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Www irs gov 1040x Publication 939 - Main Content Table of Contents General Information Taxation of Periodic PaymentsInvestment in the Contract Expected Return Computation Under the General Rule How To Use Actuarial TablesUnisex Annuity Tables Special Elections Worksheets for Determining Taxable Annuity Actuarial Tables Requesting a Ruling on Taxation of Annuity How To Get Tax HelpLow Income Taxpayer Clinics General Information Some of the terms used in this publication are defined in the following paragraphs. Www irs gov 1040x A pension is generally a series of payments made to you after you retire from work. Www irs gov 1040x Pension payments are made regularly and are for past services with an employer. Www irs gov 1040x An annuity is a series of payments under a contract. Www irs gov 1040x You can buy the contract alone or you can buy it with the help of your employer. Www irs gov 1040x Annuity payments are made regularly for more than one full year. Www irs gov 1040x Note. Www irs gov 1040x Distributions from pensions and annuities follow the same rules as outlined in this publication unless otherwise noted. Www irs gov 1040x Types of pensions and annuities. Www irs gov 1040x   Particular types of pensions and annuities include: Fixed period annuities. Www irs gov 1040x You receive definite amounts at regular intervals for a definite length of time. Www irs gov 1040x Annuities for a single life. Www irs gov 1040x You receive definite amounts at regular intervals for life. Www irs gov 1040x The payments end at death. Www irs gov 1040x Joint and survivor annuities. Www irs gov 1040x The first annuitant receives a definite amount at regular intervals for life. Www irs gov 1040x After he or she dies, a second annuitant receives a definite amount at regular intervals for life. Www irs gov 1040x The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. Www irs gov 1040x Variable annuities. Www irs gov 1040x You receive payments that may vary in amount for a definite length of time or for life. Www irs gov 1040x The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds or cost-of-living indexes. Www irs gov 1040x Disability pensions. Www irs gov 1040x You are under minimum retirement age and receive payments because you retired on disability. Www irs gov 1040x If, at the time of your retirement, you were permanently and totally disabled, you may be eligible for the credit for the elderly or the disabled discussed in Publication 524. Www irs gov 1040x If your annuity starting date is after November 18, 1996, the General Rule cannot be used for the following qualified plans. Www irs gov 1040x A qualified employee plan is an employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries. Www irs gov 1040x This plan must meet Internal Revenue Code requirements. Www irs gov 1040x It qualifies for special tax benefits, including tax deferral for employer contributions and rollover distributions. Www irs gov 1040x However, you must use the General Rule if you were 75 or over and the annuity payments are guaranteed for more than 5 years. Www irs gov 1040x A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. Www irs gov 1040x A tax-sheltered annuity is a special annuity plan or contract purchased for an employee of a public school or tax-exempt organization. Www irs gov 1040x   The General Rule is used to figure the tax treatment of various types of pensions and annuities, including nonqualified employee plans. Www irs gov 1040x A nonqualified employee plan is an employer's plan that does not meet Internal Revenue Code requirements. Www irs gov 1040x It does not qualify for most of the tax benefits of a qualified plan. Www irs gov 1040x Annuity worksheets. Www irs gov 1040x   The worksheets found near the end of the text of this publication may be useful to you in figuring the taxable part of your annuity. Www irs gov 1040x Request for a ruling. Www irs gov 1040x   If you are unable to determine the income tax treatment of your pension or annuity, you may ask the Internal Revenue Service to figure the taxable part of your annuity payments. Www irs gov 1040x This is treated as a request for a ruling. Www irs gov 1040x See Requesting a Ruling on Taxation of Annuity near the end of this publication. Www irs gov 1040x Withholding tax and estimated tax. Www irs gov 1040x   Your pension or annuity is subject to federal income tax withholding unless you choose not to have tax withheld. Www irs gov 1040x If you choose not to have tax withheld from your pension or annuity, or if you do not have enough income tax withheld, you may have to make estimated tax payments. Www irs gov 1040x Taxation of Periodic Payments This section explains how the periodic payments you receive under a pension or annuity plan are taxed under the General Rule. Www irs gov 1040x Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). Www irs gov 1040x These payments are also known as amounts received as an annuity. Www irs gov 1040x If you receive an amount from your plan that is a nonperiodic payment (amount not received as an annuity), see Taxation of Nonperiodic Payments in Publication 575. Www irs gov 1040x In general, you can recover your net cost of the pension or annuity tax free over the period you are to receive the payments. Www irs gov 1040x The amount of each payment that is more than the part that represents your net cost is taxable. Www irs gov 1040x Under the General Rule, the part of each annuity payment that represents your net cost is in the same proportion that your investment in the contract is to your expected return. Www irs gov 1040x These terms are explained in the following discussions. Www irs gov 1040x Investment in the Contract In figuring how much of your pension or annuity is taxable under the General Rule, you must figure your investment in the contract. Www irs gov 1040x First, find your net cost of the contract as of the annuity starting date (defined later). Www irs gov 1040x To find this amount, you must first figure the total premiums, contributions, or other amounts paid. Www irs gov 1040x This includes the amounts your employer contributed if you were required to include these amounts in income. Www irs gov 1040x It also includes amounts you actually contributed (except amounts for health and accident benefits and deductible voluntary employee contributions). Www irs gov 1040x From this total cost you subtract: Any refunded premiums, rebates, dividends, or unrepaid loans (any of which were not included in your income) that you received by the later of the annuity starting date or the date on which you received your first payment. Www irs gov 1040x Any additional premiums paid for double indemnity or disability benefits. Www irs gov 1040x Any other tax-free amounts you received under the contract or plan before the later of the dates in (1). Www irs gov 1040x The annuity starting date   is the later of the first day of the first period for which you receive payment under the contract or the date on which the obligation under the contract becomes fixed. Www irs gov 1040x Example. Www irs gov 1040x On January 1 you completed all your payments required under an annuity contract providing for monthly payments starting on August 1, for the period beginning July 1. Www irs gov 1040x The annuity starting date is July 1. Www irs gov 1040x This is the date you use in figuring your investment in the contract and your expected return (discussed later). Www irs gov 1040x Adjustments If any of the following items apply, adjust (add or subtract) your total cost to find your net cost. Www irs gov 1040x Foreign employment. Www irs gov 1040x   If you worked abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludible from your gross income had they been paid directly to you as compensation. Www irs gov 1040x The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (without regard to the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer on your behalf if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) if the contributions would be excludible from your gross income had they been paid directly to you. Www irs gov 1040x Foreign employment contributions while a nonresident alien. Www irs gov 1040x   In determining your cost, special rules apply if you are a U. Www irs gov 1040x S. Www irs gov 1040x citizen or resident alien who received distributions from a plan to which contributions were made while you were a nonresident alien. Www irs gov 1040x Your contributions and your employer's contributions are not included in your cost if the contributions: Were made based on compensation which was for services performed outside the United States which you were a nonresident alien, and Were not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if they had been paid as cash compensation when the services were performed. Www irs gov 1040x Death benefit exclusion. Www irs gov 1040x   If you are the beneficiary of a deceased employee (or former employee), who died before August 21, 1996, you may qualify for a death benefit exclusion of up to $5,000. Www irs gov 1040x The beneficiary of a deceased employee who died after August 20, 1996, will not qualify for the death benefit exclusion. Www irs gov 1040x How to adjust your total cost. Www irs gov 1040x   If you are eligible, treat the amount of any allowable death benefit exclusion as additional cost paid by the employee. Www irs gov 1040x Add it to the cost or unrecovered cost of the annuity at the annuity starting date. Www irs gov 1040x See Example 3 under Computation Under General Rule for an illustration of the adjustment to the cost of the contract. Www irs gov 1040x Net cost. Www irs gov 1040x   Your total cost plus certain adjustments and minus other amounts already recovered before the annuity starting date is your net cost. Www irs gov 1040x This is the unrecovered investment in the contract as of the annuity starting date. Www irs gov 1040x If your annuity starting date is after 1986, this is the maximum amount that you may recover tax free under the contract. Www irs gov 1040x Refund feature. Www irs gov 1040x   Adjustment for the value of the refund feature is only applicable when you report your pension or annuity under the General Rule. Www irs gov 1040x Your annuity contract has a refund feature if: The expected return ( discussed later) of an annuity depends entirely or partly on the life of one or more individuals, The contract provides that payments