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2012 Irs Tax Forms 1040a

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2012 Irs Tax Forms 1040a

2012 irs tax forms 1040a 3. 2012 irs tax forms 1040a   Investment Expenses Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Limits on DeductionsPassive activity. 2012 irs tax forms 1040a Other income (nonpassive income). 2012 irs tax forms 1040a Expenses. 2012 irs tax forms 1040a Additional information. 2012 irs tax forms 1040a Interest ExpensesInvestment Interest Limit on Deduction Bond Premium AmortizationSpecial rules to determine amounts payable on a bond. 2012 irs tax forms 1040a Basis. 2012 irs tax forms 1040a How To Figure Amortization Choosing To Amortize How To Report Amortization Expenses of Producing IncomeFees to buy or sell. 2012 irs tax forms 1040a Including mutual fund or REMIC expenses in income. 2012 irs tax forms 1040a Nondeductible ExpensesUsed as collateral. 2012 irs tax forms 1040a Short-sale expenses. 2012 irs tax forms 1040a Expenses for both tax-exempt and taxable income. 2012 irs tax forms 1040a State income taxes. 2012 irs tax forms 1040a Nondeductible amount. 2012 irs tax forms 1040a Basis adjustment. 2012 irs tax forms 1040a How To Report Investment Expenses When To Report Investment Expenses Topics - This chapter discusses: Limits on Deductions , Interest Expenses , Bond Premium Amortization , Expenses of Producing Income , Nondeductible Expenses , How To Report Investment Expenses , and When To Report Investment Expenses . 2012 irs tax forms 1040a Useful Items - You may want to see: Publication 535 Business Expenses 925 Passive Activity and At-Risk Rules 929 Tax Rules for Children and Dependents Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 4952 Investment Interest Expense Deduction See chapter 5, How To Get Tax Help , for information about getting these publications and forms. 2012 irs tax forms 1040a Limits on Deductions Your deductions for investment expenses may be limited by: The at-risk rules, The passive activity loss limits, The limit on investment interest, or The 2% limit on certain miscellaneous itemized deductions. 2012 irs tax forms 1040a The at-risk rules and passive activity rules are explained briefly in this section. 2012 irs tax forms 1040a The limit on investment interest is explained later in this chapter under Interest Expenses . 2012 irs tax forms 1040a The 2% limit is explained later in this chapter under Expenses of Producing Income . 2012 irs tax forms 1040a At-risk rules. 2012 irs tax forms 1040a   Special at-risk rules apply to most income-producing activities. 2012 irs tax forms 1040a These rules limit the amount of loss you can deduct to the amount you risk losing in the activity. 2012 irs tax forms 1040a Generally, this is the cash and the adjusted basis of property you contribute to the activity. 2012 irs tax forms 1040a It also includes money you borrow for use in the activity if you are personally liable for repayment or if you use property not used in the activity as security for the loan. 2012 irs tax forms 1040a For more information, see Publication 925. 2012 irs tax forms 1040a Passive activity losses and credits. 2012 irs tax forms 1040a   The amount of losses and tax credits you can claim from passive activities is limited. 2012 irs tax forms 1040a Generally, you are allowed to deduct passive activity losses only up to the amount of your passive activity income. 2012 irs tax forms 1040a Also, you can use credits from passive activities only against tax on the income from passive activities. 2012 irs tax forms 1040a There are exceptions for certain activities, such as rental real estate activities. 2012 irs tax forms 1040a Passive activity. 2012 irs tax forms 1040a   A passive activity generally is any activity involving the conduct of any trade or business in which you do not materially participate and any rental activity. 2012 irs tax forms 1040a However, if you are involved in renting real estate, the activity is not a passive activity if both of the following are true. 2012 irs tax forms 1040a More than one-half of the personal services you perform during the year in all trades or businesses are performed in real property trades or businesses in which you materially participate. 2012 irs tax forms 1040a You perform more than 750 hours of services during the year in real property trades or businesses in which you materially participate. 2012 irs tax forms 1040a  The term “trade or business” generally means any activity that involves the conduct of a trade or business, is conducted in anticipation of starting a trade or business, or involves certain research or experimental expenditures. 2012 irs tax forms 1040a However, it does not include rental activities or certain activities treated as incidental to holding property for investment. 2012 irs tax forms 1040a   You are considered to materially participate in an activity if you are involved on a regular, continuous, and substantial basis in the operations of the activity. 2012 irs tax forms 1040a Other income (nonpassive income). 2012 irs tax forms 1040a    Generally, you can use losses from passive activities only to offset income from passive activities. 2012 irs tax forms 1040a You cannot use passive activity losses to offset your other income, such as your wages or your portfolio income. 2012 irs tax forms 1040a Portfolio income includes gross income from interest, dividends, annuities, or royalties that is not derived in the ordinary course of a trade or business. 2012 irs tax forms 1040a It also includes gains or losses (not derived in the ordinary course of a trade or business) from the sale or trade of property (other than an interest in a passive activity) producing portfolio income or held for investment. 2012 irs tax forms 1040a This includes capital gain distributions from mutual funds (and other regulated investment companies) and real estate investment trusts. 2012 irs tax forms 1040a   You cannot use passive activity losses to offset Alaska Permanent Fund dividends. 2012 irs tax forms 1040a Expenses. 2012 irs tax forms 1040a   Do not include in the computation of your passive activity income or loss: Expenses (other than interest) that are clearly and directly allocable to your portfolio income, or Interest expense properly allocable to portfolio income. 2012 irs tax forms 1040a However, this interest and other expenses may be subject to other limits. 2012 irs tax forms 1040a These limits are explained in the rest of this chapter. 2012 irs tax forms 1040a Additional information. 2012 irs tax forms 1040a   For more information about determining and reporting income and losses from passive activities, see Publication 925. 2012 irs tax forms 1040a Interest Expenses This section discusses interest expenses you may be able to deduct as an investor. 2012 irs tax forms 1040a For information on business interest, see chapter 4 of Publication 535. 2012 irs tax forms 1040a You cannot deduct personal interest expenses other than qualified home mortgage interest, as explained in Publication 936, Home Mortgage Interest Deduction, and interest on certain student loans, as explained in Publication 970. 2012 irs tax forms 1040a Investment Interest If you borrow money to buy property you hold for investment, the interest you pay is investment interest. 2012 irs tax forms 1040a You can deduct investment interest subject to the limit discussed later. 2012 irs tax forms 1040a However, you cannot deduct interest you incurred to produce tax-exempt income. 2012 irs tax forms 1040a See Tax-exempt income under Nondeductible Expenses, later. 2012 irs tax forms 1040a You also cannot deduct interest expenses on straddles discussed under Interest expense and carrying charges on straddles , later. 2012 irs tax forms 1040a Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. 2012 irs tax forms 1040a Investment property. 2012 irs tax forms 1040a   Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. 2012 irs tax forms 1040a It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). 2012 irs tax forms 1040a Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). 2012 irs tax forms 1040a Partners, shareholders, and beneficiaries. 2012 irs tax forms 1040a   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. 2012 irs tax forms 1040a Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. 2012 irs tax forms 1040a Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. 2012 irs tax forms 1040a The allocation is not affected by the use of property that secures the debt. 2012 irs tax forms 1040a Example 1. 2012 irs tax forms 1040a You borrow $10,000 and use $8,000 to buy stock. 2012 irs tax forms 1040a You use the other $2,000 to buy items for your home. 2012 irs tax forms 1040a Since 80% of the debt is used for, and allocated to, investment purposes, 80% of the interest on that debt is investment interest. 2012 irs tax forms 1040a The other 20% is nondeductible personal interest. 2012 irs tax forms 1040a Debt proceeds received in cash. 2012 irs tax forms 1040a   If you receive debt proceeds in cash, the proceeds are generally not treated as investment property. 2012 irs tax forms 1040a Debt proceeds deposited in account. 2012 irs tax forms 1040a   If you deposit debt proceeds in an account, that deposit is treated as investment property, regardless of whether the account bears interest. 2012 irs tax forms 1040a But, if you withdraw the funds and use them for another purpose, you must reallocate the debt to determine the amount considered to be for investment purposes. 2012 irs tax forms 1040a Example 2. 2012 irs tax forms 1040a Assume in Example 1 that you borrowed the money on March 1 and immediately bought the stock for $8,000. 2012 irs tax forms 1040a You did not buy the household items until June 1. 2012 irs tax forms 1040a You had deposited the $2,000 in the bank. 2012 irs tax forms 1040a You had no other transactions on the bank account until June. 2012 irs tax forms 1040a You did not sell the stock, and you made no principal payments on the debt. 2012 irs tax forms 1040a You paid interest from another account. 2012 irs tax forms 1040a The $8,000 is treated as being used for an investment purpose. 2012 irs tax forms 1040a The $2,000 is treated as being used for an investment purpose for the 3-month period. 2012 irs tax forms 1040a Your total interest expense for 3 months on this debt is investment interest. 2012 irs tax forms 1040a In June, when you spend the $2,000 for household items, you must begin to allocate 80% of the debt and the interest expense to investment purposes and 20% to personal purposes. 2012 irs tax forms 1040a Amounts paid within 30 days. 2012 irs tax forms 1040a   If you receive loan proceeds in cash or if the loan proceeds are deposited in an account, you can treat any payment (up to the amount of the proceeds) made from any account you own, or from cash, as made from those proceeds. 2012 irs tax forms 1040a This applies to any payment made within 30 days before or after the proceeds are received in cash or deposited in your account. 2012 irs tax forms 1040a   If you received the loan proceeds in cash, you can treat the payment as made on the date you received the cash instead of the date you actually made the payment. 2012 irs tax forms 1040a Payments on debt may require new allocation. 2012 irs tax forms 1040a   As you repay a debt used for more than one purpose, you must reallocate the balance. 2012 irs tax forms 1040a You must first reduce the amount allocated to personal purposes by the repayment. 2012 irs tax forms 1040a You then reallocate the rest of the debt to find what part is for investment purposes. 2012 irs tax forms 1040a Example 3. 2012 irs tax forms 1040a If, in Example 2 , you repay $500 on November 1, the entire repayment is applied against the amount allocated to personal purposes. 2012 irs tax forms 1040a The debt balance is now allocated as $8,000 for investment purposes and $1,500 for personal purposes. 2012 irs tax forms 1040a Until the next reallocation is necessary, 84% ($8,000 ÷ $9,500) of the debt and the interest expense is allocated to investment. 2012 irs tax forms 1040a Pass-through entities. 2012 irs tax forms 1040a   If you use borrowed funds to buy an interest in a partnership or S corporation, then the interest on those funds must be allocated based on the assets of the entity. 2012 irs tax forms 1040a If you contribute to the capital of the entity, you can make the allocation using any reasonable method. 2012 irs tax forms 1040a Additional allocation rules. 2012 irs tax forms 1040a   For more information about allocating interest expense, see chapter 4 of Publication 535. 