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Taxact 2011 Login

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Taxact 2011 Login

Taxact 2011 login 1. Taxact 2011 login   Gain or Loss Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Sales and ExchangesGain or Loss From Sales and Exchanges Abandonments Foreclosures and RepossessionsAmount realized on a nonrecourse debt. Taxact 2011 login Amount realized on a recourse debt. Taxact 2011 login Involuntary ConversionsCondemnations Nontaxable ExchangesLike-Kind Exchanges Other Nontaxable Exchanges Transfers to Spouse Rollover of Gain From Publicly Traded Securities Gains on Sales of Qualified Small Business Stock Exclusion of Gain From Sale of DC Zone Assets Topics - This chapter discusses: Sales and exchanges Abandonments Foreclosures and repossessions Involuntary conversions Nontaxable exchanges Transfers to spouse Rollovers and exclusions for certain capital gains Useful Items - You may want to see: Publication 523 Selling Your Home 537 Installment Sales 547 Casualties, Disasters, and Thefts 550 Investment Income and Expenses 551 Basis of Assets 908 Bankruptcy Tax Guide 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1040 U. Taxact 2011 login S. Taxact 2011 login Individual Income Tax Return 1040X Amended U. Taxact 2011 login S. Taxact 2011 login Individual Income Tax Return 1099-A Acquisition or Abandonment of Secured Property 1099-C Cancellation of Debt 4797 Sales of Business Property 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets Although the discussions in this chapter may at times refer mainly to individuals, many of the rules discussed also apply to taxpayers other than individuals. Taxact 2011 login However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. Taxact 2011 login See chapter 5 for information about getting publications and forms. Taxact 2011 login Sales and Exchanges A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. Taxact 2011 login An exchange is a transfer of property for other property or services. Taxact 2011 login The following discussions describe the kinds of transactions that are treated as sales or exchanges and explain how to figure gain or loss. Taxact 2011 login Sale or lease. Taxact 2011 login    Some agreements that seem to be leases may really be conditional sales contracts. Taxact 2011 login The intention of the parties to the agreement can help you distinguish between a sale and a lease. Taxact 2011 login   There is no test or group of tests to prove what the parties intended when they made the agreement. Taxact 2011 login You should consider each agreement based on its own facts and circumstances. Taxact 2011 login For more information, see chapter 3 in Publication 535, Business Expenses. Taxact 2011 login Cancellation of a lease. Taxact 2011 login    Payments received by a tenant for the cancellation of a lease are treated as an amount realized from the sale of property. Taxact 2011 login Payments received by a landlord (lessor) for the cancellation of a lease are essentially a substitute for rental payments and are taxed as ordinary income in the year in which they are received. Taxact 2011 login Copyright. Taxact 2011 login    Payments you receive for granting the exclusive use of (or right to exploit) a copyright throughout its life in a particular medium are treated as received from the sale of property. Taxact 2011 login It does not matter if the payments are a fixed amount or a percentage of receipts from the sale, performance, exhibition, or publication of the copyrighted work, or an amount based on the number of copies sold, performances given, or exhibitions made. Taxact 2011 login Nor does it matter if the payments are made over the same period as that covering the grantee's use of the copyrighted work. Taxact 2011 login   If the copyright was used in your trade or business and you held it longer than a year, the gain or loss may be a section 1231 gain or loss. Taxact 2011 login For more information, see Section 1231 Gains and Losses in chapter 3. Taxact 2011 login Easement. Taxact 2011 login   The amount received for granting an easement is subtracted from the basis of the property. Taxact 2011 login If only a specific part of the entire tract of property is affected by the easement, only the basis of that part is reduced by the amount received. Taxact 2011 login If it is impossible or impractical to separate the basis of the part of the property on which the easement is granted, the basis of the whole property is reduced by the amount received. Taxact 2011 login   Any amount received that is more than the basis to be reduced is a taxable gain. Taxact 2011 login The transaction is reported as a sale of property. Taxact 2011 login   If you transfer a perpetual easement for consideration and do not keep any beneficial interest in the part of the property affected by the easement, the transaction will be treated as a sale of property. Taxact 2011 login However, if you make a qualified conservation contribution of a restriction or easement granted in perpetuity, it is treated as a charitable contribution and not a sale or exchange, even though you keep a beneficial interest in the property affected by the easement. Taxact 2011 login   If you grant an easement on your property (for example, a right-of-way over it) under condemnation or threat of condemnation, you are considered to have made a forced sale, even though you keep the legal title. Taxact 2011 login Although you figure gain or loss on the easement in the same way as a sale of property, the gain or loss is treated as a gain or loss from a condemnation. Taxact 2011 login See Gain or Loss From Condemnations, later. Taxact 2011 login Property transferred to satisfy debt. Taxact 2011 login   A transfer of property to satisfy a debt is an exchange. Taxact 2011 login Note's maturity date extended. Taxact 2011 login   The extension of a note's maturity date is not treated as an exchange of an outstanding note for a new and different note. Taxact 2011 login Also, it is not considered a closed and completed transaction that would result in a gain or loss. Taxact 2011 login However, an extension will be treated as a taxable exchange of the outstanding note for a new and materially different note if the changes in the terms of the note are significant. Taxact 2011 login Each case must be determined by its own facts. Taxact 2011 login For more information, see Regulations section 1. Taxact 2011 login 1001-3. Taxact 2011 login Transfer on death. Taxact 2011 login   The transfer of property of a decedent to an executor or administrator of the estate, or to the heirs or beneficiaries, is not a sale or exchange or other disposition. Taxact 2011 login No taxable gain or deductible loss results from the transfer. Taxact 2011 login Bankruptcy. Taxact 2011 login   Generally, a transfer (other than by sale or exchange) of property from a debtor to a bankruptcy estate is not treated as a disposition. Taxact 2011 login Consequently, the transfer generally does not result in gain or loss. Taxact 2011 login For more information, see Publication 908, Bankruptcy Tax Guide. Taxact 2011 login Gain or Loss From Sales and Exchanges You usually realize gain or loss when property is sold or exchanged. Taxact 2011 login A gain is the amount you realize from a sale or exchange of property that is more than its adjusted basis. Taxact 2011 login A loss is the adjusted basis of the property that is more than the amount you realize. Taxact 2011 login   Table 1-1. Taxact 2011 login How To Figure Whether You Have a Gain or Loss IF your. Taxact 2011 login . Taxact 2011 login . Taxact 2011 login THEN you have a. Taxact 2011 login . Taxact 2011 login . Taxact 2011 login Adjusted basis is more than the amount realized, Loss. Taxact 2011 login Amount realized is more than the adjusted basis, Gain. Taxact 2011 login Basis. Taxact 2011 login   You must know the basis of your property to determine whether you have a gain or loss from its sale or other disposition. Taxact 2011 login The basis of property you buy is usually its cost. Taxact 2011 login However, if you acquired the property by gift, inheritance, or in some way other than buying it, you must use a basis other than its cost. Taxact 2011 login See Basis Other Than Cost in Publication 551, Basis of Assets. Taxact 2011 login Special rules apply to property acquired from a decedent who died in 2010 and the executor made the election to file Form 8939, Allocation of Increase in Basis for Property Received From a Decedent. Taxact 2011 login See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. Taxact 2011 login Adjusted basis. Taxact 2011 login   The adjusted basis of property is your original cost or other basis plus (increased by) certain additions and minus (decreased by) certain deductions. Taxact 2011 login Increases include costs of any improvements having a useful life of more than 1 year. Taxact 2011 login Decreases include depreciation and casualty losses. Taxact 2011 login For more details and additional examples, see Adjusted Basis in Publication 551. Taxact 2011 login Amount realized. Taxact 2011 login   The amount you realize from a sale or exchange is the total of all money you receive plus the fair market value (defined below) of all property or services you receive. Taxact 2011 login The amount you realize also includes any of your liabilities that were assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage. Taxact 2011 login Fair market value. Taxact 2011 login   Fair market value (FMV) is the price at which the property would change hands between a buyer and a seller when both have reasonable knowledge of all the necessary facts and neither is being forced to buy or sell. Taxact 2011 login If parties with adverse interests place a value on property in an arm's-length transaction, that is strong evidence of FMV. Taxact 2011 login If there is a stated price for services, this price is treated as the FMV unless there is evidence to the contrary. Taxact 2011 login Example. Taxact 2011 login You used a building in your business that cost you $70,000. Taxact 2011 login You made certain permanent improvements at a cost of $20,000 and deducted depreciation totaling $10,000. Taxact 2011 login You sold the building for $100,000 plus property having an FMV of $20,000. Taxact 2011 login The buyer assumed your real estate taxes of $3,000 and a mortgage of $17,000 on the building. Taxact 2011 login The selling expenses were $4,000. Taxact 2011 login Your gain on the sale is figured as follows. Taxact 2011 login Amount realized:     Cash $100,000   FMV of property received 20,000   Real estate taxes assumed by buyer 3,000   Mortgage assumed by  buyer 17,000   Total 140,000   Minus: Selling expenses 4,000 $136,000 Adjusted basis:     Cost of building $70,000   Improvements 20,000   Total $90,000   Minus: Depreciation 10,000   Adjusted basis   $80,000 Gain on sale $56,000 Amount recognized. Taxact 2011 login   Your gain or loss realized from a sale or exchange of property is usually a recognized gain or loss for tax purposes. Taxact 2011 login Recognized gains must be included in gross income. Taxact 2011 login Recognized losses are deductible from gross income. Taxact 2011 login However, your gain or loss realized from certain exchanges of property is not recognized for tax purposes. Taxact 2011 login See Nontaxable Exchanges, later. Taxact 2011 login Also, a loss from the sale or other disposition of property held for personal use is not deductible, except in the case of a casualty or theft. Taxact 2011 login Interest in property. Taxact 2011 login   The amount you realize from the disposition of a life interest in property, an interest in property for a set number of years, or an income interest in a trust is a recognized gain under certain circumstances. Taxact 2011 login If you received the interest as a gift, inheritance, or in a transfer from a spouse or former spouse incident to a divorce, the amount realized is a recognized gain. Taxact 2011 login Your basis in the property is disregarded. Taxact 2011 login This rule does not apply if all interests in the property are disposed of at the same time. Taxact 2011 login Example 1. Taxact 2011 login Your father dies and leaves his farm to you for life with a remainder interest to your younger brother. Taxact 2011 login You decide to sell your life interest in the farm. Taxact 2011 login The entire amount you receive is a recognized gain. Taxact 2011 login Your basis in the farm is disregarded. Taxact 2011 login Example 2. Taxact 2011 login The facts are the same as in Example 1, except that your brother joins you in selling the farm. Taxact 2011 login The entire interest in the property is sold, so your basis in the farm is not disregarded. Taxact 2011 login Your gain or loss is the difference between your share of the sales price and your adjusted basis in the farm. Taxact 2011 login Canceling a sale of real property. Taxact 2011 login   If you sell real property under a sales contract that allows the buyer to return the property for a full refund and the buyer does so, you may not have to recognize gain or loss on the sale. Taxact 2011 login If the buyer returns the property in the year of sale, no gain or loss is recognized. Taxact 2011 login This cancellation of the sale in the same year it occurred places both you and the buyer in the same positions you were in before the sale. Taxact 2011 login If the buyer returns the property in a later tax year, you must recognize gain (or loss, if allowed) in the year of the sale. Taxact 2011 login When the property is returned in a later year, you acquire a new basis in the property. Taxact 2011 login That basis is equal to the amount you pay to the buyer. Taxact 2011 login Bargain Sale If you sell or exchange property for less than fair market value with the intent of making a gift, the transaction is partly a sale or exchange and partly a gift. Taxact 2011 login You have a gain if the amount realized is more than your adjusted basis in the property. Taxact 2011 login However, you do not have a loss if the amount realized is less than the adjusted basis of the property. Taxact 2011 login Bargain sales to charity. Taxact 2011 login   A bargain sale of property to a charitable organization is partly a sale or exchange and partly a charitable contribution. Taxact 2011 login If a charitable deduction for the contribution is allowable, you must allocate your adjusted basis in the property between the part sold and the part contributed based on the fair market value of each. Taxact 2011 login The adjusted basis of the part sold is figured as follows. Taxact 2011 login Adjusted basis of entire property × Amount realized (fair market value of part sold)   Fair market value of entire property   Based on this allocation rule, you will have a gain even if the amount realized is not more than your adjusted basis in the property. Taxact 2011 login This allocation rule does not apply if a charitable contribution deduction is not allowable. Taxact 2011 login   See Publication 526, Charitable Contributions, for information on figuring your charitable contribution. Taxact 2011 login Example. Taxact 2011 login You sold property with a fair market value of $10,000 to a charitable organization for $2,000 and are allowed a deduction for your contribution. Taxact 2011 login Your adjusted basis in the property is $4,000. Taxact 2011 login Your gain on the sale is $1,200, figured as follows. Taxact 2011 login Sales price $2,000 Minus: Adjusted basis of part sold ($4,000 × ($2,000 ÷ $10,000)) 800 Gain on the sale $1,200 Property Used Partly for Business or Rental Generally, if you sell or exchange property you used partly for business or rental purposes and partly for personal purposes, you must figure the gain or loss on the sale or exchange as though you had sold two separate pieces of property. Taxact 2011 login You must subtract depreciation you took or could have taken from the basis of the business or rental part. Taxact 2011 login However, see the special rule below for a home used partly for business or rental. Taxact 2011 login You must allocate the selling price, selling expenses, and the basis of the property between the business or rental part and the personal part. Taxact 2011 login Gain or loss on the business or rental part of the property may be a capital gain or loss or an ordinary gain or loss, as discussed in chapter 3 under Section 1231 Gains and Losses. Taxact 2011 login Any gain on the personal part of the property is a capital gain. Taxact 2011 login You cannot deduct a loss on the personal part. Taxact 2011 login Home used partly for business or rental. Taxact 2011 login    If you use property partly as a home and partly for business or to produce rental income, the computation and treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. Taxact 2011 login See Property Used Partly for Business or Rental, in Publication 523. Taxact 2011 login Property Changed to Business or Rental Use You cannot deduct a loss on the sale of property you purchased or constructed for use as your home and used as your home until the time of sale. Taxact 2011 login You can deduct a loss on the sale of property you acquired for use as your home but changed to business or rental property and used as business or rental property at the time of sale. Taxact 2011 login However, if the adjusted basis of the property at the time of the change was more than its fair market value, the loss you can deduct is limited. Taxact 2011 login Figure the loss you can deduct as follows. Taxact 2011 login Use the lesser of the property's adjusted basis or fair market value at the time of the change. Taxact 2011 login Add to (1) the cost of any improvements and other increases to basis since the change. Taxact 2011 login Subtract from (2) depreciation and any other decreases to basis since the change. Taxact 2011 login Subtract the amount you realized on the sale from the result in (3). Taxact 2011 login If the amount you realized is more than the result in (3), treat this result as zero. Taxact 2011 login The result in (4) is the loss you can deduct. Taxact 2011 login Example. Taxact 2011 login You changed your main home to rental property 5 years ago. Taxact 2011 login At the time of the change, the adjusted basis of your home was $75,000 and the fair market value was $70,000. Taxact 2011 login This year, you sold the property for $55,000. Taxact 2011 login You made no improvements to the property but you have depreciation expense of $12,620 over the 5 prior years. Taxact 2011 login Although your loss on the sale is $7,380 [($75,000 − $12,620) − $55,000], the amount you can deduct as a loss is limited to $2,380, figured as follows. Taxact 2011 login Lesser of adjusted basis or fair market value at time of the change $70,000 Plus: Cost of any improvements and any other additions to basis after the change -0-   70,000 Minus: Depreciation and any other decreases to basis after the change 12,620   57,380 Minus: Amount you realized from the sale 55,000 Deductible loss $2,380 Gain. Taxact 2011 login   If you have a gain on the sale, you generally must recognize the full amount of the gain. Taxact 2011 login You figure the gain by subtracting your adjusted basis from your amount realized, as described earlier. Taxact 2011 login   You may be able to exclude all or part of the gain if you owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. Taxact 2011 login However, you may not be able to exclude the part of the gain allocated to any period of nonqualified use. Taxact 2011 login   For more information, see Business Use or Rental of Home in Publication 523. Taxact 2011 login In addition, special rules apply if the home sold was acquired in a like-kind exchange. Taxact 2011 login See Special Situations in Publication 523. Taxact 2011 login Also see Like-Kind Exchanges, later. Taxact 2011 login Abandonments The abandonment of property is a disposition of property. Taxact 2011 login You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership but without passing it on to anyone else. Taxact 2011 login Generally, abandonment is not treated as a sale or exchange of the property. Taxact 2011 login If the amount you realize (if any) is more than your adjusted basis, then you have a gain. Taxact 2011 login If your adjusted basis is more than the amount you realize (if any), then you have a loss. Taxact 2011 login Loss from abandonment of business or investment property is deductible as a loss. Taxact 2011 login A loss from an abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. Taxact 2011 login This rule also applies to leasehold improvements the lessor made for the lessee that were abandoned. Taxact 2011 login If the property is foreclosed on or repossessed in lieu of abandonment, gain or loss is figured as discussed later under Foreclosure and Repossessions. Taxact 2011 login The abandonment loss is deducted in the tax year in which the loss is sustained. Taxact 2011 login If the abandoned property is secured by debt, special rules apply. Taxact 2011 login The tax consequences of abandonment of property that is secured by debt depend on whether you are personally liable for the debt (recourse debt) or you are not personally liable for the debt (nonrecourse debt). Taxact 2011 login For more information, including examples, see chapter 3 of Publication 4681. Taxact 2011 login You cannot deduct any loss from abandonment of your home or other property held for personal use only. Taxact 2011 login Cancellation of debt. Taxact 2011 login   If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you may realize ordinary income equal to the canceled debt. Taxact 2011 login This income is separate from any loss realized from abandonment of the property. Taxact 2011 login   You must report this income on your tax return unless one of the following applies. Taxact 2011 login The cancellation is intended as a gift. Taxact 2011 login The debt is qualified farm debt. Taxact 2011 login The debt is qualified real property business debt. Taxact 2011 login You are insolvent or bankrupt. Taxact 2011 login The debt is qualified principal residence indebtedness. Taxact 2011 login File Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the income exclusion. Taxact 2011 login For more information, including other exceptions and exclusion, see Publication 4681. Taxact 2011 login Forms 1099-A and 1099-C. Taxact 2011 login   If you abandon property that secures a loan and the lender knows the property has been abandoned, the lender should send you Form 1099-A showing information you need to figure your loss from the abandonment. Taxact 2011 login However, if your debt is canceled and the lender must file Form 1099-C, the lender may include the information about the abandonment on that form instead of on Form 1099-A, and send you Form 1099-C only. Taxact 2011 login The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. Taxact 2011 login For abandonments of property and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. Taxact 2011 login Foreclosures and Repossessions If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. Taxact 2011 login The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. Taxact 2011 login This is true even if you voluntarily return the property to the lender. Taxact 2011 login You also may realize ordinary income from cancellation of debt if the loan balance is more than the fair market value of the property. Taxact 2011 login Buyer's (borrower's) gain or loss. Taxact 2011 login   You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale or exchange. Taxact 2011 login The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. Taxact 2011 login See Gain or Loss From Sales and Exchanges, earlier. Taxact 2011 login You can use Table 1-2 to figure your gain or loss from a foreclosure or repossession. Taxact 2011 login Amount realized on a nonrecourse debt. Taxact 2011 login   If you are not personally liable for repaying the debt (nonrecourse debt) secured by the transferred property, the amount you realize includes the full debt canceled by the transfer. Taxact 2011 login The full canceled debt is included even if the fair market value of the property is less than the canceled debt. Taxact 2011 login Example 1. Taxact 2011 login Chris bought a new car for $15,000. Taxact 2011 login He paid $2,000 down and borrowed the remaining $13,000 from the dealer's credit company. Taxact 2011 login Chris is not personally liable for the loan (nonrecourse debt), but pledges the new car as security. Taxact 2011 login The credit company repossessed the car because he stopped making loan payments. Taxact 2011 login The balance due after taking into account the payments Chris