To Use Form 8615 To Figure Your Child's Tax? Providing Parental Information (Form 8615, Lines A–C) On Form 8615, lines A and B, enter the parent's name and social security number. Irs amendments (If the parents filed a joint return, enter the name and social security number listed first on the joint return. Irs amendments ) On line C, check the box for the parent's filing status. Irs amendments See Which Parent's Return To Use, earlier, for information on which parent's return information must be used on Form 8615. Irs amendments Parent with different tax year. Irs amendments   If the parent and the child do not have the same tax year, complete Form 8615 using the information on the parent's return for the tax year that ends in the child's tax year. Irs amendments Example. Irs amendments Kimberly must use her mother's tax and taxable income to complete her Form 8615 for calendar year 2013 (January 1 – December 31). Irs amendments Kimberly's mother files her tax return on a fiscal year basis (July 1 – June 30). Irs amendments Kimberly must use the information on her mother's return for the tax year ending June 30, 2013, to complete her 2013 Form 8615. Irs amendments Parent's return information not known timely. Irs amendments   If the information needed from the parent's return is not known by the time the child's return is due (usually April 15), you can file the return using estimates. Irs amendments   You can use any reasonable estimate. Irs amendments This includes using information from last year's return. Irs amendments If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. Irs amendments   When you get the correct information, file an amended return on Form 1040X, Amended U. Irs amendments S. Irs amendments Individual Income Tax Return. Irs amendments Extension of time to file. Irs amendments   Instead of using estimates, you can get an automatic 6-month extension of time to file if, by the date your return is due, you file Form 4868, Application for Automatic Extension of Time To File U. Irs amendments S. Irs amendments Individual Income Tax Return. Irs amendments See the instructions for Form 4868 for details. Irs amendments    An extension of time to file is not an extension of time to pay. Irs amendments You must make an accurate estimate of the tax for 2013. Irs amendments If you do not pay the full amount due by the regular due date, the child will owe interest and may also be charged penalties. Irs amendments See Form 4868 and its instructions. Irs amendments Parent's return information not available. Irs amendments   If a child cannot get the required information about his or her parent's tax return, the child (or the child's legal representative) can request the necessary information from the Internal Revenue Service (IRS). Irs amendments How to request. Irs amendments   After the end of the tax year, send a signed, written request for the information to the Internal Revenue Service Center where the parent's return will be filed. Irs amendments (The IRS cannot process a request received before the end of the tax year. Irs amendments )    You should also consider getting an extension of time to file the child's return, because there may be a delay in getting the requested information. Irs amendments   The request must contain all of the following. Irs amendments A statement that you are making the request to comply with section 1(g) of the Internal Revenue Code and that you have tried to get the information from the parent. Irs amendments Proof of the child's age (for example, a copy of the child's birth certificate). Irs amendments Evidence the child has more than $2,000 of unearned income (for example, a copy of the child's prior year tax return or copies of Forms 1099 for the current year). Irs amendments The name, address, social security number (if known), and filing status (if known) of the parent whose information is to be shown on Form 8615. Irs amendments    A child's legal representative making the request should include a copy of his or her Power of Attorney, such as Form 2848, or proof of legal guardianship. Irs amendments Step 1. Irs amendments Figuring the Child's Net Unearned Income (Form 8615, Part I) The first step in figuring a child's tax using Form 8615 is to figure the child's net unearned income. Irs amendments To do that, use Form 8615, Part I. Irs amendments Line 1 (Unearned Income) If the child had no earned income, enter on this line the adjusted gross income shown on the child's return. Irs amendments Adjusted gross income is shown on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37. Irs amendments Form 1040EZ and Form 1040NR-EZ cannot be used if Form 8615 must be filed. Irs amendments If the child had earned