2012 irs tax forms 1040a When To Deduct Investment Interest If you use the cash method of accounting, you must pay the interest before you can deduct it. 2012 irs tax forms 1040a If you use an accrual method of accounting, you can deduct interest over the period it accrues, regardless of when you pay it. 2012 irs tax forms 1040a For an exception, see Unpaid expenses owed to related party under When To Report Investment Expenses, later in this chapter. 2012 irs tax forms 1040a Example. 2012 irs tax forms 1040a You borrowed $1,000 on August 26, 2013, payable in 90 days at 12% interest. 2012 irs tax forms 1040a On November 26, 2013, you paid this with a new note for $1,030, due on February 26, 2014. 2012 irs tax forms 1040a If you use the cash method of accounting, you cannot deduct any part of the $30 interest on your return for 2013 because you did not actually pay it. 2012 irs tax forms 1040a If you use an accrual method, you may be able to deduct a portion of the interest on the loans through December 31, 2013, on your return for 2013. 2012 irs tax forms 1040a Interest paid in advance. 2012 irs tax forms 1040a   Generally, if you pay interest in advance for a period that goes beyond the end of the tax year, you must spread the interest over the tax years to which it belongs under the OID rules discussed in chapter 1. 2012 irs tax forms 1040a You can deduct in each year only the interest for that year. 2012 irs tax forms 1040a Interest on margin accounts. 2012 irs tax forms 1040a   If you are a cash method taxpayer, you can deduct interest on margin accounts to buy taxable securities as investment interest in the year you paid it. 2012 irs tax forms 1040a You are considered to have paid interest on these accounts only when you actually pay the broker or when payment becomes available to the broker through your account. 2012 irs tax forms 1040a Payment may become available to the broker through your account when the broker collects dividends or interest for your account, or sells securities held for you or received from you. 2012 irs tax forms 1040a   You cannot deduct any interest on money borrowed for personal reasons. 2012 irs tax forms 1040a Limit on interest deduction for market discount bonds. 2012 irs tax forms 1040a   The amount you can deduct for interest expense you paid or accrued during the year to buy or carry a market discount bond may be limited. 2012 irs tax forms 1040a This limit does not apply if you accrue the market discount and include it in your income currently. 2012 irs tax forms 1040a   Under this limit, the interest is deductible only to the extent it is more than: The total interest and OID includible in gross income for the bond for the year, plus The market discount for the number of days you held the bond during the year. 2012 irs tax forms 1040a Figure the amount in (2) above using the rules for figuring accrued market discount in chapter 1 under Market Discount Bonds . 2012 irs tax forms 1040a Interest not deducted due to limit. 2012 irs tax forms 1040a   In the year you dispose of the bond, you can deduct any interest expense you were not allowed to deduct in earlier years because of the limit. 2012 irs tax forms 1040a Choosing to deduct disallowed interest expense before the year of disposition. 2012 irs tax forms 1040a   You can choose to deduct disallowed interest expense in any year before the year you dispose of the bond, up to your net interest income from the bond during the year. 2012 irs tax forms 1040a The rest of the disallowed interest expense remains deductible in the year you dispose of the bond. 2012 irs tax forms 1040a Net interest income. 2012 irs tax forms 1040a   This is the interest income (including OID) from the bond that you include in income for the year, minus the interest expense paid or accrued during the year to purchase or carry the bond. 2012 irs tax forms 1040a Limit on interest deduction for short-term obligations. 2012 irs tax forms 1040a   If the current income inclusion rules discussed in chapter 1 under Discount on Short-Term Obligations do not apply to you, the amount you can deduct for interest expense you paid or accrued during the year to buy or carry a short-term obligation is limited. 2012 irs tax forms 1040a   The interest is deductible only to the extent it is more than: The amount of acquisition discount or OID on the obligation for the tax year, plus The amount of any interest payable on the obligation for the year that is not included in income because of your accounting method (other than interest taken into account in determining the amount of acquisition discount or OID). 2012 irs tax forms 1040a The method of determining acquisition discount and OID for short-term obligations is discussed in chapter 1 under Discount on Short-Term Obligations . 2012 irs tax forms 1040a Interest not deducted due to limit. 2012 irs tax forms 1040a   In the year you dispose of the obligation, or, if you choose, in another year in which you have net interest income from the obligation, you can deduct any interest expense you were not allowed to deduct for an earlier year because of the limit. 2012 irs tax forms 1040a Follow the same rules provided in the earlier discussion under Limit on interest deduction for market discount bonds , earlier. 2012 irs tax forms 1040a Limit on Deduction Generally, your deduction for investment interest expense is limited to your net investment income. 2012 irs tax forms 1040a You can carry over the amount of investment interest you could not deduct because of this limit to the next tax year. 2012 irs tax forms 1040a The interest carried over is treated as investment interest paid or accrued in that next year. 2012 irs tax forms 1040a You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. 2012 irs tax forms 1040a Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. 2012 irs tax forms 1040a Investment income. 2012 irs tax forms 1040a   This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). 2012 irs tax forms 1040a Investment income does not include Alaska Permanent Fund dividends. 2012 irs tax forms 1040a It also does not include qualified dividends or net capital gain unless you choose to include them. 2012 irs tax forms 1040a Choosing to include qualified dividends. 2012 irs tax forms 1040a   Investment income generally does not include qualified dividends, discussed in chapter 1. 2012 irs tax forms 1040a However, you can choose to include all or part of your qualified dividends in investment income. 2012 irs tax forms 1040a   You make this choice by completing Form 4952, line 4g, according to its instructions. 2012 irs tax forms 1040a   If you choose to include any of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. 2012 irs tax forms 1040a Choosing to include net capital gain. 2012 irs tax forms 1040a    Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). 2012 irs tax forms 1040a However, you can choose to include all or part of your net capital gain in investment income. 2012 irs tax forms 1040a   You make this choice by completing Form 4952, line 4g, according to its instructions. 2012 irs tax forms 1040a   If you choose to include any of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. 2012 irs tax forms 1040a   For more information about the capital gains rates, see Capital Gain Tax Rates in chapter 4. 2012 irs tax forms 1040a    Before making either choice, consider the overall effect on your tax liability. 2012 irs tax forms 1040a Compare your tax if you make one or both of these choices with your tax if you do not. 2012 irs tax forms 1040a Investment income of child reported on parent's return. 2012 irs tax forms 1040a   Investment income includes the part of your child's interest and dividend income you choose to report on your return. 2012 irs tax forms 1040a If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814. 2012 irs tax forms 1040a Include it on line 4a of Form 4952. 2012 irs tax forms 1040a Example. 2012 irs tax forms 1040a Your 8-year-old son has interest income of $2,200, which you choose to report on your own return. 2012 irs tax forms 1040a You enter $2,200 on Form 8814, lines 1a and 4, and $200 on lines 6 and 12 and complete Part II. 2012 irs tax forms 1040a Also enter $200 on Form 1040, line 21. 2012 irs tax forms 1040a Your investment income includes this $200. 2012 irs tax forms 1040a Child's qualified dividends. 2012 irs tax forms 1040a   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. 2012 irs tax forms 1040a However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. 2012 irs tax forms 1040a   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). 2012 irs tax forms 1040a Child's Alaska Permanent Fund dividends. 2012 irs tax forms 1040a   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. 2012 irs tax forms 1040a To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. 2012 irs tax forms 1040a Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. 2012 irs tax forms 1040a Subtract the result from the amount on Form 8814, line 12. 2012 irs tax forms 1040a Example. 2012 irs tax forms 1040a Your 10-year-old child has taxable interest income of $4,000 and Alaska Permanent Fund dividends of $2,000. 2012 irs tax forms 1040a You choose to report this on your return. 2012 irs tax forms 1040a You enter $4,000 on Form 8814, line 1a, $2,000 on line 2a, and $6,000 on line 4. 2012 irs tax forms 1040a You then enter $4,000 on Form 8814, lines 6 and 12, and Form 1040, line 21. 2012 irs tax forms 1040a You figure the amount of your child's income that you can consider your investment income as follows: $4,000 − ($4,000 × ($2,000 ÷ $6,000)) = $2,667 You include the result, $2,667, on Form 4952, line 4a. 2012 irs tax forms 1040a Child's capital gain distributions. 2012 irs tax forms 1040a   If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D (Form 1040), line 13, or Form 1040, line 13) generally does not count as investment income. 2012 irs tax forms 1040a However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. 2012 irs tax forms 1040a   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). 2012 irs tax forms 1040a Investment expenses. 2012 irs tax forms 1040a   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. 2012 irs tax forms 1040a Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. 2012 irs tax forms 1040a Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A (Form 1040), line 27. 2012 irs tax forms 1040a See Expenses of Producing Income , later, for a discussion of the 2% limit. 2012 irs tax forms 1040a Losses from passive activities. 2012 irs tax forms 1040a   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). 2012 irs tax forms 1040a See Publication 925 for information about passive activities. 2012 irs tax forms 1040a Example. 2012 irs tax forms 1040a Ted is a partner in a partnership that operates a business. 2012 irs tax forms 1040a However, he does not materially participate in the partnership's business. 2012 irs tax forms 1040a Ted's interest in the partnership is considered a passive activity. 2012 irs tax forms 1040a Ted's investment income from interest and dividends (other than qualified dividends) is $10,000. 2012 irs tax forms 1040a His investment expenses (other than interest) are $3,200 after taking into account the 2% limit on miscellaneous itemized deductions. 2012 irs tax forms 1040a His investment interest expense is $8,000. 2012 irs tax forms 1040a Ted also has income from the partnership of $2,000. 2012 irs tax forms 1040a Ted figures his net investment income and the limit on his investment interest expense deduction in the following way: Total investment income $10,000 Minus: Investment expenses (other than interest) 3,200 Net investment income $6,800 Deductible investment interest expense for the year $6,800 The $2,000 of income from the passive activity is not used in determining Ted's net investment income. 2012 irs tax forms 1040a His investment interest deduction for the year is limited to $6,800, the amount of his net investment income. 2012 irs tax forms 1040a Form 4952 Use Form 4952 to figure your deduction for investment interest. 2012 irs tax forms 1040a See Form 4952 for more information. 2012 irs tax forms 1040a Exception to use of Form 4952. 2012 irs tax forms 1040a   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. 2012 irs tax forms 1040a Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. 2012 irs tax forms 1040a You do not have any other deductible investment expenses. 2012 irs tax forms 1040a You have no carryover of investment interest expense from 2012. 2012 irs tax forms 1040a   If you meet all of these tests, you can deduct all of your investment interest. 2012 irs tax forms 1040a    Bond Premium Amortization If you pay a premium to buy a bond, the premium is part of your basis in the bond. 2012 irs tax forms 1040a If the bond yields taxable interest, you can choose to amortize the premium. 2012 irs tax forms 1040a This generally means that each year, over the life of the bond, you use a part of the premium to reduce the amount of interest includible in your income. 