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Turbotax 1040ez free 8. Turbotax 1040ez free   Amortization Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: How To Deduct Amortization Starting a BusinessBusiness Start-Up Costs Costs of Organizing a Corporation Costs of Organizing a Partnership How To Amortize Getting a Lease Section 197 IntangiblesSection 197 Intangibles Defined Assets That Are Not Section 197 Intangibles Safe Harbor for Creative Property Costs Anti-Churning Rules Incorrect Amount of Amortization Deducted Disposition of Section 197 Intangibles Reforestation Costs Geological and Geophysical Costs Pollution Control FacilitiesNew identifiable treatment facility. Turbotax 1040ez free Research and Experimental Costs Optional Write-off of Certain Tax Preferences Introduction Amortization is a method of recovering (deducting) certain capital costs over a fixed period of time. Turbotax 1040ez free It is similar to the straight line method of depreciation. Turbotax 1040ez free The various amortizable costs covered in this chapter are included in the list below. Turbotax 1040ez free However, this chapter does not discuss amortization of bond premium. Turbotax 1040ez free For information on that topic, see chapter 3 of Publication 550, Investment Income and Expenses. Turbotax 1040ez free Topics - This chapter discusses: Deducting amortization Amortizing costs of starting a business Amortizing costs of getting a lease Amortizing costs of section 197 intangibles Amortizing reforestation costs Amortizing costs of geological and geophysical costs Amortizing costs of pollution control facilities Amortizing costs of research and experimentation Amortizing costs of certain tax preferences Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 4626 Alternative Minimum Tax—Corporations 6251 Alternative Minimum Tax—Individuals See chapter 12 for information about getting publications and forms. Turbotax 1040ez free How To Deduct Amortization To deduct amortization that begins during the current tax year, complete Part VI of Form 4562 and attach it to your income tax return. Turbotax 1040ez free To report amortization from previous years, in addition to amortization that begins in the current year, list on Form 4562 each item separately. Turbotax 1040ez free For example, in 2012, you began to amortize a lease. Turbotax 1040ez free In 2013, you began to amortize a second lease. Turbotax 1040ez free Report amortization from the new lease on line 42 of your 2013 Form 4562. Turbotax 1040ez free Report amortization from the 2012 lease on line 43 of your 2013 Form 4562. Turbotax 1040ez free If you do not have any new amortizable expenses for the current year, you are not required to complete Form 4562 (unless you are claiming depreciation). Turbotax 1040ez free Report the current year's deduction for amortization that began in a prior year directly on the “Other deduction” or “Other expense line” of your return. Turbotax 1040ez free Starting a Business When you start a business, treat all eligible costs you incur before you begin operating the business as capital expenditures which are part of your basis in the business. Turbotax 1040ez free Generally, you recover costs for particular assets through depreciation deductions. Turbotax 1040ez free However, you generally cannot recover other costs until you sell the business or otherwise go out of business. Turbotax 1040ez free For a discussion on how to treat these costs, see If your attempt to go into business is unsuccessful under Capital Expenses in chapter 1. Turbotax 1040ez free For costs paid or incurred after September 8, 2008, you can deduct a limited amount of start-up and organizational costs. Turbotax 1040ez free The costs that are not deducted currently can be amortized ratably over a 180-month period. Turbotax 1040ez free The amortization period starts with the month you begin operating your active trade or business. Turbotax 1040ez free You are not required to attach a statement to make this election. Turbotax 1040ez free You can choose to forgo this election by affirmatively electing to capitalize your start-up costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. Turbotax 1040ez free Once made, the election to either amortize or capitalize start-up costs is irrevocable and applies to all start-up costs that are related to your trade or business. Turbotax 1040ez free See Regulations sections 1. Turbotax 1040ez free 195-1, 1. Turbotax 1040ez free 248-1, and 1. Turbotax 1040ez free 709-1. Turbotax 1040ez free For costs paid or incurred after October 22, 2004, and before September 9, 2008, you can elect to deduct a limited amount of business start-up and organizational costs in the year your active trade or business begins. Turbotax 1040ez free Any costs not deducted can be amortized ratably over a 180-month period, beginning with the month you begin business. Turbotax 1040ez free If the election is made, you must attach any statement required by Regulations sections 1. Turbotax 1040ez free 195-1(b), 1. Turbotax 1040ez free 248-1(c), and 1. Turbotax 1040ez free 709-1(c), as in effect before September 9, 2008. Turbotax 1040ez free Note. Turbotax 1040ez free You can apply the provisions of Regulations sections 1. Turbotax 1040ez free 195-1, 1. Turbotax 1040ez free 248-1, and 1. Turbotax 1040ez free 709-1 to all business start-up and organizational costs paid or incurred after October 22, 2004, provided the period of limitations on assessment has not expired for the year of the election. Turbotax 1040ez free Otherwise, the provisions under Regulations sections 1. Turbotax 1040ez free 195-1(b), 1. Turbotax 1040ez free 248-1(c), and 1. Turbotax 1040ez free 709-1(c), as in effect before September 9, 2008, will apply. Turbotax 1040ez free For costs paid or incurred before October 23, 2004, you can elect to amortize business start-up and organization costs over an amortization period of 60 months or more. Turbotax 1040ez free See How To Make the Election , later. Turbotax 1040ez free The cost must qualify as one of the following. Turbotax 1040ez free A business start-up cost. Turbotax 1040ez free An organizational cost for a corporation. Turbotax 1040ez free An organizational cost for a partnership. Turbotax 1040ez free Business Start-Up Costs Start-up costs are amounts paid or incurred for: (a) creating an active trade or business; or (b) investigating the creation or acquisition of an active trade or business. Turbotax 1040ez free Start-up costs include amounts paid or incurred in connection with an existing activity engaged in for profit; and for the production of income in anticipation of the activity becoming an active trade or business. Turbotax 1040ez free Qualifying costs. Turbotax 1040ez free   A start-up cost is amortizable if it meets both of the following tests. Turbotax 1040ez free It is a cost you could deduct if you paid or incurred it to operate an existing active trade or business (in the same field as the one you entered into). Turbotax 1040ez free It is a cost you pay or incur before the day your active trade or business begins. Turbotax 1040ez free   Start-up costs include amounts paid for the following: An analysis or survey of potential markets, products, labor supply, transportation facilities, etc. Turbotax 1040ez free Advertisements for the opening of the business. Turbotax 1040ez free Salaries and wages for employees who are being trained and their instructors. Turbotax 1040ez free Travel and other necessary costs for securing prospective distributors, suppliers, or customers. Turbotax 1040ez free Salaries and fees for executives and consultants, or for similar professional services. Turbotax 1040ez free Nonqualifying costs. Turbotax 1040ez free   Start-up costs do not include deductible interest, taxes, or research and experimental costs. Turbotax 1040ez free See Research and Experimental Costs , later. Turbotax 1040ez free Purchasing an active trade or business. Turbotax 1040ez free   Amortizable start-up costs for purchasing an active trade or business include only investigative costs incurred in the course of a general search for or preliminary investigation of the business. Turbotax 1040ez free These are costs that help you decide whether to purchase a business. Turbotax 1040ez free Costs you incur in an attempt to purchase a specific business are capital expenses that you cannot amortize. Turbotax 1040ez free Example. Turbotax 1040ez free On June 1st, you hired an accounting firm and a law firm to assist you in the potential purchase of XYZ, Inc. Turbotax 1040ez free They researched XYZ's industry and analyzed the financial projections of XYZ, Inc. Turbotax 1040ez free In September, the law firm prepared and submitted a letter of intent to XYZ, Inc. Turbotax 1040ez free The letter stated that a binding commitment would result only after a purchase agreement was signed. Turbotax 1040ez free The law firm and accounting firm continued to provide services including a review of XYZ's books and records and the preparation of a purchase agreement. Turbotax 1040ez free On October 22nd, you signed a purchase agreement with XYZ, Inc. Turbotax 1040ez free All amounts paid or incurred to investigate the business before October 22nd are amortizable investigative costs. Turbotax 1040ez free Amounts paid on or after that date relate to the attempt to purchase the business and therefore must be capitalized. Turbotax 1040ez free Disposition of business. Turbotax 1040ez free   If you completely dispose of your business before the end of the amortization period, you can deduct any remaining deferred start-up costs. Turbotax 1040ez free However, you can deduct these deferred start-up costs only to the extent they qualify as a loss from a business. Turbotax 1040ez free Costs of Organizing a Corporation Amounts paid to organize a corporation are the direct costs of creating the corporation. Turbotax 1040ez free Qualifying costs. Turbotax 1040ez free   To qualify as an organizational cost, it must be: For the creation of the corporation, Chargeable to a capital account (see chapter 1), Amortized over the life of the corporation if the corporation had a fixed life, and Incurred before the end of the first tax year in which the corporation is in business. Turbotax 1040ez free   A corporation using the cash method of accounting can amortize organizational costs incurred within the first tax year, even if it does not pay them in that year. Turbotax 1040ez free   Examples of organizational costs include: The cost of temporary directors. Turbotax 1040ez free The cost of organizational meetings. Turbotax 1040ez free State incorporation fees. Turbotax 1040ez free The cost of legal services. Turbotax 1040ez free Nonqualifying costs. Turbotax 1040ez free   The following items are capital expenses that cannot be amortized: Costs for issuing and selling stock or securities, such as commissions, professional fees, and printing costs. Turbotax 1040ez free Costs associated with the transfer of assets to the corporation. Turbotax 1040ez free Costs of Organizing a Partnership The costs to organize a partnership are the direct costs of creating the partnership. Turbotax 1040ez free Qualifying costs. Turbotax 1040ez free   A partnership can amortize an organizational cost only if it meets all the following tests. Turbotax 1040ez free It is for the creation of the partnership and not for starting or operating the partnership trade or business. Turbotax 1040ez free It is chargeable to a capital account (see chapter 1). Turbotax 1040ez free It could be amortized over the life of the partnership if the partnership had a fixed life. Turbotax 1040ez free It is incurred by the due date of the partnership return (excluding extensions) for the first tax year in which the partnership is in business. Turbotax 1040ez free However, if the partnership uses the cash method of accounting and pays the cost after the end of its first tax year, see Cash method partnership under How To Amortize, later. Turbotax 1040ez free It is for a type of item normally expected to benefit the partnership throughout its entire life. Turbotax 1040ez free   Organizational costs include the following fees. Turbotax 1040ez free Legal fees for services incident to the organization of the partnership, such as negotiation and preparation of the partnership agreement. Turbotax 1040ez free Accounting fees for services incident to the organization of the partnership. Turbotax 1040ez free Filing fees. Turbotax 1040ez free Nonqualifying costs. Turbotax 1040ez free   The following costs cannot be amortized. Turbotax 1040ez free The cost of acquiring assets for the partnership or transferring assets to the partnership. Turbotax 1040ez free The cost of admitting or removing partners, other than at the time the partnership is first organized. Turbotax 1040ez free The cost of making a contract concerning the operation of the partnership trade or business including a contract between a partner and the partnership. Turbotax 1040ez free The costs for issuing and marketing interests in the partnership such as brokerage, registration, and legal fees and printing costs. Turbotax 1040ez free These “syndication fees” are capital expenses that cannot be depreciated or amortized. Turbotax 1040ez free Liquidation of partnership. Turbotax 1040ez free   If a partnership is liquidated before the end of the amortization period, the unamortized amount of qualifying organizational costs can be deducted in the partnership's final tax year. Turbotax 1040ez free However, these costs can be deducted only to the extent they qualify as a loss from a business. Turbotax 1040ez free How To Amortize Deduct start-up and organizational costs in equal amounts over