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Quicktax 4. Quicktax   Tax Withholding and Estimated Tax Table of Contents What's New for 2014 Reminders Introduction Useful Items - You may want to see: Tax Withholding for 2014Salaries and Wages Tips Taxable Fringe Benefits Sick Pay Pensions and Annuities Gambling Winnings Unemployment Compensation Federal Payments Backup Withholding Estimated Tax for 2014Who Does Not Have To Pay Estimated Tax Who Must Pay Estimated Tax How To Figure Estimated Tax When To Pay Estimated Tax How To Figure Each Payment How To Pay Estimated Tax Credit for Withholding and Estimated Tax for 2013Withholding Estimated Tax Underpayment Penalty for 2013 What's New for 2014 Tax law changes for 2014. Quicktax  When you figure how much income tax you want withheld from your pay and when you figure your estimated tax, consider tax law changes effective in 2014. Quicktax For more information, see Publication 505. Quicktax Reminders Estimated tax safe harbor for higher income taxpayers. Quicktax  If your 2013 adjusted gross income was more than $150,000 ($75,000 if you are married filing a separate return), you must pay the smaller of 90% of your expected tax for 2014 or 110% of the tax shown on your 2013 return to avoid an estimated tax penalty. Quicktax Introduction This chapter discusses how to pay your tax as you earn or receive income during the year. Quicktax In general, the federal income tax is a pay-as-you-go tax. Quicktax There are two ways to pay as you go. Quicktax Withholding. Quicktax If you are an employee, your employer probably withholds income tax from your pay. Quicktax Tax also may be withheld from certain other income, such as pensions, bonuses, commissions, and gambling winnings. Quicktax The amount withheld is paid to the IRS in your name. Quicktax Estimated tax. Quicktax If you do not pay your tax through withholding, or do not pay enough tax that way, you may have to pay estimated tax. Quicktax People who are in business for themselves generally will have to pay their tax this way. Quicktax Also, you may have to pay estimated tax if you receive income such as dividends, interest, capital gains, rent, and royalties. Quicktax Estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well. Quicktax This chapter explains these methods. Quicktax In addition, it also explains the following. Quicktax Credit for withholding and estimated tax. Quicktax When you file your 2013 income tax return, take credit for all the income tax withheld from your salary, wages, pensions, etc. Quicktax , and for the estimated tax you paid for 2013. Quicktax Also take credit for any excess social security or railroad retirement tax withheld (discussed in chapter 37). Quicktax Underpayment penalty. Quicktax If you did not pay enough tax during the year, either through withholding or by making estimated tax payments, you may have to pay a penalty. Quicktax In most cases, the IRS can figure this penalty for you. Quicktax See Underpayment Penalty for 2013 at the end of this chapter. Quicktax Useful Items - You may want to see: Publication 505 Tax Withholding and Estimated Tax Form (and Instructions) W-4 Employee's Withholding Allowance Certificate W-4P Withholding Certificate for Pension or Annuity Payments W-4S Request for Federal Income Tax Withholding From Sick Pay W-4V Voluntary Withholding Request 1040-ES Estimated Tax for Individuals 2210 Underpayment of Estimated Tax by Individuals, Estates, and Trusts 2210-F Underpayment of Estimated Tax by Farmers and Fishermen Tax Withholding for 2014 This section discusses income tax withholding on: Salaries and wages, Tips, Taxable fringe benefits, Sick pay, Pensions and annuities, Gambling winnings, Unemployment compensation, and Certain federal payments. Quicktax This section explains the rules for withholding tax from each of these types of income. Quicktax This section also covers backup withholding on interest, dividends, and other payments. Quicktax Salaries and Wages Income tax is withheld from the pay of most employees. Quicktax Your pay includes your regular pay, bonuses, commissions, and vacation allowances. Quicktax It also includes reimbursements and other expense allowances paid under a nonaccountable plan. Quicktax See Supplemental Wages , later, for more information about reimbursements and allowances paid under a nonaccountable plan. Quicktax If your income is low enough that you will not have to pay income tax for the year, you may be exempt from withholding. Quicktax This is explained under Exemption From Withholding , later. Quicktax You can ask your employer to withhold income tax from noncash wages and other wages not subject to withholding. Quicktax If your employer does not agree to withhold tax, or if not enough is withheld, you may have to pay estimated tax, as discussed later under Estimated Tax for 2014 . Quicktax Military retirees. Quicktax   Military retirement pay is treated in the same manner as regular pay for income tax withholding purposes, even though it is treated as a pension or annuity for other tax purposes. Quicktax Household workers. Quicktax   If you are a household worker, you can ask your employer to withhold income tax from your pay. Quicktax A household worker is an employee who performs household work in a private home, local college club, or local fraternity or sorority chapter. Quicktax   Tax is withheld only if you want it withheld and your employer agrees to withhold it. Quicktax If you do not have enough income tax withheld, you may have to pay estimated tax, as discussed later under Estimated Tax for 2014 . Quicktax Farmworkers. Quicktax   Generally, income tax is withheld from your cash wages for work on a farm unless your employer does both of these: Pays you cash wages of less than $150 during the year, and Has expenditures for agricultural labor totaling less than $2,500 during the year. Quicktax Differential wage payments. Quicktax    When employees are on leave from employment for military duty, some employers make up the difference between the military pay and civilian pay. Quicktax Payments to an employee who is on active duty for a period of more than 30 days will be subject to income tax withholding, but not subject to social security or Medicare taxes. Quicktax The wages and withholding will be reported on Form W-2, Wage and Tax Statement. Quicktax   The credit employers can claim for differential wages paid to activated military reservists is scheduled to expire for wages paid after December 31, 2013. Quicktax Determining Amount of Tax Withheld Using Form W-4 The amount of income tax your employer withholds from your regular pay depends on two things. Quicktax The amount you earn in each payroll period. Quicktax The information you give your employer on Form W-4. Quicktax Form W-4 includes four types of information that your employer will use to figure your withholding. Quicktax Whether to withhold at the single rate or at the lower married rate. Quicktax How many withholding allowances you claim (each allowance reduces the amount withheld). Quicktax Whether you want an additional amount withheld. Quicktax Whether you are claiming an exemption from withholding in 2014. Quicktax See Exemption From Withholding , later. Quicktax Note. Quicktax You must specify a filing status and a number of withholding allowances on Form W-4. Quicktax You cannot specify only a dollar amount of withholding. Quicktax New Job When you start a new job, you must fill out Form W-4 and give it to your employer. Quicktax Your employer should have copies of the form. Quicktax If you need to change the information later, you must fill out a new form. Quicktax If you work only part of the year (for example, you start working after the beginning of the year), too much tax may be withheld. Quicktax You may be able to avoid overwithholding if your employer agrees to use the part-year method. Quicktax See Part-Year Method in chapter 1 of Publication 505 for more information. Quicktax Employee also receiving pension income. Quicktax   If you receive pension or annuity income and begin a new job, you will need to file Form W-4 with your new employer. Quicktax However, you can choose to split your withholding allowances between your pension and job in any manner. Quicktax Changing Your Withholding During the year changes may occur to your marital status, exemptions, adjustments, deductions, or credits you expect to claim on your tax return. Quicktax When this happens, you may need to give your employer a new Form W-4 to change your withholding status or your number of allowances. Quicktax If the changes reduce the number of allowances you are claiming or changes your marital status from married to single, you must give your employer a new Form W-4 within 10 days. Quicktax Generally, you can submit a new Form W-4 whenever you wish to change the number of your withholding allowances for any other reason. Quicktax Changing your withholding for 2015. Quicktax   If events in 2014 will decrease the number of your withholding allowances for 2015, you must give your employer a new Form W-4 by December 1, 2014. Quicktax If the event occurs in December 2014, submit a new Form W-4 within 10 days. Quicktax Checking Your Withholding After you have given your employer a Form W-4, you can check to see whether the amount of tax withheld from your pay is too little or too much. Quicktax If too much or too little tax is being withheld, you should give your employer a new Form W-4 to change your withholding. Quicktax You should try to have your withholding match your actual tax liability. Quicktax If not enough tax is withheld, you will owe tax at the end of the year and may have to pay interest and a penalty. Quicktax If too much tax is withheld, you will lose the use of that money until you get your refund. Quicktax Always check your withholding if there are personal or financial changes in your life or changes in the law that might change your tax liability. Quicktax Note. Quicktax You cannot give your employer a payment to cover withholding on salaries and wages for past pay periods or a payment for estimated tax. Quicktax Completing Form W-4 and Worksheets Form W-4 has worksheets to help you figure how many withholding allowances you can claim. Quicktax The worksheets are for your own records. Quicktax Do not give them to your employer. Quicktax Multiple jobs. Quicktax   If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. Quicktax Then split your allowances between the Forms W-4 for each job. Quicktax You cannot claim the same allowances with more than one employer at the same time. Quicktax You can claim all your allowances with one employer and none with the other(s), or divide them any other way. Quicktax Married individuals. Quicktax   If both you and your spouse are employed and expect to file a joint return, figure your withholding allowances using your combined income, adjustments, deductions, exemptions, and credits. Quicktax Use only one set of worksheets. Quicktax You can divide your total allowances any way, but you cannot claim an allowance that your spouse also claims. Quicktax   If you and your spouse expect to file separate returns, figure your allowances using separate worksheets based on your own individual income, adjustments, deductions, exemptions, and credits. Quicktax Alternative method of figuring withholding allowances. Quicktax   You do not have to use the Form W-4 worksheets if you use a more accurate method of figuring the number of withholding allowances. Quicktax For more information, see Alternative method of figuring withholding allowances under Completing Form W-4 and Worksheets in Publication 505, chapter 1. Quicktax Personal Allowances Worksheet. Quicktax   Use the Personal Allowances Worksheet on Form W-4 to figure your withholding allowances based on exemptions and any special allowances that apply. Quicktax Deduction and Adjustments Worksheet. Quicktax   Use the Deduction and Adjustments Worksheet on Form W-4 if you plan to itemize your deductions, claim certain credits, or claim adjustments to the income on your 2014 tax return and you want to reduce your withholding. Quicktax Also, complete this worksheet when you have changes to these items to see if you need to change your withholding. Quicktax Two-Earners/Multiple Jobs Worksheet. Quicktax   You may need to complete the Two-Earners/Multiple Jobs Worksheet on Form W-4 if you have more than one job, a working spouse, or are also receiving a pension. Quicktax Also, on this worksheet you can add any additional withholding necessary to cover any amount you expect to owe other than income tax, such as self-employment tax. Quicktax Getting the Right Amount of Tax Withheld In most situations, the tax withheld from your pay will be close to the tax you figure on your return if you follow these two rules. Quicktax You accurately complete all the Form W-4 worksheets that apply to you. Quicktax You give your employer a new Form W-4 when changes occur. Quicktax But because the worksheets and withholding methods do not account for all possible situations, you may not be getting the right amount withheld. Quicktax This is most likely to happen in the following situations. Quicktax You are married and both you and your spouse work. Quicktax You have more than one job at a time. Quicktax You have nonwage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income. Quicktax You will owe additional amounts with your return, such as self-employment tax. Quicktax Your withholding is based on obsolete Form W-4 information for a substantial part of the year. Quicktax Your earnings are more than the amount shown under Check your withholding in the instructions at the top of page 1 of Form W-4. Quicktax You work only part of the year. Quicktax You change the number of your withholding allowances during the year. Quicktax Cumulative wage method. Quicktax   If you change the number of your withholding allowances during the year, too much or too little tax may have been withheld for the period before you made the change. Quicktax You may be able to compensate for this if your employer agrees to use the cumulative wage withholding method for the rest of the year. Quicktax You must ask your employer in writing to use this method. Quicktax   To be eligible, you must have been paid for the same kind of payroll period (weekly, biweekly, etc. Quicktax ) since the beginning of the year. Quicktax Publication 505 To make sure you are getting the right amount of tax withheld, get Publication 505. Quicktax It will help you compare the total tax to be withheld during the year with the tax you can expect to figure on your return. Quicktax It also will help you determine how much, if any, additional withholding is needed each payday to avoid owing tax when you file your return. Quicktax If you do not have enough tax withheld, you may have to pay estimated tax, as explained under Estimated Tax for 2014 , later. Quicktax You can use the IRS Withholding Calculator at www. Quicktax irs. Quicktax gov/Individuals, instead of Publication 505 or the worksheets included with Form W-4, to determine whether you need to have your withholding increased or decreased. Quicktax Rules Your Employer