made was $10,000. Taxact 2011 login The fair market value of the car when repossessed was $9,000. Taxact 2011 login The amount Chris realized on the repossession is $10,000. Taxact 2011 login That is the outstanding amount of the debt canceled by the repossession, even though the car's fair market value is less than $10,000. Taxact 2011 login Chris figures his gain or loss on the repossession by comparing the amount realized ($10,000) with his adjusted basis ($15,000). Taxact 2011 login He has a $5,000 nondeductible loss. Taxact 2011 login Example 2. Taxact 2011 login Abena paid $200,000 for her home. Taxact 2011 login She paid $15,000 down and borrowed the remaining $185,000 from a bank. Taxact 2011 login Abena is not personally liable for the loan (nonrecourse debt), but pledges the house as security. Taxact 2011 login The bank foreclosed on the loan because Abena stopped making payments. Taxact 2011 login When the bank foreclosed on the loan, the balance due was $180,000, the fair market value of the house was $170,000, and Abena's adjusted basis was $175,000 due to a casualty loss she had deducted. Taxact 2011 login The amount Abena realized on the foreclosure is $180,000, the balance due and debt canceled by the foreclosure. Taxact 2011 login She figures her gain or loss by comparing the amount realized ($180,000) with her adjusted basis ($175,000). Taxact 2011 login She has a $5,000 realized gain. Taxact 2011 login Amount realized on a recourse debt. Taxact 2011 login   If you are personally liable for the debt (recourse debt), the amount realized on the foreclosure or repossession includes the lesser of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The fair market value of the transferred property. Taxact 2011 login You are treated as receiving ordinary income from the canceled debt for the part of the debt that is more than the fair market value. Taxact 2011 login The amount realized does not include the canceled debt that is your income from cancellation of debt. Taxact 2011 login See Cancellation of debt, below. Taxact 2011 login Seller's (lender's) gain or loss on repossession. Taxact 2011 login   If you finance a buyer's purchase of property and later acquire an interest in it through foreclosure or repossession, you may have a gain or loss on the acquisition. Taxact 2011 login For more information, see Repossession in Publication 537. Taxact 2011 login    Table 1-2. Taxact 2011 login Worksheet for Foreclosures and Repossessions Part 1. Taxact 2011 login Use Part 1 to figure your ordinary income from the cancellation of debt upon foreclosure or repossession. Taxact 2011 login Complete this part only  if you were personally liable for the debt. Taxact 2011 login Otherwise,  go to Part 2. Taxact 2011 login   1. Taxact 2011 login Enter the amount of outstanding debt immediately before the transfer of   property reduced by any amount for which you remain personally liable after   the transfer of property   2. Taxact 2011 login Enter the fair market value of the transferred property   3. Taxact 2011 login Ordinary income from cancellation of debt upon foreclosure or    repossession. Taxact 2011 login * Subtract line 2 from line 1. Taxact 2011 login   If less than zero, enter zero   Part 2. Taxact 2011 login Figure your gain or loss from foreclosure or repossession. Taxact 2011 login   4. Taxact 2011 login If you completed Part 1, enter the smaller of line 1 or line 2. Taxact 2011 login   If you did not complete Part 1, enter the outstanding debt immediately before   the transfer of property   5. Taxact 2011 login Enter any proceeds you received from the foreclosure sale   6. Taxact 2011 login Add lines 4 and 5   7. Taxact 2011 login Enter the adjusted basis of the transferred property   8. Taxact 2011 login Gain or loss from foreclosure or repossession. Taxact 2011 login Subtract line 7  from line 6   * The income may not be taxable. Taxact 2011 login See Cancellation of debt. Taxact 2011 login Cancellation of debt. Taxact 2011 login   If property that is repossessed or foreclosed on secures a debt for which you are personally liable (recourse debt), you generally must report as ordinary income the amount by which the canceled debt is more than the fair market value of the property. Taxact 2011 login This income is separate from any gain or loss realized from the foreclosure or repossession. Taxact 2011 login Report the income from cancellation of a debt related to a business or rental activity as business or rental income. Taxact 2011 login    You can use Table 1-2 to figure your income from cancellation of debt. Taxact 2011 login   You must report this income on your tax return unless one of the following applies. Taxact 2011 login The cancellation is intended as a gift. Taxact 2011 login The debt is qualified farm debt. Taxact 2011 login The debt is qualified real property business debt. Taxact 2011 login You are insolvent or bankrupt. Taxact 2011 login The debt is qualified principal residence indebtedness. Taxact 2011 login File Form 982 to report the income exclusion. Taxact 2011 login Example 1. Taxact 2011 login Assume the same facts as in Example 1 under Amount realized on a nonrecourse debt, earlier, except Chris is personally liable for the car loan (recourse debt). Taxact 2011 login In this case, the amount he realizes is $9,000. Taxact 2011 login This is the lesser of the canceled debt ($10,000) or the car's fair market value ($9,000). Taxact 2011 login Chris figures his gain or loss on the repossession by comparing the amount realized ($9,000) with his adjusted basis ($15,000). Taxact 2011 login He has a $6,000 nondeductible loss. Taxact 2011 login He also is treated as receiving ordinary income from cancellation of debt. Taxact 2011 login That income is $1,000 ($10,000 − $9,000). Taxact 2011 login This is the part of the canceled debt not included in the amount realized. Taxact 2011 login Example 2. Taxact 2011 login Assume the same facts as in Example 2 under Amount realized on a nonrecourse debt, earlier, except Abena is personally liable for the loan (recourse debt). Taxact 2011 login In this case, the amount she realizes is $170,000. Taxact 2011 login This is the lesser of the canceled debt ($180,000) or the fair market value of the house ($170,000). Taxact 2011 login Abena figures her gain or loss on the foreclosure by comparing the amount realized ($170,000) with her adjusted basis ($175,000). Taxact 2011 login She has a $5,000 nondeductible loss. Taxact 2011 login She also is treated as receiving ordinary income from cancellation of debt. Taxact 2011 login (The debt is not exempt from tax as discussed under Cancellation of debt, above. Taxact 2011 login ) That income is $10,000 ($180,000 − $170,000). Taxact 2011 login This is the part of the canceled debt not included in the amount realized. Taxact 2011 login Forms 1099-A and 1099-C. Taxact 2011 login   A lender who acquires an interest in your property in a foreclosure or repossession should send you Form 1099-A showing the information you need to figure your gain or loss. Taxact 2011 login However, if the lender also cancels part of your debt and must file Form 1099-C, the lender may include the information about the foreclosure or repossession on that form instead of on Form 1099-A and send you Form 1099-C only. Taxact 2011 login The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. Taxact 2011 login For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. Taxact 2011 login Involuntary Conversions An involuntary conversion occurs when your property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and you receive other property or money in payment, such as insurance or a condemnation award. Taxact 2011 login Involuntary conversions are also called involuntary exchanges. Taxact 2011 login Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes unless the property is your main home. Taxact 2011 login You report the gain or deduct the loss on your tax return for the year you realize it. Taxact 2011 login You cannot deduct a loss from an involuntary conversion of property you held for personal use unless the loss resulted from a casualty or theft. Taxact 2011 login However, depending on the type of property you receive, you may not have to report a gain on an involuntary conversion. Taxact 2011 login Generally, you do not report the gain if you receive property that is similar or related in service or use to the converted property. Taxact 2011 login Your basis for the new property is the same as your basis for the converted property. Taxact 2011 login This means that the gain is deferred until a taxable sale or exchange occurs. Taxact 2011 login If you receive money or property that is not similar or related in service or use to the involuntarily converted property and you buy qualifying replacement property within a certain period of time, you can elect to postpone reporting the gain on the property purchased. Taxact 2011 login This publication explains the treatment of a gain or loss from a condemnation or disposition under the threat of condemnation. Taxact 2011 login If you have a gain or loss from the destruction or theft of property, see Publication 547. Taxact 2011 login Condemnations A condemnation is the process by which private property is legally taken for public use without the owner's consent. Taxact 2011 login The property may be taken by the federal government, a state government, a political subdivision, or a private organization that has the power to legally take it. Taxact 2011 login The owner receives a condemnation award (money or property) in exchange for the property taken. Taxact 2011 login A condemnation is like a forced sale, the owner being the seller and the condemning authority being the buyer. Taxact 2011 login Example. Taxact 2011 login A local government authorized to acquire land for public parks informed you that it wished to acquire your property. Taxact 2011 login After the local government took action to condemn your property, you went to court to keep it. Taxact 2011 login But, the court decided in favor of the local government, which took your property and paid you an amount fixed by the court. Taxact 2011 login This is a condemnation of private property for public use. Taxact 2011 login Threat of condemnation. Taxact 2011 login   A threat of condemnation exists if a representative of a government body or a public official authorized to acquire property for public use informs you that the government body or official has decided to acquire your property. Taxact 2011 login You must have reasonable grounds to believe that, if you do not sell voluntarily, your property will be condemned. Taxact 2011 login   The sale of your property to someone other than the condemning authority will also qualify as an involuntary conversion, provided you have reasonable grounds to believe that your property will be condemned. Taxact 2011 login If the buyer of this property knows at the time of purchase that it will be condemned and sells it to the condemning authority, this sale also qualifies as an involuntary conversion. Taxact 2011 login Reports of condemnation. Taxact 2011 login   A threat of condemnation exists if you learn of a decision to acquire your property for public use through a report in a newspaper or other news medium, and this report is confirmed by a representative of the government body or public official involved. Taxact 2011 login You must have reasonable grounds to believe that they will take necessary steps to condemn your property if you do not sell voluntarily. Taxact 2011 login If you relied on oral statements made by a government representative or public official, the Internal Revenue Service (IRS) may ask you to get written confirmation of the statements. Taxact 2011 login Example. Taxact 2011 login Your property lies along public utility lines. Taxact 2011 login The utility company has the authority to condemn your property. Taxact 2011 login The company informs you that it intends to acquire your property by negotiation or condemnation. Taxact 2011 login A threat of condemnation exists when you receive the notice. Taxact 2011 login Related property voluntarily sold. Taxact 2011 login   A voluntary sale of your property may be treated as a forced sale that qualifies as an involuntary conversion if the property had a substantial economic relationship to property of yours that was condemned. Taxact 2011 login A substantial economic relationship exists if together the properties were one economic unit. Taxact 2011 login You also must show that the condemned property could not reasonably or adequately be replaced. Taxact 2011 login You can elect to postpone reporting the gain by buying replacement property. Taxact 2011 login See Postponement of Gain, later. Taxact 2011 login Gain or Loss From Condemnations If your property was condemned or disposed of under the threat of condemnation, figure your gain or loss by comparing the adjusted basis of your condemned property with your net condemnation award. Taxact 2011 login If your net condemnation award is more than the adjusted basis of the condemned property, you have a gain. Taxact 2011 login You can postpone reporting gain from a condemnation if you buy replacement property. Taxact 2011 login If only part of your property is condemned, you can treat the cost of restoring the remaining part to its former usefulness as the cost of replacement property. Taxact 2011 login See Postponement of Gain, later. Taxact 2011 login If your net condemnation award is less than your adjusted basis, you have a loss. Taxact 2011 login If your loss is from property you held for personal use, you cannot deduct it. Taxact 2011 login You must report any deductible loss in the tax year it happened. Taxact 2011 login You can use Part 2 of Table 1-3 to figure your gain or loss from a condemnation award. Taxact 2011 login Main home condemned. Taxact 2011 login   If you have a gain because your main home is condemned, you generally can exclude the gain from your income as if you had sold or exchanged your home. Taxact 2011 login You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). Taxact 2011 login For information on this exclusion, see Publication 523. Taxact 2011 login If your gain is more than you can exclude but you buy replacement property, you may be able to postpone reporting the rest of the gain. Taxact 2011 login See Postponement of Gain, later. Taxact 2011 login Table 1-3. Taxact 2011 login Worksheet for Condemnations Part 1. Taxact 2011 login Gain from severance damages. Taxact 2011 login  If you did not receive severance damages, skip Part 1 and go to Part 2. Taxact 2011 login   1. Taxact 2011 login Enter gross severance damages received   2. Taxact 2011 login Enter your expenses in getting severance damages   3. Taxact 2011 login Subtract line 2 from line 1. Taxact 2011 login If less than zero, enter -0-   4. Taxact 2011 login Enter any special assessment on remaining property taken out of your award   5. Taxact 2011 login Net severance damages. Taxact 2011 login Subtract line 4 from line 3. Taxact 2011 login If less than zero, enter -0-   6. Taxact 2011 login Enter the adjusted basis of the remaining property   7. Taxact 2011 login Gain from severance damages. Taxact 2011 login Subtract line 6 from line 5. Taxact 2011 login If less than zero, enter -0-   8. Taxact 2011 login Refigured adjusted basis of the remaining property. Taxact 2011 login Subtract line 5 from line 6. Taxact 2011 login If less than zero, enter -0-   Part 2. Taxact 2011 login Gain or loss from condemnation award. Taxact 2011 login   9. Taxact 2011 login Enter the gross condemnation award received   10. Taxact 2011 login Enter your expenses in getting the condemnation award   11. Taxact 2011 login If you completed Part 1, and line 4 is more than line 3, subtract line 3 from line 4. Taxact 2011 login If you did not complete Part 1, but a special assessment was taken out of your award, enter that amount. Taxact 2011 login Otherwise, enter -0-   12. Taxact 2011 login Add lines 10 and 11   13. Taxact 2011 login Net condemnation award. Taxact 2011 login Subtract line 12 from line 9   14. Taxact 2011 login Enter the adjusted basis of the condemned property   15. Taxact 2011 login Gain from condemnation award. Taxact 2011 login If line 14 is more than line 13, enter -0-. Taxact 2011 login Otherwise, subtract line 14 from  line 13 and skip line 16   16. Taxact 2011 login Loss from condemnation award. Taxact 2011 login Subtract line 13 from line 14     (Note: You cannot deduct the amount on line 16 if the condemned property was held for personal use. Taxact 2011 login )   Part 3. Taxact 2011 login Postponed gain from condemnation. Taxact 2011 login  (Complete only if line 7 or line 15 is more than zero and you bought qualifying replacement property or made expenditures to restore the usefulness of your remaining property. Taxact 2011 login )   17. Taxact 2011 login If you completed Part 1, and line 7 is more than zero, enter the amount from line 5. Taxact 2011 login Otherwise, enter -0-   18. Taxact 2011 login If line 15 is more than zero, enter the amount from line 13. Taxact 2011 login Otherwise, enter -0-   19. Taxact 2011 login Add lines 17 and 18. Taxact 2011 login If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   20. Taxact 2011 login Enter the total cost of replacement property and any expenses to restore the usefulness of your remaining property   21. Taxact 2011 login Subtract line 20 from line 19. Taxact 2011 login If less than zero, enter -0-   22. Taxact 2011 login If you completed Part 1, add lines 7 and 15. Taxact 2011 login Otherwise, enter the amount from line 15. Taxact 2011 login If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   23. Taxact 2011 login Recognized gain. Taxact 2011 login Enter the smaller of line 21 or line 22. Taxact 2011 login   24. Taxact 2011 login Postponed gain. Taxact 2011 login Subtract line 23 from line 22. Taxact 2011 login If less than zero, enter -0-   Condemnation award. Taxact 2011 login   A condemnation award is the money you are paid or the value of other property you receive for your condemned property. Taxact 2011 login The award is also the amount you are paid for the sale of your property under threat of condemnation. Taxact 2011 login Payment of your debts. Taxact 2011 login   Amounts taken out of the award to pay your debts are considered paid to you. Taxact 2011 login Amounts the government pays directly to the holder of a mortgage or lien against your property are part of your award, even if the debt attaches to the property and is not your personal liability. Taxact 2011 login Example. Taxact 2011 login The state condemned your property for public use. Taxact 2011 login The award was set at $200,000. Taxact 2011 login The state paid you only $148,000 because it paid $50,000 to your mortgage holder and $2,000 accrued real estate taxes. Taxact 2011 login You are considered to have received the entire $200,000 as a condemnation award. Taxact 2011 login Interest on award. Taxact 2011 login   If the condemning authority pays you interest for its delay in paying your award, it is not part of the condemnation award. Taxact 2011 login You must report the interest separately as ordinary income. Taxact 2011 login Payments to relocate. Taxact 2011 login   Payments you receive to relocate and replace housing because you have been displaced from your home, business, or farm as a result of federal or federally assisted programs are not part of the condemnation award. Taxact 2011 login Do not include them in your income. Taxact 2011 login Replacement housing payments used to buy new property are included in the property's basis as part of your cost. Taxact 2011 login Net condemnation award. Taxact 2011 login   A net condemnation award is the total award you received, or are considered to have received, for the condemned property minus your expenses of obtaining the award. Taxact 2011 login If only a part of your property was condemned, you also must reduce the award by any special assessment levied against the part of the property you retain. Taxact 2011 login This is discussed later under Special assessment taken out of award. Taxact 2011 login Severance damages. Taxact 2011 login    Severance damages are not part of the award paid for the property condemned. Taxact 2011 login They are paid to you if part of your property is condemned and the value of the part you keep is decreased because of the condemnation. Taxact 2011 login   For example, you may receive severance damages if your property is subject to flooding because you sell flowage easement rights (the condemned property) under threat of condemnation. Taxact 2011 login Severance damages also may be given to you if, because part of your property is condemned for a highway, you must replace fences, dig new wells or ditches, or plant trees to restore your remaining property to the same usefulness it had before the condemnation. Taxact 2011 login   The contracting parties should agree on the specific amount of severance damages in writing. Taxact 2011 login If this is not done, all proceeds from the condemning authority are considered awarded for your condemned property. Taxact 2011 login   You cannot make a completely new allocation of the total award after the transaction is completed. Taxact 2011 login However, you can show how much of the award both parties intended for severance damages. Taxact 2011 login The severance damages part of the award is determined from all the facts and circumstances. Taxact 2011 login Example. Taxact 2011 login You sold part of your property to the state under threat of condemnation. Taxact 2011 login The contract you and the condemning authority signed showed only the total purchase price. Taxact 2011 login It did not specify a fixed sum for severance damages. Taxact 2011 login However, at settlement, the condemning authority gave you closing papers showing clearly the part of the purchase price that was for severance damages. Taxact 2011 login You may treat this part as severance damages. Taxact 2011 login Treatment of severance damages. Taxact 2011 login   Your net severance damages are treated as the amount realized from an involuntary conversion of the remaining part of your property. Taxact 2011 login Use them to reduce the basis of the remaining property. Taxact 2011 login If the amount of severance damages is based on damage to a specific part of the property you kept, reduce the basis of only that part by the net severance damages. Taxact 2011 login   If your net severance damages are more than the basis of your retained property, you have a gain. Taxact 2011 login You may be able to postpone reporting the gain. Taxact 2011 login See Postponement of Gain, later. Taxact 2011 login    You can use Part 1 of Table 1-3 to figure any gain from severance damages and to refigure the adjusted basis of the remaining part of your property. Taxact 2011 login Net severance damages. Taxact 2011 login   To figure your net severance damages, you first must reduce your severance damages by your expenses in obtaining the damages. Taxact 2011 login You then reduce them by any special assessment (described later) levied against the remaining part of the property and retained out of the award by the condemning authority. Taxact 2011 login The balance is your net severance damages. Taxact 2011 login Expenses of obtaining a condemnation award and severance damages. Taxact 2011 login   Subtract the expenses of obtaining a condemnation award, such as legal, engineering, and appraisal fees, from the total award. Taxact 2011 login Also, subtract the expenses of obtaining severance damages, which may include similar expenses, from the severance damages paid to you. Taxact 2011 login If you cannot determine which part of your expenses is for each part of the condemnation proceeds, you must make a proportionate allocation. Taxact 2011 login Example. Taxact 2011 login You receive a condemnation award and severance damages. Taxact 2011 login One-fourth of the total was designated as severance damages in your agreement with the condemning authority. Taxact 2011 login You had legal expenses for the entire condemnation proceeding. Taxact 2011 login You cannot determine how much of your legal expenses is for each part of the condemnation proceeds. Taxact 2011 login You must allocate one-fourth of your legal expenses to the severance damages and the other three-fourths to the condemnation award. Taxact 2011 login Special assessment retained out of award. Taxact 2011 login   When only part of your property is condemned, a special assessment levied against the remaining property may be retained by the governing body out of your condemnation award. Taxact 2011 login An assessment