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Irs Free File Program

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Irs Free File Program

Irs free file program 2. Irs free file program   Possession Source Income Table of Contents Types of IncomeCompensation for Labor or Personal Services Investment Income Sales or Other Dispositions of Property Scholarships, Fellowships, Grants, Prizes, and Awards Effectively Connected Income In order to determine where to file your return and which form(s) you need to complete, you must determine the source of each item of income you received during the tax year. Irs free file program Income you received from sources within, or that was effectively connected with the conduct of a trade or business within, the relevant possession must be identified separately from U. Irs free file program S. Irs free file program or foreign source income. Irs free file program This chapter discusses the rules for determining if the source of your income is from: American Samoa, The Commonwealth of the Northern Mariana Islands (CNMI), The Commonwealth of Puerto Rico (Puerto Rico), Guam, or The U. Irs free file program S. Irs free file program Virgin Islands (USVI). Irs free file program Generally, the same rules that apply for determining U. Irs free file program S. Irs free file program source income also apply for determining possession source income. Irs free file program However, there are some important exceptions to these rules. Irs free file program Both the general rules and the exceptions are discussed in this chapter. Irs free file program U. Irs free file program S. Irs free file program income rule. Irs free file program   This rule states that income is not possession source income if, under the rules of Internal Revenue Code sections 861–865, it is treated as income: From sources within the United States, or Effectively connected with the conduct of a trade or business within the United States. Irs free file program Table 2-1 shows the general rules for determining whether income is from sources within the United States. Irs free file program Table 2-1. Irs free file program General Rules for Determining U. Irs free file program S. Irs free file program Source of Income Item of Income Factor Determining Source Salaries, wages, and other compensation for labor or personal services Where labor or services performed Pensions Contributions: Where services were performed that earned the pension Investment earnings: Where pension trust is located Interest Residence of payer Dividends Where corporation created or organized Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. Irs free file program Where property is used Sale of business inventory—purchased Where sold Sale of business inventory—produced Allocation if produced and sold in different locations Sale of real property Location of property Sale of personal property Seller's tax home (but see Special Rules for Gains From Dispositions of Certain Property , later, for exceptions) Sale of natural resources Allocation based on fair market value of product at export terminal. Irs free file program For more information, see Regulations section 1. Irs free file program 863-1(b). Irs free file program Types of Income This section looks at the most common types of income received by individuals, and the rules for determining the source of the income. Irs free file program Generally, the same rules shown in Table 2-1 are used to determine if you have possession source income. Irs free file program Compensation for Labor or Personal Services Income from labor or personal services includes wages, salaries, commissions, fees, per diem allowances, employee allowances and bonuses, and fringe benefits. Irs free file program It also includes income earned by sole proprietors and general partners from providing personal services in the course of their trade or business. Irs free file program Services performed wholly within a relevant possession. Irs free file program   Generally, all pay you receive for services performed in a relevant possession is considered to be from sources within that possession. Irs free file program However, there is an exception for income earned as a member of the U. Irs free file program S. Irs free file program Armed Forces or a civilian spouse. Irs free file program U. Irs free file program S. Irs free file program Armed Forces. Irs free file program   If you are a bona fide resident of a relevant possession, your military service pay will be sourced in that possession even if you perform the services in the United States or another possession. Irs free file program However, if you are not a bona fide resident of a possession, your military service pay will be income from the  United States even if you perform services in a possession. Irs free file program Civilian spouse of active duty member of the U. Irs free file program S. Irs free file program Armed Forces. Irs free file program   If you are a bona fide resident of a U. Irs free file program S. Irs free file program possession and choose to keep that possession as your tax residence under MSRRA when relocating with your servicemember spouse under military orders, the source of income for your labor or personal services is considered to be that possession. Irs free file program Likewise, if your tax residence is in one of the 50 states or the District of Columbia before relocating and you choose to keep it as your tax residence, the source of income for services performed in any of the U. Irs free file program S. Irs free file program possessions is considered to be the United States and, specifically, your state of residence or the District of Columbia. Irs free file program Services performed partly inside and partly outside a relevant possession. Irs free file program   If you are an employee and receive compensation for labor or personal services performed both inside and outside the relevant possession, special rules apply in determining the source of the compensation. Irs free file program Compensation (other than certain fringe benefits) is sourced on a time basis. Irs free file program Certain fringe benefits (such as housing and education) are sourced on a geographical basis. Irs free file program   Or, you may be permitted to use an alternative basis to determine the source of compensation. Irs free file program See Alternative basis , later. Irs free file program   If you are self-employed, determine the source of your income for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. Irs free file program In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. Irs free file program Time basis. Irs free file program   Use a time basis to figure your compensation for labor or personal services from the relevant possession (other than the fringe benefits discussed later). Irs free file program Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed  services in the relevant  possession during