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Amend 2009 Tax Return

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Amend 2009 Tax Return

Amend 2009 tax return 13. Amend 2009 tax return   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. Amend 2009 tax return Wage limit. Amend 2009 tax return Federal Income Tax WithholdingNew Form W-4 for 2014. Amend 2009 tax return Required Notice to Employees About Earned Income Credit (EIC) Reporting and Paying Social Security, Medicare, and Withheld Federal Income TaxesElectronic deposit requirement. Amend 2009 tax return Federal Unemployment (FUTA) TaxReporting and Paying FUTA Tax What's New for 2013 Social security and Medicare tax for 2013. Amend 2009 tax return  The employee tax rate for social security is 6. Amend 2009 tax return 2%. Amend 2009 tax return Previously, the employee tax rate for social security was 4. Amend 2009 tax return 2%. Amend 2009 tax return The employer tax rate for social security remains unchanged at 6. Amend 2009 tax return 2%. Amend 2009 tax return The social security wage base limit is $113,700. Amend 2009 tax return The Medicare tax rate is 1. Amend 2009 tax return 45% each for the employee and employer, unchanged from 2012. Amend 2009 tax return There is no wage base limit for Medicare tax. Amend 2009 tax return Additional Medicare Tax. Amend 2009 tax return  In addition to withholding Medicare tax at 1. Amend 2009 tax return 45%, you must withhold a 0. Amend 2009 tax return 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Amend 2009 tax return 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. Amend 2009 tax return Additional Medicare Tax is only imposed on the employee. Amend 2009 tax return There is no employer share of Additional Medicare Tax. Amend 2009 tax return All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold. Amend 2009 tax return 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. Amend 2009 tax return For more information on Additional Medicare Tax, visit IRS. Amend 2009 tax return gov and enter “Additional Medicare Tax” in the search box. Amend 2009 tax return Leave-based donation programs to aid victims of Hurricane Sandy. Amend 2009 tax return  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. Amend 2009 tax return The donated leave will not be included in the income or wages of the employee. Amend 2009 tax return The employer may deduct the cash payments as business expenses or charitable contributions. Amend 2009 tax return For more information, see Notice 2012-69, 2012-51 I. Amend 2009 tax return R. Amend 2009 tax return B. Amend 2009 tax return 712, available at www. Amend 2009 tax return irs. Amend 2009 tax return gov/irb/2012-51_IRB/ar09. Amend 2009 tax return html. Amend 2009 tax return Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans extended. Amend 2009 tax return  The work opportunity tax credit is now available for eligible unemployed veterans who begin work before January 1, 2014. Amend 2009 tax return Previously, the credit was available for unemployed veterans who began work on or after November 22, 2011, and before January 1, 2013. Amend 2009 tax return 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. Amend 2009 tax return For more information, visit IRS. Amend 2009 tax return gov and enter “work opportunity credit” in the search box. Amend 2009 tax return What's New for 2014 Social security and Medicare tax for 2014. Amend 2009 tax return  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). Amend 2009 tax return The Medicare tax rate for 2014 will also be discussed in Publication 51 (Circular A) (For use in 2014). Amend 2009 tax return There is no limit on the amount of wages subject to Medicare tax. Amend 2009 tax return Reminders Additional employment tax information for farmers. Amend 2009 tax return  See Publication 51 (Circular A) for more detailed guidance on employment taxes. Amend 2009 tax return For the latest information about employment tax developments impacting farmers, go to www. Amend 2009 tax return irs. Amend 2009 tax return gov/pub51. Amend 2009 tax return Correcting a previously filed Form 943. Amend 2009 tax return  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. Amend 2009 tax return Form 943-X is filed separately from Form 943. Amend 2009 tax return For more information on correcting Form 943, see the Instructions for Form 943-X. Amend 2009 tax return Federal tax deposits must be made by electronic funds transfer. Amend 2009 tax return  You must use electronic funds transfer to make all federal tax deposits. Amend 2009 tax return Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). Amend 2009 tax return 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. Amend 2009 tax return Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Amend 2009 tax return EFTPS is a free service provided by the Department of Treasury. Amend 2009 tax return Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Amend 2009 tax return For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). Amend 2009 tax return To get more information about EFTPS or to enroll in EFTPS, visit www. Amend 2009 tax return eftps. Amend 2009 tax return gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Amend 2009 tax return Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. Amend 2009 tax return Important Dates for 2014 You should take the action indicated by the dates listed. Amend 2009 tax return See By February 15 and On February 16 for Form W-4, Employee's Withholding Allowance Certificate, information. Amend 2009 tax return Due dates for deposits of withheld federal income taxes, social security taxes, and Medicare taxes are not listed here. Amend 2009 tax return For these dates, see Publication 509, Tax Calendars (For use in 2014). Amend 2009 tax return Note. Amend 2009 tax return  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. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return S. Amend 2009 tax return Postal Service by the due date, or sent by an IRS-designated delivery service by the due date. Amend 2009 tax return See Private delivery services in Publication 51 (Circular A). Amend 2009 tax return Federal tax deposits can only be made by electronic funds transfer and are governed by legal holidays in the District of Columbia. Amend 2009 tax return Statewide holidays no longer apply. Amend 2009 tax return For a list of legal holidays that delay the due date of a federal tax deposit, see section 7 of Publication 51 (Circular A). Amend 2009 tax return Fiscal year taxpayers. Amend 2009 tax return  The due dates listed below apply whether you use a calendar or a fiscal year. Amend 2009 tax return By January 31. Amend 2009 tax return   File Form 943 with the IRS. Amend 2009 tax return If you deposited all Form 943 taxes when due, you have 10 additional days to file. Amend 2009 tax return Furnish each employee with a completed Form W-2, Wage and Tax Statement. Amend 2009 tax return Furnish each recipient to whom you paid $600 or more in nonemployee compensation with a completed Form 1099 (for example, Form 1099-MISC). Amend 2009 tax return File Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, with the IRS. Amend 2009 tax return If you deposited all the FUTA tax when due, you have 10 additional days to file. Amend 2009 tax return File Form 945, Annual Return of Withheld Federal Income Tax, with the IRS to report any nonpayroll income tax withheld during 2013. Amend 2009 tax return If you deposited all Form 945 taxes when due, you have 10 additional days to file. Amend 2009 tax return By February 15. Amend 2009 tax return  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. Amend 2009 tax return On February 16. Amend 2009 tax return  Any Form W-4 claiming exemption from withholding for the previous year has now expired. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return By February 28. Amend 2009 tax return   File paper Forms 1099 and 1096. Amend 2009 tax return File Copy A of all paper Forms 1099 with Form 1096, Annual Summary and Transmittal of U. Amend 2009 tax return S. Amend 2009 tax return Information Returns, with the IRS. Amend 2009 tax return For electronically filed returns, see By March 31 below. Amend 2009 tax return File paper Forms W-2 and W-3. Amend 2009 tax return 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). Amend 2009 tax return For electronically filed returns, see By March 31 below. Amend 2009 tax return By March 31. Amend 2009 tax return   File electronic Forms W-2 and 1099. Amend 2009 tax return File electronic Forms W-2 with the SSA and Forms 1099 with the IRS. Amend 2009 tax return 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. Amend 2009 tax return socialsecurity. Amend 2009 tax return gov/employer. Amend 2009 tax return 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. Amend 2009 tax return By April 30, July 31, October 31, and January 31. Amend 2009 tax return   Deposit FUTA taxes. Amend 2009 tax return Deposit FUTA tax due if it is more than $500. Amend 2009 tax return Before December 1. Amend 2009 tax return  Remind employees to submit a new Form W-4 if their withholding allowances have changed or will change for the next year. Amend 2009 tax return Introduction You are generally required to withhold federal income tax from the wages of your employees. Amend 2009 tax return 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). Amend 2009 tax return You must also withhold Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Amend 2009 tax return This chapter includes information about these taxes. Amend 2009 tax return You must also pay self-employment tax on your net earnings from farming. Amend 2009 tax return See chapter 12 for information on self-employment tax. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return Farm Employment In general, you are an employer of farmworkers if your employees do any of the following types of work. Amend 2009 tax return Raising or harvesting agricultural or horticultural products on a farm, including raising and feeding of livestock. Amend 2009 tax return Operating, managing, conserving, improving, or maintaining your farm and its tools and equipment. Amend 2009 tax return Services performed in salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor). Amend 2009 tax return 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). Amend 2009 tax return Work related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. Amend 2009 tax return For more information, see Publication 51 (Circular A). Amend 2009 tax return 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. Amend 2009 tax return This is so even when you give the employee freedom of action. Amend 2009 tax return What matters is that you have the right to control the details of how the services are performed. Amend 2009 tax return You are responsible for withholding and paying employment taxes for your employees. Amend 2009 tax return You are also required to file employment tax returns. Amend 2009 tax return These requirements do not apply to amounts that you pay to independent contractors. Amend 2009 tax return See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. Amend 2009 tax return If you employ a family of workers, each worker subject to your control (not just the head of the family) is an employee. Amend 2009 tax return Special rules apply to crew leaders. Amend 2009 tax return See Crew Leaders , later. Amend 2009 tax return Employer identification number (EIN). Amend 2009 tax return   If you have employees, you must have an EIN. Amend 2009 tax return If you do not have an EIN, you may apply for one online. Amend 2009 tax return Go to IRS. Amend 2009 tax return gov and click on the Apply for an EIN Online link under Tools. Amend 2009 tax return 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). Amend 2009 tax return The hours of operation for both numbers are Monday–Friday form 7:00 a. Amend 2009 tax return m. Amend 2009 tax return –7:00 p. Amend 2009 tax return m. Amend 2009 tax return local time (Alaska and Hawaii follow Pacific time). Amend 2009 tax return You can also fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. Amend 2009 tax return Employee's social security number (SSN). Amend 2009 tax return   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). Amend 2009 tax return Form SS-5 is available from any SSA office or by calling 1-800-772-1213 (operates 24 hours per day). Amend 2009 tax return It is also available from the SSA's website at www. Amend 2009 tax return socialsecurity. Amend 2009 tax return gov. Amend 2009 tax return   The employee must furnish evidence of age, identity, and U. Amend 2009 tax return S. Amend 2009 tax return citizenship or lawful immigration status permitting employment with the Form SS-5. Amend 2009 tax return An employee who is age 18 or older must appear in person with this evidence at an SSA office. Amend 2009 tax return Form I-9. Amend 2009 tax return    You must verify that each new employee is legally eligible to work in the United States. Amend 2009 tax return This includes completing the Form I-9, Employment Eligibility Verification. Amend 2009 tax return Form I-9 is available from the U. Amend 2009 tax return S. Amend 2009 tax return Citizenship and Immigration Services (USCIS) offices or by calling the Bureau of Citizenship and Immigration Services Forms Request Line at 1-800-870-3676. Amend 2009 tax return Form I-9 is also available from the USCIS website at www. Amend 2009 tax return uscis. Amend 2009 tax return gov. Amend 2009 tax return You can also contact the USCIS at 1-800-375-5283 for more information. Amend 2009 tax return New hire reporting. Amend 2009 tax return   You are required to report any new employee to a designated state new hire registry. Amend 2009 tax return Many states accept a copy of Form W-4 with employer information added. Amend 2009 tax return Visit the Office of Child Support Enforcement website at www. Amend 2009 tax return acf. Amend 2009 tax return hhs. Amend 2009 tax return gov/programs/cse/newhire for more information. Amend 2009 tax return Family Employees Generally, the wages you pay to family members who are your employees are subject to employment taxes. Amend 2009 tax return However, certain exemptions may apply to wages paid to your child, spouse, or parent. Amend 2009 tax return Exemptions for your child. Amend 2009 tax return   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. Amend 2009 tax return However, see Nonexempt services of a child or spouse , later. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return Although not subject to social security, Medicare, or FUTA tax, the child's wages still may be subject to federal income tax withholding. Amend 2009 tax return Exemptions for your spouse. Amend 2009 tax return   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. Amend 2009 tax return   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. Amend 2009 tax return Nonexempt services of a child or spouse. Amend 2009 tax return   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. Amend 2009 tax return A corporation, even if it is controlled by you. Amend 2009 tax return A partnership, even if you are a partner. Amend 2009 tax return This does not apply to wages paid to your child if each partner is a parent of the child. Amend 2009 tax return An estate or trust, even if it is the estate of a deceased parent. Amend 2009 tax return In these situations, the child or spouse is considered to work for the corporation, partnership, or estate, not you. Amend 2009 tax return Exemptions for your parent. Amend 2009 tax return   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. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return   Wages you pay to your parent are not subject to FUTA tax, regardless of the type of services provided. Amend 2009 tax return Qualified joint venture. Amend 2009 tax return   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. Amend 2009 tax return For more information about qualified joint ventures, see chapter 12. Amend 2009 tax return Crew Leaders If farmworkers are provided by a crew leader, the crew leader may be the employer of the workers. Amend 2009 tax return Social security and Medicare taxes. Amend 2009 tax return   For social security and Medicare tax purposes, the crew leader is the employer of the workers if both of the following requirements are met. Amend 2009 tax return The crew leader pays (either on his or her own behalf or on behalf of the farmer) the workers for their farm labor. Amend 2009 tax return 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. Amend 2009 tax return Federal income tax withholding. Amend 2009 tax return   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. Amend 2009 tax return Federal unemployment (FUTA) tax. Amend 2009 tax return   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. Amend 2009 tax return The crew leader is registered under the Migrant and Seasonal Agricultural Worker Protection Act. Amend 2009 tax return Substantially all crew members operate or maintain mechanized equipment provided by the crew leader as part of the service to the farmer. Amend 2009 tax return   The farmer is the employer of workers furnished by a crew leader in all other situations. Amend 2009 tax return 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. Amend 2009 tax return For example, some farmers employ individuals to recruit farmworkers exclusively for them. Amend 2009 tax return 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. Amend 2009 tax return The farmer is the employer in these cases. Amend 2009 tax return For information about common-law employees, see section 1 of Publication 15-A. Amend 2009 tax return For information about crew leaders, see the Department of Labor website at www. Amend 2009 tax return dol. Amend 2009 tax return gov/whd/regs/compliance/whdfs49. Amend 2009 tax return htm. Amend 2009 tax return 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. Amend 2009 tax return 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). Amend 2009 tax return The $150 test applies separately to each farmworker that you employ. Amend 2009 tax return If you employ a family of workers, each member is treated separately. Amend 2009 tax return Do not count wages paid by other employers. Amend 2009 tax return You pay cash and noncash wages of $2,500 or more during the year to all your employees for farmwork (the $2,500 test). Amend 2009 tax return If the $2,500 test for the group is not met, the $150 test for an employee still applies. Amend 2009 tax return Exceptions. Amend 2009 tax return   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. Amend 2009 tax return However, these wages count toward the $2,500 test for determining whether other farmworkers' wages are subject to social security and Medicare taxes. Amend 2009 tax return   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. Amend 2009 tax return   See Family Employees , earlier, for certain exemptions from social security and Medicare taxes that apply to your child, spouse, and parent. Amend 2009 tax return Religious exemption. Amend 2009 tax return   An exemption from social security and Medicare taxes is available to members of a recognized religious group or division opposed to public insurance. Amend 2009 tax return This exemption is available only if both the employee and the employer are members of the group or division. Amend 2009 tax return   For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Amend 2009 tax return Cash wages. Amend 2009 tax return   Only cash wages paid to farmworkers are subject to social security and Medicare taxes. Amend 2009 tax return Cash wages include checks, money orders, and any kind of money or cash. Amend 2009 tax return   Only cash wages subject to social security and Medicare taxes are credited to your employees for social security benefit purposes. Amend 2009 tax return Payments not subject to these taxes, such as commodity wages, do not contribute to your employees' social security coverage. Amend 2009 tax return For information about social security benefits, contact the SSA at 1-800-772-1213 or online at www. Amend 2009 tax return socialsecurity. Amend 2009 tax return gov. Amend 2009 tax return Noncash wages. Amend 2009 tax return    Noncash wages include food, lodging, clothing, transportation passes, and other goods and services. Amend 2009 tax return Noncash wages paid to farmworkers, including commodity wages, are not subject to social security and Medicare taxes. Amend 2009 tax return However, they are subject to these taxes if the substance of the transaction is a cash payment. Amend 2009 tax return