the applicable amortization period (discussed earlier). Turbotax 1040ez free You can choose an amortization period for start-up costs that is different from the period you choose for organizational costs, as long as both are not less than the applicable amortization period. Turbotax 1040ez free Once you choose an amortization period, you cannot change it. Turbotax 1040ez free To figure your deduction, divide your total start-up or organizational costs by the months in the amortization period. Turbotax 1040ez free The result is the amount you can deduct for each month. Turbotax 1040ez free Cash method partnership. Turbotax 1040ez free   A partnership using the cash method of accounting can deduct an organizational cost only if it has been paid by the end of the tax year. Turbotax 1040ez free However, any cost the partnership could have deducted as an organizational cost in an earlier tax year (if it had been paid that year) can be deducted in the tax year of payment. Turbotax 1040ez free How To Make the Election To elect to amortize start-up or organizational costs, you must complete and attach Form 4562 to your return for the first tax year you are in business. Turbotax 1040ez free You may also be required to attach an accompanying statement (described later) to your return. Turbotax 1040ez free For start-up or organizational costs paid or incurred after September 8, 2008, an accompanying statement is not required. Turbotax 1040ez free Generally, for start-up or organizational costs paid or incurred before September 9, 2008, and after October 22, 2004, unless you choose to apply Regulations sections 1. Turbotax 1040ez free 195-1, 1. Turbotax 1040ez free 248-1, and 1. Turbotax 1040ez free 709-1, you must also attach an accompanying statement to elect to amortize the costs. Turbotax 1040ez free If you have both start-up and organizational costs, attach a separate statement (if required) to your return for each type of cost. Turbotax 1040ez free See Starting a Business , earlier, for more information. Turbotax 1040ez free Generally, you must file the return by the due date (including any extensions). Turbotax 1040ez free However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Turbotax 1040ez free For more information, see the instructions for Part VI of Form 4562. Turbotax 1040ez free You can choose to forgo the election to amortize by affirmatively electing to capitalize your start-up or organizational costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. Turbotax 1040ez free Note. Turbotax 1040ez free The election to either amortize or capitalize start-up or organizational costs is irrevocable and applies to all start-up and organizational costs that are related to the trade or business. Turbotax 1040ez free If your business is organized as a corporation or partnership, only the corporation or partnership can elect to amortize its start-up or organizational costs. Turbotax 1040ez free A shareholder or partner cannot make this election. Turbotax 1040ez free You, as a shareholder or partner, cannot amortize any costs you incur in setting up your corporation or partnership. Turbotax 1040ez free Only the corporation or partnership can amortize these costs. Turbotax 1040ez free However, you, as an individual, can elect to amortize costs you incur to investigate an interest in an existing partnership. Turbotax 1040ez free These costs qualify as business start-up costs if you acquire the partnership interest. Turbotax 1040ez free Start-up costs election statement. Turbotax 1040ez free   If you elect to amortize your start-up costs, attach a separate statement (if required) that contains the following information. Turbotax 1040ez free A description of the business to which the start-up costs relate. Turbotax 1040ez free A description of each start-up cost incurred. Turbotax 1040ez free The month your active business began (or was acquired). Turbotax 1040ez free The number of months in your amortization period (which is generally 180 months). Turbotax 1040ez free Filing the statement early. Turbotax 1040ez free   You can elect to amortize your start-up costs by filing the statement with a return for any tax year before the year your active business begins. Turbotax 1040ez free If you file the statement early, the election becomes effective in the month of the tax year your active business begins. Turbotax 1040ez free Revised statement. Turbotax 1040ez free   You can file a revised statement to include any start-up costs not included in your original statement. Turbotax 1040ez free However, you cannot include on the revised statement any cost you previously treated on your return as a cost other than a start-up cost. Turbotax 1040ez free You can file the revised statement with a return filed after the return on which you elected to amortize your start-up costs. Turbotax 1040ez free Organizational costs election statement. Turbotax 1040ez free   If you elect to amortize your corporation's or partnership's organizational costs, attach a separate statement (if required) that contains the following information. Turbotax 1040ez free A description of each cost. Turbotax 1040ez free The amount of each cost. Turbotax 1040ez free The date each cost was incurred. Turbotax 1040ez free The month your corporation or partnership began active business (or acquired the business). Turbotax 1040ez free The number of months in your amortization period (which is generally 180 months). Turbotax 1040ez free Partnerships. Turbotax 1040ez free   The statement prepared for a cash basis partnership must also indicate the amount paid before the end of the year for each cost. Turbotax 1040ez free   You do not need to separately list any partnership organizational cost that is less than $10. Turbotax 1040ez free Instead, you can list the total amount of these costs with the dates the first and last costs were incurred. Turbotax 1040ez free   After a partnership makes the election to amortize organizational costs, it can later file an amended return to include additional organizational costs not included in the partnership's original return and statement. Turbotax 1040ez free Getting a Lease If you get a lease for business property, you may recover the cost of acquiring the lease by amortizing it over the term of the lease. Turbotax 1040ez free The term of the lease for amortization purposes generally includes all renewal options (and any other period for which you and the lessor reasonably expect the lease to be renewed). Turbotax 1040ez free However, renewal periods are not included if 75% or more of the cost of acquiring the lease is for the term of the lease remaining on the acquisition date (not including any period for which you may choose to renew, extend, or continue the lease). Turbotax 1040ez free For more information on the costs of getting a lease, see Cost of Getting a Lease in  chapter 3. Turbotax 1040ez free How to amortize. Turbotax 1040ez free   Enter your deduction in Part VI of Form 4562 if you are deducting amortization that begins during the current year, or on the appropriate line of your tax return if you are not otherwise required to file Form 4562. Turbotax 1040ez free Section 197 Intangibles Generally, you may amortize the capitalized costs of “section 197 intangibles” (defined later) ratably over a 15-year period. Turbotax 1040ez free You must amortize these costs if you hold the section 197 intangibles in connection with your trade or business or in an activity engaged in for the production of income. Turbotax 1040ez free You may not be able to amortize section 197 intangibles acquired in a transaction that did not result in a significant change in ownership or use. Turbotax 1040ez free See Anti-Churning Rules, later. Turbotax 1040ez free Your amortization deduction each year is the applicable part of the intangible's adjusted basis (for purposes of determining gain), figured by amortizing it ratably over 15 years (180 months). Turbotax 1040ez free The 15-year period begins with the later of: The month the intangible is acquired, or The month the trade or business or activity engaged in for the production of income begins. Turbotax 1040ez free You cannot deduct amortization for the month you dispose of the intangible. Turbotax 1040ez free If you pay or incur an amount that increases the basis of an amortizable section 197 intangible after the 15-year period begins, amortize it over the remainder of the 15-year period beginning with the month the basis increase occurs. Turbotax 1040ez free You are not allowed any other depreciation or amortization deduction for an amortizable section 197 intangible. Turbotax 1040ez free Tax-exempt use property subject to a lease. Turbotax 1040ez free   The amortization period for any section 197 intangible leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership), shall not be less than 125 percent of the lease term. Turbotax 1040ez free Cost attributable to other property. Turbotax 1040ez free   The rules for section 197 intangibles do not apply to any amount that is included in determining the cost of property that is not a section 197 intangible. Turbotax 1040ez free For example, if the cost of computer software is not separately stated from the cost of hardware or other tangible property and you consistently treat it as part of the cost of the hardware or other tangible property, these rules do not apply. Turbotax 1040ez free Similarly, none of the cost of acquiring real property held for the production of rental income is considered the cost of goodwill, going concern value, or any other section 197 intangible. Turbotax 1040ez free Section 197 Intangibles Defined The following assets are section 197 intangibles and must be amortized over 180 months: Goodwill; Going concern value; Workforce in place; Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers; A patent, copyright, formula, process, design, pattern, know-how, format, or similar item; A customer-based intangible; A supplier-based intangible; Any item similar to items (3) through (7); A license, permit, or other right granted by a governmental unit or agency (including issuances and renewals); A covenant not to compete entered into in connection with the acquisition of an interest in a trade or business; Any franchise, trademark, or trade name; and A contract for the use of, or a term interest in, any item in this list. Turbotax 1040ez free You cannot amortize any of the intangibles listed in items (1) through (8) that you created rather than acquired unless you created them in acquiring assets that make up a trade or business or a substantial part of a trade or business. Turbotax 1040ez free Goodwill. Turbotax 1040ez free   This is the value of a trade or business based on expected continued customer patronage due to its name, reputation, or any other factor. Turbotax 1040ez free Going concern value. Turbotax 1040ez free   This is the additional value of a trade or business that attaches to property because the property is an integral part of an ongoing business activity. Turbotax 1040ez free It includes value based on the ability of a business to continue to function and generate income even though there is a change in ownership (but does not include any other section 197 intangible). Turbotax 1040ez free It also includes value based on the immediate use or availability of an acquired trade or business, such as the use of earnings during any period in which the business would not otherwise be available or operational. Turbotax 1040ez free Workforce in place, etc. Turbotax 1040ez free   This includes the composition of a workforce (for example, its experience, education, or training). Turbotax 1040ez free It also includes the terms and conditions of employment, whether contractual or otherwise, and any other value placed on employees or any of their attributes. Turbotax 1040ez free   For example, you must amortize the part of the purchase price of a business that is for the existence of a highly skilled workforce. Turbotax 1040ez free Also, you must amortize the cost of acquiring an existing employment contract or relationship with employees or consultants. Turbotax 1040ez free Business books and records, etc. Turbotax 1040ez free   This includes the intangible value of technical manuals, training manuals or programs, data files, and accounting or inventory control systems. Turbotax 1040ez free It also includes the cost of customer lists, subscription lists, insurance expirations, patient or client files, and lists of newspaper, magazine, radio, and television advertisers. Turbotax 1040ez free Patents, copyrights, etc. Turbotax 1040ez free   This includes package design, computer software, and any interest in a film, sound recording, videotape, book, or other similar property, except as discussed later under Assets That Are Not Section 197 Intangibles . Turbotax 1040ez free Customer-based intangible. Turbotax 1040ez free   This is the composition of market, market share, and any other value resulting from the future provision of goods or services because of relationships with customers in the ordinary course of business. Turbotax 1040ez free For example, you must amortize the part of the purchase price of a business that is for the existence of the following intangibles. Turbotax 1040ez free A customer base. Turbotax 1040ez free A circulation base. Turbotax 1040ez free An undeveloped market or market growth. Turbotax 1040ez free Insurance in force. Turbotax 1040ez free A mortgage servicing contract. Turbotax 1040ez free An investment management contract. Turbotax 1040ez free Any other relationship with customers involving the future provision of goods or services. Turbotax 1040ez free   Accounts receivable or other similar rights to