will be made to a beneficiary or the estate of an annuitant on or after the death of the annuitant if a stated amount or a stated number of payments has not been paid to the annuitant or annuitants before death, and The payments are a refund of the amount you paid for the annuity contract. Www irs gov 1040x   If your annuity has a refund feature, you must reduce your net cost of the contract by the value of the refund feature (figured using Table III or VII at the end of this publication, also see How To Use Actuarial Tables , later) to find the investment in the contract. Www irs gov 1040x Zero value of refund feature. Www irs gov 1040x   For a joint and survivor annuity, the value of the refund feature is zero if: Both annuitants are age 74 or younger, The payments are guaranteed for less than 2½ years, and The survivor's annuity is at least 50% of the first annuitant's annuity. Www irs gov 1040x   For a single-life annuity without survivor benefit, the value of the refund feature is zero if: The payments are guaranteed for less than 2½ years, and The annuitant is: Age 57 or younger (if using the new (unisex) annuity tables), Age 42 or younger (if male and using the old annuity tables), or Age 47 or younger (if female and using the old annuity tables). Www irs gov 1040x   If you do not meet these requirements, you will have to figure the value of the refund feature, as explained in the following discussion. Www irs gov 1040x Examples. Www irs gov 1040x The first example shows how to figure the value of the refund feature when there is only one beneficiary. Www irs gov 1040x Example 2 shows how to figure the value of the refund feature when the contract provides, in addition to a whole life annuity, one or more temporary life annuities for the lives of children. Www irs gov 1040x In both examples, the taxpayer elects to use Tables V through VIII. Www irs gov 1040x If you need the value of the refund feature for a joint and survivor annuity, write to the Internal Revenue Service as explained under Requesting a Ruling on Taxation of Annuity near the end of this publication. Www irs gov 1040x Example 1. Www irs gov 1040x At age 65, Barbara bought for $21,053 an annuity with a refund feature. Www irs gov 1040x She will get $100 a month for life. Www irs gov 1040x Barbara's contract provides that if she does not live long enough to recover the full $21,053, similar payments will be made to her surviving beneficiary until a total of $21,053 has been paid under the contract. Www irs gov 1040x In this case, the contract cost and the total guaranteed return are the same ($21,053). Www irs gov 1040x Barbara's investment in the contract is figured as follows: Net cost $21,053 Amount to be received annually $1,200   Number of years for which payment is guaranteed ($21,053 divided by $1,200) 17. Www irs gov 1040x 54   Rounded to nearest whole number of years 18   Percentage from Actuarial Table VII for age 65 with 18 years of guaranteed payments 15%   Value of the refund feature (rounded to the nearest dollar)—15% of $21,053 3,158 Investment in the contract, adjusted for value of refund feature $17,895       If the total guaranteed return were less than the $21,053 net cost of the contract, Barbara would apply the appropriate percentage from the tables to the lesser amount. Www irs gov 1040x For example, if the contract guaranteed the $100 monthly payments for 17 years to Barbara's estate or beneficiary if she were to die before receiving all the payments for that period, the total guaranteed return would be $20,400 ($100 × 12 × 17 years). Www irs gov 1040x In this case, the value of the refund feature would be $2,856 (14% of $20,400) and Barbara's investment in the contract would be $18,197 ($21,053 minus $2,856) instead of $17,895. Www irs gov 1040x Example 2. Www irs gov 1040x John died while still employed. Www irs gov 1040x His widow, Eleanor, age 48, receives $171 a month for the rest of her life. Www irs gov 1040x John's son, Elmer, age 9, receives $50 a month until he reaches age 18. Www irs gov 1040x John's contributions to the retirement fund totaled $7,559. Www irs gov 1040x 45, with interest on those contributions of $1,602. Www irs gov 1040x 53. Www irs gov 1040x The guarantee or total refund feature of the contract is $9,161. Www irs gov 1040x 98 ($7,559. Www irs gov 1040x 45 plus $1,602. Www irs gov 1040x 53). Www irs gov 1040x The adjustment in the investment in the contract is figured as follows: A) Expected return:*       1) Widow's expected return:         Annual annuity ($171 × 12) $2,052       Multiplied by factor from Table V         (nearest age 48) 34. Www irs gov 1040x 9 $71,614. Www irs gov 1040x 80   2) Child's expected return:         Annual annuity ($50 × 12) $600       Multiplied by factor from         Table VIII (nearest age 9         for term of 9 years) 9. Www irs gov 1040x 0 5,400. Www irs gov 1040x 00   3) Total expected return   $77,014. Www irs gov 1040x 80 B) Adjustment for refund feature:       1) Contributions (net cost) $7,559. Www irs gov 1040x 45   2) Guaranteed amount (contributions of $7,559. Www irs gov 1040x 45 plus interest of $1,602. Www irs gov 1040x 53) $9,161. Www irs gov 1040x 98   3) Minus: Expected return under child's (temporary life) annuity (A(2)) 5,400. Www irs gov 1040x 00   4) Net guaranteed amount $3,761. Www irs gov 1040x 98   5) Multiple from Table VII (nearest age 48 for 2 years duration (recovery of $3,761. Www irs gov 1040x 98 at $171 a month to nearest whole year)) 0%   6) Adjustment required for value of refund feature rounded to the nearest whole dollar  (0% × $3,761. Www irs gov 1040x 98, the smaller of B(3) or B(6)) 0 *Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Www irs gov 1040x See the discussion of expected return, later in this publication. Www irs gov 1040x Free IRS help. Www irs gov 1040x   If you need to request assistance to figure the value of the refund feature, see Requesting a Ruling on Taxation of Annuity near the end of this publication. Www irs gov 1040x Expected Return Your expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Www irs gov 1040x The following discussions explain how to figure the expected return with each type of annuity. Www irs gov 1040x A person's age, for purposes of figuring the expected return, is the age at the birthday nearest to the annuity starting date. Www irs gov 1040x Fixed period annuity. Www irs gov 1040x   If you will get annuity payments for a fixed number of years, without regard to your life expectancy, you must figure your expected return based on that fixed number of years. Www irs gov 1040x It is the total amount you will get beginning at the annuity starting date. Www irs gov 1040x You will receive specific periodic payments for a definite period of time, such as a fixed number of months (but not less than 13). Www irs gov 1040x To figure your expected return, multiply the fixed number of months for which payments are to be made by the amount of the payment specified for each period. Www irs gov 1040x Single life annuity. Www irs gov 1040x   If you are to get annuity payments for the rest of your life, find your expected return as follows. Www irs gov 1040x You must multiply the amount of the annual payment by a multiple based on your life expectancy as of the annuity starting date. Www irs gov 1040x These multiples are set out in actuarial Tables I and V near the end of this publication (see How To Use Actuarial Tables , later). Www irs gov 1040x   You may need to adjust these multiples if the payments are made quarterly, semiannually, or annually. Www irs gov 1040x See Adjustments to Tables I, II, V, VI, and VIA following Table I. Www irs gov 1040x Example. Www irs gov 1040x Henry bought an annuity contract that will give him an annuity of $500 a month for his life. Www irs gov 1040x If at the annuity starting date Henry's nearest birthday is 66, the expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table V, age 66 × 19. Www irs gov 1040x 2 Expected return $115,200 If the payments were to be made to Henry quarterly and the first payment was made one full month after the annuity starting date, Henry would adjust the 19. Www irs gov 1040x 2 multiple by +. Www irs gov 1040x 1. Www irs gov 1040x His expected return would then be $115,800 ($6,000 × 19. Www irs gov 1040x 3). Www irs gov 1040x Annuity for shorter of life or specified period. Www irs gov 1040x   With this type of annuity, you are to get annuity payments either for the rest of your life or until the end of a specified period, whichever period is shorter. Www irs gov 1040x To figure your expected return, multiply the amount of your annual payment by a multiple in Table IV or VIII for temporary life annuities. Www irs gov 1040x Find the proper multiple based on your sex (if using Table IV), your age at the annuity starting date, and the nearest whole number of years in the specified period. Www irs gov 1040x Example. Www irs gov 1040x Harriet purchased an annuity this year that will pay her $200 each month for five years or until she dies, whichever period is shorter. Www irs gov 1040x She was age 65 at her birthday nearest the annuity starting date. Www irs gov 1040x She figures the expected return as follows: Annual payment ($200 × 12 months) $2,400 Multiple shown in Table VIII, age 65, 5-year term × 4. Www irs gov 1040x 9 Expected return $11,760 She uses Table VIII (not Table IV) because all her contributions were made after June 30, 1986. Www irs gov 1040x See Special Elections, later. Www irs gov 1040x Joint and survivor annuities. Www irs gov 1040x   If you have an annuity that pays you a periodic income for life and after your death provides an identical lifetime periodic income to your spouse (or some other person), you figure the expected return based on your combined life expectancies. Www irs gov 1040x To figure the expected return, multiply the annual payment by a multiple in Table II or VI based on your joint life expectancies. Www irs gov 1040x If your payments are made quarterly, semiannually, or annually, you may need to adjust these multiples. Www irs gov 1040x See Adjustments to Tables I, II, V, VI, and VIA following Table I near the end of this publication. Www irs gov 1040x Example. Www irs gov 1040x John bought a joint and survivor annuity providing payments of $500 a month for his life, and, after his death, $500 a month for the remainder of his wife's life. Www irs gov 1040x At John's annuity starting date, his age at his nearest