may be levied if the remaining part of your property benefited by the improvement resulting from the condemnation. Taxact 2011 login Examples of improvements that may cause a special assessment are widening a street and installing a sewer. Taxact 2011 login   To figure your net condemnation award, you must reduce the amount of the award by the assessment retained out of the award. Taxact 2011 login Example. Taxact 2011 login To widen the street in front of your home, the city condemned a 25-foot deep strip of your land. Taxact 2011 login You were awarded $5,000 for this and spent $300 to get the award. Taxact 2011 login Before paying the award, the city levied a special assessment of $700 for the street improvement against your remaining property. Taxact 2011 login The city then paid you only $4,300. Taxact 2011 login Your net award is $4,000 ($5,000 total award minus $300 expenses in obtaining the award and $700 for the special assessment retained). Taxact 2011 login If the $700 special assessment was not retained out of the award and you were paid $5,000, your net award would be $4,700 ($5,000 − $300). Taxact 2011 login The net award would not change, even if you later paid the assessment from the amount you received. Taxact 2011 login Severance damages received. Taxact 2011 login   If severance damages are included in the condemnation proceeds, the special assessment retained out of the severance damages is first used to reduce the severance damages. Taxact 2011 login Any balance of the special assessment is used to reduce the condemnation award. Taxact 2011 login Example. Taxact 2011 login You were awarded $4,000 for the condemnation of your property and $1,000 for severance damages. Taxact 2011 login You spent $300 to obtain the severance damages. Taxact 2011 login A special assessment of $800 was retained out of the award. Taxact 2011 login The $1,000 severance damages are reduced to zero by first subtracting the $300 expenses and then $700 of the special assessment. Taxact 2011 login Your $4,000 condemnation award is reduced by the $100 balance of the special assessment, leaving a $3,900 net condemnation award. Taxact 2011 login Part business or rental. Taxact 2011 login   If you used part of your condemned property as your home and part as business or rental property, treat each part as a separate property. Taxact 2011 login Figure your gain or loss separately because gain or loss on each part may be treated differently. Taxact 2011 login   Some examples of this type of property are a building in which you live and operate a grocery, and a building in which you live on the first floor and rent out the second floor. Taxact 2011 login Example. Taxact 2011 login You sold your building for $24,000 under threat of condemnation to a public utility company that had the authority to condemn. Taxact 2011 login You rented half the building and lived in the other half. Taxact 2011 login You paid $25,000 for the building and spent an additional $1,000 for a new roof. Taxact 2011 login You claimed allowable depreciation of $4,600 on the rental half. Taxact 2011 login You spent $200 in legal expenses to obtain the condemnation award. Taxact 2011 login Figure your gain or loss as follows. Taxact 2011 login     Resi- dential Part Busi- ness Part 1) Condemnation award received $12,000 $12,000 2) Minus: Legal expenses, $200 100 100 3) Net condemnation award $11,900 $11,900 4) Adjusted basis:       ½ of original cost, $25,000 $12,500 $12,500   Plus: ½ of cost of roof, $1,000 500 500   Total $13,000 $13,000 5) Minus: Depreciation   4,600 6) Adjusted basis, business part   $8,400 7) (Loss) on residential property ($1,100)   8) Gain on business property $3,500 The loss on the residential part of the property is not deductible. Taxact 2011 login Postponement of Gain Do not report the gain on condemned property if you receive only property that is similar or related in service or use to the condemned property. Taxact 2011 login Your basis for the new property is the same as your basis for the old. Taxact 2011 login Money or unlike property received. Taxact 2011 login   You ordinarily must report the gain if you receive money or unlike property. Taxact 2011 login You can elect to postpone reporting the gain if you buy property that is similar or related in service or use to the condemned property within the replacement period, discussed later. Taxact 2011 login You also can elect to postpone reporting the gain if you buy a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the condemned property. Taxact 2011 login See Controlling interest in a corporation, later. Taxact 2011 login   To postpone reporting all the gain, you must buy replacement property costing at least as much as the amount realized for the condemned property. Taxact 2011 login If the cost of the replacement property is less than the amount realized, you must report the gain up to the unspent part of the amount realized. Taxact 2011 login   The basis of the replacement property is its cost, reduced by the postponed gain. Taxact 2011 login Also, if your replacement property is stock in a corporation that owns property similar or related in service or use, the corporation generally will reduce its basis in its assets by the amount by which you reduce your basis in the stock. Taxact 2011 login See Controlling interest in a corporation, later. Taxact 2011 login You can use Part 3 of Table 1-3 to figure the gain you must report and your postponed gain. Taxact 2011 login Postponing gain on severance damages. Taxact 2011 login   If you received severance damages for part of your property because another part was condemned and you buy replacement property, you can elect to postpone reporting gain. Taxact 2011 login See Treatment of severance damages, earlier. Taxact 2011 login You can postpone reporting all your gain if the replacement property costs at least as much as your net severance damages plus your net condemnation award (if resulting in gain). Taxact 2011 login   You also can make this election if you spend the severance damages, together with other money you received for the condemned property (if resulting in gain), to acquire nearby property that will allow you to continue your business. Taxact 2011 login If suitable nearby property is not available and you are forced to sell the remaining property and relocate in order to continue your business, see Postponing gain on the sale of related property, next. Taxact 2011 login   If you restore the remaining property to its former usefulness, you can treat the cost of restoring it as the cost of replacement property. Taxact 2011 login Postponing gain on the sale of related property. Taxact 2011 login   If you sell property that is related to the condemned property and then buy replacement property, you can elect to postpone reporting gain on the sale. Taxact 2011 login You must meet the requirements explained earlier under Related property voluntarily sold. Taxact 2011 login You can postpone reporting all your gain if the replacement property costs at least as much as the amount realized from the sale plus your net condemnation award (if resulting in gain) plus your net severance damages, if any (if resulting in gain). Taxact 2011 login Buying replacement property from a related person. Taxact 2011 login   Certain taxpayers cannot postpone reporting gain from a condemnation if they buy the replacement property from a related person. Taxact 2011 login For information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2. Taxact 2011 login   This rule applies to the following taxpayers. Taxact 2011 login C corporations. Taxact 2011 login Partnerships in which more than 50% of the capital or profits interest is owned by  C corporations. Taxact 2011 login All others (including individuals, partnerships (other than those in (2)), and S corporations) if the total realized gain for the tax year on all involuntarily converted properties on which there is realized gain of more than $100,000. Taxact 2011 login   For taxpayers described in (3) above, gains cannot be offset with any losses when determining whether the total gain is more than $100,000. Taxact 2011 login If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Taxact 2011 login If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Taxact 2011 login Exception. Taxact 2011 login   This rule does not apply if the related person acquired the property from an unrelated person within the replacement period. Taxact 2011 login Advance payment. Taxact 2011 login   If you pay a contractor in advance to build your replacement property, you have not bought replacement property unless it is finished before the end of the replacement period (discussed later). Taxact 2011 login Replacement property. Taxact 2011 login   To postpone reporting gain, you must buy replacement property for the specific purpose of replacing your condemned property. Taxact 2011 login You do not have to use the actual funds from the condemnation award to acquire the replacement property. Taxact 2011 login Property you acquire by gift or inheritance does not qualify as replacement property. Taxact 2011 login Similar or related in service or use. Taxact 2011 login   Your replacement property must be similar or related in service or use to the property it replaces. Taxact 2011 login   If the condemned property is real property you held for productive use in your trade or business or for investment (other than property held mainly for sale), like-kind property to be held either for productive use in trade or business or for investment will be treated as property similar or related in service or use. Taxact 2011 login For a discussion of like-kind property, see Like-Kind Property under Like-Kind Exchanges, later. Taxact 2011 login Owner-user. Taxact 2011 login   If you are an owner-user, similar or related in service or use means that replacement property must function in the same way as the property it replaces. Taxact 2011 login Example. Taxact 2011 login Your home was condemned and you invested the proceeds from the condemnation in a grocery store. Taxact 2011 login Your replacement property is not similar or related in service or use to the condemned property. Taxact 2011 login To be similar or related in service or use, your replacement property must also be used by you as your home. Taxact 2011 login Owner-investor. Taxact 2011 login   If you are an owner-investor, similar or related in service or use means that any replacement property must have the same relationship of services or uses to you as the property it replaces. Taxact 2011 login You decide this by determining all the following information. Taxact 2011 login Whether the properties are of similar service to you. Taxact 2011 login The nature of the business risks connected with the properties. Taxact 2011 login What the properties demand of you in the way of management, service, and relations to your tenants. Taxact 2011 login Example. Taxact 2011 login You owned land and a building you rented to a manufacturing company. Taxact 2011 login The building was condemned. Taxact 2011 login During the replacement period, you had a new building built on other land you already owned. Taxact 2011 login You rented out the new building for use as a wholesale grocery warehouse. Taxact 2011 login The replacement property is also rental property, so the two properties are considered similar or related in service or use if there is a similarity in all the following areas. Taxact 2011 login Your management activities. Taxact 2011 login The amount and kind of services you provide to your tenants. Taxact 2011 login The nature of your business risks connected with the properties. Taxact 2011 login Leasehold replaced with fee simple property. Taxact 2011 login   Fee simple property you will use in your trade or business or for investment can qualify as replacement property that is similar or related in service or use to a condemned leasehold if you use it in the same business and for the identical purpose as the condemned leasehold. Taxact 2011 login   A fee simple property interest generally is a property interest that entitles the owner to the entire property with unconditional power to dispose of it during his or her lifetime. Taxact 2011 login A leasehold is property held under a lease, usually for a term of years. Taxact 2011 login Outdoor advertising display replaced with real property. Taxact 2011 login   You can elect to treat an outdoor advertising display as real property. Taxact 2011 login If you make this election and you replace the display with real property in which you hold a different kind of interest, your replacement property can qualify as like-kind property. Taxact 2011 login For example, real property bought to replace a destroyed billboard and leased property on which the billboard was located qualify as property of a like-kind. Taxact 2011 login   You can make this election only if you did not claim a section 179 deduction for the display. Taxact 2011 login You cannot cancel this election unless you get the consent of the IRS. Taxact 2011 login   An outdoor advertising display is a sign or device rigidly assembled and permanently attached to the ground, a building, or any other permanent structure used to display a commercial or other advertisement to the public. Taxact 2011 login Substituting replacement property. Taxact 2011 login   Once you designate certain property as replacement property on your tax return, you cannot substitute other qualified property. Taxact 2011 login But, if your previously designated replacement property does not qualify, you can substitute qualified property if you acquire it within the replacement period. Taxact 2011 login Controlling interest in a corporation. Taxact 2011 login   You can replace property by acquiring a controlling interest in a corporation that owns property similar or related in service or use to your condemned property. Taxact 2011 login You have controlling interest if you own stock having at least 80% of the combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock of the corporation. Taxact 2011 login Basis adjustment to corporation's property. Taxact 2011 login   The basis of property held by the corporation at the time you acquired control must be reduced by your postponed gain, if any. Taxact 2011 login You are not required to reduce the adjusted basis of the corporation's properties below your adjusted basis in the corporation's stock (determined after reduction by your postponed gain). Taxact 2011 login   Allocate this reduction to the following classes of property in the order shown below. Taxact 2011 login Property that is similar or related in service or use to the condemned property. Taxact 2011 login Depreciable property not reduced in (1). Taxact 2011 login All other property. Taxact 2011 login If two or more properties fall in the same class, allocate the reduction to each property in proportion to the adjusted basis of all the properties in that class. Taxact 2011 login The reduced basis of any single property cannot be less than zero. Taxact 2011 login Main home replaced. Taxact 2011 login   If your gain from a condemnation of your main home is more than you can exclude from your income (see Main home condemned under Gain or Loss From Condemnations, earlier), you can postpone reporting the rest of the gain by buying replacement property that is similar or related in service or use. Taxact 2011 login The replacement property must cost at least as much as the amount realized from the condemnation minus the excluded gain. Taxact 2011 login   You must reduce the basis of your replacement property by the postponed gain. Taxact 2011 login Also, if you postpone reporting any part of your gain under these rules, you are treated as having owned and used the replacement property as your main home for the period you owned and used the condemned property as your main home. Taxact 2011 login Example. Taxact 2011 login City authorities condemned your home that you had used as a personal residence for 5 years prior to the condemnation. Taxact 2011 login The city paid you a condemnation award of $400,000. Taxact 2011 login Your adjusted basis in the property was $80,000. Taxact 2011 login You realize a gain of $320,000 ($400,000 − $80,000). Taxact 2011 login You purchased a new home for $100,000. Taxact 2011 login You can exclude $250,000 of the realized gain from your gross income. Taxact 2011 login The amount realized is then treated as being $150,000 ($400,000 − $250,000) and the gain realized is $70,000 ($150,000 amount realized − $80,000 adjusted basis). Taxact 2011 login You must recognize $50,000 of the gain ($150,000 amount realized − $100,000 cost of new home). Taxact 2011 login The remaining $20,000 of realized gain is postponed. Taxact 2011 login Your basis in the new home is $80,000 ($100,000 cost − $20,000 gain postponed). Taxact 2011 login Replacement period. Taxact 2011 login   To postpone reporting your gain from a condemnation, you must buy replacement property within a certain period of time. Taxact 2011 login This is the replacement period. Taxact 2011 login   The replacement period for a condemnation begins on the earlier of the following dates. Taxact 2011 login The date on which you disposed of the condemned property. Taxact 2011 login The date on which the threat of condemnation began. Taxact 2011 login   The replacement period generally ends 2 years after the end of the first tax year in which any part of the gain on the condemnation is realized. Taxact 2011 login However, see the exceptions below. Taxact 2011 login Three-year replacement period for certain property. Taxact 2011 login   If real property held for use in a trade or business or for investment (not including property held primarily for sale) is condemned, the replacement period ends 3 years after the end of the first tax year in which any part of the gain on the condemnation is realized. Taxact 2011 login However, this 3-year replacement period cannot be used if you replace the condemned property by acquiring control of a corporation owning property that is similar or related in service or use. Taxact 2011 login Five-year replacement period for certain property. Taxact 2011 login   The replacement period ends 5 years after the end of the first tax year in which any part of the gain is realized on the compulsory or involuntary conversion of the following qualified property. Taxact 2011 login Property in any Midwestern disaster area compulsorily or involuntarily converted on or after the applicable disaster date as a result of severe storms, tornadoes, or flooding, but only if substantially all of the use of the replacement property is in a Midwestern disaster area. Taxact 2011 login Property in the Kansas disaster area compulsorily or involuntarily converted after May 3, 2007, but only if substantially all of the use of the replacement property is in the Kansas disaster area. Taxact 2011 login Property in the Hurricane Katrina disaster area compulsorily or involuntarily converted after August 24, 2005, as a result of Hurricane Katrina, but only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. Taxact 2011 login Extended replacement period for taxpayers affected by other federally declared disasters. Taxact 2011 login    If you are affected by a federally declared disaster, the IRS may grant disaster relief by extending the periods to perform certain tax-related acts for 2013, including the replacement period, by up to one year. Taxact 2011 login For more information visit www. Taxact 2011 login irs. Taxact 2011 login gov/uac/Tax-Relief-in-Disaster-Situations. Taxact 2011 login Weather-related sales of livestock in an area eligible for federal assistance. Taxact 2011 login   Generally, if the sale or exchange of livestock is due to drought, flood, or other weather-related conditions in an area eligible for federal assistance, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the sale or exchange. Taxact 2011 login    If the weather-related conditions continue for longer than 3 years, the replacement period may be extended on a regional basis until the end of your first drought-free year for the applicable region. Taxact 2011 login See Notice 2006-82. Taxact 2011 login You can find Notice 2006-82 on page 529 of Internal Revenue Bulletin 2006-39 at www. Taxact 2011 login irs. Taxact 2011 login gov/irb/2006-39_IRB/ar13. Taxact 2011 login html. Taxact 2011 login    Each year, the IRS publishes a list of counties, districts, cities, or parishes for which exceptional, extreme, or severe drought was reported during the preceding 12 months. Taxact 2011 login If you qualified for a 4-year replacement period for livestock sold or exchanged on account of drought and your replacement period is scheduled to expire at the end of 2013 (or at the end of the tax year that includes August 31, 2013), see Notice 2013-62. Taxact 2011 login You can find Notice 2013-62 on page 466 of Internal Revenue Bulletin 2013-45 at www. Taxact 2011 login irs. Taxact 2011 login gov/irb/2013-45_IRB/ar04. Taxact 2011 login html. Taxact 2011 login The replacement period will be extended under Notice 2006-82 if the applicable region is on the list included in Notice 2013-62. Taxact 2011 login Determining when gain is realized. Taxact 2011 login   If you are a cash basis taxpayer, you realize gain when you receive payments that are more than your basis in the property. Taxact 2011 login If the condemning authority makes deposits with the court, you realize gain when you withdraw (or have the right to withdraw) amounts that are more than your basis. Taxact 2011 login   This applies even if the amounts received are only partial or advance payments and the full award has not yet been determined. Taxact 2011 login A replacement will be too late if you wait for a final determination that does not take place in the applicable replacement period after you first realize gain. Taxact 2011 login   For accrual basis taxpayers, gain (if any) accrues in the earlier year when either of the following occurs. Taxact 2011 login All events have occurred that fix the right to the condemnation award and the amount can be determined with reasonable accuracy. Taxact 2011 login All or part of the award is actually or constructively received. Taxact 2011 login For example, if you have an absolute right to a part of a condemnation award when it is deposited with the court, the amount deposited accrues in the year the deposit is made even though the full amount of the award is still contested. Taxact 2011 login Replacement property bought before the condemnation. Taxact 2011 login   If you buy your replacement property after there is a threat of condemnation but before the actual condemnation and you still hold the replacement property at the time of the condemnation, you have bought your replacement property within the replacement period. Taxact 2011 login Property you acquire before there is a threat of condemnation does not qualify as replacement property acquired within the replacement period. Taxact 2011 login Example. Taxact 2011 login On April 3, 2012, city authorities notified you that your property would be condemned. Taxact 2011 login On June 5, 2012, you acquired property to replace the property to be condemned. Taxact 2011 login You still had the new property when the city took possession of your old property on September 4, 2013. Taxact 2011 login You have made a replacement within the replacement period. Taxact 2011 login Extension. Taxact 2011 login   You can request an extension of the replacement period from the IRS director for your area. Taxact 2011 login You should apply before the end of the replacement period. Taxact 2011 login Your request should explain in detail why you need an extension. Taxact 2011 login The IRS will consider a request filed within a reasonable time after the replacement period if you can show reasonable cause for the delay. Taxact 2011 login An extension of the replacement period will be granted if you can show reasonable cause for not making the replacement within the regular period. Taxact 2011 login   Ordinarily, requests for extensions are granted near the end of the replacement period or the extended replacement period. Taxact 2011 login Extensions are usually limited to a period of 1 year or less. Taxact 2011 login The high market value or scarcity of replacement property is not a sufficient reason for granting an extension. Taxact 2011 login If your replacement property is being built and you clearly show that the replacement or restoration cannot be made within the replacement peri
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Treasury, IRS Will Issue Proposed Guidance for Tax-Exempt Social Welfare Organizations