2012 irs tax forms 1040a If you make this choice, you must reduce your basis in the bond by the amortization for the year. 2012 irs tax forms 1040a If the bond yields tax-exempt interest, you must amortize the premium. 2012 irs tax forms 1040a This amortized amount is not deductible in determining taxable income. 2012 irs tax forms 1040a However, each year you must reduce your basis in the bond (and tax-exempt interest otherwise reportable on Form 1040, line 8b) by the amortization for the year. 2012 irs tax forms 1040a Bond premium. 2012 irs tax forms 1040a   Bond premium is the amount by which your basis in the bond right after you get it is more than the total of all amounts payable on the bond after you get it (other than payments of qualified stated interest). 2012 irs tax forms 1040a For example, a bond with a maturity value of $1,000 generally would have a $50 premium if you buy it for $1,050. 2012 irs tax forms 1040a Special rules to determine amounts payable on a bond. 2012 irs tax forms 1040a   For special rules that apply to determine the amounts payable on a variable rate bond, an inflation-indexed debt instrument, a bond that provides for certain alternative payment schedules (for example, a bond callable prior to the stated maturity date of the bond), or a bond that provides for remote or incidental contingencies, see Regulations section 1. 2012 irs tax forms 1040a 171-3. 2012 irs tax forms 1040a Basis. 2012 irs tax forms 1040a   In general, your basis for figuring bond premium amortization is the same as your basis for figuring any loss on the sale of the bond. 2012 irs tax forms 1040a However, you may need to use a different basis for: Convertible bonds, Bonds you got in a trade, and Bonds whose basis has to be determined using the basis of the person who transferred the bond to you. 2012 irs tax forms 1040a See Regulations section 1. 2012 irs tax forms 1040a 171-1(e). 2012 irs tax forms 1040a Dealers. 2012 irs tax forms 1040a   A dealer in taxable bonds (or anyone who holds them mainly for sale to customers in the ordinary course of a trade or business or who would properly include bonds in inventory at the close of the tax year) cannot claim a deduction for amortizable bond premium. 2012 irs tax forms 1040a   See section 75 of the Internal Revenue Code for the treatment of bond premium by a dealer in tax-exempt bonds. 2012 irs tax forms 1040a How To Figure Amortization For bonds issued after September 27, 1985, you must amortize bond premium using a constant yield method on the basis of the bond's yield to maturity, determined by using the bond's basis and compounding at the close of each accrual period. 2012 irs tax forms 1040a Constant yield method. 2012 irs tax forms 1040a   Figure the bond premium amortization for each accrual period as follows. 2012 irs tax forms 1040a Step 1: Determine your yield. 2012 irs tax forms 1040a   Your yield is the discount rate that, when used in figuring the present value of all remaining payments to be made on the bond (including payments of qualified stated interest), produces an amount equal to your basis in the bond. 2012 irs tax forms 1040a Figure the yield as of the date you got the bond. 2012 irs tax forms 1040a It must be constant over the term of the bond and must be figured to at least two decimal places when expressed as a percentage. 2012 irs tax forms 1040a   If you do not know the yield, consult your broker or tax advisor. 2012 irs tax forms 1040a Databases available to them are likely to show the yield at the date of purchase. 2012 irs tax forms 1040a Step 2: Determine the accrual periods. 2012 irs tax forms 1040a   You can choose the accrual periods to use. 2012 irs tax forms 1040a They may be of any length and may vary in length over the term of the bond, but each accrual period can be no longer than 1 year and each scheduled payment of principal or interest must occur either on the first or the final day of an accrual period. 2012 irs tax forms 1040a The computation is simplest if accrual periods are the same as the intervals between interest payment dates. 2012 irs tax forms 1040a Step 3: Determine the bond premium for the accrual period. 2012 irs tax forms 1040a   To do this, multiply your adjusted acquisition price at the beginning of the accrual period by your yield. 2012 irs tax forms 1040a Then subtract the result from the qualified stated interest for the period. 2012 irs tax forms 1040a   Your adjusted acquisition price at the beginning of the first accrual period is the same as your basis. 2012 irs tax forms 1040a After that, it is your basis decreased by the amount of bond premium amortized for earlier periods and the amount of any payment previously made on the bond other than a payment of qualified stated interest. 2012 irs tax forms 1040a Example. 2012 irs tax forms 1040a On February 1, 2012, you bought a taxable bond for $110,000. 2012 irs tax forms 1040a The bond has a stated principal amount of $100,000, payable at maturity on February 1, 2019, making your premium $10,000 ($110,000 − $100,000). 2012 irs tax forms 1040a The bond pays qualified stated interest of $10,000 on February 1 of each year. 2012 irs tax forms 1040a Your yield is 8. 2012 irs tax forms 1040a 07439% compounded annually. 2012 irs tax forms 1040a You choose to use annual accrual periods ending on February 1 of each year. 2012 irs tax forms 1040a To find your bond premium amortization for the accrual period ending on February 1, 2013, you multiply the adjusted acquisition price at the beginning of the period ($110,000) by your yield. 2012 irs tax forms 1040a When you subtract the result ($8,881. 2012 irs tax forms 1040a 83) from the qualified stated interest for the period ($10,000), you find that your bond premium amortization for the period is $1,118. 2012 irs tax forms 1040a 17. 2012 irs tax forms 1040a Special rules to figure amortization. 2012 irs tax forms 1040a   For special rules to figure the bond premium amortization on a variable rate bond, an inflation-indexed debt instrument, a bond that provides for certain alternative payment schedules (for example, a bond callable prior to the stated maturity date of the bond), or a bond that provides for remote or incidental contingencies, see Regulations section 1. 2012 irs tax forms 1040a 171-3. 2012 irs tax forms 1040a Bonds Issued Before September 28, 1985 For these bonds, you can amortize bond premium using any reasonable method. 2012 irs tax forms 1040a Reasonable methods include: The straight-line method, and The Revenue Ruling 82-10 method. 2012 irs tax forms 1040a Straight-line method. 2012 irs tax forms 1040a   Under this method, the amount of your bond premium amortization is the same each month. 2012 irs tax forms 1040a Divide the number of months you held the bond during the year by the number of months from the beginning of the tax year (or, if later, the date of acquisition) to the date of maturity or earlier call date. 2012 irs tax forms 1040a Then multiply the result by the bond premium (reduced by any bond premium amortization claimed in earlier years). 2012 irs tax forms 1040a This gives you your bond premium amortization for the year. 2012 irs tax forms 1040a Revenue Ruling 82-10 method. 2012 irs tax forms 1040a   Under this method, the amount of your bond premium amortization increases each month over the life of the bond. 2012 irs tax forms 1040a This method is explained in Revenue Ruling 82-10, 1982-1 C. 2012 irs tax forms 1040a B. 2012 irs tax forms 1040a 46. 2012 irs tax forms 1040a Choosing To Amortize You choose to amortize the premium on taxable bonds by reporting the amortization for the year on your income tax return for the first tax year you want the choice to apply. 2012 irs tax forms 1040a You should attach a statement to your return that you are making this choice under section 171. 2012 irs tax forms 1040a See How To Report Amortization, next. 2012 irs tax forms 1040a This choice is binding for the year you make it and for later tax years. 2012 irs tax forms 1040a It applies to all taxable bonds you own in the year you make the choice and also to those you acquire in later years. 2012 irs tax forms 1040a You can change your decision to amortize bond premium only with the written approval of the IRS. 2012 irs tax forms 1040a To request approval, use Form 3115. 2012 irs tax forms 1040a For more information on requesting approval, see section 5 of the Appendix to Revenue Procedure 2011-14 in Internal Revenue Bulletin 2011-4. 2012 irs tax forms 1040a You can find Revenue Procedure 2011-14 at www. 2012 irs tax forms 1040a irs. 2012 irs tax forms 1040a gov/irb/2011-04_IRB/ar08. 2012 irs tax forms 1040a html. 2012 irs tax forms 1040a How To Report Amortization Subtract the bond premium amortization from your interest income from these bonds. 2012 irs tax forms 1040a Report the bond's interest on Schedule B (Form 1040A or 1040), line 1. 2012 irs tax forms 1040a Under your last entry on line 1, put a subtotal of all interest listed on line 1. 2012 irs tax forms 1040a Below this subtotal, print “ABP Adjustment,” and the total interest you received. 2012 irs tax forms 1040a Subtract this amount from the subtotal, and enter the result on line 2. 2012 irs tax forms 1040a Bond premium amortization more than interest. 2012 irs tax forms 1040a   If the amount of your bond premium amortization for an accrual period is more than the qualified stated interest for the period, you can deduct the difference as a miscellaneous itemized deduction on Schedule A (Form 1040), line 28. 2012 irs tax forms 1040a    But your deduction is limited to the amount by which your total interest inclusions on the bond in prior accrual periods is more than your total bond premium deductions on the bond in prior periods. 2012 irs tax forms 1040a Any amount you cannot deduct because of this limit can be carried forward to the next accrual period. 2012 irs tax forms 1040a Pre-1998 election to amortize bond premium. 2012 irs tax forms 1040a   Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988. 2012 irs tax forms 1040a Bonds acquired before October 23, 1986. 2012 irs tax forms 1040a   The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2%-of-adjusted-gross-income limit. 2012 irs tax forms 1040a Bonds acquired after October 22, 1986, but before 1988. 2012 irs tax forms 1040a    The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you choose to treat it as an offset to interest income on the bond. 2012 irs tax forms 1040a Expenses of Producing Income You deduct investment expenses (other than interest expenses) as miscellaneous itemized deductions on Schedule A (Form 1040). 2012 irs tax forms 1040a To be deductible, these expenses must be ordinary and necessary expenses paid or incurred: To produce or collect income, or To manage property held for producing income. 2012 irs tax forms 1040a The expenses must be directly related to the income or income-producing property, and the income must be taxable to you. 2012 irs tax forms 1040a The deduction for most income-producing expenses is subject to a 2% limit that also applies to certain other miscellaneous itemized deductions. 2012 irs tax forms 1040a The amount deductible is limited to the total of these miscellaneous deductions that is more than 2% of your adjusted gross income. 2012 irs tax forms 1040a For information on how to report expenses of producing income, see How To Report Investment Expenses , later. 2012 irs tax forms 1040a Attorney or accounting fees. 2012 irs tax forms 1040a   You can deduct attorney or accounting fees that are necessary to produce or collect taxable income. 2012 irs tax forms 1040a However, in some cases, attorney or accounting fees are part of the basis of property. 2012 irs tax forms 1040a See Basis of Investment Property in chapter 4. 2012 irs tax forms 1040a Automatic investment service and dividend reinvestment plans. 2012 irs tax forms 1040a   A bank may offer its checking account customers an automatic investment service so that, for a charge, each customer can choose to invest a part of the checking account each month in common stock. 2012 irs tax forms 1040a Or a bank that is a dividend disbursing agent for a number of publicly-owned corporations may set up an automatic dividend reinvestment service. 2012 irs tax forms 1040a Through that service, cash dividends are reinvested in more shares of stock after the bank deducts a service charge. 2012 irs tax forms 1040a   A corporation in which you own stock also may have a dividend reinvestment plan. 2012 irs tax forms 1040a This plan lets you choose to use your dividends to buy more shares of stock in the corporation instead of receiving the dividends in cash. 2012 irs tax forms 1040a   You can deduct the monthly service charge you pay to a bank to participate in an automatic investment service. 