income, figure the amount to enter on Form 8615, line 1, by using the worksheet in the instructions for the form. Irs amendments However, use the following worksheet if: the child has excluded any foreign earned income, deducted a loss from self-employment, or has a net operating loss from another year. Irs amendments Alternate Worksheet for Form 8615, Line 1 A. Irs amendments Enter the amount from the child's Form 1040, line 22, or Form 1040NR, line 23   B. Irs amendments Enter the total of any net loss  from self-employment, any net operating loss deduction, any foreign earned income exclusion, and any foreign housing exclusion from the child's Form 1040 or Form 1040NR. Irs amendments Enter this total as a positive number (greater than zero)   C. Irs amendments Add line A and line B and  enter the total   D. Irs amendments Enter the child's earned income plus any amount from the child's Form 1040, line 30, or the child's Form 1040NR, line 30     Generally, the child's earned income is the total of the amounts reported on Form 1040, lines 7, 12, and 18 (if line 12 or 18 is a loss, use zero) or Form 1040NR, lines 8, 13, and 19 (if line 13 or 19 is a loss, use zero)   E. Irs amendments Subtract line D from line C. Irs amendments Enter the result here and on Form 8615, line 1   Unearned income defined. Irs amendments   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually performed. Irs amendments It includes taxable interest, dividends, capital gains (including capital gain distributions), the taxable part of social security and pension payments, certain distributions from trusts, and unemployment compensation. Irs amendments Unearned income includes amounts produced by assets the child obtained with earned income (such as interest on a savings account into which the child deposited wages). Irs amendments Nontaxable income. Irs amendments   For this purpose, unearned income includes only amounts the child must include in gross income. Irs amendments Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. Irs amendments Capital loss. Irs amendments   A child's capital losses are taken into account in figuring the child's unearned income. Irs amendments Capital losses are first applied against capital gains. Irs amendments If the capital losses are more than the capital gains, the difference (up to $3,000) is subtracted from the child's interest, dividends, and other unearned income. Irs amendments Any difference over $3,000 is carried to the next year. Irs amendments Income from property received as a gift. Irs amendments   A child's unearned income includes all income produced by property belonging to the child. Irs amendments This is true even if the property was transferred to the child, regardless of when the property was transferred or purchased or who transferred it. Irs amendments   A child's unearned income includes income produced by property given as a gift to the child. Irs amendments This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. Irs amendments Example. Irs amendments Amanda Black, age 13, received the following income. Irs amendments Dividends—$800 Wages—$2,100 Taxable interest—$1,200 Tax-exempt interest—$100 Capital gains—$300 Capital losses—($200) The dividends were qualified dividends on stock given to her by her grandparents. Irs amendments Amanda's unearned income is $2,100. Irs amendments This is the total of the dividends ($800), taxable interest ($1,200), and capital gains reduced by capital losses ($300 − $200 = $100). Irs amendments Her wages are earned (not unearned) income because they are received for work actually performed. Irs amendments Her tax-exempt interest is not included because it is nontaxable. Irs amendments Trust income. Irs amendments   If a child is the beneficiary of a trust, distributions of taxable interest, dividends, capital gains, and other unearned income from the trust are unearned income to the child. Irs amendments   However, taxable distributions from a qualified disability trust are considered earned income for the purposes of completing Form 8615. Irs amendments See the Form 8615 instructions for details. Irs amendments Adjustment to income. Irs amendments   In figuring the amount to enter on line 1, the child's unearned income is reduced by any penalty on the early withdrawal of savings. Irs amendments Line 2 (Deductions) If the child does not itemize deductions on Schedule A (Form 1040 or Form 1040NR), enter $2,000 on line 2. Irs amendments If the child itemizes deductions, enter on line 2 the larger of: $1,000 plus the portion of the child's itemized deductions on Schedule A (Form 1040), line 29 (or Schedule A (Form 1040NR), line 15), that are directly connected with the production of the unearned