Initial Proposed Guidance Clarifies Qualification Requirements and Seeks Public Input

IR-2013-92, Nov. 26, 2013

WASHINGTON — The U.S. Department of the Treasury and the Internal Revenue Service today will issue initial guidance regarding qualification requirements for tax-exemption as a social welfare organization under section 501(c)(4) of the Internal Revenue Code. This proposed guidance defines the term “candidate-related political activity,” and would amend current regulations by indicating that the promotion of social welfare does not include this type of activity. The proposed guidance also seeks initial comments on other aspects of the qualification requirements, including what proportion of a 501(c)(4) organization’s activities must promote social welfare.

The proposed guidance is expected to be posted on the Federal Register later today.

There are a number of steps in the regulatory process that must be taken before any final guidance can be issued. Given the significant public interest in these and related issues, Treasury and the IRS expect to receive a large number of comments. Treasury and the IRS are committed to carefully and comprehensively considering all of the comments received before issuing additional proposed guidance or final rules.

“This is part of ongoing efforts within the IRS that are improving our work in the tax-exempt area,” said IRS Acting Commissioner Danny Werfel. “Once final, this proposed guidance will continue moving us forward and provide clarity for this important segment of exempt organizations.”

“This proposed guidance is a first critical step toward creating clear-cut definitions of political activity by tax-exempt social welfare organizations,” said Treasury Assistant Secretary for Tax Policy Mark J. Mazur. “We are committed to getting this right before issuing final guidance that may affect a broad group of organizations. It will take time to work through the regulatory process and carefully consider all public feedback as we strive to ensure that the standards for tax-exemption are clear and can be applied consistently.”

Organizations may apply for tax-exempt status under section 501(c)(4) of the tax code if they operate to promote social welfare. The IRS currently applies a “facts and circumstances” test to determine whether an organization is engaged in political campaign activities that do not promote social welfare. Today’s proposed guidance would reduce the need to conduct fact-intensive inquiries by replacing this test with more definitive rules.

In defining the new term, “candidate-related political activity,” Treasury and the IRS drew upon existing definitions of political activity under federal and state campaign finance laws, other IRS provisions, as well as suggestions made in unsolicited public comments.

Under the proposed guidelines, candidate-related political activity includes:

1. Communications

  • Communications that expressly advocate for a clearly identified political candidate or candidates of a political party.
  • Communications that are made within 60 days of a general election (or within 30 days of a primary election) and clearly identify a candidate or political party.
  • Communications expenditures that must be reported to the Federal Election Commission.

2. Grants and Contributions

  • Any contribution that is recognized under campaign finance law as a reportable contribution.
  • Grants to section 527 political organizations and other tax-exempt organizations that conduct candidate-related political activities (note that a grantor can rely on a written certification from a grantee stating that it does not engage in, and will not use grant funds for, candidate-related political activity).

3.  Activities Closely Related to Elections or Candidates

  • Voter registration drives and “get-out-the-vote” drives.
  • Distribution of any material prepared by or on behalf of a candidate or by a section 527 political organization.
  • Preparation or distribution of voter guides that refer to candidates (or, in a general election, to political parties).
  • Holding an event within 60 days of a general election (or within 30 days of a primary election) at which a candidate appears as part of the program.

These proposed rules reduce the need to conduct fact-intensive inquiries, including inquiries into whether activities or communications are neutral and unbiased.

Treasury and the IRS are planning to issue additional guidance that will address other issues relating to the standards for tax exemption under section 501(c)(4). In particular, there has been considerable public focus regarding the proportion of a section 501(c)(4) organization’s activities that must promote social welfare. Due to the importance of this aspect of the regulation, the proposed guidance requests initial comments on this issue.

The proposed guidance also seeks comments regarding whether standards similar to those proposed today should be adopted to define the political activities that do not further the tax-exempt purposes of other tax-exempt organizations and to promote consistent definitions across the tax-exempt sector.