Must Follow It may be helpful for you to know some of the withholding rules your employer must follow. Quicktax These rules can affect how to fill out your Form W-4 and how to handle problems that may arise. Quicktax New Form W-4. Quicktax   When you start a new job, your employer should have you complete a Form W-4. Quicktax Beginning with your first payday, your employer will use the information you give on the form to figure your withholding. Quicktax   If you later fill out a new Form W-4, your employer can put it into effect as soon as possible. Quicktax The deadline for putting it into effect is the start of the first payroll period ending 30 or more days after you turn it in. Quicktax No Form W-4. Quicktax   If you do not give your employer a completed Form W-4, your employer must withhold at the highest rate, as if you were single and claimed no withholding allowances. Quicktax Repaying withheld tax. Quicktax   If you find you are having too much tax withheld because you did not claim all the withholding allowances you are entitled to, you should give your employer a new Form W-4. Quicktax Your employer cannot repay any of the tax previously withheld. Quicktax Instead, claim the full amount withheld when you file your tax return. Quicktax   However, if your employer has withheld more than the correct amount of tax for the Form W-4 you have in effect, you do not have to fill out a new Form W-4 to have your withholding lowered to the correct amount. Quicktax Your employer can repay the amount that was withheld incorrectly. Quicktax If you are not repaid, your Form W-2 will reflect the full amount actually withheld, which you would claim when you file your tax return. Quicktax Exemption From Withholding If you claim exemption from withholding, your employer will not withhold federal income tax from your wages. Quicktax The exemption applies only to income tax, not to social security or Medicare tax. Quicktax You can claim exemption from withholding for 2014 only if both of the following situations apply. Quicktax For 2013 you had a right to a refund of all federal income tax withheld because you had no tax liability. Quicktax For 2014 you expect a refund of all federal income tax withheld because you expect to have no tax liability. Quicktax Students. Quicktax   If you are a student, you are not automatically exempt. Quicktax See chapter 1 to find out if you must file a return. Quicktax If you work only part time or only during the summer, you may qualify for exemption from withholding. Quicktax Age 65 or older or blind. Quicktax   If you are 65 or older or blind, use Worksheet 1-3 or 1-4 in chapter 1 of Publication 505, to help you decide if you qualify for exemption from withholding. Quicktax Do not use either worksheet if you will itemize deductions, claim exemptions for dependents, or claim tax credits on your 2014 return. Quicktax Instead, see Itemizing deductions or claiming exemptions or credits in chapter 1 of Publication 505. Quicktax Claiming exemption from withholding. Quicktax   To claim exemption, you must give your employer a Form W-4. Quicktax Do not complete lines 5 and 6. Quicktax Enter “Exempt” on line 7. Quicktax   If you claim exemption, but later your situation changes so that you will have to pay income tax after all, you must file a new Form W-4 within 10 days after the change. Quicktax If you claim exemption in 2014, but you expect to owe income tax for 2015, you must file a new Form W-4 by December 1, 2014. Quicktax   Your claim of exempt status may be reviewed by the IRS. Quicktax An exemption is good for only 1 year. Quicktax   You must give your employer a new Form W-4 by February 15 each year to continue your exemption. Quicktax Supplemental Wages Supplemental wages include bonuses, commissions, overtime pay, vacation allowances, certain sick pay, and expense allowances under certain plans. Quicktax The payer can figure withholding on supplemental wages using the same method used for your regular wages. Quicktax However, if these payments are identified separately from your regular wages, your employer or other payer of supplemental wages can withhold income tax from these wages at a flat rate. Quicktax Expense allowances. Quicktax   Reimbursements or other expense allowances paid by your employer under a nonaccountable plan are treated as supplemental wages. Quicktax   Reimbursements or other expense allowances paid under an accountable plan that are more than your proven expenses are treated as paid under a nonaccountable plan if you do not return the excess payments within a reasonable period of time. Quicktax   For more information about accountable and nonaccountable expense allowance plans, see Reimbursements in chapter 26. Quicktax Penalties You may have to pay a penalty of $500 if both of the following apply. Quicktax You make statements or claim withholding allowances on your Form W-4 that reduce the amount of tax withheld. Quicktax You have no reasonable basis for those statements or allowances at the time you prepare your Form W-4. Quicktax There is also a criminal penalty for willfully supplying false or fraudulent information on your Form W-4 or for willfully failing to supply information that would increase the amount withheld. Quicktax The penalty upon conviction can be either a fine of up to $1,000 or imprisonment for up to 1 year, or both. Quicktax These penalties will apply if you deliberately and knowingly falsify your Form W-4 in an attempt to reduce or eliminate the proper withholding of taxes. Quicktax A simple error or an honest mistake will not result in one of these penalties. Quicktax For example, a person who has tried to figure the number of withholding allowances correctly, but claims seven when the proper number is six, will not be charged a W-4 penalty. Quicktax Tips The tips you receive while working on your job are considered part of your pay. Quicktax You must include your tips on your tax return on the same line as your regular pay. Quicktax However, tax is not withheld directly from tip income, as it is from your regular pay. Quicktax Nevertheless, your employer will take into account the tips you report when figuring how much to withhold from your regular pay. Quicktax See chapter 6 for information on reporting your tips to your employer. Quicktax For more information on the withholding rules for tip income, see Publication 531, Reporting Tip Income. Quicktax How employer figures amount to withhold. Quicktax   The tips you report to your employer are counted as part of your income for the month you report them. Quicktax Your employer can figure your withholding in either of two ways. Quicktax By withholding at the regular rate on the sum of your pay plus your reported tips. Quicktax By withholding at the regular rate on your pay plus a percentage of your reported tips. Quicktax Not enough pay to cover taxes. Quicktax   If your regular pay is not enough for your employer to withhold all the tax (including income tax and social security and Medicare taxes (or the equivalent railroad retirement tax)) due on your pay plus your tips, you can give your employer money to cover the shortage. Quicktax See Giving your employer money for taxes in chapter 6. Quicktax Allocated tips. Quicktax   Your employer should not withhold income tax, Medicare tax, social security tax, or railroad retirement tax on any allocated tips. Quicktax Withholding is based only on your pay plus your reported tips. Quicktax Your employer should refund to you any incorrectly withheld tax. Quicktax See Allocated Tips in chapter 6 for more information. Quicktax Taxable Fringe Benefits The value of certain noncash fringe benefits you receive from your employer is considered part of your pay. Quicktax Your employer generally must withhold income tax on these benefits from your regular pay. Quicktax For information on fringe benefits, see Fringe Benefits under Employee Compensation in chapter 5. Quicktax Although the value of your personal use of an employer-provided car, truck, or other highway motor vehicle is taxable, your employer can choose not to withhold income tax on that amount. Quicktax Your employer must notify you if this choice is made. Quicktax For more information on withholding on taxable fringe benefits, see chapter 1 of Publication 505. Quicktax Sick Pay Sick pay is a payment to you to replace your regular wages while you are temporarily absent from work due to sickness or personal injury. Quicktax To qualify as sick pay, it must be paid under a plan to which your employer is a party. Quicktax If you receive sick pay from your employer or an agent of your employer, income tax must be withheld. Quicktax An agent who does not pay regular wages to you may choose to withhold income tax at a flat rate. Quicktax However, if you receive sick pay from a third party who is not acting as an agent of your employer, income tax will be withheld only if you choose to have it withheld. Quicktax See Form W-4S , later. Quicktax If you receive payments under a plan in which your employer does not participate (such as an accident or health plan where you paid all the premiums), the payments are not sick pay and usually are not taxable. Quicktax Union agreements. Quicktax   If you receive sick pay under a collective bargaining agreement between your union and your employer, the agreement may determine the amount of income tax withholding. Quicktax See your union representative or your employer for more information. Quicktax Form W-4S. Quicktax   If you choose to have income tax withheld from sick pay paid by a third party, such as an insurance company, you must fill out Form W-4S. Quicktax Its instructions contain a worksheet you can use to figure the amount you want withheld. Quicktax They also explain restrictions that may apply. Quicktax   Give the completed form to the payer of your sick pay. Quicktax The payer must withhold according to your directions on the form. Quicktax Estimated tax. Quicktax   If you do not request withholding on Form W-4S, or if you do not have enough tax withheld, you may have to make estimated tax payments. Quicktax If you do not pay enough tax, either through estimated tax or withholding, or a combination of both, you may have to pay a penalty. Quicktax See Underpayment Penalty for 2013 at the end of this chapter. Quicktax Pensions and Annuities Income tax usually will be withheld from your pension or annuity distributions unless you choose not to have it withheld. Quicktax This rule applies to distributions from: A traditional individual retirement arrangement (IRA); A life insurance company under an endowment, annuity, or life insurance contract; A pension, annuity, or profit-sharing plan; A stock bonus plan; and Any other plan that defers the time you receive compensation. Quicktax The amount withheld depends on whether you receive payments spread out over more than 1 year (periodic payments), within 1 year (nonperiodic payments), or as an eligible rollover distribution (ERD). Quicktax Income tax withholding from an ERD is mandatory. Quicktax More information. Quicktax   For more information on taxation of annuities and distributions (including ERDs) from qualified retirement plans, see chapter 10. Quicktax For information on IRAs, see chapter 17. Quicktax For more information on withholding on pensions and annuities, including a discussion of Form W-4P, see Pensions and Annuities in chapter 1 of Publication 505. Quicktax Gambling Winnings Income tax is withheld at a flat 25% rate from certain kinds of gambling winnings. Quicktax Gambling winnings of more than $5,000 from the following sources are subject to income tax withholding. Quicktax Any sweepstakes; wagering pool, including payments made to winners of poker tournaments; or lottery. Quicktax Any other wager, if the proceeds are at least 300 times the amount of the bet. Quicktax It does not matter whether your winnings are paid in cash, in property, or as an annuity. Quicktax Winnings not paid in cash are taken into account at their fair market value. Quicktax Exception. Quicktax   Gambling winnings from bingo, keno, and slot machines generally are not subject to income tax withholding. Quicktax However, you may need to provide the payer with a social security number to avoid withholding. Quicktax See Backup withholding on gambling winnings in chapter 1 of Publication 505. Quicktax If you receive gambling winnings not subject to withholding, you may need to pay estimated tax. Quicktax See Estimated Tax for 2014 , later. Quicktax If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. Quicktax See Underpayment Penalty for 2013 at the end of this chapter. Quicktax Form W-2G. Quicktax   If a payer withholds income tax from your gambling winnings, you should receive a Form W-2G, Certain Gambling Winnings, showing the amount you won and the amount withheld. Quicktax Report the tax withheld on line 62 of Form 1040. Quicktax Unemployment Compensation You can choose to have income tax withheld from unemployment compensation. Quicktax To make this choice, fill out Form W-4V (or a similar form provided by the payer) and give it to the payer. Quicktax All unemployment compensation is taxable. Quicktax So, if you do not have income tax withheld, you may have to pay estimated tax. Quicktax See Estimated Tax for 2014 , later. Quicktax If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. Quicktax For information, see Underpayment Penalty for 2013 at the end of this chapter. Quicktax Federal Payments You can choose to have income tax withheld from certain federal payments you receive. Quicktax These payments are: Social security benefits, Tier 1 railroad retirement benefits, Commodity credit corporation loans you choose to include in your gross income, Payments under the Agricultural Act of 1949 (7 U. Quicktax S. Quicktax C. Quicktax 1421 et. Quicktax seq. Quicktax ), as amended, or title II of the Disaster Assistance Act of 1988, that are treated as insurance proceeds and that you receive because: Your crops were destroyed or damaged by drought, flood, or any other natural disaster, or You were unable to plant crops because of a natural disaster described in (a), and Any other payment under Federal law as determined by the Secretary. Quicktax To make this choice, fill out Form W-4V (or a similar form provided by the payer) and give it to the payer. Quicktax If you do not choose to have income tax withheld, you may have to pay estimated tax. Quicktax See Estimated Tax for 2014 , later. Quicktax If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. Quicktax For information, see Underpayment Penalty for 2013 at the end of this chapter. Quicktax More information. Quicktax   For more information about the tax treatment of social security and railroad retirement benefits, see chapter 11. Quicktax Get Publication 225, Farmer's Tax Guide, for information about the tax treatment of commodity credit corporation loans or crop disaster payments. Quicktax Backup Withholding Banks or other businesses that pay you certain kinds of income must file an information return (Form 1099) with the IRS. Quicktax The information return shows how much you were paid during the year. Quicktax It also includes your name and taxpayer