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Free hrblock 28. Free hrblock   Miscellaneous Deductions Table of Contents What's New Introduction Useful Items - You may want to see: Deductions Subject to the 2% LimitUnreimbursed Employee Expenses (Line 21) Tax Preparation Fees (Line 22) Other Expenses (Line 23) Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses What's New Standard mileage rate. Free hrblock  The 2013 rate for business use of a vehicle is 56½ cents per mile. Free hrblock Introduction This chapter explains which expenses you can claim as miscellaneous itemized deductions on Schedule A (Form 1040). Free hrblock You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. Free hrblock This chapter covers the following topics. Free hrblock Deductions subject to the 2% limit. Free hrblock Deductions not subject to the 2% limit. Free hrblock Expenses you cannot deduct. Free hrblock You must keep records to verify your deductions. Free hrblock You should keep receipts, canceled checks, substitute checks, financial account statements, and other documentary evidence. Free hrblock For more information on recordkeeping, get Publication 552, Record- keeping for Individuals. Free hrblock Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) 946 How To Depreciate Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040). Free hrblock You can claim the amount of expenses that is more than 2% of your adjusted gross income. Free hrblock You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Free hrblock Your adjusted gross income is the amount on Form 1040, line 38. Free hrblock Generally, you apply the 2% limit after you apply any other deduction limit. Free hrblock For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed in chapter 26) before you apply the 2% limit. Free hrblock Deductions subject to the 2% limit are discussed in the three categories in which you report them on Schedule A (Form 1040). Free hrblock Unreimbursed employee expenses (line 21). Free hrblock Tax preparation fees (line 22). Free hrblock Other expenses (line 23). Free hrblock Unreimbursed Employee Expenses (Line 21) Generally, you can deduct on Schedule A (Form 1040), line 21, unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. Free hrblock An expense is ordinary if it is common and accepted in your trade, business, or profession. Free hrblock An expense is necessary if it is appropriate and helpful to your business. Free hrblock An expense does not have to be required to be considered necessary. Free hrblock Examples of unreimbursed employee expenses are listed next. Free hrblock The list is followed by discussions of additional unreimbursed employee expenses. Free hrblock Business bad debt of an employee. Free hrblock Education that is work related. Free hrblock (See chapter 27. Free hrblock ) Legal fees related to your job. Free hrblock Licenses and regulatory fees. Free hrblock Malpractice insurance premiums. Free hrblock Medical examinations required by an employer. Free hrblock Occupational taxes. Free hrblock Passport for a business trip. Free hrblock Subscriptions to professional journals and trade magazines related to your work. Free hrblock Travel, transportation, entertainment, and gifts related to your work. Free hrblock (See chapter 26. Free hrblock ) Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. Free hrblock Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer that are attributable to the pay you received from that employer. Free hrblock Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. Free hrblock For more information about the rules and exceptions to the rules affecting the allowable deductions for a home computer, see Publication 529. Free hrblock Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. Free hrblock Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. Free hrblock Lobbying and political activities. Free hrblock   You may not be able to deduct that part of your dues that is for certain lobbying and political activities. Free hrblock See Dues used for lobbying under Nondeductible Expenses, later. Free hrblock Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. Free hrblock If you file Form 1040A, you can deduct these expenses on line 16. Free hrblock If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. Free hrblock However, neither spouse can deduct more than $250 of his or her qualified expenses. Free hrblock Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. Free hrblock You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. Free hrblock The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. Free hrblock See Publication 587 for more detailed information and a worksheet. Free hrblock Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. Free hrblock You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. Free hrblock Employment and outplacement agency fees. Free hrblock   You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. Free hrblock Employer pays you back. Free hrblock   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. Free hrblock (See Recoveries in chapter 12. Free hrblock ) Employer pays the employment agency. Free hrblock   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. Free hrblock Résumé. Free hrblock   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. Free hrblock Travel and transportation expenses. Free hrblock   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. Free hrblock You can deduct the travel expenses if the trip is primarily to look for a new job. Free hrblock The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. Free hrblock   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. Free hrblock   You can choose to use the standard mileage rate to figure your car expenses. Free hrblock The 2013 rate for business use of a vehicle is 56½ cents per mile. Free hrblock See chapter 26 for more information. Free hrblock Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. Free hrblock Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Free hrblock If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. Free hrblock Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. Free hrblock If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. Free hrblock Research Expenses of a College Professor If you are a college professor, you can deduct research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. Free hrblock You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. Free hrblock However, you cannot deduct the cost of travel as a form of education. Free hrblock Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. Free hrblock You can depreciate the cost of tools that have a useful life substantially beyond the tax year. Free hrblock For more information about depreciation, see Publication 946. Free hrblock Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. Free hrblock You can also deduct assessments for benefit payments to unemployed union members. Free hrblock However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Free hrblock Also, you cannot deduct contributions to a pension fund, even if the union requires you to make the contributions. Free hrblock You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. Free hrblock See Lobbying Expenses under Nondeductible Expenses, later. Free hrblock Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. Free hrblock You must wear them as a condition of your employment. Free hrblock The clothes are not suitable for everyday wear. Free hrblock It is not enough that you wear distinctive clothing. Free hrblock The clothing must be specifically required by your employer. Free hrblock Nor is it enough that you do not, in fact, wear your work clothes away from work. Free hrblock The clothing must not be suitable for taking the place of your regular clothing. Free hrblock Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. Free hrblock ). Free hrblock Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. Free hrblock However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. Free hrblock Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. Free hrblock Protective clothing. Free hrblock   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. Free hrblock   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. Free hrblock Military uniforms. Free hrblock   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. Free hrblock However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. Free hrblock In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. Free hrblock   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. Free hrblock   You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. Free hrblock Tax Preparation Fees (Line 22) You can usually deduct tax preparation