2012 irs tax forms 1040a If you participate in a dividend reinvestment plan, you can deduct any service charge subtracted from your cash dividends before the dividends are used to buy more shares of stock. 2012 irs tax forms 1040a Deduct the charges in the year you pay them. 2012 irs tax forms 1040a Clerical help and office rent. 2012 irs tax forms 1040a   You can deduct office expenses, such as rent and clerical help, you incurred in connection with your investments and collecting the taxable income on your investments. 2012 irs tax forms 1040a Cost of replacing missing securities. 2012 irs tax forms 1040a   To replace your taxable securities that are mislaid, lost, stolen, or destroyed, you may have to post an indemnity bond. 2012 irs tax forms 1040a You can deduct the premium you pay to buy the indemnity bond and the related incidental expenses. 2012 irs tax forms 1040a   You may, however, get a refund of part of the bond premium if the missing securities are recovered within a specified time. 2012 irs tax forms 1040a Under certain types of insurance policies, you can recover some of the expenses. 2012 irs tax forms 1040a   If you receive the refund in the tax year you pay the amounts, you can deduct only the difference between the expenses paid and the amount refunded. 2012 irs tax forms 1040a If the refund is made in a later tax year, you must include the refund in income in the year you received it, but only to the extent that the expenses decreased your tax in the year you deducted them. 2012 irs tax forms 1040a Fees to collect income. 2012 irs tax forms 1040a   You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect investment income, such as your taxable bond or mortgage interest, or your dividends on shares of stock. 2012 irs tax forms 1040a Fees to buy or sell. 2012 irs tax forms 1040a   You cannot deduct a fee you pay to a broker to acquire investment property, such as stocks or bonds. 2012 irs tax forms 1040a You must add the fee to the cost of the property. 2012 irs tax forms 1040a See Basis of Investment Property in chapter 4. 2012 irs tax forms 1040a    You cannot deduct any broker's fees, commissions, or option premiums you pay (or that were netted out) in connection with the sale of investment property. 2012 irs tax forms 1040a They can be used only to figure gain or loss from the sale. 2012 irs tax forms 1040a See Reporting Capital Gains and Losses , in chapter 4, for more information about the treatment of these sale expenses. 2012 irs tax forms 1040a Investment counsel and advice. 2012 irs tax forms 1040a   You can deduct fees you pay for counsel and advice about investments that produce taxable income. 2012 irs tax forms 1040a This includes amounts you pay for investment advisory services. 2012 irs tax forms 1040a Safe deposit box rent. 2012 irs tax forms 1040a   You can deduct rent you pay for a safe deposit box if you use the box to store taxable income-producing stocks, bonds, or other investment-related papers and documents. 2012 irs tax forms 1040a If you also use the box to store tax-exempt securities or personal items, you can deduct only part of the rent. 2012 irs tax forms 1040a See Tax-exempt income under Nondeductible Expenses, later, to figure what part you can deduct. 2012 irs tax forms 1040a State and local transfer taxes. 2012 irs tax forms 1040a   You cannot deduct the state and local transfer taxes you pay when you buy or sell securities. 2012 irs tax forms 1040a If you pay these transfer taxes when you buy securities, you must treat them as part of the cost of the property. 2012 irs tax forms 1040a If you pay these transfer taxes when you sell securities, you must treat them as a reduction in the amount realized. 2012 irs tax forms 1040a Trustee's commissions for revocable trust. 2012 irs tax forms 1040a   If you set up a revocable trust and have its income distributed to you, you can deduct the commission you pay the trustee for managing the trust to the extent it is to produce or collect taxable income or to manage property. 2012 irs tax forms 1040a However, you cannot deduct any part of the commission used for producing or collecting tax-exempt income or for managing property that produces tax-exempt income. 2012 irs tax forms 1040a   If you are a cash-basis taxpayer and pay the commissions for several years in advance, you must deduct a part of the commission each year. 2012 irs tax forms 1040a You cannot deduct the entire amount in the year you pay it. 2012 irs tax forms 1040a Investment expenses from pass-through entities. 2012 irs tax forms 1040a   If you hold an interest in a partnership, S corporation, real estate mortgage investment conduit (REMIC), or a nonpublicly offered mutual fund, you can deduct your share of that entity's investment expenses. 2012 irs tax forms 1040a A partnership or S corporation will show your share of these expenses on your Schedule K-1 (Form 1065) or Schedule K-1 (Form 1120S). 2012 irs tax forms 1040a A nonpublicly offered mutual fund will indicate your share of these expenses in box 5 of Form 1099-DIV (or substitute statement). 2012 irs tax forms 1040a Publicly-offered mutual funds are discussed later. 2012 irs tax forms 1040a   If you hold an interest in a REMIC, any expenses relating to your residual interest investment will be shown on Schedule Q (Form 1066), line 3b. 2012 irs tax forms 1040a Any expenses relating to your regular interest investment will appear in box 5 of Form 1099-INT (or substitute statement) or box 9 of Form 1099-OID (or substitute statement). 2012 irs tax forms 1040a   Report your share of these investment expenses on Schedule A (Form 1040), subject to the 2% limit, in the same manner as your other investment expenses. 2012 irs tax forms 1040a Including mutual fund or REMIC expenses in income. 2012 irs tax forms 1040a   Your share of the investment expenses of a REMIC or a nonpublicly offered mutual fund, as described above, are considered to be indirect deductions through that pass-through entity. 2012 irs tax forms 1040a You must include in your gross income an amount equal to the expenses allocated to you, whether or not you are able to claim a deduction for those expenses. 2012 irs tax forms 1040a If you are a shareholder in a nonpublicly offered mutual fund, you must include on your return the full amount of ordinary dividends or other distributions of stock, as shown in box 1a of Form 1099-DIV (or substitute statement). 2012 irs tax forms 1040a If you are a residual interest holder in a REMIC, you must report as ordinary income on Schedule E (Form 1040) the total amounts shown on Schedule Q (Form 1066), lines 1b and 3b. 2012 irs tax forms 1040a If you are a REMIC regular interest holder, you must include the amount of any expense allocation you received on Form 1040, line 8a. 2012 irs tax forms 1040a Publicly-offered mutual funds. 2012 irs tax forms 1040a   Most mutual funds are publicly offered. 2012 irs tax forms 1040a These mutual funds, generally, are traded on an established securities exchange. 2012 irs tax forms 1040a These funds do not pass investment expenses through to you. 2012 irs tax forms 1040a Instead, the dividend income they report to you in box 1a of Form 1099-DIV (or substitute statement) is already reduced by your share of investment expenses. 2012 irs tax forms 1040a As a result, you cannot deduct the expenses on your return. 2012 irs tax forms 1040a   Include the amount from box 1a of Form 1099-DIV (or substitute statement) in your income. 2012 irs tax forms 1040a    A publicly offered mutual fund is one that: Is continuously offered pursuant to a public offering, Is regularly traded on an established securities market, and Is held by or for no fewer than 500 persons at any time during the year. 2012 irs tax forms 1040a Contact your mutual fund if you are not sure whether it is publicly offered. 2012 irs tax forms 1040a Nondeductible Expenses Some expenses that you incur as an investor are not deductible. 2012 irs tax forms 1040a Stockholders' meetings. 2012 irs tax forms 1040a   You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you have no interest other than owning stock. 2012 irs tax forms 1040a This is true even if your purpose in attending is to get information that would be useful in making further investments. 2012 irs tax forms 1040a Investment-related seminar. 2012 irs tax forms 1040a   You cannot deduct expenses for attending a convention, seminar, or similar meeting for investment purposes. 2012 irs tax forms 1040a Single-premium life insurance, endowment, and annuity contracts. 2012 irs tax forms 1040a   You cannot deduct interest on money you borrow to buy or carry a single-premium life insurance, endowment, or annuity contract. 2012 irs tax forms 1040a Used as collateral. 2012 irs tax forms 1040a   If you use a single premium annuity contract as collateral to obtain or continue a mortgage loan, you cannot deduct any interest on the loan that is collateralized by the annuity contract. 2012 irs tax forms 1040a Figure the amount of interest expense disallowed by multiplying the current interest rate on the mortgage loan by the lesser of the amount of the annuity contract used as collateral or the amount of the loan. 2012 irs tax forms 1040a Borrowing on insurance. 2012 irs tax forms 1040a   Generally, you cannot deduct interest on money you borrow to buy or carry a life insurance, endowment, or annuity contract if you plan to systematically borrow part or all of the increases in the cash value of the contract. 2012 irs tax forms 1040a This rule applies to the interest on the total amount borrowed to buy or carry the contract, not just the interest on the borrowed increases in the cash value. 2012 irs tax forms 1040a Tax-exempt income. 2012 irs tax forms 1040a   You cannot deduct expenses you incur to produce tax-exempt income. 2012 irs tax forms 1040a Nor can you deduct interest on money you borrow to buy tax-exempt securities or shares in a mutual fund or other regulated investment company that distributes only exempt-interest dividends. 2012 irs tax forms 1040a Short-sale expenses. 2012 irs tax forms 1040a   The rule disallowing a deduction for interest expenses on tax-exempt securities applies to amounts you pay in connection with personal property used in a short sale or amounts paid by others for the use of any collateral in connection with the short sale. 2012 irs tax forms 1040a However, it does not apply to the expenses you incur if you deposit cash as collateral for the property used in the short sale and the cash does not earn a material return during the period of the sale. 2012 irs tax forms 1040a Short sales are discussed in Short Sales in chapter 4. 2012 irs tax forms 1040a Expenses for both tax-exempt and taxable income. 2012 irs tax forms 1040a   You may have expenses that are for both tax-exempt and taxable income. 2012 irs tax forms 1040a If you cannot specifically identify what part of the expenses is for each type of income, you can divide the expenses, using reasonable proportions based on facts and circumstances. 2012 irs tax forms 1040a You must attach a statement to your return showing how you divided the expenses and stating that each deduction claimed is not based on tax-exempt income. 2012 irs tax forms 1040a   One accepted method for dividing expenses is to do it in the same proportion that each type of income is to the total income. 2012 irs tax forms 1040a If the expenses relate in part to capital gains and losses, include the gains, but not the losses, in figuring this proportion. 2012 irs tax forms 1040a To find the part of the expenses that is for the tax-exempt income, divide your tax-exempt income by the total income and multiply your expenses by the result. 2012 irs tax forms 1040a Example. 2012 irs tax forms 1040a You received $6,000 interest; $4,800 was tax-exempt and $1,200 was taxable. 2012 irs tax forms 1040a In earning this income, you had $500 of expenses. 2012 irs tax forms 1040a You cannot specifically identify the amount of each expense item that is for each income item, so you must divide your expenses. 2012 irs tax forms 1040a 80% ($4,800 tax-exempt interest divided by $6,000 total interest) of your expenses is for the tax-exempt income. 2012 irs tax forms 1040a You cannot deduct $400 (80% of $500) of the expenses. 2012 irs tax forms 1040a You can deduct $100 (the rest of the expenses) because they are for the taxable interest. 2012 irs tax forms 1040a State income taxes. 2012 irs tax forms 1040a   If you itemize your deductions, you can deduct, as taxes, state income taxes on interest income that is exempt from federal income tax. 2012 irs tax forms 1040a But you cannot deduct, as either taxes or investment expenses, state income taxes on other exempt income. 2012 irs tax forms 1040a Interest expense and carrying charges on straddles. 