the year     Total number of days you  performed services during the year           You can use a unit of time less than a day in the above fraction, if appropriate. Irs free file program The time period for which the income is made does not have to be a year. Irs free file program Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. Irs free file program Example. Irs free file program In 2013, you worked in your employer's office in the United States for 60 days and in the Puerto Rico office for 180 days, earning a total of $80,000 for the year. Irs free file program Your Puerto Rico source income is $60,000, figured as follows. Irs free file program       180 days 240 days × $80,000 = $60,000                 Multi-year compensation. Irs free file program   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. Irs free file program Multi-year compensation is compensation that is included in your income in 1 tax year but is attributable to a period that includes 2 or more tax years. Irs free file program You determine the period to which the income is attributable based on the facts and circumstances of your case. Irs free file program For more information on multi-year compensation, see Treasury Decision (T. Irs free file program D. Irs free file program ) 9212 and Regulations section 1. Irs free file program 861-4, 2005-35 I. Irs free file program R. Irs free file program B. Irs free file program 429, available at www. Irs free file program irs. Irs free file program gov/irb/2005-35_IRB/ar14. Irs free file program html. Irs free file program Certain fringe benefits sourced on a geographical basis. Irs free file program   If you received any of the following fringe benefits as compensation for labor or services performed as an employee partly inside and partly outside a relevant possession, you must source that income on a geographical basis. Irs free file program Housing. Irs free file program Education. Irs free file program Local transportation. Irs free file program Tax reimbursement. Irs free file program Hazardous or hardship duty pay. Irs free file program Moving expense reimbursement. Irs free file program For information on determining the source of the fringe benefits listed above, see Regulations section 1. Irs free file program 861-4. Irs free file program Alternative basis. Irs free file program   You can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your income than the time or geographical basis. Irs free file program If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your income. Irs free file program De minimis exception. Irs free file program   There is an exception to the rule for determining the source of income earned in a possession. Irs free file program Generally, you will not have income from a possession if during a tax year you: Are a U. Irs free file program S. Irs free file program citizen or resident, Are not a bona fide resident of that possession, Are not employed by or under contract with an individual, partnership, or corporation that is engaged in a trade or business in that possession, Temporarily perform services in that possession for 90 days or less, and Earned $3,000 or less from such services. Irs free file program This exception began with income earned during your 2008 tax year. Irs free file program Pensions. Irs free file program   Generally, pension income has two components: contributions to the pension plan and the earnings accrued from investing those contributions. Irs free file program The contribution portion is sourced according to where services were performed that earned the pension. Irs free file program The investment earnings portion is sourced according to the location of the pension trust. Irs free file program Example. Irs free file program You are a U. Irs free file program S. Irs free file program citizen who worked in Puerto Rico for a U. Irs free file program S. Irs free file program company. Irs free file program All services were performed in Puerto Rico. Irs free file program Upon retirement you remained in Puerto Rico and began receiving your pension from the U. Irs free file program S. Irs free file program pension trust of your employer. Irs free file program Distributions from the U. Irs free file program S. Irs free file program pension trust must be allocated between (1) contributions, which are Puerto Rico source income, and (2) investment earnings, which are U. Irs free file program S. Irs free file program source income. Irs free file program Investment Income This category includes such income as interest, dividends, rents, and royalties. Irs free file program Interest income. Irs free file program   The source of interest income is generally determined by the residence of the payer. Irs free file program Interest paid by corporations created or organized in a relevant possession (possession corporation) or by individuals who are bona fide residents of a relevant possession is considered income from sources within that possession. Irs free file program   However, there is an exception to this rule if you are a bona fide resident of a relevant possession, receive interest from a corporation created or organized in that possession, and are a shareholder of that corporation who owns, directly or indirectly, at least 10% of the total voting stock of the corporation. Irs free file program See Regulations section 1. Irs free file program 937-2(i) for more information. Irs free file program Dividends. Irs free file program   Generally, dividends paid by a corporation created or organized in a relevant possession will be considered income from sources within that possession. Irs free file program There are additional rules for bona fide residents of a relevant possession who receive dividend income from possession corporations, and who own, directly or indirectly, at least 10% of the voting stock of the corporation. Irs free file program For more information, see Regulations section 1. Irs free file program 937-2(g). Irs free file program Rental income. Irs free file program   Rents from property located in a relevant possession are treated as income from sources within that possession. Irs free file program Royalties. Irs free file program   Royalties from natural resources located in a relevant possession are considered income from sources within that possession. Irs free file program   Also considered possession source income are royalties received for the use of, or for the privilege of using, in a relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property. Irs free file program Sales or Other Dispositions of Property The source rules for sales or other dispositions of property are varied. Irs free file program The most common situations are discussed below. Irs free file program Real property. Irs free file program   Real property includes land and buildings, and generally anything built on, growing on, or attached to land. Irs free file program The location of the property