For information on lodging provided as a condition of employment, see Publication 15-B. Amend 2009 tax return   Report the value of noncash wages in box 1 of Form W-2 together with cash wages. Amend 2009 tax return Do not show noncash wages in box 3 or in box 5, (unless the substance of the transaction is a cash payment). Amend 2009 tax return Tax rates and social security wage limit. Amend 2009 tax return   For 2013, the employer and the employee will pay the following taxes. Amend 2009 tax return The employer and employee each pay 6. Amend 2009 tax return 2% of cash wages for social security tax (old-age, survivors, and disability insurance). Amend 2009 tax return The employer and employee each pay 1. Amend 2009 tax return 45% of cash wages for Medicare tax (hospital insurance). Amend 2009 tax return The employee pays 0. Amend 2009 tax return 9% of cash wages in excess of $200,000 for Additional Medicare Tax. Amend 2009 tax return Wage limit. Amend 2009 tax return   The limit on wages subject to the social security tax for 2013 is $113,700. Amend 2009 tax return There is no limit on wages subject to the Medicare tax. Amend 2009 tax return All covered wages are subject to the Medicare tax. Amend 2009 tax return Additionally, all wages in excess of $200,000 are subject to Additional Medicare Tax withholding. Amend 2009 tax return Paying employee's share. Amend 2009 tax return   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. Amend 2009 tax return It is additional income to the employee. Amend 2009 tax return 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. Amend 2009 tax return Example. Amend 2009 tax return Jane operates a small family fruit farm. Amend 2009 tax return She employs day laborers in the picking season to enable her to timely get her crop to market. Amend 2009 tax return She does not deduct the employees' share of social security and Medicare taxes from their pay; instead, she pays it on their behalf. Amend 2009 tax return 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). Amend 2009 tax return For 2013, Jane paid Mary $1,000 during the year. Amend 2009 tax return Susan enters $1,076. Amend 2009 tax return 50 in box 1 of Mary's Form W-2 ($1,000 wages plus $76. Amend 2009 tax return 50 social security and Medicare taxes paid for Mary). Amend 2009 tax return She enters $1,000 in boxes 3 and 5 of Mary's Form W-2. Amend 2009 tax return Additional Medicare Tax. Amend 2009 tax return   In addition to withholding Medicare tax at 1. Amend 2009 tax return 45%, you must withhold a 0. Amend 2009 tax return 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Amend 2009 tax return 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. Amend 2009 tax return Additional Medicare Tax is only imposed on the employee. Amend 2009 tax return There is no employer share of Additional Medicare Tax. Amend 2009 tax return All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold. Amend 2009 tax return   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). Amend 2009 tax return For more information on Additional Medicare Tax, visit IRS. Amend 2009 tax return gov and enter “Additional Medicare Tax” in the search box. Amend 2009 tax return 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. Amend 2009 tax return Although noncash wages are subject to federal income tax, withhold income tax only if you and the employee agree to do so. Amend 2009 tax return The amount to withhold is figured on gross wages without taking out social security and Medicare taxes, union dues, insurance, etc. Amend 2009 tax return Form W-4. Amend 2009 tax return   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. Amend 2009 tax return 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. Amend 2009 tax return An employee may also be able to claim a special withholding allowance and allowances for estimated deductions and credits. Amend 2009 tax return   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. Amend 2009 tax return   You should give each new employee a Form W-4 as soon as you hire the employee. Amend 2009 tax return For Spanish-speaking employees, you may use Formulario W-4(SP) which is the Spanish translation of Form W-4. Amend 2009 tax return Have the employee complete and return the form to you before the first payday. Amend 2009 tax return 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. Amend 2009 tax return New Form W-4 for 2014. Amend 2009 tax return   You should make the 2014 Form W-4 available to your employees and encourage them to check their income tax withholding for 2014. Amend 2009 tax return 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. Amend 2009 tax return You cannot accept substitute Forms W-4 developed by employees. Amend 2009 tax return How to figure withholding. Amend 2009 tax return   You can use one of several methods to determine the amount to withhold. Amend 2009 tax return The methods are described in Publication 51 (Circular A), which contains tables showing the correct amount of federal income tax you should withhold. Amend 2009 tax return Publication 51 (Circular A) also contains additional information about federal income tax withholding. Amend 2009 tax return Nonemployee compensation. Amend 2009 tax return   Generally, you do not have to withhold federal income tax on payments for services to individuals who are not your employees. Amend 2009 tax return However, you may be required to report these payments on Form 1099-MISC, Miscellaneous Income, and to withhold under the backup withholding rules. Amend 2009 tax return For more information, see the Instructions for Form 1099-MISC. Amend 2009 tax return 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. Amend 2009 tax return However, you do not have to notify employees who claim exemption from federal income tax withholding on Form W-4. Amend 2009 tax return You meet the notification requirement by giving each employee any of the following. Amend 2009 tax return Form W-2, which contains EIC notification on the back of Copy B. Amend 2009 tax return A substitute Form W-2 with the exact EIC wording shown on the back of copy B of Form W-2. Amend 2009 tax return Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC). Amend 2009 tax return Your own written statement with the exact wording of Notice 797. Amend 2009 tax return For more information, see Publication 51 (Circular A). Amend 2009 tax return 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. Amend 2009 tax return You are liable for the payment of these taxes to the federal government whether or not you collect them from your employees. Amend 2009 tax return If, for example, you withhold less than the correct tax from an employee's wages, you are still liable for the full amount. Amend 2009 tax return You must also pay the employer's share of social security and Medicare taxes. Amend 2009 tax return There is no employer share of