birthday is 70 and his wife's at her nearest birthday is 67. Www irs gov 1040x The expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table VI, ages 67 and 70 × 22. Www irs gov 1040x 0 Expected return $132,000 Different payments to survivor. Www irs gov 1040x   If your contract provides that payments to a survivor annuitant will be different from the amount you receive, you must use a computation which accounts for both the joint lives of the annuitants and the life of the survivor. Www irs gov 1040x Example 1. Www irs gov 1040x Gerald bought a contract providing for payments to him of $500 a month for life and, after his death, payments to his wife, Mary, of $350 a month for life. Www irs gov 1040x If, at the annuity starting date, Gerald's nearest birthday is 70 and Mary's is 67, the expected return under the contract is figured as follows: Combined multiple for Gerald and Mary, ages 70 and 67 (from Table VI)   22. Www irs gov 1040x 0 Multiple for Gerald, age 70 (from Table V)   16. Www irs gov 1040x 0 Difference: Multiple applicable to Mary   6. Www irs gov 1040x 0 Gerald's annual payment ($500 × 12) $6,000   Gerald's multiple 16. Www irs gov 1040x 0   Gerald's expected return   $96,000 Mary's annual payment ($350 × 12) $4,200   Mary's multiple 6. Www irs gov 1040x 0   Mary's expected return   25,200 Total expected return under the contract   $121,200 Example 2. Www irs gov 1040x Your husband died while still employed. Www irs gov 1040x Under the terms of his employer's retirement plan, you are entitled to get an immediate annuity of $400 a month for the rest of your life or until you remarry. Www irs gov 1040x Your daughters, Marie and Jean, are each entitled to immediate temporary life annuities of $150 a month until they reach age 18. Www irs gov 1040x You were 50 years old at the annuity starting date. Www irs gov 1040x Marie was 16 and Jean was 14. Www irs gov 1040x Using the multiples shown in Tables V and VIII at the end of this publication, the total expected return on the annuity starting date is $169,680, figured as follows: Widow, age 50 (multiple from Table V—33. Www irs gov 1040x 1 × $4,800 annual payment) $158,880 Marie, age 16 for 2 years duration (multiple from Table VIII—2. Www irs gov 1040x 0 × $1,800 annual payment) 3,600 Jean, age 14 for 4 years duration (multiple from Table VIII—4. Www irs gov 1040x 0 × $1,800 annual payment) 7,200 Total expected return $169,680 No computation of expected return is made based on your husband's age at the date of death because he died before the annuity starting date. Www irs gov 1040x Computation Under the General Rule Note. Www irs gov 1040x Variable annuities use a different computation for determining the exclusion amounts. Www irs gov 1040x See Variable annuities later. Www irs gov 1040x Under the General Rule, you figure the taxable part of your annuity by using the following steps: Step 1. Www irs gov 1040x   Figure the amount of your investment in the contract, including any adjustments for the refund feature and the death benefit exclusion, if applicable. Www irs gov 1040x See Death benefit exclusion , earlier. Www irs gov 1040x Step 2. Www irs gov 1040x   Figure your expected return. Www irs gov 1040x Step 3. Www irs gov 1040x   Divide Step 1 by Step 2 and round to three decimal places. Www irs gov 1040x This will give you the exclusion percentage. Www irs gov 1040x Step 4. Www irs gov 1040x   Multiply the exclusion percentage by the first regular periodic payment. Www irs gov 1040x The result is the tax-free part of each pension or annuity payment. Www irs gov 1040x   The tax-free part remains the same even if the total payment increases due to variation in the annuity amount such as cost of living increases, or you outlive the life expectancy factor used. Www irs gov 1040x However, if your annuity starting date is after 1986, the total amount of annuity income that is tax free over the years cannot exceed your net cost. Www irs gov 1040x   Each annuitant applies the same exclusion percentage to his or her initial payment called for in the contract. Www irs gov 1040x Step 5. Www irs gov 1040x   Multiply the tax-free part of each payment (step 4) by the number of payments received during the year. Www irs gov 1040x This will give you the tax-free part of the total payment for the year. Www irs gov 1040x    In the first year of your annuity, your first payment or part of your first payment may be for a fraction of the payment period. Www irs gov 1040x This fractional amount is multiplied by your exclusion percentage to get the tax-free part. Www irs gov 1040x Step 6. Www irs gov 1040x   Subtract the tax-free part from the total payment you received. Www irs gov 1040x The rest is the taxable part of your pension or annuity. Www irs gov 1040x Example 1. Www irs gov 1040x You purchased an annuity with an investment in the contract of $10,800. Www irs gov 1040x Under its terms, the annuity will pay you $100 a month for life. Www irs gov 1040x The multiple for your age (age 65) is 20. Www irs gov 1040x 0 as shown in Table V. Www irs gov 1040x Your expected return is $24,000 (20 × 12 × $100). Www irs gov 1040x Your cost of $10,800, divided by your expected return of $24,000, equals 45. Www irs gov 1040x 0%. Www irs gov 1040x This is the percentage you will not have to include in income. Www irs gov 1040x Each year, until your net cost is recovered, $540 (45% of $1,200) will be tax free and you will include $660 ($1,200 − $540) in your income. Www irs gov 1040x If you had received only six payments of $100 ($600) during the year, your exclusion would have been $270 (45% of $100 × 6 payments). Www irs gov 1040x Example 2. Www irs gov 1040x Gerald bought a joint and survivor annuity. Www irs gov 1040x Gerald's investment in the contract is $62,712 and the expected return is $121,200. Www irs gov 1040x The exclusion percentage is 51. Www irs gov 1040x 7% ($62,712 ÷ $121,200). Www irs gov 1040x Gerald will receive $500 a month ($6,000 a year). Www irs gov 1040x Each year, until his net cost is recovered, $3,102 (51. Www irs gov 1040x 7% of his total payments received of $6,000) will be tax free and $2,898 ($6,000 − $3,102) will be included in his income. Www irs gov 1040x If Gerald dies, his wife will receive $350 a month ($4,200 a year). Www irs gov 1040x If Gerald had not recovered all of his net cost before his death, his wife will use the same exclusion percentage (51. Www irs gov 1040x 7%). Www irs gov 1040x Each year, until the entire net cost is recovered, his wife will receive $2,171. Www irs gov 1040x 40 (51. Www irs gov 1040x 7% of her payments received of $4,200) tax free. Www irs gov 1040x She will include $2,028. Www irs gov 1040x 60 ($4,200 − $2,171. Www irs gov 1040x 40) in her income tax return. Www irs gov 1040x Example 3. Www irs gov 1040x Using the same facts as Example 2 under Different payments to survivor, you are to receive an annual annuity of $4,800 until you die or remarry. Www irs gov 1040x Your two daughters each receive annual annuities of $1,800 until they reach age 18. Www irs gov 1040x Your husband contributed $25,576 to the plan. Www irs gov 1040x You are eligible for the $5,000 death benefit exclusion because your husband died before August 21, 1996. Www irs gov 1040x Adjusted Investment in the Contract Contributions $25,576 Plus: Death benefit exclusion 5,000 Adjusted investment in the contract $30,576 The total expected return, as previously figured (in Example 2 under Different payments to survivor), is $169,680. Www irs gov 1040x The exclusion percentage of 18. Www irs gov 1040x 0% ($30,576 ÷ $169,680) applies to the annuity payments you and each of your daughters receive. Www irs gov 1040x Each full year $864 (18. Www irs gov 1040x 0% × $4,800) will be tax free to you, and you must include $3,936 in your income tax return. Www irs gov 1040x Each year, until age 18, $324 (18. Www irs gov 1040x 0% × $1,800) of each of your daughters' payments will be tax free and each must include the balance, $1,476, as income on her own income tax return. Www irs gov 1040x Part-year payments. Www irs gov 1040x   If you receive payments for only part of a year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments received during the year. Www irs gov 1040x   If you receive amounts during the year that represent 12 payments, one for each month in that year, and an amount that represents payments for months in a prior year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments the amounts received represent. Www irs gov 1040x For instance, if you received amounts during the year that represent the 12 payments for that year plus an amount that represents three payments for a prior year, multiply that amount by the 15 (12 + 3) payments received that the year. Www irs gov 1040x   If you received a fractional payment, follow Step 5, discussed earlier. Www irs gov 1040x This gives you the tax-free part of your total payment. Www irs gov 1040x Example. Www irs gov 1040x On September 28, Mary bought an annuity contract for $22,050 that will give her $125 a month for life, beginning October 30. Www irs gov 1040x The applicable multiple from Table V is 23. Www irs gov 1040x 3 (age 61). Www irs gov 1040x Her expected return is $34,950 ($125 × 12 × 23. Www irs gov 1040x 3). Www irs gov 1040x Mary's investment in the contract of $22,050, divided by her expected return of $34,950, equals 63. Www irs gov 1040x 1%. Www irs gov 1040x Each payment received will consist of 63. Www irs gov 1040x 1% return of cost and 36. Www irs gov 1040x 9% taxable income, until her net cost of the contract is fully recovered. Www irs gov 1040x During the first year, Mary received three payments of $125, or $375, of which $236. Www irs gov 1040x 63 (63. Www irs gov 1040x 1% × $375) is a return of cost. Www irs gov 1040x The remaining $138. Www irs gov 1040x 37 is included in income. Www irs gov 1040x Increase in annuity payments. Www irs gov 1040x   The tax-free amount remains the same as the amount figured at the annuity starting date, even if the payment increases. Www irs gov 1040x All increases in the installment payments are fully taxable. Www irs gov 1040x   However, if your annuity payments are scheduled to increase at a definite date in the future you must figure the expected return for that annuity using the method described in section 1. Www irs gov 1040x 72-5(a)(5) of the regulations. Www irs gov 1040x Example. Www irs gov 1040x Joe's wife died while she was still employed and, as her