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

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

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

3. E-File for FREE

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

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

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

Irs Forms Amended Return

File State Taxes Only Online FreeTaxact ComFile Taxes For FreeTaxslayer Com LoginWhat Forms Do I Need To File My 2011 TaxesHow Do I Amend My 2012 Tax Return OnlineWww Taxact Com 2012How Do You File State Income TaxesFree State TaxHttp Www Irs Gov FreefileHow To Do A Amended Tax ReturnFiling Taxes As A College StudentHow To Ammend TaxesE FileIrs Form 1040a Or 1040ezFree Online Tax Filing For 2011Where Can I File 2012 Taxes OnlineIrs Ez Tax FormTaxes 2009How Can I File My 2012 State Taxes For FreeIowa 1040xFile 2005 TaxesDoes A Full Time Student Have To File TaxesCan I File 2012 Taxes Without Filing 20112012 State Tax FormsFile 1040x Online FreeFile Tax ReturnTax Act 2011Filing TaxesFile Taxes Online Free 2011La State Tax Forms 2012Turbo Tax 2011Printable 1040ez Form 2011Turbotax OnlineForm 1040ez InstructionsFree Amended Tax Return1040ez Tax Table 2010File 2011 Federal Tax ReturnAmend My 2010 Tax ReturnIrs Tax Return 2011