Additional Medicare Tax. Amend 2009 tax return Form 943. Amend 2009 tax return   Report withheld federal income tax, social security tax, and Medicare tax on Form 943. Amend 2009 tax return 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). Amend 2009 tax return Deposits. Amend 2009 tax return   Generally, you must deposit both the employer and employee shares of social security and Medicare taxes and federal income tax withheld during the year. Amend 2009 tax return 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. Amend 2009 tax return   For more information on deposit rules, see Publication 51 (Circular A). Amend 2009 tax return Electronic deposit requirement. Amend 2009 tax return   You must use electronic funds transfer to make all federal tax deposits. Amend 2009 tax return Generally, electronic funds transfers are made using EFTPS. Amend 2009 tax return 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. Amend 2009 tax return Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Amend 2009 tax return EFTPS is a free service provided by the Department of Treasury. Amend 2009 tax return Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Amend 2009 tax return   For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). Amend 2009 tax return To get more information about EFTPS or to enroll in EFTPS, visit www. Amend 2009 tax return eftps. Amend 2009 tax return gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Amend 2009 tax return Additional information about EFTPS is also available in Publication 966. Amend 2009 tax return Form W-2. Amend 2009 tax return   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. Amend 2009 tax return 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. Amend 2009 tax return The date the employee requests the form. Amend 2009 tax return The date you make your final payment of wages to the employee. Amend 2009 tax return Compensation paid to H-2A visa holders. Amend 2009 tax return   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. Amend 2009 tax return 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. Amend 2009 tax return   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. Amend 2009 tax return In this case, the worker must give the employer a completed Form W-4. Amend 2009 tax return Federal income tax withheld should be reported on Form 943, line 8, and in box 2 of Form W-2. Amend 2009 tax return   These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. Amend 2009 tax return 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. Amend 2009 tax return Trust fund recovery penalty. Amend 2009 tax return   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. Amend 2009 tax return A responsible person can be an officer of a corporation, a partner, a sole proprietor, or an employee of any form of business. Amend 2009 tax return A trustee or agent with authority over the funds of the business can also be held responsible for the penalty. Amend 2009 tax return   Willfully means voluntarily, consciously, and intentionally. Amend 2009 tax return Paying other expenses of the business instead of the taxes due is acting willfully. Amend 2009 tax return Consequences of treating an employee as an independent contractor. Amend 2009 tax return   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. Amend 2009 tax return See Publication 15-A for more information. Amend 2009 tax return Federal Unemployment (FUTA) Tax You must pay FUTA tax if you meet either of the following tests. Amend 2009 tax return You paid cash wages of $20,000 or more to farmworkers in any calendar quarter during the current or preceding calendar year. Amend 2009 tax return 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. Amend 2009 tax return These rules do not apply to exempt services of your spouse, your parents, or your children under age 21. Amend 2009 tax return See Family Employees , earlier. Amend 2009 tax return Alien farmworkers. Amend 2009 tax return   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. Amend 2009 tax return However, include your employment of these workers and the wages you paid them to determine whether you meet either of the above tests. Amend 2009 tax return Commodity wages. Amend 2009 tax return   Payments in kind for farm labor are not cash wages. Amend 2009 tax return Do not count them to figure whether you are subject to FUTA tax or to figure how much tax you owe. Amend 2009 tax return Tax rate and credit. Amend 2009 tax return   The gross FUTA tax rate is 6. Amend 2009 tax return 0% of the first $7,000 cash wages you pay to each employee during the year. Amend 2009 tax return However, you are given a credit of up to 5. Amend 2009 tax return 4% of the first $7,000 cash wages you pay to each employee for the state unemployment tax you pay. Amend 2009 tax return If your state tax rate (experience rate) is less than 5. Amend 2009 tax return 4%, you may still be allowed the full 5. Amend 2009 tax return 4% credit. Amend 2009 tax return   If you do not pay the state tax, you cannot take the credit. Amend 2009 tax return If you are exempt from state unemployment tax for any reason, the full 6. Amend 2009 tax return 0% rate applies. Amend 2009 tax return See the Instructions for Form 940 for additional information. Amend 2009 tax return More information. Amend 2009 tax return   For more information on FUTA tax, see Publication 51 (Circular A). Amend 2009 tax return Reporting and Paying FUTA Tax The FUTA tax is imposed on you as the employer. Amend 2009 tax return It must not be collected or deducted from the wages of your employees. Amend 2009 tax return Form 940. Amend 2009 tax return   Report FUTA tax on Form 940. Amend 2009 tax return 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). Amend 2009 tax return Deposits. Amend 2009 tax return   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. Amend 2009 tax return If the undeposited tax is $500 or less at the end of a quarter, you do not have to deposit it. Amend 2009 tax return You can add it to the tax for the next quarter. Amend 2009 tax return If the total undeposited tax is more than $500 at the end of the next quarter, a deposit will be required. Amend 2009 tax return 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. Amend 2009 tax return Electronic deposit requirement. Amend 2009 tax return   You must use electronic funds transfer to make all federal tax deposits. Amend 2009 tax return Generally, electronic funds transfers are made using EFTPS. Amend 2009 tax return 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. Amend 2009 tax return Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Amend 2009 tax return EFTPS is a free service provided by the Department of Treasury. Amend 2009 tax return Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Amend 2009 tax return   For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). Amend 2009 tax return To get more information about EFTPS or to enroll in EFTPS, visit www. Amend 2009 tax return eftps. Amend 2009 tax return gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Amend 2009 tax return Additional information about EFTPS is also available in Publication 966. Amend 2009 tax return Prev  Up  Next   Home   More Online Publications