beneficiary, he began receiving an annuity of $147 per month. Www irs gov 1040x In figuring the taxable part, Joe elects to use Tables V through VIII. Www irs gov 1040x The cost of the contract was $7,938, consisting of the sum of his wife's net contributions, adjusted for any refund feature. Www irs gov 1040x His expected return as of the annuity starting date is $35,280 (age 65, multiple of 20. Www irs gov 1040x 0 × $1,764 annual payment). Www irs gov 1040x The exclusion percentage is $7,938 ÷ $35,280, or 22. Www irs gov 1040x 5%. Www irs gov 1040x During the year he received 11 monthly payments of $147, or $1,617. Www irs gov 1040x Of this amount, 22. Www irs gov 1040x 5% × $147 × 11 ($363. Www irs gov 1040x 83) is tax free as a return of cost and the balance of $1,253. Www irs gov 1040x 17 is taxable. Www irs gov 1040x Later, because of a cost-of-living increase, his annuity payment was increased to $166 per month, or $1,992 a year (12 × $166). Www irs gov 1040x The tax-free part is still only 22. Www irs gov 1040x 5% of the annuity payments as of the annuity starting date (22. Www irs gov 1040x 5% × $147 × 12 = $396. Www irs gov 1040x 90 for a full year). Www irs gov 1040x The increase of $228 ($1,992 − $1,764 (12 × $147)) is fully taxable. Www irs gov 1040x Variable annuities. Www irs gov 1040x   For variable annuity payments, figure the amount of each payment that is tax free by dividing your investment in the contract (adjusted for any refund feature) by the total number of periodic payments you expect to get under the contract. Www irs gov 1040x   If the annuity is for a definite period, you determine the total number of payments by multiplying the number of payments to be made each year by the number of years you will receive payments. Www irs gov 1040x If the annuity is for life, you determine the total number of payments by using a multiple from the appropriate actuarial table. Www irs gov 1040x Example. Www irs gov 1040x Frank purchased a variable annuity at age 65. Www irs gov 1040x The total cost of the contract was $12,000. Www irs gov 1040x The annuity starting date is January 1 of the year of purchase. Www irs gov 1040x His annuity will be paid, starting July 1, in variable annual installments for his life. Www irs gov 1040x The tax-free amount of each payment, until he has recovered his cost of his contract, is: Investment in the contract $12,000 Number of expected annual payments (multiple for age 65 from Table V) 20 Tax-free amount of each payment ($12,000 ÷ 20) $600 If Frank's first payment is $920, he includes only $320 ($920 − $600) in his gross income. Www irs gov 1040x   If the tax-free amount for a year is more than the payments you receive in that year, you may choose, when you receive the next payment, to refigure the tax-free part. Www irs gov 1040x Divide the amount of the periodic tax-free part that is more than the payment you received by the remaining number of payments you expect. Www irs gov 1040x The result is added to the previously figured periodic tax-free part. Www irs gov 1040x The sum is the amount of each future payment that will be tax free. Www irs gov 1040x Example. Www irs gov 1040x Using the facts of the previous example about Frank, assume that after Frank's $920 payment, he received $500 in the following year, and $1,200 in the year after that. Www irs gov 1040x Frank does not pay tax on the $500 (second year) payment because $600 of each annual pension payment is tax free. Www irs gov 1040x Since the $500 payment is less than the $600 annual tax-free amount, he may choose to refigure his tax-free part when he receives his $1,200 (third year) payment, as follows: Amount tax free in second year $600. Www irs gov 1040x 00 Amount received in second year 500. Www irs gov 1040x 00 Difference $100. Www irs gov 1040x 00 Number of remaining payments after the first 2 payments (age 67, from Table V) 18. Www irs gov 1040x 4 Amount to be added to previously determined annual tax-free part ($100 ÷ 18. Www irs gov 1040x 4) $5. Www irs gov 1040x 43 Revised annual tax-free part for third and later years ($600 + $5. Www irs gov 1040x 43) $605. Www irs gov 1040x 43 Amount taxable in third year ($1,200 − $605. Www irs gov 1040x 43) $594. Www irs gov 1040x 57 If you choose to refigure your tax-free amount,   you must file a statement with your income tax return stating that you are refiguring the tax-free amount in accordance with the rules of section 1. Www irs gov 1040x 72–4(d)(3) of the Income Tax Regulations. Www irs gov 1040x The statement must also show the following information: The annuity starting date and your age on that date. Www irs gov 1040x The first day of the first period for which you received an annuity payment in the current year. Www irs gov 1040x Your investment in the contract as originally figured. Www irs gov 1040x The total of all amounts received tax free under the annuity from the annuity starting date through the first day of the first period for which you received an annuity payment in the current tax year. Www irs gov 1040x Exclusion Limits Your annuity starting date determines the total amount of annuity income that you can exclude from income over the years. Www irs gov 1040x Exclusion limited to net cost. Www irs gov 1040x   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a return of your cost cannot exceed your net cost (figured without any reduction for a refund feature). Www irs gov 1040x This is the unrecovered investment in the contract as of the annuity starting date. Www irs gov 1040x   If your annuity starting date is after July 1, 1986, any unrecovered net cost at your (or last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. Www irs gov 1040x This deduction is not subject to the 2%-of-adjusted-gross-income limit. Www irs gov 1040x Example 1. Www irs gov 1040x Your annuity starting date is after 1986. Www irs gov 1040x Your total cost is $12,500, and your net cost is $10,000, taking into account certain adjustments. Www irs gov 1040x There is no refund feature. Www irs gov 1040x Your monthly annuity payment is $833. Www irs gov 1040x 33. Www irs gov 1040x Your exclusion ratio is 12% and you exclude $100 a month. Www irs gov 1040x Your exclusion ends after 100 months, when you have excluded your net cost of $10,000. Www irs gov 1040x Thereafter, your annuity payments are fully taxable. Www irs gov 1040x Example 2. Www irs gov 1040x The facts are the same as in Example 1, except that there is a refund feature, and you die after 5 years with no surviving annuitant. Www irs gov 1040x The adjustment for the refund feature is $1,000, so the investment in the contract is $9,000. Www irs gov 1040x The exclusion ratio is 10. Www irs gov 1040x 8%, and your monthly exclusion is $90. Www irs gov 1040x After 5 years (60 months), you have recovered tax free only $5,400 ($90 x 60). Www irs gov 1040x An itemized deduction for the unrecovered net cost of $4,600 ($10,000 net cost minus $5,400) may be taken on your final income tax return. Www irs gov 1040x Your unrecovered investment is determined without regard to the refund feature adjustment, discussed earlier, under Adjustments. Www irs gov 1040x Exclusion not limited to net cost. Www irs gov 1040x   If your annuity starting date was before 1987, you could continue to take your monthly exclusion for as long as you receive your annuity. Www irs gov 1040x If you choose a joint and survivor annuity, your survivor continues to take the survivor's exclusion figured as of the annuity starting date. Www irs gov 1040x The total exclusion may be more than your investment in the contract. Www irs gov 1040x How To Use Actuarial Tables In figuring, under the General Rule, the taxable part of your annuity payments that you are to get for the rest of your life (rather than for a fixed number of years), you must use one or more of the actuarial tables in this publication. Www irs gov 1040x Unisex Annuity Tables Effective July 1, 1986, the Internal Revenue Service adopted new annuity Tables V through VIII, in which your sex is not considered when determining the applicable factor. Www irs gov 1040x These tables correspond to the old Tables I through IV. Www irs gov 1040x In general, Tables V through VIII must be used if you made contributions to the retirement plan after June 30, 1986. Www irs gov 1040x If you made no contributions to the plan after June 30, 1986, generally you must use only Tables I through IV. Www irs gov 1040x However, if you received an annuity payment after June 30, 1986, you may elect to use Tables V through VIII (see Annuity received after June 30, 1986, later). Www irs gov 1040x Special Elections Although you generally must use Tables V through VIII if you made contributions to the retirement plan after June 30, 1986, and Tables I through IV if you made no contributions after June 30, 1986, you can make the following special elections to select which tables to use. Www irs gov 1040x Contributions made both before July 1986 and after June 1986. Www irs gov 1040x   If you made contributions to the retirement plan both before July 1986 and after June 1986, you may elect to use Tables I through IV for the pre-July 1986 cost of the contract, and Tables V through VIII for the post-June 1986 cost. Www irs gov 1040x (See the examples below. Www irs gov 1040x )    Making the election. Www irs gov 1040x Attach this statement to your income tax return for the first year in which you receive an annuity:    “I elect to apply the provisions of paragraph (d) of section 1. Www irs gov 1040x 72–6 of the Income Tax Regulations. Www irs gov 1040x ”   The statement must also include your name, address, social security number, and the amount of the pre-July 1986 investment in the contract. Www irs gov 1040x   If your investment in the contract includes post-June 1986 contributions to the plan, and you do not make the election to use Tables I through IV and Tables V through VIII, then you can only use Tables V through VIII in figuring the taxable part of your annuity. Www irs gov 1040x You must also use Tables V through VIII if you are unable or do not wish to determine the portions of your contributions which were made before July 1, 1986, and after June 30, 1986. Www irs gov 1040x    Advantages of election. Www irs gov 1040x In general, a lesser amount of each annual annuity payment is taxable if you separately figure your exclusion ratio for pre-July 1986 and post-June 1986 contributions. Www irs gov 1040x    If you intend to make this