fees in the year you pay them. Free hrblock Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. Free hrblock These fees include the cost of tax preparation software programs and tax publications. Free hrblock They also include any fee you paid for electronic filing of your return. Free hrblock Other Expenses (Line 23) You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2% limit. Free hrblock On Schedule A (Form 1040), line 23, you can deduct expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. Free hrblock You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonably and closely related to these purposes. Free hrblock Some of these other expenses are explained in the following discussions. Free hrblock If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses , later, under Nondeductible Expenses. Free hrblock Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. Free hrblock Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. Free hrblock First report the loss in Section B of Form 4684, Casualties and Thefts. Free hrblock You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Free hrblock To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Free hrblock For other casualty and theft losses, see chapter 25. Free hrblock Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. Free hrblock Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. Free hrblock The fees are deductible in the year paid. Free hrblock Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). Free hrblock You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. Free hrblock But if you work as an employee and also use the computer in that work, see Publication 946. Free hrblock Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. Free hrblock Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. Free hrblock The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. Free hrblock For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. Free hrblock Fees to Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. Free hrblock But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. Free hrblock You must add the fee to the cost of the property. Free hrblock You cannot deduct the fee you pay to a broker to sell securities. Free hrblock You can use the fee only to figure gain or loss from the sale. Free hrblock See the Instructions for Form 8949 for information on how to report the fee. Free hrblock Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. Free hrblock A hobby is not a business because it is not carried on to make a profit. Free hrblock See Activity not for profit in chapter 12 under Other Income. Free hrblock Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. Free hrblock Deductions of pass-through entities are passed through to the partners or shareholders. Free hrblock The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. Free hrblock Example. Free hrblock You are a member of an investment club that is formed solely to invest in securities. Free hrblock The club is treated as a partnership. Free hrblock The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. Free hrblock In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. Free hrblock However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. Free hrblock Publicly offered mutual funds. Free hrblock   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. Free hrblock A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. Free hrblock   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). Free hrblock This net figure is the amount you report on your return as income. Free hrblock You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. Free hrblock Information returns. Free hrblock   You should receive information returns from pass-through entities. Free hrblock Partnerships and S corporations. Free hrblock   These entities issue Schedule K-1, which lists the items and amounts you must report and identifies the tax return schedules and lines to use. Free hrblock Nonpublicly offered mutual funds. Free hrblock   These funds will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing your share of gross income and investment expenses. Free hrblock You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. Free hrblock Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. Free hrblock Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. Free hrblock You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce, if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. Free hrblock You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F), on the appropriate schedule. Free hrblock You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040). Free hrblock See Tax Preparation Fees , earlier. Free hrblock Loss on Deposits For information on whether, and if so, how, you may deduct a loss on your deposit in a qualified financial institution, see Loss on Deposits in chapter 25. Free hrblock Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. Free hrblock If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. Free hrblock If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. Free hrblock Repayments of Social Security Benefits For information on how to deduct your repayments of certain social security benefits, see Repayments More Than Gross Benefits in chapter 11. Free hrblock Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. Free hrblock You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. Free hrblock Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. Free hrblock These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. Free hrblock Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your individual retirement arrangement (IRA) are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. Free hrblock For more information about IRAs, see chapter 17. Free hrblock Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. Free hrblock They are not subject to the 2% limit. Free hrblock Report these items on Schedule A (Form 1040), line 28. Free hrblock List of Deductions Each of the following items is discussed in detail after the list (except where indicated). Free hrblock Amortizable premium on taxable bonds. Free hrblock Casualty and theft losses from income- producing property. Free hrblock Federal estate tax on income in respect of a decedent. Free hrblock Gambling losses up to the amount of gambling winnings. Free hrblock Impairment-related work expenses of persons with disabilities. Free hrblock Loss from other activities from Schedule K-1 (Form 1065-B), box 2. Free hrblock Losses from Ponzi-type investment schemes. Free hrblock See Losses from Ponzi-type investment schemes under Theft in chapter 25. Free hrblock Repayments of more than $3,000 under a claim of right. Free hrblock Unrecovered investment in an annuity. Free hrblock Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. Free hrblock You can elect to amortize the premium on taxable bonds. Free hrblock The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. Free hrblock Part of the premium on some bonds may be a miscellaneous deduction not subject to the 2% limit. Free hrblock For more information, see Amortizable Premium on Taxable Bonds in Publication 529, and Bond Premium Amortization in chapter 3 of Publication 550, Investment Income and Expenses. Free hrblock Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). Free hrblock First, report the loss in Form 4684, Section B. Free hrblock You may also have to include the loss on Form 4797, Sales of Business Property if you are otherwise required to file that form. Free hrblock To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Free hrblock For more information on casualty and theft losses, see chapter 25. Free hrblock Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. Free hrblock Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. Free hrblock See Publication 559 for more information. Free hrblock Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. Free hrblock You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. Free hrblock You cannot deduct gambling losses that are more than your winnings. Free hrblock You cannot reduce your gambling winnings by your gambling losses and report the difference. Free hrblock You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Free hrblock Therefore, your records should show your winnings separately from your losses. Free hrblock Diary of winnings and losses. Free hrblock You must keep an accurate diary or similar record of your losses and winnings. Free hrblock Your diary should contain at least the following information. Free hrblock The date and type of your specific wager or wagering activity. Free hrblock The name and address or location of the gambling establishment. Free hrblock The names