income for goods or services provided to customers before the acquisition of a trade or business are not section 197 intangibles. Turbotax 1040ez free Supplier-based intangible. Turbotax 1040ez free   A supplier-based intangible is the value resulting from the future acquisitions, (through contract or other relationships with suppliers in the ordinary course of business) of goods or services that you will sell or use. Turbotax 1040ez free The amount you pay or incur for supplier-based intangibles includes, for example, any portion of the purchase price of an acquired trade or business that is attributable to the existence of a favorable relationship with persons providing distribution services (such as a favorable shelf or display space or a retail outlet), or the existence of favorable supply contracts. Turbotax 1040ez free Do not include any amount required to be paid for the goods or services to honor the terms of the agreement or other relationship. Turbotax 1040ez free Also, see Assets That Are Not Section 197 Intangibles below. Turbotax 1040ez free Government-granted license, permit, etc. Turbotax 1040ez free   This is any right granted by a governmental unit or an agency or instrumentality of a governmental unit. Turbotax 1040ez free For example, you must amortize the capitalized costs of acquiring (including issuing or renewing) a liquor license, a taxicab medallion or license, or a television or radio broadcasting license. Turbotax 1040ez free Covenant not to compete. Turbotax 1040ez free   Section 197 intangibles include a covenant not to compete (or similar arrangement) entered into in connection with the acquisition of an interest in a trade or business, or a substantial portion of a trade or business. Turbotax 1040ez free An interest in a trade or business includes an interest in a partnership or a corporation engaged in a trade or business. Turbotax 1040ez free   An arrangement that requires the former owner to perform services (or to provide property or the use of property) is not similar to a covenant not to compete to the extent the amount paid under the arrangement represents reasonable compensation for those services or for that property or its use. Turbotax 1040ez free Franchise, trademark, or trade name. Turbotax 1040ez free   A franchise, trademark, or trade name is a section 197 intangible. Turbotax 1040ez free You must amortize its purchase or renewal costs, other than certain contingent payments that you can deduct currently. Turbotax 1040ez free For information on currently deductible contingent payments, see chapter 11. Turbotax 1040ez free Professional sports franchise. Turbotax 1040ez free   A franchise engaged in professional sports and any intangible assets acquired in connection with acquiring the franchise (including player contracts) is a section 197 intangible amortizable over a 15-year period. Turbotax 1040ez free Contract for the use of, or a term interest in, a section 197 intangible. Turbotax 1040ez free   Section 197 intangibles include any right under a license, contract, or other arrangement providing for the use of any section 197 intangible. Turbotax 1040ez free It also includes any term interest in any section 197 intangible, whether the interest is outright or in trust. Turbotax 1040ez free Assets That Are Not Section 197 Intangibles The following assets are not section 197 intangibles. Turbotax 1040ez free Any interest in a corporation, partnership, trust, or estate. Turbotax 1040ez free Any interest under an existing futures contract, foreign currency contract, notional principal contract, interest rate swap, or similar financial contract. Turbotax 1040ez free Any interest in land. Turbotax 1040ez free Most computer software. Turbotax 1040ez free (See Computer software , later. Turbotax 1040ez free ) Any of the following assets not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Turbotax 1040ez free An interest in a film, sound recording, video tape, book, or similar property. Turbotax 1040ez free A right to receive tangible property or services under a contract or from a governmental agency. Turbotax 1040ez free An interest in a patent or copyright. Turbotax 1040ez free Certain rights that have a fixed duration or amount. Turbotax 1040ez free (See Rights of fixed duration or amount , later. Turbotax 1040ez free ) An interest under either of the following. Turbotax 1040ez free An existing lease or sublease of tangible property. Turbotax 1040ez free A debt that was in existence when the interest was acquired. Turbotax 1040ez free A right to service residential mortgages unless the right is acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Turbotax 1040ez free Certain transaction costs incurred by parties to a corporate organization or reorganization in which any part of a gain or loss is not recognized. Turbotax 1040ez free Intangible property that is not amortizable under the rules for section 197 intangibles can be depreciated if it meets certain requirements. Turbotax 1040ez free You generally must use the straight line method over its useful life. Turbotax 1040ez free For certain intangibles, the depreciation period is specified in the law and regulations. Turbotax 1040ez free For example, the depreciation period for computer software that is not a section 197 intangible is generally 36 months. Turbotax 1040ez free For more information on depreciating intangible property, see Intangible Property under What Method Can You Use To Depreciate Your Property? in chapter 1 of Publication 946. Turbotax 1040ez free Computer software. Turbotax 1040ez free   Section 197 intangibles do not include the following types of computer software. Turbotax 1040ez free Software that meets all the following requirements. Turbotax 1040ez free It is, or has been, readily available for purchase by the general public. Turbotax 1040ez free It is subject to a nonexclusive license. Turbotax 1040ez free It has not been substantially modified. Turbotax 1040ez free This requirement is considered met if the cost of all modifications is not more than the greater of 25% of the price of the publicly available unmodified software or $2,000. Turbotax 1040ez free Software that is not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. Turbotax 1040ez free Computer software defined. Turbotax 1040ez free   Computer software includes all programs designed to cause a computer to perform a desired function. Turbotax 1040ez free It also includes any database or similar item that is in the public domain and is incidental to the operation of qualifying software. Turbotax 1040ez free Rights of fixed duration or amount. Turbotax 1040ez free   Section 197 intangibles do not include any right under a contract or from a governmental agency if the right is acquired in the ordinary course of a trade or business (or in an activity engaged in for the production of income) but not as part of a purchase of a trade or business and either: Has a fixed life of less than 15 years, or Is of a fixed amount that, except for the rules for section 197 intangibles, would be recovered under a method similar to the unit-of-production method of cost recovery. Turbotax 1040ez free However, this does not apply to the following intangibles. Turbotax 1040ez free Goodwill. Turbotax 1040ez free Going concern value. Turbotax 1040ez free A covenant not to compete. Turbotax 1040ez free A franchise, trademark, or trade name. Turbotax 1040ez free A customer-related information base, customer-based intangible, or similar item. Turbotax 1040ez free Safe Harbor for Creative Property Costs If you are engaged in the trade or business of film production, you may be able to amortize the creative property costs for properties not set for production within 3 years of the first capitalized transaction. Turbotax 1040ez free You may amortize these costs ratably over a 15-year period beginning on the first day of the second half of the tax year in which you properly write off the costs for financial accounting purposes. Turbotax 1040ez free If, during the 15-year period, you dispose of the creative property rights, you must continue to amortize the costs over the remainder of the 15-year period. Turbotax 1040ez free Creative property costs include costs paid or incurred to acquire and develop screenplays, scripts, story outlines, motion picture production rights to books and plays, and other similar properties for purposes of potential future film development, production, and exploitation. Turbotax 1040ez free Amortize these costs using the rules of Revenue Procedure 2004-36. Turbotax 1040ez free For more information, see Revenue Procedure 2004-36, 2004-24 I. Turbotax 1040ez free R. Turbotax 1040ez free B. Turbotax 1040ez free 1063, available at  www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/irb/2004-24_IRB/ar16. Turbotax 1040ez free html. Turbotax 1040ez free A change in the treatment of creative property costs is a change in method of accounting. Turbotax 1040ez free Anti-Churning Rules Anti-churning rules prevent you from amortizing most section 197 intangibles if the transaction in which you acquired them did not result in a significant change in ownership or use. Turbotax 1040ez free These rules apply to goodwill and going concern value, and to any other section 197 intangible that is not otherwise depreciable or amortizable. Turbotax 1040ez free Under the anti-churning rules, you cannot use 15-year amortization for the intangible if any of the following conditions apply. Turbotax 1040ez free You or a related person (defined later) held or used the intangible at any time from July 25, 1991, through August 10, 1993. Turbotax 1040ez free You acquired the intangible from a person who held it at any time during the period in (1) and, as part of the transaction, the user did not change. Turbotax 1040ez free You granted the right to use the intangible to a person (or a person related to that person) who held or used it at any time during the period in (1). Turbotax 1040ez free This applies only if the transaction in which you granted the right and the transaction in which you acquired the intangible are part of a series of related transactions. Turbotax 1040ez free See Related person , later, for more information. Turbotax 1040ez free Exceptions. Turbotax 1040ez free   The anti-churning rules do not apply in the following situations. Turbotax 1040ez free You acquired the intangible from a decedent and its basis was stepped up to its fair market value. Turbotax 1040ez free The intangible was amortizable as a section 197 intangible by the seller or transferor you acquired it from. Turbotax 1040ez free This exception does not apply if the transaction in which you acquired the intangible and the transaction in which the seller or transferor acquired it are part of a series of related transactions. Turbotax 1040ez free The gain-recognition exception, discussed later, applies. Turbotax 1040ez free Related person. Turbotax 1040ez free   For purposes of the anti-churning rules, the following are related persons. Turbotax 1040ez free An individual and his or her brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. Turbotax 1040ez free ), and lineal descendants (children, grandchildren, etc. Turbotax 1040ez free ). Turbotax 1040ez free A corporation and an individual who owns, directly or indirectly, more than 20% of the value of the corporation's outstanding stock. Turbotax 1040ez free Two corporations that are members of the same controlled group as defined in section 1563(a) of the Internal Revenue Code, except that “more than 20%” is substituted for “at least 80%” in that definition and the determination is made without regard to subsections (a)(4) and (e)(3)(C) of section 1563. Turbotax 1040ez free (For an exception, see section 1. Turbotax 1040ez free 197-2(h)(6)(iv) of the regulations. Turbotax 1040ez free ) A trust fiduciary and a corporation if more than 20% of the value of the corporation's outstanding stock is owned, directly or indirectly, by or for the trust or grantor of the trust. Turbotax 1040ez free The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Turbotax 1040ez free The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. Turbotax 1040ez free The executor and beneficiary of an estate. Turbotax 1040ez free A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization (or whose family members control it). Turbotax 1040ez free A corporation and a partnership if the same persons own more than 20% of the value of the outstanding stock of the corporation and more than 20% of the capital or profits interest in the partnership. Turbotax 1040ez free Two S corporations, and an S corporation and a regular corporation, if the same persons own more than 20% of the value of the outstanding stock of each corporation. Turbotax 1040ez free Two partnerships if the same persons own, directly or indirectly, more than 20% of the capital or profits interests in both partnerships. Turbotax 1040ez free A partnership and a person who owns, directly or indirectly, more than 20% of the capital or profits interests in the partnership. Turbotax 1040ez free Two persons who are engaged in trades or businesses under common control (as described in section 41(f)(1) of the Internal Revenue Code). Turbotax 1040ez free When to determine relationship. Turbotax 1040ez free   Persons are treated as related if the relationship existed at the following time. Turbotax 1040ez free In the case of a single transaction, immediately before or immediately after the transaction in which the intangible was acquired. Turbotax 1040ez free In the case of a series of related transactions (or a series of transactions that comprise a qualified stock purchase under section 338(d)(3) of