Irs Forms Amended Return

Irs forms amended return Publication 517 - Main Content Table of Contents Social Security CoverageCoverage of Members of the Clergy Coverage of Religious Workers (Church Employees) U. Irs forms amended return S. Irs forms amended return Citizens and Resident and Nonresident Aliens Ministerial ServicesMinisters Members of Religious Orders Christian Science Practitioners and Readers Exemption From Self-Employment (SE) TaxMembers of the Clergy Members of Recognized Religious Sects Self-Employment Tax: Figuring Net EarningsRegular Method Nonfarm Optional Method Income Tax: Income and ExpensesIncome Items Expense Items Income Tax Withholding and Estimated Tax Filing Your Return Retirement Savings ArrangementsDeducting contributions to tax-sheltered annuity plans. Irs forms amended return Full-time student. Irs forms amended return Adjusted gross income. Irs forms amended return More information. Irs forms amended return Earned Income Credit Comprehensive ExampleForm W-2 From Church Form W-2 From College Schedule C-EZ (Form 1040) Form 2106-EZ Schedule A (Form 1040) Schedule SE (Form 1040) Form 1040 Attachment 1 Attachment 2 How To Get Tax HelpLow Income Taxpayer Clinics Social Security Coverage This section gives information about which system (SECA or FICA) is used to collect social security and Medicare taxes from members of the clergy (ministers, members of a religious order, and Christian Science practitioners and readers) and religious workers (church employees). Irs forms amended return Coverage of Members of the Clergy The services you perform in the exercise of your ministry, of the duties required by your religious order, or of your profession as a Christian Science practitioner or reader are covered by social security and Medicare under SECA. Irs forms amended return Your earnings for these ministerial services (defined later) are subject to self-employment (SE) tax unless one of the following applies. Irs forms amended return You are a member of a religious order who has taken a vow of poverty. Irs forms amended return You ask the Internal Revenue Service (IRS) for an exemption from SE tax for your services and the IRS approves your request. Irs forms amended return See Exemption From Self-Employment (SE) Tax , later. Irs forms amended return You are subject only to the social security laws of a foreign country under the provisions of a social security agreement between the United States and that country. Irs forms amended return For more information, see Bilateral Social Security (Totalization) Agreements in Publication 54. Irs forms amended return Your earnings that are not from ministerial services may be subject to social security tax under FICA or SECA according to the rules that apply to taxpayers in general. Irs forms amended return See Ministerial Services , later. Irs forms amended return Ministers If you are a minister of a church, your earnings for the services you perform in your capacity as a minister are subject to SE tax, even if you perform these services as an employee of that church. Irs forms amended return However, you can request that the IRS grant you an exemption, as discussed under Exemption From Self-Employment (SE) Tax , later. Irs forms amended return For the specific services covered, see Ministerial Services , later. Irs forms amended return Ministers defined. Irs forms amended return   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. Irs forms amended return Ministers have the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances or sacraments according to the prescribed tenets and practices of that church or denomination. Irs forms amended return   If a church or denomination ordains some ministers and licenses or commissions others, anyone licensed or commissioned must be able to perform substantially all the religious functions of an ordained minister to be treated as a minister for social security purposes. Irs forms amended return Employment status for other tax purposes. Irs forms amended return   Even though all of your income from performing ministerial services is subject to self-employment tax for social security tax purposes, you may be an employee for income tax or retirement plan purposes in performing those same services. Irs forms amended return For income tax or retirement plan purposes, your income earned as an employee will be considered wages. Irs forms amended return Common-law employee. Irs forms amended return   Under common-law rules, you are considered either an employee or a self-employed person. Irs forms amended return Generally, you are an employee if you perform services for someone who has the legal right to control both what you do and how you do it, even if you have considerable discretion and freedom of action. Irs forms amended return For more information about the common-law rules, see Publication 15-A, Employer's Supplemental Tax Guide. Irs forms amended return   If a congregation employs you and pays you a salary, you are generally a common-law employee and income from the exercise of your ministry is wages for income tax purposes. Irs forms amended return However, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services, are not wages; such amounts are self-employment income for both income tax purposes and social security tax purposes. Irs forms amended return Example. Irs forms amended return A church hires and pays you a salary to perform ministerial services subject to its control. Irs forms amended return Under the common-law rules, you are an employee of the church while performing those services. Irs forms amended return Form SS-8. Irs forms amended return   If you are not certain whether you are an employee or a self-employed person, you can get a determination from the IRS by filing Form SS-8. Irs forms amended return Members of Religious Orders If you are a member of a religious order who has not taken a vow of poverty, your earnings for ministerial services you perform as a member of the order are subject to SE tax. Irs forms amended return See Ministerial Services , later. Irs forms amended return However, you can request that the IRS grant you an exemption as discussed under Exemption From Self-Employment (SE) Tax , later. Irs forms amended return Vow of poverty. Irs forms amended return   If you are a member of a religious order and have taken a vow of poverty, you are already exempt from paying SE tax on your earnings for ministerial services you perform as an agent of your church or its agencies. Irs forms amended return You do not need to request a separate exemption. Irs forms amended return For income tax purposes, the earnings are tax free to you. Irs forms amended return Your earnings are considered the income of the religious order. Irs forms amended return Services covered under FICA at the election of the order. Irs forms amended return   However, even if you have taken a vow of poverty, the services you perform for your church or its agencies may be covered under social security. Irs forms amended return Your services are covered if your order, or an autonomous subdivision of the order, elects social security coverage for its current and future vow-of-poverty members. Irs forms amended return   The order or subdivision elects coverage by filing Form SS-16. Irs forms amended return The election may cover certain vow-of-poverty members for a retroactive period of up to 20 calendar quarters before the quarter in which it files the certificate. Irs forms amended return If the election is made, the order or subdivision pays both the employer's and employee's share of the tax. Irs forms amended return You do not pay any of the FICA tax. Irs forms amended return Services performed outside the order. Irs forms amended return   Even if you are a member of a religious order who has taken a vow of poverty and the order requires you to turn over amounts you earn, your earnings are subject to federal income tax and either SE tax or FICA tax (including estimated tax payments and/or withholding) if you: Are self-employed or an employee of an organization outside your religious community, and Perform work not required by, or done on behalf of, the order. Irs forms amended return   In these cases, your income from self-employment or as an employee of that outside organization is taxable to you directly. Irs forms amended return You may, however, be able to take a charitable deduction for the amount you turn over to the order. Irs forms amended return See Publication 526, Charitable Contributions. Irs forms amended return Rulings. Irs forms amended return   Organizations and individuals may request rulings from the IRS on whether they are religious orders, or members of a religious order, respectively, for FICA tax, SE tax, and federal income tax withholding purposes. Irs forms amended return To request a ruling, follow the procedures in Revenue Procedure 2014-1, 2014-1 I. Irs forms amended return R. Irs forms amended return B. Irs forms amended return 1, available at www. Irs forms amended return irs. Irs forms amended return gov/irb/2014-1_IRB/ar05. Irs forms amended return html. Irs forms amended return Christian Science Practitioners and Readers Generally, your earnings from services you perform in your profession as a Christian Science practitioner or reader are subject to SE tax. Irs forms amended return However, you can request an exemption as discussed under Exemption From Self-Employment (SE) Tax , later. Irs forms amended return Practitioners. Irs forms amended return   Christian Science practitioners are members in good standing of the Mother Church, The First Church of Christ, Scientist, in Boston, Massachusetts, who practice healing according to the teachings of Christian Science. Irs forms amended return State law specifically exempts Christian Science practitioners from licensing requirements. Irs forms amended return   Some Christian Science practitioners also are Christian Science teachers or lecturers. Irs forms amended return Income from teaching or lecturing is considered the same as income from their work as practitioners. Irs forms amended return Readers. Irs forms amended return   For tax purposes, Christian Science readers are considered the same as ordained, commissioned, or licensed ministers. Irs forms amended return Coverage of Religious Workers (Church Employees) If you are a religious worker (a church employee) and are not in one of the classes already discussed, your wages are generally subject to social security and Medicare tax under FICA, not SECA. Irs forms amended return Some exceptions are discussed next. Irs forms amended return Election by Church To Exclude Its Employees From FICA Coverage Churches and qualified church-controlled organizations (church organizations) that are opposed for religious reasons to the payment of social security and Medicare taxes can elect to exclude their employees from FICA coverage. Irs forms amended return If your employer makes this election, it does not pay the employer's portion of the FICA taxes or withhold from your pay your portion of the FICA taxes. Irs forms amended return Instead, your wages are subject to SECA and you must pay SE tax on your wages if they exceed $108. Irs forms amended return 28 during the tax year. Irs forms amended return However, you can request an exemption from SE tax if you are a member of a recognized religious sect, as discussed below. Irs forms amended return Churches and church organizations make this election by filing two copies of Form 8274. Irs forms amended return For more information about making this election, see Form 8274. Irs forms amended return Election by Certain Church Employees Who Are Opposed to Social Security and Medicare You may be able to choose to be exempt from social security and Medicare taxes, including the SE tax, if you are a member of a recognized religious sect or division and work for a church (or church-controlled nonprofit division) that does not pay the employer's part of the social security tax on wages. Irs forms amended return This exemption does not apply to your service, if any, as a minister of a church or as a member of a religious order. Irs forms amended return Make this choice by filing Form 4029. Irs forms amended return See Requesting Exemption—Form 4029 , later, under Members of Recognized Religious Sects. Irs forms amended return U. Irs forms amended return S. Irs forms amended return Citizens and Resident and Nonresident Aliens To be covered under the SE tax provisions (SECA), individuals generally must be citizens or resident aliens of the United States. Irs forms amended return Nonresident aliens are not covered under SECA unless a social security agreement in effect between the United States and the foreign country determines that you are covered under the U. Irs forms amended return S. Irs forms amended return social security system. Irs forms amended return To determine your alien status, see Publication 519, U. Irs forms amended return S. Irs forms amended return Tax Guide for Aliens. Irs forms amended return Residents of Puerto Rico, the U. Irs forms amended return S. Irs forms amended return Virgin Islands, Guam, the CNMI, and American Samoa. Irs forms amended return   If you are a resident of one of these U. Irs forms amended return S. Irs forms amended return possessions but not a U. Irs forms amended return S. Irs forms amended return citizen, for SE tax purposes you are treated the same as a citizen or resident alien of the United States. Irs forms amended return For information on figuring the tax, see Self-Employment Tax: Figuring Net Earnings , later. Irs forms amended return Ministerial Services Ministerial services, in general, are the services you perform in the exercise of your ministry, in the exercise of your duties as required by your religious order, or in the exercise of your profession as a Christian Science practitioner or reader. Irs forms amended return Income you receive for performing ministerial services is subject to SE tax unless you have an exemption as explained later. Irs forms amended return Even if you have an exemption, only the income you receive for performing ministerial services is exempt. Irs forms amended return The exemption does not apply to any other income. Irs forms amended return The following discussions provide more detailed information on ministerial services of ministers, members of a religious order, and Christian Science practitioners and readers. Irs forms amended return Ministers Most services you perform as a minister, priest, rabbi, etc. Irs forms amended return , are ministerial services. Irs forms amended return These services include: Performing sacerdotal functions, Conducting religious worship, and Controlling, conducting, and maintaining religious organizations (including the religious boards, societies, and other integral agencies of such organizations) that are under the authority of a religious body that is a church or denomination. Irs forms amended return You are considered to control, conduct, and maintain a religious organization if you direct, manage, or promote the organization's activities. Irs forms amended return A religious organization is under the authority of a religious body that is a church or denomination if it is organized for and dedicated to carrying out the principles of a faith according to the requirements governing the creation of institutions of the faith. Irs forms amended return Services for nonreligious organizations. Irs forms amended return   Your services for a nonreligious organization are ministerial services if the services are assigned or designated by your church. Irs forms amended return Assigned or designated services qualify even if they do not involve performing sacerdotal functions or conducting religious worship. Irs forms amended return   If your services are not assigned or designated by your church, they are ministerial services only if they involve performing sacerdotal functions or conducting religious worship. Irs forms amended return Services that are not part of your ministry. Irs forms amended return   Income from services you perform as an employee that are not ministerial services is subject to social security and Medicare tax withholding under FICA (not SECA) under the rules that apply to employees in general. Irs forms amended return The following are not ministerial services. Irs forms amended return Services you perform for nonreligious organizations other than the services stated above. Irs forms amended return Services you perform as a duly ordained, commissioned, or licensed minister of a church as an employee of the United States, the District of Columbia, a foreign government, or any of their political subdivisions. Irs forms amended return These services are not ministerial services even if you are performing sacerdotal functions or conducting religious worship. Irs forms amended return (For example, if you perform services as a chaplain in the Armed Forces of the United States, those services are not ministerial services. Irs forms amended return ) Services you perform in a government-owned and operated hospital. Irs forms amended return (These services are considered performed by a government employee, not by a minister as part of the ministry. Irs forms amended return ) However, services that you perform at a church-related hospital or health and welfare institution, or a private nonprofit hospital, are considered to be part of the ministry and are considered ministerial services. Irs forms amended return Books or articles. Irs forms amended return   Writing religious books or articles is considered to be in the exercise of your ministry and is considered a ministerial service. Irs forms amended return   This rule also applies to members of religious orders and to Christian Science practitioners and readers. Irs forms amended return Members of Religious Orders Services you perform as a member of a religious order in the exercise of duties required by the order are ministerial services. Irs forms amended return The services are considered ministerial because you perform them as an agent of the order. Irs forms amended return For example, if the order directs you to perform services for another agency of the supervising church or an associated institution, you are considered to perform the services as an agent of the order. Irs forms amended return However, if the order directs you to work outside the order, this employment will not be considered a duty required by the order unless: Your services are the kind that are ordinarily performed by members of the order, and Your services are part of the duties that must be exercised for, or on behalf of, the religious order as its agent. Irs forms amended return Effect of employee status. Irs forms amended return   Ordinarily, if your services are not considered directed or required of you by the order, you and the outside party for whom you work are considered employee and employer. Irs forms amended return In this case, your earnings from the services are taxed under the rules that apply to employees in general, not under the rules for services provided as agent for the order. Irs forms amended return This result is true even if you have taken a vow of poverty. Irs forms amended return Example. Irs forms amended return Pat Brown and Chris Green are members of a religious order and have taken vows of poverty. Irs forms amended return They renounce all claims to their earnings. Irs forms amended return The earnings belong to the order. Irs forms amended return Pat is a licensed attorney. Irs forms amended return The superiors of the order instructed her to get a job with a law firm. Irs forms amended return Pat joined a law firm as an employee and, as she requested, the firm made the salary payments directly to the order. Irs forms amended return Chris is a secretary. Irs forms amended return The superiors of the order instructed him to accept a job with the business office of the church that supervises the order. Irs forms amended return Chris took the job and gave all his earnings to the order. Irs forms amended return Pat's services are not duties required by the order. Irs forms amended return Her earnings are subject to social security and Medicare tax under FICA and to federal income tax. Irs forms amended return Chris' services are duties required by the order. Irs forms amended return He is acting as an agent of the order and not as an employee of a third party. Irs forms amended return He does not include the earnings in gross income, and they are not subject to income tax withholding or to social security and Medicare tax under FICA or SECA. Irs forms amended return Christian Science Practitioners and Readers Services you perform as a Christian Science practitioner or reader in the exercise of your profession are ministerial services. Irs forms amended return Amounts you receive for performing these services are generally subject to SE tax. Irs forms amended return You may request an exemption from SE tax, discussed next, which applies only to those services. Irs forms amended return Exemption From Self-Employment (SE) Tax You can request an exemption from SE tax if you are a member of the clergy (minister, member of a religious order, or Christian Science practitioner or reader) or a member of a recognized religious sect. Irs forms amended return Generally, members of religious orders who have taken a vow of poverty are already exempt from paying SE tax, as discussed earlier under Members of Religious Orders under Social Security Coverage. Irs forms amended return They do not have to request the exemption. Irs forms amended return Who cannot be exempt. Irs forms amended return   You cannot be exempt from SE tax if you made one of the following elections to be covered under social security. Irs forms amended return These elections are irrevocable. Irs forms amended return You elected to be covered under social security by filing Form 2031, Revocation of Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders, and Christian Science Practitioners, for your 1986, 1987, 2000, or 2001 tax year. Irs forms amended return You elected before 1968 to be covered under social security for your ministerial services. Irs forms amended return Requesting exemption. Irs forms amended return    Table 2, earlier, briefly summarizes the procedure for requesting exemption from the SE tax. Irs forms amended return More detailed explanations follow. Irs forms amended return If you are a minister, member of a religious order, or Christian Science practitioner, an approved exemption only applies to earnings you receive for ministerial services, discussed earlier. Irs forms amended return It does not apply to any other self-employment income. Irs forms amended return Table 2. Irs forms amended return The Self-Employment Tax Exemption Application and Approval Process   Who Can Apply Members of the Clergy Members of Recognized  Religious Sects How File Form 4361 File Form 4029 When File by the due date (including extensions) of your income tax return for the second tax year in which you had at least $400 of net earnings from self-employment (at least part from ministerial services) File anytime Approval If approved, you will receive an approved copy of Form 4361 If approved, you will receive an approved copy of Form 4029 Effective Date For all tax years after 1967 in which you have at least $400 of net earnings from self-employment For all tax years beginning with the first year you meet the eligibility requirements discussed later Members of the Clergy To claim the exemption from SE tax, you must meet all of the following conditions. Irs forms amended return You file Form 4361, described below under Requesting Exemption—Form 4361 . Irs forms amended return You are conscientiously opposed to public insurance because of your individual religious considerations (not because of your general conscience), or you are opposed because of the principles of your religious denomination. Irs forms amended return You file for other than economic reasons. Irs forms amended return You inform the ordaining, commissioning, or licensing body of your church or order that you are opposed to public insurance if you are a minister or a member of a religious order (other than a vow-of-poverty member). Irs forms amended return This requirement does not apply to Christian Science practitioners or readers. Irs forms amended return You establish that the organization that ordained, commissioned, or licensed you, or your religious order, is a tax-exempt religious organization. Irs forms amended return You establish that the organization is a church or a convention or association of churches. Irs forms amended return You did not make an election discussed earlier under Who cannot be exempt . Irs forms amended return You sign and return the statement the IRS mails to you to certify that you are requesting an exemption based on the grounds listed on the statement. Irs forms amended return Requesting Exemption—Form 4361 To request exemption from SE tax, file Form 4361 in triplicate (original and two copies) with the IRS. Irs forms amended return The IRS will return to you a copy of the Form 4361 that you filed indicating whether it has approved your exemption. Irs forms amended return If it is approved, keep the approved copy of Form 4361 in your permanent records. Irs forms amended return When to file. Irs forms amended return   File Form 4361 by the date your income tax return is due, including extensions, for the second tax year in which both of the following are true. Irs forms amended return You have net earnings from self-employment of at least $400. Irs forms amended return Any part of those net earnings was from ministerial services you performed as a: Minister, Member of a religious order, or Christian Science practitioner or reader. Irs forms amended return The 2 years do not have to be consecutive tax years. Irs forms amended return    The approval process can take some time, so you should file Form 4361 as soon