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Page Last Reviewed or Updated: 02-Dec-2013

The Taxact 2011 Login

Taxact 2011 login 2. Taxact 2011 login   Estimated Tax for 2014 Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Who Does Not Have To Pay Estimated Tax Who Must Pay Estimated TaxGeneral Rule Married Taxpayers Special Rules Aliens Estates and Trusts How To Figure Estimated Tax2014 Estimated Tax Worksheet When To Pay Estimated TaxWhen To Start Farmers and Fishermen How To Figure Each PaymentRegular Installment Method Annualized Income Installment Method Estimated Tax Payments Not Required How To Pay Estimated TaxCredit an Overpayment Pay Online Pay by Phone Pay by Check or Money Order Using the Estimated Tax Payment Voucher Introduction Estimated tax is the method used to pay tax on income that is not subject to withholding. Taxact 2011 login This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards. Taxact 2011 login 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. Taxact 2011 login 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. Taxact 2011 login 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. Taxact 2011 login 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. Taxact 2011 login For information on when the penalty applies, see chapter 4. Taxact 2011 login It would be helpful for you to have a copy of your 2013 tax return and an estimate of your 2014 income nearby while reading this chapter. Taxact 2011 login Topics - This chapter discusses: Who must pay estimated tax, How to figure estimated tax (including illustrated examples), When to pay estimated tax, How to figure each payment, and How to pay estimated tax. Taxact 2011 login Useful Items - You may want to see: Form (and Instructions) 1040-ES Estimated Tax for Individuals See chapter 5 for information about how to get this publication and form. Taxact 2011 login Worksheets. Taxact 2011 login   You may need to use several of the blank worksheets included in this chapter. Taxact 2011 login See Worksheets for Chapter 2, later, to locate what you need. Taxact 2011 login Who Does Not Have To Pay Estimated Tax If you receive salaries and wages, you may be able to avoid paying estimated tax by asking your employer to take more tax out of your earnings. Taxact 2011 login To do this, file a new Form W-4 with your employer. Taxact 2011 login See chapter 1. Taxact 2011 login Estimated tax not required. Taxact 2011 login   You do not have to pay estimated tax for 2014 if you meet all three of the following conditions. Taxact 2011 login You had no tax liability for 2013. Taxact 2011 login You were a U. Taxact 2011 login S. Taxact 2011 login citizen or resident alien for the whole year. Taxact 2011 login Your 2013 tax year covered a 12-month period. Taxact 2011 login   You had no tax liability for 2013 if your total tax (defined later under Total tax for 2013—line 14b ) was zero or you did not have to file an income tax return. Taxact 2011 login Please click here for the text description of the image. Taxact 2011 login Figure 2-A: Do You Have To Pay Estimated Tax? Who Must Pay Estimated Tax If you owed additional tax for 2013, you may have to pay estimated tax for 2014. Taxact 2011 login You can use the following general rule as a guide during the year to see if you will have enough withholding, or should increase your withholding or make estimated tax payments. Taxact 2011 login General Rule In most cases, you must pay estimated tax for 2014 if both of the following apply. Taxact 2011 login You expect to owe at least $1,000 in tax for 2014, after subtracting your withholding and refundable credits. Taxact 2011 login You expect your withholding and 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. Taxact 2011 login Your 2013 tax return must cover all 12 months. Taxact 2011 login Note. Taxact 2011 login The percentages in (2a) or (2b) above may be different if you are a farmer, fisherman, or higher income taxpayer. Taxact 2011 login See Special Rules , later. Taxact 2011 login If the result from using the general rule above suggests that you will not have enough withholding, complete the 2014 Estimated Tax Worksheet for a more accurate calculation. Taxact 2011 login Figure 2-A takes you through the general rule. Taxact 2011 login You may find this helpful in determining if you must pay estimated tax. Taxact 2011 login If all your income will be subject to income tax withholding, you probably do not need to pay estimated tax. Taxact 2011 login Example 1. Taxact 2011 login Jane Smart uses Figure 2-A and the following information to figure whether she should pay estimated tax for 2014. Taxact 2011 login She files as head of household claiming her dependent son, takes the standard deduction, and expects no refundable credits for 2014. Taxact 2011 login Expected adjusted gross income (AGI) for 2014 $82,800 AGI for 2013 $73,700 Total tax on 2013 return (Form 1040,  line 61) $  8,746 Total 2014 estimated tax (line 13c of the 2014 Estimated Tax Worksheet) $11,015 Tax expected to be withheld in 2014 $10,000 Jane's answer to Figure 2-A, box 1, is YES; she expects to owe at least $1,000 for 2014 after subtracting her withholding from her expected total tax ($11,015 − $10,000 = $1,015). Taxact 2011 login Her answer to box 2a is YES; she expects her income tax withholding ($10,000) to be at least 90% of the tax to be shown on her 2014 return ($11,015 × 90% = $9,913. Taxact 2011 login 50). Taxact 2011 login Jane does not need to pay estimated tax. Taxact 2011 login Example 2. Taxact 2011 login The facts are the same as in Example 1, except that Jane expects only $8,700 tax to be withheld in 2014. Taxact 2011 login Because that is less than $9,913. Taxact 2011 login 50, her answer to box 2a is NO. Taxact 2011 login Jane's answer to box 2b is also NO; she does not expect her income tax withholding ($8,700) to be at least 100% of the total tax shown on her 2013 return ($8,746). Taxact 2011 login Jane must increase her withholding or pay estimated tax for 2014. Taxact 2011 login Example 3. Taxact 2011 login The facts are the same as in Example 2, except that the total tax shown on Jane's 2013 return was $8,600. Taxact 2011 login Because she expects to have more than $8,600 withheld in 2014 ($8,700), her answer to box 2b is YES. Taxact 2011 login Jane does not need to pay estimated tax for 2014. Taxact 2011 login Married Taxpayers If you qualify to make joint estimated tax payments, apply the rules discussed here to your joint estimated income. Taxact 2011 login You and your spouse can make joint estimated tax payments even if you are not living together. Taxact 2011 login 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, Either spouse is a nonresident alien (unless that spouse elected to be treated as a resident alien for tax purposes). Taxact 2011 login See Choosing Resident Alien Status in Publication 519, or Individuals of the same sex and opposite sex who are in registered domestic partnerships, civil unions, or other similar formal relationships that are not marriages under state law cannot make joint estimated tax payments. Taxact 2011 login These individuals can take credit only for the estimated tax payments that he or she made. Taxact 2011 login If you and your spouse cannot make joint estimated tax payments, apply these rules to your separate estimated income. Taxact 2011 login Making joint or separate estimated tax payments will not affect your choice of filing a joint tax return or separate returns for 2014. Taxact 2011 login 2013 separate returns and 2014 joint return. Taxact 2011 login   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. Taxact 2011 login You filed a separate return if you filed as single, head of household, or married filing separately. Taxact 2011 login 2013 joint return and 2014 separate returns. Taxact 2011 login   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. Taxact 2011 login You file a separate return if you file as single, head of household, or married filing separately. Taxact 2011 login   To figure your share of the tax on a 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 for 2014. Taxact 2011 login Then multiply the tax on the joint return by the following fraction. Taxact 2011 login      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. Taxact 2011 login Joe and Heather filed a joint return for 2013 showing taxable income of $48,500 and a tax of $6,386. Taxact 2011 login Of the $48,500 taxable income, $40,100 was Joe's and the rest was Heather's. Taxact 2011 login For 2014, they plan to file married filing separately. Taxact 2011 login Joe figures his share of the tax on the 2013 joint return as follows: Tax on $40,100 based on separate return $5,960 Tax on $8,400 based on separate return 843 Total $6,803 Joe's percentage of total ($5,960 ÷ $6,803) 87. Taxact 2011 login 6% Joe's share of tax on joint return  ($6,386 × 87. Taxact 2011 login 6%) $5,594 Special Rules There are special rules for farmers, fishermen, and certain higher income taxpayers. Taxact 2011 login Farmers and Fishermen If at least two-thirds of your gross income for 2013 or 2014 is from farming or fishing, substitute 662/3% for 90% in (2a) under General Rule , earlier. Taxact 2011 login Gross income. Taxact 2011 login   Your gross income is all income you receive in the form of money, goods, property, and services that is not exempt from tax. Taxact 2011 login To determine whether two-thirds of your gross income for 2013 was from farming or fishing, use as your gross income the total of the income (not loss) amounts. Taxact 2011 login Joint returns. Taxact 2011 login   On a joint return, you must add your spouse's gross income to your gross income to determine if at least two-thirds of your total gross income is from farming or fishing. Taxact 2011 login Gross income from farming. Taxact 2011 login   This is income from cultivating the soil or raising agricultural commodities. Taxact 2011 login It includes the following amounts. Taxact 2011 login Income from operating a stock, dairy, poultry, bee, fruit, or truck farm. Taxact 2011 login Income from a plantation, ranch, nursery, range, orchard, or oyster bed. Taxact 2011 login Crop shares for the use of your land. Taxact 2011 login Gains from sales of draft, breeding, dairy, or sporting livestock. Taxact 2011 login   For 2013, gross income from farming is the total of the following amounts. Taxact 2011 login Schedule F (Form 1040), Profit or Loss From Farming, line 9. Taxact 2011 login Form 4835, Farm Rental Income and Expenses, line 7. Taxact 2011 login Your share of the gross farming income from a partnership, S corporation, estate or trust, from: Schedule K-1 (Form 1065), Schedule K-1 (Form 1120S), or Schedule K-1 (Form 1041). Taxact 2011 login Your gains from sales of draft, breeding, dairy, or sporting livestock shown on Form 4797, Sales of Business Property. Taxact 2011 login   Wages you receive as a farm employee and wages you receive from a farm corporation are not gross income from farming. Taxact 2011 login Gross income from fishing. Taxact 2011 login   This is income from catching, taking, harvesting, cultivating, or farming any kind of fish, shellfish (for example, clams and mussels), crustaceans (for example, lobsters, crabs, and shrimp), sponges, seaweeds, or other aquatic forms of animal and vegetable life. Taxact 2011 login   Gross income from fishing includes the following amounts. Taxact 2011 login Schedule C (Form 1040), Profit or Loss From Business. Taxact 2011 login Income for services as an officer or crew member of a vessel while the vessel is engaged in fishing. Taxact 2011 login Your share of the gross fishing income from a partnership, S corporation, estate or trust, from: Schedule K-1 (Form 1065), Schedule K-1 (Form 1120S), or Schedule K-1 (Form 1041). Taxact 2011 login Certain taxable interest and punitive damage awards received in connection with the Exxon Valdez litigation. Taxact 2011 login Income for services normally performed in connection with fishing. Taxact 2011 login Services normally performed in connection with fishing include: Shore service as an officer or crew member of a vessel engaged in fishing, and Services that are necessary for the immediate preservation of the catch, such as cleaning, icing, and packing the catch. Taxact 2011 login Higher Income Taxpayers 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. Taxact 2011 login For 2013, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4. Taxact 2011 login Note. Taxact 2011 login This rule does not apply to farmers and fishermen. Taxact 2011 login Aliens Resident and nonresident aliens also may have to pay estimated tax. Taxact 2011 login Resident aliens should follow the rules in this publication, unless noted otherwise. Taxact 2011 login Nonresident aliens should get Form 1040-ES (NR), U. Taxact 2011 login S. Taxact 2011 login Estimated Tax for Nonresident Alien Individuals. Taxact 2011 login You are an alien if you are not a citizen or national of the United States. Taxact 2011 login You are a resident alien if you either have a green card or meet the substantial presence test. Taxact 2011 login For more information about withholding, the substantial presence test, and Form 1040-ES (NR), see Publication 519. Taxact 2011 login Estates and Trusts Estates and trusts also must pay estimated tax. Taxact 2011 login However, estates (and certain grantor trusts that receive the residue of the decedent's estate under the decedent's will) are exempt from paying estimated tax for the first 2 years after the decedent's death. Taxact 2011 login Estates and trusts must use Form 1041-ES, Estimated Income Tax for Estates and Trusts, to figure and pay estimated tax. Taxact 2011 login How To Figure Estimated Tax To figure your estimated tax, you must figure your expected AGI, taxable income, taxes, deductions, and credits for the year. Taxact 2011 login When figuring your 2014 estimated tax, it may be helpful to use your income, deductions, and credits for 2013 as a starting point. Taxact 2011 login Use your 2013 federal tax return as a guide. Taxact 2011 login You can use Form 1040-ES to figure your estimated tax. Taxact 2011 login Nonresident aliens use Form 1040-ES (NR) to figure estimated tax. Taxact 2011 login You must make adjustments both for changes in your own situation and for recent changes in the tax law. Taxact 2011 login Some of these changes are discussed under What's New for 2014 , earlier. Taxact 2011 login For information about these and other changes in the law, visit the IRS website at IRS. Taxact 2011 login gov. Taxact 2011 login The instructions for Form 1040-ES include a worksheet to help you figure your estimated tax. Taxact 2011 login Keep the worksheet for your records. Taxact 2011 login 2014 Estimated Tax Worksheet Use Worksheet 2-1 to help guide you through the information about completing the 2014 Estimated Tax Worksheet. Taxact 2011 login You can also find a copy of the worksheet in the Instructions for Form 1040-ES. Taxact 2011 login Expected AGI—Line 1 Your expected AGI for 2014 (line 1) is your expected total income minus your expected adjustments to income. Taxact 2011 login Total income. Taxact 2011 login   Include in your total income all the income you expect to receive during the year, even income that is subject to withholding. Taxact 2011 login However, do not include income that is tax exempt. Taxact 2011 login   Total income includes all income and loss for 2014 that, if you had received it in 2013, would have been included on your 2013 tax return in the total on line 22 of Form 1040, line 15 of Form 1040A, or line 4 of Form 1040EZ. Taxact 2011 login Social security and railroad retirement benefits. Taxact 2011 login If you expect to receive social security or tier 1 railroad retirement benefits during 2014, use Worksheet 2-2 to figure the amount of expected taxable benefits you should include on line 1. Taxact 2011 login Adjustments to income. Taxact 2011 login   Be sure to subtract from your expected total income all of the adjustments you expect to take on your 2014 tax return. Taxact 2011 login Self-employed. Taxact 2011 login If you expect to have income from self-employment, use Worksheet 2-3 to figure your expected self-employment tax and your allowable deduction for self-employment tax. Taxact 2011 login Include the amount from Worksheet 2-3 in your expected adjustments to income. Taxact 2011 login If you file a joint return and both you and your spouse have net earnings from self-employment, each of you must complete a separate worksheet. Taxact 2011 login Expected Taxable Income— Lines 2–5 Reduce your expected AGI for 2014 (line 1) by either your expected itemized deductions or your standard deduction and by your exemptions (lines 2 through 5). Taxact 2011 login Itemized deductions—line 2. Taxact 2011 login   If you expect to claim itemized deductions on your 2014 tax return, enter the estimated amount on line 2. Taxact 2011 login   Itemized deductions are the deductions that can be claimed on Schedule A (Form 1040). Taxact 2011 login    For 2014, your total itemized deductions may be reduced if your AGI is more than the amount shown next for your filing status. Taxact 2011 login Single $254,200 Married filing jointly or qualifying widow(er) $305,050 Married filing separately $152,525 Head of household $279,650   If you expect your AGI to be more than this amount, use Worksheet 2-5 to figure the amount to enter on line 2. Taxact 2011 login Standard deduction—line 2. Taxact 2011 login   If you expect to claim the standard deduction on your 2014 tax return, enter the amount on line 2. Taxact 2011 login Use Worksheet 2-4 to figure your standard deduction. Taxact 2011 login No standard deduction. Taxact 2011 login   The standard deduction for some individuals is zero. Taxact 2011 login Your standard deduction will be zero if you: File a separate return and your spouse itemizes deductions, Are a dual-status alien, or File a return for a period of less than 12 months because you change your accounting period. Taxact 2011 login Exemptions—line 4. Taxact 2011 login   After you have subtracted either your expected itemized deductions or your standard deduction from your expected AGI, reduce the amount remaining by $3,950 for each exemption you expect to take on your 2014 tax return. Taxact 2011 