the Internal Revenue Code), immediately before the earliest transaction or immediately after the last transaction. Turbotax 1040ez free Ownership of stock. Turbotax 1040ez free   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Turbotax 1040ez free Rule 1. Turbotax 1040ez free   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Turbotax 1040ez free Rule 2. Turbotax 1040ez free   An individual is considered to own the stock directly or indirectly owned by or for his or her family. Turbotax 1040ez free Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Turbotax 1040ez free Rule 3. Turbotax 1040ez free   An individual owning (other than by applying Rule 2) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Turbotax 1040ez free Rule 4. Turbotax 1040ez free   For purposes of applying Rule 1, 2, or 3, treat stock constructively owned by a person under Rule 1 as actually owned by that person. Turbotax 1040ez free Do not treat stock constructively owned by an individual under Rule 2 or 3 as owned by the individual for reapplying Rule 2 or 3 to make another person the constructive owner of the stock. Turbotax 1040ez free Gain-recognition exception. Turbotax 1040ez free   This exception to the anti-churning rules applies if the person you acquired the intangible from (the transferor) meets both of the following requirements. Turbotax 1040ez free That person would not be related to you (as described under Related person , earlier) if the 20% test for ownership of stock and partnership interests were replaced by a 50% test. Turbotax 1040ez free That person chose to recognize gain on the disposition of the intangible and pay income tax on the gain at the highest tax rate. Turbotax 1040ez free See chapter 2 in Publication 544 for information on making this choice. Turbotax 1040ez free   If this exception applies, the anti-churning rules apply only to the amount of your adjusted basis in the intangible that is more than the gain recognized by the transferor. Turbotax 1040ez free Notification. Turbotax 1040ez free   If the person you acquired the intangible from chooses to recognize gain under the rules for this exception, that person must notify you in writing by the due date of the return on which the choice is made. Turbotax 1040ez free Anti-abuse rule. Turbotax 1040ez free   You cannot amortize any section 197 intangible acquired in a transaction for which the principal purpose was either of the following. Turbotax 1040ez free To avoid the requirement that the intangible be acquired after August 10, 1993. Turbotax 1040ez free To avoid any of the anti-churning rules. Turbotax 1040ez free More information. Turbotax 1040ez free   For more information about the anti-churning rules, including additional rules for partnerships, see Regulations section 1. Turbotax 1040ez free 197-2(h). Turbotax 1040ez free Incorrect Amount of Amortization Deducted If you later discover that you deducted an incorrect amount for amortization for a section 197 intangible in any year, you may be able to make a correction for that year by filing an amended return. Turbotax 1040ez free See Amended Return , next. Turbotax 1040ez free If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amortization. Turbotax 1040ez free See Changing Your Accounting Method , later. Turbotax 1040ez free Amended Return If you deducted an incorrect amount for amortization, you can file an amended return to correct the following. Turbotax 1040ez free A mathematical error made in any year. Turbotax 1040ez free A posting error made in any year. Turbotax 1040ez free An amortization deduction for a section 197 intangible for which you have not adopted a method of accounting. Turbotax 1040ez free When to file. Turbotax 1040ez free   If an amended return is allowed, you must file it by the later of the following dates. Turbotax 1040ez free 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. Turbotax 1040ez free (A return filed early is considered filed on the due date. Turbotax 1040ez free ) 2 years from the time you paid your tax for that year. Turbotax 1040ez free Changing Your Accounting Method Generally, you must get IRS approval to change your method of accounting. Turbotax 1040ez free File Form 3115, Application for Change in Accounting Method, to request a change to a permissible method of accounting for amortization. Turbotax 1040ez free The following are examples of a change in method of accounting for amortization. Turbotax 1040ez free A change in the amortization method, period of recovery, or convention of an amortizable asset. Turbotax 1040ez free A change in the accounting for amortizable assets from a single asset account to a multiple asset account (pooling), or vice versa. Turbotax 1040ez free A change in the accounting for amortizable assets from one type of multiple asset account to a different type of multiple asset account. Turbotax 1040ez free Changes in amortization that are not a change in method of accounting include the following: A change in computing amortization in the tax year in which your use of the asset changes. Turbotax 1040ez free An adjustment in the useful life of an amortizable asset. Turbotax 1040ez free Generally, the making of a late amortization election or the revocation of a timely valid amortization election. Turbotax 1040ez free Any change in the placed-in-service date of an amortizable asset. Turbotax 1040ez free See Regulations section 1. Turbotax 1040ez free 446-1(e)(2)(ii)(a) for more information and examples. Turbotax 1040ez free Automatic approval. Turbotax 1040ez free   In some instances, you may be able to get automatic approval from the IRS to change your method of accounting for amortization. Turbotax 1040ez free For a list of automatic accounting method changes, see the Instructions for Form 3115. Turbotax 1040ez free Also see the Instructions for Form 3115 for more information on getting approval, automatic approval procedures, and a list of exceptions to the automatic approval process. Turbotax 1040ez free For more information, see Revenue Procedure 2006-12, as modified by Revenue Procedure 2006-37, and Revenue Procedure 2008-52, as amplified, clarified, and modified by Revenue Procedure 2009-39, as clarified and modified by Revenue Procedure 2011-14, as modified and amplified by Revenue Procedure 2011-22, as modified by Revenue Procedure 2012-39, or any successor. Turbotax 1040ez free See Revenue Procedure 2006-12, 2006-3 I. Turbotax 1040ez free R. Turbotax 1040ez free B. Turbotax 1040ez free 310, available at  www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/irb/2006-03_IRB/ar14. Turbotax 1040ez free html. Turbotax 1040ez free  See Revenue Procedure 2006-37, 2006-38 I. Turbotax 1040ez free R. Turbotax 1040ez free B. Turbotax 1040ez free 499, available at  www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/irb/2006-38_IRB/ar10. Turbotax 1040ez free html. Turbotax 1040ez free  See Revenue Procedure 2008-52, 2008-36 I. Turbotax 1040ez free R. Turbotax 1040ez free B. Turbotax 1040ez free 587, available at www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/irb/2008-36_IRB/ar09. Turbotax 1040ez free html. Turbotax 1040ez free  See Revenue Procedure 2009-39, 2009-38 I. Turbotax 1040ez free R. Turbotax 1040ez free B. Turbotax 1040ez free 371, available at  www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/irb/2009-38_IRB/ar08. Turbotax 1040ez free html. Turbotax 1040ez free  See Revenue Procedure 2011-14, 2011-4 I. Turbotax 1040ez free R. Turbotax 1040ez free B. Turbotax 1040ez free 330, available at  www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/irb/2011-04_IRB/ar08. Turbotax 1040ez free html. Turbotax 1040ez free  See Revenue Procedure 2011-22, 2011-18 I. Turbotax 1040ez free R. Turbotax 1040ez free B. Turbotax 1040ez free 737, available at  www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/irb/2011-18_IRB/ar08. Turbotax 1040ez free html. Turbotax 1040ez free Also, see Revenue Procedure 2012-39, 2012-41 I. Turbotax 1040ez free R. Turbotax 1040ez free B. Turbotax 1040ez free 470 available at www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/irb/2012-41_IRB/index. Turbotax 1040ez free html. Turbotax 1040ez free Disposition of Section 197 Intangibles A section 197 intangible is treated as depreciable property used in your trade or business. Turbotax 1040ez free If you held the intangible for more than 1 year, any gain on its disposition, up to the amount of allowable amortization, is ordinary income (section 1245 gain). Turbotax 1040ez free If multiple section 197 intangibles are disposed of in a single transaction or a series of related transactions, treat all of the section 197 intangibles as if they were a single asset for purposes of determining the amount of gain that is ordinary income. Turbotax 1040ez free Any remaining gain, or any loss, is a section 1231 gain or loss. Turbotax 1040ez free If you held the intangible 1 year or less, any gain or loss on its disposition is an ordinary gain or loss. Turbotax 1040ez free For more information on ordinary or capital gain or loss on business property, see chapter 3 in Publication 544. Turbotax 1040ez free Nondeductible loss. Turbotax 1040ez free   You cannot deduct any loss on the disposition or worthlessness of a section 197 intangible that you acquired in the same transaction (or series of related transactions) as other section 197 intangibles you still have. Turbotax 1040ez free Instead, increase the adjusted basis of each remaining amortizable section 197 intangible by a proportionate part of the nondeductible loss. Turbotax 1040ez free Figure the increase by multiplying the nondeductible loss on the disposition of the intangible by the following fraction. Turbotax 1040ez free The numerator is the adjusted basis of each remaining intangible on the date of the disposition. Turbotax 1040ez free The denominator is the total adjusted bases of all remaining amortizable section 197 intangibles on the date of the disposition. Turbotax 1040ez free Covenant not to compete. Turbotax 1040ez free   A covenant not to compete, or similar arrangement, is not considered disposed of or worthless before you dispose of your entire interest in the trade or business for which you entered into the covenant. Turbotax 1040ez free Nonrecognition transfers. Turbotax 1040ez free   If you acquire a section 197 intangible in a nonrecognition transfer, you are treated as the transferor with respect to the part of your adjusted basis in the intangible that is not more than the transferor's adjusted basis. Turbotax 1040ez free You amortize this part of the adjusted basis over the intangible's remaining amortization period in the hands of the transferor. Turbotax 1040ez free Nonrecognition transfers include transfers to a corporation, partnership contributions and distributions, like-kind exchanges, and involuntary conversions. Turbotax 1040ez free   In a like-kind exchange or involuntary conversion of a section 197 intangible, you must continue to amortize the part of your adjusted basis in the acquired intangible that is not more than your adjusted basis in the exchanged or converted intangible over the remaining amortization period of the exchanged or converted intangible. Turbotax 1040ez free Amortize over a new 15-year period the part of your adjusted basis in the acquired intangible that is more than your adjusted basis in the exchanged or converted intangible. Turbotax 1040ez free Example. Turbotax 1040ez free You own a section 197 intangible you have amortized for 4 full years. Turbotax 1040ez free It has a remaining unamortized basis of $30,000. Turbotax 1040ez free You exchange the asset plus $10,000 for a like-kind section 197 intangible. Turbotax 1040ez free The nonrecognition provisions of like-kind exchanges apply. Turbotax 1040ez free You amortize $30,000 of the $40,000 adjusted basis of the acquired intangible over the 11 years remaining in the original 15-year amortization period for the transferred asset. Turbotax 1040ez free You amortize the other $10,000 of adjusted basis over a new 15-year period. Turbotax 1040ez free For more information, see Regulations section 1. Turbotax 1040ez free 197-2(g). Turbotax 1040ez free Reforestation Costs You can elect to deduct a limited amount of reforestation costs paid or incurred during the tax year. Turbotax 1040ez free See Reforestation Costs in chapter 7. Turbotax 1040ez free You can elect to amortize the qualifying costs that are not deducted currently over an 84-month period. Turbotax 1040ez free There is no limit on the amount of your amortization deduction for reforestation costs paid or incurred during the tax year. Turbotax 1040ez free The election to amortize reforestation costs incurred by a partnership, S corporation, or estate must be made by the partnership, corporation, or estate. Turbotax 1040ez free A partner, shareholder, or beneficiary cannot make that election. Turbotax 1040ez free A partner's or shareholder's share of amortizable costs is figured under the general rules for allocating items of income, loss, deduction, etc. Turbotax 1040ez free , of a partnership or S corporation. Turbotax 1040ez free The amortizable costs of an estate are divided between the estate and the income beneficiary based on the income of the estate allocable to each. Turbotax 1040ez free Qualifying costs. Turbotax 1040ez free   Reforestation costs are the direct costs of planting or seeding for forestation or reforestation. Turbotax 1040ez free Qualifying costs include only those costs you must capitalize and include in the adjusted basis of the property. Turbotax 1040ez free They include costs for the following items. Turbotax 1040ez free Site preparation. Turbotax 1040ez free Seeds or seedlings. Turbotax 