as possible. Irs forms amended return Example 1. Irs forms amended return Rev. Irs forms amended return Lawrence Jaeger, a clergyman ordained in 2013, has net self-employment earnings as a minister of $450 in 2013 and $500 in 2014. Irs forms amended return He must file his application for exemption by the due date, including extensions, for his 2014 income tax return. Irs forms amended return However, if Rev. Irs forms amended return Jaeger does not receive IRS approval for an exemption by April 15, 2015, his SE tax for 2014 is due by that date. Irs forms amended return Example 2. Irs forms amended return Rev. Irs forms amended return Louise Wolfe has only $300 in net self-employment earnings as a minister in 2013, but earned more than $400 in 2012 and expects to earn more than $400 in 2014. Irs forms amended return She must file her application for exemption by the due date, including extensions, for her 2014 income tax return. Irs forms amended return However, if she does not receive IRS approval for an exemption by April 15, 2015, her SE tax for 2014 is due by that date. Irs forms amended return Example 3. Irs forms amended return In 2011, Rev. Irs forms amended return David Moss was ordained a minister and had $700 in net self-employment earnings as a minister. Irs forms amended return In 2012, he received $1,000 as a minister, but his related expenses were over $1,000. Irs forms amended return Therefore, he had no net self-employment earnings as a minister in 2012. Irs forms amended return Also in 2012, he opened a book store and had $8,000 in net self-employment earnings from the store. Irs forms amended return In 2013, he had net self-employment earnings of $1,500 as a minister and $10,000 net self-employment earnings from the store. Irs forms amended return Rev. Irs forms amended return Moss had net earnings from self-employment in 2011 and 2013 that were $400 or more each year, and part of the self-employment earnings in each of those years was for his services as a minister. Irs forms amended return Thus, he must file his application for exemption by the due date, including extensions, for his 2013 income tax return. Irs forms amended return Death of individual. Irs forms amended return   The right to file an application for exemption ends with an individual's death. Irs forms amended return A surviving spouse, executor, or administrator cannot file an exemption application for a deceased clergy member. Irs forms amended return Effective date of exemption. Irs forms amended return   An approved exemption is effective for all tax years after 1967 in which you have $400 or more of net earnings from self-employment and any part of those earnings is for services as a member of the clergy. Irs forms amended return Once the exemption is approved, it is irrevocable. Irs forms amended return Example. Irs forms amended return Rev. Irs forms amended return Trudy Austin, ordained in 2010, had $400 or more in net self-employment earnings as a minister in both 2010 and 2013. Irs forms amended return She files an application for exemption on February 20, 2014. Irs forms amended return If an exemption is granted, it is effective for 2010 and the following years. Irs forms amended return Refunds of SE tax. Irs forms amended return   If, after receiving an approved Form 4361, you find that you overpaid SE tax, you can file a claim for refund on Form 1040X. Irs forms amended return Generally, for a refund, you must file Form 1040X within 3 years from the date you filed the return or within 2 years from the date you paid the tax, whichever is later. Irs forms amended return A return you filed, or tax you paid, before the due date is considered to have been filed or paid on the due date. Irs forms amended return   If you file a claim after the 3-year period but within 2 years from the time you paid the tax, the credit or refund will not be more than the tax you paid within the 2 years immediately before you file the claim. Irs forms amended return Members of Recognized Religious Sects If you are a member of a recognized religious sect, or a division of a recognized religious sect, you can apply for an exemption from payment of social security and Medicare taxes on both your self-employment income and the wages you earn from an employer who also has an exemption. Irs forms amended return Exception. Irs forms amended return   If you received social security benefits or payments, or anyone else received these benefits or payments based on your wages or self-employment income, you cannot apply. Irs forms amended return However, if you pay your benefits back, you may be considered for exemption. Irs forms amended return Contact your local Social Security Administration office to find out the amount you must pay back. Irs forms amended return Eligibility requirements. Irs forms amended return   To claim this exemption from SE tax, all the following requirements must be met. Irs forms amended return You must file Form 4029, discussed later under Requesting Exemption—Form 4029 . Irs forms amended return As a follower of the established teachings of the sect or division, you must be conscientiously opposed to accepting benefits of any private or public insurance that makes payments for death, disability, old age, retirement, or medical care, or provides services for medical care. Irs forms amended return You must waive all rights to receive any social security payment or benefit and agree that no benefits or payments will be made to anyone else based on your wages and self-employment income. Irs forms amended return The Commissioner of Social Security must determine that: Your sect or division has the established teachings as described in (2) above, It is the practice, and has been for a substantial period of time, for members of the sect or division to provide for their dependent members in a manner that is reasonable in view of the members' general level of living, and The sect or division has existed at all times since December 31, 1950. Irs forms amended return Requesting Exemption—Form 4029 To request the exemption, file Form 4029 in triplicate (original and two copies) with the Social Security Administration at the address shown on the form. Irs forms amended return The sect or division must complete part of the form. Irs forms amended return The IRS will return to you a copy of the Form 4029 that you filed indicating whether it has approved your exemption. Irs forms amended return If it is approved, keep the approved copy of Form 4029 in your permanent records. Irs forms amended return When to file. Irs forms amended return   You can file Form 4029 at any time. Irs forms amended return   If you have an approved exemption from SE tax and for some reason that approved exemption ended, you must file a new Form 4029 if you subsequently meet the eligibility requirements, discussed earlier. Irs forms amended return See Effective date of exemption next for information on when the newly approved exemption would become effective. Irs forms amended return    If you have a previously approved exemption from SE tax and you change membership to another recognized religious sect, without any change to your eligibility requirements, then you do not need to file a new Form 4029. Irs forms amended return Effective date of exemption. Irs forms amended return   An approved exemption from SE tax generally is effective for all tax years beginning with the first year you meet the eligibility requirements discussed earlier. Irs forms amended return (For example, if you meet the eligibility requirements in 2011, you file Form 4029 in 2012, and the IRS approves your exemption in 2013, your exemption is effective for tax year 2011 and all later years. Irs forms amended return )   The exemption will end if you fail to meet the eligibility requirements or if the Commissioner of Social Security determines that the sect or division fails to meet them. Irs forms amended return You must notify the IRS within 60 days if you are no longer a member of the religious group, or if you no longer follow the established teachings of this group. Irs forms amended return The exemption will end for the tax year where you or your sect/division first fails to meet the eligibility requirements. Irs forms amended return Refunds of SE tax paid. Irs forms amended return    To get a refund of any SE tax you paid while the exemption was in effect, file Form 1040X. Irs forms amended return For information on filing this form, see Refunds of SE tax under Requesting Exemption—Form 4361, earlier. Irs forms amended return Exemption From FICA Taxes Generally, under FICA, the employer and the employee each pay half of the social security and Medicare tax. Irs forms amended return Both the employee and the employer, if they meet the eligibility requirements discussed earlier, can apply to be exempt from their share of FICA taxes on wages paid by the employer to the employee. Irs forms amended return A partnership in which each partner holds a religious exemption from social security and Medicare is an employer for this purpose. Irs forms amended return If the employer's application is approved, the exemption will apply only to FICA taxes on wages paid to employees who also received an approval of identical applications. Irs forms amended return Information for employers. Irs forms amended return   If you have an approved Form 4029 and you have an employee who has an approved Form 4029, do not report wages you paid to the employee as social security and Medicare wages. Irs forms amended return   If you have an employee who does not have an approved Form 4029, you must withhold the employee's share of social security and Medicare taxes and pay the employer's share. Irs forms amended return Form W-2. Irs forms amended return   When preparing a Form W-2 for an employee with an approved Form 4029, enter “Form 4029” in box 14, “Other. Irs forms amended return ” Do not make any entries in boxes 3, 4, 5, or 6. Irs forms amended return Forms 941, 943, and 944. Irs forms amended return   If both you and your employee have received approved Forms 4029, do not include these exempt wages on the following forms. Irs forms amended return Instead, follow the instructions given below. Irs forms amended return Form 941, Employer's QUARTERLY Federal Tax Return: check the box on line 4 and enter “Form 4029” in the empty space below the check box. Irs forms amended return Form 943, Employer's Annual Federal Tax Return for Agricultural Employees: enter “Form 4029” on the dotted line next to the lines 2 and 4 entry spaces. Irs forms amended return Form 944, Employer's ANNUAL Federal Tax Return: check the box on line 3 and enter “Form 4029” in the empty space below the check box. Irs forms amended return Effective date. Irs forms amended return   An approved exemption from FICA becomes effective on the first day of the first calendar quarter after the quarter in which you file Form 4029. Irs forms amended return The exemption will end on the last day of the calendar quarter before the quarter in which the employer, employee, sect, or division fails to meet the requirements. Irs forms amended return Self-Employment Tax: Figuring Net Earnings There are two methods for figuring your net earnings from self-employment as a member of the clergy or a religious worker. Irs forms amended return Regular method. Irs forms amended return Nonfarm optional method. Irs forms amended return You may find Worksheets 1 through 4 helpful in figuring your net earnings from self-employment. Irs forms amended return Blank worksheets are in the back of this publication, after the Comprehensive Example. Irs forms amended return Regular Method Most people use the regular method. Irs forms amended return Under this method, figure your net earnings from self-employment by totaling your gross income for services you performed as a minister, a member of a religious order who has not taken a vow of poverty, or a Christian Science practitioner or reader. Irs forms amended return Then, subtract your allowable business deductions and multiply the difference by 92. Irs forms amended return 35% (. Irs forms amended return 9235). Irs forms amended return Use Schedule SE (Form 1040) to figure your net earnings and SE tax. Irs forms amended return If you are an employee of a church that elected to exclude you from FICA coverage, figure net earnings by multiplying your church wages shown on Form W-2 by 92. Irs forms amended return 35% (. Irs forms amended return 9235). Irs forms amended return Do not reduce your wages by any business deductions when making this computation. Irs forms amended return Use Schedule SE (Form 1040), Section B, to figure your net earnings and SE tax. Irs forms amended return If you have an approved exemption, or you are automatically exempt, do not include the income or deductions from ministerial services in figuring your net earnings from self-employment. Irs forms amended return Amounts included in gross income. Irs forms amended return   To figure your net earnings from self-employment (on Schedule SE (Form 1040)), include in gross income: Salaries and fees for your ministerial services (discussed earlier), Offerings you receive for marriages, baptisms, funerals, masses, etc. Irs forms amended return , The value of meals and lodging provided to you, your spouse, and your dependents for your employer's convenience, The fair rental value of a parsonage provided to you (including the cost of utilities that are furnished) and the rental allowance (including an amount for payment of utilities) paid to you, and Any amount a church pays toward your income tax or SE tax, other than withholding the amount from your salary. Irs forms amended return This amount is also subject to income tax. Irs forms amended return   For the income tax treatment of items (2) and (4), see Income Tax: Income and Expenses , later. Irs forms amended return Example. Irs forms amended return Pastor Roger Adams receives an annual salary of $39,000 as a full-time minister. Irs forms amended return The $39,000 includes $5,000 that is designated as a rental allowance to pay utilities. Irs forms amended return His church owns a parsonage that has a fair rental value of $12,000 per year. Irs forms amended return The church gives Pastor Adams the use of the parsonage. Irs forms amended return He is not exempt from SE tax. Irs forms amended return He must include $51,000 ($39,000 plus $12,000) when figuring his net earnings for SE tax purposes. Irs forms amended return The results would be the same if, instead of the use of the parsonage and receipt of the rental allowance for utilities, Pastor Adams had received an annual salary of $51,000 of which $17,000 ($5,000 plus $12,000) per year was designated as a rental allowance. Irs forms amended return Overseas duty. Irs forms amended return   Your net earnings from self-employment are determined without any foreign earned income exclusion or the foreign housing exclusion or deduction if you are a U. Irs forms amended return S. Irs forms amended return citizen or resident alien serving abroad and living in a foreign country. Irs forms amended return   For information on excluding foreign earned income or the foreign housing amount, see Publication 54. Irs forms amended return Example. Irs forms amended return Diane Jones was the minister of a U. Irs forms amended return S. Irs forms amended return church in Mexico. Irs forms amended return She earned $35,000 in that position and was able to exclude it all for income tax purposes under the foreign earned income exclusion. Irs forms amended return The United States does not have a social security agreement with Mexico, so Mrs. Irs forms amended return Jones is subject to U. Irs forms amended return S. Irs forms amended return SE tax and must include $35,000 when figuring net earnings from self-employment. Irs forms amended return Specified U. Irs forms amended return S. Irs forms amended return possessions. Irs forms amended return    The exclusion from gross income for amounts derived from American Samoa or Puerto Rico does not apply in computing net earnings from self-employment. Irs forms amended return Also see Residents of Puerto Rico, the U. Irs forms amended return S. Irs forms amended return Virgin Islands, Guam, the CNMI, and American Samoa , earlier, under U. Irs forms amended return S. Irs forms amended return Citizens and Resident and Nonresident Aliens. Irs forms amended return Amounts not included in gross income. Irs forms amended return   Do not include the following amounts in gross income when figuring your net earnings from self-employment. Irs forms amended return Offerings that others made to the church. Irs forms amended return Contributions by your church to a tax-sheltered annuity plan set up for you, including any salary reduction contributions (elective deferrals) that are not included in your gross income. Irs forms amended return Pension payments or retirement allowances you receive for your past ministerial services. Irs forms amended return The rental value of a parsonage or a parsonage allowance provided to you after you retire. Irs forms amended return Allowable deductions. Irs forms amended return   When figuring your net earnings from self-employment, deduct all your expenses related to your ministerial services performed as a self-employed person. Irs forms amended return These are ministerial expenses you incurred while working other than as a common-law employee of the church. Irs forms amended return They include expenses incurred in performing marriages and baptisms, and in delivering speeches. Irs forms amended return Deduct these expenses on Schedule C or C-EZ (Form 1040), and carry the net amount to line 2 of Schedule SE (Form 1040), Section A or B. Irs forms amended return   Wages earned as a common-law employee (explained earlier) of a church are generally subject to self-employment tax unless an exemption is requested, as discussed earlier under Exemption From Self-Employment (SE) Tax . Irs forms amended return Subtract any allowable expenses (including unreimbursed employee business expenses) from those wages, include the net amount on line 2 of Schedule SE (Form 1040), Section A or B, and attach an explanation. Irs forms amended return Do not complete Schedule C or C-EZ (Form 1040). Irs forms amended return However, for income tax purposes, the expenses are allowed only as an itemized deduction on Schedule A (Form 1040) to the extent they exceed 2% of adjusted gross income. Irs forms amended return Employee reimbursement arrangements. Irs forms amended return   If you received an advance, allowance, or reimbursement for your employee expenses, how you report this amount and your employee expenses depends on whether your employer reimbursed you under an accountable plan or a nonaccountable plan. Irs forms amended return Ask your employer if you are not sure if it reimburses you using an accountable or a nonaccountable plan. Irs forms amended return Accountable plans. Irs forms amended return   To be an accountable plan, your employer's reimbursement arrangement must include all three of the following rules. Irs forms amended return Your expenses must have a business connection—that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Irs forms amended return You must adequately account to your employer for these expenses within a reasonable period of time. Irs forms amended return You must return any excess reimbursement or allowance within a reasonable period of time. Irs forms amended return   The reimbursement is not reported on your Form W-2. Irs forms amended return Generally, if your expenses equal your reimbursement, you have no deduction. Irs forms amended return If your expenses are more than your reimbursement, you can deduct your excess expenses for SE tax and income tax purposes. Irs forms amended return Nonaccountable plan. Irs forms amended return   A nonaccountable plan is a reimbursement arrangement that does not meet all three of the rules listed under Accountable plans above. Irs forms amended return In addition, even if your employer has an accountable plan, the following payments will be treated as being paid under a nonaccountable plan. Irs forms amended return Excess reimbursements you fail to return to your employer. Irs forms amended return Reimbursement of nondeductible expenses related to your employer's business. Irs forms amended return   Your employer will combine any reimbursement paid to you under a nonaccountable plan with your wages, salary, or other compensation and report the combined total in box 1 of your Form W-2. Irs forms amended return Since reimbursements under a nonaccountable plan are included in your gross income, you can deduct your related expenses (for SE tax and income tax purposes) regardless of whether they are more than, less than, or equal to your reimbursement. Irs forms amended return   For more information on accountable and nonaccountable plans, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Irs forms amended return Married Couple Missionary Team If both spouses are duly ordained, commissioned, or licensed ministers of a church and have an agreement that each will perform specific services for which they are paid jointly or separately, they must divide the self-employment income according to the agreement. Irs forms amended return If the agreement is with one spouse only and the other spouse is not paid for any specific duties, amounts received for their services are included only in the self-employment income of the spouse having the agreement. Irs forms amended return Earnings Subject to SE Tax For 2013, the maximum net earnings from self-employment subject to social security (old age, survivors, and disability insurance) tax is $113,700 minus any wages and tips you earned that were subject to social security tax. Irs forms amended return The tax rate for the social security part is 12. Irs forms amended return 4%. Irs forms amended return In addition, all of your net earnings are subject to the Medicare (hospital insurance) part of the SE tax. Irs forms amended return This tax rate is 2. Irs forms amended return 9%. Irs forms amended return The combined self-employment tax rate is 15. Irs forms amended return 3%. Irs forms amended return Additional Medicare Tax. Irs forms amended return   Beginning in 2013, a 0. Irs forms amended return 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Irs forms amended return Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Irs forms amended return A self-employment loss is not considered for purposes of this tax. Irs forms amended return RRTA compensation is separately compared to the threshold. Irs forms amended return For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Irs forms amended return Nonfarm Optional Method You may be able to use the nonfarm optional method for figuring your net earnings from self-employment. Irs forms amended return In general, the nonfarm optional method is intended to permit continued coverage for social security and Medicare purposes when your income for the tax year is low. Irs forms amended return You may use the nonfarm optional method if you meet all the following tests. Irs forms amended return You are self-employed on a regular basis. Irs forms amended return You meet this test if your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. Irs forms amended return The net earnings can be from either farm or nonfarm earnings or both. Irs forms amended return You have used this method less than 5 prior years. Irs forms amended return (There is a 5-year lifetime limit. Irs forms amended return ) The years do not have to be consecutive. Irs forms amended return Your net nonfarm profits were: Less than $5,024, and Less than 72. Irs forms amended return 189% of your gross nonfarm income. Irs forms amended return If you meet all three tests, use Table 3 to figure your net earnings from self-employment under the nonfarm optional method. Irs forms amended return Table 3. Irs forms amended return Figuring Nonfarm Net Earnings IF your gross nonfarm income is . Irs forms amended return . Irs forms amended return . Irs forms amended return THEN your net earnings are equal to . Irs forms amended return . Irs forms amended return . Irs forms amended return $6,960 or less Two-thirds of your gross nonfarm income. Irs forms amended return More than $6,960 $4,640. Irs forms amended return Actual net earnings. Irs forms amended return   Multiply your total earnings subject to SE tax by 92. Irs forms amended return 35% (. Irs forms amended return 9235) to get actual net earnings. Irs forms amended return Actual net earnings are equivalent to net earnings under the “Regular Method. Irs forms amended return ” More information. Irs forms amended return   For more information on the nonfarm optional method, see Publication 334, Tax Guide for Small Business, and the Schedule SE (Form 1040) instructions. Irs forms amended return Income Tax: Income and Expenses Some income and expense items are treated the same for both income tax and SE tax purposes and some are treated differently. Irs forms amended return Note. Irs forms amended return For purposes of this section, references to members of the clergy are only to ministers or members of a religious order. Irs forms amended return Income Items The tax treatment of offerings and fees, outside earnings, rental allowances, rental value of a parsonage, earnings of members of religious orders, and foreign earned income is discussed here. Irs forms amended return Offerings and Fees If you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc. Irs forms amended return , in addition to your salary. Irs forms amended return If the offering is made to the religious institution, it is not taxable to you. Irs forms amended return Outside Earnings If you are a member of a religious organization and you give your outside earnings to the organization, you still must include the earnings in your income. Irs forms amended return However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. Irs