of other persons present with you at the gambling establishment. Free hrblock The amount(s) you won or lost. Free hrblock See Publication 529 for more information. Free hrblock Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. Free hrblock Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and for other expenses in connection with your place of work that are necessary for you to be able to work. Free hrblock Self-employed. Free hrblock   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. Free hrblock Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28. Free hrblock It is not subject to the passive activity limitations. Free hrblock Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid or take a credit against your tax. Free hrblock See Repayments in chapter 12 for more information. Free hrblock Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. Free hrblock If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. Free hrblock See chapter 10 for more information about the tax treatment of pensions and annuities. Free hrblock Nondeductible Expenses Examples of nondeductible expenses are listed next. Free hrblock The list is followed by discussions of additional nondeductible expenses. Free hrblock List of Nondeductible Expenses Broker's commissions that you paid in connection with your IRA or other investment property. Free hrblock Burial or funeral expenses, including the cost of a cemetery lot. Free hrblock Capital expenses. Free hrblock Fees and licenses, such as car licenses, marriage licenses, and dog tags. Free hrblock Hobby losses, but see Hobby Expenses , earlier. Free hrblock Home repairs, insurance, and rent. Free hrblock Illegal bribes and kickbacks. Free hrblock See Bribes and kickbacks in chapter 11 of Publication 535. Free hrblock Losses from the sale of your home, furniture, personal car, etc. Free hrblock Personal disability insurance premiums. Free hrblock Personal, living, or family expenses. Free hrblock The value of wages never received or lost vacation time. Free hrblock Adoption Expenses You cannot deduct the expenses of adopting a child, but you may be able to take a credit for those expenses. Free hrblock See chapter 37. Free hrblock Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. Free hrblock These include qualification and registration fees for primary elections. Free hrblock Legal fees. Free hrblock   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. Free hrblock Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. Free hrblock Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. Free hrblock This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. Free hrblock You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. Free hrblock Dues paid to airline, hotel, and luncheon clubs are not deductible. Free hrblock Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). Free hrblock If you haul tools, instruments, or other items, in your car to and from work, you can deduct only the additional cost of hauling the items such as the rent on a trailer to carry the items. Free hrblock Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. Free hrblock This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Free hrblock Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. Free hrblock Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. Free hrblock Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. Free hrblock However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. Free hrblock See Home Office under Unreimbursed Employee Expenses, earlier, and Security System under Deducting Expenses in Publication 587. Free hrblock Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. Free hrblock Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. Free hrblock You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. Free hrblock See chapter 18 for information on alimony. Free hrblock Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. Free hrblock These include expenses to: Influence legislation, Participate or intervene in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. Free hrblock Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. Free hrblock Dues used for lobbying. Free hrblock   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. Free hrblock See Lobbying Expenses in Publication 529 for information on exceptions. Free hrblock Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. Free hrblock However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Free hrblock See chapter 25. Free hrblock Example. Free hrblock A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Free hrblock The diamond falls from the ring and is never found. Free hrblock The loss of the diamond is a casualty. Free hrblock Lunches with Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. Free hrblock See chapter 26 for information on deductible expenses while traveling away from home. Free hrblock Meals While Working Late You cannot deduct the cost of meals while working late. Free hrblock However, you may be able to claim a deduction if the cost of meals is a deductible entertainment expense, or if you are traveling away from home. Free hrblock See chapter 26 for information on deductible entertainment expenses and expenses while traveling away from home. Free hrblock Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. Free hrblock Custody of children. Free hrblock Breach of promise to marry suit. Free hrblock Civil or criminal charges resulting from a personal relationship. Free hrblock Damages for personal injury, except for certain unlawful discrimination and whistleblower claims. Free hrblock Preparation of a title (or defense or perfection of a title). Free hrblock Preparation of a will. Free hrblock Property claims or property settlement in a divorce. Free hrblock You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. Free hrblock Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Free hrblock Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. Free hrblock Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. Free hrblock Accounting certificate fees paid for the initial right to practice accounting. Free hrblock Bar exam fees and incidental expenses in securing initial admission to the bar. Free hrblock Medical and dental license fees paid to get initial licensing. Free hrblock Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. Free hrblock Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. Free hrblock Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. Free hrblock Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. Free hrblock You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. Free hrblock Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. Free hrblock You cannot deduct interest on a debt incurred or continued to buy or carry  tax-exempt securities. Free hrblock If you have expenses to produce both taxable and tax-exempt income, but you cannot identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct. Free hrblock Example. Free hrblock During the year, you received taxable interest of $4,800 and tax-exempt interest of $1,200. Free hrblock In earning this income, you had total expenses of $500 during the year. Free hrblock You cannot identify the amount of each expense item that is for each income item. Free hrblock Therefore, 80% ($4,800/$6,000) of the expense is for the taxable interest and 20% ($1,200/$6,000) is for the tax-exempt interest. Free hrblock You can deduct, subject to the 2% limit, expenses of $400 (80% of $500). Free hrblock Travel Expenses for Another Individual You generally cannot deduct travel expenses you pay or incur for a spouse, dependent, or other individual who accompanies you (or your employee) on business or personal travel unless the spouse, dependent, or other individual is an employee of the taxpayer, the travel is for a bona fide business purpose, and such expenses would otherwise be deductible by the spouse, dependent, or other individual. Free hrblock See chapter 26 for more information on deductible travel expenses. Free hrblock Voluntary Unemployment Benefit Fund Contributions You cannot deduct voluntary unemployment benefit fund contributions you make to a union fund or a private fund. Free hrblock However, you can deduct contributions as taxes if state law requires you to make them to a state unemployment fund that covers you for the loss of wages from unemployment caused by business conditions. Free hrblock Wristwatches You cannot deduct the cost of a wristwatch, even if there is a job requirement that you know the correct time to properly perform your duties. Free hrblock Prev  Up  Next   Home   More Online Publications
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Contact My Local Office in Kentucky