identification number (TIN). Quicktax TINs are explained in chapter 1 under Social Security Number (SSN) . Quicktax These payments generally are not subject to withholding. Quicktax However, “backup” withholding is required in certain situations. Quicktax Backup withholding can apply to most kinds of payments that are reported on Form 1099. Quicktax The payer must withhold at a flat 28% rate in the following situations. Quicktax You do not give the payer your TIN in the required manner. Quicktax The IRS notifies the payer that the TIN you gave is incorrect. Quicktax You are required, but fail, to certify that you are not subject to backup withholding. Quicktax The IRS notifies the payer to start withholding on interest or dividends because you have underreported interest or dividends on your income tax return. Quicktax The IRS will do this only after it has mailed you four notices over at least a 210-day period. Quicktax See Backup Withholding in chapter 1 of Publication 505 for more information. Quicktax Penalties. Quicktax   There are civil and criminal penalties for giving false information to avoid backup withholding. Quicktax The civil penalty is $500. Quicktax The criminal penalty, upon conviction, is a fine of up to $1,000 or imprisonment of up to 1 year, or both. Quicktax Estimated Tax for 2014 Estimated tax is the method used to pay tax on income that is not subject to withholding. Quicktax This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards. Quicktax You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough. Quicktax Estimated tax is used to pay both income tax and self-employment tax, as well as other taxes and amounts reported on your tax return. Quicktax If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. Quicktax If you do not pay enough by the due date of each payment period (see When To Pay Estimated Tax , later), you may be charged a penalty even if you are due a refund when you file your tax return. Quicktax For information on when the penalty applies, see Underpayment Penalty for 2013 at the end of this chapter. Quicktax Who Does Not Have To Pay Estimated Tax If you receive salaries or wages, you can avoid having to pay estimated tax by asking your employer to take more tax out of your earnings. Quicktax To do this, give a new Form W-4 to your employer. Quicktax See chapter 1 of Publication 505. Quicktax Estimated tax not required. Quicktax   You do not have to pay estimated tax for 2014 if you meet all three of the following conditions. Quicktax You had no tax liability for 2013. Quicktax You were a U. Quicktax S. Quicktax citizen or resident alien for the whole year. Quicktax Your 2013 tax year covered a 12-month period. Quicktax   You had no tax liability for 2013 if your total tax was zero or you did not have to file an income tax return. Quicktax For the definition of “total tax” for 2013, see Publication 505, chapter 2. Quicktax Who Must Pay Estimated Tax If you owe additional tax for 2013, you may have to pay estimated tax for 2014. Quicktax You can use the following general rule as a guide during the year to see if you will have enough withholding, or if you should increase your withholding or make estimated tax payments. Quicktax General rule. Quicktax   In most cases, you must pay estimated tax for 2014 if both of the following apply. Quicktax You expect to owe at least $1,000 in tax for 2014, after subtracting your withholding and refundable credits. Quicktax You expect your withholding plus your refundable credits to be less than the smaller of: 90% of the tax to be shown on your 2014 tax return, or 100% of the tax shown on your 2013 tax return (but see Special rules for farmers, fishermen, and higher income taxpayers, later). Quicktax Your 2013 tax return must cover all 12 months. Quicktax    If the result from using the general rule above suggests that you will not have enough withholding, complete the 2014 Estimated Tax Worksheet in Publication 505 for a more accurate calculation. Quicktax Special rules for farmers, fishermen, and higher income taxpayers. Quicktax   If at least two-thirds of your gross income for tax year 2013 or 2014 is from farming or fishing, substitute 662/3% for 90% in (2a) under the General rule, earlier. Quicktax If your AGI for 2013 was more than $150,000 ($75,000 if your filing status for 2014 is married filing a separate return), substitute 110% for 100% in (2b) under General rule , earlier. Quicktax See Figure 4-A and Publication 505, chapter 2 for more information. Quicktax Figure 4-A. Quicktax Do You Have To Pay Estimated Tax? Please click here for the text description of the image. Quicktax Figure 4-A Do You Have To Pay Estimated Tax? Aliens. Quicktax   Resident and nonresident aliens also may have to pay estimated tax. Quicktax Resident aliens should follow the rules in this chapter unless noted otherwise. Quicktax Nonresident aliens should get Form 1040-ES (NR), U. Quicktax S. Quicktax Estimated Tax for Nonresident Alien Individuals. Quicktax   You are an alien if you are not a citizen or national of the United States. Quicktax You are a resident alien if you either have a green card or meet the substantial presence test. Quicktax For more information about the substantial presence test, see Publication 519, U. Quicktax S. Quicktax Tax Guide for Aliens. Quicktax Married taxpayers. Quicktax   If you qualify to make joint estimated tax payments, apply the rules discussed here to your joint estimated income. Quicktax   You and your spouse can make joint estimated tax payments even if you are not living together. Quicktax   However, you and your spouse cannot make joint estimated tax payments if:  You are legally separated under a decree of divorce or separate maintenance, You and your spouse have different tax years, or Either spouse is a nonresident alien (unless that spouse elected to be treated as a resident alien for tax purposes (see chapter 1 of Publication 519)). Quicktax   If you do not qualify to make joint estimated tax payments, apply these rules to your separate estimated income. Quicktax Making joint or separate estimated tax payments will not affect your choice of filing a joint tax return or separate returns for 2014. Quicktax 2013 separate returns and 2014 joint return. Quicktax   If you plan to file a joint return with your spouse for 2014, but you filed separate returns for 2013, your 2013 tax is the total of the tax shown on your separate returns. Quicktax You filed a separate return if you filed as single, head of household, or married filing separately. Quicktax 2013 joint return and 2014 separate returns. Quicktax   If you plan to file a separate return for 2014 but you filed a joint return for 2013, your 2013 tax is your share of the tax on the joint return. Quicktax You file a separate return if you file as single, head of household, or married filing separately. Quicktax   To figure your share of the tax on the joint return, first figure the tax both you and your spouse would have paid had you filed separate returns for 2013 using the same filing status as for 2014. Quicktax Then multiply the tax on the joint return by the following fraction. Quicktax     The tax you would have paid had you filed a separate return   The total tax you and your spouse would have paid had you filed separate returns Example. Quicktax Joe and Heather filed a joint return for 2013 showing taxable income of $48,500 and a tax of $6,386. Quicktax Of the $48,500 taxable income, $40,100 was Joe's and the rest was Heather's. Quicktax For 2014, they plan to file married filing separately. Quicktax Joe figures his share of the tax on the 2013 joint return as follows. Quicktax   Tax on $40,100 based on a separate return $5,960     Tax on $8,400 based on a separate return 843     Total $6,803     Joe's percentage of total ($5,960 ÷ $6,803) 87. Quicktax 6%     Joe's share of tax on joint return  ($6,386 × 87. Quicktax 6%) $5,594   How To Figure Estimated Tax To figure your estimated tax, you must figure your expected adjusted gross income (AGI), taxable income, taxes, deductions, and credits for the year. Quicktax When figuring your 2014 estimated tax, it may be helpful to use your income, deductions, and credits for 2013 as a starting point. Quicktax Use your 2013 federal tax return as a guide. Quicktax You can use Form 1040-ES and Publication 505 to figure your estimated tax. Quicktax Nonresident aliens use Form 1040-ES (NR) and Publication 505 to figure estimated tax (see chapter 8 of Publication 519 for more information). Quicktax You must make adjustments both for changes in your own situation and for recent changes in the tax law. Quicktax For a discussion of these changes, visit IRS. Quicktax gov. Quicktax For more complete information on how to figure your estimated tax for 2014, see chapter 2 of Publication 505. Quicktax When To Pay Estimated Tax For estimated tax purposes, the tax year is divided into four payment periods. Quicktax Each period has a specific payment due date. Quicktax If you do not pay enough tax by the due date of each payment period, you may be charged a penalty even if you are due a refund when you file your income tax return. Quicktax The payment periods and due dates for estimated tax payments are shown next. Quicktax   For the period: Due date:*     Jan. Quicktax 1 – March 31 April 15     April 1 – May 31 June 16     June 1 – August 31 Sept. Quicktax 15     Sept. Quicktax 1– Dec. Quicktax 31 Jan. Quicktax 15, next year     *See Saturday, Sunday, holiday rule and January payment . Quicktax Saturday, Sunday, holiday rule. Quicktax   If the due date for an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next day that is not a Saturday, Sunday, or legal holiday. Quicktax January payment. Quicktax   If you file your 2014 Form 1040 or Form 1040A by January 31, 2015, and pay the rest of the tax you owe, you do not need to make the payment due on January 15, 2015. Quicktax Fiscal year taxpayers. Quicktax   If your tax year does not start on January 1, see the Form 1040-ES instructions for your payment due dates. Quicktax When To Start You do not have to make estimated tax payments until you have income on which you will owe income tax. Quicktax If you have income subject to estimated tax during the first payment period, you must make your first payment by the due date for the first payment period. Quicktax You can pay all your estimated tax at that time, or you can pay it in installments. Quicktax If you choose to pay in installments, make your first payment by the due date for the first payment period. Quicktax Make your remaining installment payments by the due dates for the later periods. Quicktax No income subject to estimated tax during first period. Quicktax    If you do not have income subject to estimated tax until a later payment period, you must make your first payment by the due date for that period. Quicktax You can pay your entire estimated tax by the due date for that period or you can pay it in installments by the due date for that period and the due dates for the remaining periods. Quicktax The following chart shows when to make installment payments. Quicktax If you first have income on which you must pay estimated tax: Make a payment  by:* Make later installments by:* Before April 1 April 15 June 16 Sept. Quicktax 15 Jan. Quicktax 15 next year April 1–May 31 June 16 Sept. Quicktax 15 Jan. Quicktax 15 next year June 1–Aug. Quicktax 31 Sept. Quicktax 15 Jan. Quicktax 15 next year After Aug. Quicktax 31 Jan. Quicktax 15 next year (None) *See Saturday, Sunday, holiday rule and January payment . Quicktax How much to pay to avoid a penalty. Quicktax   To determine how much you should pay by each payment due date, see How To Figure Each Payment, next. Quicktax How To Figure Each Payment You should pay enough estimated tax by the due date of each payment period to avoid a penalty for that period. Quicktax You can figure your required payment for each period by using either the regular installment method or the annualized income installment method. Quicktax These methods are described in chapter 2 of Publication 505. Quicktax If you do not pay enough during each payment period, you may be charged a penalty even if you are due a refund when you file your tax return. Quicktax If the earlier discussion of No income subject to estimated tax during first period or the later discussion of Change in estimated tax applies to you, you may benefit from reading Annualized Income Installment Method in chapter 2 of Publication 505 for information on how to avoid a penalty. Quicktax Underpayment penalty. Quicktax   Under the regular installment method, if your estimated tax payment for any period is less than one-fourth of your estimated tax, you may be charged a penalty for underpayment of estimated tax for that period when you file your tax return. Quicktax Under the annualized income installment method, your estimated tax payments vary with your income, but the amount required must be paid each period. Quicktax See chapter 4 of Publication 505 for more information. Quicktax Change in estimated tax. Quicktax   After you make an estimated tax payment, changes in your income, adjustments, deductions, credits, or exemptions may make it necessary for you to refigure your estimated tax. Quicktax Pay the unpaid balance of your amended estimated tax by the next payment due date after the change or in installments by that date and the due dates for the remaining payment periods. Quicktax Estimated Tax Payments Not Required You do not have to pay estimated tax if your withholding in each payment period is at least as much as: One-fourth of your required annual payment, or Your required annualized income installment for that period. Quicktax You also do not have to pay estimated tax if you will pay enough through withholding to keep the amount you owe with your return under $1,000. Quicktax How To Pay Estimated Tax There are several ways to pay estimated tax. Quicktax Credit an overpayment on your 2013 return to your 2014 estimated tax. Quicktax Pay by direct transfer from your bank account, or pay by credit or debit card using a pay-by-phone system or the Internet. Quicktax Send in your payment (check or money order) with a payment voucher from Form 1040-ES. Quicktax Credit an Overpayment If you show an overpayment of tax after completing your Form 1040 or Form 1040A for 2013, you can apply part or all of it to your estimated tax for 2014. Quicktax On line 75 of Form 1040, or line 44 of Form 1040A, enter the amount you want credited to your estimated tax rather than refunded. Quicktax Take the amount you have credited into account when figuring your estimated tax payments. Quicktax You cannot have any of the amount you credited to your estimated tax refunded to you until you file your tax return for the following year. Quicktax You also cannot use that overpayment in any other way. Quicktax Pay Online Paying online is convenient and secure and helps make sure we get your payments on time. Quicktax You can pay using either of the following electronic payment methods. Quicktax Direct transfer from your bank account. Quicktax Credit or debit card. Quicktax To pay your taxes online or for more information, go to www. Quicktax