1040ez free Labor. Turbotax 1040ez free Tools. Turbotax 1040ez free Depreciation on equipment used in planting and seeding. Turbotax 1040ez free Qualifying costs do not include costs for which the government reimburses you under a cost-sharing program, unless you include the reimbursement in your income. Turbotax 1040ez free Qualified timber property. Turbotax 1040ez free   Qualified timber property is property that contains trees in significant commercial quantities. Turbotax 1040ez free It can be a woodlot or other site that you own or lease. Turbotax 1040ez free The property qualifies only if it meets all of the following requirements. Turbotax 1040ez free It is located in the United States. Turbotax 1040ez free It is held for the growing and cutting of timber you will either use in, or sell for use in, the commercial production of timber products. Turbotax 1040ez free It consists of at least one acre planted with tree seedlings in the manner normally used in forestation or reforestation. Turbotax 1040ez free Qualified timber property does not include property on which you have planted shelter belts or ornamental trees, such as Christmas trees. Turbotax 1040ez free Amortization period. Turbotax 1040ez free   The 84-month amortization period starts on the first day of the first month of the second half of the tax year you incur the costs (July 1 for a calendar year taxpayer), regardless of the month you actually incur the costs. Turbotax 1040ez free You can claim amortization deductions for no more than 6 months of the first and last (eighth) tax years of the period. Turbotax 1040ez free Life tenant and remainderman. Turbotax 1040ez free   If one person holds the property for life with the remainder going to another person, the life tenant is entitled to the full amortization for qualifying reforestation costs incurred by the life tenant. Turbotax 1040ez free Any remainder interest in the property is ignored for amortization purposes. Turbotax 1040ez free Recapture. Turbotax 1040ez free   If you dispose of qualified timber property within 10 years after the tax year you incur qualifying reforestation expenses, report any gain as ordinary income up to the amortization you took. Turbotax 1040ez free See chapter 3 of Publication 544 for more information. Turbotax 1040ez free How to make the election. Turbotax 1040ez free   To elect to amortize qualifying reforestation costs, complete Part VI of Form 4562 and attach a statement that contains the following information. Turbotax 1040ez free A description of the costs and the dates you incurred them. Turbotax 1040ez free A description of the type of timber being grown and the purpose for which it is grown. Turbotax 1040ez free Attach a separate statement for each property for which you amortize reforestation costs. Turbotax 1040ez free   Generally, you must make the election on a timely filed return (including extensions) for the tax year in which you incurred the costs. Turbotax 1040ez free However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Turbotax 1040ez free Attach Form 4562 and the statement to the amended return and write “Filed pursuant to section 301. Turbotax 1040ez free 9100-2” on Form 4562. Turbotax 1040ez free File the amended return at the same address you filed the original return. Turbotax 1040ez free Revoking the election. Turbotax 1040ez free   You must get IRS approval to revoke your election to amortize qualifying reforestation costs. Turbotax 1040ez free Your application to revoke the election must include your name, address, the years for which your election was in effect, and your reason for revoking it. Turbotax 1040ez free Please provide your daytime telephone number (optional), in case we need to contact you. Turbotax 1040ez free You, or your duly authorized representative, must sign the application and file it at least 90 days before the due date (without extensions) for filing your income tax return for the first tax year for which your election is to end. Turbotax 1040ez free    Send the application to: Internal Revenue Service Associate Chief Counsel Passthroughs and Special Industries CC:PSI:6 1111 Constitution Ave. Turbotax 1040ez free NW, IR-5300 Washington, DC 20224 Geological and Geophysical Costs You can amortize the cost of geological and geophysical expenses paid or incurred in connection with oil and gas exploration or development within the United States. Turbotax 1040ez free These costs can be amortized ratably over a 24-month period beginning on the mid-point of the tax year in which the expenses were paid or incurred. Turbotax 1040ez free For major integrated oil companies (as defined in section 167(h)(5)), these costs must be amortized ratably over a 5-year period for costs paid or incurred after May 17, 2006 (a 7-year period for costs paid or incurred after December 19, 2007). Turbotax 1040ez free If you retire or abandon the property during the amortization period, no amortization deduction is allowed in the year of retirement or abandonment. Turbotax 1040ez free Pollution Control Facilities You can elect to amortize the cost of a certified pollution control facility over 60 months. Turbotax 1040ez free However, see Atmospheric pollution control facilities for an exception. Turbotax 1040ez free The cost of a pollution control facility that is not eligible for amortization can be depreciated under the regular rules for depreciation. Turbotax 1040ez free Also, you can claim a special depreciation allowance on a certified pollution control facility that is qualified property even if you elect to amortize its cost. Turbotax 1040ez free You must reduce its cost (amortizable basis) by the amount of any special allowance you claim. Turbotax 1040ez free See chapter 3 of Publication 946. Turbotax 1040ez free A certified pollution control facility is a new identifiable treatment facility used in connection with a plant or other property in operation before 1976, to reduce or control water or atmospheric pollution or contamination. Turbotax 1040ez free The facility must do so by removing, changing, disposing, storing, or preventing the creation or emission of pollutants, contaminants, wastes, or heat. Turbotax 1040ez free The facility must be certified by state and federal certifying authorities. Turbotax 1040ez free The facility must not significantly increase the output or capacity, extend the useful life, or reduce the total operating costs of the plant or other property. Turbotax 1040ez free Also, it must not significantly change the nature of the manufacturing or production process or facility. Turbotax 1040ez free The federal certifying authority will not certify your property to the extent it appears you will recover (over the property's useful life) all or part of its cost from the profit based on its operation (such as through sales of recovered wastes). Turbotax 1040ez free The federal certifying authority will describe the nature of the potential cost recovery. Turbotax 1040ez free You must then reduce the amortizable basis of the facility by this potential recovery. Turbotax 1040ez free New identifiable treatment facility. Turbotax 1040ez free   A new identifiable treatment facility is tangible depreciable property that is identifiable as a treatment facility. Turbotax 1040ez free It does not include a building and its structural components unless the building is exclusively a treatment facility. Turbotax 1040ez free Atmospheric pollution control facilities. Turbotax 1040ez free   Certain atmospheric pollution control facilities can be amortized over 84 months. Turbotax 1040ez free To qualify, the following must apply. Turbotax 1040ez free The facility must be acquired and placed in service after April 11, 2005. Turbotax 1040ez free If acquired, the original use must begin with you after April 11, 2005. Turbotax 1040ez free The facility must be used in connection with an electric generation plant or other property placed in operation after December 31, 1975, that is primarily coal fired. Turbotax 1040ez free If you construct, reconstruct, or erect the facility, only the basis attributable to the construction, reconstruction, or erection completed after April 11, 2005, qualifies. Turbotax 1040ez free Basis reduction for corporations. Turbotax 1040ez free   A corporation must reduce the amortizable basis of a pollution control facility by 20% before figuring the amortization deduction. Turbotax 1040ez free More information. Turbotax 1040ez free   For more information on the amortization of pollution control facilities, see Code sections 169 and 291(c) and the related regulations. Turbotax 1040ez free Research and Experimental Costs You can elect to amortize your research and experimental costs, deduct them as current business expenses, or write them off over a 10-year period (see Optional write-off method below). Turbotax 1040ez free If you elect to amortize these costs, deduct them in equal amounts over 60 months or more. Turbotax 1040ez free The amortization period begins the month you first receive an economic benefit from the costs. Turbotax 1040ez free For a definition of “research and experimental costs” and information on deducting them as current business expenses, see chapter 7. Turbotax 1040ez free Optional write-off method. Turbotax 1040ez free   Rather than amortize these costs or deduct them as a current expense, you have the option of deducting (writing off) research and experimental costs ratably over a 10-year period beginning with the tax year in which you incurred the costs. Turbotax 1040ez free For more information, see Optional Write-off of Certain Tax Preferences , later, and section 59(e) of the Internal Revenue Code. Turbotax 1040ez free Costs you can amortize. Turbotax 1040ez free   You can amortize costs chargeable to a capital account (see chapter 1) if you meet both of the following requirements. Turbotax 1040ez free You paid or incurred the costs in your trade or business. Turbotax 1040ez free You are not deducting the costs currently. Turbotax 1040ez free How to make the election. Turbotax 1040ez free   To elect to amortize research and experimental costs, complete Part VI of Form 4562 and attach it to your income tax return. Turbotax 1040ez free Generally, you must file the return by the due date (including extensions). Turbotax 1040ez free However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Turbotax 1040ez free Attach Form 4562 to the amended return and write “Filed pursuant to section 301. Turbotax 1040ez free 9100-2” on Form 4562. Turbotax 1040ez free File the amended return at the same address you filed the original return. Turbotax 1040ez free   Your election is binding for the year it is made and for all later years unless you obtain approval from the IRS to change to a different method. Turbotax 1040ez free Optional Write-off of Certain Tax Preferences You can elect to amortize certain tax preference items over an optional period beginning in the tax year in which you incurred the costs. Turbotax 1040ez free If you make this election, there is no AMT adjustment. Turbotax 1040ez free The applicable costs and the optional recovery periods are as follows: Circulation costs — 3 years, Intangible drilling and development costs — 60 months, Mining exploration and development costs — 10 years, and Research and experimental costs — 10 years. Turbotax 1040ez free How to make the election. Turbotax 1040ez free   To elect to amortize qualifying costs over the optional recovery period, complete Part VI of Form 4562 and attach a statement containing the following information to your return for the tax year in which the election begins: Your name, address, and taxpayer identification number; and The type of cost and the specific amount of the cost for which you are making the election. Turbotax 1040ez free   Generally, the election must be made on a timely filed return (including extensions) for the tax year in which you incurred the costs. Turbotax 1040ez free However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Turbotax 1040ez free Attach Form 4562 to the amended return and write “Filed pursuant to section 301. Turbotax 1040ez free 9100-2” on Form 4562. Turbotax 1040ez free File the amended return at the same address you filed the original return. Turbotax 1040ez free Revoking the election. Turbotax 1040ez free   You must obtain consent from the IRS to revoke your election. Turbotax 1040ez free Your request to revoke the election must be submitted to the IRS in the form of a letter ruling before the end of the tax year in which the optional recovery period ends. Turbotax 1040ez free The request must contain all of the information necessary to demonstrate the rare and unusual circumstances that would justify granting revocation. Turbotax 1040ez free If the request for revocation is approved, any unamortized costs are deductible in the year the revocation is effective. Turbotax 1040ez free Prev  Up  Next   Home   More Online Publications