generally determines the source of income from the sale. Irs free file program For example, if you are a bona fide resident of Guam and sell your home that is located in Guam, the gain on the sale is sourced in Guam. Irs free file program If, however, the home you sold was located in the United States, the gain is U. Irs free file program S. Irs free file program source income. Irs free file program Personal property. Irs free file program   The term “personal property” refers to property (such as machinery, equipment, or furniture) that is not real property. Irs free file program Generally, gain (or loss) from the sale or other disposition is sourced according to the seller's tax home. Irs free file program If personal property is sold by a bona fide resident of a relevant possession, the gain (or loss) from the sale is treated as sourced within that possession. Irs free file program   This rule does not apply to the sale of inventory, intangible property, depreciable personal property, or property sold through a foreign office or fixed place of business. Irs free file program The rules applying to sales of inventory are discussed below. Irs free file program For information on sales of the other types of property mentioned, see Internal Revenue Code section 865. Irs free file program Inventory. Irs free file program   Your inventory is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. Irs free file program The source of income from the sale of inventory depends on whether the inventory was purchased or produced. Irs free file program Purchased. Irs free file program   Income from the sale of inventory that you purchased is sourced where you sell the property. Irs free file program Generally, this is where title to the property passes to the buyer. Irs free file program Produced. Irs free file program   Income from the sale of inventory that you produced in a relevant possession and sold outside that possession (or vice versa) is sourced based on an allocation. Irs free file program For information on making the allocation, see Regulations section 1. Irs free file program 863-3(f). Irs free file program Special Rules for Gains From Dispositions of Certain Property There are special rules for gains from dispositions of certain investment property (for example, stocks, bonds, debt instruments, diamonds, and gold) owned by a U. Irs free file program S. Irs free file program citizen or resident alien prior to becoming a bona fide resident of a possession. Irs free file program You are subject to these special rules if you meet both of the following conditions. Irs free file program For the tax year for which the source of the gain must be determined, you are a bona fide resident of the relevant possession. Irs free file program For any of the 10 years preceding that year, you were a citizen or resident alien of the United States (other than a bona fide resident of the relevant possession). Irs free file program If you meet these conditions, gains from the disposition of this property will not be treated as income from sources within the relevant possession for purposes of the Internal Revenue Code. Irs free file program Accordingly, bona fide residents of American Samoa and Puerto Rico, for example, may not exclude the gain on their U. Irs free file program S. Irs free file program tax return. Irs free file program (See chapter 3 for additional filing information. Irs free file program ) With respect to the CNMI, Guam, and the USVI, the gain from the disposition of this property will not meet the requirements for certain tax rules that may allow bona fide residents of those possessions to reduce or obtain a rebate of taxes on income from sources within the relevant possessions. Irs free file program These rules apply to dispositions after April 11, 2005. Irs free file program For details, see Regulations section 1. Irs free file program 937-2(f)(1) and Examples 1 and 2 of section 1. Irs free file program 937-2(k). Irs free file program Example 1. Irs free file program In 2007, Cheryl Jones, a U. Irs free file program S. Irs free file program citizen, lived in the United States and paid $1,000 for 100 shares of stock in the Rose Corporation, a U. Irs free file program S. Irs free file program corporation listed on the New York Stock Exchange. Irs free file program On March 1, 2010, she moved to Puerto Rico and changed her tax home to Puerto Rico on the same date. Irs free file program Cheryl satisfied the presence test in 2010 and, under the year-of-move exception, she was considered a bona fide resident of Puerto Rico for the rest of 2010. Irs free file program On March 1, 2010, the closing value of Cheryl's stock in the Rose Corporation was $2,000. Irs free file program On January 5, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold all her Rose Corporation stock for $7,000. Irs free file program Under the earlier rules, none of Cheryl's $6,000 gain will be treated as income from sources within Puerto Rico. Irs free file program The source rules discussed in the preceding paragraphs supplement, and may apply in conjunction with, an existing special rule. Irs free file program This existing special rule applies if you are a U. Irs free file program S. Irs free file program citizen or resident alien who becomes a bona fide resident of American Samoa, the CNMI, or Guam, and who has gain from the disposition of certain U. Irs free file program S. Irs free file program assets during the 10-year period beginning when you became a bona fide resident. Irs free file program The gain is U. Irs free file program S. Irs free file program source income that generally is subject to U. Irs free file program S. Irs free file program tax if the property is either (1) located in the United States; (2) stock issued by a U. Irs free file program S. Irs free file program corporation or a debt obligation of a U. Irs free file program S. Irs free file program person or of the United States, a state (or political subdivision), or the District of Columbia; or (3) property that has a basis in whole or in part by reference to property described in (1) or (2). Irs free file program See chapter 3 for filing information. Irs free file program Special election. Irs free file program   For dispositions after April 11, 2005, you can choose to treat the part of gain (or loss) attributable to the time you held the property while a bona fide resident of the relevant possession (the possession holding period) as gain (or loss) from sources within that possession. Irs free file program Make the election by reporting the gain attributable to the possession holding period on your income tax return for the year of disposition. Irs free file program This election overrides both of the special rules discussed earlier. Irs free file program   There are two methods for figuring the gain for the possession holding period, one for marketable securities and another for other types of investment property. Irs