forms amended return For more information, see Publication 526. Irs forms amended return Exclusion of Rental Allowance and Fair Rental Value of a Parsonage Ordained, commissioned, or licensed ministers of the gospel may be able to exclude from income tax the rental allowance or fair rental value of a parsonage that is provided to them as pay for their services. Irs forms amended return Services include: Ministerial services, discussed earlier, Administrative duties and teaching at theological seminaries, and The ordinary duties of a minister performed as an employee of the United States (other than as a chaplain in the Armed Forces), a state, possession, political subdivision, or the District of Columbia. Irs forms amended return This exclusion applies only for income tax purposes. Irs forms amended return It does not apply for SE tax purposes, as discussed earlier under Amounts included in gross income under Self-Employment Tax: Figuring Net Earnings. Irs forms amended return Designation requirement. Irs forms amended return   The church or organization that employs you must officially designate the payment as a housing allowance before it makes the payment. Irs forms amended return It must designate a definite amount. Irs forms amended return It cannot determine the amount of the housing allowance at a later date. Irs forms amended return If the church or organization does not officially designate a definite amount as a housing allowance, you must include your total salary in your income. Irs forms amended return   If you are employed and paid by a local congregation, a resolution by a national church agency of your denomination does not effectively designate a housing allowance for you. Irs forms amended return The local congregation must officially designate the part of your salary that is a housing allowance. Irs forms amended return However, a resolution of a national church agency can designate your housing allowance if you are directly employed by the national agency. Irs forms amended return Rental allowances. Irs forms amended return   If you receive in your salary an amount officially designated as a rental allowance (including an amount to pay utility costs), you can exclude the allowance from your gross income if: You use the amount to provide or rent a home, and The amount is not more than reasonable pay for your services. Irs forms amended return   The amount you exclude cannot be more than the fair rental value of the home, including furnishings, plus the cost of utilities. Irs forms amended return Fair rental value of parsonage. Irs forms amended return   You can exclude from gross income the fair rental value of a house or parsonage, including utilities, furnished to you as part of your earnings. Irs forms amended return However, the exclusion cannot be more than the reasonable pay for your services. Irs forms amended return If you pay for the utilities, you can exclude any allowance designated for utility costs, up to your actual cost. Irs forms amended return Example. Irs forms amended return Rev. Irs forms amended return Joanna Baker is a full-time minister. Irs forms amended return The church allows her to use a parsonage that has an annual fair rental value of $24,000. Irs forms amended return The church pays her an annual salary of $67,000, of which $7,500 is designated for utility costs. Irs forms amended return Her actual utility costs during the year were $7,000. Irs forms amended return For income tax purposes, Rev. Irs forms amended return Baker excludes $31,000 from gross income ($24,000 fair rental value of the parsonage plus $7,000 from the allowance for utility costs). Irs forms amended return She will report $60,000 ($59,500 salary plus $500 of unused utility allowance). Irs forms amended return Her income for SE tax purposes, however, is $91,000 ($67,000 salary + $24,000 fair rental value of the parsonage). Irs forms amended return Home ownership. Irs forms amended return   If you own your home and you receive as part of your salary a housing or rental allowance, you may exclude from gross income the smallest of: The amount actually used to provide a home, The amount officially designated as a rental allowance, or The fair rental value of the home, including furnishings, utilities, garage, etc. Irs forms amended return Excess rental allowance. Irs forms amended return   You must include in gross income the amount of any rental allowance that is more than the smallest of: Your reasonable salary, The fair rental value of the home plus utilities, or The amount actually used to provide a home. Irs forms amended return   Include in the total on Form 1040, line 7. Irs forms amended return On the dotted line next to line 7, enter “Excess allowance” and the amount. Irs forms amended return You may deduct the home mortgage interest and real estate taxes paid on your home even though you pay all or part of those expenses with funds you get through a tax-free rental or parsonage allowance. Irs forms amended return However, you can only deduct these expenses as itemized deductions on Schedule A (Form 1040). Irs forms amended return Retired ministers. Irs forms amended return   If you are a retired minister, you can exclude from your gross income the rental value of a home (plus utilities) furnished to you by your church as a part of your pay for past services, or the part of your pension that was designated as a rental allowance. Irs forms amended return However, a minister's surviving spouse cannot exclude the rental value unless the rental value is for ministerial services he or she performs or performed. Irs forms amended return Teachers or administrators. Irs forms amended return   If you are a minister employed as a teacher or administrator by a church school, college, or university, you are performing ministerial services for purposes of the housing exclusion. Irs forms amended return However, if you perform services as a teacher or administrator on the faculty of a nonchurch college, you cannot exclude from your income a housing allowance or the value of a home that the college provides to you. Irs forms amended return    If you live in faculty lodging as an employee of an educational institution or academic health center, all or part of the value of that lodging may be nontaxable under a different rule. Irs forms amended return In Publication 525, see Faculty lodging in the discussion on meals and lodging under Fringe Benefits. Irs forms amended return   If you serve as a minister of music or minister of education, or serve in an administrative or other function of your religious organization, but are not authorized to perform substantially all of the religious duties of an ordained minister in your church (even if you are commissioned as a minister of the gospel), the housing exclusion does not apply to you. Irs forms amended return Theological students. Irs forms amended return   If you are a theological student serving a required internship as a part-time or assistant pastor, you cannot exclude a parsonage or rental allowance from your income unless you are ordained, commissioned, or licensed as a minister. Irs forms amended return Traveling evangelists. Irs forms amended return   You can exclude a designated rental allowance from out-of-town churches if you meet all of the following requirements. Irs forms amended return You are an ordained minister. Irs forms amended return You perform ministerial services at churches located away from your community. Irs forms amended return You actually use the rental allowance to maintain your permanent home. Irs forms amended return Cantors. Irs forms amended return   If you have a bona fide commission and your congregation employs you on a full-time basis to perform substantially all the religious functions of the Jewish faith, you can exclude a rental allowance from your gross income. Irs forms amended return Earnings—Members of Religious Orders Your earnings may be exempt from both income tax and SE tax if you are a member of a religious order who: Has taken a vow of poverty, Receives earnings for services performed as an agent of the order and in the exercise of duties required by the order, and Renounces the earnings and gives them to the order. Irs forms amended return See Members of Religious Orders , earlier, under Social Security Coverage. Irs forms amended return Foreign Earned Income Certain income may be exempt from income tax if you work in a foreign country or in a specified U. Irs forms amended return S. Irs forms amended return possession. Irs forms amended return Publication 54 discusses the foreign earned income exclusion. Irs forms amended return Publication 570, Tax Guide for Individuals With Income From U. Irs forms amended return S. Irs forms amended return Possessions, covers the rules for taxpayers with income from U. Irs forms amended return S. Irs forms amended return possessions. Irs forms amended return You can get these free publications from the Internal Revenue Service at IRS. Irs forms amended return gov or from most U. Irs forms amended return S. Irs forms amended return Embassies or consulates. Irs forms amended return Expense Items The tax treatment of ministerial trade or business expenses, expenses allocable to tax-free income, and health insurance costs is discussed here. Irs forms amended return Ministerial Trade or Business Expenses as an Employee When you figure your income tax, you must itemize your deductions on Schedule A (Form 1040) to claim allowable deductions for ministerial trade or business expenses incurred while working as an employee. Irs forms amended return You also may have to file Form 2106, Employee Business Expenses (or Form 2106-EZ, Unreimbursed Employee Business Expenses). Irs forms amended return You claim these expenses as miscellaneous itemized deductions that are subject to the 2%-of-adjusted-gross-income (AGI) limit. Irs forms amended return See Publication 529 for more information on this limit. Irs forms amended return However, you cannot deduct any of your employee business expenses that are allocable to tax-free income (discussed next). Irs forms amended return Expenses Allocable to Tax-Free Income If you receive a rental or parsonage allowance that is exempt from income tax (tax free), you must allocate a portion of the expenses of operating your ministry to that tax-free income. Irs forms amended return You cannot deduct the portion of your expenses that you allocate to your tax-free rental or parsonage allowance. Irs forms amended return Exception. Irs forms amended return   This rule does not apply to your deductions for home mortgage interest or real estate taxes on your home. Irs forms amended return Figuring the allocation. Irs forms amended return   Figure the portion of your otherwise deductible expenses that you cannot deduct (because you must allocate that portion to tax-free income) by multiplying the expenses by the following fraction:      Tax-free rental or parsonage allowance     All income (taxable and tax free) earned from your ministry           When figuring the allocation, include the income and expenses related to the ministerial duties you perform both as an employee and as a self-employed person. Irs forms amended return    Reduce your otherwise deductible expenses only in figuring your income tax, not your SE tax. Irs forms amended return Example. Irs forms amended return Rev. Irs forms amended return Charles Ashford received $40,000 in earnings for ministerial services consisting of a $28,000 salary for ministerial services performed as an employee, $2,000 for weddings and baptisms performed as a self-employed person, and a $10,000 tax-free parsonage allowance. Irs forms amended return He incurred $4,000 of unreimbursed expenses connected with his earnings for ministerial services. Irs forms amended return $3,500 of the $4,000 is for employee expenses related to his ministerial salary, and $500 is related to the weddings and baptisms he performed as a self-employed person. Irs forms amended return Rev. Irs forms amended return Ashford figures the nondeductible (tax-free) portion of expenses related to his ministerial salary as follows: ($10,000 ÷ $40,000) x $3,500 = $875   Rev. Irs forms amended return Ashford figures the nondeductible (tax-free) portion of expenses related to his wedding and baptism income as follows: ($10,000 ÷ $40,000) x $500 = $125 Required statement. Irs forms amended return   If you receive a tax-free rental or parsonage allowance and have ministerial expenses, attach a statement to your tax return. Irs forms amended return The statement must contain all of the following information. Irs forms amended return A list of each item of taxable ministerial income by source (such as wages, salary, weddings, baptisms, etc. Irs forms amended return ) plus the amount. Irs forms amended return A list of each item of tax-free ministerial income by source (parsonage allowance) plus the amount. Irs forms amended return A list of each item of otherwise deductible ministerial expenses plus the amount. Irs forms amended return How you figured the nondeductible part of your otherwise deductible expenses. Irs forms amended return A statement that the other deductions claimed on your tax return are not allocable to your tax-free income. Irs forms amended return   See the attachments prepared for the Comprehensive Example , later. Irs forms amended return Following the example, you will find blank worksheets for your own use. Irs forms amended return Health Insurance Costs of Self-Employed Ministers If you are self-employed, you may be able to deduct the amount you paid in 2013 for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents. Irs forms amended return If you qualify, you can take this deduction as an adjustment to income on Form 1040, line 29. Irs forms amended return See the Instructions for Form 1040 to figure your deduction. Irs forms amended return The following special rules apply to the self-employed health insurance deduction. Irs forms amended return You cannot take a medical expense deduction on Schedule A (Form 1040) for any expenses you claim for purposes of the self-employed health insurance deduction. Irs forms amended return You cannot take the deduction for any month you are eligible to participate in a subsidized plan of your (or your spouse's) employer. Irs forms amended return The deduction cannot exceed your net earnings from the business under which the insurance plan is established. Irs forms amended return Your net earnings under this rule do not include the income you earned as a common-law employee (discussed earlier) of a church. Irs forms amended return More information. Irs forms amended return   For more information about the self-employed health insurance deduction, see chapter 6 in Publication 535. Irs forms amended return Deduction for SE Tax You can deduct one-half of your SE tax in figuring adjusted gross income. Irs forms amended return This is an income tax deduction only, on Form 1040, line 27. Irs forms amended return Do not claim this deduction in figuring net earnings from self-employment subject to SE tax. Irs forms amended return Income Tax Withholding and Estimated Tax The federal income tax is a pay-as-you-go tax. Irs forms amended return You must pay the tax as you earn or receive income during the year. Irs forms amended return An employee usually has income tax withheld from his or her wages or salary. Irs forms amended return However, your salary is not subject to federal income tax withholding if both of the following conditions apply. Irs forms amended return You are a duly ordained, commissioned, or licensed minister, a member of a religious order (who has not taken a vow of poverty), or a Christian Science practitioner or reader. Irs forms amended return Your salary is for ministerial services (see Ministerial Services , earlier). Irs forms amended return If your salary is not subject to withholding, or if you do not pay enough tax through withholding, you may need to make estimated tax payments to avoid penalties for not paying enough tax as you earn your income. Irs forms amended return You generally must make estimated tax payments if you expect to owe taxes, including SE tax, of $1,000 or more, when you file your return. Irs forms amended return Determine your estimated tax by using the worksheets in Publication 505, Tax Withholding and Estimated Tax. Irs forms amended return Pay the entire estimated tax for 2014 or the first installment by April 15, 2014. Irs forms amended return See Form 1040-ES for the different payment methods. Irs forms amended return The April 15 date applies whether or not your tax home and your abode are outside the United States and Puerto Rico. Irs forms amended return For more information, see chapter 2 of Publication 505. Irs forms amended return If you perform your services as a common-law employee of the church and your salary is not subject to income tax withholding, you can enter into a voluntary withholding agreement with the church to cover any income and SE tax that may be due. Irs forms amended return Filing Your Return You must file an income tax return for 2013 if your gross income was at least the amount shown in the third column of Table 4 above. Irs forms amended return Table 4. Irs forms amended return 2013 Filing Requirements for Most Taxpayers IF your filing status is . Irs forms amended return . Irs forms amended return . Irs forms amended return AND at the end of 2013 you were* . Irs forms amended return . Irs forms amended return . Irs forms amended return THEN file a return if your gross income** was at least . Irs forms amended return . Irs forms amended return . Irs forms amended return single under age 65 65 or older   $10,000 $11,500   married filing jointly*** under 65 (both spouses) 65 or older (one spouse) 65 or older (both spouses)   $20,000  $21,200  $22,400   married filing separately any age   $3,900   head of household under 65 65 or older   $12,850 $14,350   qualifying widow(er) with dependent child under 65 65 or older   $16,100  $17,300   * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Irs forms amended return ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). Irs forms amended return Do not include any social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time in 2013, or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). Irs forms amended return If (a) or (b) applies, see the instructions for Form 1040, lines 20a and 20b, to figure the taxable part of social security benefits you must include in gross income. Irs forms amended return Gross income includes gains, but not losses, reported on Form 8949 or Schedule D (Form 1040). Irs forms amended return Gross income from a business means, for example, the amount on Schedule C (Form 1040), line 7, or Schedule F (Form 1040), line 9. Irs forms amended return But, in figuring gross income, do not reduce your income by any losses, including any loss on Schedule C (Form 1040), line 7, or Schedule F (Form 1040), line 9. Irs forms amended return *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900, you must file a return regardless of your age. Irs forms amended return Additional requirements. Irs forms amended return   Even if your income was less than the amount shown in Table 4, you must file an income tax return on Form 1040, and attach a completed Schedule SE (Form 1040), if:    You are not exempt from SE tax, and you have net earnings from self-employment (discussed earlier under Self-Employment Tax: Figuring Net Earnings ) of $400 or more in the tax year, You are exempt from SE tax on earnings from ministerial services and you have $400 or more of other net earnings subject to SE tax, or You had wages of $108. Irs forms amended return 28 or more from an electing church or church-controlled organization (see Coverage of Religious Workers (Church Employees) , earlier, under Social Security Coverage). Irs forms amended return Self-employment tax. Irs forms amended return   If you are liable for SE tax, you must file Schedule SE (Form 1040) with your return. Irs forms amended return   If you filed Form 4361 and did not receive approval from the IRS, you must pay SE tax on your ministerial earnings, as explained earlier. Irs forms amended return You should report ministerial earnings and expenses from nonemployee ministerial services on Schedule C or C-EZ (Form 1040). Irs forms amended return You should then carry the net amount over to line 2 of Schedule SE (Form 1040), Section A or B. Irs forms amended return However, if you were a duly ordained minister who was an employee of a church and you must pay SE tax on the wages you earned for those services, do not report those wages on Schedule C or C-EZ (Form 1040). Irs forms amended return Instead, report those wages less any allowable expenses (including any unreimbursed employee business expenses), on line 2 of Schedule SE (Form 1040), Section A or B, and attach an explanation. Irs forms amended return Note. Irs forms amended return For income tax purposes, the unreimbursed employee business expenses that you incurred as an employee of the church and subtracted from your wages on line 2 of Schedule SE (Form 1040) are allowed only as an itemized deduction on Schedule A (Form 1040) if they exceed 2% of your adjusted gross income. Irs forms amended return You cannot deduct these expenses on Schedule C or C-EZ (Form 1040) as a trade or business expense. Irs forms amended return Exemption from SE tax. Irs forms amended return   If you filed Form 4361 and received IRS approval not to be taxed on your ministerial earnings, and you do not have any other income subject to SE tax, do not file Schedule SE (Form 1040). Irs forms amended return Instead, enter “Exempt—Form 4361” on the dotted line next to Form 1040, line 56. Irs forms amended return However, if you had net earnings from another trade or business of $400 or more subject to SE tax, see line A at the top of Schedule SE (Form 1040), Section B. Irs forms amended return    If you filed Form 4029 and received IRS approval not to be taxed on those earnings, and you do not have any other income subject to SE tax, do not file Schedule SE (Form 1040). Irs forms amended return Instead, enter “Exempt—Form 4029” on the dotted line next to Form 1040, line 56. Irs forms amended return More information. Irs forms amended return   For more information on filing your return, including when and where to file it, see the Instructions for Form 1040. Irs forms amended return Retirement Savings Arrangements Retirement savings arrangements are plans that offer you a tax-favored way to save for your retirement. Irs forms amended return You generally can deduct your contributions to the plan. Irs forms amended return Your contributions and the earnings on them are not taxed until they are distributed. Irs forms amended return Retirement plans for the self-employed. Irs forms amended return   To set up one of the following plans you must be self-employed. Irs forms amended return SEP (simplified employee pension) plan. Irs forms amended return SIMPLE (savings incentive match plan for employees) plan. Irs forms amended return Qualified retirement plan (also called a Keogh or H. Irs forms amended return R. Irs forms amended return 10 plan). Irs forms amended return   The common-law rules determine whether you are an employee or a self-employed person for purposes of setting up a retirement plan. Irs forms amended return See Employment status for other tax purposes under Coverage of Members of the Clergy, earlier. Irs forms amended return This result is true even if your compensation for ministerial services (defined earlier) is subject to SE tax. Irs forms amended return   For example, if a congregation pays you a salary for performing ministerial services and you are subject to the congregation's control, you generally are a common-law employee. Irs forms amended return You are not a self-employed person for purposes of setting up a retirement plan. Irs forms amended return This result is true even if your salary is subject to SE tax. Irs forms amended return   On the other hand, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services that you report on Schedule C or C-EZ (Form 1040), are earnings from self-employment for all tax purposes. Irs forms amended return   For more information on establishing a SEP, SIMPLE, or qualified retirement plan, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). Irs forms amended return Individual retirement arrangements (IRAs). Irs forms amended return   The traditional IRA and the Roth IRA are two individual retirement arrangements you can use to save money for your retirement. Irs forms amended return Generally, your maximum contribution for 2013 to either of these plans (or to a combination of the two) is the smaller of your taxable compensation or $5,500 ($6,500 if you are age 50 or older). Irs forms amended return   However, your maximum contribution to a Roth IRA will be further reduced or eliminated if your adjusted gross income is above a certain amount. Irs forms amended return You cannot deduct Roth IRA contributions, but if you satisfy certain requirements, all earnings in the Roth IRA are tax free and neither your nondeductible contributions nor any earnings on them are taxable when distributed. Irs forms amended return   If you contribute to a traditional IRA, your contribution may be deductible. Irs forms amended return However, your deduction may be reduced or eliminated if you or your spouse is covered by an employer retirement plan (including, but not limited to, a SEP, SIMPLE, or qualified retirement plan). Irs forms amended return   For more information on IRAs, see Publication 590. Irs forms amended return Tax-sheltered annuity plans. Irs forms amended return   Church employees, members of religious orders, and duly ordained, commissioned, or licensed ministers working as ministers or chaplains can participate in tax-sheltered annuity (403(b)) plans. Irs forms amended return For more
Español