election, save your records that substantiate your pre-July 1986 and post-June 1986 contributions. Www irs gov 1040x If the death benefit exclusion applies (see discussion, earlier), you do not have to apportion it between the pre-July 1986 and the post-June 1986 investment in the contract. Www irs gov 1040x   The following examples illustrate the separate computations required if you elect to use Tables I through IV for your pre-July 1986 investment in the contract and Tables V through VIII for your post-June 1986 investment in the contract. Www irs gov 1040x Example 1. Www irs gov 1040x Bill, who is single, contributed $42,000 to the retirement plan and will receive an annual annuity of $24,000 for life. Www irs gov 1040x Payment of the $42,000 contribution is guaranteed under a refund feature. Www irs gov 1040x Bill is 55 years old as of the annuity starting date. Www irs gov 1040x For figuring the taxable part of Bill's annuity, he chose to make separate computations for his pre-July 1986 investment in the contract of $41,300, and for his post-June 1986 investment in the contract of $700. Www irs gov 1040x       Pre- July 1986   Post- June 1986 A. Www irs gov 1040x Adjustment for refund feature         1) Net cost $41,300   $700   2) Annual annuity—$24,000  ($41,300/$42,000 × $24,000) $23,600       ($700/$42,000 × $24,000)     $400   3) Guarantee under contract $41,300   $700   4) No. Www irs gov 1040x of years payments  guaranteed (rounded), A(3) ÷ A(2) 2   2   5) Applicable percentage from  Tables III and VII 1%   0%   6) Adjustment for value of refund  feature, A(5) × smaller of A(1)  or A(3) $413   $0 B. Www irs gov 1040x Investment in the contract         1) Net cost $41,300   $700   2) Minus: Amount in A(6) 413   0   3) Investment in the contract $40,887   $700 C. Www irs gov 1040x Expected return         1) Annual annuity receivable $24,000   $24,000   2) Multiples from Tables I and V 21. Www irs gov 1040x 7   28. Www irs gov 1040x 6   3) Expected return, C(1) × C(2) $520,800   $686,400 D. Www irs gov 1040x Tax-free part of annuity         1) Exclusion ratio as decimal,  B(3) ÷ C(3) . Www irs gov 1040x 079   . Www irs gov 1040x 001   2) Tax-free part, C(1) × D(1) $1,896   $24 The tax-free part of Bill's total annuity is $1,920 ($1,896 plus $24). Www irs gov 1040x The taxable part of his annuity is $22,080 ($24,000 minus $1,920). Www irs gov 1040x If the annuity starting date is after 1986, the exclusion over the years cannot exceed the net cost (figured without any reduction for a refund feature). Www irs gov 1040x Example 2. Www irs gov 1040x Al is age 62 at his nearest birthday to the annuity starting date. Www irs gov 1040x Al's wife is age 60 at her nearest birthday to the annuity starting date. Www irs gov 1040x The joint and survivor annuity pays $1,000 per month to Al for life, and $500 per month to Al's surviving wife after his death. Www irs gov 1040x The pre-July 1986 investment in the contract is $53,100 and the post-June 1986 investment in the contract is $7,000. Www irs gov 1040x Al makes the election described in Example 1 . Www irs gov 1040x For purposes of this example, assume the refund feature adjustment is zero. Www irs gov 1040x If an adjustment is required, IRS will figure the amount. Www irs gov 1040x See Requesting a Ruling on Taxation of Annuity near the end of this publication. Www irs gov 1040x       Pre-  July 1986   Post-  June 1986 A. Www irs gov 1040x Adjustment for refund feature         1) Net cost $53,100   $7,000   2) Annual annuity—$12,000  ($53,100/$60,100 × $12,000) $10,602       ($7,000/$60,100 × $12,000)     $1,398   3) Guaranteed under the contract $53,100   $7,000   4) Number of years guaranteed,  rounded, A(3) ÷ A(2) 5   5   5) Applicable percentages 0%   0%   6) Refund feature adjustment, A(5) × smaller of A(1) or A(3) 0   0 B. Www irs gov 1040x Investment in the contract         1) Net cost $53,100   $7,000   2) Refund feature adjustment 0   0   3) Investment in the contract adjusted for refund feature $53,100   $7,000 C. Www irs gov 1040x Expected return         1) Multiple for both annuitants from Tables II and VI 25. Www irs gov 1040x 4   28. Www irs gov 1040x 8   2) Multiple for first annuitant from Tables I and V 16. Www irs gov 1040x 9   22. Www irs gov 1040x 5   3) Multiple applicable to surviving annuitant, subtract C(2) from C(1) 8. Www irs gov 1040x 5   6. Www irs gov 1040x 3   4) Annual annuity to surviving annuitant $6,000   $6,000   5) Portion of expected return for surviving annuitant, C(4) × C(3) $51,000   $37,800   6) Annual annuity to first annuitant $12,000   $12,000   7) Plus: Portion of expected return for first annuitant, C(6) × C(2) $202,800   $270,000   8) Expected return for both annuitants, C(5) + C(7) $253,800   $307,800 D. Www irs gov 1040x Tax-free part of annuity         1) Exclusion ratio as a decimal, B(3) ÷ C(8) . Www irs gov 1040x 209   . Www irs gov 1040x 023   2) Retiree's tax-free part of annuity, C(6) × D(1) $2,508   $276   3) Survivor's tax-free part of annuity, C(4) × D(1) $1,254   $138 The tax-free part of Al's total annuity is $2,784 ($2,508 + $276). Www irs gov 1040x The taxable part of his annuity is $9,216 ($12,000 − $2,784). Www irs gov 1040x The exclusion over the years cannot exceed the net cost of the contract (figured without any reduction for a refund feature) if the annuity starting date is after 1986. Www irs gov 1040x After Al's death, his widow will apply the same exclusion percentages (20. Www irs gov 1040x 9% and 2. Www irs gov 1040x 3%) to her annual annuity of $6,000 to figure the tax-free part of her annuity. Www irs gov 1040x Annuity received after June 30, 1986. Www irs gov 1040x   If you receive an annuity payment after June 30, 1986, (regardless of your annuity starting date), you may elect to treat the entire cost of the contract as post-June 1986 cost (even if you made no post-June 1986 contributions to the plan) and use Tables V through VIII. Www irs gov 1040x Once made, you cannot revoke the election, which will apply to all payments during the year and in any later year. Www irs gov 1040x    Make the election by attaching the following statement to your income tax return. Www irs gov 1040x    “I elect, under section 1. Www irs gov 1040x 72–9 of the Income Tax Regulations, to treat my entire cost of the contract as a post-June 1986 cost of the plan. Www irs gov 1040x ”   The statement must also include your name, address, and social security number. Www irs gov 1040x   You should also indicate you are making this election if you are unable or do not wish to determine the parts of your contributions which were made before July 1, 1986, and after June 30, 1986. Www irs gov 1040x Disqualifying form of payment or settlement. Www irs gov 1040x   If your annuity starting date is after June 30, 1986, and the contract provides for a disqualifying form of payment or settlement, such as an option to receive a lump sum in full discharge of the obligation under the contract, the entire investment in the contract is treated as post-June 1986 investment in the contract. Www irs gov 1040x See regulations section 1. Www irs gov 1040x 72–6(d)(3) for additional examples of disqualifying forms of payment or settlement. Www irs gov 1040x You can find the Income Tax Regulations in many libraries and at Internal Revenue Service Offices. Www irs gov 1040x Worksheets for Determining Taxable Annuity Worksheets I and II. Www irs gov 1040x   Worksheets I and II follow for determining your taxable annuity under Regulations Section 1. Www irs gov 1040x 72–6(d)(6) Election. Www irs gov 1040x Worksheet I For Determining Taxable Annuity Under Regulations Section 1. Www irs gov 1040x 72-6(d)(6) Election For Single Annuitant With No Survivor Annuity               Pre-July 1986   Post-June 1986 A. Www irs gov 1040x   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Www irs gov 1040x )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)   Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages* from Tables III and VII                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. Www irs gov 1040x If not, the IRS will calculate the refund feature percentage. Www irs gov 1040x             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Www irs gov 1040x   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund feature:                   B(1) minus B(2)                             C. Www irs gov 1040x   Expected Return             1)   Annual Annuity:                   12 times monthly annuity**             2)   Expected return multiples from Tables I and V             3)     Expected return:                   C(1) times C(2)                             D. Www irs gov 1040x   Tax-Free Part of Annuity             1)     Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(3)             2)     Tax-free part of annuity:                   C(1) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. Www irs gov 1040x     Worksheet II For Determining Taxable Annuity Under Regulations Section 1. Www irs gov 1040x 72-6(d)(6) Election For Joint and Survivor Annuity               Pre-July 1986   Post-June 1986 A. Www irs gov 1040x   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Www irs gov 1040x )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)     Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages*                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. Www irs gov 1040x If not, the IRS will calculate the refund feature percentage. Www irs gov 1040x             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Www irs gov 1040x   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund future:                   B(1) minus B(2)                             C. Www irs gov 1040x   Expected Return             1)   Multiples for both annuitants, Tables II and VI             2)   Multiple for retiree. Www irs gov 1040x Tables I and VI             3)   Multiple for survivor:                   C(1) minus C(2)             4)   Annual annuity to survivor:                   12 times potential monthly rate for survivor**             5)   Expected return for survivor:                   C(3) times C(4)             6)   Annual annuity to retiree:                   12 times monthly rate for retiree**             7)   Expected return for retiree:                   C(2) times C(6)             8)   Total expected return:                   C(5) plus C(7)                             D. Www irs gov 1040x   Tax-Free Part of Annuity             1)   Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(8)             2)   Retiree's tax-free part of annuity:                   C(6) times D(1)             3)   Survivor's tax-free part of annuity, if surviving after death of retiree:                   C(4) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. Www irs gov 1040x   Actuarial Tables Please click here for the text description of the image. Www irs gov 1040x Actuarial Tables Please click here for the text description of the image. Www irs gov 1040x Actuarial Tables Please click here for the text description of the image. Www irs gov 1040x Actuarial tables Please click here for the text description of the image. 