2012 irs tax forms 1040a   You cannot deduct interest and carrying charges allocable to personal property that is part of a straddle. 2012 irs tax forms 1040a The nondeductible interest and carrying charges are added to the basis of the straddle property. 2012 irs tax forms 1040a However, this treatment does not apply if: All the offsetting positions making up the straddle either consist of one or more qualified covered call options and the optioned stock, or consist of section 1256 contracts (and the straddle is not part of a larger straddle); or The straddle is a hedging transaction. 2012 irs tax forms 1040a  For information about straddles, including definitions of the terms used in this discussion, see Straddles in chapter 4. 2012 irs tax forms 1040a   Interest includes any amount you pay or incur in connection with personal property used in a short sale. 2012 irs tax forms 1040a However, you must first apply the rules discussed in Payments in lieu of dividends under Short Sales in chapter 4. 2012 irs tax forms 1040a   To determine the interest on market discount bonds and short-term obligations that are part of a straddle, you must first apply the rules discussed under Limit on interest deduction for market discount bonds and Limit on interest deduction for short-term obligations (both under Interest Expenses, earlier). 2012 irs tax forms 1040a Nondeductible amount. 2012 irs tax forms 1040a   Figure the nondeductible interest and carrying charges on straddle property as follows. 2012 irs tax forms 1040a Add: Interest on indebtedness incurred or continued to buy or carry the personal property, and All other amounts (including charges to insure, store, or transport the personal property) paid or incurred to carry the personal property. 2012 irs tax forms 1040a Subtract from the amount in (1): Interest (including OID) includible in gross income for the year on the personal property, Any income from the personal property treated as ordinary income on the disposition of short-term government obligations or as ordinary income under the market discount and short-term bond provisions — see Discount on Debt Instruments in chapter 1, The dividends includible in gross income for the year from the personal property, and Any payment on a loan of the personal property for use in a short sale that is includible in gross income. 2012 irs tax forms 1040a Basis adjustment. 2012 irs tax forms 1040a   Add the nondeductible amount to the basis of your straddle property. 2012 irs tax forms 1040a How To Report Investment Expenses To deduct your investment expenses, you must itemize deductions on Schedule A (Form 1040). 2012 irs tax forms 1040a Enter your deductible investment interest expense on Schedule A (Form1040), line 14. 2012 irs tax forms 1040a Include any deductible short sale expenses. 2012 irs tax forms 1040a (See Short Sales in chapter 4 for information on these expenses. 2012 irs tax forms 1040a ) Also attach a completed Form 4952 if you used that form to figure your investment interest expense. 2012 irs tax forms 1040a Enter the total amount of your other investment expenses (other than interest expenses) on Schedule A (Form 1040), line 23. 2012 irs tax forms 1040a List the type and amount of each expense on the dotted lines next to line 23. 2012 irs tax forms 1040a (If necessary, you can show the required information on an attached statement. 2012 irs tax forms 1040a ) For information on how to report amortizable bond premium, see Bond Premium Amortization , earlier in this chapter. 2012 irs tax forms 1040a When To Report Investment Expenses If you use the cash method to report income and expenses, you generally deduct your expenses, except for certain prepaid interest, in the year you pay them. 2012 irs tax forms 1040a If you use an accrual method, you generally deduct your expenses when you incur a liability for them, rather than when you pay them. 2012 irs tax forms 1040a Also see When To Deduct Investment Interest , earlier in this chapter. 2012 irs tax forms 1040a Unpaid expenses owed to related party. 2012 irs tax forms 1040a   If you use an accrual method, you cannot deduct interest and other expenses owed to a related cash-basis person until payment is made and the amount is includible in the gross income of that person. 2012 irs tax forms 1040a The relationship, for purposes of this rule, is determined as of the end of the tax year for which the interest or expense would otherwise be deductible. 2012 irs tax forms 1040a If a deduction is denied under this rule, this rule will continue to apply even if your relationship with the person ceases to exist before the amount is includible in the gross income of that person. 2012 irs tax forms 1040a   This rule generally applies to those relationships listed in chapter 4 under Related Party Transactions . 2012 irs tax forms 1040a It also applies to accruals by partnerships to partners, partners to partnerships, shareholders to S corporations, and S corporations to shareholders. 2012 irs tax forms 1040a   The postponement of deductions for unpaid expenses and interest under the related party rule does not apply to OID, regardless of when payment is made. 2012 irs tax forms 1040a This rule also does not apply to loans with below-market interest rates or to certain payments for the use of property and services when the lender or recipient has to include payments periodically in income, even if a payment has not been made. 2012 irs tax forms 1040a Prev  Up  Next   Home   More Online Publications
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SOI Bulletin (Publication 1136)

Index of SOI Bulletin Articles, by Topic

Articles and Data Releases by Year and Season

2014 Winter Spring    
2013 Winter Spring Summer Fall
2012 Winter Spring Summer Fall
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1981 Winter Spring Summer Fall

Historical Tables and Appendix

Tables: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 (expanded version), 13 (expanded version), 14a, 14b, 15, 16 (expanded version), 17, 18, 19 , 20, 21, 22a, 22b, 23, 24.

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The 2012 Irs Tax Forms 1040a

2012 irs tax forms 1040a 13. 2012 irs tax forms 1040a   Employment Taxes Table of Contents What's New for 2013 What's New for 2014 Reminders Important Dates for 2014 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Farm Employment Family Employees Crew Leaders Social Security and Medicare TaxesReligious exemption. 2012 irs tax forms 1040a Wage limit. 2012 irs tax forms 1040a Federal Income Tax WithholdingNew Form W-4 for 2014. 2012 irs tax forms 1040a Required Notice to Employees About Earned Income Credit (EIC) Reporting and Paying Social Security, Medicare, and Withheld Federal Income TaxesElectronic deposit requirement. 2012 irs tax forms 1040a Federal Unemployment (FUTA) TaxReporting and Paying FUTA Tax What's New for 2013 Social security and Medicare tax for 2013. 2012 irs tax forms 1040a  The employee tax rate for social security is 6. 2012 irs tax forms 1040a 2%. 2012 irs tax forms 1040a Previously, the employee tax rate for social security was 4. 2012 irs tax forms 1040a 2%. 2012 irs tax forms 1040a The employer tax rate for social security remains unchanged at 6. 2012 irs tax forms 1040a 2%. 2012 irs tax forms 1040a The social security wage base limit is $113,700. 2012 irs tax forms 1040a The Medicare tax rate is 1. 2012 irs tax forms 1040a 45% each for the employee and employer, unchanged from 2012. 2012 irs tax forms 1040a There is no wage base limit for Medicare tax. 2012 irs tax forms 1040a Additional Medicare Tax. 2012 irs tax forms 1040a  In addition to withholding Medicare tax at 1. 2012 irs tax forms 1040a 45%, you must withhold a 0. 2012 irs tax forms 1040a 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 2012 irs tax forms 1040a 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. 2012 irs tax forms 1040a Additional Medicare Tax is only imposed on the employee. 2012 irs tax forms 1040a There is no employer share of Additional Medicare Tax. 2012 irs tax forms 1040a All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold. 2012 irs tax forms 1040a 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 of Publication 15 (Circular E), Employer's Tax Guide. 2012 irs tax forms 1040a For more information on Additional Medicare Tax, visit IRS. 2012 irs tax forms 1040a gov and enter “Additional Medicare Tax” in the search box. 2012 irs tax forms 1040a Leave-based donation programs to aid victims of Hurricane Sandy. 2012 irs tax forms 1040a  Under these programs, employees may donate their vacation, sick, or personal leave in exchange for employer cash payments made before January 1, 2014, to qualified tax-exempt organizations providing relief for the victims of Hurricane Sandy. 2012 irs tax forms 1040a The donated leave will not be included in the income or wages of the employee. 2012 irs tax forms 1040a The employer may deduct the cash payments as business expenses or charitable contributions. 2012 irs tax forms 1040a For more information, see Notice 2012-69, 2012-51 I. 2012 irs tax forms 1040a R. 2012 irs tax forms 1040a B. 2012 irs tax forms 1040a 712, available at www. 2012 irs tax forms 1040a irs. 2012 irs tax forms 1040a gov/irb/2012-51_IRB/ar09. 2012 irs tax forms 1040a html. 2012 irs tax forms 1040a Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans extended. 2012 irs tax forms 1040a  The work opportunity tax credit is now available for eligible unemployed veterans who begin work before January 1, 2014. 2012 irs tax forms 1040a Previously, the credit was available for unemployed veterans who began work on or after November 22, 2011, and before January 1, 2013. 2012 irs tax forms 1040a 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. 2012 irs tax forms 1040a For more information, visit IRS. 2012 irs tax forms 1040a gov and enter “work opportunity credit” in the search box. 2012 irs tax forms 1040a What's New for 2014 Social security and Medicare tax for 2014. 2012 irs tax forms 1040a  The employee and employer tax rates for social security and the maximum amount of wages subject to social security tax for 2014 will be discussed in Publication 51 (Circular A), Agricultural Employer's Tax Guide (For use in 2014). 2012 irs tax forms 1040a The Medicare tax rate for 2014 will also be discussed in Publication 51 (Circular A) (For use in 2014). 2012 irs tax forms 1040a There is no limit on the amount of wages subject to Medicare tax. 2012 irs tax forms 1040a Reminders Additional employment tax information for farmers. 2012 irs tax forms 1040a  See Publication 51 (Circular A) for more detailed guidance on employment taxes. 2012 irs tax forms 1040a For the latest information about employment tax developments impacting farmers, go to www. 2012 irs tax forms 1040a irs. 2012 irs tax forms 1040a gov/pub51. 2012 irs tax forms 1040a Correcting a previously filed Form 943. 2012 irs tax forms 1040a  If you discover an error on a previously filed Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, make the correction using Form 943-X, Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund. 2012 irs tax forms 1040a Form 943-X is filed separately from Form 943. 2012 irs tax forms 1040a For more information on correcting Form 943, see the Instructions for Form 943-X. 2012 irs tax forms 1040a Federal tax deposits must be made by electronic funds transfer. 2012 irs tax forms 1040a  You must use electronic funds transfer to make all federal tax deposits. 2012 irs tax forms 1040a Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). 2012 irs tax forms 1040a 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. 2012 irs tax forms 1040a Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 2012 irs tax forms 1040a EFTPS is a free service provided by the Department of Treasury. 2012 irs tax forms 1040a Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 2012 irs tax forms 1040a For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). 2012 irs tax forms 1040a To get more information about EFTPS or to enroll in EFTPS, visit www. 2012 irs tax forms 1040a eftps. 2012 irs tax forms 1040a gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). 2012 irs tax forms 1040a Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. 2012 irs tax forms 1040a Important Dates for 2014 You should take the action indicated by the dates listed. 2012 irs tax forms 1040a See By February 15 and On February 16 for Form W-4, Employee's Withholding Allowance Certificate, information. 2012 irs tax forms 1040a Due dates for deposits of withheld federal income taxes, social security taxes, and Medicare taxes are not listed here. 2012 irs tax forms 1040a For these dates, see Publication 509, Tax Calendars (For use in 2014). 