Know Your Rights as a Car Owner

Sometimes a manufacturer makes a design or production mistake on a motor vehicle. A service bulletin notifies the dealer of the problem and how to resolve it. Because these free repairs are not publicized, they are called "secret warranties." The National Highway Traffic Safety Administration maintains a database of service bulletins filed by manufacturers.

If you have a problem with a vehicle that is a safety hazard, check whether the manufacturer has recalled your vehicle. Click on Recalls or call NHTSA at 1-800-424-9393.Hazards that aren't listed should be reported to your dealer, the manufacturer of the vehicle, and NHTSA. If a safety-related defect exists, the maker must fix it at no cost to you-even if your warranty has expired.

If you have a vehicle with a unique problem that just never seems to get fixed, you may have a lemon. Some states have laws concerning lemons that require a refund or replacement if a problem is not fixed within a reasonable number of tries or if you haven't been able to use your vehicle for a certain number of days. Contact your local consumer protection office to learn whether you have such protections and what steps you must take to solve your problem. If you believe your car is a lemon:

  • Give the dealer a list of the problems every time you bring it in for repairs.
  • Get and keep copies of the repair orders listing the problems, the work done, and the dates the car was in the shop.
  • Contact the manufacturer, as well as the dealer, to report the problem. Check your owner's manual or the directory for the auto manufacturers.
  • Help other consumers avoid purchasing your lemon by registering it at safetyforum.com.

The Center for Auto Safety gathers information and complaints concerning safety defects, recalls, service bulletins and state lemon laws.