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City Street Address Days/Hours of Service Telephone*
Bowling Green 200 West Professional
Park Court
Bowling Green, KY 42104

Monday-Friday 8:30 a.m.-4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

Services Provided

(270) 782-7667
Hopkinsville 121 W. Tenth St.
Hopkinsville, KY 42240

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

Services Provided

(270) 886-6625 
Lexington  1500 Leestown Rd.
Lexington, KY 40511 

Monday-Friday - 8:30 a.m.-4:30 p.m.

 

Services Provided

(859) 244-2400 
Louisville  600 Dr. Martin Luther
King Jr. Place
Louisville, KY 40202 

Monday-Friday - 8:30 a.m.-4:30 p.m. 

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(502) 582-6700 
Owensboro  401 Frederica St.
Owensboro, KY 42301 

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

   Services Provided

(270) 852-8490 
Paducah  2765 Wayne Sullivan Dr.
Paducah, KY 42003 

Monday - Friday  8:30 a.m. - 4:30 p.m.
(Closed for lunch 11:30 a.m.-12:30 p.m.) 

 

Services Provided

(270) 443-1977 
Prestonsburg  311 N. Arnold Ave.
Prestonsburg, KY 41653 

Monday-Friday - 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.) 

 

Services Provided

(606) 889-1590 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

For information on where to file your tax return please see Where to File Addresses.

The Taxpayer Advocate Service: Call (502) 582-6030 in Louisville or 1-877-777-4778 elsewhere, or see  Publication 1546, The Taxpayer Advocate Service of the IRS. For further information, see  Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
600 Dr. Martin Luther King, Jr. Place
Room 321
Louisville, KY 40202