free file program Marketable securities. Irs free file program   Marketable securities are those actively traded on an established financial market, such as stock in a publicly held corporation. Irs free file program Under the special election, allocate the gain (or loss) by figuring the appreciation separately for your possession and U. Irs free file program S. Irs free file program holding periods. Irs free file program   Your possession holding period begins on the first day you do not have a tax home outside the relevant possession. Irs free file program The gain (or loss) attributable to the possession holding period is the difference in fair market value of the security at the close of the market on the first and last days of this holding period. Irs free file program This is your gain (or loss) that is treated as being from sources within the relevant possession. Irs free file program If you were a bona fide resident of the relevant possession for more than one continuous period, combine the gains (or losses) from each possession holding period. Irs free file program Example 2. Irs free file program Assume the same facts as in Example 1, except that Cheryl makes the special election to allocate the gain between her U. Irs free file program S. Irs free file program and possession holding periods. Irs free file program Cheryl's possession holding period began March 1, 2010, the date her tax home changed to Puerto Rico. Irs free file program Therefore, the portion of gain attributable to her possession holding period is $5,000 ($7,000 sale price – $2,000 closing value on first day of the possession holding period). Irs free file program By reporting $5,000 of her $6,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. Irs free file program Other personal property. Irs free file program   For personal property other than marketable securities, use a time-based allocation. Irs free file program Figure the gain (or loss) attributable to the possession holding period by multiplying your total gain (or loss) by the following fraction. Irs free file program      Number of days in the  possession holding period     Total number of days  in your holding period         The result is your gain (or loss) that is treated as being from sources within the relevant possession. Irs free file program Example 3. Irs free file program In addition to the stock in Rose Corporation, Cheryl acquired a 5% interest in the Alder Partnership on January 1, 2009. Irs free file program On March 1, 2010, when she established bona fide residency in Puerto Rico, her partnership interest was not considered a marketable security. Irs free file program On September 16, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold her interest in Alder Partnership for a $100,000 gain. Irs free file program She had owned the interest for a total of 1,720 days. Irs free file program Cheryl's possession holding period (from March 1, 2010, through September 16, 2013) is 1,296 days. Irs free file program The portion of her gain attributable to Puerto Rico is $75,349 ($100,000 x (1,296 Puerto Rico days ÷ 1,720 total days)). Irs free file program By reporting $75,349 of her $100,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. Irs free file program Scholarships, Fellowships, Grants, Prizes, and Awards The source of these types of income is generally the residence of the payer, regardless of who actually disburses the funds. Irs free file program Therefore, in order to be possession source income, the payer must be a resident of the relevant possession, such as an individual who is a bona fide resident or a corporation created or organized in that possession. Irs free file program These rules do not apply to amounts paid as salary or other compensation for services. Irs free file program See Compensation for Labor or Personal Services, earlier in this chapter, for the source rules that apply. Irs free file program Effectively Connected Income In limited circumstances, some kinds of income from sources outside the relevant possession must be treated as effectively connected with a trade or business in that possession. Irs free file program These circumstances are listed below. Irs free file program You have an office or other fixed place of business in the relevant possession to which the income can be attributed. Irs free file program That office or place of business is a material factor in producing the income. Irs free file program The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. Irs free file program An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. Irs free file program The three kinds of income from sources outside the relevant possession to which these rules apply are the following. Irs free file program Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the relevant possession or from any interest in such property. Irs free file program Included are rents or royalties for the use of, or for the privilege of using, outside the relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the relevant possession. Irs free file program Dividends or interest from the active conduct of a banking, financing, or similar business in the relevant possession. Irs free file program Income, gain, or loss from the sale or exchange outside the relevant possession, through the office or other fixed place of business in the relevant possession, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. Irs free file program Item (3) will not apply if you sold the property for use, consumption, or disposition outside the relevant possession and an office or other fixed place of business in a foreign country was a material factor in the sale. Irs free file program Example. Irs free file program Marcy Jackson is a bona fide resident of American Samoa. Irs free file program Her business, which she conducts from an office in American Samoa, is developing and selling specialized computer software. Irs free file program A software purchaser will frequently pay Marcy an additional amount to install the software on the purchaser's operating system and to ensure that the software is functioning properly. Irs free file program Marcy installs the software at the purchaser's place of business, which may be in American Samoa, in the United States, or in another country. Irs free file program The income from selling the software is effectively connected with the conduct of Marcy's business in American Samoa, even though the product's destination may be outside the possession. Irs free file program However, the compensation she receives for installing the software (personal services) outside of American Samoa is not effectively connected with the conduct of her business in the possession—the income is sourced where she performs the services. Irs free file program Prev  Up  Next   Home   More Online Publications
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National Taxpayer Advocate Congressional Testimony