The Irs Forms Amended Return

Irs forms amended return 4. Irs forms amended return   Sales and Trades of Investment Property Table of Contents IntroductionNominees. Irs forms amended return Topics - This chapter discusses: Useful Items - You may want to see: What Is a Sale or Trade?Dividend versus sale or trade. Irs forms amended return Worthless Securities Constructive Sales of Appreciated Financial Positions Section 1256 Contracts Marked to Market Basis of Investment PropertyCost Basis Basis Other Than Cost Adjusted Basis Stocks and Bonds How To Figure Gain or LossFair market value. Irs forms amended return Debt paid off. Irs forms amended return Payment of cash. Irs forms amended return Special Rules for Mutual Funds Nontaxable TradesLike-Kind Exchanges Corporate Stocks Exchange of Shares In One Mutual Fund For Shares In Another Mutual Fund Insurance Policies and Annuities U. Irs forms amended return S. Irs forms amended return Treasury Notes or Bonds Transfers Between Spouses Related Party TransactionsGain on Sale or Trade of Depreciable Property Capital Gains and LossesCapital or Ordinary Gain or Loss Holding Period Nonbusiness Bad Debts Short Sales Wash Sales Options Straddles Sales of Stock to ESOPs or Certain Cooperatives Rollover of Gain From Publicly Traded Securities Gains on Qualified Small Business Stock Exclusion of Gain From DC Zone Assets Reporting Capital Gains and LossesException 1. Irs forms amended return Exception 2. Irs forms amended return Section 1256 contracts and straddles. Irs forms amended return Market discount bonds. Irs forms amended return File Form 1099-B or Form 1099-S with the IRS. Irs forms amended return Capital Losses Capital Gain Tax Rates Special Rules for Traders in SecuritiesHow To Report Introduction This chapter explains the tax treatment of sales and trades of investment property. Irs forms amended return Investment property. Irs forms amended return   This is property that produces investment income. Irs forms amended return Examples include stocks, bonds, and Treasury bills and notes. Irs forms amended return Property used in a trade or business is not investment property. Irs forms amended return Form 1099-B. Irs forms amended return   If you sold property such as stocks, bonds, mutual funds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. Irs forms amended return You should receive the statement by February 15 of the next year. Irs forms amended return It will show the gross proceeds from the sale. Irs forms amended return The IRS will also get a copy of Form 1099-B from the broker. Irs forms amended return   Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Irs forms amended return If you sold a covered security in 2013, your broker will send you a Form 1099-B (or substitute statement) that shows your basis. Irs forms amended return This will help you complete Form 8949. Irs forms amended return Generally, a covered security is a security you acquired after 2010, with certain exceptions explained in the Instructions for Form 8949. Irs forms amended return    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in this chapter. Irs forms amended return Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Irs forms amended return Nominees. Irs forms amended return   If someone receives gross proceeds as a nominee for you, that person will give you a Form 1099-B, which will show gross proceeds received on your behalf. Irs forms amended return   If you receive a Form 1099-B that includes gross proceeds belonging to another person, see Nominees , later under Reporting Capital Gains and Losses for more information. Irs forms amended return Other property transactions. Irs forms amended return   Certain transfers of property are discussed in other IRS publications. Irs forms amended return These include: Sale of your main home, discussed in Publication 523, Selling Your Home; Installment sales, covered in Publication 537; Various types of transactions involving business property, discussed in Publication 544, Sales and Other Dispositions of Assets; Transfers of property at death, covered in Publication 559; and Disposition of an interest in a passive activity, discussed in Publication 925. Irs forms amended return Topics - This chapter discusses: What Is a Sale or Trade? , Basis of Investment Property , Adjusted Basis , How To Figure Gain or Loss , Nontaxable trades , Transfers Between Spouses , Related Party Transactions , Capital Gains and Losses , Reporting Capital Gains and Losses , and Special Rules for Traders in Securities . Irs forms amended return Useful Items - You may want to see: Publication 551 Basis of Assets Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 6781 Gains and Losses From Section 1256 Contracts and Straddles 8582 Passive Activity Loss Limitations 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Irs forms amended return What Is a Sale or Trade? This section explains what is a sale or trade. Irs forms amended return It also explains certain transactions and events that are treated as sales or trades. Irs forms amended return A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Irs forms amended return A trade is a transfer of property for other property or services, and may be taxed in the same way as a sale. Irs forms amended return Sale and purchase. Irs forms amended return   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Irs forms amended return The sale and purchase are two separate transactions. Irs forms amended return But see Like-Kind Exchanges under Nontaxable Trades, later. Irs forms amended return Redemption of stock. Irs forms amended return   A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. Irs forms amended return Dividend versus sale or trade. Irs forms amended return   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Irs forms amended return Both direct and indirect ownership of stock will be considered. Irs forms amended return The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend — see Dividends and Other Distributions in chapter 1, There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. Irs forms amended return Redemption or retirement of bonds. Irs forms amended return   A redemption or retirement of bonds or notes at their maturity generally is treated as a sale or trade. Irs forms amended return See Stocks, stock rights, and bonds and Discounted Debt Instruments under Capital or Ordinary Gain or Loss, later. Irs forms amended return   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Irs forms amended return For details, see Regulations section 1. Irs forms amended return 1001-3. Irs forms amended return Surrender of stock. Irs forms amended return   A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. Irs forms amended return The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Irs forms amended return Trade of investment property for an annuity. Irs forms amended return   The transfer of investment property to a corporation, trust, fund, foundation, or other organization, in exchange for a fixed annuity contract that will make guaranteed annual payments to you for life, is a taxable trade. Irs forms amended return If the present value of the annuity is more than your basis in the property traded, you have a taxable gain in the year of the trade. Irs forms amended return Figure the present value of the annuity according to factors used by commercial insurance companies issuing annuities. Irs forms amended return Transfer by inheritance. Irs forms amended return   The transfer of property of a decedent to the executor or administrator of the estate, or to the heirs or beneficiaries, is not a sale or other disposition. Irs forms amended return No taxable gain or deductible loss results from the transfer. Irs forms amended return Termination of certain rights and obligations. Irs forms amended return   The cancellation, lapse, expiration, or other termination of a right or obligation (other than a securities futures contract) with respect to property that is a capital asset (or that would be a capital asset if you acquired it) is treated as a sale. Irs forms amended return Any gain or loss is treated as a capital gain or loss. Irs forms amended return   This rule does not apply to the retirement of a debt instrument. Irs forms amended return See Redemption or retirement of bonds , earlier. Irs forms amended return Worthless Securities Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. Irs forms amended return This affects whether your capital loss is long term or short term. Irs forms amended return See Holding Period , later. Irs forms amended return Worthless securities also include securities that you abandon after March 12, 2008. Irs forms amended return To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Irs forms amended return All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. Irs forms amended return If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. Irs forms amended return Do not deduct them in the year the stock became worthless. Irs forms amended return How to report loss. Irs forms amended return   Report worthless securities in Form 8949, Part I or Part II, whichever applies. Irs forms amended return    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Irs forms amended return See Form 8949 and the Instructions for Form 8949. Irs forms amended return Filing a claim for refund. Irs forms amended return   If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. Irs forms amended return You must use Form 1040X, Amended U. Irs forms amended return S. Irs forms amended return Individual Income Tax Return, to amend your return for the year the security became worthless. Irs forms amended return You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Irs forms amended return (Claims not due to worthless securities or bad debts generally must be filed within 3 years from the date a return is filed, or 2 years from the date the tax is paid, whichever is later. Irs forms amended return ) For more information about filing a claim, see Publication 556. Irs forms amended return Constructive Sales of Appreciated Financial Positions You are treated as having made a constructive sale when you enter into certain transactions involving an appreciated financial position (defined later) in stock, a partnership interest, or certain debt instruments. Irs forms amended return You must recognize gain as if the position were disposed of at its fair market value on the date of the constructive sale. Irs forms amended return This gives you a new holding period for the position that begins on the date of the constructive sale. Irs forms amended return Then, when you close the transaction, you reduce your gain (or increase your loss) by the gain recognized on the constructive sale. Irs forms amended return Constructive sale. Irs forms amended return   You are treated as having made a constructive sale of an appreciated financial position if you: Enter into a short sale of the same or substantially identical property, Enter into an offsetting notional principal contract relating to the same or substantially identical property, Enter into a futures or forward contract to deliver the same or substantially identical property (including a forward contract that provides for cash settlement), or Acquire the same or substantially identical property (if the appreciated financial position is a short sale, an offsetting notional principal contract, or a futures or forward contract). Irs forms amended return   You are also treated as having made a constructive sale of an appreciated financial position if a person related to you enters into a transaction described above with a view toward avoiding the constructive sale treatment. Irs forms amended return For this purpose, a related person is any related party described under Related Party Transactions , later in this chapter. Irs forms amended return Exception for nonmarketable securities. Irs forms amended return   You are not treated as having made a constructive sale solely because you entered into a contract for sale of any stock, debt instrument, or partnership interest that is not a marketable security if it settles within 1 year of the date you enter into it. Irs forms amended return Exception for certain closed transactions. Irs forms amended return   Do not treat a transaction as a constructive sale if all of the following are true. Irs forms amended return You closed the transaction on or before the 30th day after the end of your tax year. Irs forms amended return You held the appreciated financial position throughout the 60-day period beginning on the date you closed the transaction. Irs forms amended return Your risk of loss was not reduced at any time during that 60-day period by holding certain other positions. Irs forms amended return   If a closed transaction is reestablished in a substantially similar position during the 60-day period beginning on the date the first transaction was closed, this exception still applies if the reestablished position is closed before the 30th day after the end of your tax year in which the first transaction was closed and, after that closing, (2) and (3) above are true. Irs forms amended return   This exception also applies to successive short sales of an entire appreciated financial position. Irs forms amended return For more information, see Revenue Ruling 2003-1 in Internal Revenue Bulletin 2003-3. Irs forms amended return This bulletin is available at www. Irs forms amended return irs. Irs forms amended return gov/pub/irs-irbs/irb03-03. Irs forms amended return pdf. Irs forms amended return Appreciated financial position. Irs forms amended return   This is any interest in stock, a partnership interest, or a debt instrument (including a futures or forward contract, a short sale, or an option) if disposing of the interest would result in a gain. Irs forms amended return Exceptions. Irs forms amended return   An appreciated financial position does not include the following. Irs forms amended return Any position from which all of the appreciation is accounted for under marked-to-market rules, including section 1256 contracts (described later under Section 1256 Contracts Marked to Market ). Irs forms amended return Any position in a debt instrument if: The position unconditionally entitles the holder to receive a specified principal amount, The interest payments (or other similar amounts) with respect to the position are payable at a fixed rate or a variable rate described in Regulations section 1. Irs forms amended return 860G-1(a)(3), and The position is not convertible, either directly or indirectly, into stock of the issuer (or any related person). Irs forms amended return Any hedge with respect to a position described in (2). Irs forms amended return Certain trust instruments treated as stock. Irs forms amended return   For the constructive sale rules, an interest in an actively traded trust is treated as stock unless substantially all of the value of the property held by the trust is debt that qualifies for the exception to the definition of an appreciated financial position (explained in (2) above). Irs forms amended return Sale of appreciated financial position. Irs forms amended return   A transaction treated as a constructive sale of an appreciated financial position is not treated as a constructive sale of any other appreciated financial position, as long as you continue to hold the original position. Irs forms amended return However, if you hold another appreciated financial position and dispose of the original position before closing the transaction that resulted in the constructive sale, you are treated as if, at the same time, you constructively sold the other appreciated financial position. Irs forms amended return Section 1256 Contracts Marked to Market If you hold a section 1256 contract at the end of the tax year, you generally must treat it as sold at its fair market value on the last business day of the tax year. Irs forms amended return Section 1256 Contract A section 1256 contract is any: Regulated futures contract, Foreign currency contract, Nonequity option, Dealer equity option, or Dealer securities futures contract. Irs forms amended return Exceptions. Irs forms amended return   A section 1256 contract does not include: Interest rate swaps, Currency swaps, Basis swaps, Interest rate caps, Interest rate floors, Commodity swaps, Equity swaps, Equity index swaps, Credit default swaps, or Similar agreements. Irs forms amended return For more details, including definitions of these terms, see section 1256. Irs forms amended return Regulated futures contract. Irs forms amended return   This is a contract that: Provides that amounts which must be deposited to, or can be withdrawn from, your margin account depend on daily market conditions (a system of marking to market), and Is traded on, or subject to the rules of, a qualified board of exchange. Irs forms amended return A qualified board of exchange is a domestic board of trade designated as a contract market by the Commodity Futures Trading Commission, any board of trade or exchange approved by the Secretary of the Treasury, or a national securities exchange registered with the Securities and Exchange Commission. Irs forms amended return Foreign currency contract. Irs forms amended return   This is a contract that: Requires delivery of a foreign currency that has positions traded through regulated futures contracts (or settlement of which depends on the value of that type of foreign currency), Is traded in the interbank market, and Is entered into at arm's length at a price determined by reference to the price in the interbank market. Irs forms amended return   Bank forward contracts with maturity dates longer than the maturities ordinarily available for regulated futures contracts are considered to meet the definition of a foreign currency contract if the above three conditions are satisfied. Irs forms amended return   Special rules apply to certain foreign currency transactions. Irs forms amended return These transactions may result in ordinary gain or loss treatment. Irs forms amended return For details, see Internal Revenue Code section 988 and Regulations sections 1. Irs forms amended return 988-1(a)(7) and 1. Irs forms amended return 988-3. Irs forms amended return Nonequity option. Irs forms amended return   This is any listed option (defined later) that is not an equity option. Irs forms amended return Nonequity options include debt options, commodity futures options, currency options, and broad-based stock index options. Irs forms amended return A broad-based stock index is based on the value of a group of diversified stocks or securities (such as the Standard and Poor's 500 index). Irs forms amended return Warrants based on a stock index that are economically, substantially identical in all material respects to options based on a stock index are treated as options based on a stock index. Irs forms amended return Cash-settled options. Irs forms amended return   Cash-settled options based on a stock index and either traded on or subject to the rules of a qualified board of exchange are nonequity options if the Securities and Exchange Commission (SEC) determines that the stock index is broad based. Irs forms amended return   This rule does not apply to options established before the SEC determines that the stock index is broad based. Irs forms amended return Listed option. Irs forms amended return   This is any option traded on, or subject to the rules of, a qualified board or exchange (as discussed earlier under Regulated futures contract). Irs forms amended return A listed option, however, does not include an option that is a right to acquire stock from the issuer. Irs forms amended return Dealer equity option. Irs forms amended return   This is any listed option that, for an options dealer: Is an equity option, Is bought or granted by that dealer in the normal course of the dealer's business activity of dealing in options, and Is listed on the qualified board of exchange where that dealer is registered. Irs forms amended return   An “options dealer” is any person registered with an appropriate national securities exchange as a market maker or specialist in listed options. Irs forms amended return Equity option. Irs forms amended return   This is any option: To buy or sell stock, or That is valued directly or indirectly by reference to any stock or narrow-based security index. Irs forms amended return  Equity options include options on a group of stocks only if the group is a narrow-based stock index. Irs forms amended return Dealer securities futures contract. Irs forms amended return   For any dealer in securities futures contracts or options on those contracts, this is a securities futures contract (or option on such a contract) that: Is entered into by the dealer (or, in the case of an option, is purchased or granted by the dealer) in the normal course of the dealer's activity of dealing in this type of contract (or option), and Is traded on a qualified board or exchange (as defined under Regulated futures contract , earlier). Irs forms amended return A securities futures contract that is not a dealer securities futures contract is treated as described later under Securities Futures Contracts . Irs forms amended return Marked-to-Market Rules A section 1256 contract that you hold at the end of the tax year will generally be treated as sold at its fair market value on the last business day of the tax year, and you must recognize any gain or loss that results. Irs forms amended return That gain or loss is taken into account in figuring your gain or loss when you later dispose of the contract, as shown in the example under 60/40 rule, below. Irs forms amended return Hedging exception. Irs forms amended return   The marked-to-market rules do not apply to hedging transactions. Irs forms amended return See Hedging Transactions , later. Irs forms amended return 60/40 rule. Irs forms amended return   Under the marked-to-market system, 60% of your capital gain or loss will be treated as a long-term capital gain or loss, and 40% will be treated as a short-term capital gain or loss. Irs forms amended return This is true regardless of how long you actually held the property. Irs forms amended return Example. Irs forms amended return On June 22, 2012, you bought a regulated futures contract for $50,000. Irs forms amended return On December 31, 2012 (the last business day of your tax year), the fair market value of the contract was $57,000. Irs forms amended return You recognized a $7,000 gain on your 2012 tax return, treated as 60% long-term and 40% short-term capital gain. Irs forms amended return On February 1, 2013, you sold the contract for $56,000. Irs forms amended return Because you recognized a $7,000 gain on your 2012 return, you recognize a $1,000 loss ($57,000 − $56,000) on your 2013 tax return, treated as 60% long-term and 40% short-term capital loss. Irs forms amended return Limited partners or entrepreneurs. Irs forms amended return   The 60/40 rule does not apply to dealer equity options or dealer securities futures contracts that result in capital gain or loss allocable to limited partners or limited entrepreneurs (defined later under Hedging Transactions ). Irs forms amended return Instead, these gains or losses are treated as short term. Irs forms amended return Terminations and transfers. Irs forms amended return   The marked-to-market rules also apply if your obligation or rights under section 1256 contracts are terminated or transferred during the tax year. Irs forms amended return In this case, use the fair market value of each section 1256 contract at the time of termination or transfer to determine the gain or loss. Irs forms amended return Terminations or transfers may result from any offsetting, delivery, exercise, assignment, or lapse of your obligation or rights under section 1256 contracts. Irs forms amended return Loss carryback election. Irs forms amended return   An individual having a net section 1256 contracts loss (defined later), generally can elect to carry this loss back 3 years instead of carrying it over to the next year. Irs forms amended return See How To Report , later, for information about reporting this election on your return. Irs forms amended return   The loss carried back to any year under this election cannot be more than the net section 1256 contracts gain in that year. Irs forms amended return In addition, the amount of loss carried back to an earlier tax year cannot increase or produce a net operating loss for that year. Irs forms amended return   The loss is carried to the earliest carryback year first, and any unabsorbed loss amount can then be carried to each of the next 2 tax years. Irs forms amended return In each carryback year, treat 