irs. Quicktax gov/e-pay. Quicktax Pay by Phone Paying by phone is another safe and secure method of paying electronically. Quicktax Use one of the following methods. Quicktax Direct transfer from your bank account. Quicktax Credit or debit card. Quicktax To pay by direct transfer from your bank account, call 1-800-555-4477 (English), 1-800-244-4829 (Espanol). Quicktax People who are deaf, hard of hearing, or have a speech disability and who have access to TTY/TDD can call 1-800-733-4829. Quicktax To pay using a credit or debit card, you can call one of the following service providers. Quicktax There is a convenience fee charged by these providers that varies by provider, card type, and payment amount. Quicktax WorldPay 1-888-9-PAY-TAXTM(1-888-972-9829) www. Quicktax payUSAtax. Quicktax com Official Payments Corporation 1-888-UPAY-TAXTM (1-888-872-9829) www. Quicktax officialpayments. Quicktax com Link2Gov Corporation 1-888-PAY-1040TM (1-888-729-1040) www. Quicktax PAY1040. Quicktax com For the latest details on how to pay by phone, go to www. Quicktax irs. Quicktax gov/e-pay. Quicktax Pay by Check or Money Order Using the Estimated Tax Payment Voucher Each payment of estimated tax by check or money order must be accompanied by a payment voucher from Form 1040-ES. Quicktax During 2013, if you: made at least one estimated tax payment but not by electronic means, did not use software or a paid preparer to prepare or file your return,  then you should receive a copy of the 2014 Form 1040-ES/V. Quicktax The enclosed payment vouchers will be preprinted with your name, address, and social security number. Quicktax Using the preprinted vouchers will speed processing, reduce the chance of error, and help save processing costs. Quicktax Use the window envelopes that came with your Form 1040-ES package. Quicktax If you use your own envelopes, make sure you mail your payment vouchers to the address shown in the Form 1040-ES instructions for the place where you live. Quicktax Note. Quicktax These criteria can change without notice. Quicktax If you do not receive a Form 1040-ES/V package and you are required to make an estimated tax payment, you should go to www. Quicktax irs. Quicktax gov and print a copy of Form 1040-ES which includes four blank payment vouchers. Quicktax Complete one of these and make your payment timely to avoid penalties for paying late. Quicktax Do not use the address shown in the Form 1040 or Form 1040A instructions for your estimated tax payments. Quicktax If you did not pay estimated tax last year, you can order Form 1040-ES from the IRS (see inside back cover of this publication) or download it from IRS. Quicktax gov. Quicktax Follow the instructions to make sure you use the vouchers correctly. Quicktax Joint estimated tax payments. Quicktax   If you file a joint return and are making joint estimated tax payments, enter the names and social security numbers on the payment voucher in the same order as they will appear on the joint return. Quicktax Change of address. Quicktax   You must notify the IRS if you are making estimated tax payments and you changed your address during the year. Quicktax Complete Form 8822, Change of Address, and mail it to the address shown in the instructions for that form. Quicktax Credit for Withholding and Estimated Tax for 2013 When you file your 2013 income tax return, take credit for all the income tax and excess social security or railroad retirement tax withheld from your salary, wages, pensions, etc. Quicktax Also take credit for the estimated tax you paid for 2013. Quicktax These credits are subtracted from your total tax. Quicktax Because these credits are refundable, you should file a return and claim these credits, even if you do not owe tax. Quicktax Two or more employers. Quicktax   If you had two or more employers in 2013 and were paid wages of more than $113,700, too much social security or tier 1 railroad retirement tax may have been withheld from your pay. Quicktax You may be able to claim the excess as a credit against your income tax when you file your return. Quicktax See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld in chapter 37. Quicktax Withholding If you had income tax withheld during 2013, you should be sent a statement by January 31, 2014, showing your income and the tax withheld. Quicktax Depending on the source of your income, you should receive: Form W-2, Wage and Tax Statement, Form W-2G, Certain Gambling Winnings, or A form in the 1099 series. Quicktax Forms W-2 and W-2G. Quicktax   If you file a paper return, always file Form W-2 with your income tax return. Quicktax File Form W-2G with your return only if it shows any federal income tax withheld from your winnings. Quicktax   You should get at least two copies of each form. Quicktax If you file a paper return, attach one copy to the front of your federal income tax return. Quicktax Keep one copy for your records. Quicktax You also should receive copies to file with your state and local returns. Quicktax Form W-2 Your employer is required to provide or send Form W-2 to you no later than January 31, 2014. Quicktax You should receive a separate Form W-2 from each employer you worked for. Quicktax If you stopped working before the end of 2013, your employer could have given you your Form W-2 at any time after you stopped working. Quicktax However, your employer must provide or send it to you by January 31, 2014. Quicktax If you ask for the form, your employer must send it to you within 30 days after receiving your written request or within 30 days after your final wage payment, whichever is later. Quicktax If you have not received your Form W-2 by January 31, you should ask your employer for it. Quicktax If you do not receive it by February 15, call the IRS. Quicktax Form W-2 shows your total pay and other compensation and the income tax, social security tax, and Medicare tax that was withheld during the year. Quicktax Include the federal income tax withheld (as shown in box 2 of Form W-2) on: Line 62 if you file Form 1040, Line 36 if you file Form 1040A, or Line 7 if you file Form 1040EZ. Quicktax In addition, Form W-2 is used to report any taxable sick pay you received and any income tax withheld from your sick pay. Quicktax Form W-2G If you had gambling winnings in 2013, the payer may have withheld income tax. Quicktax If tax was withheld, the payer will give you a Form W-2G showing the amount you won and the amount of tax withheld. Quicktax Report the amounts you won on line 21 of Form 1040. Quicktax Take credit for the tax withheld on line 62 of Form 1040. Quicktax If you had gambling winnings, you must use Form 1040; you cannot use Form 1040A or Form 1040EZ. Quicktax The 1099 Series Most forms in the 1099 series are not filed with your return. Quicktax These forms should be furnished to you by January 31, 2014 (or, for Forms 1099-B, 1099-S, and certain Forms 1099-MISC, by February 15, 2014). Quicktax Unless instructed to file any of these forms with your return, keep them for your records. Quicktax There are several different forms in this series, including: Form 1099-B, Proceeds From Broker and Barter Exchange Transactions; Form 1099-DIV, Dividends and Distributions; Form 1099-G, Certain Government Payments; Form 1099-INT, Interest Income; Form 1099-K, Payment Card and Third Party Network Transactions; Form 1099-MISC, Miscellaneous Income; Form 1099-OID, Original Issue Discount; Form 1099-PATR, Taxable Distributions Received from Cooperatives; Form 1099-Q, Payments From Qualified Education Programs; Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Quicktax ; Form 1099-S, Proceeds From Real Estate Transactions; Form RRB-1099, Payments by the Railroad Retirement Board. Quicktax If you received the types of income reported on some forms in the 1099 series, you may not be able to use Form 1040A or Form 1040EZ. Quicktax See the instructions to these forms for details. Quicktax Form 1099-R. Quicktax   Attach Form 1099-R to your paper return if box 4 shows federal income tax withheld. Quicktax Include the amount withheld in the total on line 62 of Form 1040 or line 36 of Form 1040A. Quicktax You cannot use Form 1040EZ if you received payments reported on Form 1099-R. Quicktax Backup withholding. Quicktax   If you were subject to backup withholding on income you received during 2013, include the amount withheld, as shown on your Form 1099, in the total on line 62 of Form 1040, line 36 of Form 1040A, or line 7 of Form 1040EZ. Quicktax Form Not Correct If you receive a form with incorrect information on it, you should ask the payer for a corrected form. Quicktax Call the telephone number or write to the address given for the payer on the form. Quicktax The corrected Form W-2G or Form 1099 you receive will have an “X” in the “CORRECTED” box at the top of the form. Quicktax A special form, Form W-2c, Corrected Wage and Tax Statement, is used to correct a Form W-2. Quicktax In certain situations, you will receive two forms in place of the original incorrect form. Quicktax This will happen when your taxpayer identification number is wrong or missing, your name and address are wrong, or you received the wrong type of form (for example, a Form 1099-DIV instead of a Form 1099-INT). Quicktax One new form you receive will be the same incorrect form or have the same incorrect information, but all money amounts will be zero. Quicktax This form will have an “X” in the “CORRECTED” box at the top of the form. Quicktax The second new form should have all the correct information, prepared as though it is the original (the “CORRECTED” box will not be checked). Quicktax Form Received After Filing If you file your return and you later receive a form for income that you did not include on your return, you should report the income and take credit for any income tax withheld by filing Form 1040X, Amended U. Quicktax S. Quicktax Individual Income Tax Return. Quicktax Separate Returns If you are married but file a separate return, you can take credit only for the tax withheld from your own income. Quicktax Do not include any amount withheld from your spouse's income. Quicktax However, different rules may apply if you live in a community property state. Quicktax Community property states are listed in chapter 2. Quicktax For more information on these rules, and some exceptions, see Publication 555, Community Property. Quicktax Fiscal Years If you file your tax return on the basis of a fiscal year (a 12-month period ending on the last day of any month except December), you must follow special rules to determine your credit for federal income tax withholding. Quicktax For a discussion of how to take credit for withholding on a fiscal year return, see Fiscal Years (FY) in chapter 3 of Publication 505. Quicktax Estimated Tax Take credit for all your estimated tax payments for 2013 on line 63 of Form 1040 or line 37 of Form 1040A. Quicktax Include any overpayment from 2012 that you had credited to your 2013 estimated tax. Quicktax You must use Form 1040 or Form 1040A if you paid estimated tax. Quicktax You cannot use Form 1040EZ. Quicktax Name changed. Quicktax   If you changed your name, and you made estimated tax payments using your old name, attach a brief statement to the front of your paper tax return indicating: When you made the payments, The amount of each payment, Your name when you made the payments, and Your social security number. Quicktax The statement should cover payments you made jointly with your spouse as well as any you made separately. Quicktax   Be sure to report the change to the Social Security Administration. Quicktax This prevents delays in processing your return and issuing any refunds. Quicktax Separate Returns If you and your spouse made separate estimated tax payments for 2013 and you file separate returns, you can take credit only for your own payments. Quicktax If you made joint estimated tax payments, you must decide how to divide the payments between your returns. Quicktax One of you can claim all of the estimated tax paid and the other none, or you can divide it in any other way you agree on. Quicktax If you cannot agree, you must divide the payments in proportion to each spouse's individual tax as shown on your separate returns for 2013. Quicktax Divorced Taxpayers If you made joint estimated tax payments for 2013, and you were divorced during the year, either you or your former spouse can claim all of the joint payments, or you each can claim part of them. Quicktax If you cannot agree on how to divide the payments, you must divide them in proportion to each spouse's individual tax as shown on your separate returns for 2013. Quicktax If you claim any of the joint payments on your tax return, enter your former spouse's social security number (SSN) in the space provided on the front of Form 1040 or Form 1040A. Quicktax If you divorced and remarried in 2013, enter your present spouse's SSN in that space and write your former spouse's SSN, followed by “DIV,” to the left of Form 1040, line 63, or Form 1040A, line 37. Quicktax Underpayment Penalty for 2013 If you did not pay enough tax, either through withholding or by making timely estimated tax payments, you will have an underpayment of estimated tax and you may have to pay a penalty. Quicktax Generally, you will not have to pay a penalty for 2013 if any of the following apply. Quicktax The total of your withholding and estimated tax payments was at least as much as your 2012 tax (or 110% of your 2012 tax if your AGI was more than $150,000, $75,000 if your 2013 filing status is married filing separately) and you paid all required estimated tax payments on time. Quicktax The tax balance due on your 2013 return is no more than 10% of your total 2013 tax, and you paid all required estimated tax payments on time. Quicktax Your total 2013 tax minus your withholding and refundable credits is less than $1,000. Quicktax You did not have a tax liability for 2012 and your 2012 tax year was 12 months, or You did not have any withholding taxes and your current year tax less any household employment taxes is less than $1,000. Quicktax See Publication 505, chapter 4, for a definition of “total tax” for 2012 and 2013. Quicktax Farmers and fishermen. Quicktax   Special rules apply if you are a farmer or fisherman. Quicktax See Farmers and Fishermen in chapter 4 of Publication 505 for more information. Quicktax IRS can figure the penalty for you. Quicktax   If you think you owe the penalty but you do not want to figure it yourself when you file your tax return, you may not have to. Quicktax Generally, the IRS will figure the penalty for you and send you a bill. Quicktax However, if you think you are able to lower or eliminate your penalty, you must complete Form 2210 or Form 2210-F and attach it to your paper return. Quicktax See chapter 4 of Publication 505. Quicktax Prev  Up  Next   Home   More Online Publications
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2013 IRSAC Report Made Available at Public Meeting

The Internal Revenue Service Advisory Council (IRSAC) is holding its annual public meeting today in Washington, D.C., and will release its annual report that includes recommendations on a wide range of tax administration issues.