income entered on line 1, or $2,000. Irs amendments Directly connected. Irs amendments   Itemized deductions are directly connected with the production of unearned income if they are for expenses paid to produce or collect taxable income or to manage, conserve, or maintain property held for producing income. Irs amendments These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. Irs amendments    These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). Irs amendments Only the amount greater than 2% of the child's adjusted gross income can be deducted. Irs amendments See Publication 529, Miscellaneous Deductions, for more information. Irs amendments Example 1. Irs amendments Roger, age 12, has unearned income of $8,000, no other income, no adjustments to income, and itemized deductions of $300 (net of the 2%-of-adjusted-gross-income limit) that are directly connected with his unearned income. Irs amendments His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. Irs amendments Roger enters $2,000 on line 2 because that is more than the total of $1,000 plus his directly-connected itemized deductions of $300. Irs amendments Example 2. Irs amendments Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. Irs amendments She has no other income. Irs amendments She has itemized deductions of $1,050 (net of the 2%-of-adjusted-gross-income limit) that are directly connected with the production of her unearned income. Irs amendments Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). Irs amendments The amount on line 2 is $2,050. Irs amendments This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. Irs amendments Line 3 Subtract line 2 from line 1 and enter the result on this line. Irs amendments If zero or less, do not complete the rest of the form. Irs amendments However, you must still attach Form 8615 to the child's tax return. Irs amendments Figure the tax on the child's taxable income in the normal manner. Irs amendments Line 4 (Child's Taxable Income) Enter on line 4 the child's taxable income from Form 1040, line 43; Form 1040A, line 27; or Form 1040NR, line 41. Irs amendments Child files Form 2555 or 2555-EZ. Irs amendments   If the child files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, the Foreign Earned Income Tax Worksheet (in the Form 1040 instructions) is used to figure the child's tax. Irs amendments Enter the amount from line 3 of the Foreign Earned Income Tax Worksheet as the child's taxable income on Form 8615, line 4. Irs amendments Line 5 (Net Unearned Income) A child's net unearned income cannot be more than his or her taxable income. Irs amendments Enter on Form 8615, line 5, the smaller of line 3 or line 4. Irs amendments This is the child's net unearned income. Irs amendments If zero or less, do not complete the rest of the form. Irs amendments However, you must still attach Form 8615 to the child's tax return. Irs amendments Figure the tax on the child's taxable income in the normal manner. Irs amendments Step 2. Irs amendments Figuring a Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) The next step in completing Form 8615 is to figure a tentative tax on the child's net unearned income at the parent's tax rate. Irs amendments The tentative tax at the parent's tax rate is the difference between the tax on the parent's taxable income figured with the child's net unearned income (plus the net unearned income of any other child whose Form 8615 includes the tax return information of that parent) and the tax figured without it. Irs amendments When figuring the tentative tax at the parent's tax rate on Form 8615, do not refigure any of the exclusions, deductions, or credits on the parent's return because of the child's net unearned income. Irs amendments For example, do not refigure the medical expense deduction. Irs amendments Figure the tentative tax on Form 8615, lines 6 through 13. Irs amendments Line 6 (Parent's Taxable Income) Enter on line 6 the amount from the parent's Form 1040, line 43; Form 1040A, line 27; Form 1040EZ, line 6; Form 1040NR, line 41; or Form 1040NR-EZ, line 14. Irs amendments If the parent's taxable income is zero or less, enter zero on line 6. Irs amendments Parent files Form 2555 or 2555-EZ. Irs amendments   If the parent files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, the Foreign Earned Income Tax Worksheet in the Form 1040 instructions is used to figure the parent's tax. Irs amendments Enter the amount from line 3 of the Foreign Earned Income Tax Worksheet as the parent's taxable income, on line 6 of Form 8615. Irs amendments Line 7 (Net Unearned Income of Other Children) If the tax return information of the parent is also used on any other child's Form 8615, enter on line 7 the