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The Amend 2009 Tax Return

Amend 2009 tax return 3. Amend 2009 tax return   Rent Expense Table of Contents Introduction Topics - This chapter discusses: RentConditional sales contract. Amend 2009 tax return Leveraged leases. Amend 2009 tax return Leveraged leases of limited-use property. Amend 2009 tax return Taxes on Leased Property Cost of Getting a Lease Improvements by Lessee Capitalizing Rent Expenses Introduction This chapter discusses the tax treatment of rent or lease payments you make for property you use in your business but do not own. Amend 2009 tax return It also discusses how to treat other kinds of payments you make that are related to your use of this property. Amend 2009 tax return These include payments you make for taxes on the property. Amend 2009 tax return Topics - This chapter discusses: The definition of rent Taxes on leased property The cost of getting a lease Improvements by the lessee Capitalizing rent expenses Rent Rent is any amount you pay for the use of property you do not own. Amend 2009 tax return In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. Amend 2009 tax return If you have or will receive equity in or title to the property, the rent is not deductible. Amend 2009 tax return Unreasonable rent. Amend 2009 tax return   You cannot take a rental deduction for unreasonable rent. Amend 2009 tax return Ordinarily, the issue of reasonableness arises only if you and the lessor are related. Amend 2009 tax return Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. Amend 2009 tax return Rent is not unreasonable just because it is figured as a percentage of gross sales. Amend 2009 tax return For examples of related persons, see Related persons in chapter 2, Publication 544. Amend 2009 tax return Rent on your home. Amend 2009 tax return   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. Amend 2009 tax return You must meet the requirements for business use of your home. Amend 2009 tax return For more information, see Business use of your home in chapter 1. Amend 2009 tax return Rent paid in advance. Amend 2009 tax return   Generally, rent paid in your trade or business is deductible in the year paid or accrued. Amend 2009 tax return If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. Amend 2009 tax return You can deduct the rest of your payment only over the period to which it applies. Amend 2009 tax return Example 1. Amend 2009 tax return You are a calendar year taxpayer and you leased a building for 5 years beginning July 1. Amend 2009 tax return Your rent is $12,000 per year. Amend 2009 tax return You paid the first year's rent ($12,000) on June 30. Amend 2009 tax return You can deduct only $6,000 (6/12 × $12,000) for the rent that applies to the first year. Amend 2009 tax return Example 2. Amend 2009 tax return You are a calendar year taxpayer. Amend 2009 tax return Last January you leased property for 3 years for $6,000 a year. Amend 2009 tax return You paid the full $18,000 (3 × $6,000) during the first year of the lease. Amend 2009 tax return Each year you can deduct only $6,000, the part of the lease that applies to that year. Amend 2009 tax return Canceling a lease. Amend 2009 tax return   You generally can deduct as rent an amount you pay to cancel a business lease. Amend 2009 tax return Lease or purchase. Amend 2009 tax return   There may be instances in which you must determine whether your payments are for rent or for the purchase of the property. Amend 2009 tax return You must first determine whether your agreement is a lease or a conditional sales contract. Amend 2009 tax return Payments made under a conditional sales contract are not deductible as rent expense. Amend 2009 tax return Conditional sales contract. Amend 2009 tax return   Whether an agreement is a conditional sales contract depends on the intent of the parties. Amend 2009 tax return Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. Amend 2009 tax return No single test, or special combination of tests, always applies. Amend 2009 tax return However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. Amend 2009 tax return The agreement applies part of each payment toward an equity interest you will receive. Amend 2009 tax return You get title to the property after you make a stated amount of required payments. Amend 2009 tax return The amount you must pay to use the property for a short time is a large part of the amount you would pay to get title to the property. Amend 2009 tax return You pay much more than the current fair rental value of the property. Amend 2009 tax return You have an option to buy the property at a nominal price compared to the value of the property when you may exercise the option. Amend 2009 tax return Determine this value when you make the agreement. Amend 2009 tax return You have an option to buy the property at a nominal price compared to the total amount you have to pay under the agreement. Amend 2009 tax return The agreement designates part of the payments as interest, or that part is easy to recognize as interest. Amend 2009 tax return Leveraged leases. Amend 2009 tax return   Leveraged lease transactions may not be considered leases. Amend 2009 tax return Leveraged leases generally involve three parties: a lessor, a lessee, and a lender to the lessor. Amend 2009 tax return Usually the lease term covers a large part of the useful life of the leased property, and the lessee's payments to the lessor are enough to cover the lessor's payments to the lender. Amend 2009 tax return   If you plan to take part in what appears to be a leveraged lease, you may want to get an advance ruling. Amend 2009 tax return Revenue Procedure 2001-28 on page 1156 of Internal Revenue Bulletin 2001-19 contains the guidelines the IRS will use to determine if a leveraged lease is a lease for federal income tax purposes. Amend 2009 tax return Revenue Procedure 2001-29 on page 1160 of the same Internal Revenue Bulletin provides the information required to be furnished in a request for an advance ruling on a leveraged lease transaction. Amend 2009 tax return Internal Revenue Bulletin 2001-19 is available at www. Amend 2009 tax return irs. Amend 2009 tax return gov/pub/irs-irbs/irb01-19. Amend 2009 tax return pdf. Amend 2009 tax return   In general, Revenue Procedure 2001-28 provides that, for advance ruling purposes only, the IRS will consider the lessor in a leveraged lease transaction to be the owner of the property and the transaction to be a valid lease if all the factors in the revenue procedure