“Members of IRSAC devote significant amounts of their own time to provide us with valuable feedback regarding current issues of tax administration,” said Acting IRS Commissioner Danny Werfel. “We appreciate their important contribution.”

IRSAC is an advisory group to the entire agency. IRSAC’s primary purpose is to provide an organized public forum for senior IRS executives and representatives of the public to discuss relevant tax issues.

IRSAC draws its members from the tax professional community and members of academia. Based on its findings and discussions, IRSAC made several recommendations on a broad array of issues and concerns including:

  • The IRS needs sufficient funding to operate efficiently, provide timely and useful guidance to taxpayers and enforce current Law, so that respect for our voluntary tax system is maintained
  • The IRS should continue to expand voluntary correction programs to facilitate taxpayers self-reporting prior year non-compliance
  • Reducing Processing time for Form 2848, Power of Attorney and Declaration of Representative
  • Review the Transcript Request Policy for the Practitioner Priority Service (PPS) Toll-Free Line
  • Risk Assessing Large Taxpayers
  • Schedule M-3, Net Operating (Loss) Reconciliation for Corporations with Total assets with $10 million or more
  • Strategies to Increase use of On-line Payment Agreements
  • Modifications to Notice CP2030
  • Guidance to Practitioners regarding Professional Obligations
  • Treasury Circular 230 Enrollment of Former Internal Revenue Service Employees

IRSAC is administered by the National Public Liaison Office of the IRS. Today’s meeting is being held at the Melrose Hotel, 2430 Pennsylvania Ave, NW, Washington, DC.

View the 2013 Internal Revenue Service Advisory Council Public Report online.

 

Page Last Reviewed or Updated: 20-Nov-2013

The Quicktax

Quicktax Publication 504 - Main Content Table of Contents Filing StatusUnmarried persons. Quicktax Married persons. Quicktax Same-sex marriage. Quicktax Exception. Quicktax Married Filing Jointly Married Filing Separately Head of Household ExemptionsPersonal Exemptions Exemptions for Dependents Phaseout of Exemptions AlimonyInvalid decree. Quicktax Amended instrument. Quicktax General Rules Instruments Executed After 1984 Instruments Executed Before 1985 Qualified Domestic Relations OrderRollovers. Quicktax Individual Retirement Arrangements Property SettlementsTransfer Between Spouses Gift Tax on Property Settlements Sale of Jointly-Owned Property Costs of Getting a Divorce Tax Withholding and Estimated Tax Community PropertyCommunity Income Alimony (Community Income) How To Get Tax Help Filing Status Your filing status is used in determining whether you must file a return, your standard deduction, and the correct tax. Quicktax It may also be used in determining whether you can claim certain other deductions and credits. Quicktax The filing status you can choose depends partly on your marital status on the last day of your tax year. Quicktax Marital status. Quicktax   If you are unmarried, your filing status is single or, if you meet certain requirements, head of household or qualifying widow(er). Quicktax If you are married, your filing status is either married filing a joint return or married filing a separate return. Quicktax For information about the single and qualifying widow(er) filing statuses, see Publication 501. Quicktax Unmarried persons. Quicktax   You are unmarried for the whole year if either of the following applies. Quicktax You have obtained a final decree of divorce or separate maintenance by the last day of your tax year. Quicktax You must follow your state law to determine if you are divorced or legally separated. Quicktax Exception. Quicktax If you and your spouse obtain a divorce in one year for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intend to remarry each other and do so in the next tax year, you and your spouse must file as married individuals. Quicktax You have obtained a decree of annulment, which holds that no valid marriage ever existed. Quicktax You must file amended returns (Form 1040X, Amended U. Quicktax S. Quicktax Individual Income Tax Return) for all tax years affected by the annulment that are not closed by the statute of limitations. Quicktax The statute of limitations generally does not end until 3 years (including extensions) after the date you file your original return or within 2 years after the date you pay the tax. Quicktax On the amended return you will change your filing status to single or, if you meet certain requirements, head of household. Quicktax Married persons. Quicktax   You are married for the whole year if you are separated but you have not obtained a final decree of divorce or separate maintenance by the last day of your tax year. Quicktax An interlocutory decree is not a final decree. Quicktax Same-sex marriage. Quicktax   For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Quicktax The term "spouse" includes an individual married to a person of the same sex if the couple is lawfully married under state (or foreign) law. Quicktax However, individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that is not considered a marriage under state (or foreign) law are not considered married for federal tax purposes. Quicktax For more details, see Publication 501. Quicktax Exception. Quicktax   If you live apart from your spouse, under certain circumstances, you may be considered unmarried and can file as head of household. Quicktax See Head of Household , later. Quicktax Married Filing Jointly If you are married, you and your spouse can choose to file a joint return. Quicktax If you file jointly, you both must include all your income, exemptions, deductions, and credits on that return. Quicktax You can file a joint return even if one of you had no income or deductions. Quicktax If both you and your spouse have income, you should usually figure your tax on both a joint return and separate returns (using the filing status of married filing separately) to see which gives the two of you the lower combined tax. Quicktax Nonresident alien. Quicktax   To file a joint return, at least one of you must be a U. Quicktax S. Quicktax citizen or resident alien at the end of the tax year. Quicktax If either of you was a nonresident alien at any time during the tax year, you can file a joint return only if you agree to treat the nonresident spouse as a resident of the United States. Quicktax This means that your combined worldwide incomes are subject to U. Quicktax S. Quicktax income tax. Quicktax These rules are explained in Publication 519, U. Quicktax S. Quicktax Tax Guide for Aliens. Quicktax Signing a joint return. Quicktax   Both you and your spouse generally must sign the return, or it will not be considered a joint return. Quicktax Joint and individual liability. Quicktax   Both you and your spouse may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. Quicktax This means that one spouse may be held liable for all the tax due even if all the income was earned by the other spouse. Quicktax Divorced taxpayers. Quicktax   If you are divorced, you are jointly and individually responsible for any tax, interest, and penalties due on a joint return for a tax year ending before your divorce. Quicktax This responsibility applies even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns. Quicktax Relief from joint liability. Quicktax   In some cases, a spouse may be relieved of the tax, interest, and penalties on a joint return. Quicktax You can ask for relief no matter how small the liability. Quicktax   There are three types of relief available. Quicktax Innocent spouse relief. Quicktax Separation of liability, which applies to joint filers who are divorced, widowed, legally separated, or who have not lived together for the 12 months ending on the date election of this relief is filed. Quicktax Equitable relief. Quicktax   Married persons who live in community property states, but who did not file joint returns, may also qualify for relief from liability arising from community property law or for equitable relief. Quicktax See Relief from liability arising from community property law , later, under Community Property. Quicktax    Each kind of relief has different requirements. Quicktax You must file Form 8857 to request relief under any of these categories. Quicktax Publication 971 explains these kinds of relief and who may qualify for them. Quicktax You can also find information on our website at IRS. Quicktax gov. Quicktax Tax refund applied to spouse's debts. Quicktax   The overpayment shown on your joint return may be used to pay the past-due amount of your spouse's debts. Quicktax This includes your spouse's federal tax, state income tax, child or spousal support payments, or a federal nontax debt, such as a student loan. Quicktax You can get a refund of your share of the overpayment if you qualify as an injured spouse. Quicktax Injured spouse. Quicktax   You are an injured spouse if you file a joint return and all or part of your share of the overpayment was, or is expected to be, applied against your spouse's past-due debts. Quicktax An injured spouse can get a refund for his or her share of the overpayment that would otherwise be used to pay the past-due amount. Quicktax   To be considered an injured spouse, you must: Have made and reported tax payments (such as federal income tax withheld from wages or estimated tax payments), or claimed a refundable tax credit, such as the earned income credit or additional child tax credit on the joint return, and Not be legally obligated to pay the past-due amount. Quicktax Note. Quicktax If the injured spouse's permanent home is in a community property state, then the injured spouse must only meet (2). Quicktax For more information, see Publication 555. Quicktax    Refunds that involve community property states must be divided according to local law. Quicktax If you live in a community property state in which all community property is subject to the debts of either spouse, your entire refund is generally used to pay those debts. Quicktax   If you are an injured spouse, you must file Form 8379 to have your portion of the overpayment refunded to you. Quicktax Follow the instructions for the form. Quicktax   If you have not filed your joint return and you know that your joint refund will be offset, file Form 8379 with your return. Quicktax You should receive your refund within 14 weeks from the date the paper return is filed or within 11 weeks from the date the return is filed electronically. Quicktax   If you filed your joint return and your joint refund was offset, file Form 8379 by itself. Quicktax When filed after offset, it can take up to 8 weeks to receive your refund. Quicktax Do not attach the previously filed tax return, but do include copies of all Forms W-2, Wage and Tax Statement, and W-2G, Certain Gambling Winnings, for both spouses and any Forms 1099 that show income tax withheld. Quicktax    An injured spouse claim is different from an innocent spouse relief request. Quicktax An injured spouse uses Form 8379 to request an allocation of the tax overpayment attributed to each spouse. Quicktax An innocent spouse uses Form 8857 to request relief from joint liability for tax, interest, and penalties on a joint return for items of the other spouse (or former spouse) that were incorrectly reported on or omitted from the joint return. Quicktax For information on innocent spouses, see Relief from joint liability, earlier. Quicktax Married Filing Separately If you and your spouse file separate returns, you should each report only your own income, exemptions, deductions, and credits on your individual return. Quicktax You can file a separate return even if only one of you had income. Quicktax For information on exemptions you can claim on your separate return, see Exemptions , later. Quicktax Community or separate income. Quicktax   If you live in a community property state and file a separate return, your income may be separate income or community income for income tax purposes. Quicktax For more information, see Community Income under Community Property, later. Quicktax Separate liability. Quicktax   If you and your spouse file separately, you each are responsible only for the tax due on your own return. Quicktax Itemized deductions. Quicktax   If you and your spouse file separate returns and one of you itemizes deductions, the other spouse cannot use the standard deduction and should also itemize deductions. Quicktax Table 1. Quicktax Itemized Deductions on Separate Returns This table shows itemized deductions you can claim on your married filing separate return whether you paid the expenses separately with your own funds or jointly with your spouse. Quicktax  Caution: If you live in a community property state, these rules do not apply. Quicktax See Community Property. Quicktax IF you paid . Quicktax . Quicktax . Quicktax AND you . Quicktax . Quicktax . Quicktax THEN you can deduct on your separate federal return. Quicktax . Quicktax . Quicktax   medical expenses   paid with funds deposited in a joint checking account in which you and your spouse have an equal interest     half of the total medical expenses, subject to certain limits, unless you can show that you alone paid the expenses. Quicktax     state income tax   file a separate state income tax return     the state income tax you alone paid during the year. Quicktax         file a joint state income tax return and you and your spouse are jointly and individually liable for the full amount of the state income tax     the state income tax you alone paid during the year. Quicktax         file a joint state income tax return and you  are liable for only your own share of state  income tax     the smaller of: the state income tax you alone paid during the year, or the total state income tax you and your spouse paid during the year multiplied by the following fraction. Quicktax The numerator is your gross income and the denominator  is your combined gross income. Quicktax     property tax   paid the tax on property held as tenants by the entirety     the property tax you alone paid. Quicktax     mortgage interest   paid the interest on a qualified home1 held  as tenants by the entirety     the mortgage interest you alone paid. Quicktax     casualty loss   have a casualty loss on a home you own  as tenants by the entirety     half of the loss, subject to the deduction limits. Quicktax Neither spouse may report the total casualty loss. Quicktax 1 For more information on a qualified home and deductible mortgage interest, see Publication 936, Home Mortgage Interest Deduction. Quicktax Dividing itemized deductions. Quicktax   You may be able to claim itemized deductions on a separate return for certain expenses that you paid separately or jointly with your spouse. Quicktax See Table 1, later. Quicktax Separate returns may give you a higher tax. Quicktax   Some married couples file separate returns because each wants to be responsible only for his or her own tax. Quicktax There is no joint liability. Quicktax But in almost all instances, if you file separate returns, you will pay more combined federal tax than you would with a joint return. Quicktax This is because the following special rules apply if you file a separate return. Quicktax Your tax rate generally will be higher than it would be on a joint return. Quicktax Your exemption amount for figuring the alternative minimum tax will be half of that allowed a joint return filer. Quicktax You cannot take the credit for child and dependent care expenses in most cases. Quicktax You cannot take the earned income credit. Quicktax You cannot take the exclusion or credit for adoption expenses in most cases. Quicktax You cannot take the credit for higher education expenses (American opportunity and lifetime learning credits), the deduction for student loan interest, or the tuition and fees deduction. Quicktax You cannot exclude the interest from qualified savings bonds that you used for higher education expenses. Quicktax If you lived with your spouse at any time during the tax year: You cannot claim the credit for the elderly or the disabled, and You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received. Quicktax Your income limits that reduce the child tax credit, the retirement savings contributions credit, itemized deductions, and the deduction for personal exemptions are half of the limits for a joint return filer. Quicktax Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return). Quicktax Your basic standard deduction, if allowable, is half of that allowed a