2012 irs tax forms 1040a Note. 2012 irs tax forms 1040a  If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. 2012 irs tax forms 1040a A statewide legal holiday delays a filing or furnishing due date only if the IRS office where you are required to file a return or furnish a form is located in that state. 2012 irs tax forms 1040a For any due date, you will meet the “file” or “furnish” date requirement if the envelope containing the tax return or form is properly addressed, contains sufficient postage, and is postmarked by the U. 2012 irs tax forms 1040a S. 2012 irs tax forms 1040a Postal Service by the due date, or sent by an IRS-designated delivery service by the due date. 2012 irs tax forms 1040a See Private delivery services in Publication 51 (Circular A). 2012 irs tax forms 1040a Federal tax deposits can only be made by electronic funds transfer and are governed by legal holidays in the District of Columbia. 2012 irs tax forms 1040a Statewide holidays no longer apply. 2012 irs tax forms 1040a For a list of legal holidays that delay the due date of a federal tax deposit, see section 7 of Publication 51 (Circular A). 2012 irs tax forms 1040a Fiscal year taxpayers. 2012 irs tax forms 1040a  The due dates listed below apply whether you use a calendar or a fiscal year. 2012 irs tax forms 1040a By January 31. 2012 irs tax forms 1040a   File Form 943 with the IRS. 2012 irs tax forms 1040a If you deposited all Form 943 taxes when due, you have 10 additional days to file. 2012 irs tax forms 1040a Furnish each employee with a completed Form W-2, Wage and Tax Statement. 2012 irs tax forms 1040a Furnish each recipient to whom you paid $600 or more in nonemployee compensation with a completed Form 1099 (for example, Form 1099-MISC). 2012 irs tax forms 1040a File Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, with the IRS. 2012 irs tax forms 1040a If you deposited all the FUTA tax when due, you have 10 additional days to file. 2012 irs tax forms 1040a File Form 945, Annual Return of Withheld Federal Income Tax, with the IRS to report any nonpayroll income tax withheld during 2013. 2012 irs tax forms 1040a If you deposited all Form 945 taxes when due, you have 10 additional days to file. 2012 irs tax forms 1040a By February 15. 2012 irs tax forms 1040a  Ask for a new Form W-4 or Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, from each employee who claimed exemption from federal income tax withholding last year. 2012 irs tax forms 1040a On February 16. 2012 irs tax forms 1040a  Any Form W-4 claiming exemption from withholding for the previous year has now expired. 2012 irs tax forms 1040a Begin withholding for any employee who previously claimed exemption from withholding but has not given you a new Form W-4 for the current year. 2012 irs tax forms 1040a If the employee does not give you a new Form W-4, withhold taxes based on the last valid Form W-4 you have for the employee that does not claim exemption from withholding or, if one does not exist, as if he or she is single with zero withholding allowances. 2012 irs tax forms 1040a If the employee furnishes a new Form W-4 claiming exemption from withholding after February 15, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. 2012 irs tax forms 1040a By February 28. 2012 irs tax forms 1040a   File paper Forms 1099 and 1096. 2012 irs tax forms 1040a File Copy A of all paper Forms 1099 with Form 1096, Annual Summary and Transmittal of U. 2012 irs tax forms 1040a S. 2012 irs tax forms 1040a Information Returns, with the IRS. 2012 irs tax forms 1040a For electronically filed returns, see By March 31 below. 2012 irs tax forms 1040a File paper Forms W-2 and W-3. 2012 irs tax forms 1040a File Copy A of all paper Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration (SSA). 2012 irs tax forms 1040a For electronically filed returns, see By March 31 below. 2012 irs tax forms 1040a By March 31. 2012 irs tax forms 1040a   File electronic Forms W-2 and 1099. 2012 irs tax forms 1040a File electronic Forms W-2 with the SSA and Forms 1099 with the IRS. 2012 irs tax forms 1040a For more information on reporting Form W-2 information to the SSA electronically, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. 2012 irs tax forms 1040a socialsecurity. 2012 irs tax forms 1040a gov/employer. 2012 irs tax forms 1040a For information on filing information returns electronically with the IRS, see Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically. 2012 irs tax forms 1040a By April 30, July 31, October 31, and January 31. 2012 irs tax forms 1040a   Deposit FUTA taxes. 2012 irs tax forms 1040a Deposit FUTA tax due if it is more than $500. 2012 irs tax forms 1040a Before December 1. 2012 irs tax forms 1040a  Remind employees to submit a new Form W-4 if their withholding allowances have changed or will change for the next year. 2012 irs tax forms 1040a Introduction You are generally required to withhold federal income tax from the wages of your employees. 2012 irs tax forms 1040a You may also be subject to social security and Medicare taxes under the Federal Insurance Contributions Act (FICA) and federal unemployment tax under the Federal Unemployment Tax Act (FUTA). 2012 irs tax forms 1040a You must also withhold Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 2012 irs tax forms 1040a This chapter includes information about these taxes. 2012 irs tax forms 1040a You must also pay self-employment tax on your net earnings from farming. 2012 irs tax forms 1040a See chapter 12 for information on self-employment tax. 2012 irs tax forms 1040a Topics - This chapter discusses: Farm employment, Family employees, Crew leaders, Social security and Medicare taxes, Additional Medicare Tax withholding, Federal income tax withholding, Reporting and paying social security, Medicare, and withheld federal income taxes, and FUTA tax. 2012 irs tax forms 1040a Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits 51 (Circular A), Agricultural Employer's Tax Guide 926 Household Employer's Tax Guide Form (and Instructions) W-2 Wage and Tax Statement W-4 Employee's Withholding Allowance Certificate W-9 Request for Taxpayer Identification Number and Certification 940 Employer's Annual Federal Unemployment (FUTA) Tax Return 943 Employer's Annual Federal Tax Return for Agricultural Employees 943-X Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund See chapter 16 for information about getting publications and forms. 2012 irs tax forms 1040a Farm Employment In general, you are an employer of farmworkers if your employees do any of the following types of work. 2012 irs tax forms 1040a Raising or harvesting agricultural or horticultural products on a farm, including raising and feeding of livestock. 2012 irs tax forms 1040a Operating, managing, conserving, improving, or maintaining your farm and its tools and equipment. 2012 irs tax forms 1040a Services performed in salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor). 2012 irs tax forms 1040a Handling, processing, or packaging any agricultural or horticultural commodity if you produced more than half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity). 2012 irs tax forms 1040a Work related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. 2012 irs tax forms 1040a For more information, see Publication 51 (Circular A). 2012 irs tax forms 1040a Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. 2012 irs tax forms 1040a This is so even when you give the employee freedom of action. 2012 irs tax forms 1040a What matters is that you have the right to control the details of how the services are performed. 2012 irs tax forms 1040a You are responsible for withholding and paying employment taxes for your employees. 2012 irs tax forms 1040a You are also required to file employment tax returns. 2012 irs tax forms 1040a These requirements do not apply to amounts that you pay to independent contractors. 2012 irs tax forms 1040a See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. 2012 irs tax forms 1040a If you employ a family of workers, each worker subject to your control (not just the head of the family) is an employee. 2012 irs tax forms 1040a Special rules apply to crew leaders. 2012 irs tax forms 1040a See Crew Leaders , later. 2012 irs tax forms 1040a Employer identification number (EIN). 2012 irs tax forms 1040a   If you have employees, you must have an EIN. 2012 irs tax forms 1040a If you do not have an EIN, you may apply for one online. 2012 irs tax forms 1040a Go to IRS. 2012 irs tax forms 1040a gov and click on the Apply for an EIN Online link under Tools. 2012 irs tax forms 1040a You may also apply for an EIN by calling 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). 2012 irs tax forms 1040a The hours of operation for both numbers are Monday–Friday form 7:00 a. 2012 irs tax forms 1040a m. 2012 irs tax forms 1040a –7:00 p. 2012 irs tax forms 1040a m. 2012 irs tax forms 1040a local time (Alaska and Hawaii follow Pacific time). 2012 irs tax forms 1040a You can also fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. 2012 irs tax forms 1040a Employee's social security number (SSN). 2012 irs tax forms 1040a   An employee who does not have an SSN should submit Form SS-5, Application for a Social Security Card, to the Social Security Administration (SSA). 2012 irs tax forms 1040a Form SS-5 is available from any SSA office or by calling 1-800-772-1213 (operates 24 hours per day). 2012 irs tax forms 1040a It is also available from the SSA's website at www. 2012 irs tax forms 1040a socialsecurity. 2012 irs tax forms 1040a gov. 2012 irs tax forms 1040a   The employee must furnish evidence of age, identity, and U. 2012 irs tax forms 1040a S. 2012 irs tax forms 1040a citizenship or lawful immigration status permitting employment with the Form SS-5. 2012 irs tax forms 1040a An employee who is age 18 or older must appear in person with this evidence at an SSA office. 2012 irs tax forms 1040a Form I-9. 2012 irs tax forms 1040a    You must verify that each new employee is legally eligible to work in the United States. 2012 irs tax forms 1040a This includes completing the Form I-9, Employment Eligibility Verification. 2012 irs tax forms 1040a Form I-9 is available from the U. 2012 irs tax forms 1040a S. 2012 irs tax forms 1040a Citizenship and Immigration Services (USCIS) offices or by calling the Bureau of Citizenship and Immigration Services Forms Request Line at 1-800-870-3676. 2012 irs tax forms 1040a Form I-9 is also available from the USCIS website at www. 2012 irs tax forms 1040a uscis. 2012 irs tax forms 1040a gov. 2012 irs tax forms 1040a You can also contact the USCIS at 1-800-375-5283 for more information. 2012 irs tax forms 1040a New hire reporting. 2012 irs tax forms 1040a   You are required to report any new employee to a designated state new hire registry. 2012 irs tax forms 1040a Many states accept a copy of Form W-4 with employer information added. 2012 irs tax forms 1040a Visit the Office of Child Support Enforcement website at www. 2012 irs tax forms 1040a acf. 2012 irs tax forms 1040a hhs. 2012 irs tax forms 1040a gov/programs/cse/newhire for more information. 2012 irs tax forms 1040a Family Employees Generally, the wages you pay to family members who are your employees are subject to employment taxes. 2012 irs tax forms 1040a However, certain exemptions may apply to wages paid to your child, spouse, or parent. 2012 irs tax forms 1040a Exemptions for your child. 2012 irs tax forms 1040a   Payments for the services of your child under age 18 who works for you in your trade or business (including a farm) are not subject to social security and Medicare taxes. 2012 irs tax forms 1040a However, see Nonexempt services of a child or spouse , later. 2012 irs tax forms 1040a Payments for the services of your child under age 21 employed by you in other than a trade or business, such as payments for household services in your home, are also not subject to social security or Medicare taxes. 2012 irs tax forms 1040a Payments for the services of your child under age 21 employed by you, whether or not in your trade or business, are not subject to FUTA tax. 2012 irs tax forms 1040a Although not subject to social security, Medicare, or FUTA tax, the child's wages still may be subject to federal income tax withholding. 2012 irs tax forms 1040a Exemptions for your spouse. 2012 irs tax forms 1040a   Payments for the services of your spouse who works for you in your trade or business are subject to federal income tax withholding and social security and Medicare taxes, but not FUTA tax. 2012 irs tax forms 1040a   Payments for the services of your spouse employed by you in other than a trade or business, such as payments for household services in your home, are not subject to social security, Medicare, or FUTA taxes. 2012 irs tax forms 1040a Nonexempt services of a child or spouse. 