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Turbotax 1040ez free Publication 15 - Introductory Material Table of Contents Future Developments What's New Reminders Electronic Filing and Payment Forms in Spanish Hiring New Employees Paying Wages, Pensions, or Annuities Information Returns Nonpayroll Income Tax Withholding Recordkeeping Change of Business Address or Responsible Party Private Delivery Services Telephone Help Ordering Employer Tax Forms and Publications Filing Addresses Dishonored Payments Photographs of Missing Children Calendar Introduction Future Developments For the latest information about developments related to Publication 15 (Circular E), such as legislation enacted after it was published, go to www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/pub15. Turbotax 1040ez free What's New Social security and Medicare tax for 2014. Turbotax 1040ez free  The social security tax rate is 6. Turbotax 1040ez free 2% each for the employee and employer, unchanged from 2013. Turbotax 1040ez free The social security wage base limit is $117,000. Turbotax 1040ez free The Medicare tax rate is 1. Turbotax 1040ez free 45% each for the employee and employer, unchanged from 2013. Turbotax 1040ez free There is no wage base limit for Medicare tax. Turbotax 1040ez free Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. Turbotax 1040ez free Social security and Medicare taxes apply to election workers who are paid $1,600 or more in cash or an equivalent form of compensation. Turbotax 1040ez free 2014 withholdng tables. Turbotax 1040ez free  This publication includes the 2014 Percentage Method Tables and Wage Bracket Tables for Income Tax Withholding. Turbotax 1040ez free Withholding allowance. Turbotax 1040ez free  The 2014 amount for one withholding allowance on an annual basis is $3,950. Turbotax 1040ez free Voluntary withholding on dividends and other distributions by an Alaska Native Corporation (ANC). Turbotax 1040ez free  A shareholder of an ANC may now request voluntary income tax withholding on dividends and other distributions paid by an ANC. Turbotax 1040ez free A shareholder may request voluntary withholding by giving the ANC a completed Form W-4V, Voluntary Withholding Request. Turbotax 1040ez free For more information see Notice 2013-77, 2013-50 I. Turbotax 1040ez free R. Turbotax 1040ez free B. Turbotax 1040ez free 632, available at www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/irb/2013-50_IRB/ar10. Turbotax 1040ez free html. Turbotax 1040ez free Change of responsible party. Turbotax 1040ez free  Beginning January 1, 2014, any entity with an employer identification number (EIN) must file Form 8822-B, Change of Address or Responsible Party — Business, to report the latest change to its responsible party. Turbotax 1040ez free Form 8822-B must be filed within 60 days of the change. Turbotax 1040ez free If the change in the identity of your responsible party occurred before 2014, and you have not previously notified the IRS of the change, file Form 8822-B before March 1, 2014, reporting only the most recent change. Turbotax 1040ez free For a definition of “responsible party,” see the Form 8822-B instructions. Turbotax 1040ez free Same-sex marriage. Turbotax 1040ez free  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Turbotax 1040ez free For more information, see Revenue Ruling 2013-17, 2013-38 I. Turbotax 1040ez free R. Turbotax 1040ez free B. Turbotax 1040ez free 201, available at www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/irb/2013-38_IRB/ar07. Turbotax 1040ez free html. Turbotax 1040ez free Notice 2013-61 provides special administrative procedures for employers to make claims for refunds or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. Turbotax 1040ez free Notice 2013-61, 2013-44 I. Turbotax 1040ez free R. Turbotax 1040ez free B. Turbotax 1040ez free 432, is available at www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/irb/2013-44_IRB/ar10. Turbotax 1040ez free html. Turbotax 1040ez free Reminders Additional Medicare Tax withholding. Turbotax 1040ez free  In addition to withholding Medicare tax at 1. Turbotax 1040ez free 45%, you must withhold a 0. Turbotax 1040ez free 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Turbotax 1040ez free You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Turbotax 1040ez free Additional Medicare Tax is only imposed on the employee. Turbotax 1040ez free There is no employer share of Additional Medicare Tax. Turbotax 1040ez free All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Turbotax 1040ez free For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments , in section 15. Turbotax 1040ez free For more information on Additional Medicare Tax, visit IRS. Turbotax 1040ez free gov and enter “Additional Medicare Tax” in the search box. Turbotax 1040ez free Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. Turbotax 1040ez free  The work opportunity tax credit is available for eligible unemployed veterans who began work on or after November 22, 2011, and before January 1, 2014. Turbotax 1040ez free Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Turbotax 1040ez free For more information, visit IRS. Turbotax 1040ez free gov and enter “work opportunity tax credit” in the search box. Turbotax 1040ez free Outsourcing payroll duties. Turbotax 1040ez free  Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. Turbotax 1040ez free The employer remains responsible if the third party fails to perform any required action. Turbotax 1040ez free If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer such as a payroll service provider or reporting agent, visit IRS. Turbotax 1040ez free gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. Turbotax 1040ez free COBRA premium assistance credit. Turbotax 1040ez free  The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months. Turbotax 1040ez free See COBRA premium assistance credit under Introduction. Turbotax 1040ez free Federal tax deposits must be made by electronic funds transfer. Turbotax 1040ez free  You must use electronic funds transfer to make all federal tax deposits. Turbotax 1040ez free Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). Turbotax 1040ez free If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Turbotax 1040ez free Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Turbotax 1040ez free EFTPS is a free service provided by the Department of Treasury. Turbotax 1040ez free Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Turbotax 1040ez free For more information on making federal tax deposits, see How To Deposit in section 11. Turbotax 1040ez free To get more information about EFTPS or to enroll in EFTPS, visit www. Turbotax 1040ez free eftps. Turbotax 1040ez free gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Turbotax 1040ez free Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. Turbotax 1040ez free You must receive written notice from the IRS to file Form 944. Turbotax 1040ez free  If you have been filing Forms 941, Employer's QUARTERLY Federal Tax Return (or Forms 941-SS, Employer's QUARTERLY Federal Tax Return—American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U. Turbotax 1040ez free S. Turbotax 1040ez free Virgin Islands, or Formularios 941-PR, Planilla para la Declaración Federal TRIMESTRAL del Patrono), and believe your employment taxes for the calendar year will be $1,000 or less, and you would like to file Form 944, Employer's ANNUAL Federal Tax Return, instead of Forms 941, you must contact the IRS to request to file Form 944. Turbotax 1040ez free You must receive written notice from the IRS to file Form 944 instead of Forms 941 before you may file this form. Turbotax 1040ez free For more information on requesting to file Form 944, visit IRS. Turbotax 1040ez free gov and enter “file employment taxes annually” in the search box. Turbotax 1040ez free Employers can request to file Forms 941 instead of Form 944. Turbotax 1040ez free  If you received notice from the IRS and have been filing Form 944 but would like to file Forms 941 instead, you must contact the IRS to request to file Forms 941. Turbotax 1040ez free You must receive written notice from the IRS to file Forms 941 instead of Form 944 before you may file these forms. Turbotax 1040ez free For more information on requesting to file Form 944, visit IRS. Turbotax 1040ez free gov and enter “file employment taxes annually” in the search box. Turbotax 1040ez free Aggregate Form 941 filers. Turbotax 1040ez free  Agents must complete Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, when filing an aggregate Form 941. Turbotax 1040ez free Aggregate Forms 941 may only be filed by agents approved by the IRS under section 3504 of the Internal Revenue Code. Turbotax 1040ez free To request approval to act as an agent for an employer, the agent files Form 2678, Employer/Payer Appointment of Agent, with the IRS. Turbotax 1040ez free Aggregate Form 940 filers. Turbotax 1040ez free  Agents must complete Schedule R (Form 940), Allocation Schedule for Aggregate Form 940 Filers, when filing an aggregate Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Turbotax 1040ez free Aggregate Forms 940 can be filed by agents acting on behalf of home care service recipients who receive home care services through a program administered by a federal, state, or local government. Turbotax 1040ez free To request approval to act as an agent on behalf of home care service recipients, the agent files Form 2678 with the IRS. Turbotax 1040ez free Electronic Filing and Payment  Now, more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. Turbotax 1040ez free Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make filing and payment easier. Turbotax 1040ez free Spend less time and worry about taxes and more time running your business. Turbotax 1040ez free Use e-file and the Electronic Federal Tax Payment System (EFTPS) to your benefit. Turbotax 1040ez free For e-file, visit www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/efile for additional information. Turbotax 1040ez free For EFTPS, visit www. Turbotax 1040ez free eftps. Turbotax 1040ez free gov or call EFTPS Customer Service at 1-800-555-4477 or 1-800-733-4829 (TDD). Turbotax 1040ez free For electronic filing of Forms W-2, Wage and Tax Statement, visit www. Turbotax 1040ez free socialsecurity. Turbotax 1040ez free gov/employer. Turbotax 1040ez free If you are filing your tax return or paying your federal taxes electronically, a valid EIN is required. Turbotax 1040ez free If a valid EIN is not provided, the return or payment will not be processed. Turbotax 1040ez free This may result in penalties and delays in processing your return or payment. Turbotax 1040ez free Electronic funds withdrawal (EFW). Turbotax 1040ez free  If you file Form 940, Form 941, Form 944, or Form 945 electronically, you can e-file and e-pay (electronic funds withdrawal) the balance due in a single step using tax preparation software or through a tax professional. Turbotax 1040ez free However, do not use EFW to make federal tax deposits. Turbotax 1040ez free For more information on paying your taxes using EFW, visit the IRS website at www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/e-pay. Turbotax 1040ez free A fee may be charged to file electronically. Turbotax 1040ez free Credit or debit card payments. Turbotax 1040ez free  For information on paying your taxes with a credit or debit card, visit the IRS website at www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/e-pay. Turbotax 1040ez free However, do not use credit or debit cards to make federal tax deposits. Turbotax 1040ez free Forms in Spanish You can provide Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, in place of Form W-4, Employee's Withholding Allowance Certificate, to your Spanish-speaking employees. Turbotax 1040ez free For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). Turbotax 1040ez free For nonemployees, Formulario W-9(SP), Solicitud y Certificación del Número de Identificación del Contribuyente, may be used in place of Form W-9, Request for Taxpayer Identification Number and Certification. Turbotax 1040ez free Hiring New Employees Eligibility for employment. Turbotax 1040ez free  You must verify that each new employee is legally eligible to work in the United States. Turbotax 1040ez free This includes completing the U. Turbotax 1040ez free S. Turbotax 1040ez free Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. Turbotax 1040ez free You can get the form from USCIS offices or by calling 1-800-870-3676. Turbotax 1040ez free Contact the USCIS at 1-800-375-5283, or visit the USCIS website at www. Turbotax 1040ez free uscis. Turbotax 1040ez free gov for more information. Turbotax 1040ez free New hire reporting. Turbotax 1040ez free  You are required to report any new employee to a designated state new hire registry. Turbotax 1040ez free A new employee is an employee who has not previously been employed by you or was previously employed by you but has been separated from such prior employment for at least 60 consecutive days. Turbotax 1040ez free Many states accept a copy of Form W-4 with employer information added. Turbotax 1040ez free Visit the Office of Child Support Enforcement website at www. Turbotax 1040ez free acf. Turbotax 1040ez free hhs. Turbotax 1040ez free gov/programs/cse/newhire for more information. Turbotax 1040ez free W-4 request. Turbotax 1040ez free  Ask each new employee to complete the 2014 Form W-4. Turbotax 1040ez free See section 9. Turbotax 1040ez free Name and social security number. Turbotax 1040ez free  Record each new employee's name and number from his or her social security card. Turbotax 1040ez free Any employee without a social security card should apply for one. Turbotax 1040ez free See section 4. Turbotax 1040ez free Paying Wages, Pensions, or Annuities Correcting Form 941 or Form 944. Turbotax 1040ez free  If you discover an error on a previously filed Form 941 or Form 944, make the correction using Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund, or Form 944-X, Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund. Turbotax 1040ez free Forms 941-X and 944-X are stand-alone forms, meaning taxpayers can file them when an error is discovered. Turbotax 1040ez free Forms 941-X and 944-X are used by employers to claim refunds or abatements of employment taxes, rather than Form 843, Claim for Refund and Request for Abatement. Turbotax 1040ez free See section 13 for more