 Current Testimony:


Written Statement of Nina E. Olson before the Subcommittee on Financial Services and General Government Committee on Appropriations, U.S. House of Representatives. Subject: Internal Revenue Service Oversight. 02/26/2014

 Prior Testimony:


Written Statement of Nina E. Olson before the Subcommittee on Government Operations, House Committee on Oversight and Government Reform, U.S. House of Representatives. Subject: Identity Theft-Related Tax Fraud. 08/02/2013
 

Written Statement of Nina E. Olson before the Subcommittee on Financial Services and General Government, Committee on Appropriations, United States Senate. Subject: Internal Revenue Service FY 2014 Budget Request. 05/08/2013
 

Written Statement of Nina E. Olson before the Committee on Finance, U.S. Senate. Subject: Tax Fraud, Tax ID Theft, and Tax Reform. 04/16/2013
 

Written Statement of Nina E. Olson before the Subcommittee on Government Organization, Efficiency, and Financial Management - Committee on Oversight and Government Reform, U.S. House of Representatives. Subject: Identity Theft-Related Tax Fraud. 11/29/2012
 

Written Statement of Nina E. Olson before the Committee on Oversight and Government Reform, U.S. House of Representatives. Subject: Tax-Related Provisions of the Affordable Care Act. 08/02/2012
 

Written Statement of Nina E. Olson before the Subcommittee on Crime, Terrorism, and Homeland Security, U.S. House of Representatives, Committee on the Judiciary. Subject: Identity Theft and Income Tax Preparation Fraud. 06/28/2012
 

Written Statement of Nina E. Olson before the Subcommittees on Oversight and Social Security, U.S. House of Representatives, Committee on Ways and Means. Subject: Identity Theft and Tax Fraud. 05/08/2012
 

Written Statement of Nina E. Olson before the Subcommittee on Government Organization, Efficiency, and Financial Management, U.S. House of Representatives, Committee on Oversight and Government Reform. Subject: Tax Compliance and Tax-Fraud Prevention. 04/19/2012
 