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Www irs gov 1040x Actuarial tables Requesting a Ruling on Taxation of Annuity If you are a retiree, or the survivor of an employee or retiree, you may ask the Internal Revenue Service to help you determine the taxation of your annuity. Www irs gov 1040x If you make this request, you are asking for a ruling. Www irs gov 1040x User fee. Www irs gov 1040x   Under the law in effect at the time this publication went to print, the IRS must charge a user fee for all ruling requests. Www irs gov 1040x You should call the IRS for the proper fee. Www irs gov 1040x A request solely for the value of the refund feature is not treated as a ruling request and requires no fee. Www irs gov 1040x Send your request to:     Internal Revenue Service  Attention: EP Letter Rulings P. Www irs gov 1040x O. Www irs gov 1040x Box 27063 McPherson Station Washington, DC 20038 The user fee is allowed as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit. Www irs gov 1040x When to make the request. Www irs gov 1040x   Please note that requests sent between February 1 and April 15 may experience some delay. Www irs gov 1040x We process requests in the order received, and we will reply to your request as soon as we can process it. Www irs gov 1040x If you do not receive your ruling by the required filing date, you may use Form 4868, Application for Automatic Extension of Time To File U. Www irs gov 1040x S. Www irs gov 1040x Individual Income Tax Return, to get an extension of time to file. Www irs gov 1040x Information you must furnish. Www irs gov 1040x   You must furnish the information listed below so the IRS can comply with your request. Www irs gov 1040x Failure to furnish the information will result in a delay in processing your request. Www irs gov 1040x Please send only copies of the following documents, as the IRS retains all material sent for its records: A letter explaining the question(s) you wish to have resolved or the information you need from the ruling. Www irs gov 1040x Copies of any documents showing distributions, annuity rates, and annuity options available to you. Www irs gov 1040x A copy of any Form 1099–R you received since your annuity began. Www irs gov 1040x A statement indicating whether you have filed your return for the year for which you are making the request. Www irs gov 1040x If you have requested an extension of time to file that return, please indicate the extension date. Www irs gov 1040x Your daytime phone number. Www irs gov 1040x Your current mailing address. Www irs gov 1040x A power of attorney if someone other than you, an attorney, a certified public accountant, or an enrolled agent is signing this request. Www irs gov 1040x Form 2848, Power of Attorney and Declaration of Representative, may be used for this purpose. Www irs gov 1040x A completed Tax Information Sheet (or facsimile) shown on the next page. Www irs gov 1040x Sign and date the Disclosure and Perjury Statement (or facsimile) at the end of the tax information sheet. Www irs gov 1040x This statement must be signed by the retiree or the survivor annuitant. Www irs gov 1040x It cannot be signed by a representative. Www irs gov 1040x Tax Information Sheet Please click here for the text description of the image. Www irs gov 1040x Tax Information Sheet Please click here for the text description of the image. Www irs gov 1040x Tax Information Sheet (continued) How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Www irs gov 1040x Free help with your tax return. Www irs gov 1040x   You can get free help preparing your return nationwide from IRS-certified volunteers. Www irs gov 1040x The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Www irs gov 1040x The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Www irs gov 1040x Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Www irs gov 1040x In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Www irs gov 1040x To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Www irs gov 1040x gov, download the IRS2Go app, or call 1-800-906-9887. Www irs gov 1040x   As part of the TCE program, AARP offers the Tax-Aide counseling program. Www irs gov 1040x To find the nearest AARP Tax-Aide site, visit AARP's website at www. Www irs gov 1040x aarp. Www irs gov 1040x org/money/taxaide or call 1-888-227-7669. Www irs gov 1040x For more information on these programs, go to IRS. Www irs gov 1040x gov and enter “VITA” in the search box. Www irs gov 1040x Internet. Www irs gov 1040x    IRS. Www irs gov 1040x gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Www irs gov 1040x Download the free IRS2Go app from the iTunes app store or from Google Play. Www irs gov 1040x Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Www irs gov 1040x Check the status of your 2013 refund with the Where's My Refund? application on IRS. Www irs gov 1040x gov or download the IRS2Go app and select the Refund Status option. Www irs gov 1040x The IRS issues more than 9 out of 10 refunds in less than 21 days. Www irs gov 1040x Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Www irs gov 1040x You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Www irs gov 1040x The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Www irs gov 1040x Use the Interactive Tax Assistant (ITA) to research your tax questions. Www irs gov 1040x No need to wait on the phone or stand in line. Www irs gov 1040x The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Www irs gov 1040x When you reach the response screen, you can print the entire interview and the final response for your records. Www irs gov 1040x New subject areas are added on a regular basis. Www irs gov 1040x  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Www irs gov 1040x gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Www irs gov 1040x You can use the IRS Tax Map, to search publications and instructions by topic or keyword. Www irs gov 1040x The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Www irs gov 1040x When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Www irs gov 1040x Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Www irs gov 1040x You can also ask the IRS to mail a return or an account transcript to you. Www irs gov 1040x Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Www irs gov 1040x gov or by calling 1-800-908-9946. Www irs gov 1040x Tax return and tax account transcripts are generally available for the current year and the past three years. Www irs gov 1040x Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Www irs gov 1040x Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Www irs gov 1040x If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Www irs gov 1040x Check the status of your amended return using Where's My Amended Return? Go to IRS. Www irs gov 1040x gov and enter Where's My Amended Return? in the search box. Www irs gov 1040x You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Www irs gov 1040x It can take up to 3 weeks from the date you mailed it to show up in our system. Www irs gov 1040x Make a payment using one of several safe and convenient electronic payment options available on IRS. Www irs gov 1040x gov. Www irs gov 1040x Select the Payment tab on the front page of IRS. Www irs gov 1040x gov for more information. Www irs gov 1040x Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Www irs gov 1040x Figure your income tax withholding with the IRS Withholding Calculator on IRS. Www irs gov 1040x gov. Www irs gov 1040x Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Www irs gov 1040x Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Www irs gov 1040x gov. Www irs gov 1040x Request an Electronic Filing PIN by going to IRS. Www irs gov 1040x gov and entering Electronic Filing PIN in the search box. Www irs gov 1040x Download forms, instructions and publications, including accessible versions for people with disabilities. Www irs gov 1040x Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Www irs gov 1040x gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Www irs gov 1040x An employee can answer questions about your tax account or help you set up a payment plan. Www irs gov 1040x Before you visit, check the Office Locator on IRS. Www irs gov 1040x gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Www irs gov 1040x If you have a special need, such as a disability, you can request an appointment. Www irs gov 1040x Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Www irs gov 1040x Apply for an Employer Identification Number (EIN). Www irs gov 1040x Go to IRS. Www irs gov 1040x gov and enter Apply for an EIN in the search box. Www irs gov 1040x Read the Internal Revenue Code, regulations, or other official guidance. Www irs gov 1040x Read Internal Revenue Bulletins. Www irs gov 1040x Sign up to receive local and national tax news and more by email. Www irs gov 1040x Just click on “subscriptions” above the search box on IRS. Www irs gov 1040x gov and choose from a variety of options. Www irs gov 1040x    Phone. Www irs gov 1040x You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Www irs gov 1040x Download the free IRS2Go app from the iTunes app store or from Google Play. Www irs gov 1040x Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. Www irs gov 1040x gov, or download the IRS2Go app. Www irs gov 1040x Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Www irs gov 1040x The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Www irs gov 1040x Mos