information. Turbotax 1040ez free Income tax withholding. Turbotax 1040ez free  Withhold federal income tax from each wage payment or supplemental unemployment compensation plan benefit payment according to the employee's Form W-4 and the correct withholding table. Turbotax 1040ez free If you have nonresident alien employees, see Withholding income taxes on the wages of nonresident alien employees in section 9. Turbotax 1040ez free Withhold from periodic pension and annuity payments as if the recipient is married claiming three withholding allowances, unless he or she has provided Form W-4P, Withholding Certificate for Pension or Annuity Payments, either electing no withholding or giving a different number of allowances, marital status, or an additional amount to be withheld. Turbotax 1040ez free Do not withhold on direct rollovers from qualified plans or governmental section 457(b) plans. Turbotax 1040ez free See section 9 and Publication 15-A, Employer's Supplemental Tax Guide. Turbotax 1040ez free Publication 15-A includes information about withholding on pensions and annuities. Turbotax 1040ez free Zero wage return. Turbotax 1040ez free  If you have not filed a “final” Form 941 or Form 944, or are not a “seasonal” employer, you must continue to file a Form 941 or Form 944 even for periods during which you paid no wages. Turbotax 1040ez free The IRS encourages you to file your “Zero Wage” Forms 941 or 944 electronically using IRS e-file at www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/efile. Turbotax 1040ez free Employer Responsibilities Employer Responsibilities: The following list provides a brief summary of your basic responsibilities. Turbotax 1040ez free Because the individual circumstances for each employer can vary greatly, responsibilities for withholding, depositing, and reporting employment taxes can differ. Turbotax 1040ez free Each item in this list has a page reference to a more detailed discussion in this publication. Turbotax 1040ez free   New Employees: Page     Annually (By January 31 of the current year, Page □ Verify work eligibility of new employees 3     for the prior year):   □ Record employees' names and SSNs from     □ File Form 944 if required (pay tax with return if     social security cards 4     not required to deposit) 29 □ Ask employees for Form W-4 3     Annually (see Calendar for due dates):     Each Payday:     □ Remind employees to submit a new Form W-4   □ Withhold federal income tax based on each       if they need to change their withholding 20   employee's Form W-4 20   □ Ask for a new Form W-4 from employees   □ Withhold employee's share of social security       claiming exemption from income tax     and Medicare taxes 23     withholding 20 □ Deposit:     □ Reconcile Forms 941 (or Form 944) with Forms     • Withheld income tax       W-2 and W-3 31   • Withheld and employer social security taxes     □ Furnish each employee a Form W-2 7   • Withheld and employer Medicare taxes 24   □ File Copy A of Forms W-2 and the transmittal     Note:Due date of deposit generally depends       Form W-3 with the SSA 8   on your deposit schedule (monthly or semiweekly)     □ Furnish each other payee a Form 1099 (for example, Form 1099-MISC, Miscellaneous Income) 7   Quarterly (By April 30, July 31, October 31, and January 31):     □ File Forms 1099 and the transmittal Form   □ Deposit FUTA tax if undeposited amount       1096 8   is over $500 35   □ File Form 940 7 □ File Form 941 (pay tax with return if not     □ File Form 945 for any nonpayroll income tax     required to deposit) 29     withholding 8 Information Returns You may be required to file information returns to report certain types of payments made during the year. Turbotax 1040ez free For example, you must file Form 1099-MISC, Miscellaneous Income, to report payments of $600 or more to persons not treated as employees (for example, independent contractors) for services performed for your trade or business. Turbotax 1040ez free For details about filing Forms 1099 and for information about required electronic filing, see the General Instructions for Certain Information Returns for general information and the separate, specific instructions for each information return you file (for example, Instructions for Form 1099-MISC). Turbotax 1040ez free Generally, do not use Forms 1099 to report wages and other compensation you paid to employees; report these on Form W-2. Turbotax 1040ez free See the General Instructions for Forms W-2 and W-3 for details about filing Form W-2 and for information about required electronic filing. Turbotax 1040ez free If you file 250 or more Forms 1099, you must file them electronically. Turbotax 1040ez free If you file 250 or more Forms W-2, you must file them electronically. Turbotax 1040ez free SSA will not accept Forms W-2 and W-3 filed on magnetic media. Turbotax 1040ez free Information reporting customer service site. Turbotax 1040ez free  The IRS operates the Enterprise Computing Center—Martinsburg, a centralized customer service site, to answer questions about reporting on Forms W-2, W-3, 1099, and other information returns. Turbotax 1040ez free If you have questions related to reporting on information returns, call 1-866-455-7438 (toll free), 304-263-8700 (toll call), or 304-267-3367 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). Turbotax 1040ez free The center can also be reached by email at mccirp@irs. Turbotax 1040ez free gov. Turbotax 1040ez free Do not include tax identification numbers (TINs) or attachments in email correspondence because electronic mail is not secure. Turbotax 1040ez free Nonpayroll Income Tax Withholding Nonpayroll federal income tax withholding (reported on Forms 1099 and Form W-2G) must be reported on Form 945, Annual Return of Withheld Federal Income Tax. Turbotax 1040ez free Separate deposits are required for payroll (Form 941 or Form 944) and nonpayroll (Form 945) withholding. Turbotax 1040ez free Nonpayroll items include: Pensions (including distributions from tax-favored retirement plans, for example, section 401(k), section 403(b), and governmental section 457(b) plans) and annuities. Turbotax 1040ez free Military retirement. Turbotax 1040ez free Gambling winnings. Turbotax 1040ez free Indian gaming profits. Turbotax 1040ez free Certain government payments, such as unemployment compensation, social security, and Tier 1 railroad retirement benefits, subject to voluntary withholding. Turbotax 1040ez free Payments subject to backup withholding. Turbotax 1040ez free For details on depositing and reporting nonpayroll income tax withholding, see the Instructions for Form 945. Turbotax 1040ez free All income tax withholding reported on Form W-2 must be reported on Form 941, Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, Form 944, or Schedule H (Form 1040), Household Employment Taxes. Turbotax 1040ez free Distributions from nonqualified pension plans and deferred compensation plans. Turbotax 1040ez free  Because distributions to participants from some nonqualified pension plans and deferred compensation plans (including section 457(b) plans of tax-exempt organizations) are treated as wages and are reported on Form W-2, income tax withheld must be reported on Form 941 or Form 944, not on Form 945. Turbotax 1040ez free However, distributions from such plans to a beneficiary or estate of a deceased employee are not wages and are reported on Forms 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Turbotax 1040ez free ; income tax withheld must be reported on Form 945. Turbotax 1040ez free Backup withholding. Turbotax 1040ez free  You generally must withhold 28% of certain taxable payments if the payee fails to furnish you with his or her correct taxpayer identification number (TIN). Turbotax 1040ez free This withholding is referred to as “backup withholding. Turbotax 1040ez free ” Payments subject to backup withholding include interest, dividends, patronage dividends, rents, royalties, commissions, nonemployee compensation, and certain other payments you make in the course of your trade or business. Turbotax 1040ez free In addition, transactions by brokers and barter exchanges and certain payments made by fishing boat operators are subject to backup withholding. Turbotax 1040ez free Backup withholding does not apply to wages, pensions, annuities, IRAs (including simplified employee pension (SEP) and SIMPLE retirement plans), section 404(k) distributions from an employee stock ownership plan (ESOP), medical savings accounts, health savings accounts, long-term-care benefits, or real estate transactions. Turbotax 1040ez free You can use Form W-9 or Formulario W-9(SP) to request payees to furnish a TIN and to certify the number furnished is correct. Turbotax 1040ez free You can also use Form W-9 or Formulario W-9(SP) to get certifications from payees that they are not subject to backup withholding or that they are exempt from backup withholding. Turbotax 1040ez free The Instructions for the Requester of Form W-9 or Formulario W-9(SP) includes a list of types of payees who are exempt from backup withholding. Turbotax 1040ez free For more information, see Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s). Turbotax 1040ez free Recordkeeping Keep all records of employment taxes for at least 4 years. Turbotax 1040ez free These should be available for IRS review. Turbotax 1040ez free Your records should include the following information. Turbotax 1040ez free Your EIN. Turbotax 1040ez free Amounts and dates of all wage, annuity, and pension payments. Turbotax 1040ez free Amounts of tips reported to you by your employees. Turbotax 1040ez free Records of allocated tips. Turbotax 1040ez free The fair market value of in-kind wages paid. Turbotax 1040ez free Names, addresses, social security numbers, and occupations of employees and recipients. Turbotax 1040ez free Any employee copies of Forms W-2 and W-2c returned to you as undeliverable. Turbotax 1040ez free Dates of employment for each employee. Turbotax 1040ez free Periods for which employees and recipients were paid while absent due to sickness or injury and the amount and weekly rate of payments you or third party payors made to them. Turbotax 1040ez free Copies of employees' and recipients' income tax withholding allowance certificates (Forms W-4, W-4P, W-4(SP), W-4S, and W-4V). Turbotax 1040ez free Copies of employees' Earned Income Credit Advance Payment Certificates (Forms W-5 and W-5(SP)). Turbotax 1040ez free Dates and amounts of tax deposits you made and acknowledgment numbers for deposits made by EFTPS. Turbotax 1040ez free Copies of returns filed and confirmation numbers. Turbotax 1040ez free Records of fringe benefits and expense reimbursements provided to your employees, including substantiation. Turbotax 1040ez free Change of Business Address or Responsible Party To notify the IRS of a change in business address or responsible party, file Form 8822-B. Turbotax 1040ez free Do not mail Form 8822-B with your employment tax return. Turbotax 1040ez free Private Delivery Services You can use certain private delivery services designated by the IRS to mail tax returns and payments. Turbotax 1040ez free The list includes only the following: DHL Express (DHL): DHL Same Day Service. Turbotax 1040ez free Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. Turbotax 1040ez free United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Turbotax 1040ez free M. Turbotax 1040ez free , UPS Worldwide Express Plus, and UPS Worldwide Express. Turbotax 1040ez free For the IRS mailing address to use if you are using a private delivery service, go to IRS. Turbotax 1040ez free gov and enter “private delivery service” in the search box. Turbotax 1040ez free Your private delivery service can tell you how to get written proof of the mailing date. Turbotax 1040ez free   Private delivery services cannot deliver items to P. Turbotax 1040ez free O. Turbotax 1040ez free boxes. Turbotax 1040ez free You must use the U. Turbotax 1040ez free S. Turbotax 1040ez free Postal Service to mail any item to an IRS P. Turbotax 1040ez free O. Turbotax 1040ez free box address. Turbotax 1040ez free Telephone Help Tax questions. Turbotax 1040ez free   You can call the IRS Business and Specialty Tax Line with your employment tax questions at 1-800-829-4933. Turbotax 1040ez free Help for people with disabilities. Turbotax 1040ez free  You may call 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability) with any tax question or to order forms and publications. Turbotax 1040ez free You may also use this number for assistance with unresolved tax problems. Turbotax 1040ez free Recorded tax information (TeleTax). Turbotax 1040ez free  The IRS TeleTax service provides recorded tax information on topics that answer many individual and business federal tax questions. Turbotax 1040ez free You can listen to up to three topics on each call you make. Turbotax 1040ez free Touch-Tone service is available 24 hours a day, 7 days a week. Turbotax 1040ez free TeleTax topics are also available on the IRS website at www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/taxtopics. Turbotax 1040ez free Most tax topics listed below are also available in Spanish. Turbotax 1040ez free For a complete list of TeleTax topics in Spanish, visit the IRS website at www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/Spanish/Índice-de-Temas-Tributarios-Año-2013. Turbotax 1040ez free A list of employment tax topics is provided next. Turbotax 1040ez free Select, by number, the topic you want to hear and call 1-800-829-4477. Turbotax 1040ez free For the directory of all topics, select Topic 123. Turbotax 1040ez free Teletax Topics Topic No. Turbotax 1040ez free Subject 751 Social