total of the amounts from line 5 of all the other children's Forms 8615. Irs amendments Do not include the amount from line 5 of the Form 8615 being completed. Irs amendments (The term “other child” means any other child whose Form 8615 uses the tax information of the parent identified on Lines A and B of Form 8615. Irs amendments ) Example. Irs amendments Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. Irs amendments The children's net unearned income amounts on line 5 of their Forms 8615 are: Sharon—$800 Jerry—$600 Mike—$1,000 Line 7 of Sharon's Form 8615 will show $1,600, the total of the amounts on line 5 of Jerry's and Mike's Forms 8615. Irs amendments Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). Irs amendments Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). Irs amendments Other children's information not available. Irs amendments   If the net unearned income of the other children is not available when the return is due, either file the return using estimates or get an extension of time to file. Irs amendments Estimates and extensions are discussed earlier under Providing Parental Information (Form 8615, Lines A–C) . Irs amendments Line 8 (Parent's Taxable Income Plus Children's Net Unearned Income) Enter on this line the total of lines 5, 6, and 7. Irs amendments You must determine the amount of net capital gain and qualified dividends included on this line before completing Form 8615, line 9. Irs amendments Net capital gain. Irs amendments   Net capital gain is the smaller of the gain, if any, on Schedule D (Form 1040), line 15, or the gain, if any, on Schedule D, line 16. Irs amendments If Schedule D is not required, it is the amount on Form 1040, line 13; Form 1040A, line 10; or Form 1040NR, line 14. Irs amendments Qualified dividends. Irs amendments   Qualified dividends are those dividends reported on line 9b of Form 1040 or Form 1040A, or line 10b of Form 1040NR. Irs amendments Net capital gain and qualified dividends on line 8. Irs amendments   If neither the child, nor the parent, nor any other child has net capital gain, the net capital gain on line 8 is zero. Irs amendments   If neither the child, nor the parent, nor any other child has qualified dividends, the amount of qualified dividends on line 8 is zero. Irs amendments   If the child, parent, or any other child has net capital gain, figure the amount of net capital gain included on line 8 by adding together the net capital gain amounts included on lines 5, 6, and 7 of Form 8615. Irs amendments   If the child, parent, or any other child has qualified dividends, figure the amount of qualified dividends included on line 8 by adding together the qualified dividend amounts included on lines 5, 6, and 7. Irs amendments   Use the instructions for Form 8615, line 8, including the appropriate Line 5 Worksheet, to find these amounts. Irs amendments See the instructions for Form 8615 for more details. Irs amendments Note. Irs amendments The amount of any net capital gain or qualified dividends is not separately reported on line 8. Irs amendments It is  needed, however, when figuring the tax on line 9. Irs amendments Line 9 (Tax on Parent's Taxable Income Plus Children's Net Unearned Income) Figure the tax on the amount on line 8 using the Tax Table, the Tax Computation Worksheet, the Qualified Dividends and Capital Gain Tax Worksheet (in the Form 1040, 1040A, or 1040NR instructions), the Schedule D Tax Worksheet (in the Schedule D instructions), or Schedule J (Form 1040), as follows. Irs amendments If line 8 does not include any net capital gain or qualified dividends, use the Tax Table or Tax Computation Worksheet to figure this tax. Irs amendments But if Schedule J, Income Averaging for Farmers and Fishermen, is used to figure the tax on the parent's return, use it to figure this tax. Irs amendments If line 8 includes any net capital gain or qualified dividends, use the Qualified Dividends and Capital Gain Tax Worksheet to figure this tax. Irs amendments For details, see the instructions for Form 8615, line 9. Irs amendments However, if the child, parent, or any other child has 28% rate gain or unrecaptured section 1250 gain, use the Schedule D Tax Worksheet. Irs amendments But if Schedule J is used to figure the tax on the parent's return, use it to figure this tax. Irs amendments Child files Form 2555 or 2555-EZ. Irs amendments   If line 8 includes any net capital gain or qualified dividends and the child, or any other child filing Form 8615, also files Form 2555 or 2555-EZ, use Using the Schedule D Tax Worksheet for line 9 tax, next, to figure the line 9 tax. Irs amendments Using the Schedule D Tax Worksheet for line 9 tax. Irs amendments    Use the Schedule D Tax Worksheet (in