60% of the carryback amount as a long-term capital loss and 40% as a short-term capital loss from section 1256 contracts. Irs forms amended return   If only a portion of the net section 1256 contracts loss is absorbed by carrying the loss back, the unabsorbed portion can be carried forward, under the capital loss carryover rules, to the year following the loss. Irs forms amended return (See Capital Losses under Reporting Capital Gains and Losses, later. Irs forms amended return ) Figure your capital loss carryover as if, for the loss year, you had an additional short-term capital gain of 40% of the amount of net section 1256 contracts loss absorbed in the carryback years and an additional long-term capital gain of 60% of the absorbed loss. Irs forms amended return In the carryover year, treat any capital loss carryover from losses on section 1256 contracts as if it were a loss from section 1256 contracts for that year. Irs forms amended return Net section 1256 contracts loss. Irs forms amended return   This loss is the lesser of: The net capital loss for your tax year determined by taking into account only the gains and losses from section 1256 contracts, or The capital loss carryover to the next tax year determined without this election. Irs forms amended return Net section 1256 contracts gain. Irs forms amended return   This gain is the lesser of: The capital gain net income for the carryback year determined by taking into account only gains and losses from section 1256 contracts, or The capital gain net income for that year. Irs forms amended return  Figure your net section 1256 contracts gain for any carryback year without regard to the net section 1256 contracts loss for the loss year or any later tax year. Irs forms amended return Traders in section 1256 contracts. Irs forms amended return   Gain or loss from the trading of section 1256 contracts is capital gain or loss subject to the marked-to-market rules. Irs forms amended return However, this does not apply to contracts held for purposes of hedging property if any loss from the property would be an ordinary loss. Irs forms amended return Treatment of underlying property. Irs forms amended return   The determination of whether an individual's gain or loss from any property is ordinary or capital gain or loss is made without regard to the fact that the individual is actively engaged in dealing in or trading section 1256 contracts related to that property. Irs forms amended return How To Report If you disposed of regulated futures or foreign currency contracts in 2013 (or had unrealized profit or loss on these contracts that were open at the end of 2012 or 2013), you should receive Form 1099-B, or substitute statement, from your broker. Irs forms amended return Form 6781. Irs forms amended return   Use Part I of Form 6781 to report your gains and losses from all section 1256 contracts that are open at the end of the year or that were closed out during the year. Irs forms amended return This includes the amount shown in box 10 of Form 1099-B. Irs forms amended return Then enter the net amount of these gains and losses on Schedule D (Form 1040), line 4 or line 11, as appropriate. Irs forms amended return Include a copy of Form 6781 with your income tax return. Irs forms amended return   If the Form 1099-B you receive includes a straddle or hedging transaction, defined later, it may be necessary to show certain adjustments on Form 6781. Irs forms amended return Follow the Form 6781 instructions for completing Part I. Irs forms amended return Loss carryback election. Irs forms amended return   To carry back your loss under the election procedures described earlier, file Form 1040X or Form 1045, Application for Tentative Refund, for the year to which you are carrying the loss with an amended Form 6781 and an amended Schedule D (Form 1040) attached. Irs forms amended return Follow the instructions for completing Form 6781 for the loss year to make this election. Irs forms amended return Hedging Transactions The marked-to-market rules, described earlier, do not apply to hedging transactions. Irs forms amended return A transaction is a hedging transaction if both of the following conditions are met. Irs forms amended return You entered into the transaction in the normal course of your trade or business primarily to manage the risk of: Price changes or currency fluctuations on ordinary property you hold (or will hold), or Interest rate or price changes, or currency fluctuations, on your current or future borrowings or ordinary obligations. Irs forms amended return You clearly identified the transaction as being a hedging transaction before the close of the day on which you entered into it. Irs forms amended return This hedging transaction exception does not apply to transactions entered into by or for any syndicate. Irs forms amended return A syndicate is a partnership, S corporation, or other entity (other than a regular corporation) that allocates more than 35% of its losses to limited partners or limited entrepreneurs. Irs forms amended return A limited entrepreneur is a person who has an interest in an enterprise (but not as a limited partner) and who does not actively participate in its management. Irs forms amended return However, an interest is not considered held by a limited partner or entrepreneur if the interest holder actively participates (or did so for at least 5 full years) in the management of the entity, or is the spouse, child (including a legally adopted child), grandchild, or parent of an individual who actively participates in the management of the entity. Irs forms amended return Hedging loss limit. Irs forms amended return   If you are a limited partner or entrepreneur in a syndicate, the amount of a hedging loss you can claim is limited. Irs forms amended return A “hedging loss” is the amount by which the allowable deductions in a tax year that resulted from a hedging transaction (determined without regard to the limit) are more than the income received or accrued during the tax year from this transaction. Irs forms amended return   Any hedging loss allocated to you for the tax year is limited to your taxable income for that year from the trade or business in which the hedging transaction occurred. Irs forms amended return Ignore any hedging transaction items in determining this taxable income. Irs forms amended return If you have a hedging loss that is disallowed because of this limit, you can carry it over to the next tax year as a deduction resulting from a hedging transaction. Irs forms amended return   If the hedging transaction relates to property other than stock or securities, the limit on hedging losses applies if the limited partner or entrepreneur is an individual. Irs forms amended return   The limit on hedging losses does not apply to any hedging loss to the extent that it is more than all your unrecognized gains from hedging transactions at the end of the tax year that are from the trade or business in which the hedging transaction occurred. Irs forms amended return The term “unrecognized gain” has the same meaning as defined under Loss Deferral Rules in Straddles, later. Irs forms amended return Sale of property used in a hedge. Irs forms amended return   Once you identify personal property as being part of a hedging transaction, you must treat gain from its sale or exchange as ordinary income, not capital gain. Irs forms amended return Self-Employment Income Gains and losses derived in the ordinary course of a commodity or option dealer's trading in section 1256 contracts and property related to these contracts are included in net earnings from self-employment. Irs forms amended return See the Instructions for Schedule SE (Form 1040). Irs forms amended return In addition, the rules relating to contributions to self-employment retirement plans apply. Irs forms amended return For information on retirement plan contributions, see Publication 560 and Publication 590. Irs forms amended return Basis of Investment Property Basis is a way of measuring your investment in property for tax purposes. Irs forms amended return You must know the basis of your property to determine whether you have a gain or loss on its sale or other disposition. Irs forms amended return Investment property you buy normally has an original basis equal to its cost. Irs forms amended return If you get property in some way other than buying it, such as by gift or inheritance, its fair market value may be important in figuring the basis. Irs forms amended return Cost Basis The basis of property you buy is usually its cost. Irs forms amended return The cost is the amount you pay in cash, debt obligations, or other property or services. Irs forms amended return Unstated interest. Irs forms amended return   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, minus the amount considered to be unstated interest. Irs forms amended return You generally have unstated interest if your interest rate is less than the applicable federal rate. Irs forms amended return For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Irs forms amended return Basis Other Than Cost There are times when you must use a basis other than cost. Irs forms amended return In these cases, you may need to know the property's fair market value or the adjusted basis of the previous owner. Irs forms amended return Fair market value. Irs forms amended return   This is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Irs forms amended return Sales of similar property, around the same date, may be helpful in figuring fair market value. Irs forms amended return Property Received for Services If you receive investment property for services, you must include the property's fair market value in income. Irs forms amended return The amount you include in income then becomes your basis in the property. Irs forms amended return If the services were performed for a price that was agreed to beforehand, this price will be accepted as the fair market value of the property if there is no evidence to the contrary. Irs forms amended return Restricted property. Irs forms amended return   If you receive, as payment for services, property that is subject to certain restrictions, your basis in the property generally is its fair market value when it becomes substantially vested. Irs forms amended return Property becomes substantially vested when it is transferable or is no longer subject to substantial risk of forfeiture, whichever happens first. Irs forms amended return See Restricted Property in Publication 525 for more information. Irs forms amended return Bargain purchases. Irs forms amended return   If you buy investment property at less than fair market value, as payment for services, you must include the difference in income. Irs forms amended return Your basis in the property is the price you pay plus the amount you include in income. Irs forms amended return Property Received in Taxable Trades If you received investment property in trade for other property, the basis of the new property is its fair market value at the time of the trade unless you received the property in a nontaxable trade. Irs forms amended return Example. Irs forms amended return You trade A Company stock for B Company stock having a fair market value of $1,200. Irs forms amended return If the adjusted basis of the A Company stock is less than $1,200, you have a taxable gain on the trade. Irs forms amended return If the adjusted basis of the A Company stock is more than $1,200, you have a deductible loss on the trade. Irs forms amended return The basis of your B Company stock is $1,200. Irs forms amended return If you later sell the B Company stock for $1,300, you will have a gain of $100. Irs forms amended return Property Received in Nontaxable Trades If you have a nontaxable trade, you do not recognize gain or loss until you dispose of the property you received in the trade. Irs forms amended return See Nontaxable Trades , later. Irs forms amended return The basis of property you received in a nontaxable or partly nontaxable trade is generally the same as the adjusted basis of the property you gave up. Irs forms amended return Increase this amount by any cash you paid, additional costs you had, and any gain recognized. Irs forms amended return Reduce this amount by any cash or unlike property you received, any loss recognized, and any liability of yours that was assumed or treated as assumed. Irs forms amended return Property Received From Your Spouse If property is transferred to you from your spouse (or former spouse, if the transfer is incident to your divorce), your basis is the same as your spouse's or former spouse's adjusted basis just before the transfer. Irs forms amended return See Transfers Between Spouses , later. Irs forms amended return Recordkeeping. Irs forms amended return The transferor must give you the records necessary to determine the adjusted basis and holding period of the property as of the date of the transfer. Irs forms amended return Property Received as a Gift To figure your basis in property that you received as a gift, you must know its adjusted basis to the donor just before it was given to you, its fair market value at the time it was given to you, the amount of any gift tax paid on it, and the date it was given to you. Irs forms amended return Fair market value less than donor's adjusted basis. Irs forms amended return   If the fair market value of the property at the time of the gift was less than the donor's adjusted basis just before the gift, your basis for gain on its sale or other disposition is the same as the donor's adjusted basis plus or minus any required adjustments to basis during the period you hold the property. Irs forms amended return Your basis for loss is its fair market value at the time of the gift plus or minus any required adjustments to basis during the period you hold the property. Irs forms amended return No gain or loss. Irs forms amended return   If you use the basis for figuring a gain and the result is a loss, and then use the basis for figuring a loss and the result is a gain, you will have neither a gain nor a loss. Irs forms amended return Example. Irs forms amended return You receive a gift of investment property having an adjusted basis of $10,000 at the time of the gift. Irs forms amended return The fair market value at the time of the gift is $9,000. Irs forms amended return You later sell the property for $9,500. Irs forms amended return You have neither gain nor loss. Irs forms amended return Your basis for figuring gain is $10,000, and $9,500 minus $10,000 results in a $500 loss. Irs forms amended return Your basis for figuring loss is $9,000, and $9,500 minus $9,000 results in a $500 gain. Irs forms amended return Fair market value equal to or more than donor's adjusted basis. Irs forms amended return   If the fair market value of the property at the time of the gift was equal to or more than the donor's adjusted basis just before the gift, your basis for gain or loss on its sale or other disposition is the donor's adjusted basis plus or minus any required adjustments to basis during the period you hold the property. Irs forms amended return Also, you may be allowed to add to the donor's adjusted basis all or part of any gift tax paid, depending on the date of the gift. Irs forms amended return Gift received before 1977. Irs forms amended return   If you received property as a gift before 1977, your basis in the property is the donor's adjusted basis increased by the total gift tax paid on the gift. Irs forms amended return However, your basis cannot be more than the fair market value of the gift at the time it was given to you. Irs forms amended return Example 1. Irs forms amended return You were given XYZ Company stock in 1976. Irs forms amended return At the time of the gift, the stock had a fair market value of $21,000. Irs forms amended return The donor's adjusted basis was $20,000. Irs forms amended return The donor paid a gift tax of $500 on the gift. Irs forms amended return Your basis for gain or loss is $20,500, the donor's adjusted basis plus the amount of gift tax paid. Irs forms amended return Example 2. Irs forms amended return The facts are the same as in Example 1 except that the gift tax paid was $1,500. Irs forms amended return Your basis is $21,000, the donor's adjusted basis plus the gift tax paid, but limited to the fair market value of the stock at the time of the gift. Irs forms amended return Gift received after 1976. Irs forms amended return   If you received property as a gift after 1976, your basis is the donor's adjusted basis increased by the part of the gift tax paid that was for the net increase in value of the gift. Irs forms amended return You figure this part by multiplying the gift tax paid on the gift by a fraction. Irs forms amended return The numerator (top part) is the net increase in value of the gift and the denominator (bottom part) is the amount of the gift. Irs forms amended return   The net increase in value of the gift is the fair market value of the gift minus the donor's adjusted basis. Irs forms amended return The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Irs forms amended return Example. Irs forms amended return In 2013, you received a gift of property from your mother. Irs forms amended return At the time of the gift, the property had a fair market value of $101,000 and an adjusted basis to her of $40,000. Irs forms amended return The amount of the gift for gift tax purposes was $87,000 ($101,000 minus the $14,000 annual exclusion), and your mother paid a gift tax of $21,000. Irs forms amended return You figure your basis in the following way: Fair market value $101,000 Minus: Adjusted basis 40,000 Net increase in value of gift $61,000 Gift tax paid $21,000 Multiplied by . Irs forms amended return 701 ($61,000 ÷ $87,000) . Irs forms amended return 701 Gift tax due to net increase in value $14,721 Plus: Adjusted basis of property to  your mother 40,000 Your basis in the property $54,721 Part sale, part gift. Irs forms amended return   If you get property in a transfer that is partly a sale and partly a gift, your basis is the larger of the amount you paid for the property or the transferor's adjusted basis in the property at the time of the transfer. Irs forms amended return Add to that amount the amount of any gift tax paid on the gift, as described in the preceding discussion. Irs forms amended return For figuring loss, your basis is limited to the property's fair market value at the time of the transfer. Irs forms amended return Gift tax information. Irs forms amended return   For information on gift tax, see Publication 950, Introduction to Estate and Gift Taxes. Irs forms amended return For information on figuring the amount of gift tax to add to your basis, see Property Received as a Gift in Publication 551. Irs forms amended return Property Received as Inheritance Before or after 2010. Irs forms amended return   If you inherited property from a decedent who died before or after 2010, or who died in 2010 and the executor of the decedent's estate elected not to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, your basis in that property generally is its fair market value (its appraised value on Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return) on: The date of the decedent's death, or The later alternate valuation date if the estate qualifies for, and elects to use, alternate valuation. Irs forms amended return If no Form 706 was filed, use the appraised value on the date of death for state inheritance or transmission taxes. Irs forms amended return For stocks and bonds, if no Form 706 was filed and there are no state inheritance or transmission taxes, see the Form 706 instructions for figuring the fair market value of the stocks and bonds on the date of the decedent's death. Irs forms amended return Appreciated property you gave the decedent. Irs forms amended return   Your basis in certain appreciated property that you inherited is the decedent's adjusted basis in the property immediately before death rather than its fair market value. Irs forms amended return This applies to appreciated property that you or your spouse gave the decedent as a gift during the 1-year period ending on the date of death. Irs forms amended return Appreciated property is any property whose fair market value on the day you gave it to the decedent was more than its adjusted basis. Irs forms amended return More information. Irs forms amended return   See Publication 551 for more information on the basis of inherited property, including community property, property held by a surviving tenant in a joint tenancy or tenancy by the entirety, a qualified joint interest, and a farm or closely held business. Irs forms amended return Inherited in 2010 and executor elected to file Form 8939. Irs forms amended return   If you inherited property from a decedent who died in 2010 and the executor made the election to file Form 8939, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to figure your basis. Irs forms amended return Adjusted Basis Before you can figure any gain or loss on a sale, exchange, or other disposition of property or figure allowable depreciation, depletion, or amortization, you usually must make certain adjustments (increases and decreases) to the basis of the property. Irs forms amended return The result of these adjustments to the basis is the adjusted basis. Irs forms amended return Adjustments to the basis of stocks and bonds are explained in the following discussion. Irs forms amended return For information about other adjustments to basis, see Publication 551. Irs forms amended return Stocks and Bonds The basis of stocks or bonds you own generally is the purchase price plus the costs of purchase, such as commissions and recording or transfer fees. Irs forms amended return If you acquired stock or bonds other than by purchase, your basis is usually determined by fair market value or the previous owner's adjusted basis as discussed earlier under Basis Other Than Cost . Irs forms amended return The basis of stock must be adjusted for certain events that occur after purchase. Irs forms amended return For example, if you receive more stock from nontaxable stock dividends or stock splits, you must reduce the basis of your original stock. Irs forms amended return You must also reduce your basis when you receive nondividend distributions (discussed in chapter 1). Irs forms amended return These distributions, up to the amount of your basis, are a nontaxable return of capital. Irs forms amended return The IRS partners with companies that offer Form 8949 and Schedule D (Form 1040) software that can import trades from many brokerage firms and accounting software to help you keep track of your adjusted basis in securities. Irs forms amended return To find out more, go to www. Irs forms amended return irs. Irs forms amended return gov/Filing/Filing-Options. Irs forms amended return Identifying stock or bonds sold. Irs forms amended return   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. Irs forms amended return Adequate identification. Irs forms amended return   You will make an adequate identification if you show that certificates representing shares of stock from a lot that you bought on a certain date or for a certain price were delivered to your broker or other agent. Irs forms amended return Broker holds stock. Irs forms amended return   If you have left the stock certificates with your broker or other agent, you will make an adequate identification if you: Tell your broker or other agent the particular stock to be sold or transferred at the time of the sale or transfer, and Receive a written confirmation of this from your broker or other agent within a reasonable time. Irs forms amended return  Stock identified this way is the stock sold or transferred even if stock certificates from a different lot are delivered to the broker or other agent. Irs forms amended return Single stock certificate. Irs forms amended return   If you bought stock in different lots at different times and you hold a single stock certificate for this stock, you will make an adequate identification if you: Tell your broker or other agent the particular stock to be sold or transferred when you deliver the certificate to your broker or other agent, and Receive a written confirmation of this from your broker or other agent within a reasonable time. Irs forms amended return   If you sell part of the stock represented by a single certificate directly to the buyer instead of through a broker, you will make an adequate identification if you keep a written record of the particular stock that you intend to sell. Irs forms amended return Bonds. Irs forms amended return   These methods of identification also