are met, including the following. Amend 2009 tax return The lessor must maintain a minimum unconditional “at risk” equity investment in the property (at least 20% of the cost of the property) during the entire lease term. Amend 2009 tax return The lessee may not have a contractual right to buy the property from the lessor at less than fair market value when the right is exercised. Amend 2009 tax return The lessee may not invest in the property, except as provided by Revenue Procedure 2001-28. Amend 2009 tax return The lessee may not lend any money to the lessor to buy the property or guarantee the loan used by the lessor to buy the property. Amend 2009 tax return The lessor must show that it expects to receive a profit apart from the tax deductions, allowances, credits, and other tax attributes. Amend 2009 tax return   The IRS may charge you a user fee for issuing a tax ruling. Amend 2009 tax return For more information, see Revenue Procedure 2014-1 available at  www. Amend 2009 tax return irs. Amend 2009 tax return gov/irb/2014-1_IRB/ar05. Amend 2009 tax return html. Amend 2009 tax return Leveraged leases of limited-use property. Amend 2009 tax return   The IRS will not issue advance rulings on leveraged leases of so-called limited-use property. Amend 2009 tax return Limited-use property is property not expected to be either useful to or usable by a lessor at the end of the lease term except for continued leasing or transfer to a lessee. Amend 2009 tax return See Revenue Procedure 2001-28 for examples of limited-use property and property that is not limited-use property. Amend 2009 tax return Leases over $250,000. Amend 2009 tax return   Special rules are provided for certain leases of tangible property. Amend 2009 tax return The rules apply if the lease calls for total payments of more than $250,000 and any of the following apply. Amend 2009 tax return Rents increase during the lease. Amend 2009 tax return Rents decrease during the lease. Amend 2009 tax return Rents are deferred (rent is payable after the end of the calendar year following the calendar year in which the use occurs and the rent is allocated). Amend 2009 tax return Rents are prepaid (rent is payable before the end of the calendar year preceding the calendar year in which the use occurs and the rent is allocated). Amend 2009 tax return These rules do not apply if your lease specifies equal amounts of rent for each month in the lease term and all rent payments are due in the calendar year to which the rent relates (or in the preceding or following calendar year). Amend 2009 tax return   Generally, if the special rules apply, you must use an accrual method of accounting (and time value of money principles) for your rental expenses, regardless of your overall method of accounting. Amend 2009 tax return In addition, in certain cases in which the IRS has determined that a lease was designed to achieve tax avoidance, you must take rent and stated or imputed interest into account under a constant rental accrual method in which the rent is treated as accruing ratably over the entire lease term. Amend 2009 tax return For details, see section 467 of the Internal Revenue Code. Amend 2009 tax return Taxes on Leased Property If you lease business property, you can deduct as additional rent any taxes you have to pay to or for the lessor. Amend 2009 tax return When you can deduct these taxes as additional rent depends on your accounting method. Amend 2009 tax return Cash method. Amend 2009 tax return   If you use the cash method of accounting, you can deduct the taxes as additional rent only for the tax year in which you pay them. Amend 2009 tax return Accrual method. Amend 2009 tax return   If you use an accrual method of accounting, you can deduct taxes as additional rent for the tax year in which you can determine all the following. Amend 2009 tax return That you have a liability for taxes on the leased property. Amend 2009 tax return How much the liability is. Amend 2009 tax return That economic performance occurred. Amend 2009 tax return   The liability and amount of taxes are determined by state or local law and the lease agreement. Amend 2009 tax return Economic performance occurs as you use the property. Amend 2009 tax return Example 1. Amend 2009 tax return Oak Corporation is a calendar year taxpayer that uses an accrual method of accounting. Amend 2009 tax return Oak leases land for use in its business. Amend 2009 tax return Under state law, owners of real property become liable (incur a lien on the property) for real estate taxes for the year on January 1 of that year. Amend 2009 tax return However, they do not have to pay these taxes until July 1 of the next year (18 months later) when tax bills are issued. Amend 2009 tax return Under the terms of the lease, Oak becomes liable for the real estate taxes in the later year when the tax bills are issued. Amend 2009 tax return If the lease ends before the tax bill for a year is issued, Oak is not liable for the taxes for that year. Amend 2009 tax return Oak cannot deduct the real estate taxes as rent until the tax bill is issued. Amend 2009 tax return This is when Oak's liability under the lease becomes fixed. Amend 2009 tax return Example 2. Amend 2009 tax return The facts are the same as in Example 1 except that, according to the terms of the lease, Oak becomes liable for the real estate taxes when the owner of the property becomes liable for them. Amend 2009 tax return As a result, Oak will deduct the real estate taxes as rent on its tax return for the earlier year. Amend 2009 tax return This is the year in which Oak's liability under the lease becomes fixed. Amend 2009 tax return Cost of Getting a Lease You may either enter into a new lease with the lessor of the property or get an existing lease from another lessee. Amend 2009 tax return Very often when you get an existing lease from another lessee, you must pay the previous lessee money to get the lease, besides having to pay the rent on the lease. Amend 2009 tax return If you get an existing lease on property or equipment for your business, you generally must amortize any amount you pay to get that lease over the remaining term of the lease. Amend 2009 tax return For example, if you pay $10,000 to get a lease and there are 10 years remaining on the lease with no option to renew, you can deduct $1,000 each year. Amend 2009 tax return The cost of getting an existing lease of tangible property is not subject to the amortization rules for section 197 intangibles discussed in chapter 8. Amend 2009 tax return Option to renew. Amend 2009 tax return   The term of the lease for amortization includes all renewal options plus any other period for which you and the lessor reasonably expect the lease to be renewed. Amend 2009 tax return However, this applies only if less than 75% of the cost of getting the lease is for the term remaining