the Schedule D instructions) to figure the line 9 tax on Form 8615 if the child, parent, or any other child has unrecaptured section 1250 gain or 28% rate gain. Irs amendments If you must use the Schedule D Tax Worksheet, first complete any Schedule D and any actual Schedule D Tax Worksheet required for the child, parent, or any other child. Irs amendments Then figure the line 9 tax using another Schedule D Tax Worksheet. Irs amendments (Do not attach this Schedule D Tax Worksheet to the child's return. Irs amendments )   Complete this Schedule D Tax Worksheet as follows. Irs amendments On line 1, enter the amount from Form 8615, line 8. Irs amendments On line 2, enter the qualified dividends included on Form 8615, line 8. Irs amendments (See the earlier discussion for line 8. Irs amendments ) On line 3, enter the total of the amounts, if any, on line 4g of all Forms 4952 filed by the child, parent, or any other child. Irs amendments On line 4, enter the total of the amounts, if any, on line 4e of all Forms 4952 filed by the child, parent, or any other child. Irs amendments If applicable, include instead the smaller amount entered on the dotted line next to line 4e. Irs amendments On lines 5 and 6, follow the worksheet instructions. Irs amendments On line 7, enter the net capital gain included on Form 8615, line 8. Irs amendments (See the earlier discussion for line 8. Irs amendments ) On lines 8 through 10, follow the worksheet instructions. Irs amendments On line 11, enter zero if neither the child, nor the parent, nor any other child has unrecaptured section 1250 gain (Schedule D, line 19) or 28% rate gain (Schedule D, line 18). Irs amendments Otherwise, enter the amount of unrecaptured section 1250 gain and 28% rate gain included in the net capital gain on line 8 of Form 8615. Irs amendments Figure these amounts as explained later under Figuring unrecaptured section 1250 gain (line 11) and Figuring 28% rate gain (line 11). Irs amendments If the Foreign Earned Income Tax Worksheet was used to figure the parent's tax or the tax of any child, go to step 10 below. Irs amendments Otherwise, skip steps 10, 11, and 12 below, and go to step 13. Irs amendments Determine whether there is a line 8 capital gain excess as follows. Irs amendments Add the amounts on line 2 of all Foreign Earned Income Tax Worksheets completed by the parent or any child for whom Form 8615 is filed. Irs amendments (But for each child do not add more than the excess, if any, of the amount on line 5 of the child's Form 8615 over the child's taxable income on Form 1040, line 43; Form 1040A, line 27; or Form 1040NR, line 41. Irs amendments ) Subtract (a) from the amount on line 1 of this Schedule D Tax Worksheet. Irs amendments Subtract (b) from the amount on line 10 of this Schedule D Tax Worksheet. Irs amendments If the result is more than zero, that amount is the line 8 capital gain excess. Irs amendments If the result is zero or less, there is no line 8 capital gain excess. Irs amendments If there is no line 8 capital gain excess, skip step 12 below and go to step 13. Irs amendments If there is a line 8 capital gain excess, complete a second Schedule D Tax Worksheet as instructed above and in step 13, but in its entirety and with the following additional modifications. Irs amendments (These modifications are to be made only for purposes of filling out this additional Schedule D Tax Worksheet. Irs amendments ) Reduce the amount you would otherwise enter on line 9 (but not below zero) by the line 8 capital gain excess. Irs amendments Reduce the amount you would otherwise enter on line 6 (but not below zero) by any of the line 8 capital gain excess not used in (a) above. Irs amendments If the child, parent, or any other child has 28% rate gain, reduce the amount you would otherwise enter on line 8 of Worksheet 1 for Line 11 of the Schedule D Tax Worksheet – 28% Rate Gain (Line 9 Tax), shown later, (but not below zero) by the line 8 capital gain excess, and refigure the amount on line 11 of this Schedule D Tax Worksheet. Irs amendments If the child, parent, or any other child has unrecaptured section 1250 gain, reduce the amount you would otherwise enter on line 8 of Worksheet 2 for Line 11 of the Schedule D Tax Worksheet – Unrecaptured Section 1250 Gain (Line 9 Tax) (but not below zero) by the line 8 capital gain excess not used in 12(c), and refigure the amount on line 11 of this Schedule D Tax Worksheet. Irs amendments Complete lines 12 through 45 following the worksheet instructions. Irs amendments Use the parent's filing status to complete lines 15, 42, and 44. Irs amendments Enter the amount from line 45 of this Schedule D Tax Worksheet on Form 8615, line 9, and check the box on that line