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Www irs gov 1040x 5. Www irs gov 1040x   Recordkeeping Table of Contents How To Prove ExpensesWhat Are Adequate Records? What If I Have Incomplete Records? Separating and Combining Expenses How Long To Keep Records and Receipts Examples of Records If you deduct travel, entertainment, gift, or transportation expenses, you must be able to prove (substantiate) certain elements of expense. Www irs gov 1040x This chapter discusses the records you need to keep to prove these expenses. Www irs gov 1040x If you keep timely and accurate records, you will have support to show the IRS if your tax return is ever examined. Www irs gov 1040x You will also have proof of expenses that your employer may require if you are reimbursed under an accountable plan. Www irs gov 1040x These plans are discussed in chapter 6 under Reimbursements . Www irs gov 1040x How To Prove Expenses Table 5-1 is a summary of records you need to prove each expense discussed in this publication. Www irs gov 1040x You must be able to prove the elements listed across the top portion of the chart. Www irs gov 1040x You prove them by having the information and receipts (where needed) for the expenses listed in the first column. Www irs gov 1040x You cannot deduct amounts that you approximate or estimate. Www irs gov 1040x You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. Www irs gov 1040x You must generally prepare a written record for it to be considered adequate. Www irs gov 1040x This is because written evidence is more reliable than oral evidence alone. Www irs gov 1040x However, if you prepare a record on a computer, it is considered an adequate record. Www irs gov 1040x What Are Adequate Records? You should keep the proof you need in an account book, diary, log, statement of expense, trip sheets, or similar record. Www irs gov 1040x You should also keep documentary evidence that, together with your record, will support each element of an expense. Www irs gov 1040x Documentary evidence. Www irs gov 1040x   You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses. Www irs gov 1040x Exception. Www irs gov 1040x   Documentary evidence is not needed if any of the following conditions apply. Www irs gov 1040x You have meals or lodging expenses while traveling away from home for which you account to your employer under an accountable plan, and you use a per diem allowance method that includes meals and/or lodging. Www irs gov 1040x ( Accountable plans and per diem allowances are discussed in chapter 6. Www irs gov 1040x ) Your expense, other than lodging, is less than $75. Www irs gov 1040x You have a transportation expense for which a receipt is not readily available. Www irs gov 1040x Adequate evidence. Www irs gov 1040x   Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense. Www irs gov 1040x   For example, a hotel receipt is enough to support expenses for business travel if it has all of the following information. Www irs gov 1040x The name and location of the hotel. Www irs gov 1040x The dates you stayed there. Www irs gov 1040x Separate amounts for charges such as lodging, meals, and telephone calls. Www irs gov 1040x   A restaurant receipt is enough to prove an expense for a business meal if it has all of the following information. Www irs gov 1040x The name and location of the restaurant. Www irs gov 1040x The number of people served. Www irs gov 1040x The date and amount of the expense. Www irs gov 1040x If a charge is made for items other than food and beverages, the receipt must show that this is the case. Www irs gov 1040x Canceled check. Www irs gov 1040x   A canceled check, together with a bill from the payee, ordinarily establishes the cost. Www irs gov 1040x However, a canceled check by itself does not prove a business expense without other evidence to show that it was for a business purpose. Www irs gov 1040x Duplicate information. Www irs gov 1040x   You do not have to record information in your account book or other record that duplicates information shown on a receipt as long as your records and receipts complement each other in an orderly manner. Www irs gov 1040x   You do not have to record amounts your employer pays directly for any ticket or other travel item. Www irs gov 1040x However, if you charge these items to your employer, through a credit card or otherwise, you must keep a record of the amounts you spend. Www irs gov 1040x Timely-kept records. Www irs gov 1040x   You should record the elements of an expense or of a business use at or near the time of the expense or use and support it with sufficient documentary evidence. Www irs gov 1040x A timely-kept record has more value than a statement prepared later when generally there is a lack of accurate recall. Www irs gov 1040x   You do not need to write down the elements of every expense on the day of the expense. Www irs gov 1040x If you maintain a log on a weekly basis that accounts for use during the week, the log is considered a timely-kept record. Www irs gov 1040x   If you give your employer, client, or customer an expense account statement, it can also be considered a timely-kept record. Www irs gov 1040x This is true if you copy it from your account book, diary, log, statement of expense, trip sheets, or similar record. Www irs gov 1040x Proving business purpose. Www irs gov 1040x   You must generally provide a written statement of the business purpose of an expense. Www irs gov 1040x However, the degree of proof varies according to the circumstances in each case. Www irs gov 1040x If the business purpose of an expense is clear from the surrounding circumstances, then you do not need to give a written explanation. Www irs gov 1040x Example. Www irs gov 1040x If you are a sales representative who calls on customers on an established sales route, you do not have to give a written explanation of the business purpose for traveling that route. Www irs gov 1040x You can satisfy the requirements by recording the length of the delivery route once, the date of each trip at or near the time of the trips, and the total miles you drove the car during the tax year. Www irs gov 1040x You could also establish the date of each trip with a receipt, record of delivery, or other documentary evidence. Www irs gov 1040x Confidential information. Www irs gov 1040x   You do not need to put confidential information relating to an element of a deductible expense (such as the place, business purpose, or business relationship) in your account book, diary, or other record. Www irs gov 1040x However, you do have to record the information elsewhere at or near the time of the expense and have it available to fully prove that element of the expense. Www irs gov 1040x What If I Have Incomplete Records? If you do not have complete records to prove an element of an expense, then you must prove the element with: Your own written or oral statement containing specific information about the element, and Other supporting evidence that is sufficient to establish the element. Www irs gov 1040x If the element is the description of a gift, or the cost, time, place, or date of an expense, the supporting evidence must be either direct evidence or documentary evidence. Www irs gov 1040x Direct evidence can be written statements or the oral testimony of your guests or other witnesses setting forth detailed information about the element. Www irs gov 1040x Documentary evidence can be receipts, paid bills, or similar evidence. Www irs gov 1040x If the element is either the business relationship of your guests or the business purpose of the amount spent, the supporting evidence can be circumstantial rather than direct. Www irs gov 1040x For example, the nature of your work, such as making deliveries, provides circumstantial evidence of the use of your car for business purposes. Www irs gov 1040x Invoices of deliveries establish when you used the car for business. Www irs gov 1040x Table 5-1. Www irs gov 1040x How To Prove Certain Business Expenses IF you have expenses for . Www irs gov 1040x . Www irs gov 1040x THEN you must keep records that show details of the following elements . Www irs gov 1040x . Www irs gov 1040x . Www irs gov 1040x   Amount Time Place or  Description Business Purpose Business Relationship Travel Cost of each separate expense for travel, lodging, and meals. Www irs gov 1040x Incidental expenses may be totaled in reasonable categories such as taxis, fees and tips, etc. Www irs gov 1040x Dates you left and returned for each trip and number of days spent on business. Www irs gov 1040x Destination or area of your travel (name of city, town, or other designation). Www irs gov 1040x Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. Www irs gov 1040x    Relationship: N/A Entertainment Cost of each separate expense. Www irs gov 1040x Incidental expenses such as taxis, telephones, etc. Www irs gov 1040x , may be totaled on a daily basis. Www irs gov 1040x Date of entertainment. Www irs gov 1040x (Also see Business Purpose. Www irs gov 1040x ) Name and address or location of place of entertainment. Www irs gov 1040x Type of entertainment if not otherwise apparent. Www irs gov 1040x (Also see Business Purpose. Www irs gov 1040x ) Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. Www irs gov 1040x  For entertainment, the nature of the business discussion or activity. Www irs gov 1040x If the entertainment was directly before or after a business discussion: the date, place, nature, and duration of the business discussion, and the identities of the persons who took part in both the business discussion and the entertainment activity. Www irs gov 1040x    Relationship: Occupations or other information (such as names, titles, or other designations) about the recipients that shows their business relationship to you. Www irs gov 1040x  For entertainment, you must also prove that you or your employee was present if the entertainment was a business meal. Www irs gov 1040x Gifts Cost of the gift. Www irs gov 1040x Date of the gift. Www irs gov 1040x Description of the gift. Www irs gov 1040x   Transportation Cost of each separate expense. Www irs gov 1040x For car expenses, the cost of the car and any improvements, the date you started using it for business, the mileage for each business use, and the total miles for the year. Www irs gov 1040x Date of the expense. Www irs gov 1040x For car expenses, the date of the use of the car. Www irs gov 1040x Your business destination. Www irs gov 1040x Purpose: Business purpose for the expense. Www irs gov 1040x    Relationship: N/A Sampling. Www irs gov 1040x   You can keep an adequate record for parts of a tax year and use that record to prove the amount of business or investment use for the entire year. Www irs gov 1040x You must demonstrate by other evidence