on the purchase date (not including any period for which you may choose to renew, extend, or continue the lease). Amend 2009 tax return Allocate the lease cost to the original term and any option term based on the facts and circumstances. Amend 2009 tax return In some cases, it may be appropriate to make the allocation using a present value computation. Amend 2009 tax return For more information, see Regulations section 1. Amend 2009 tax return 178-1(b)(5). Amend 2009 tax return Example 1. Amend 2009 tax return You paid $10,000 to get a lease with 20 years remaining on it and two options to renew for 5 years each. Amend 2009 tax return Of this cost, you paid $7,000 for the original lease and $3,000 for the renewal options. Amend 2009 tax return Because $7,000 is less than 75% of the total $10,000 cost of the lease (or $7,500), you must amortize the $10,000 over 30 years. Amend 2009 tax return That is the remaining life of your present lease plus the periods for renewal. Amend 2009 tax return Example 2. Amend 2009 tax return The facts are the same as in Example 1, except that you paid $8,000 for the original lease and $2,000 for the renewal options. Amend 2009 tax return You can amortize the entire $10,000 over the 20-year remaining life of the original lease. Amend 2009 tax return The $8,000 cost of getting the original lease was not less than 75% of the total cost of the lease (or $7,500). Amend 2009 tax return Cost of a modification agreement. Amend 2009 tax return   You may have to pay an additional “rent” amount over part of the lease period to change certain provisions in your lease. Amend 2009 tax return You must capitalize these payments and amortize them over the remaining period of the lease. Amend 2009 tax return You cannot deduct the payments as additional rent, even if they are described as rent in the agreement. Amend 2009 tax return Example. Amend 2009 tax return You are a calendar year taxpayer and sign a 20-year lease to rent part of a building starting on January 1. Amend 2009 tax return However, before you occupy it, you decide that you really need less space. Amend 2009 tax return The lessor agrees to reduce your rent from $7,000 to $6,000 per year and to release the excess space from the original lease. Amend 2009 tax return In exchange, you agree to pay an additional rent amount of $3,000, payable in 60 monthly installments of $50 each. Amend 2009 tax return   You must capitalize the $3,000 and amortize it over the 20-year term of the lease. Amend 2009 tax return Your amortization deduction each year will be $150 ($3,000 ÷ 20). Amend 2009 tax return You cannot deduct the $600 (12 × $50) that you will pay during each of the first 5 years as rent. Amend 2009 tax return Commissions, bonuses, and fees. Amend 2009 tax return   Commissions, bonuses, fees, and other amounts you pay to get a lease on property you use in your business are capital costs. Amend 2009 tax return You must amortize these costs over the term of the lease. Amend 2009 tax return Loss on merchandise and fixtures. Amend 2009 tax return   If you sell at a loss merchandise and fixtures that you bought solely to get a lease, the loss is a cost of getting the lease. Amend 2009 tax return You must capitalize the loss and amortize it over the remaining term of the lease. Amend 2009 tax return Improvements by Lessee If you add buildings or make other permanent improvements to leased property, depreciate the cost of the improvements using the modified accelerated cost recovery system (MACRS). Amend 2009 tax return Depreciate the property over its appropriate recovery period. Amend 2009 tax return You cannot amortize the cost over the remaining term of the lease. Amend 2009 tax return If you do not keep the improvements when you end the lease, figure your gain or loss based on your adjusted basis in the improvements at that time. Amend 2009 tax return For more information, see the discussion of MACRS in Publication 946, How To Depreciate Property. Amend 2009 tax return Assignment of a lease. Amend 2009 tax return   If a long-term lessee who makes permanent improvements to land later assigns all lease rights to you for money and you pay the rent required by the lease, the amount you pay for the assignment is a capital investment. Amend 2009 tax return If the rental value of the leased land increased since the lease began, part of your capital investment is for that increase in the rental value. Amend 2009 tax return The rest is for your investment in the permanent improvements. Amend 2009 tax return   The part that is for the increased rental value of the land is a cost of getting a lease, and you amortize it over the remaining term of the lease. Amend 2009 tax return You can depreciate the part that is for your investment in the improvements over the recovery period of the property as discussed earlier, without regard to the lease term. Amend 2009 tax return Capitalizing Rent Expenses Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Amend 2009 tax return Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Amend 2009 tax return You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Amend 2009 tax return Indirect costs include amounts incurred for renting or leasing equipment, facilities, or land. Amend 2009 tax return Uniform capitalization rules. Amend 2009 tax return   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Amend 2009 tax return Produce real property or tangible personal property. Amend 2009 tax return For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Amend 2009 tax return Acquire property for resale. Amend 2009 tax return However, these rules do not apply to the following property. Amend 2009 tax return Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. Amend 2009 tax return Property you produce if you meet either of the following conditions. Amend 2009 tax return Your indirect costs of producing the property are $200,000 or less. Amend 2009 tax return You use the cash method of accounting and do not account for inventories. Amend 2009 tax return Example 1. Amend 2009 tax return You rent construction equipment to build a storage facility. Amend 2009 tax return If you are subject to the uniform capitalization rules, you must capitalize as part of the cost of the building the rent you paid for the equipment. Amend 2009 tax return You recover your cost by claiming a deduction for depreciation on the building. Amend 2009 tax return Example 2. Amend 2009 tax return You rent space in a facility to conduct your business of manufacturing tools. Amend 2009 tax return If you are subject to the uniform capitalization rules, you must include the rent you paid to occupy the facility in the cost of the tools you produce. Amend 2009 tax return More information. Amend 2009 tax return   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. Amend 2009 tax return Prev  Up  Next   Home   More Online Publications