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The Free Hrblock

Free hrblock Publication 556 - Main Content Table of Contents Examination of ReturnsIf Your Return Is Examined Interest Netting Abatement of Interest Due to Error or Delay by the IRS Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions Offer in Compromise Appeal RightsAppeal Within the IRS Appeals to the Courts Refund or Credit of Overpayments Before Final Determination Claims for RefundTime for Filing a Claim for Refund Limit on Amount of Refund Processing Claims for Refund Reduced Refund How To Get Tax Help Examination of Returns Your return may be examined for a variety of reasons, and the examination may take place in any one of several ways. Free hrblock After the examination, if any changes to your tax are proposed, you can either agree with those changes and pay any additional tax you may owe, or you can disagree with the changes and appeal the decision. Free hrblock Examination selection criteria. Free hrblock   Your return may be selected for examination on the basis of computer scoring. Free hrblock A computer program called the Discriminant Inventory Function System (DIF) assigns a numeric score to each individual and some corporate tax returns after they have been processed. Free hrblock If your return is selected because of a high score under the DIF system, the potential is high that an examination of your return will result in a change to your income tax liability. Free hrblock   Your return may also be selected for examination on the basis of information received from third-party documentation, such as Forms 1099 and W-2, that does not match the information reported on your return. Free hrblock Or, your return may be selected to address both the questionable treatment of an item and to study the behavior of similar taxpayers (a market segment) in handling a tax issue. Free hrblock   In addition, your return may be selected as a result of information received from other sources on potential noncompliance with the tax laws or inaccurate filing. Free hrblock This information can come from a number of sources, including newspapers, public records, and individuals. Free hrblock The information is evaluated for reliability and accuracy before it is used as the basis of an examination or investigation. Free hrblock Notice of IRS contact of third parties. Free hrblock    The IRS must give you reasonable notice before contacting other persons about your tax matters. Free hrblock You must be given reasonable notice in advance that, in examining or collecting your tax liability, the IRS may contact third parties such as your neighbors, banks, employers, or employees. Free hrblock The IRS must also give you notice of specific contacts by providing you with a record of persons contacted on both a periodic basis and upon your request. Free hrblock    This provision does not apply: To any pending criminal investigation, When providing notice would jeopardize collection of any tax liability, Where providing notice may result in reprisal against any person, or When you authorized the contact. Free hrblock Taxpayer Advocate Service. Free hrblock   The Taxpayer Advocate Service is an independent organization within the IRS whose goal is to help taxpayers resolve problems with the IRS. Free hrblock If you have an ongoing issue with the IRS that has not been resolved through normal processes, or your problems with the IRS are causing financial difficulty, contact the Taxpayer Advocate Service. Free hrblock    Before contacting the Taxpayer Advocate Service, you should first discuss any problem with a supervisor. Free hrblock Your local Taxpayer Advocate will assist you if you are unable to resolve the problem with the supervisor. Free hrblock   For more information, see Publication 1546. Free hrblock See How To Get Tax Help , near the end of this publication, for more information about contacting the Taxpayer Advocate Service. Free hrblock Comments from small business. Free hrblock    The Small Business and Agricultural Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards have been established to receive comments from small business about federal agency enforcement actions. Free hrblock The Ombudsman will annually evaluate the enforcement activities of each agency and rate their responsiveness to small business. Free hrblock If you wish to comment on the enforcement actions of the IRS, you can take any of the following steps. Free hrblock Fax your comments to 1-202-481-5719. Free hrblock Write to the following address: Office of the National Ombudsman U. Free hrblock S. Free hrblock Small Business Administration 409 3rd Street, SW Washington, DC 20416 Call 1-888-734-3247. Free hrblock Send an email to ombudsman@sba. Free hrblock gov. Free hrblock File a comment or complaint online at www. Free hrblock sba. Free hrblock gov/ombudsman. Free hrblock If Your Return Is Examined Some examinations are handled entirely by mail. Free hrblock Examinations not handled by mail can take place in your home, your place of business, an Internal Revenue office, or the office of your authorized representative. Free hrblock If the time, place, or method is not convenient for you, the examiner will try to work out something more suitable. Free hrblock However, the IRS makes the final determination of when, where, and how the examination will take place. Free hrblock Throughout the examination, you can act on your own behalf or have someone represent you or accompany you. Free hrblock If you filed a joint return, either you or your spouse, or both, can meet with the IRS. Free hrblock The person representing you can be any federally authorized practitioner, including an attorney, a certified public accountant, an enrolled agent (a person enrolled to practice before the IRS), an enrolled actuary, or the person who prepared the return and signed it as the preparer. Free hrblock If you want someone to represent you in your absence, you must furnish that person with proper written authorization. Free hrblock You can use Form 2848 or any other properly written authorization. Free hrblock If you want to consult with an attorney, a certified public accountant, an enrolled agent, or any other person permitted to represent a taxpayer during an interview for examining a tax return or collecting tax, you should make arrangements with that person to be available for the interview. Free hrblock In most cases, the IRS must suspend the interview and reschedule it. Free hrblock The IRS cannot suspend the interview if you are there because of an administrative summons. Free hrblock Third party authorization. Free hrblock   If you checked the box in the signature area of your income tax return (Form 1040, Form 1040A, or Form 1040EZ) to allow the IRS to discuss your return with another person (a third party designee), this authorization does not replace Form 2848. Free hrblock The box you checked on your return only authorizes the other person to receive information about the processing of your return and the status of your refund during the period your return is being processed. Free hrblock For more information, see the instructions for your return. Free hrblock Confidentiality privilege. Free hrblock   Generally, the same confidentiality protection that you have with an attorney also applies to certain communications that you have with federally authorized