Written Statement of Nina E. Olson before the Subcommittee on Fiscal Responsibility and Economic Growth, United States Senate. Subject: Tax Fraud by Identity Theft, Part 2: Status, Progress, and Potential Solutions. 03/20/2012
 

Written Statement of Nina E. Olson before the Committee on Finance, United States Senate. Subject: Complexity and the Tax Gap: Making Tax Compliance Easier and Collecting What's Due. 06/28/2011
 

Written Statement of Nina E. Olson before the Subcommittee on Financial Services and General Government Committee on Appropriations, United States Senate. Subject: Internal Revenue Service FY 2012 Budget Request. 06/08/2011
 

Written Statement of Nina E. Olson before the Subcommittee on Fiscal Responsibility and Economic Growth, Committee on Finance. Subject: Hearing on the Spread of Tax Fraud by Identity Theft: A Threat to Taxpayers, A Drain on the Public Treasury. 05/25/2011
 

Written Statement of Nina E. Olson before the Subcommittee on Oversight, Committee on Ways and Means. Subject: Hearing on Improper Payments in the Administration of Refundable Tax Credits. 05/25/2011
 

Written Statement of Nina E. Olson before the House Committee on Small Business. Subject: Hearing on How Tax Complexity Hinders Small Businesses and the Impact on Job Creation and Economic Growth. 04/13/2011
 

Written Statement of Nina E. Olson before the U.S. House of Representatives, Committee on Ways and Means. Subject: Hearing on Tax Reform. 01/20/2011
 

Written Statement of Nina E. Olson before the U.S. Senate, Committee on Finance. Subject: Tax Filing Season Update - Current IRSW Issues. 04/15/2010
 

Written Statement of Nina E. Olson, before the U.S. House of Representatives, Committee on Ways and Means. Subject: National Taxpayer Advocate's 2009 Annual Report to Congress - 03/16/2010
 

Written Statement of Nina E. Olson, before the U.S. House of Representatives, Committee on Ways and Means.  Subject:  Tax Compliance Challenges Facing Financially Struggling Taxpayers. 02/26/09
 

Written Statement of Nina E. Olson, before the U.S. House of Representatives, Committee on Ways and Means.  Subject:  The Status of Economic Stimulus Payments. 06/19/08
 

Written Statement of Nina E. Olson, before the U.S. Senate Committee on Appropriations. Subject:  Internal Revenue Service FY 2009 Budget Request. 04/16/08
 

Written Statement of Nina E. Olson before the U.S. Senate Committee on Finance. Subject: Identity Theft in Tax Administration. 04/10/08
 

Written Statement of Nina E. Olson, before the U.S. House of Representatives, Committee on Ways and Means. Subject:  The 2008 Tax Return Filing Season; IRS Operations; FY 2009 Budget Proposals; and the National Taxpayer Advocate's 2007 Annual Report to Congress. 03/13/08
 

Written Statement of Nina E. Olson, before the U.S. House of Representatives, Committee on Ways and Means. Subject: IRS Private Debt Collection Program. 05/23/07  [ Appendices transmitted as a separate document]
 

Written Statement of Nina E. Olson, before the U.S. House of Representatives, Committee on Ways and Means, Subcommittee on Select Revenue Measures. Subject: The Alternative Minimum Tax. 03/07/07
 

Written Statement of Nina E. Olson, before the U.S. House of Representatives, Committee on Appropriations, Subcommittee on Financial Services and General Government.  Subject:  Tax Fairness: Policy and Enforcement. 03/05/07
 

Written Statement of Nina E. Olson, before the U.S. House of Representatives, Committee on the Budget. Subject:  The IRS and the Tax Gap. 02/16/07
 

Written Statement of Nina E. Olson, before the U.S. Senate, Committee on Homeland Security and Governmental Affairs, Subcommittee on Federal Financial Management, Government Information, and International Security.  Subject:  The Tax Gap. 09/26/06 
 

Written Statement of Nina E. Olson, before the U.S. Senate, Committee on Finance, Subcommittee of Taxation and IRS Oversight.  Subject:  The Tax Gap. 07/26/06
 

Written Statement of Nina E. Olson, before the U.S. Senate, Committee on Appropriations; Subcommittee on Transportation, Treasury, the Judiciary, Housing and Urban Development, and Related Agencies. Subject:  Internal Revenue Service FY 2007 Budget Request. 04/27/06 
 