that the periods for which an adequate record is kept are representative of the use throughout the tax year. Www irs gov 1040x Example. Www irs gov 1040x You use your car to visit the offices of clients, meet with suppliers and other subcontractors, and pick up and deliver items to clients. Www irs gov 1040x There is no other business use of the car, but you and your family use the car for personal purposes. Www irs gov 1040x You keep adequate records during the first week of each month that show that 75% of the use of the car is for business. Www irs gov 1040x Invoices and bills show that your business use continues at the same rate during the later weeks of each month. Www irs gov 1040x Your weekly records are representative of the use of the car each month and are sufficient evidence to support the percentage of business use for the year. Www irs gov 1040x Exceptional circumstances. Www irs gov 1040x   You can satisfy the substantiation requirements with other evidence if, because of the nature of the situation in which an expense is made, you cannot get a receipt. Www irs gov 1040x This applies if all the following are true. Www irs gov 1040x You were unable to obtain evidence for an element of the expense or use that completely satisfies the requirements explained earlier under What Are Adequate Records . Www irs gov 1040x You are unable to obtain evidence for an element that completely satisfies the two rules listed earlier under What If I Have Incomplete Records . Www irs gov 1040x You have presented other evidence for the element that is the best proof possible under the circumstances. Www irs gov 1040x Destroyed records. Www irs gov 1040x   If you cannot produce a receipt because of reasons beyond your control, you can prove a deduction by reconstructing your records or expenses. Www irs gov 1040x Reasons beyond your control include fire, flood, and other casualties. Www irs gov 1040x    Table 5-2. Www irs gov 1040x Daily Business Mileage and Expense Log Name:       Odometer Readings Expenses Date Destination  (City, Town, or Area) Business Purpose Start Stop Miles  this trip Type  (Gas, oil, tolls, etc. Www irs gov 1040x ) Amount                                                                                                                   Weekly  Total             Total Year-to-Date             Separating and Combining Expenses This section explains when expenses must be kept separate and when expenses can be combined. Www irs gov 1040x Separating expenses. Www irs gov 1040x   Each separate payment is generally considered a separate expense. Www irs gov 1040x For example, if you entertain a customer or client at dinner and then go to the theater, the dinner expense and the cost of the theater tickets are two separate expenses. Www irs gov 1040x You must record them separately in your records. Www irs gov 1040x Season or series tickets. Www irs gov 1040x   If you buy season or series tickets for business use, you must treat each ticket in the series as a separate item. Www irs gov 1040x To determine the cost of individual tickets, divide the total cost (but not more than face value) by the number of games or performances in the series. Www irs gov 1040x You must keep records to show whether you use each ticket as a gift or entertainment. Www irs gov 1040x Also, you must be able to prove the cost of nonluxury box seat tickets if you rent a skybox or other private luxury box for more than one event. Www irs gov 1040x See Entertainment tickets in chapter 2. Www irs gov 1040x Combining items. Www irs gov 1040x   You can make one daily entry in your record for reasonable categories of expenses. Www irs gov 1040x Examples are taxi fares, telephone calls, or other incidental travel costs. Www irs gov 1040x Meals should be in a separate category. Www irs gov 1040x You can include tips for meal-related services with the costs of the meals. Www irs gov 1040x   Expenses of a similar nature occurring during the course of a single event are considered a single expense. Www irs gov 1040x For example, if during entertainment at a cocktail lounge, you pay separately for each serving of refreshments, the total expense for the refreshments is treated as a single expense. Www irs gov 1040x Car expenses. Www irs gov 1040x   You can account for several uses of your car that can be considered part of a single use, such as a round trip or uninterrupted business use, with a single record. Www irs gov 1040x Minimal personal use, such as a stop for lunch on the way between two business stops, is not an interruption of business use. Www irs gov 1040x Example. Www irs gov 1040x You make deliveries at several different locations on a route that begins and ends at your employer's business premises and that includes a stop at the business premises between two deliveries. Www irs gov 1040x You can account for these using a single record of miles driven. Www irs gov 1040x Gift expenses. Www irs gov 1040x   You do not always have to record the name of each recipient of a gift. Www irs gov 1040x A general listing will be enough if it is evident that you are not trying to avoid the $25 annual limit on the amount you can deduct for gifts to any one person. Www irs gov 1040x For example, if you buy a large number of tickets to local high school basketball games and give one or two tickets to each of many customers, it is usually enough to record a general description of the recipients. Www irs gov 1040x Allocating total cost. Www irs gov 1040x   If you can prove the total cost of travel or entertainment but you cannot prove how much it cost for each person who participated in the event, you may have to allocate the total cost among you and your guests on a pro rata basis. Www irs gov 1040x To do so, you must establish the number of persons who participated in the event. Www irs gov 1040x   An allocation would be needed, for example, if you did not have a business relationship with all of your guests. Www irs gov 1040x See Allocating between business and nonbusiness in chapter 2. Www irs gov 1040x If your return is examined. Www irs gov 1040x    If your return is examined, you may have to provide additional information to the IRS. Www irs gov 1040x This information could be needed to clarify or to establish the accuracy or reliability of information contained in your records, statements, testimony, or documentary evidence before a deduction is allowed. Www irs gov 1040x    THIS IS NOT AN OFFICIAL INTERNAL REVENUE FORM Table 5-3. Www irs gov 1040x Weekly Traveling Expense and Entertainment Record From: To: Name: Expenses Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total 1. Www irs gov 1040x Travel Expenses: Airlines                                 Excess Baggage                                 Bus – Train                                 Cab and Limousine                                 Tips                                 Porter                                 2. Www irs gov 1040x Meals and Lodging:  Breakfast                                 Lunch                                 Dinner                                 Hotel and Motel  (Detail in Schedule B)                                 3. Www irs gov 1040x Entertainment  (Detail in Schedule C)                                 4. Www irs gov 1040x Other Expenses:  Postage                                 Telephone & Telegraph                                 Stationery & Printing                                 Stenographer                                 Sample Room                                 Advertising                                 Assistant(s)                                 Trade Shows                                 5. Www irs gov 1040x Car Expenses: (List all car expenses - the division between business and personal expenses may be made at the end of the year. Www irs gov 1040x ) (Detail mileage in Schedule A. Www irs gov 1040x ) Gas, oil, lube, wash                                 Repairs, parts                                 Tires, supplies                                 Parking fees, tolls                                 6. Www irs gov 1040x Other (Identify)                                 Total                                 Note: Attach receipted bills for (1) ALL lodging and (2) any other expenses of $75. Www irs gov 1040x 00 or more. Www irs gov 1040x Schedule A – Car Mileage: End                 Start                 Total                 Business Mileage                 Schedule B – Lodging Hotel or Motel Name                 City                 Schedule C – Entertainment Date Item Place Amount Business Purpose Business Relationship                                             WEEKLY REIMBURSEMENTS:     Travel and transportation expenses     Other reimbursements     TOTAL   How Long To Keep Records and Receipts You must keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Www irs gov 1040x Generally, this means you must keep records that support your deduction (or an item of income) for 3 years from the date you file the income tax return on which the deduction is claimed. Www irs gov 1040x A return filed early is considered filed on the due date. Www irs gov 1040x For a more complete explanation of how long to keep records, see Publication 583, Starting a Business and Keeping Records. Www irs gov 1040x You must keep records of the business use of your car for each year of the recovery period. Www irs gov 1040x See More-than-50%-use test in chapter 4 under Depreciation Deduction. Www irs gov 1040x Reimbursed for expenses. Www irs gov 1040x   Employees who give their records and documentation to their employers and are reimbursed for their expenses generally do not have to keep copies of this information. Www irs gov 1040x However, you may have to prove your expenses if any of the following conditions apply. Www irs gov 1040x You claim deductions for expenses that are more than reimbursements. Www irs gov 1040x Your expenses are reimbursed under a nonaccountable plan. Www irs gov 1040x Your employer does not use adequate accounting procedures to verify expense accounts. Www irs gov 1040x You are related to your employer as defined under Per Diem and Car Allowances , in chapter 6. Www irs gov 1040x Reimbursements , adequate accounting , and nonaccountable plans are discussed in chapter 6. Www irs gov 1040x Examples of Records Table 5-2 and Table 5-3 are examples of worksheets which can be used for tracking business expenses. Www irs gov 1040x Prev  Up  Next   Home   More Online Publications