login If another person (such as your parent) can claim an exemption for you on his or her tax return, you cannot claim your own personal exemption. Taxact 2011 login This is true even if the other person will not claim your exemption or the exemption will be reduced or eliminated under the phaseout rule. Taxact 2011 login    For 2014, your deduction for personal exemption is reduced if your AGI is more than the amount shown next for your filing status. Taxact 2011 login Single $254,200 Married filing jointly or qualifying widow(er) $305,050 Married filing separately $152,525 Head of household $279,650   If you expect your AGI to be more than this amount, use Worksheet 2-6 to figure the amount to enter on line 4. Taxact 2011 login Expected Taxes and Credits— Lines 6–13c After you have figured your expected taxable income (line 5), follow the steps next to figure your expected taxes, credits, and total tax for 2014. Taxact 2011 login Most people will have entries for only a few of these steps. Taxact 2011 login However, you should check every step to be sure you do not overlook anything. Taxact 2011 login Step 1. Taxact 2011 login   Figure your expected income tax (line 6). Taxact 2011 login Generally, you will use the 2014 Tax Rate Schedules, later, to figure your expected income tax. Taxact 2011 login   However, see below for situations where you must use a different method to compute your estimated tax. Taxact 2011 login Tax on child's investment income. Taxact 2011 login   You must use a special method to figure tax on the income of the following children who have more than $2,000 of investment income. Taxact 2011 login Children under age 18 at the end of 2014. Taxact 2011 login The following children if their earned income is not more than half their support. Taxact 2011 login Children age 18 at the end of 2014. Taxact 2011 login Children who are full-time students over age 18 and under age 24 at the end of 2014. Taxact 2011 login See Publication 929, Tax Rules for Children and Dependents. Taxact 2011 login Although the ages and dollar amounts in the publication may be different in the 2014 revision, this reference will give you basic information for figuring the tax. Taxact 2011 login Tax on net capital gain. Taxact 2011 login   The regular income tax rates for individuals do not apply to a net capital gain. Taxact 2011 login Instead, your net capital gain is taxed at a lower maximum rate. Taxact 2011 login   The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. Taxact 2011 login Tax on capital gain and qualified dividends. Taxact 2011 login If the amount on line 1 includes a net capital gain or qualified dividends, use Worksheet 2-7 to figure your tax. Taxact 2011 login Note. Taxact 2011 login For 2014, your capital gains and dividends rate will depend on your income. Taxact 2011 login Tax if excluding foreign earned income or excluding or deducting foreign housing. Taxact 2011 login If you expect to claim the foreign earned income exclusion or the housing exclusion or deduction on Form 2555 or Form 2555-EZ, use Worksheet 2-8 to figure your estimated tax. Taxact 2011 login Step 2. Taxact 2011 login   Total your expected taxes (line 8). Taxact 2011 login Include on line 8 the sum of the following. Taxact 2011 login Your tax on line 6. Taxact 2011 login Your expected alternative minimum tax (AMT) from Form 6251, or included on Form 1040A. Taxact 2011 login Your expected additional taxes from Form 8814, Parents' Election To Report Child's Interest and Dividends, and Form 4972, Tax on Lump-Sum Distributions. Taxact 2011 login Any recapture of education credits. Taxact 2011 login Step 3. Taxact 2011 login   Subtract your expected credits (line 9). Taxact 2011 login If you are using your 2013 return as a guide and filed Form 1040, your total credits for 2013 were shown on line 54. Taxact 2011 login If you filed Form 1040A, your total credits for 2013 were on line 34. Taxact 2011 login   If your credits on line 9 are more than your taxes on line 8, enter “-0-” on line 10 and go to Step 4. Taxact 2011 login Step 4. Taxact 2011 login   Add your expected self-employment tax (line 11). Taxact 2011 login You already should have figured your self-employment tax (see Self-employed under Expected AGI—Line 1, earlier). Taxact 2011 login Step 5. Taxact 2011 login   Add your expected other taxes (line 12). Taxact 2011 login   Other taxes include the following. Taxact 2011 login Additional tax on early distributions from: An IRA or other qualified retirement plan, A tax-sheltered annuity, or A modified endowment contract entered into after June 20, 1988. Taxact 2011 login Household employment taxes if: You will have federal income tax withheld from wages, pensions, annuities, gambling winnings, or other income, or You would be required to make estimated tax payments even if you did not include household employment taxes when figuring your estimated tax. Taxact 2011 login Amounts written on Form 1040 on the line for “other taxes” (line 60 on the 2013 Form 1040). Taxact 2011 login But, do not include recapture of a federal mortgage subsidy; tax on excess golden parachute payments; look-back interest due under section 167(g) or 460(b) of the Internal Revenue Code; excise tax on insider stock compensation from an expatriated corporation; uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance; or additional tax on advance payments of health coverage tax credit when not eligible. Taxact 2011 login Repayment of the first-time homebuyer credit. Taxact 2011 login See Form 5405. Taxact 2011 login Additional Medicare Tax. Taxact 2011 login A 0. Taxact 2011 login 9% Additional Medicare Tax applies to your combined Medicare wages and self-employment income and/or your RRTA compensation that exceeds the amount listed in the following chart, based on your filing status. Taxact 2011 login Filing Status Threshold Amount Married filing jointly $250,000 Married filing separately $125,000 Single $200,000 Head of household $200,000 Qualifying Widow(er) $200,000 Medicare wages and self-employment income are combined to determine if your income exceeds the threshold. Taxact 2011 login A self-employment loss should not be considered for purposes of this tax. Taxact 2011 login RRTA compensation should be separately compared to the threshold. Taxact 2011 login Your employer is responsible for withholding the 0. Taxact 2011 login 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000 in 2014. Taxact 2011 login You should consider this withholding, if applicable, in determining whether you need to make an estimated payment. Taxact 2011 login For more information on Additional Medicare Tax, go to IRS. Taxact 2011 login gov and enter “Additional Medicare Tax” in the search box. Taxact 2011 login Net Investment Income Tax (NIIT). Taxact 2011 login The NIIT is 3. Taxact 2011 login 8% of the lesser of your net investment income or the excess of your modified adjusted gross income over the amount listed in the following chart, based on your filing status. Taxact 2011 login Filing Status Threshold Amount Married filing jointly $250,000 Married filing separately $125,000 Single $200,000 Head of household $200,000 Qualifying Widow(er) $250,000 For more information on Net Investment Income Tax, go to IRS. Taxact 2011 login gov and enter “Net Investment Income Tax” in the search box. Taxact 2011 login Step 6. Taxact 2011 login   Subtract your refundable credit (line 13b). Taxact 2011 login   To figure your expected fuel tax credit, do not include fuel tax for the first three quarters of the year that you expect to have refunded to you. Taxact 2011 login   The result of steps 1 through 6 is your total estimated tax for 2014 (line 13c). Taxact 2011 login Required Annual Payment— Line 14c On lines 14a through 14c, figure the total amount you must pay for 2014, through withholding and estimated tax payments, to avoid paying a penalty. Taxact 2011 login General rule. Taxact 2011 login   The total amount you must pay is the smaller of: 90% of your total expected tax for 2014, or 100% of the total tax shown on your 2013 return. Taxact 2011 login Your 2013 tax return must cover all 12 months. Taxact 2011 login Special rules. Taxact 2011 login   There are special rules for higher income taxpayers and for farmers and fishermen. Taxact 2011 login Higher income taxpayers. Taxact 2011 login   If your AGI for 2013 was more than $150,000 ($75,000 if your filing status for 2014 is married filing separately), substitute 110% for 100% in (2) above. Taxact 2011 login This rule does not apply to farmers and fishermen. Taxact 2011 login For 2013, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4. Taxact 2011 login Example. Taxact 2011 login   Jeremy Martin's total tax on his 2013 return was $42,581, and his expected tax for 2014 is $71,253. Taxact 2011 login His 2013 AGI was $180,000. Taxact 2011 login Because Jeremy had more than $150,000 of AGI in 2013, he figures his required annual payment as follows. Taxact 2011 login He determines that 90% of his expected tax for 2014 is $64,128 (. Taxact 2011 login 90 × $71,253). Taxact 2011 login Next, he determines that 110% of the tax shown on his 2013 return is $46,839 (1. Taxact 2011 login 10 x $42,581). Taxact 2011 login Finally, he determines that his required annual payment is $46,839, the smaller of the two. Taxact 2011 login Farmers and fishermen. Taxact 2011 login   If at least two-thirds of your gross income for 2013 or 2014 is from farming or fishing, your required annual payment is the smaller of: 662/3% (. Taxact 2011 login 6667) of your total tax for 2014, or 100% of the total tax shown on your 2013 return. Taxact 2011 login (Your 2013 tax return must cover all 12 months. Taxact 2011 login )   For definitions of “gross income from farming” and “gross income from fishing,” see Farmers and Fishermen , under Special Rules discussed earlier. Taxact 2011 login Total tax for 2013—line 14b. Taxact 2011 login   Your 2013 total tax, if you filed Form 1040, is the amount on line 61 reduced by the following. Taxact 2011 login Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). Taxact 2011 login The following amounts from Form 5329 included on line 58. Taxact 2011 login Any tax on excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts. Taxact 2011 login Any tax on excess accumulations in qualified retirement plans. Taxact 2011 login The following write-ins on line 60. Taxact 2011 login Excise tax on excess golden parachute payments (identified as “EPP”). Taxact 2011 login Excise tax on insider stock compensation from an expatriated corporation (identified as “ISC”). Taxact 2011 login Look-back interest due under section 167(g) (identified as “From Form 8866”). Taxact 2011 login Look-back interest due under section 460(b) (identified as “From Form 8697”). Taxact 2011 login Recapture of federal mortgage subsidy (identified as “FMSR”). Taxact 2011 login Additional tax on advance payments of health coverage tax credit when not eligible (identified as “HCTC”). Taxact 2011 login Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance (identified as “UT”). Taxact 2011 login Any refundable credit amounts. Taxact 2011 login   If you filed Form 1040A, your 2013 total tax is the amount on line 35 reduced by any refundable credits. Taxact 2011 login   If you filed Form 1040EZ, your 2013 total tax is the amount on line 10 reduced by the amount on line 8a. Taxact 2011 login Total Estimated Tax Payments Needed—Line 16a Use lines 15 and 16a to figure the total estimated tax you may be required to pay for 2014. Taxact 2011 login Subtract your expected withholding from your required annual payment (line 14c). Taxact 2011 login You usually must pay this difference in four equal installments. Taxact 2011 login See When To Pay Estimated Tax and How To Figure Each Payment . Taxact 2011 login You do not have to pay estimated tax if: Line 14c minus line 15 is zero or less, or Line 13c minus line 15 is less than $1,000. Taxact 2011 login Withholding—line 15. Taxact 2011 login   Your expected withholding for 2014 (line 15) includes the income tax you expect to be withheld from all sources (wages, pensions and annuities, etc. Taxact 2011 login ). Taxact 2011 login It includes excess social security, and tier 1 railroad retirement tax you expect to be withheld from your wages and compensation. Taxact 2011 login For this purpose, you will have excess social security or tier 1 railroad retirement tax withholding for 2014 only if your wages and compensation from two or more employers are more than $117,000. Taxact 2011 login See Excess Social Security or Railroad Retirement Tax Withholding in chapter 3. Taxact 2011 login   It also includes Additional Medicare Tax you expect to be withheld from your wages or compensation. Taxact 2011 login Your employer is responsible for withholding the 0. Taxact 2011 login 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000. Taxact 2011 login When To Pay Estimated Tax For estimated tax purposes, the year is divided into four payment periods. Taxact 2011 login Each period has a specific payment due date. Taxact 2011 login If you do not pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due a refund when you file your income tax return. Taxact 2011 login If a payment is mailed, the date of the U. Taxact 2011 login S. Taxact 2011 login postmark is considered the date of payment. Taxact 2011 login The payment periods and due dates for estimated tax payments are shown next. Taxact 2011 login For exceptions to the dates listed, see Saturday, Sunday, holiday rule below. Taxact 2011 login For the period: Due date: Jan. Taxact 2011 login 11 – March 31 April 15 April 1 – May 31 June 16 June 1 – August 31 September 15 Sept. Taxact 2011 login 1 – Dec. Taxact 2011 login 31 January 15  next year2 1If your tax year does not begin on January 1,  see Fiscal year taxpayers . Taxact 2011 login 2See January payment . Taxact 2011 login Saturday, Sunday, holiday rule. Taxact 2011 login   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 a holiday. Taxact 2011 login January payment. Taxact 2011 login   If you file your 2014 Form 1040 or Form 1040A by February 2, 2015, and pay the rest of the tax you owe, you do not need to make the payment due on January 15, 2015. Taxact 2011 login Example. Taxact 2011 login Janet Adams does not pay any estimated tax for 2014. Taxact 2011 login She files her 2014 income tax return and pays the balance due shown on her return on January 26, 2015. Taxact 2011 login Janet's estimated tax for the fourth payment period is considered to have been paid on time. Taxact 2011 login However, she may owe a penalty for not making the first three estimated tax payments, if required. Taxact 2011 login Any penalty for not making those payments will be figured up to January 26, 2015. Taxact 2011 login Fiscal year taxpayers. Taxact 2011 login   If your tax year does not start on January 1, your payment due dates are: The 15th day of the 4th month of your fiscal year, The 15th day of the 6th month of your fiscal year, The 15th day of the 9th month of your fiscal year, and The 15th day of the 1st month after the end of your fiscal year. Taxact 2011 login   You do not have to make the last payment listed above if you file your income tax return by the last day of the first month after the end of your fiscal year and pay all the tax you owe with your return. Taxact 2011 login When To Start You do not have to make estimated tax payments until you have income on which you will owe income tax. Taxact 2011 login 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. Taxact 2011 login You have several options when paying estimated taxes. Taxact 2011 login You can: apply an overpayment from the previous tax year, pay all your estimated tax by the due date of your first payment, or pay it in installments. Taxact 2011 login If you choose to pay in installments, make your first payment by the due date for the first payment period. Taxact 2011 login Make your remaining installment payments by the due dates for the later periods. Taxact 2011 login To avoid any estimated tax penalties, all installments must be paid by their due date and for the required amount. Taxact 2011 login No income subject to estimated tax during first period. Taxact 2011 login   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. Taxact 2011 login 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. Taxact 2011 login Table 2-1 shows the dates for making installment payments. Taxact 2011 login    Table 2-1. Taxact 2011 login Due Dates for Estimated Tax Installment Payments 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. Taxact 2011 login 15     Jan. Taxact 2011 login 15 next year April 1–May 31 June 16 Sept. Taxact 2011 login 15     Jan. Taxact 2011 login 15 next year June 1–Aug. Taxact 2011 login 31 Sept. Taxact 2011 login 15 Jan. Taxact 2011 login 15 next year After Aug. Taxact 2011 login 31 Jan. Taxact 2011 login 15 next year (None) *See January payment and Saturday, Sunday, holiday rule . Taxact 2011 login How much to pay to avoid penalty. Taxact 2011 login   To determine how much you should pay by each payment due date, see How To Figure Each Payment , later. Taxact 2011 login Farmers and Fishermen If at least two-thirds of your gross income for 2013 or 2014 is from farming or fishing, you have only one payment due date for your 2014 estimated tax, January 15, 2015. Taxact 2011 login The due dates for the first three payment periods, discussed under When To Pay Estimated Tax , earlier, do not apply to you. Taxact 2011 login If you file your 2014 Form 1040 by March 2, 2015, and pay all the tax you owe at that time, you do not need to make an estimated tax payment. Taxact 2011 login Fiscal year farmers and fishermen. Taxact 2011 login   If you are a farmer or fisherman, but your tax year does not start on January 1, you can either: Pay all your estimated tax by the 15th day after the end of your tax year, or File your return and pay all the tax you owe by the 1st day of the 3rd month after the end of your tax year. Taxact 2011 login How To Figure Each Payment After you have figured your total estimated tax, figure how much you must pay by the due date of each payment period. Taxact 2011 login You should pay enough by each due date to avoid a penalty for that period. Taxact 2011 login If you do not pay enough