Written Statement of Nina E. Olson, before the U.S. House of Representatives, Committee on Small Business.  Subject:  The Effects of Tax Compliance Initiatives on Small Business. 04/05/06 
 

Written Statement of Nina E. Olson, before the U.S. Senate, Committee on Finance. Subject:  Tax Return Preparation Options for Taxpayers. 04/04/06
 

Written Statement of Nina E. Olson, before the U.S. House of Representatives, Committee on Appropriations, Subcommittee on Transportation, Treasury, and Housing and Urban Development, the Judiciary, District of Columbia, and Related Agencies. Subject:  Internal Revenue Service FY 2007 Budget Request. 03/29/06
 

Written Statement of Nina E. Olson  before the Committee on the Budget, United States Senate. Subject:  The Causes of and Solutions to the Federal Tax Gap. 02/15/2006
 

Written Statement of Nina E. Olson, NTA, before the Subcommittee on Federal Financial Management, Government Information, and International Security. Subject: The Tax Gap.  10/26/2005
 

National Taxpayer Advocate Written Testimony, before the House Committee on Small Business. 09/21/05
 

National Taxpayer Advocate Written Testimony before the House Committee on Ways and Means Subcommittee on Oversight on the Regulation of Federal Tax Return Preparers. 07/20/05
 

National Taxpayer Advocate Written Testimony before the Senate Subcommittee on Taxation and IRS Oversight on the Alternative Minimum Tax (AMT). 05/23/05
 

National Taxpayer Advocate Written Testimony for the Joint Review of the Strategic Plans and Budget of the Internal Revenue Service.05/19/05
 

National Taxpayer Advocate Testimony before the President's Advisory Panel on Federal Tax Reform 03/05:


National Taxpayer Advocate Testimony before the Senate Committee of Finance on the Tax Gap and Tax Shelters. 07/21/2004

 