apply to bonds sold or transferred. Irs forms amended return Identification not possible. Irs forms amended return   If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. Irs forms amended return Except for certain mutual fund shares, discussed later, you cannot use the average price per share to figure gain or loss on the sale of the shares. Irs forms amended return Example. Irs forms amended return You bought 100 shares of stock of XYZ Corporation in 1998 for $10 a share. Irs forms amended return In January 1999 you bought another 200 shares for $11 a share. Irs forms amended return In July 1999 you gave your son 50 shares. Irs forms amended return In December 2001 you bought 100 shares for $9 a share. Irs forms amended return In April 2013 you sold 130 shares. Irs forms amended return You cannot identify the shares you disposed of, so you must use the stock you acquired first to figure the basis. Irs forms amended return The shares of stock you gave your son had a basis of $500 (50 × $10). Irs forms amended return You figure the basis of the 130 shares of stock you sold in 2013 as follows: 50 shares (50 × $10) balance of stock bought in 1998 $ 500 80 shares (80 × $11) stock bought in January 1999 880 Total basis of stock sold in 2013 $1,380 Shares in a mutual fund or REIT. Irs forms amended return    The basis of shares in a mutual fund (or other regulated investment company) or a real estate investment trust (REIT) is generally figured in the same way as the basis of other stock and usually includes any commissions or load charges paid for the purchase. Irs forms amended return Example. Irs forms amended return You bought 100 shares of Fund A for $10 a share. Irs forms amended return You paid a $50 commission to the broker for the purchase. Irs forms amended return Your cost basis for each share is $10. Irs forms amended return 50 ($1,050 ÷ 100). Irs forms amended return Commissions and load charges. Irs forms amended return   The fees and charges you pay to acquire or redeem shares of a mutual fund are not deductible. Irs forms amended return You can usually add acquisition fees and charges to your cost of the shares and thereby increase your basis. Irs forms amended return A fee paid to redeem the shares is usually a reduction in the redemption price (sales price). Irs forms amended return   You cannot add your entire acquisition fee or load charge to the cost of the mutual fund shares acquired if all of the following conditions apply. Irs forms amended return You get a reinvestment right because of the purchase of the shares or the payment of the fee or charge. Irs forms amended return You dispose of the shares within 90 days of the purchase date. Irs forms amended return You acquire new shares in the same mutual fund or another mutual fund, for which the fee or charge is reduced or waived because of the reinvestment right you got when you acquired the original shares. Irs forms amended return   The amount of the original fee or charge in excess of the reduction in (3) is added to the cost of the original shares. Irs forms amended return The rest of the original fee or charge is added to the cost basis of the new shares (unless all three conditions above also apply to the purchase of the new shares). Irs forms amended return Choosing average basis for mutual fund shares. Irs forms amended return   You can choose to use the average basis of mutual fund shares if you acquired the identical shares at various times and prices, or you acquired the shares after 2010 in connection with a dividend reinvestment plan, and left them on deposit in an account kept by a custodian or agent. Irs forms amended return The methods you can use to figure average basis are explained later. Irs forms amended return Undistributed capital gains. Irs forms amended return   If you had to include in your income any undistributed capital gains of the mutual fund or REIT, increase your basis in the stock by the difference between the amount you included and the amount of tax paid for you by the fund or REIT. Irs forms amended return See Undistributed capital gains of mutual funds and REITs under Capital Gain Distributions in chapter 1. Irs forms amended return Reinvestment right. Irs forms amended return   This is the right to acquire mutual fund shares in the same or another mutual fund without paying a fee or load charge, or by paying a reduced fee or load charge. Irs forms amended return      The original cost basis of mutual fund shares you acquire by reinvesting your distributions is the amount of the distributions used to purchase each full or fractional share. Irs forms amended return This rule applies even if the distribution is an exempt-interest dividend that you do not report as income. Irs forms amended return Table 4-1. Irs forms amended return This is a worksheet you can use to keep track of the adjusted basis of your mutual fund shares. Irs forms amended return Enter the cost per share when you acquire new shares and any adjustments to their basis when the adjustment occurs. Irs forms amended return This worksheet will help you figure the adjusted basis when you sell or redeem shares. Irs forms amended return Table 4-1. Irs forms amended return Mutual Fund Record Mutual Fund Acquired1 Adjustment to Basis Per Share Adjusted2 Basis Per Share Sold or redeemed Date Number of Shares Cost Per Share Date Number of Shares                                                                                                                                                                                                                                                                         1 Include share received from reinvestment of distributions. Irs forms amended return 2 Cost plus or minus adjustments. Irs forms amended return Automatic investment service. Irs forms amended return   If you participate in an automatic investment service, your basis for each share of stock, including fractional shares, bought by the bank or other agent is the purchase price plus a share of the broker's commission. Irs forms amended return Dividend reinvestment plans. Irs forms amended return   If you participate in a dividend reinvestment plan and receive stock from the corporation at a discount, your basis is the full fair market value of the stock on the dividend payment date. Irs forms amended return You must include the amount of the discount in your income. Irs forms amended return Public utilities. Irs forms amended return   If, before 1986, you excluded from income the value of stock you had received under a qualified public utility reinvestment plan, your basis in that stock is zero. Irs forms amended return Stock dividends. Irs forms amended return   Stock dividends are distributions made by a corporation of its own stock. Irs forms amended return Generally, stock dividends are not taxable to you. Irs forms amended return However, see Distributions of Stock and Stock Rights under Dividends and Other Distributions in chapter 1 for some exceptions. Irs forms amended return If the stock dividends are not taxable, you must divide your basis for the old stock between the old and new stock. Irs forms amended return New and old stock identical. Irs forms amended return   If the new stock you received as a nontaxable dividend is identical to the old stock on which the dividend was declared, divide the adjusted basis of the old stock by the number of shares of old and new stock. Irs forms amended return The result is your basis for each share of stock. Irs forms amended return Example 1. Irs forms amended return You owned one share of common stock that you bought for $45. Irs forms amended return The corporation distributed two new shares of common stock for each share held. Irs forms amended return You then had three shares of common stock. Irs forms amended return Your basis in each share is $15 ($45 ÷ 3). Irs forms amended return Example 2. Irs forms amended return You owned two shares of common stock. Irs forms amended return You bought one for $30 and the other for $45. Irs forms amended return The corporation distributed two new shares of common stock for each share held. Irs forms amended return You had six shares after the distribution—three with a basis of $10 each ($30 ÷ 3) and three with a basis of $15 each ($45 ÷ 3). Irs forms amended return New and old stock not identical. Irs forms amended return   If the new stock you received as a nontaxable dividend is not identical to the old stock on which it was declared, the basis of the new stock is calculated differently. Irs forms amended return Divide the adjusted basis of the old stock between the old and the new stock in the ratio of the fair market value of each lot of stock to the total fair market value of both lots on the date of distribution of the new stock. Irs forms amended return Example. Irs forms amended return You bought a share of common stock for $100. Irs forms amended return Later, the corporation distributed a share of preferred stock for each share of common stock held. Irs forms amended return At the date of distribution, your common stock had a fair market value of $150 and the preferred stock had a fair market value of $50. Irs forms amended return You figure the basis of the old and new stock by dividing your $100 basis between them. Irs forms amended return The basis of your common stock is $75 (($150 ÷ $200) × $100), and the basis of the new preferred stock is $25 (($50 ÷ $200) × $100). Irs forms amended return Stock bought at various times. Irs forms amended return   Figure the basis of stock dividends received on stock you bought at various times and at different prices by allocating to each lot of stock the share of the stock dividends due to it. Irs forms amended return Taxable stock dividends. Irs forms amended return   If your stock dividend is taxable when you receive it, the basis of your new stock is its fair market value on the date of distribution. Irs forms amended return The basis of your old stock does not change. Irs forms amended return Stock splits. Irs forms amended return   Figure the basis of stock splits in the same way as stock dividends if identical stock is distributed on the stock held. Irs forms amended return Stock rights. Irs forms amended return   A stock right is a right to acquire a corporation's stock. Irs forms amended return It may be exercised, it may be sold if it has a market value, or it may expire. Irs forms amended return Stock rights are rarely taxable when you receive them. Irs forms amended return See Distributions of Stock and Stock Rights under Dividends and Other Distributions in chapter 1. Irs forms amended return Taxable stock rights. Irs forms amended return   If you receive stock rights that are taxable, the basis of the rights is their fair market value at the time of distribution. Irs forms amended return The basis of the old stock does not change. Irs forms amended return Nontaxable stock rights. Irs forms amended return   If you receive nontaxable stock rights and allow them to expire, they have no basis. Irs forms amended return   If you exercise or sell the nontaxable stock rights and if, at the time of distribution, the stock rights had a fair market value of 15% or more of the fair market value of the old stock, you must divide the adjusted basis of the old stock between the old stock and the stock rights. Irs forms amended return Use a ratio of the fair market value of each to the total fair market value of both at the time of distribution. Irs forms amended return   If the fair market value of the stock rights was less than 15%, their basis is zero. Irs forms amended return However, you can choose to divide the basis of the old stock between the old stock and the stock rights. Irs forms amended return To make the choice, attach a statement to your return for the year in which you received the rights, stating that you choose to divide the basis of the stock. Irs forms amended return Basis of new stock. Irs forms amended return   If you exercise the stock rights, the basis of the new stock is its cost plus the basis of the stock rights exercised. Irs forms amended return Example. Irs forms amended return You own 100 shares of ABC Company stock, which cost you $22 per share. Irs forms amended return The ABC Company gave you 10 nontaxable stock rights that would allow you to buy 10 more shares at $26 per share. Irs forms amended return At the time the stock rights were distributed, the stock had a market value of $30, not including the stock rights. Irs forms amended return Each stock right had a market value of $3. Irs forms amended return The market value of the stock rights was less than 15% of the market value of the stock, but you chose to divide the basis of your stock between the stock and the rights. Irs forms amended return You figure the basis of the rights and the basis of the old stock as follows: 100 shares × $22 = $2,200, basis of old stock   100 shares × $30 = $3,000, market value of old stock   10 rights × $3 = $30, market value of rights   ($3,000 ÷ $3,030) × $2,200 = $2,178. Irs forms amended return 22, new basis of old stock   ($30 ÷ $3,030) × $2,200 = $21. Irs forms amended return 78, basis of rights   If you sell the rights, the basis for figuring gain or loss is $2. Irs forms amended return 18 ($21. Irs forms amended return 78 ÷ 10) per right. Irs forms amended return If you exercise the rights, the basis of the stock you acquire is the price you pay ($26) plus the basis of the right exercised ($2. Irs forms amended return 18), or $28. Irs forms amended return 18 per share. Irs forms amended return The remaining basis of the old stock is $21. Irs forms amended return 78 per share. Irs forms amended return Investment property received in liquidation. Irs forms amended return   In general, if you receive investment property as a distribution in partial or complete liquidation of a corporation and if you recognize gain or loss when you acquire the property, your basis in the property is its fair market value at the time of the distribution. Irs forms amended return S corporation stock. Irs forms amended return   You must increase your basis in stock of an S corporation by your pro rata share of the following items. Irs forms amended return All income items of the S corporation, including tax-exempt income, that are separately stated and passed through to you as a shareholder. Irs forms amended return The nonseparately stated income of the S corporation. Irs forms amended return The amount of the deduction for depletion (other than oil and gas depletion) that is more than the basis of the property being depleted. Irs forms amended return   You must decrease your basis in stock of an S corporation by your pro rata share of the following items. Irs forms amended return Distributions by the S corporation that were not included in your income. Irs forms amended return All loss and deduction items of the S corporation that are separately stated and passed through to you. Irs forms amended return Any nonseparately stated loss of the S corporation. Irs forms amended return Any expense of the S corporation that is not deductible in figuring its taxable income and not properly chargeable to a capital account. Irs forms amended return The amount of your deduction for depletion of oil and gas wells to the extent the deduction is not more than your share of the adjusted basis of the wells. Irs forms amended return However, your basis in the stock cannot be reduced below zero. Irs forms amended return Specialized small business investment company stock or partnership interest. Irs forms amended return   If you bought this stock or interest as replacement property for publicly traded securities you sold at a gain, you must reduce the basis of the stock or interest by the amount of any postponed gain on that sale. Irs forms amended return See Rollover of Gain From Publicly Traded Securities , later. Irs forms amended return Qualified small business stock. Irs forms amended return   If you bought this stock as replacement property for other qualified small business stock you sold at a gain, you must reduce the basis of this replacement stock by the amount of any postponed gain on the earlier sale. Irs forms amended return See Gains on Qualified Small Business Stock , later. Irs forms amended return Short sales. Irs forms amended return   If you cannot deduct payments you make to a lender in lieu of dividends on stock used in a short sale, the amount you pay to the lender is a capital expense, and you must add it to the basis of the stock used to close the short sale. Irs forms amended return   See Payments in lieu of dividends , later, for information about deducting payments in lieu of dividends. Irs forms amended return Premiums on bonds. Irs forms amended return   If you buy a bond at a premium, the premium is treated as part of your basis in the bond. Irs forms amended return If you choose to amortize the premium paid on a taxable bond, you must reduce the basis of the bond by the amortized part of the premium each year over the life of the bond. Irs forms amended return   Although you cannot deduct the premium on a tax-exempt bond, you must amortize it to determine your adjusted basis in the bond. Irs forms amended return You must reduce the basis of the bond by the premium you amortized for the period you held the bond. Irs forms amended return   See Bond Premium Amortization in chapter 3 for more information. Irs forms amended return Market discount on bonds. Irs forms amended return   If you include market discount on a bond in income currently, increase the basis of your bond by the amount of market discount you include in your income. Irs forms amended return See Market Discount Bonds in chapter 1 for more information. Irs forms amended return Bonds purchased at par value. Irs forms amended return   A bond purchased at par value (face amount) has no premium or discount. Irs forms amended return When you sell or otherwise dispose of the bond, you figure the gain or loss by comparing the bond proceeds to the purchase price of the bond. Irs forms amended return Example. Irs forms amended return You purchased a bond several years ago for its par value of $10,000. Irs forms amended return You sold the bond this year for $10,100. Irs forms amended return You have a gain of $100. Irs forms amended return However, if you had sold the bond for $9,900, you would have a loss of $100. Irs forms amended return Acquisition discount on short-term obligations. Irs forms amended return   If you include acquisition discount on a short-term obligation in your income currently, increase the basis of the obligation by the amount of acquisition discount you include in your income. Irs forms amended return See Discount on Short-Term Obligations in chapter 1 for more information. Irs forms amended return Original issue discount (OID) on debt instruments. Irs forms amended return   Increase the basis of a debt instrument by the OID you include in your income. Irs forms amended return See Original Issue Discount (OID) in chapter 1. Irs forms amended return Discounted tax-exempt obligations. Irs forms amended return   OID on tax-exempt obligations is generally not taxable. Irs forms amended return However, when you dispose of a tax-exempt obligation issued after September 3, 1982, that you acquired after March 1, 1984, you must accrue OID on the obligation to determine its adjusted basis. Irs forms amended return The accrued OID is added to the basis of the obligation to determine your gain or loss. Irs forms amended return   For information on determining OID on a long-term obligation, see Debt Instruments Issued After July 1, 1982, and Before 1985 or Debt Instruments Issued After 1984, whichever applies, in Publication 1212 under Figuring OID on Long-Term Debt Instruments. Irs forms amended return   If the tax-exempt obligation has a maturity of 1 year or less, accrue OID under the rules for acquisition discount on short-term obligations. Irs forms amended return See Discount on Short-Term Obligations in chapter 1. Irs forms amended return Stripped tax-exempt obligation. Irs forms amended return   If you acquired a stripped tax-exempt bond or coupon after October 22, 1986, you must accrue OID on it to determine its adjusted basis when you dispose of it. Irs forms amended return For stripped tax-exempt bonds or coupons acquired after June 10, 1987, part of this OID may be taxable. Irs forms amended return You accrue the OID on these obligations in the manner described in chapter 1 under Stripped Bonds and Coupons . Irs forms amended return   Increase your basis in the stripped tax-exempt bond or coupon by the taxable and nontaxable accrued OID. Irs forms amended return Also increase your basis by the interest that accrued (but was not paid and was not previously reflected in your basis) before the date you sold the bond or coupon. Irs forms amended return In addition, for bonds acquired after June 10, 1987, add to your basis any accrued market discount not previously reflected in basis. Irs forms amended return How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Irs forms amended return Gain. Irs forms amended return   If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Irs forms amended return Loss. Irs forms amended return   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Irs forms amended return Amount realized. Irs forms amended return   The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). Irs forms amended return Amount realized includes the money you receive plus the fair market value of any property or services you receive. Irs forms amended return   If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. Irs forms amended return For more information, see Publication 537. Irs forms amended return   If a buyer of property issues a debt instrument to the seller of the property, the amount realized is determined by reference to the issue price of the debt instrument, which may or may not be the fair market value of the debt instrument. Irs forms amended return See Regulations section 1. Irs forms amended return 1001-1(g). Irs forms amended return However, if the debt instrument was previously issued by a third party (one not part of the sale transaction), the fair market value of the debt instrument is used to determine the amount realized. Irs forms amended return Fair market value. Irs forms amended return   Fair market value is the price at which property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Irs forms amended return Example. Irs forms amended return You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. Irs forms amended return Your gain is $3,000 ($10,000 – $7,000). Irs forms amended return If you also receive a note for $6,000 that has an issue price of $6,000, your gain is $9,000 ($10,000 + $6,000 – $7,000). Irs forms amended return Debt paid off. Irs forms amended return   A debt against the property, or against you, that is paid off as a part of the transaction or that is assumed by the buyer must be included in the amount realized. Irs forms amended return This is true even if neither you nor the buyer is personally liable for the debt. Irs forms amended return For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. Irs forms amended return Example. Irs forms amended return You sell stock that you had pledged as security for a bank loan of $8,000. Irs forms amended return Your basis in the stock is $6,000. Irs forms amended return The buyer pays off your bank loan and pays you $20,000 in cash. Irs forms amended return The amount realized is $28,000 ($20,000 + $8,000). Irs forms amended return Your gain is $22,000 ($28,000 – $6,000). Irs forms amended return Payment of cash. Irs forms amended return   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Irs forms amended return Determine your gain or loss by subtracting the cash you pay and the adjusted basis of the property you trade in from the amount you realize. Irs forms amended return If the result is a positive number, it is a gain. Irs forms amended return If the result is a negative number, it is a loss. Irs forms amended return No gain or loss. Irs forms amended return   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Irs forms amended return In this case, you may have neither a gain nor a loss. Irs forms amended return See No gain or loss in the discussion on the basis of property you received as a gift under Basis Other Than Cost, earlier. Irs forms amended return Special Rules for Mutual Funds To figure your gain or loss when you dispose of mutual fund shares, you need to determine which shares were sold and the basis of those shares. Irs forms amended return If your shares in a mutual fund were acquired all on the same day and for the same price, figuring their basis is not difficu