joint return filer. Quicktax See Itemized deductions , earlier. Quicktax Joint return after separate returns. Quicktax   If either you or your spouse (or both of you) file a separate return, you generally can change to a joint return within 3 years from the due date (not including extensions) of the separate return or returns. Quicktax This applies to a return either of you filed claiming married filing separately, single, or head of household filing status. Quicktax Use Form 1040X to change your filing status. Quicktax Separate returns after joint return. Quicktax   After the due date of your return, you and your spouse cannot file separate returns if you previously filed a joint return. Quicktax Exception. Quicktax   A personal representative for a decedent can change from a joint return elected by the surviving spouse to a separate return for the decedent. Quicktax The personal representative has 1 year from the due date (including extensions) of the joint return to make the change. Quicktax Head of Household Filing as head of household has the following advantages. Quicktax You can claim the standard deduction even if your spouse files a separate return and itemizes deductions. Quicktax Your standard deduction is higher than is allowed if you claim a filing status of single or married filing separately. Quicktax Your tax rate usually will be lower than it is if you claim a filing status of single or married filing separately. Quicktax You may be able to claim certain credits (such as the dependent care credit and the earned income credit) you cannot claim if your filing status is married filing separately. Quicktax Income limits that reduce your child tax credit, retirement savings contributions credit, itemized deductions, and the deduction for personal exemptions are higher than the income limits if you claim a filing status of married filing separately. Quicktax Requirements. Quicktax   You may be able to file as head of household if you meet all the following requirements. Quicktax You are unmarried or “considered unmarried” on the last day of the year. Quicktax You paid more than half the cost of keeping up a home for the year. Quicktax A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). Quicktax However, if the “qualifying person” is your dependent parent, he or she does not have to live with you. Quicktax See Special rule for parent , later, under Qualifying person. Quicktax Considered unmarried. Quicktax   You are considered unmarried on the last day of the tax year if you meet all the following tests. Quicktax You file a separate return. Quicktax A separate return includes a return claiming married filing separately, single, or head of household filing status. Quicktax You paid more than half the cost of keeping up your home for the tax year. Quicktax Your spouse did not live in your home during the last 6 months of the tax year. Quicktax Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. Quicktax See Temporary absences , later. Quicktax Your home was the main home of your child, stepchild, or foster child for more than half the year. Quicktax (See Qualifying person , later, for rules applying to a child's birth, death, or temporary absence during the year. Quicktax ) You must be able to claim an exemption for the child. Quicktax However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child using the rule described later in Special rule for divorced or separated parents (or parents who live apart) under Exemptions for Dependents. Quicktax The general rules for claiming an exemption for a dependent are shown later in Table 3. Quicktax    If you were considered married for part of the year and lived in a community property state (one of the states listed later under Community Property), special rules may apply in determining your income and expenses. Quicktax See Publication 555 for more information. Quicktax Nonresident alien spouse. Quicktax   If your spouse was a nonresident alien at any time during the tax year, and you have not chosen to treat your spouse as a resident alien, you are considered unmarried for head of household purposes. Quicktax However, your spouse is not a qualifying person for head of household purposes. Quicktax You must have another qualifying person and meet the other requirements to file as head of household. Quicktax Keeping up a home. Quicktax   You are keeping up a home only if you pay more than half the cost of its upkeep for the year. Quicktax This includes rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home. Quicktax This does not include the cost of clothing, education, medical treatment, vacations, life insurance, or transportation for any member of the household. Quicktax Qualifying person. Quicktax    Table 2, later, shows who can be a qualifying person. Quicktax Any person not described in Table 2 is not a qualifying person. Quicktax   Generally, the qualifying person must live with you for more than half of the year. Quicktax Table 2. Quicktax Who Is a Qualifying Person Qualifying You To File as Head of Household?1 Caution. Quicktax See the text of this publication for the other requirements you must meet to claim head of household filing status. Quicktax IF the person is your . Quicktax . Quicktax . Quicktax AND . Quicktax . Quicktax . Quicktax THEN that person is . Quicktax . Quicktax . Quicktax   qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests)2 he or she is single a qualifying person, whether or not you can claim an exemption for the person. Quicktax     he or she is married and you can claim an exemption for him or her a qualifying person. Quicktax     he or she is married and you cannot claim an exemption for him or her not a qualifying person. Quicktax 3     qualifying relative4 who is your father or mother you can claim an exemption for him or her5 a qualifying person. Quicktax 6     you cannot claim an exemption for him or her not a qualifying person. Quicktax     qualifying relative4 other than your father or mother (such as a grandparent, brother, or sister who meets certain tests) he or she lived with you more than half the year, and he or she is related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 and you can claim an exemption for him or her5 a qualifying person. Quicktax     he or she did not live with you more than half the year not a qualifying person. Quicktax     he or she is not related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 and is your qualifying relative only because he or she lived with you all year as a member of your household not a qualifying person. Quicktax     you cannot claim an exemption for him or her not a qualifying person. Quicktax   1 A person cannot qualify more than one taxpayer to use the head of household filing status for the year. Quicktax 2 See Table 3, later, for the tests that must be met to be a qualifying child. Quicktax Note. Quicktax If you are a noncustodial parent, the term “qualifying child” for head of household filing status does not include a child who is your qualifying child for exemption purposes only because of the rules described under Children of Divorced or Separated Parents (or Parents Who Live Apart) under Exemptions for Dependents, later. Quicktax If you are the custodial parent and those rules apply, the child is generally your qualifying child for head of household filing status even though the child is not a qualifying child for whom you can claim an exemption. Quicktax 3 This person is a qualifying person if the only reason you cannot claim the exemption is that you can be claimed as a dependent on someone else's return. Quicktax 4 See Table 3, later, for the tests that must be met to be a qualifying relative. Quicktax 5 If you can claim an exemption for a person only because of a multiple support agreement, that person is not a qualifying person. Quicktax See Multiple Support Agreement in Publication 501. Quicktax 6 See Special rule for parent . Quicktax Special rule for parent. Quicktax   If your qualifying person is your father or mother, you may be eligible to file as head of household even if your father or mother does not live with you. Quicktax However, you must be able to claim an exemption for your father or mother. Quicktax Also, you must pay more than half the cost of keeping up a home that was the main home for the entire year for your father or mother. Quicktax You are keeping up a main home for your father or mother if you pay more than half the cost of keeping your parent in a rest home or home for the elderly. Quicktax Death or birth. Quicktax   If the person for whom you kept up a home was born or died in 2013, you still may be able to file as head of household. Quicktax If the person is your qualifying child, the child must have lived with you for more than half the part of the year he or she was alive. Quicktax If the person is anyone else, see Publication 501. Quicktax Temporary absences. Quicktax   You and your qualifying person are considered to live together even if one or both of you are temporarily absent from your home due to special circumstances such as illness, education, business, vacation, or military service. Quicktax It must be reasonable to assume that the absent person will return to the home after the temporary absence. Quicktax You must continue to keep up the home during the absence. Quicktax Kidnapped child. Quicktax   You may be eligible to file as head of household even if the child who is your qualifying person has been kidnapped. Quicktax You can claim head of household filing status if all the following statements are true. Quicktax The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family. Quicktax In the year of the kidnapping, the child lived with you for more than half the part of the year before the kidnapping. Quicktax You would have qualified for head of household filing status if the child had not been kidnapped. Quicktax   This treatment applies for all years until the earlier of: The year the child is returned, The year there is a determination that the child is dead, or The year the child would have reached age 18. Quicktax More information. Quicktax   For more information on filing as head of household, see Publication 501. Quicktax Exemptions You can deduct $3,900 for each exemption you claim in 2013. Quicktax However, if your adjusted gross income is more than $150,000, see Phaseout of Exemptions , later. Quicktax There are two types of exemptions: personal exemptions and exemptions for dependents. Quicktax If you are entitled to claim an exemption for a dependent (such as your child), that dependent cannot claim his or her personal exemption on his or her own tax return. Quicktax Personal Exemptions You can claim your own exemption unless someone else can claim it. Quicktax If you are married, you may be able to take an exemption for your spouse. Quicktax These are called personal exemptions. Quicktax Exemption for Your Spouse Your spouse is never considered your dependent. Quicktax Joint return. Quicktax   On a joint return, you can claim one exemption for yourself and one for your spouse. Quicktax   If your spouse had any gross income, you can claim his or her exemption only if you file a joint return. Quicktax Separate return. Quicktax   If you file a separate return, you can take an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer. Quicktax If your spouse is the dependent of another taxpayer, you cannot claim an exemption for your spouse even if the other taxpayer does not actually claim your spouse's exemption. Quicktax Alimony paid. Quicktax   If you paid alimony to your spouse, you cannot take an exemption for your spouse. Quicktax This is because alimony is gross income to the spouse who received it. Quicktax Divorced or separated spouse. Quicktax   If you obtained a final decree of divorce or separate maintenance during the year, you cannot take your former spouse's exemption. Quicktax This rule applies even if you provided all of your former spouse's support. Quicktax Exemptions for Dependents You are allowed one exemption for each person you can claim as a dependent. Quicktax You can claim an exemption for a dependent even if your dependent files a return. Quicktax The term “dependent” means: A qualifying child, or A qualifying relative. Quicktax Table 3 shows the tests that must be met to be either a qualifying child or qualifying relative, plus the additional requirements for claiming an exemption for a dependent. Quicktax For detailed information, see Publication 501. Quicktax   Dependent not allowed a personal exemption. Quicktax If you can claim an exemption for your dependent, the dependent cannot claim his or her own exemption on his or her own tax return. Quicktax This is true even if you do not claim the dependent's exemption on your return. Quicktax It is also true if the decedent's exemption on your return is reduced or eliminated under the phaseout rule described under Phaseout of Exemptions, later. Quicktax Table 3. Quicktax Overview of the Rules for Claiming an Exemption for a Dependent Caution. Quicktax This table is only an overview of the rules. Quicktax For details, see Publication 501. Quicktax • You cannot claim any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer. Quicktax • You cannot claim a married person who files a joint return as a dependent unless that joint return is only a claim for refund and there would be no tax liability for either spouse on separate returns. Quicktax • You cannot claim a person as a dependent unless that person is a U. Quicktax S. Quicktax citizen, U. Quicktax S. Quicktax resident alien, U. Quicktax S. Quicktax national, or a resident of Canada or Mexico. Quicktax 1 • You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative. Quicktax   Tests To Be a Qualifying Child   Tests To Be a Qualifying Relative 1. Quicktax     2. Quicktax       3. Quicktax    4. Quicktax    5. Quicktax    The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. Quicktax   The child must be (a) under age 19 at the end of the year and younger than you (or your spouse if filing jointly), (b) under age 24 at the end of the year, a student, and younger than you (or your spouse if filing jointly), or (c) any age if permanently and totally disabled. Quicktax   The child must have lived with you for more than half of the year. Quicktax 2   The child must not have provided more than half of his or her own support for the year. Quicktax   The child is not filing a joint return for the year (unless that joint return is filed only as a claim for refund of withheld income tax or estimated tax paid). Quicktax   1. Quicktax    2. Quicktax       3. Quicktax    4. Quicktax The person cannot be your qualifying child or the qualifying child of anyone else. Quicktax   The person either (a) must be related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 or (b) must live with you all year as a member of your household 2 (and your relationship must not violate local law). Quicktax   The person's gross income for the year must be less than $3,900. Quicktax 3   You must provide more than half of the person's total support for the year. Quicktax 4 If the child meets the rules to be a qualifying child of more than one person, only one person can actually treat the child as a qualifying child. Quicktax See Special Rule for Qualifying Child of More Than One Person , later, to find out which person is the person entitled to claim the child as a qualifying child. Quicktax     1 Exception exists for certain adopted children. Quicktax 2 Exceptions exist for temporary absences, children who were born or died during the year, children of divorced or separated parents (or parents who live apart), and kidnapped children. Quicktax 3 Exception exists for persons who are disabled and have income from a sheltered workshop. Quicktax 4 Exceptions exist for multiple support agreements, children of divorced or separated parents (or parents who live apart), and kidnapped children. Quicktax See Publication 501. Quicktax You may be entitled to a child tax credit for each qualifying child who was under age 17 at the end of the year if you claimed an exemption for that child. Quicktax For more information, see the instructions for your tax return if you file Form 1040A or 1040. Quicktax Children of Divorced or Separated Parents (or Parents Who Live Apart) In most cases, because of the residency test (see item 3 under Tests To Be a Qualifying Child in Table 3), a child of divorced or separated parents is the qualifying child of the custodial parent. Quicktax However, the child will be treated as the qualifying child of the noncustodial parent if the special rule (discussed