Security and Medicare Withholding Rates 752 Form W-2—Where, When, and How to File 753 Form W-4—Employee's Withholding Allowance Certificate 755 Employer Identification Number (EIN)—How to Apply 756 Employment Taxes for Household Employees 757 Form 941 and Form 944—Deposit Requirements 758 Form 941—Employer's QUARTERLY Federal Tax Return and Form 944—Employer's ANNUAL Federal Tax Return 759 Form 940—Employer's Annual Federal Unemployment (FUTA) Tax Return—Filing and Deposit Requirements 760 Reporting and Deposit Requirements for Agricultural Employers 761 Tips—Withholding and Reporting 762 Independent Contractor vs. Turbotax 1040ez free Employee 763 The “Affordable Care Act” of 2010 Offers Employers New Tax Deductions and Credits Additional employment tax information. Turbotax 1040ez free  Visit the IRS website at www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/businesses and click on the Employment Taxes link under Businesses Topics. Turbotax 1040ez free Ordering Employer Tax Forms and Publications You can order employer tax forms and publications and information returns online at www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/businesses. Turbotax 1040ez free To order 2013 and 2014 forms, click on the Online Ordering for Information Returns and Employer Returns link. Turbotax 1040ez free You may also order employer tax forms and publications and information returns by calling 1-800-TAX-FORM (1-800-829-3676). Turbotax 1040ez free Instead of ordering paper Forms W-2 and W-3, consider filing them electronically using the Social Security Administration's (SSA) free e-file service. Turbotax 1040ez free Visit the SSA's Employer W-2 Filing Instructions & Information website at www. Turbotax 1040ez free socialsecurity. Turbotax 1040ez free gov/employer to register for Business Services Online. Turbotax 1040ez free You will be able to create Forms W-2 online and submit them to the SSA by typing your wage information into easy-to-use fill-in fields. Turbotax 1040ez free In addition, you can print out completed copies of Forms W-2 to file with state or local governments, distribute to your employees, and keep for your records. Turbotax 1040ez free Form W-3 will be created for you based on your Forms W-2. Turbotax 1040ez free Filing Addresses Generally, your filing address for Forms 940, 941, 943, 944, 945, and CT-1 depends on the location of your residence or principal place of business and whether or not you are including a payment with your return. Turbotax 1040ez free There are separate filing addresses for these returns if you are a tax-exempt organization or government entity. Turbotax 1040ez free See the separate instructions for Forms 940, 941, 943, 944, 945, or CT-1 for the filing addresses. Turbotax 1040ez free Dishonored Payments Any form of payment that is dishonored and returned from a financial institution is subject to a penalty. Turbotax 1040ez free The penalty is $25 or 2% of the payment, whichever is more. Turbotax 1040ez free However, the penalty on dishonored payments of $24. Turbotax 1040ez free 99 or less is an amount equal to the payment. Turbotax 1040ez free For example, a dishonored payment of $18 is charged a penalty of $18. Turbotax 1040ez free Photographs of Missing Children The IRS is a proud partner with the National Center for Missing and Exploited Children. Turbotax 1040ez free Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Turbotax 1040ez free You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Turbotax 1040ez free Calendar The following is a list of important dates. Turbotax 1040ez free Also see Publication 509, Tax Calendars. Turbotax 1040ez free   If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, use the next business day. Turbotax 1040ez free A statewide legal holiday delays a filing due date only if the IRS office where you are required to file is located in that state. Turbotax 1040ez free However, a statewide legal holiday does not delay the due date of federal tax deposits. Turbotax 1040ez free See Deposits on Business Days Only in section 11. Turbotax 1040ez free For any filing due date, you will meet the “file” or “furnish” requirement if the envelope containing the return or form is properly addressed, contains sufficient postage, and is postmarked by the U. Turbotax 1040ez free S. Turbotax 1040ez free Postal Service on or before the due date, or sent by an IRS-designated private delivery service on or before the due date. Turbotax 1040ez free See Private Delivery Services under Reminders for more information. Turbotax 1040ez free Introduction This publication explains your tax responsibilities as an employer. Turbotax 1040ez free It explains the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. Turbotax 1040ez free It explains the forms you must give to your employees, those your employees must give to you, and those you must send to the IRS and SSA. Turbotax 1040ez free This guide also has tax tables you need to figure the taxes to withhold from each employee for 2014. Turbotax 1040ez free References to “income tax” in this guide apply only to “federal” income tax. Turbotax 1040ez free Contact your state or local tax department to determine if their rules are different. Turbotax 1040ez free Additional employment tax information is available in Publication 15-A. Turbotax 1040ez free Publication 15-A includes specialized information supplementing the basic employment tax information provided in this publication. Turbotax 1040ez free Publication 15-B, Employer's Tax Guide to Fringe Benefits, contains information about the employment tax treatment and valuation of various types of noncash compensation. Turbotax 1040ez free Most employers must withhold (except FUTA), deposit, report, and pay the following employment taxes. Turbotax 1040ez free Income tax. Turbotax 1040ez free Social security tax. Turbotax 1040ez free Medicare tax. Turbotax 1040ez free FUTA tax. Turbotax 1040ez free There are exceptions to these requirements. Turbotax 1040ez free See section 15 for guidance. Turbotax 1040ez free Railroad retirement taxes are explained in the Instructions for Form CT-1. Turbotax 1040ez free Comments and suggestions. Turbotax 1040ez free   We welcome your comments about this publication and your suggestions for future editions. Turbotax 1040ez free   You can write to us at the following address: Internal Revenue Service Tax Forms & Publications Division 1111 Constitution Ave. Turbotax 1040ez free NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Turbotax 1040ez free Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Turbotax 1040ez free   You can also send us comments from www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/formspubs. Turbotax 1040ez free Click on More Information and then click on Comment on Tax Forms and Publications. Turbotax 1040ez free   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. Turbotax 1040ez free Federal Government employers. Turbotax 1040ez free   The information in this publication, including the rules for making federal tax deposits, applies to federal agencies. Turbotax 1040ez free State and local government employers. Turbotax 1040ez free   Payments to employees for services in the employ of state and local government employers are generally subject to federal income tax withholding but not FUTA tax. Turbotax 1040ez free Most elected and appointed public officials of state or local governments are employees under common law rules. Turbotax 1040ez free See chapter 3 of Publication 963, Federal-State Reference Guide. Turbotax 1040ez free In addition, wages, with certain exceptions, are subject to social security and Medicare taxes. Turbotax 1040ez free See section 15 for more information on the exceptions. Turbotax 1040ez free   If an election worker is employed in another capacity with the same government entity, see Revenue Ruling 2000-6 on page 512 of Internal Revenue Bulletin 2000-6 at www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/pub/irs-irbs/irb00-06. Turbotax 1040ez free pdf. Turbotax 1040ez free   You can get information on reporting and social security coverage from your local IRS office. Turbotax 1040ez free If you have any questions about coverage under a section 218 (Social Security Act) agreement, contact the appropriate state official. Turbotax 1040ez free To find your State Social Security Administrator, visit the National Conference of State Social Security Administrators website at www. Turbotax 1040ez free ncsssa. Turbotax 1040ez free org. Turbotax 1040ez free Disregarded entities and qualified subchapter S subsidiaries (QSubs). Turbotax 1040ez free   Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. Turbotax 1040ez free Eligible single-member entities that have not elected to be taxed as corporations must report and pay employment taxes on wages paid to their employees using the entities' own names and EINs. Turbotax 1040ez free See Regulations sections 1. Turbotax 1040ez free 1361-4(a)(7) and 301. Turbotax 1040ez free 7701-2(c)(2)(iv). Turbotax 1040ez free COBRA premium assistance credit. Turbotax 1040ez free   The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. Turbotax 1040ez free COBRA generally covers multiemployer health plans and health plans maintained by private-sector employers (other than churches) with 20 or more full and part-time employees. Turbotax 1040ez free Parallel requirements apply to these plans under the Employee Retirement Income Security Act of 1974 (ERISA). Turbotax 1040ez free Under the Public Health Service Act, COBRA requirements apply also to health plans covering state or local government employees. Turbotax 1040ez free Similar requirements apply under the Federal Employees Health Benefits Program and under some state laws. Turbotax 1040ez free For the premium assistance (or subsidy) discussed below, these requirements are all referred to as COBRA requirements. Turbotax 1040ez free   Under the American Recovery and Reinvestment Act of 2009 (ARRA), employers are allowed a credit against “payroll taxes” (referred to in this publication as “employment taxes”) for providing COBRA premium assistance to assistance eligible individuals. Turbotax 1040ez free For periods of COBRA continuation coverage beginning after February 16, 2009, a group health plan must treat an assistance eligible individual as having paid the required COBRA continuation coverage premium if the individual elects COBRA coverage and pays 35% of the amount of the premium. Turbotax 1040ez free   An assistance eligible individual is a qualified beneficiary of an employer's group health plan who is eligible for COBRA continuation coverage during the period beginning September 1, 2008, and ending May 31, 2010, due to the involuntarily termination from employment of a covered employee during the period and elects continuation COBRA coverage. Turbotax 1040ez free The assistance for the coverage can last up to 15 months. Turbotax 1040ez free   Employees terminated during the period beginning September 1, 2008, and ending May 31, 2010, who received a severance package that delayed the start of the COBRA continuation coverage, may still be eligible for premium assistance for COBRA continuation coverage. Turbotax 1040ez free For more information see Notice 2009-27, 2009-16 I. Turbotax 1040ez free R. Turbotax 1040ez free B. Turbotax 1040ez free 838, available at www. Turbotax 1040ez free irs. Turbotax 1040ez free gov/irb/2009-16_irb/ar09. Turbotax 1040ez free html. Turbotax 1040ez free   Administrators of the group health plans (or other entities) that provide or administer COBRA continuation coverage must provide notice to assistance eligible individuals of the COBRA premium assistance. Turbotax 1040ez free   The 65% of the premium not paid by the assistance eligible individuals is reimbursed to the employer maintaining the group health plan. Turbotax 1040ez free The reimbursement is made through a credit against the employer's employment tax liabilities. Turbotax 1040ez free For information on how to claim the credit, see the Instructions for Form 941 or the Instructions for Form 944. Turbotax 1040ez free The credit is treated as a deposit made on the first day of the return period (quarter or year). Turbotax 1040ez free In the case of a multiemployer plan, the credit is claimed by the plan, rather than the employer. Turbotax 1040ez free In the case of an insured plan subject to state law continuation coverage requirements, the credit is claimed by the insurance company, rather than the employer. Turbotax 1040ez free   Anyone claiming the credit for COBRA premium assistance payments must maintain the following information to support their claim, including the following. Turbotax 1040ez free Information on the receipt of the assistance eligible individuals' 35% share of the premium, including dates and amounts. Turbotax 1040ez free In the case of an insurance plan, a copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier required under COBRA. Turbotax 1040ez free In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals. Turbotax 1040ez free Attestation of involuntary termination, including the date of the involuntary termination for each covered employee whose involuntary termination is the basis for eligibility for the subsidy. Turbotax 1040ez free Proof of each assistance eligible individual's eligibility for COBRA coverage and the election of COBRA coverage. Turbotax 1040ez free A record of the SSNs of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for one individual or two or more individuals. Turbotax 1040ez free   For more information, visit IRS. Turbotax 1040ez free gov and enter “COBRA” in the search box. Turbotax 1040ez free Prev  Up  Next   Home   More Online Publications