practitioners. Free hrblock   Confidential communications are those that: Advise you on tax matters within the scope of the practitioner's authority to practice before the IRS, Would be confidential between an attorney and you, and Relate to noncriminal tax matters before the IRS, or Relate to noncriminal tax proceedings brought in federal court by or against the United States. Free hrblock   In the case of communications in connection with the promotion of a person's participation in a tax shelter, the confidentiality privilege does not apply to written communications between a federally authorized practitioner and that person, any director, officer, employee, agent, or representative of that person, or any other person holding a capital or profits interest in that person. Free hrblock   A tax shelter is any entity, plan, or arrangement, a significant purpose of which is the avoidance or evasion of income tax. Free hrblock Recordings. Free hrblock    You can make an audio recording of the examination interview. Free hrblock Your request to record the interview should be made in writing. Free hrblock You must notify the examiner 10 days in advance and bring your own recording equipment. Free hrblock The IRS also can record an interview. Free hrblock If the IRS initiates the recording, you must be notified 10 days in advance and you can get a copy of the recording at your expense. Free hrblock Transfers to another area. Free hrblock    Generally, your return is examined in the area where you live. Free hrblock But if your return can be examined more quickly and conveniently in another area, such as where your books and records are located, you can ask to have the case transferred to that area. Free hrblock Repeat examinations. Free hrblock    The IRS tries to avoid repeat examinations of the same items, but sometimes this happens. Free hrblock If your tax return was examined for the same items in either of the 2 previous years and no change was proposed to your tax liability, please contact the IRS as soon as possible to see if the examination should be discontinued. Free hrblock The Examination An examination usually begins when you are notified that your return has been selected. Free hrblock The IRS will tell you which records you will need. Free hrblock The examination can proceed more easily if you gather your records before any interview. Free hrblock Any proposed changes to your return will be explained to you or your authorized representative. Free hrblock It is important that you understand the reasons for any proposed changes. Free hrblock You should not hesitate to ask about anything that is unclear to you. Free hrblock The IRS must follow the tax laws set forth by Congress in the Internal Revenue Code. Free hrblock The IRS also follows Treasury Regulations, other rules, and procedures that were written to administer the tax laws and court decisions. Free hrblock However, the IRS can lose cases that involve taxpayers with the same issue and still apply its interpretation of the law to your situation. Free hrblock Most taxpayers agree to changes proposed by examiners, and the examinations are closed at this level. Free hrblock If you do not agree, you can appeal any proposed change by following the procedures provided to you by the IRS. Free hrblock A more complete discussion of appeal rights is found later under Appeal Rights . Free hrblock If You Agree If you agree with the proposed changes, you can sign an agreement form and pay any additional tax you may owe. Free hrblock You must pay interest on any additional tax. Free hrblock If you pay when you sign the agreement, the interest is generally figured from the due date of your return (excluding any extension of time to file) to the date of your payment. Free hrblock If you do not pay the additional tax when you sign the agreement, you will receive a bill that includes interest. Free hrblock If you pay the amount due within 10 business days of the billing date, you will not have to pay more interest or penalties. Free hrblock This period is extended to 21 calendar days if the amount due is less than $100,000. Free hrblock If you are due a refund, you will receive it sooner if you sign the agreement form. Free hrblock You will be paid interest on the refund. Free hrblock If the IRS accepts your tax return as filed, you will receive a letter in a few weeks stating that the examiner proposed no changes to your return. Free hrblock You should keep this letter with your tax records. Free hrblock If You Do Not Agree If you do not agree with the proposed changes, the examiner will explain your appeal rights. Free hrblock If your examination takes place in an IRS office, you can request an immediate meeting with the examiner's supervisor to explain your position. Free hrblock If an agreement is reached, your case will be closed. Free hrblock If you cannot reach an agreement with the supervisor at this meeting, or if the examination took place outside of an IRS office, the examiner will write up your case explaining your position and the IRS's position. Free hrblock The examiner will forward your case for processing. Free hrblock Fast track mediation. Free hrblock   The IRS offers fast track mediation services to help taxpayers resolve many disputes resulting from: Examinations (audits), Offers in compromise, Trust fund recovery penalties, and Other collection actions. Free hrblock   Most cases that are not docketed in any court qualify for fast track mediation. Free hrblock Mediation can take place at a conference you request with a supervisor, or later. Free hrblock The process involves an Appeals Officer who has been trained in mediation. Free hrblock You may represent yourself at the mediation session, or someone else can act as your representative. Free hrblock For more information, see Publication 3605. Free hrblock 30-day letter and 90-day letter. Free hrblock   Within a few weeks after your closing conference with the examiner and/or supervisor, you will receive a package with: A letter (known as a 30-day letter) notifying you of your right to appeal the proposed changes within 30 days, A copy of the examination report explaining the examiner's proposed changes, An agreement or waiver form, and A copy of Publication 5. Free hrblock You generally have 30 days from the date of the 30-day letter to tell the IRS whether you will accept or appeal the proposed changes. Free hrblock The letter will explain what steps you should take, depending on which action you choose. Free hrblock Be sure to follow the instructions carefully. Free hrblock Appeal Rights are explained later. Free hrblock 90-day letter. Free hrblock   If you do not respond to the 30-day letter, or if you later do not reach an agreement with an Appeals Officer, the IRS will send you a 90-day letter, which is also known as a notice of deficiency. Free hrblock You will have 90 days (150 days if it is addressed to you outside the United States) from the date of this notice to file a petition with the Tax Court. Free hrblock Filing a petition with the Tax Court is discussed later under Appeals to the Courts and Tax Court . Free hrblock The notice will show the 90th (or 150th) day by which you must file your petition with the Tax Court. Free hrblock Suspension of interest and penalties. Free hrblock   Generally, the IRS has 3 years from the date you filed your return (or the date the return was