next) applies. Quicktax Special rule for divorced or separated parents (or parents who live apart). Quicktax   A child will be treated as the qualifying child of his or her noncustodial parent if all four of the following statements are true. Quicktax The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all times during the last 6 months of the year, whether or not they are or were married. Quicktax The child received over half of his or her support for the year from the parents. Quicktax The child is in the custody of one or both parents for more than half of the year. Quicktax Either of the following applies. Quicktax The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. Quicktax (If the decree or agreement went into effect after 1984, see Divorce decree or separation agreement that went into effect after 1984 and before 2009 , later. Quicktax A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child's support during 2013. Quicktax See Child support under pre-1985 agreement , later. Quicktax Custodial parent and noncustodial parent. Quicktax   The custodial parent is the parent with whom the child lived for the greater number of nights during the year. Quicktax The other parent is the noncustodial parent. Quicktax   If the parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater number of nights during the rest of the year. Quicktax   A child is treated as living with a parent for a night if the child sleeps: At that parent's home, whether or not the parent is present, or In the company of the parent, when the child does not sleep at a parent's home (for example, the parent and child are on vacation together). Quicktax Equal number of nights. Quicktax   If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income. Quicktax December 31. Quicktax   The night of December 31 is treated as part of the year in which it begins. Quicktax For example, December 31, 2013, is treated as part of 2013. Quicktax Emancipated child. Quicktax   If a child is emancipated under state law, the child is treated as not living with either parent. Quicktax See Examples 5 and 6 . Quicktax Absences. Quicktax    If a child was not with either parent on a particular night (because, for example, the child was staying at a friend's house), the child is treated as living with the parent with whom the child normally would have lived for that night, except for the absence. Quicktax But if it cannot be determined with which parent the child normally would have lived or if the child would not have lived with either parent that night, the child is treated as not living with either parent that night. Quicktax Parent works at night. Quicktax   If, due to a parent's nighttime work schedule, a child lives for a greater number of days but not nights with the parent who works at night, that parent is treated as the custodial parent. Quicktax On a school day, the child is treated as living at the primary residence registered with the school. Quicktax Example 1 – child lived with one parent greater number of nights. Quicktax You and your child’s other parent are divorced. Quicktax In 2013, your child lived with you 210 nights and with the other parent 156 nights. Quicktax You are the custodial parent. Quicktax Example 2 – child is away at camp. Quicktax In 2013, your daughter lives with each parent for alternate weeks. Quicktax In the summer, she spends 6 weeks at summer camp. Quicktax During the time she is at camp, she is treated as living with you for 3 weeks and with her other parent, your ex-spouse, for 3 weeks because this is how long she would have lived with each parent if she had not attended summer camp. Quicktax Example 3 – child lived same number of days with each parent. Quicktax Your son lived with you 180 nights during the year and lived the same number of nights with his other parent, your ex-spouse. Quicktax Your adjusted gross income is $40,000. Quicktax Your ex-spouse's adjusted gross income is $25,000. Quicktax You are treated as your son's custodial parent because you have the higher adjusted gross income. Quicktax Example 4 – child is at parent’s home but with other parent. Quicktax Your son normally lives with you during the week and with his other parent, your ex-spouse, every other weekend. Quicktax You become ill and are hospitalized. Quicktax The other parent lives in your home with your son for 10 consecutive days while you are in the hospital. Quicktax Your son is treated as living with you during this 10-day period because he was living in your home. Quicktax Example 5 – child emancipated in May. Quicktax When your son turned age 18 in May 2013, he became emancipated under the law of the state where he lives. Quicktax As a result, he is not considered in the custody of his parents for more than half of the year. Quicktax The special rule for children of divorced or separated parents (or parents who live apart) does not apply. Quicktax Example 6 – child emancipated in August. Quicktax Your daughter lives with you from January 1, 2013, until May 31, 2013, and lives with her other parent, your ex-spouse, from June 1, 2013, through the end of the year. Quicktax She turns 18 and is emancipated under state law on August 1, 2013. Quicktax Because she is treated as not living with either parent beginning on August 1, she is treated as living with you the greater number of nights in 2013. Quicktax You are the custodial parent. Quicktax Written declaration. Quicktax    The custodial parent must use either Form 8332 or a similar statement (containing the same information required by the form) to make the written declaration to release the exemption to the noncustodial parent. Quicktax The noncustodial parent must attach a copy of the form or statement to his or her tax return. Quicktax   The exemption can be released for 1 year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration. Quicktax Divorce decree or separation agreement that went into effect after 1984 and before 2009. Quicktax   If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. Quicktax To be able to do this, the decree or agreement must state all three of the following. Quicktax The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support. Quicktax The custodial parent will not claim the child as a dependent for the year. Quicktax The years for which the noncustodial parent, rather than the custodial parent, can claim the child as a dependent. Quicktax   The noncustodial parent must attach all of the following pages of the decree or agreement to his or her return. Quicktax The cover page (write the other parent's social security number on this page). Quicktax The pages that include all of the information identified in items (1) through (3) above. Quicktax The signature page with the other parent's signature and the date of the agreement. Quicktax Post-2008 divorce decree or separation agreement. Quicktax   If the decree or agreement went into effect after 2008, a noncustodial parent claiming an exemption for a child cannot attach pages from a divorce decree or separation agreement instead of Form 8332. Quicktax The custodial parent must sign either a Form 8332 or a similar statement. Quicktax The only purpose of this statement must be to release the custodial parent's claim to the child's exemption. Quicktax The noncustodial parent must attach a copy to his or her return. Quicktax The form or statement must release the custodial parent's claim to the child without any conditions. Quicktax For example, the release must not depend on the noncustodial parent paying support. Quicktax    The noncustodial parent must attach the required information even if it was filed with a return in an earlier year. Quicktax Revocation of release of claim to an exemption. Quicktax   The custodial parent can revoke a release of claim to exemption that he or she previously released to the noncustodial parent on Form 8332 or a similar statement. Quicktax In order for the revocation to be effective for 2013, the custodial parent must have given (or made reasonable efforts to give) written notice of the revocation to the noncustodial parent in 2012 or earlier. Quicktax The custodial parent can use Part III of Form 8332 for this purpose and must attach a copy of the revocation to his or her return for each tax year he or she claims the child as a dependent as a result of the revocation. Quicktax Remarried parent. Quicktax   If you remarry, the support provided by your new spouse is treated as provided by you. Quicktax Child support under pre-1985 agreement. Quicktax   All child support payments actually received from the noncustodial parent under a pre-1985 agreement are considered used for the support of the child, even if such amounts are not actually spent for child support. Quicktax Example. Quicktax Under a pre-1985 agreement, the noncustodial parent provides $1,200 for the child's support. Quicktax This amount is considered support provided by the noncustodial parent even if the $1,200 was actually spent on things other than support. Quicktax Parents who never married. Quicktax   The special rule for divorced or separated parents also applies to parents who never married and lived apart at all times during the last 6 months of the year. Quicktax Alimony. Quicktax   Payments to your spouse that are includible in his or her gross income as either alimony, separate maintenance payments, or similar payments from an estate or trust, are not treated as a payment for the support of a dependent. Quicktax Special Rule for Qualifying Child of More Than One Person If your qualifying child is not a qualifying child of anyone else, this special rule does not apply to you and you do not need to read about it. Quicktax This is also true if your qualifying child is not a qualifying child of anyone else except your spouse with whom you file a joint return. Quicktax If a child is treated as the qualifying child of the noncustodial parent under the Special rule for divorced or separated parents (or parents who live apart), earlier, see Applying this special rule to divorced or separated parents (or parents who live apart), later. Quicktax Sometimes, a child meets the relationship, age, residency, support, and joint return tests to be a qualifying child of more than one person. Quicktax (For a description of these tests, see list items 1 through 5 under Tests To Be a Qualifying Child in Table 3). Quicktax Although the child meets the conditions to be a qualifying child of each of these persons, only one person can actually use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). Quicktax The exemption for the child. Quicktax The child tax credit. Quicktax Head of household filing status. Quicktax The credit for child and dependent care expenses. Quicktax The exclusion from income for dependent care benefits. Quicktax The earned income credit. Quicktax The other person cannot take any of these benefits based on this qualifying child. Quicktax In other words, you and the other person cannot agree to divide these tax benefits between you. Quicktax The other person cannot take any of these tax benefits unless he or she has a different qualifying child. Quicktax Tiebreaker rules. Quicktax   To determine which person can treat the child as a qualifying child to claim these six tax benefits, the following tiebreaker rules apply. Quicktax If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. Quicktax If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. Quicktax If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. Quicktax If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. Quicktax If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. Quicktax If the child's parents file a joint return with each other, this rule can be applied by dividing the parents' total AGI evenly between them; see Publication 501 for details. Quicktax   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. Quicktax Example 1—separated parents. Quicktax You, your husband, and your 10-year-old son lived together until August 1, 2013, when your husband moved out of the household. Quicktax In August and September, your son lived with you. Quicktax For the rest of the year, your son lived with your husband, the boy's father. Quicktax Your son is a qualifying child of both you and your husband because your son lived with each of you for more than half the year and because he met the relationship, age, support, and joint return tests for both of you. Quicktax At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the special rule for divorced or separated parents (or parents who live apart) does not apply. Quicktax You and your husband will file separate returns. Quicktax Your husband agrees to let you treat your son as a qualifying child. Quicktax This means, if your husband does not claim your son as a qualifying child, you can claim your son as a dependent and treat him as a qualifying child for the child tax credit and exclusion for dependent care benefits, if you qualify for each of those tax benefits. Quicktax However, you cannot claim head of household filing status because you and your husband did not live apart the last 6 months of the year. Quicktax And, as a result of your filing status being married filing separately, you cannot claim the earned income credit or the credit for child and dependent care expenses. Quicktax Example 2—separated parents claim same child. Quicktax The facts are the same as in Example 1 except that you and your husband both claim your son as a qualifying child. Quicktax In this case, only your husband will be allowed to treat your son as a qualifying child. Quicktax This is because, during 2013, the boy lived with him longer than with you. Quicktax If you claimed an exemption, the child tax credit, or the exclusion for dependent care benefits for your son, the IRS will disallow your claim to all these tax benefits, unless you have another qualifying child. Quicktax In addition, because you and your husband did not live apart the last 6 months of the year, your husband cannot claim head of household filing status. Quicktax And, as a result of his filing status being married filing separately, he cannot claim the earned income credit or the credit for child and dependent care expenses. Quicktax Applying this special rule to divorced or separated parents (or parents who live apart). Quicktax   If a child is treated as the qualifying child of the noncustodial parent under the special rule for divorced or separated parents (or parents who live apart) described earlier, only the noncustodial parent can claim an exemption and the child tax credit for the child. Quicktax However, the noncustodial parent cannot claim the child as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, and the earned income credit. Quicktax Only the custodial parent, if eligible, or another eligible taxpayer can claim the child as a qualifying child for those four tax benefits. Quicktax If the child is the qualifying child of more than one person for those tax benefits, the tiebreaker rules determine which person can treat the child as a qualifying child. Quicktax Example 1. Quicktax You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. Quicktax Your AGI is $10,000. Quicktax Your mother's AGI is $25,000. Quicktax Your son's father does not live with you or your son. Quicktax Under the rules for children of divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for the child if he meets all the requirements to do so. Quicktax Because of this, you cannot claim an exemption or the child tax credit for your son. Quicktax However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the earned income credit. Quicktax You and your mother did not have any child care expenses or dependent care benefits, but the boy is a qualifying child of both you and your mother for head of household filing status and the earned income credit because he meets the relationship, age, residency, support, and joint return tests for both you and your mother. Quicktax (Note: The support test does not apply for the earned income credit. Quicktax ) However, you agree to let your mother claim your son. Quicktax This means she can claim him for head of household filing status and the earned income credit if she qualifies for each and if you do not claim him as a qualifying child for the earned income credit. Quicktax (You cannot claim head of household filing status because your mother paid the entire cost of keeping up the home. Quicktax ) Example 2. Quicktax The facts are the same as in Example 1 except that your AGI is $25,000 and your mother's AGI is $21,000. Quicktax Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. Quicktax Example 