during any payment period, you may be charged a penalty even if you are due a refund when you file your tax return. Taxact 2011 login The penalty is discussed in chapter 4. Taxact 2011 login Regular Installment Method If your first estimated tax payment is due April 15, 2014, you can figure your required payment for each period by dividing your annual estimated tax due (line 16a of the 2014 Estimated Tax Worksheet (Worksheet 2-1)) by 4. Taxact 2011 login Enter this amount on line 17. Taxact 2011 login However, use this method only if your income is basically the same throughout the year. Taxact 2011 login Change in estimated tax. Taxact 2011 login   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. Taxact 2011 login 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. Taxact 2011 login If you do not receive your income evenly throughout the year, your required estimated tax payments may not be the same for each period. Taxact 2011 login See Annualized Income Installment Method . Taxact 2011 login Amended estimated tax. Taxact 2011 login If you refigure your estimated tax during the year, or if your first estimated tax payment is due after April 15, 2014, figure your required payment for each remaining payment period using Worksheet 2-14. Taxact 2011 login Example. Taxact 2011 login Early in 2014, Mira Roberts figures that her estimated tax due is $1,800. Taxact 2011 login She makes estimated tax payments on April 15 and June 16 of $450 each ($1,800 ÷ 4). Taxact 2011 login On July 10, she sells investment property at a gain. Taxact 2011 login Her refigured estimated tax is $4,100. Taxact 2011 login Her required estimated tax payment for the third payment period is $2,175, as shown in her filled-in Worksheet 2-14. Taxact 2011 login If Mira's estimated tax does not change again, her required estimated tax payment for the fourth payment period will be $1,025. Taxact 2011 login Worksheet 2-14. Taxact 2011 login Amended Estimated Tax Worksheet—Illustrated               1. Taxact 2011 login Amended total estimated tax due 1. Taxact 2011 login $4,100 2. Taxact 2011 login Multiply line 1 by:           50% (. Taxact 2011 login 50) if next payment is due June 16, 2014           75% (. Taxact 2011 login 75) if next payment is due September 15,  2014           100% (1. Taxact 2011 login 00) if next payment is due January 15,  2015 2. Taxact 2011 login 3,075     3. Taxact 2011 login Estimated tax payments for all previous periods 3. Taxact 2011 login 900     4. Taxact 2011 login Next required payment: Subtract line 3 from line 2 and enter the result (but not less than zero) here and on your payment voucher for your next required payment 4. Taxact 2011 login $2,175       Note. Taxact 2011 login If the payment on line 4 is due January 15, 2015, stop here. Taxact 2011 login Otherwise, go to line 5. Taxact 2011 login         5. Taxact 2011 login Add lines 3 and 4 5. Taxact 2011 login 3,075 6. Taxact 2011 login Subtract line 5 from line 1 and enter the result (but not less than zero) 6. Taxact 2011 login 1,025 7. Taxact 2011 login Each following required payment: If the payment on line 4 is due June 16, 2014, enter one-half of the amount on line 6 here and on the payment vouchers for your payments due September 15, 2014, and January 15, 2015. Taxact 2011 login If the amount on line 4 is due September 15, 2014, enter the amount from line 6 here and on the payment voucher for your payment due January 15, 2015 7. Taxact 2011 login $1,025 Worksheet 2-14. Taxact 2011 login Amended Estimated Tax Worksheet—Blank               1. Taxact 2011 login Amended total estimated tax due 1. Taxact 2011 login   2. Taxact 2011 login Multiply line 1 by:           50% (. Taxact 2011 login 50) if next payment is due June 16, 2014           75% (. Taxact 2011 login 75) if next payment is due September 15,  2014           100% (1. Taxact 2011 login 00) if next payment is due January 15,  2015 2. Taxact 2011 login       3. Taxact 2011 login Estimated tax payments for all previous periods 3. Taxact 2011 login       4. Taxact 2011 login Next required payment: Subtract line 3 from line 2 and enter the result (but not less than zero) here and on your payment voucher for your next required payment 4. Taxact 2011 login         Note. Taxact 2011 login If the payment on line 4 is due January 15, 2015, stop here. Taxact 2011 login Otherwise, go to line 5. Taxact 2011 login         5. Taxact 2011 login Add lines 3 and 4 5. Taxact 2011 login   6. Taxact 2011 login Subtract line 5 from line 1 and enter the result (but not less than zero) 6. Taxact 2011 login   7. Taxact 2011 login Each following required payment: If the payment on line 4 is due June 16, 2014, enter one-half of the amount on line 6 here and on the payment vouchers for your payments due September 15, 2014, and January 15, 2015. Taxact 2011 login If the amount on line 4 is due September 15, 2014, enter the amount from line 6 here and on the payment voucher for your payment due January 15, 2015 7. Taxact 2011 login   Underpayment penalty. Taxact 2011 login   The penalty is figured separately for each payment period. Taxact 2011 login If you figure your payments using the regular installment method and later refigure your payments because of an increase in income, you may be charged a penalty for underpayment of estimated tax for the period(s) before you changed your payments. Taxact 2011 login To see how you may be able to avoid or reduce this penalty, see Annualized Income Installment Method (Schedule AI) in chapter 4. Taxact 2011 login Annualized Income Installment Method If you do not receive your income evenly throughout the year (for example, your income from a repair shop you operate is much larger in the summer than it is during the rest of the year), your required estimated tax payment for one or more periods may be less than the amount figured using the regular installment method. Taxact 2011 login The annualized income installment method annualizes your tax at the end of each period based on a reasonable estimate of your income, deductions, and other items relating to events that occurred from the beginning of the tax year through the end of the period. Taxact 2011 login To see whether you can pay less for any period, complete the 2014 Annualized Estimated Tax Worksheet (Worksheet 2-9). Taxact 2011 login You first must complete the 2014 Estimated Tax Worksheet (Worksheet 2-1) through line 16b. Taxact 2011 login Use the result you figure on line 32 of Worksheet 2-9 to make your estimated tax payments and complete your payment vouchers. Taxact 2011 login Note. Taxact 2011 login If you use the annualized income installment method to figure your estimated tax payments, you must file Form 2210 with your 2014 tax return. Taxact 2011 login See Annualized Income Installment Method (Schedule AI) in chapter 4 for more information. Taxact 2011 login Instructions for the 2014 Annualized Estimated Tax Worksheet (Worksheet 2-9) Use Worksheet 2-9 to help you follow these instructions. Taxact 2011 login The purpose of this worksheet is to determine your estimated tax liability as your income accumulates throughout the year, rather than dividing your entire year's estimated tax liability by four as if your income was earned equally throughout the year. Taxact 2011 login The top of the worksheet shows the dates for each payment period. Taxact 2011 login The periods build; that is, each period includes all previous periods. Taxact 2011 login After the end of each payment period, complete the corresponding worksheet column to figure the payment due for that period. Taxact 2011 login Line 1. Taxact 2011 login   Enter your AGI for the period. Taxact 2011 login This is your gross income for the period, including your share of partnership or S corporation income or loss, minus your adjustments to income for that period. Taxact 2011 login See Expected AGI—Line 1 , earlier. Taxact 2011 login Self-employment income. Taxact 2011 login   If you had self-employment income, first complete Section B of this worksheet. Taxact 2011 login Use the amounts on line 43 when figuring your expected AGI to enter in each column of Section A, line 1. Taxact 2011 login Line 4. Taxact 2011 login   Be sure to consider all deduction limits figured on Schedule A (Form 1040), such as reducing your medical expenses by 10% (7. Taxact 2011 login 5% if either you or your spouse was born before January 2, 1950) or reducing certain miscellaneous deductions by 2% of your AGI. Taxact 2011 login Figure your deduction limits using your expected AGI in the corresponding column of line 1 (2014 Annualized Estimated Tax Worksheet (Worksheet 2-9)). Taxact 2011 login Line 6. Taxact 2011 login   Multiply line 4 by line 5 and enter the result on line 6 unless line 3 is more than $305,050 if married filing jointly or qualifying widow(er), $279,650 if head of household, $254,200 if single, or $152,525 if married filing separately. Taxact 2011 login In that case, use Worksheet 2-10 to figure the amount to enter on line 6. Taxact 2011 login Complete Worksheet 2–10 for each period, as necessary. Taxact 2011 login Line 7. Taxact 2011 login   If you will not itemize your deductions, use Worksheet 2-4 to figure your standard deduction. Taxact 2011 login Line 10. Taxact 2011 login   Multiply $3,950 by your total expected exemptions and enter the result on line 10 unless line 3 is more than $305,050 if married filing jointly or qualifying widow(er), $279,650 if head of household, $254,200 if single, or $152,525 if married filing separately. Taxact 2011 login   In that case, use Worksheet 2-11 to figure the amount to enter on line 10. Taxact 2011 login Line 12. Taxact 2011 login   Generally, you will use the Tax Rate Schedules to figure the tax on your annualized income. Taxact 2011 login However, see below for situations where you must use a different method to compute your estimated tax. Taxact 2011 login Tax on child's investment income. Taxact 2011 login   You must use a special method to figure tax on the income of the following children who have more than $2,000 of investment income. Taxact 2011 login Children under age 18 at the end of 2014. Taxact 2011 login The following children if their earned income is not more than half their support. Taxact 2011 login Children age 18 at the end of 2014. Taxact 2011 login Children who are full-time students over age 18 and under age 24 at the end of 2014. Taxact 2011 login See Publication 929. Taxact 2011 login Tax on net capital gain. Taxact 2011 login   The regular income tax rates for individuals do not apply to a net capital gain. Taxact 2011 login Instead, your net capital gain is taxed at a lower maximum rate. Taxact 2011 login   The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. Taxact 2011 login Tax on qualified dividends and capital gains. Taxact 2011 login   For 2014, your capital gain and dividends rate will depend on your income. Taxact 2011 login Tax on capital gain or qualified dividends. Taxact 2011 login If the amount on line 1 includes a net capital gain or qualified dividends, use Worksheet 2-12 to figure the amount to enter on line 12. Taxact 2011 login Tax if excluding foreign earned income or excluding or deducting foreign housing. Taxact 2011 login If you expect to claim the foreign earned income exclusion or the housing exclusion or deduction on Form 2555 or Form 2555-EZ, use Worksheet 2-13 to figure the amount to enter on line 12. Taxact 2011 login Line 13. Taxact 2011 login   If you file Form 1040, add the tax from Forms 8814, 4972, and 6251 for the period. Taxact 2011 login If you file Form 1040A, add the amount from the Alternative Minimum Tax Worksheet found in the instructions. Taxact 2011 login Also include any recapture of an education credit for each period. Taxact 2011 login You may owe this tax if you claimed an education credit in an earlier year and you received either tax-free educational assistance or a refund of qualifying expenses for the same student after filing your 2013 return. Taxact 2011 login   Use the 2013 forms or worksheets to see if you will owe any of the taxes discussed above. Taxact 2011 login Figure the tax based on your income and deductions during the period shown in the column headings. Taxact 2011 login Multiply this amount by the annualization amounts shown for each column on line 2 of the 2014 Annualized Estimated Tax Worksheet (Worksheet 2-9). Taxact 2011 login Enter the result on line 13 of this worksheet. Taxact 2011 login Line 15. Taxact 2011 login   Include all the nonrefundable credits you expect to claim because of events that will occur during the period. Taxact 2011 login Note. Taxact 2011 login When figuring your credits for each period, annualize any item of income or deduction to figure each credit. Taxact 2011 login For example, if you need to use your AGI to figure a credit, use line 3 of Worksheet 2-9 to figure the credit for each column. Taxact 2011 login Line 18. Taxact 2011 login   Add your expected other taxes. Taxact 2011 login   Other taxes include the following. Taxact 2011 login Additional tax on early distributions from: An IRA or other qualified retirement plan, A tax-sheltered annuity, or A modified endowment contract entered into after June 20, 1988. Taxact 2011 login Household employment taxes if: You will have federal income tax withheld from wages, pensions, annuities, gambling winnings, or other income, or You would be required to make estimated tax payments even if you did not include household employment taxes when figuring your estimated tax. Taxact 2011 login Amounts on Form 1040 written on the line for “other taxes” (line 60 on the 2013 Form 1040). Taxact 2011 login But do not include recapture of a federal mortgage subsidy; tax on excess golden parachute payments; look-back interest due under section 167(g) or 460(b) of the Internal Revenue Code; excise tax on insider stock compensation from an expatriated corporation; uncollected social security, Medicare, or RRTA tax on tips or group-term life insurance; or additional tax on advance payments of health coverage tax credit when not eligible. Taxact 2011 login Repayment of the first-time homebuyer credit if the home will cease to be your main home in 2014. Taxact 2011 login See Form 5405 for exceptions. Taxact 2011 login Additional Medicare Tax. Taxact 2011 login A 0. Taxact 2011 login 9% Additional Medicare Tax applies to your combined Medicare wages and self-employment income and/or your RRTA compensation that exceeds the amount listed in the following chart, based on your filing status. Taxact 2011 login Filing Status Threshold Amount Married filing jointly $250,000 Married filing separately $125,000 Single $200,000 Head of household $200,000 Qualifying Widow(er) $200,000 Medicare wages and self-employment income are combined to determine if your income exceeds the threshold. Taxact 2011 login A self-employment loss should not be considered for purposes of this tax. Taxact 2011 login RRTA compensation should be separately compared to the threshold. Taxact 2011 login Your employer is responsible for withholding the 0. Taxact 2011 login 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays you in excess of $200,000 in 2014. Taxact 2011 login You should consider this withholding, if applicable, in determining whether you need to make an estimated payment. Taxact 2011 login For more information on Additional Medicare Tax, go to IRS. Taxact 2011 login gov and enter “Additional Medicare Tax” in the search box. Taxact 2011 login Net Investment Income Tax (NIIT). Taxact 2011 login The NIIT is 3. Taxact 2011 login 8% of the lesser of your net investment income or the excess of your modified adjusted gross income over a specified threshold amount. Taxact 2011 login Threshold amounts: Filing Status Threshold Amount Married filing jointly $250,000 Married filing separately $125,000 Single $200,000 Head of household $200,000 Qualifying Widow(er) $250,000 For more information on Net Investment Income Tax, go to IRS. Taxact 2011 login gov and enter “Net Investment Income Tax” in the search box. Taxact 2011 login Line 20. Taxact 2011 login   Include all the refundable credits (other than withholding credits) you can claim because of events that occurred during the period. Taxact 2011 login Note. Taxact 2011 login When figuring your refundable credits for each period, annualize any item of income or deduction used to figure each credit. Taxact 2011 login Line 29. Taxact 2011 login   If line 28 is smaller than line 25 and you are not certain of the estimate of your 2014 tax, you can avoid a penalty by entering the amount from line 25 on line 29. Taxact 2011 login Line 31. Taxact 2011 login   For each period, include estimated tax payments made and any excess social security and railroad retirement tax. Taxact 2011 login   Also include estimated federal income tax withholding. Taxact 2011 login One-fourth of your estimated withholding is considered withheld on the due date of each payment period. Taxact 2011 login To figure the amount to include on line 31 for each period, multiply your total expected withholding for 2014 by: 25% (. Taxact 2011 login 25) for the first period, 50% (. Taxact 2011 login 50) for the second period, 75% (. Taxact 2011 login 75) for the third period, and 100% (1. Taxact 2011 login 00) for the fourth period. Taxact 2011 login   However, you may choose to include your withholding according to the actual dates on which the amounts will be withheld. Taxact 2011 login For each period, include withholding made from the beginning of the period up to and including the payment due date. Taxact 2011 login You can make this choice separately for the taxes withheld from your wages and all other withholding. Taxact 2011 login For an explanation of what to include in withholding, see Total Estimated Tax Payments Needed—Line 16a , earlier. Taxact 2011 login Nonresident aliens. Taxact 2011 login   If you will file Form 1040NR and you do not receive wages as an employee subject to U. Taxact 2011 login S. Taxact 2011 login income tax withholding, the instructions for the worksheet are modified as follows. Taxact 2011 login Skip column (a). Taxact 2011 login On line 1, enter your income for the period that is effectively connected with a U. Taxact 2011 login S. Taxact 2011 login trade or business. Taxact 2011 login On line 21, increase your entry