Page Last Reviewed or Updated: 14-Mar-2014

The Irs Free File Program

Irs free file program 4. Irs free file program   Retirement Savings Contributions Credit (Saver's Credit) Table of Contents What's New Introduction Full-time student. Irs free file program Adjusted gross income. Irs free file program Distributions received by spouse. Irs free file program Testing period. Irs free file program What's New Modified AGI limit for retirement savings contributions credit increased. Irs free file program  For 2013, you may be able to claim the retirement savings contributions credit if your modified AGI is not more than: $59,000 if your filing status is married filing jointly, $44,250 if your filing status is head of household, or $29,500 if your filing status is single, married filing separately, or qualifying widow(er). Irs free file program Introduction You may be able to take a tax credit if you make eligible contributions (defined later) to a qualified retirement plan, an eligible deferred compensation plan, or an individual retirement arrangement (IRA). Irs free file program You may be able to take a credit of up to $1,000 (up to $2,000 if filing jointly). Irs free file program This credit could reduce the federal income tax you pay dollar for dollar. Irs free file program    Can you claim the credit?   If you make eligible contributions to a qualified retirement plan, an eligible deferred compensation plan, or an IRA, you can claim the credit if all of the following apply. Irs free file program You were born before January 2, 1996. Irs free file program You are not a full-time student (explained next). Irs free file program No one else, such as your parent(s), claims an exemption for you on their tax return. Irs free file program Your adjusted gross income (defined below) is not more than: $59,000 if your filing status is married filing jointly, $44,250 if your filing status is head of household, or $29,500 if your filing status is single, married filing separately, or qualifying widow(er). Irs free file program Full-time student. Irs free file program   You are a full-time student if, during some part of each of 5 calendar months (not necessarily consecutive) during the calendar year, you are either: A full-time student at a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or A student taking a full-time, on-farm training course given by either a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or a state, county, or local government. Irs free file program You are a full-time student if you are enrolled for the number of hours or courses the school considers to be full time. Irs free file program Adjusted gross income. Irs free file program   This is generally the amount on line 38 of your 2013 Form 1040; line 22 of your 2013 Form 1040A; or line 37 of your 2013 Form 1040NR. Irs free file program However, you must add to that amount any exclusion or deduction claimed for the year for: Foreign earned income, Foreign housing costs, Income for bona fide residents of American Samoa, and Income from Puerto Rico. Irs free file program Eligible contributions. Irs free file program   These include: Contributions to a traditional or Roth IRA, Salary reduction contributions (elective deferrals, including amounts designated as after-tax Roth contributions) to: A 401(k) plan (including a SIMPLE 401(k)), A section 403(b) annuity, An eligible deferred compensation plan of a state or local government (a governmental 457 plan), A SIMPLE IRA plan, or A salary reduction SEP, and Contributions to a section 501(c)(18) plan. Irs free file program They also include voluntary after-tax employee contributions to a tax-qualified retirement plan or section 403(b) annuity. Irs free file program For purposes of the credit, an employee contribution will be voluntary as long as it is not required as a condition of employment. Irs free file program Reducing eligible contributions. Irs free file program   Reduce your eligible contributions (but not below zero) by the total distributions you received during the testing period (defined later) from any IRA, plan, or annuity included above under Eligible contributions. Irs free file program Also reduce your eligible contributions by any distribution from a Roth IRA that is not rolled over, even if the distribution is not taxable. Irs free file program   Do not reduce your eligible contributions by any of the following. Irs free file program The portion of any distribution which is not includible in income because it is a trustee-to-trustee transfer or a rollover distribution. Irs free file program Distributions that are taxable as the result of an in-plan rollover to your designated Roth account. Irs free file program Any distribution that is a return of a contribution to an IRA (including a Roth IRA) made during the year for which you claim the credit if: The distribution is made before the due date (including extensions) of your tax return for that year, You do not take a deduction for the contribution, and The distribution includes any income attributable to the contribution. Irs free file program Loans from a qualified employer plan treated as a distribution. Irs free file program Distributions of excess contributions or deferrals (and income attributable to excess contributions and deferrals). Irs free file program Distributions of dividends paid on stock held by an employee stock ownership plan under section 404(k). Irs free file program Distributions from an eligible retirement plan that are converted or rolled over to a Roth IRA. Irs free file program Distributions from a military retirement plan. Irs free file program Distributions from an inherited IRA by a nonspousal beneficiary. Irs free file program Distributions received by spouse. Irs free file program   Any distributions your spouse receives are treated as received by you if you file a joint return with your spouse both for the year of the distribution and for the year for which you claim the credit. Irs free file program Testing period. Irs free file program   The testing period consists of the year for which you claim the credit, the period after the end of that year and before the due date (including extensions) for filing your return for that year, and the 2 tax years before that year. Irs free file program Example. Irs free file program You and your spouse filed joint returns in 2011 and 2012, and plan to do so in 2013 and 2014. Irs free file program You received a taxable distribution from a qualified plan in 2011 and a taxable distribution from an eligible deferred compensation plan in 2012. Irs free file program Your spouse received taxable distributions from a Roth IRA in 2013 and tax-free distributions from a Roth IRA in 2014 before April 15. Irs free file program You made eligible contributions to an IRA in 2013 and you otherwise qualify for this credit. Irs free file program You must reduce the amount of your qualifying contributions in 2013 by the total of the distributions you received in 2011, 2012, 2013, and 2014. Irs free file program Maximum eligible contributions. Irs free file program   After your contributions are reduced, the maximum annual contribution on which you can base the credit is $2,000 per person. Irs free file program Effect on other credits. Irs free file program   The amount of this credit will not change the amount of your refundable tax credits. Irs free file program A refundable tax credit, such as the earned income credit or the refundable amount of your child tax credit, is an amount that you would receive as a refund even if you did not otherwise owe any taxes. Irs free file program Maximum credit. Irs free file program   This is a nonrefundable credit. Irs free file program The amount of the credit in any year cannot be more than the amount of tax that you would otherwise pay (not counting any refundable credits) in any year. Irs free file program If your tax liability is reduced to zero because of other nonrefundable credits, such as the credit for child and dependent care expenses, then you will not be entitled to this credit. Irs free file program How to figure and report the credit. Irs free file program   The amount of the credit you can get is based on the contributions you make and your credit rate. Irs free file program Your credit rate can be as low as 10% or as high as 50%. Irs free file program Your credit rate depends on your income and your filing status. Irs free file program See Form 8880 to determine your credit rate. Irs free file program   The maximum contribution taken into account is $2,000 per person. Irs free file program On a joint return, up to $2,000 is taken into account for each spouse. Irs free file program   Figure the credit on Form 8880. Irs free file program Report the credit on line 50 of your Form 1040; line 32 of your Form 1040A; or line 47 of your Form 1040NR and attach Form 8880 to your return. Irs free file program Prev  Up  Next   Home   More Online Publications