due, if later) to assess any additional tax. Free hrblock However, if you file your return timely (including extensions), interest and certain penalties will be suspended if the IRS does not mail a notice to you, stating your liability and the basis for that liability, within a 36-month period beginning on the later of: The date on which you filed your tax return, or The due date (without extensions) of your tax return. Free hrblock If the IRS mails a notice after the 36-month period, interest and certain penalties applicable to the suspension period will be suspended. Free hrblock   The suspension period begins the day after the close of the 36-month period and ends 21 days after the IRS mails a notice to you stating your liability and the basis for that liability. Free hrblock Also, the suspension period applies separately to each notice stating your liability and the basis for that liability received by you. Free hrblock    The suspension does not apply to a: Failure-to-pay penalty, Fraudulent tax return, Penalty, interest, addition to tax, or additional amount with respect to any tax liability shown on your return or with respect to any gross misstatement, Penalty, interest, addition to tax, or additional amount with respect to any reportable transaction that is not adequately disclosed or any listed transaction, or Criminal penalty. Free hrblock Seeking relief from improperly assessed interest. Free hrblock   You can seek relief if interest is assessed for periods during which interest should have been suspended because the IRS did not mail a notice to you in a timely manner. Free hrblock   If you believe that interest was assessed with respect to a period during which interest should have been suspended, submit Form 843, writing “Section 6404(g) Notification” at the top of the form, with the IRS Service Center where you filed your return. Free hrblock The IRS will review the Form 843 and notify you whether interest will be abated. Free hrblock If the IRS does not abate interest, you can pay the disputed interest assessment and file a claim for refund. Free hrblock If your claim is denied or not acted upon within 6 months from the date you filed it, you can file suit for a refund in your United States District Court or in the United States Court of Federal Claims. Free hrblock   If you believe that an IRS officer or employee has made an unreasonable error or delay in performing a ministerial or managerial act (discussed later under Abatement of Interest Due to Error or Delay by the IRS ), file Form 843 with the IRS Service Center where you filed the tax return. Free hrblock If the IRS denies your claim, the Tax Court may be able to review that determination. Free hrblock See Tax Court can review failure to abate interest later under Abatement of Interest Due to Error or Delay by the IRS . Free hrblock If you later agree. Free hrblock    If you agree with the examiner's changes after receiving the examination report or the 30-day letter, sign and return either the examination report or the waiver form. Free hrblock Keep a copy for your records. Free hrblock You can pay any additional amount you owe without waiting for a bill. Free hrblock Include interest on the additional tax at the applicable rate. Free hrblock This interest rate is usually for the period from the due date of the return (excluding any extension of time to file) to the date of payment. Free hrblock The examiner can tell you the interest rate(s) or help you figure the amount. Free hrblock   You must pay interest on penalties and additions to tax for failing to file returns, for overstating valuations, for understating valuations on estate and gift tax returns, and for substantially understating tax liability. Free hrblock Interest is generally figured from the date (including extensions) the tax return is required to be filed to the date you pay the penalty and/or additions to tax. Free hrblock   If you pay the amount due within 10 business days after the date of notice and demand for immediate payment, you will not have to pay any additional penalties and interest. Free hrblock This period is extended to 21 calendar days if the amount due is less than $100,000. Free hrblock How To Stop Interest From Accruing If you think that you will owe additional tax at the end of the examination, you can stop the further accrual of interest by sending money to the IRS to cover all or part of the amount you think you will owe. Free hrblock Interest on part or all of any amount you owe will stop accruing on the date the IRS receives your money. Free hrblock You can send an amount either in the form of a deposit in the nature of a cash bond or as a payment of tax. Free hrblock Both a deposit and a payment stop any further accrual of interest. Free hrblock However, making a deposit or payment will stop the accrual of interest on only the amount you sent. Free hrblock Because of compounding rules, interest will continue to accrue on accrued interest, even though you have paid the underlying tax. Free hrblock To stop the accrual of interest on both tax and interest, you must make a deposit or payment for both the tax and interest that has accrued as of the date of deposit or payment. Free hrblock Payment or Deposit Deposits differ from payments in two ways: You can have all or part of your deposit returned to you without filing for a refund. Free hrblock However, if you request and receive your deposit and the IRS later assesses a deficiency for that period and type of tax, interest will be figured as if the funds were never on deposit. Free hrblock Also, your deposit will not be returned if one of the following situations applies: The IRS assesses a tax liability. Free hrblock The IRS determines that, by returning the deposit, it may not be able to collect a future deficiency. Free hrblock The IRS determines that the deposit should be applied against another tax liability. Free hrblock Deposits returned to you will include interest based on the Federal short-term rate determined under section 6621(b). Free hrblock The deposit returned will be treated as a tax payment to the extent of the disputed tax. Free hrblock A disputed tax means the amount of tax specified at the time of deposit as a reasonable estimate of the maximum amount of any tax owed by you, such as the deficiency proposed in the 30-day letter. Free hrblock Notice not mailed. Free hrblock    If you send money before the IRS mails you a notice of deficiency, you can ask the IRS to treat it as a deposit. Free hrblock You must make your request in writing. Free hrblock   If, after being notified of a proposed liability but before the IRS mails you a notice of deficiency, you send an amount large enough to cover the proposed liability, it will be considered a payment unless you request in writing that it be treated as a deposit. Free hrblock Keep copies of all correspondence you send to the IRS. Free hrblock   If the amount you send is at least as much as the proposed liability and you do not request that it be treated as a deposit, the IRS will not send you a notice of deficiency. Free hrblock If you do not receive a notice of deficiency, you cannot take your case to the Tax Court. Free hrblock See Tax Court , later under Appeal Rights . Free hrblock Notice mailed. Free hrblock    If, after the IRS mails the notice of deficiency, you send money without written instructions, it will be