by the amount determined by multiplying your income for the period that is not effectively connected with a U. Taxact 2011 login S. Taxact 2011 login trade or business by the following. Taxact 2011 login 72% for column (b). Taxact 2011 login 45% for column (c). Taxact 2011 login 30% for column (d). Taxact 2011 login However, if you can use a treaty rate lower than 30%, use the percentages determined by multiplying your treaty rate by 2. Taxact 2011 login 4, 1. Taxact 2011 login 5, and 1, respectively. Taxact 2011 login On line 26, enter one-half of the amount from line 16c of the Form 1040-ES (NR) 2014 Estimated Tax Worksheet in column (b), and one-fourth in columns (c) and (d) of Worksheet 2-9. Taxact 2011 login On lines 24 and 27, skip column (b). Taxact 2011 login On line 31, if you do not use the actual withholding method, include one-half of your total expected withholding in column (b) and one-fourth in columns (c) and (d). Taxact 2011 login See Publication 519 for more information. Taxact 2011 login 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. Taxact 2011 login You also do not have to pay estimated tax if you will pay enough through withholding to keep the amount you will owe with your return under $1,000. Taxact 2011 login How To Pay Estimated Tax There are several ways to pay estimated tax. Taxact 2011 login Credit an overpayment on your 2013 return to your 2014 estimated tax. Taxact 2011 login Pay by direct transfer from your bank account, or pay by credit or debit card using a pay-by-phone system or the Internet. Taxact 2011 login Send in your payment (check or money order) with a payment voucher from Form 1040-ES. Taxact 2011 login 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. Taxact 2011 login On Form 1040, or Form 1040A, enter the amount you want credited to your estimated tax rather than refunded. Taxact 2011 login Take the amount you have credited into account when figuring your estimated tax payments. Taxact 2011 login If you timely file your 2013 return, treat the credit as a payment made on April 15, 2014. Taxact 2011 login If you are a beneficiary of an estate or trust, and the trustee elects to credit 2014 trust payments of estimated tax to you, you can treat the amount credited as paid by you on January 15, 2015. Taxact 2011 login If you choose to have an overpayment of tax credited to your estimated tax, you cannot have any of that amount refunded to you until you file your tax return for the following year. Taxact 2011 login You also cannot use that overpayment in any other way. Taxact 2011 login Example. Taxact 2011 login When Kathleen finished filling out her 2013 tax return, she saw that she had overpaid her taxes by $750. Taxact 2011 login Kathleen knew she would owe additional tax in 2014. Taxact 2011 login She credited $600 of the overpayment to her 2014 estimated tax and had the remaining $150 refunded to her. Taxact 2011 login In September, she amended her 2013 return by filing Form 1040X, Amended U. Taxact 2011 login S. Taxact 2011 login Individual Income Tax Return. Taxact 2011 login It turned out that she owed $250 more in tax than she had thought. Taxact 2011 login This reduced her 2013 overpayment from $750 to $500. Taxact 2011 login Because the $750 had already been applied to her 2014 estimated tax or refunded to her, the IRS billed her for the additional $250 she owed, plus penalties and interest. Taxact 2011 login Kathleen could not use any of the $600 she had credited to her 2014 estimated tax to pay this bill. Taxact 2011 login Pay Online Paying online is convenient and secure and helps make sure we get your payments on time. Taxact 2011 login You can make your estimated tax payments online when you e-file or at any time during the year. Taxact 2011 login You can pay using either of the following electronic payment methods. Taxact 2011 login Direct transfer from your bank account. Taxact 2011 login Credit or debit card. Taxact 2011 login To pay your taxes online or for more information, go to www. Taxact 2011 login irs. Taxact 2011 login gov/e-pay. Taxact 2011 login Pay by Phone Paying by phone is another safe and secure method of paying electronically. Taxact 2011 login Use one of the following methods. Taxact 2011 login Direct transfer from your bank account. Taxact 2011 login Credit or debit card. Taxact 2011 login To pay by direct transfer from your bank account, call EFTPS Customer Service at 1-800-555-4477 (English), 1-800-244-4829 (Espanol), or TTY/TDD 1-800-733-4829. Taxact 2011 login To pay using a credit or debit card, you can call one of the following service providers. Taxact 2011 login There is a convenience fee charged by these providers that varies by provider, card type, and payment amount. Taxact 2011 login WorldPay 1-888-9-PAY-TAXTM (1-888-972-9829) www. Taxact 2011 login payUSAtax. Taxact 2011 login com Official Payments Corporation 1-888-UPAY-TAXTM (1-888-872-9829) www. Taxact 2011 login officialpayments. Taxact 2011 login com Link2GOV Corporation 1-888-PAY-1040TM (1-888-729-1040) www. Taxact 2011 login PAY1040. Taxact 2011 login com For the latest details on how to pay by phone, go to www. Taxact 2011 login irs. Taxact 2011 login gov/e-pay. Taxact 2011 login 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. Taxact 2011 login If you use your own envelopes (and not the window envelope that comes with the 1040-ES package), make sure you mail your payment vouchers to the address shown in the Form 1040-ES instructions for the place where you live. Taxact 2011 login Do not use the address shown in the Form 1040 or Form 1040A instructions. Taxact 2011 login If you did not pay estimated tax last year, get a copy of Form 1040-ES from the IRS (see chapter 5). Taxact 2011 login Follow the instructions to make sure you use the vouchers correctly. Taxact 2011 login Joint estimated tax payments. Taxact 2011 login    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. Taxact 2011 login Change of address. Taxact 2011 login    You must notify the IRS if you are making estimated tax payments and you changed your address during the year. Taxact 2011 login Complete Form 8822, Change of Address, and mail it to the address shown in the instructions for that form. Taxact 2011 login Worksheets for Chapter 2 Use the following worksheets and tables to figure your correct estimated tax. Taxact 2011 login IF you need. Taxact 2011 login . Taxact 2011 login . Taxact 2011 login THEN use. Taxact 2011 login . Taxact 2011 login . Taxact 2011 login 2014 Tax Rate Schedules   the 2014 Estimated Tax Worksheet Worksheet 2-1 to estimate your taxable social security and railroad retirement benefits—line 1 of ES Worksheet (or Annualized ES Worksheet (Worksheet 2-9)) Worksheet 2-2 to estimate your self-employment (SE) tax and your deduction for SE tax—lines 1 and 11 of ES Worksheet (lines 1 and 17 of Annualized ES Worksheet (Worksheet 2-9)) Worksheet 2-3 to estimate your standard deduction—line 2 of ES Worksheet (line 7 of Annualized ES Worksheet (Worksheet 2-9)) Worksheet 2-4 to reduce your itemized deductions because your estimated AGI is more than $152,525—line 2 of ES Worksheet Worksheet 2-5 to reduce your exemption amount because your estimated AGI is more than $152,525—line 4 of ES Worksheet Worksheet 2-6 to estimate your income tax if line 1 of your ES Worksheet includes a net capital gain or qualified dividends—line 6 of ES Worksheet Worksheet 2-7 to estimate your income tax if you expect to claim a foreign earned income exclusion or foreign housing exclusion or deduction on Form 2555 or Form 2555-EZ—line 6 of ES Worksheet Worksheet 2-8 the 2014 Annualized Estimated Tax Worksheet (Annualized ES Worksheet) Worksheet 2-9 to reduce your itemized deductions because your estimated annualized AGI is more than $152,525—line 6 of Annualized ES Worksheet Worksheet 2-10 to reduce your exemption amount because your estimated annualized AGI is more than $152,525—line 10 of Annualized ES Worksheet Worksheet 2-11 to estimate your income tax if line 1 of your Annualized ES Worksheet includes a net capital gain or qualified dividends—line 12 of Annualized ES Worksheet Worksheet 2-12 to estimate your income tax if you expect to claim a foreign earned income exclusion or foreign housing exclusion or deduction on Form 2555 or Form 2555-EZ—line 12 of Annualized ES Worksheet Worksheet 2-13 to refigure (amend) your estimated tax during the year Worksheet 2-14 2014 Tax Rate Schedules Do not use these Tax Rate Schedules to figure your 2013 taxes. Taxact 2011 login Use them only to figure your 2014 estimated taxes. Taxact 2011 login Schedule X—Use if your 2014 filing status is  Single Schedule Z—Use if your 2014 filing status is Head of household If line 5 is: The tax is:     If line 5 is: The tax is:     Over— But not  over—         of the  amount  over— Over— But not  over—         of the  amount  over— $0 $9,075     10. Taxact 2011 login 0%   $0 $0 $12,950     10. Taxact 2011 login 0%   $0 9,075 36,900 $907. Taxact 2011 login 50 + 15. Taxact 2011 login 0%   9,075 12,950 49,400 $1,295. Taxact 2011 login 00 + 15. Taxact 2011 login 0%   12,950 36,900 89,350 5,081. Taxact 2011 login 25 + 25. Taxact 2011 login 0%   36,900 49,400 127,550 6,762. Taxact 2011 login 50 + 25. Taxact 2011 login 0%   49,400 89,350 186,350 18,193. Taxact 2011 login 75 + 28. Taxact 2011 login 0%   89,350 127,550 206,600 26,300. Taxact 2011 login 00 + 28. Taxact 2011 login 0%   127,550 186,350 405,100 45,353. Taxact 2011 login 75 + 33. Taxact 2011 login 0%   186,350 206,600 405,100 48,434. Taxact 2011 login 00 + 33. Taxact 2011 login 0%   206,600 405,100 406,750 117,541. Taxact 2011 login 25 + 35. Taxact 2011 login 0%   405,100 405,100 432,200 113,939. Taxact 2011 login 00 + 35. Taxact 2011 login 0%   405,100 406,750 - - - - - - 118,118. Taxact 2011 login 75 + 39. Taxact 2011 login 6%   406,750 432,200 - - - - - - 123,424. Taxact 2011 login 00 + 39. Taxact 2011 login 6%   432,200 Schedule Y-1—Use if your 2014 filing status is Married filing jointly or Qualifying widow(er) Schedule Y-2—Use if your 2014 filing status is  Married filing separately If line 5 is: The tax is:     If line 5 is: The tax is:     Over— But not  over—         of the  amount  over— Over— But not  over—         of the  amount  over— $0 $18,150     10. Taxact 2011 login 0%   $0 $0 $9,075     10. Taxact 2011 login 0%   $0 18,150 73,800 $1,815. Taxact 2011 login 00 + 15. Taxact 2011 login 0%   18,150 9,075 36,900 $907. Taxact 2011 login 50 + 15. Taxact 2011 login 0%   9,075 73,800 148,850 10,162. Taxact 2011 login 50 + 25. Taxact 2011 login 0%   73,800 36,900 74,425 5,081. Taxact 2011 login 25 + 25. Taxact 2011 login 0%   36,900 148,850 226,850 28,925. Taxact 2011 login 00 + 28. Taxact 2011 login 0%   148,850 74,425 113,425 14,462. Taxact 2011 login 50 + 28. Taxact 2011 login 0%   74,425 226,850 405,100 50,765. Taxact 2011 login 00 + 33. Taxact 2011 login 0%   226,850 113,425 202,550 25,382. Taxact 2011 login 50 + 33. Taxact 2011 login 0%   113,425 405,100 457,600 109,587. Taxact 2011 login 50 + 35. Taxact 2011 login 0%   405,100 202,550 228,800 54,793. Taxact 2011 login 75 + 35. Taxact 2011 login 0%   202,550 457,600 - - - - - - 127,962. Taxact 2011 login 50 + 39. Taxact 2011 login 6%   457,600 228,800 - - - - - - 63,981. Taxact 2011 login 25 + 39. Taxact 2011 login 6%   228,800                             Worksheet 2-1. Taxact 2011 login 2014 Estimated Tax Worksheet When this worksheet refers you to instructions, you can find those instructions in the Instructions for 2014 Form 1040-ES. Taxact 2011 login 1 Adjusted gross income you expect in 2014 (see instructions) 1     2 If you plan to itemize deductions, enter the estimated total of your itemized deductions. Taxact 2011 login  Caution: If line 1 is over $152,525, your deduction may be reduced. Taxact 2011 login See Worksheet 2-5. Taxact 2011 login If you do not plan to itemize deductions, enter your standard deduction. Taxact 2011 login 2     3 Subtract line 2 from line 1 3     4 Exemptions. Taxact 2011 login Multiply $3,950 by the number of personal exemptions. Taxact 2011 login  Caution: If line 1 is over $152,525, the amount of your personal exemptions may be limited. Taxact 2011 login See Worksheet 2-6. Taxact 2011 login 4     5 Subtract line 4 from line 3 5     6 Tax. Taxact 2011 login Figure your tax on the amount on line 5 by using the 2014 Tax Rate Schedules Caution: If you will have qualified dividends or a net capital gain, or expect to exclude or deduct foreign earned income or housing, see Worksheets 2-7 and 2-8 to figure the tax 6     7 Alternative minimum tax from Form 6251 or included on Form 1040A, line 28 7     8 Add lines 6 and 7. Taxact 2011 login Add to this amount any other taxes you expect to include in the total on Form 1040, line 44 8     9 Credits (see instructions). Taxact 2011 login Do not include any income tax withholding on this line 9     10 Subtract line 9 from line 8. Taxact 2011 login If zero or less, enter -0- 10     11 Self-employment tax (see instructions) 11     12 Other taxes including, if applicable, Additional Medicare Tax and/or NIIT (see instructions) 12     13a Add lines 10 through 12 13a     b Earned income credit, additional child tax credit, fuel tax credit, and refundable American opportunity credit 13b     c Total 2014 estimated tax. Taxact 2011 login Subtract line 13b from line 13a. Taxact 2011 login If zero or less, enter -0- ▶ 13c     14a Multiply line 13c by 90% (662/3% for farmers and fishermen) 14a           b Required annual payment based on prior year's tax (see instructions) 14b           c Required annual payment to avoid a penalty. Taxact 2011 login Enter the smaller of line 14a or 14b ▶ 14c        Caution: Generally, if you do not prepay (through income tax withholding and estimated tax payments) at least the amount on line 14c, you may owe a penalty for not paying enough estimated tax. Taxact 2011 login To avoid a penalty, make sure your estimate on line 13c is as accurate as possible. Taxact 2011 login Even if you pay the required annual payment, you may still owe tax when you file your return. Taxact 2011 login If you prefer, you can pay the amount shown on line 13c. Taxact 2011 login                         15 Income tax withheld and estimated to be withheld during 2014 (including income tax withholding on pensions, annuities, certain deferred income, etc. Taxact 2011 login ) 15     16a Subtract line 15 from line 14c 16a             Is the result zero or less? □ Yes. Taxact 2011 login Stop here. Taxact 2011 login You are not required to make estimated tax payments. Taxact 2011 login  □ No. Taxact 2011 login Go to line 16b. Taxact 2011 login             b Subtract line 15 from line 13c 16b             Is the result less than $1,000? □ Yes. Taxact 2011 login Stop here. Taxact 2011 login You are not required to make estimated tax payments. Taxact 2011 login  □ No. Taxact 2011 login Go to line 17 to figure your required payment. Taxact 2011 login                         17 If the first payment you are required to make is due April 15, 2014, enter ¼ of line 16a (minus any 2013 overpayment that you are applying to this installment) here, and on your estimated tax payment voucher(s) if you are paying by check or money order 17     Worksheet 2-2. Taxact 2011 login 2014 Estimated Tax Worksheet—Line 1 Estimated Taxable Social Security and Railroad Retirement Benefits Note. Taxact 2011 login If you are using this worksheet to estimate your taxable social security or railroad retirement benefits for Worksheet 2-9, 2014 Annualized Estimated Tax Worksheet, multiply the expected amount of benefits for each period by the annualization amount shown on Worksheet 2-9, line 2, for the same period before entering it on line 1 below. Taxact 2011 login     1. Taxact 2011 login Enter your expected social security and railroad retirement benefits 1. Taxact 2011 login   2. Taxact 2011 login Enter one-half of line 1 2. Taxact 2011 login   3. Taxact 2011 login Enter your expected total income. Taxact 2011 login Do not include any social security and railroad retirement benefits, nontaxable interest income, nontaxable IRA distributions, or nontaxable pension distributions 3. Taxact 2011 login   4. Taxact 2011 login Enter your expected nontaxable interest income 4. Taxact 2011 login   5. Taxact 2011 login Enter (as a positive amount) the total of any expected exclusions or deductions for: U. Taxact 2011 login S. Taxact 2011 login savings bond interest used for higher education expenses (Form 8815) Employer-provided adoption benefits (Form 8839) Foreign earned income or housing (Form 2555 or 2555-EZ) Income by bona fide residents of American Samoa (Form 4563) or Puerto Rico 5. Taxact 2011 login   6. Taxact 2011 login Add lines 2, 3, 4, and 5 6. Taxact 2011 login   7. Taxact 2011 login Enter your expected adjustments to income. Taxact 2011 login Do not include any student loan interest deduction 7. Taxact 2011 login   8. Taxact 2011 login Subtract line 7 from line 6. Taxact 2011 login If zero or less, stop here. Taxact 2011 login  Note. Taxact 2011 login Do not include any social security or railroad retirement benefits in the amount on line 1 of your 2014 Estimated Tax Worksheet (Worksheet 2-1) (or Annualized Estimated Tax Worksheet (Worksheet 2-9)) 8. Taxact 2011 login   9. Taxact 2011 login Enter $25,000 ($32,000 if you expect to file married filing jointly; $0 if you expect to file married filing separately and expect to live with your spouse at any time during the year) 9. Taxact 2011 login   10. Taxact 2011 login Subtract line 9 from line 8. Taxact 2011 login If zero or less, stop here. Taxact 2011 login  Note. Taxact 2011 login Do not include any social security or railroad retirement benefits in the amount on line 1 of your Worksheet 2-1 (or Annualized Estimated Tax Worksheet (Worksheet 2-9)) 10. Taxact 2011 login   11. Taxact 2011 login Enter $9,000 ($12,000 if you expect to file married filing jointly; $0 if you expect to file married filing separately and expect to live with your spouse at any time during the year) 11. Taxact 2011 login   12. Taxact 2011 login Subtract line 11 from line 10. Taxact 2011 login If zero or less, enter -0- 12. Taxact 2011 login   13. Taxact 2011 login Enter the smaller of line 10 or line 11 13. Taxact 2011 login   14. Taxact 2011 login Enter one-half of line 13 14. Taxact 2011 login   15