3. Quicktax The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the earned income credit. Quicktax Your mother also claims him as a qualifying child for head of household filing status. Quicktax You, as the child's parent, will be the only one allowed to claim your son as a qualifying child for the earned income credit. Quicktax The IRS will disallow your mother's claim to the earned income credit and head of household filing status unless she has another qualifying child. Quicktax Phaseout of Exemptions The amount you can claim as a deduction for exemptions is reduced once your adjusted gross income (AGI) goes above a certain level for your filing status. Quicktax These levels are as follows:    Filing Status AGI Level That Reduces Exemption Amount Married filing separately $150,000 Single 250,000 Head of household 275,000 Married filing jointly 300,000 Qualifying widow(er) 300,000 You must reduce the dollar amount of your exemptions by 2% for each $2,500, or part of $2,500 ($1,250 if you are married filing separately), that your AGI exceeds the amount shown above for your filing status. Quicktax If your AGI exceeds the amount shown above by more than $122,500 ($61,250 if married filing separately), the amount of your deduction for exemptions is reduced to zero. Quicktax If your AGI exceeds the level for your filing status, use the Deduction for Exemptions Worksheet found in the instructions for Form 1040 or Form 1040NR to figure the amount of your deduction for exemptions. Quicktax Alimony Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. Quicktax It does not include voluntary payments that are not made under a divorce or separation instrument. Quicktax Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. Quicktax Although this discussion is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony. Quicktax To be alimony, a payment must meet certain requirements. Quicktax There are some differences between the requirements that apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. Quicktax The general requirements that apply to payments regardless of when the divorce or separation instrument was executed and the specific requirements that apply to post-1984 instruments (and, in certain cases, some pre-1985 instruments) are discussed in this publication. Quicktax See, Instruments Executed Before 1985 , later, if you are looking for information on where to find the specific requirements that apply to pre-1985 instruments. Quicktax Spouse or former spouse. Quicktax   Unless otherwise stated, the term “spouse” includes former spouse. Quicktax Divorce or separation instrument. Quicktax   The term “divorce or separation instrument” means: A decree of divorce or separate maintenance or a written instrument incident to that decree, A written separation agreement, or A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. Quicktax This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement). Quicktax Invalid decree. Quicktax   Payments under a divorce decree can be alimony even if the decree's validity is in question. Quicktax A divorce decree is valid for tax purposes until a court having proper jurisdiction holds it invalid. Quicktax Amended instrument. Quicktax   An amendment to a divorce decree may change the nature of your payments. Quicktax Amendments are not ordinarily retroactive for federal tax purposes. Quicktax However, a retroactive amendment to a divorce decree correcting a clerical error to reflect the original intent of the court will generally be effective retroactively for federal tax purposes. Quicktax Example 1. Quicktax A court order retroactively corrected a mathematical error under your divorce decree to express the original intent to spread the payments over more than 10 years. Quicktax This change also is effective retroactively for federal tax purposes. Quicktax Example 2. Quicktax Your original divorce decree did not fix any part of the payment as child support. Quicktax To reflect the true intention of the court, a court order retroactively corrected the error by designating a part of the payment as child support. Quicktax The amended order is effective retroactively for federal tax purposes. Quicktax Deducting alimony paid. Quicktax   You can deduct alimony you paid, whether or not you itemize deductions on your return. Quicktax You must file Form 1040. Quicktax You cannot use Form 1040A, 1040EZ, or 1040NR. Quicktax Enter the amount of alimony you paid on Form 1040, line 31a. Quicktax In the space provided on line 31b, enter your spouse's social security number (SSN) or IRS individual taxpayer identification number (ITIN). Quicktax If you paid alimony to more than one person, enter the SSN or ITIN of one of the recipients. Quicktax Show the SSN or ITIN and amount paid to each other recipient on an attached statement. Quicktax Enter your total payments on line 31a. Quicktax If you do not provide your spouse's SSN or ITIN, you may have to pay a $50 penalty and your deduction may be disallowed. Quicktax Reporting alimony received. Quicktax   Report alimony you received as income on Form 1040, line 11, or on Schedule NEC (Form 1040NR), line 12. Quicktax You cannot use Form 1040A, 1040EZ, or 1040NR-EZ. Quicktax    You must give the person who paid the alimony your SSN or ITIN. Quicktax If you do not, you may have to pay a $50 penalty. Quicktax Withholding on nonresident aliens. Quicktax   If you are a U. Quicktax S. Quicktax citizen or resident alien and you pay alimony to a nonresident alien spouse, you may have to withhold income tax at a rate of 30% on each payment. Quicktax However, many tax treaties provide for an exemption from withholding for alimony payments. Quicktax For more information, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. Quicktax General Rules The following rules apply to alimony regardless of when the divorce or separation instrument was executed. Quicktax Payments not alimony. Quicktax   Not all payments under a divorce or separation instrument are alimony. Quicktax Alimony does not include: Child support, Noncash property settlements, Payments that are your spouse's part of community income, as explained later under Community Property , Payments to keep up the payer's property, or Use of the payer's property. Quicktax Example. Quicktax Under your written separation agreement, your spouse lives rent-free in a home you own and you must pay the mortgage, real estate taxes, insurance, repairs, and utilities for the home. Quicktax Because you own the home and the debts are yours, your payments for the mortgage, real estate taxes, insurance, and repairs are not alimony. Quicktax Neither is the value of your spouse's use of the home. Quicktax If they otherwise qualify, you can deduct the payments for utilities as alimony. Quicktax Your spouse must report them as income. Quicktax If you itemize deductions, you can deduct the real estate taxes and, if the home is a qualified home, you can also include the interest on the mortgage in figuring your deductible interest. Quicktax However, if your spouse owned the home, see Example 2 under Payments to a third party, later. Quicktax If you owned the home jointly with your spouse, see Table 4. Quicktax For more information on a qualified home and deductible mortgage interest, see Publication 936, Home Mortgage Interest Deduction. Quicktax Child support. Quicktax   To determine whether a payment is child support, see the discussion under Instruments Executed After 1984 , later. Quicktax If your divorce or separation agreement was executed before 1985, see the 2004 revision of Publication 504 available at www. Quicktax irs. Quicktax gov/formspubs. Quicktax Underpayment. Quicktax   If both alimony and child support payments are called for by your divorce or separation instrument, and you pay less than the total required, the payments apply first to child support and then to alimony. Quicktax Example. Quicktax Your divorce decree calls for you to pay your former spouse $200 a month ($2,400 ($200 x 12) a year) as child support and $150 a month ($1,800 ($150 x 12) a year) as alimony. Quicktax If you pay the full amount of $4,200 ($2,400 + $1,800) during the year, you can deduct $1,800 as alimony and your former spouse must report $1,800 as alimony received. Quicktax If you pay only $3,600 during the year, $2,400 is child support. Quicktax You can deduct only $1,200 ($3,600 – $2,400) as alimony and your former spouse must report $1,200 as alimony received. Quicktax Payments to a third party. Quicktax   Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify. Quicktax These include payments for your spouse's medical expenses, housing costs (rent, utilities, etc. Quicktax ), taxes, tuition, etc. Quicktax The payments are treated as received by your spouse and then paid to the third party. Quicktax Example 1. Quicktax Under your divorce decree, you must pay your former spouse's medical and dental expenses. Quicktax If the payments otherwise qualify, you can deduct them as alimony on your return. Quicktax Your former spouse must report them as alimony received and can include them in figuring deductible medical expenses. Quicktax Example 2. Quicktax Under your separation agreement, you must pay the real estate taxes, mortgage payments, and insurance premiums on a home owned by your spouse. Quicktax If they otherwise qualify, you can deduct the payments as alimony on your return, and your spouse must report them as alimony received. Quicktax If itemizing deductions, your spouse can deduct the real estate taxes and, if the home is a qualified home, also include the interest on the mortgage in figuring deductible interest. Quicktax However, if you owned the home, see the example under Payments not alimony , earlier. Quicktax If you owned the home jointly with your spouse, see Table 4. Quicktax Life insurance premiums. Quicktax   Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy. Quicktax Payments for jointly-owned home. Quicktax   If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse or former spouse, some of your payments may be alimony. Quicktax See Table 4. Quicktax   However, if your spouse owned the home, see Example 2 under Payments to a third party, earlier. Quicktax If you owned the home, see the example under Payments not alimony , earlier. Quicktax Table 4. Quicktax Expenses for a Jointly-Owned Home Use the table below to find how much of your payment is alimony and how much you can claim as an itemized deduction. Quicktax IF you must pay all of the . Quicktax . Quicktax . Quicktax AND your home is . Quicktax . Quicktax . Quicktax THEN you can deduct and your spouse (or former spouse) must include as alimony . Quicktax . Quicktax . Quicktax AND you can claim as an itemized deduction . Quicktax . Quicktax . Quicktax   mortgage payments (principal and interest) jointly owned half of the total payments half of the interest as interest expense (if the home is a qualified home). Quicktax 1   real estate taxes and home insurance held as tenants in common half of the total payments half of the real estate taxes2 and none of the home insurance. Quicktax     held as tenants by the entirety or in joint tenancy none of the payments all of the real estate taxes and none of the home insurance. Quicktax 1 Your spouse (or former spouse) can deduct the other half of the interest if the home is a qualified home. Quicktax  2 Your spouse (or former spouse) can deduct the other half of the real estate taxes. Quicktax Instruments Executed After 1984 The following rules for alimony apply to payments under divorce or separation instruments executed after 1984. Quicktax Exception for instruments executed before 1985. Quicktax   There are two situations where the rules for instruments executed after 1984 apply to instruments executed before 1985. Quicktax A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply. Quicktax A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that: Changes the amount or period of payment, or Adds or deletes any contingency or condition. Quicktax   For the rules for alimony payments under pre-1985 instruments not meeting these exceptions, see the 2004 revision of Publication 504 available at www. Quicktax irs. Quicktax gov/formspubs. Quicktax Example 1. Quicktax In November 1984, you and your former spouse executed a written separation agreement. Quicktax In February 1985, a decree of divorce was substituted for the written separation agreement. Quicktax The decree of divorce did not change the terms for the alimony you pay your former spouse. Quicktax The decree of divorce is treated as executed before 1985. Quicktax Alimony payments under this decree are not subject to the rules for payments under instruments executed after 1984. Quicktax Example 2. Quicktax The facts are the same as in Example 1 except that the decree of divorce changed the amount of the alimony. Quicktax In this example, the decree of divorce is not treated as executed before 1985. Quicktax The alimony payments are subject to the rules for payments under instruments executed after 1984. Quicktax Alimony Requirements A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met. Quicktax The payment is in cash. Quicktax The instrument does not designate the payment as not alimony. Quicktax The spouses are not members of the same household at the time the payments are made. Quicktax This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance. Quicktax There is no liability to make any payment (in cash or property) after the death of the recipient spouse. Quicktax The payment is not treated as child support. Quicktax Each of these requirements is discussed next. Quicktax Cash payment requirement. Quicktax   Only cash payments, including checks and money orders, qualify as alimony. Quicktax The following do not qualify as alimony. Quicktax Transfers of services or property (including a debt instrument of a third party or an annuity contract). Quicktax Execution of a debt instrument by the payer. Quicktax The use of the payer's property. Quicktax Payments to a third party. Quicktax   Cash payments to a third party under the terms of your divorce or separation instrument can qualify as cash payments to your spouse. Quicktax See Payments to a third party under General Rules, earlier. Quicktax   Also, cash payments made to a third party at the written request of your spouse may qualify as alimony if all the following requirements are met. Quicktax The payments are in lieu of payments of alimony directly to your spouse. Quicktax The written request states that both spouses intend the payments to be treated as alimony. Quicktax You receive the written request from your spouse before you file your return for the year you made the payments. Quicktax Payments designated as not alimony. Quicktax   You and your spouse can designate that otherwise qualifying payments are not alimony. Quicktax You do this by including a provision in your divorce or separation instrument that states the payments are not deductible as alimony by you and are excludable from your spouse's income. Quicktax For this purpose, any instrument (written statement) signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement (and therefore a divorce or separation instrument). Quicktax If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order. Quicktax   Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. Quicktax The copy must be attached each year the designation applies. Quicktax Spouses cannot be members of the same household. Quicktax   Payments to your spouse while you are members of the same household are not alimony if you are legally separated under a decree of divorce or separate maintenance. Quicktax A home you formerly shared is considered one household, even if you physically separate yourselves in the home. Quicktax   You are not treated as members of the same household if one of you is preparing to leave the household and does leave no later than 1 month after the date of the payment. Quicktax Exception. Quicktax   If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree, or other court order may qualify as alimony even if you are members of the same household when the payment is made. Quicktax Liability for payments after death of recipient spouse. Quicktax   If any part of payments you make must continue to be made for any period after your spouse's death, that part of your payments is not alimony whether made before or after the death. Quicktax If all of the payments would continue, then none of the payments made before or after the death are alimony. Quicktax   The divorce or separation instrument does not have to expressly state that the payments cease upon the