2012 irs tax forms 1040a   Payments for the services of your child or spouse are subject to federal income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for any of the following entities. 2012 irs tax forms 1040a A corporation, even if it is controlled by you. 2012 irs tax forms 1040a A partnership, even if you are a partner. 2012 irs tax forms 1040a This does not apply to wages paid to your child if each partner is a parent of the child. 2012 irs tax forms 1040a An estate or trust, even if it is the estate of a deceased parent. 2012 irs tax forms 1040a In these situations, the child or spouse is considered to work for the corporation, partnership, or estate, not you. 2012 irs tax forms 1040a Exemptions for your parent. 2012 irs tax forms 1040a   Payments for the services of your parent employed by you in your trade or business are subject to federal income tax withholding and social security and Medicare taxes. 2012 irs tax forms 1040a Social security and Medicare taxes do not apply to wages paid to your parent for services not in your trade or business, but they do apply to payments for household services in your home if both the following conditions are satisfied. 2012 irs tax forms 1040a You have a child living in your home who is under age 18 or has a physical or mental condition that requires care by an adult for at least 4 continuous weeks in a calendar quarter. 2012 irs tax forms 1040a You are a widow or widower; or divorced and not remarried; or have a spouse in the home who, because of a physical or mental condition, cannot care for your child for at least 4 continuous weeks in the quarter. 2012 irs tax forms 1040a   Wages you pay to your parent are not subject to FUTA tax, regardless of the type of services provided. 2012 irs tax forms 1040a Qualified joint venture. 2012 irs tax forms 1040a   If spouses elect to be treated as a qualified joint venture instead of a partnership, either spouse may report and pay the employment taxes due on the wages paid to employees using the EIN of that spouse's sole proprietorship. 2012 irs tax forms 1040a For more information about qualified joint ventures, see chapter 12. 2012 irs tax forms 1040a Crew Leaders If farmworkers are provided by a crew leader, the crew leader may be the employer of the workers. 2012 irs tax forms 1040a Social security and Medicare taxes. 2012 irs tax forms 1040a   For social security and Medicare tax purposes, the crew leader is the employer of the workers if both of the following requirements are met. 2012 irs tax forms 1040a The crew leader pays (either on his or her own behalf or on behalf of the farmer) the workers for their farm labor. 2012 irs tax forms 1040a The crew leader has not entered into a written agreement with the farmer under which the crew leader is designated as an employee of the farmer. 2012 irs tax forms 1040a Federal income tax withholding. 2012 irs tax forms 1040a   If the crew leader is the employer for social security and Medicare tax purposes, the crew leader is the employer for federal income tax withholding purposes. 2012 irs tax forms 1040a Federal unemployment (FUTA) tax. 2012 irs tax forms 1040a   For FUTA tax purposes, the crew leader is the employer of the workers if, in addition to the earlier requirements, either of the following requirements are met. 2012 irs tax forms 1040a The crew leader is registered under the Migrant and Seasonal Agricultural Worker Protection Act. 2012 irs tax forms 1040a Substantially all crew members operate or maintain mechanized equipment provided by the crew leader as part of the service to the farmer. 2012 irs tax forms 1040a   The farmer is the employer of workers furnished by a crew leader in all other situations. 2012 irs tax forms 1040a In addition, the farmer is the employer of workers furnished by a registered crew leader if the workers are the employees of the farmer under the common-law test. 2012 irs tax forms 1040a For example, some farmers employ individuals to recruit farmworkers exclusively for them. 2012 irs tax forms 1040a Although these individuals may be required to register under the Migrant and Seasonal Agricultural Worker Protection Act, the workers are employed directly by the farmer. 2012 irs tax forms 1040a The farmer is the employer in these cases. 2012 irs tax forms 1040a For information about common-law employees, see section 1 of Publication 15-A. 2012 irs tax forms 1040a For information about crew leaders, see the Department of Labor website at www. 2012 irs tax forms 1040a dol. 2012 irs tax forms 1040a gov/whd/regs/compliance/whdfs49. 2012 irs tax forms 1040a htm. 2012 irs tax forms 1040a Social Security and Medicare Taxes All cash wages you pay to an employee during the year for farmwork are subject to social security and Medicare taxes if you meet either of the following tests. 2012 irs tax forms 1040a You pay the employee $150 or more in cash wages (count all wages paid on a time, piecework, or other basis) during the year for farmwork (the $150 test). 2012 irs tax forms 1040a The $150 test applies separately to each farmworker that you employ. 2012 irs tax forms 1040a If you employ a family of workers, each member is treated separately. 2012 irs tax forms 1040a Do not count wages paid by other employers. 2012 irs tax forms 1040a You pay cash and noncash wages of $2,500 or more during the year to all your employees for farmwork (the $2,500 test). 2012 irs tax forms 1040a If the $2,500 test for the group is not met, the $150 test for an employee still applies. 2012 irs tax forms 1040a Exceptions. 2012 irs tax forms 1040a   Annual cash wages of less than $150 you pay to a seasonal farmworker are not subject to social security and Medicare taxes, even if you pay $2,500 or more to all your farmworkers. 2012 irs tax forms 1040a However, these wages count toward the $2,500 test for determining whether other farmworkers' wages are subject to social security and Medicare taxes. 2012 irs tax forms 1040a   A seasonal farmworker is a worker who: Works as a hand-harvest laborer, Is paid piece rates in an operation usually paid on this basis in the region of employment, Commutes daily from his or her permanent home to the farm, and Worked in agriculture less than 13 weeks in the preceding calendar year. 2012 irs tax forms 1040a   See Family Employees , earlier, for certain exemptions from social security and Medicare taxes that apply to your child, spouse, and parent. 2012 irs tax forms 1040a Religious exemption. 2012 irs tax forms 1040a   An exemption from social security and Medicare taxes is available to members of a recognized religious group or division opposed to public insurance. 2012 irs tax forms 1040a This exemption is available only if both the employee and the employer are members of the group or division. 2012 irs tax forms 1040a   For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. 2012 irs tax forms 1040a Cash wages. 2012 irs tax forms 1040a   Only cash wages paid to farmworkers are subject to social security and Medicare taxes. 2012 irs tax forms 1040a Cash wages include checks, money orders, and any kind of money or cash. 2012 irs tax forms 1040a   Only cash wages subject to social security and Medicare taxes are credited to your employees for social security benefit purposes. 2012 irs tax forms 1040a Payments not subject to these taxes, such as commodity wages, do not contribute to your employees' social security coverage. 2012 irs tax forms 1040a For information about social security benefits, contact the SSA at 1-800-772-1213 or online at www. 2012 irs tax forms 1040a socialsecurity. 2012 irs tax forms 1040a gov. 2012 irs tax forms 1040a Noncash wages. 2012 irs tax forms 1040a    Noncash wages include food, lodging, clothing, transportation passes, and other goods and services. 2012 irs tax forms 1040a Noncash wages paid to farmworkers, including commodity wages, are not subject to social security and Medicare taxes. 2012 irs tax forms 1040a However, they are subject to these taxes if the substance of the transaction is a cash payment. 2012 irs tax forms 1040a For information on lodging provided as a condition of employment, see Publication 15-B. 2012 irs tax forms 1040a   Report the value of noncash wages in box 1 of Form W-2 together with cash wages. 2012 irs tax forms 1040a Do not show noncash wages in box 3 or in box 5, (unless the substance of the transaction is a cash payment). 2012 irs tax forms 1040a Tax rates and social security wage limit. 2012 irs tax forms 1040a   For 2013, the employer and the employee will pay the following taxes. 2012 irs tax forms 1040a The employer and employee each pay 6. 2012 irs tax forms 1040a 2% of cash wages for social security tax (old-age, survivors, and disability insurance). 2012 irs tax forms 1040a The employer and employee each pay 1. 2012 irs tax forms 1040a 45% of cash wages for Medicare tax (hospital insurance). 2012 irs tax forms 1040a The employee pays 0. 2012 irs tax forms 1040a 9% of cash wages in excess of $200,000 for Additional Medicare Tax. 2012 irs tax forms 1040a Wage limit. 2012 irs tax forms 1040a   The limit on wages subject to the social security tax for 2013 is $113,700. 2012 irs tax forms 1040a There is no limit on wages subject to the Medicare tax. 2012 irs tax forms 1040a All covered wages are subject to the Medicare tax. 2012 irs tax forms 1040a Additionally, all wages in excess of $200,000 are subject to Additional Medicare Tax withholding. 2012 irs tax forms 1040a Paying employee's share. 2012 irs tax forms 1040a   If you would rather pay the employee's share of social security and Medicare taxes without deducting it from his or her wages, you may do so. 2012 irs tax forms 1040a It is additional income to the employee. 2012 irs tax forms 1040a You must include it in box 1 of the employee's Form W-2, but do not count it as social security and Medicare wages (boxes 3 and 5 on Form W-2) or as wages for federal unemployment (FUTA) tax purposes. 2012 irs tax forms 1040a Example. 2012 irs tax forms 1040a Jane operates a small family fruit farm. 2012 irs tax forms 1040a She employs day laborers in the picking season to enable her to timely get her crop to market. 2012 irs tax forms 1040a She does not deduct the employees' share of social security and Medicare taxes from their pay; instead, she pays it on their behalf. 2012 irs tax forms 1040a When her accountant, Susan, prepares the employees' Forms W-2, she adds each employee's share of social security and Medicare taxes paid by Jane to the employee's wage income (box 1 of Form W-2), but does not include it in box 3 (social security wages) or box 5 (Medicare wages and tips). 2012 irs tax forms 1040a For 2013, Jane paid Mary $1,000 during the year. 2012 irs tax forms 1040a Susan enters $1,076. 2012 irs tax forms 1040a 50 in box 1 of Mary's Form W-2 ($1,000 wages plus $76. 2012 irs tax forms 1040a 50 social security and Medicare taxes paid for Mary). 2012 irs tax forms 1040a She enters $1,000 in boxes 3 and 5 of Mary's Form W-2. 2012 irs tax forms 1040a Additional Medicare Tax. 2012 irs tax forms 1040a   In addition to withholding Medicare tax at 1. 2012 irs tax forms 1040a 45%, you must withhold a 0. 2012 irs tax forms 1040a 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 2012 irs tax forms 1040a 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. 2012 irs tax forms 1040a Additional Medicare Tax is only imposed on the employee. 2012 irs tax forms 1040a There is no employer share of Additional Medicare Tax. 2012 irs tax forms 1040a All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold. 2012 irs tax forms 1040a   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 of Publication 15 (Circular E). 2012 irs tax forms 1040a For more information on Additional Medicare Tax, visit IRS. 2012 irs tax forms 1040a gov and enter “Additional Medicare Tax” in the search box. 2012 irs tax forms 1040a Federal Income Tax Withholding If the cash wages you pay to farmworkers are subject to social security and Medicare taxes, they are also subject to federal income tax withholding. 2012 irs tax forms 1040a Although noncash wages are subject to federal income tax, withhold income tax only if you and the employee agree to do so. 2012 irs tax forms 1040a The amount to withhold is figured on gross wages without taking out social security and Medicare taxes, union dues, insurance, etc. 2012 irs tax forms 1040a Form W-4. 2012 irs tax forms 1040a   Generally, the amount of federal income tax you withhold is based on the employee's marital status and withholding allowances claimed on the employee's Form W-4. 2012 irs tax forms 1040a In general, an employee can claim withholding allowances on Form W-4 equal to the number of exemptions the employee will be entitled to claim on his or her tax return. 2012 irs tax forms 1040a An employee may also be able to claim a special withholding allowance and allowances for estimated deductions and credits. 2012 irs tax forms 1040a   Do not withhold federal income tax from the wages of an employee who, by filing Form W-4, certifies that he or she had no federal income tax liability last year and anticipates no liability for the current year. 2012 irs tax forms 1040a   You should give each new employee a Form W-4 as soon as you hire the employee. 2012 irs tax forms 1040a For Spanish-speaking employees, you may use Formulario W-4(SP) which is the Spanish translation of Form W-4. 2012 irs tax forms 1040a Have the employee complete and return the form to you before the first payday. 2012 irs tax forms 1040a If the employee does not return the completed form, you must withhold federal income tax as if the employee is single and claims no withholding allowances. 2012 irs tax forms 1040a New Form W-4 for 2014. 2012 irs tax forms 1040a   You should make the 2014 Form W-4 available to your employees and encourage them to check their income tax withholding for 2014. 2012 irs tax forms 1040a Those employees who owed a large amount of tax or received a large refund for 2013 may want to submit a new Form W-4. 2012 irs tax forms 1040a You cannot accept substitute Forms W-4 developed by employees. 2012 irs tax forms 1040a How to figure withholding. 2012 irs tax forms 1040a   You can use one of several methods to determine the amount to withhold. 2012 irs tax forms 1040a The methods are described in Publication 51 (Circular A), which contains tables showing the correct amount of federal income tax you should withhold. 2012 irs tax forms 1040a Publication 51 (Circular A) also contains additional information about federal income tax withholding. 2012 irs tax forms 1040a Nonemployee compensation. 2012 irs tax forms 1040a   Generally, you do not have to withhold federal income tax on payments for services to individuals who are not your employees. 2012 irs tax forms 1040a However, you may be required to report these payments on Form 1099-MISC, Miscellaneous Income, and to withhold under the backup withholding rules. 2012 irs tax forms 1040a For more information, see the Instructions for Form 1099-MISC. 2012 irs tax forms 1040a Required Notice to Employees About Earned Income Credit (EIC) You must provide notification about EIC to each employee who worked for you at any time during the year and from whom you did not withhold any federal income tax. 2012 irs tax forms 1040a However, you do not have to notify employees who claim exemption from federal income tax withholding on Form W-4. 2012 irs tax forms 1040a You meet the notification requirement by giving each employee any of the following. 2012 irs tax forms 1040a Form W-2, which contains EIC notification on the back of Copy B. 2012 irs tax forms 1040a A substitute Form W-2 with the exact EIC wording shown on the back of copy B of Form W-2. 2012 irs tax forms 1040a Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC). 2012 irs tax forms 1040a Your own written statement with the exact wording of Notice 797. 2012 irs tax forms 1040a For more information, see Publication 51 (Circular A). 2012 irs tax forms 1040a Reporting and Paying Social Security, Medicare, and Withheld Federal Income Taxes You must withhold federal income, social security, and Medicare taxes required to be withheld from the salaries and wages of your employees. 2012 irs tax forms 1040a You are liable for the payment of these taxes to the federal government whether or not you collect them from your employees. 2012 irs tax forms 1040a If, for example, you withhold less than the correct tax from an employee's wages, you are still liable for the full amount. 2012 irs tax forms 1040a You must also pay the employer's share of social security and Medicare taxes. 2012 irs tax forms 1040a There is no employer share of Additional Medicare Tax. 2012 irs tax forms 1040a Form 943. 2012 irs tax forms 1040a   Report withheld federal income tax, social security tax, and Medicare tax on Form 943. 2012 irs tax forms 1040a Your 2013 Form 943 is due by January 31, 2014 (or February 10, 2014, if you made deposits on time in full payment of the taxes due for the year). 2012 irs tax forms 1040a Deposits. 2012 irs tax forms 1040a   Generally, you must deposit both the employer and employee shares of social security and Medicare taxes and federal income tax withheld during the year. 2012 irs tax forms 1040a However, you may make payments with Form 943 instead of depositing them if you accumulate less than a $2,500 tax liability (“Total taxes after adjustments” line on Form 943) during the year and you pay in full with a timely filed return. 2012 irs tax forms 1040a   For more information on deposit rules, see Publication 51 (Circular A). 2012 irs tax forms 1040a Electronic deposit requirement. 2012 irs tax forms 1040a   You must use electronic funds transfer to make all federal tax deposits. 2012 irs tax forms 1040a Generally, electronic funds transfers are made using EFTPS. 2012 irs tax forms 1040a 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. 2012 irs tax forms 1040a Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 2012 irs tax forms 1040a EFTPS is a free service provided by the Department of Treasury. 2012 irs tax forms 1040a Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 2012 irs tax forms 1040a   For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). 2012 irs tax forms 1040a To get more information about EFTPS or to enroll in EFTPS, visit www. 2012 irs tax forms 1040a eftps. 2012 irs tax forms 1040a gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). 2012 irs tax forms 1040a Additional information about EFTPS is also available in Publication 966. 2012 irs tax forms 1040a Form W-2. 2012 irs tax forms 1040a   By January 31, you must furnish each employee a Form W-2 showing total wages for the previous year and total federal income tax, social security tax, and Medicare tax withheld. 2012 irs tax forms 1040a However, if an employee stops working for you and requests the form earlier, you must give it to the employee within 30 days of the later of the following dates. 2012 irs tax forms 1040a The date the employee requests the form. 2012 irs tax forms 1040a The date you make your final payment of wages to the employee. 2012 irs tax forms 1040a Compensation paid to H-2A visa holders. 2012 irs tax forms 1040a   Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2. 2012 irs tax forms 1040a Compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes, and therefore should not be reported as wages subject to social security tax (line 2), Medicare tax (line 4), or Additional Medicare Tax (line 6) on Form 943, and should not be reported as social security wages (box 3) or Medicare wages (box 5) on Form W-2. 2012 irs tax forms 1040a   An employer is not required to withhold federal income tax from compensation it pays to an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. 2012 irs tax forms 1040a In this case, the worker must give the employer a completed Form W-4. 2012 irs tax forms 1040a Federal income tax withheld should be reported on Form 943, line 8, and in box 2 of Form W-2. 2012 irs tax forms 1040a   These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. 2012 irs tax forms 1040a For the rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945. 2012 irs tax forms 1040a Trust fund recovery penalty. 2012 irs tax forms 1040a   If you are responsible for withholding, accounting for, depositing, or paying federal withholding taxes and willfully fail to do so, you can be held liable for a penalty equal to the withheld tax not paid. 2012 irs tax forms 1040a A responsible person can be an officer of a corporation, a partner, a sole proprietor, or an employee of any form of business. 2012 irs tax forms 1040a A trustee or agent with authority over the funds of the business can also be held responsible for the penalty. 2012 irs tax forms 1040a   Willfully means voluntarily, consciously, and intentionally. 2012 irs tax forms 1040a Paying other expenses of the business instead of the taxes due is acting willfully. 2012 irs tax forms 1040a Consequences of treating an employee as an independent contractor. 2012 irs tax forms 1040a   If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker. 2012 irs tax forms 1040a See Publication 15-A for more information. 2012 irs tax forms 1040a Federal Unemployment (FUTA) Tax You must pay FUTA tax if you meet either of the following tests. 2012 irs tax forms 1040a You paid cash wages of $20,000 or more to farmworkers in any calendar quarter during the current or preceding calendar year. 2012 irs tax forms 1040a You employed 10 or more farmworkers for some part of at least 1 day during any 20 or more different calendar weeks during the current or preceding calendar year. 2012 irs tax forms 1040a These rules do not apply to exempt services of your spouse, your parents, or your children under age 21. 2012 irs tax forms 1040a See Family Employees , earlier. 2012 irs tax forms 1040a Alien farmworkers. 2012 irs tax forms 1040a   Wages paid to aliens admitted on a temporary basis to the United States to perform farmwork (also known as “H-2A visa workers”) are exempt from FUTA tax. 2012 irs tax forms 1040a However, include your employment of these workers and the wages you paid them to determine whether you meet either of the above tests. 2012 irs tax forms 1040a Commodity wages. 2012 irs tax forms 1040a   Payments in kind for farm labor are not cash wages. 2012 irs tax forms 1040a Do not count them to figure whether you are subject to FUTA tax or to figure how much tax you owe. 2012 irs tax forms 1040a Tax rate and credit. 2012 irs tax forms 1040a   The gross FUTA tax rate is 6. 2012 irs tax forms 1040a 0% of the first $7,000 cash wages you pay to each employee during the year. 2012 irs tax forms 1040a However, you are given a credit of up to 5. 2012 irs tax forms 1040a 4% of the first $7,000 cash wages you pay to each employee for the state unemployment tax you pay. 2012 irs tax forms 1040a If your state tax rate (experience rate) is less than 5. 2012 irs tax forms 1040a 4%, you may still be allowed the full 5. 2012 irs tax forms 1040a 4% credit. 2012 irs tax forms 1040a   If you do not pay the state tax, you cannot take the credit. 2012 irs tax forms 1040a If you are exempt from state unemployment tax for any reason, the full 6. 2012 irs tax forms 1040a 0% rate applies. 2012 irs tax forms 1040a See the Instructions for Form 940 for additional information. 2012 irs tax forms 1040a More information. 2012 irs tax forms 1040a   For more information on FUTA tax, see Publication 51 (Circular A). 2012 irs tax forms 1040a Reporting and Paying FUTA Tax The FUTA tax is imposed on you as the employer. 2012 irs tax forms 1040a It must not be collected or deducted from the wages of your employees. 2012 irs tax forms 1040a Form 940. 2012 irs tax forms 1040a   Report FUTA tax on Form 940. 2012 irs tax forms 1040a The 2013 Form 940 is due January 31, 2014 (or February 10, 2014, if you timely deposited the full amount of your 2013 FUTA tax). 2012 irs tax forms 1040a Deposits. 2012 irs tax forms 1040a   If at the end of any calendar quarter you owe, but have not yet deposited, more than $500 in FUTA tax for the year, you must make a deposit by the end of the following month. 2012 irs tax forms 1040a If the undeposited tax is $500 or less at the end of a quarter, you do not have to deposit it. 2012 irs tax forms 1040a You can add it to the tax for the next quarter. 2012 irs tax forms 1040a If the total undeposited tax is more than $500 at the end of the next quarter, a deposit will be required. 2012 irs tax forms 1040a If the total undeposited tax at the end of the 4th quarter is $500 or less, you can either make a deposit or pay it with your return by the January 31, 2014, due date. 2012 irs tax forms 1040a Electronic deposit requirement. 2012 irs tax forms 1040a   You must use electronic funds transfer to make all federal tax deposits. 2012 irs tax forms 1040a Generally, electronic funds transfers are made using EFTPS. 2012 irs tax forms 1040a 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. 2012 irs tax forms 1040a Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 2012 irs tax forms 1040a EFTPS is a free service provided by the Department of Treasury. 2012 irs tax forms 1040a Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 2012 irs tax forms 1040a   For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). 2012 irs tax forms 1040a To get more information about EFTPS or to enroll in EFTPS, visit www. 2012 irs tax forms 1040a eftps. 2012 irs tax forms 1040a gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). 2012 irs tax forms 1040a Additional information about EFTPS is also available in Publication 966. 2012 irs tax forms 1040a Prev  Up  Next   Home   More Online Publications