treated as a payment. Free hrblock You will still be able to petition the Tax Court. Free hrblock   If you send money after receiving a notice of deficiency and you have specified in writing that it is a “deposit in the nature of a cash bond,” the IRS will treat it as a deposit if you send it before either: The close of the 90-day or 150-day period for filing a petition with the Tax Court to appeal the deficiency, or The date the Tax Court decision is final, if you have filed a petition. Free hrblock Using a Deposit To Pay the Tax If you agree with the examiner's proposed changes after the examination, your deposit will be applied against any amount you may owe. Free hrblock The IRS will not mail you a notice of deficiency and you will not have the right to take your case to the Tax Court. Free hrblock If you do not agree to the full amount of the deficiency after the examination, the IRS will mail you a notice of deficiency. Free hrblock Your deposit will be applied against the proposed deficiency unless you write to the IRS before the end of the 90-day or 150-day period stating that you still want the money to be treated as a deposit. Free hrblock You will still have the right to take your case to the Tax Court. Free hrblock Installment Agreement Request You can request a monthly installment plan if you cannot pay the full amount you owe. Free hrblock To be valid, your request must be approved by the IRS. Free hrblock However, if you owe $10,000 or less in tax and you meet certain other criteria, the IRS must accept your request. Free hrblock Before you request an installment agreement, you should consider other less costly alternatives, such as a bank loan. Free hrblock You will continue to be charged interest and penalties on the amount you owe until it is paid in full. Free hrblock Unless your income is below a certain level, the fee for an approved installment agreement has increased to $105 ($52 if you make your payments by electronic funds withdrawal). Free hrblock If your income is below a certain level, you may qualify to pay a reduced fee of $43. Free hrblock For more information about installment agreements, see Form 9465, Installment Agreement Request. Free hrblock Interest Netting If you owe interest to the IRS on an underpayment for the same period the IRS owes you interest on an overpayment, the IRS will figure interest on the underpayment and overpayment at the same interest rate (up to the amount of the overpayment). Free hrblock As a result, the net rate is zero for that period. Free hrblock Abatement of Interest Due to Error or Delay by the IRS The IRS may abate (reduce) the amount of interest you owe if the interest is due to an unreasonable error or delay by an IRS officer or employee in performing a ministerial or managerial act (discussed later). Free hrblock Only the amount of interest on income, estate, gift, generation-skipping, and certain excise taxes can be reduced. Free hrblock The amount of interest will not be reduced if you or anyone related to you contributed significantly to the error or delay. Free hrblock Also, the interest will be reduced only if the error or delay happened after the IRS contacted you in writing about the deficiency or payment on which the interest is based. Free hrblock An audit notification letter is such a contact. Free hrblock The IRS cannot reduce the amount of interest due to a general administrative decision, such as a decision on how to organize the processing of tax returns. Free hrblock Ministerial act. Free hrblock    This is a procedural or mechanical act, not involving the exercise of judgment or discretion, during the processing of a case after all prerequisites (for example, conferences and review by supervisors) have taken place. Free hrblock A decision concerning the proper application of federal tax law (or other federal or state law) is not a ministerial act. Free hrblock Example 1. Free hrblock You move from one state to another before the IRS selects your tax return for examination. Free hrblock A letter stating that your return has been selected is sent to your old address and then forwarded to your new address. Free hrblock When you get the letter, you respond with a request that the examination be transferred to the area office closest to your new address. Free hrblock The examination group manager approves your request. Free hrblock After your request has been approved, the transfer is a ministerial act. Free hrblock The IRS can reduce the interest because of any unreasonable delay in transferring the case. Free hrblock Example 2. Free hrblock An examination of your return reveals tax due for which a notice of deficiency (90-day letter) will be issued. Free hrblock After you and the IRS discuss the issues, the notice is prepared and reviewed. Free hrblock After the review process, issuing the notice of deficiency is a ministerial act. Free hrblock If there is an unreasonable delay in sending the notice of deficiency to you, the IRS can reduce the interest resulting from the delay. Free hrblock Managerial act. Free hrblock    This is an administrative act during the processing of a case that involves the loss of records or the exercise of judgment or discretion concerning the management of personnel. Free hrblock A decision concerning the proper application of federal tax law (or other federal or state law) is not a managerial act. Free hrblock Example. Free hrblock A revenue agent is examining your tax return. Free hrblock During the middle of the examination, the agent is sent to an extended training course. Free hrblock The agent's supervisor decides not to reassign your case, so the work is unreasonably delayed until the agent returns. Free hrblock Interest from the unreasonable delay can be abated since both the decision to send the agent to the training class and not to reassign the case are managerial acts. Free hrblock How to request abatement of interest. Free hrblock    You request an abatement (reduction) of interest on Form 843. Free hrblock You should file the claim with the IRS Service Center where you filed the tax return that was affected by the error or delay. Free hrblock   If you have already paid the interest and you would like a credit or refund of interest paid, you must file Form 843 within 3 years from the date you filed your original return or 2 years from the date you paid the interest, whichever is later. Free hrblock If you have not paid any of the interest, these time limitations for filing Form 843 do not apply. Free hrblock   Generally, you should file a separate Form 843 for each tax period and each type of tax. Free hrblock However, complete only one Form 843 if the interest is from an IRS error or delay that affected your tax for more than one tax period or for more than one type of tax (for example, where 2 or more tax years were being examined). Free hrblock   If your request for abatement of interest is denied, you can appeal the decision to the IRS Appeals Office. Free hrblock Tax Court can review failure to abate interest. Free hrblock    The Tax Court can review the IRS's refusal to abate (reduce) interest if all of the following requirements are met: You filed a request for abatement of interest (Form 843) with the IRS after July 30,1996. Free hrblock The IRS has mailed you a notice of final determination or a notice of disallowance. Free hrblock You file a petition with the Tax Court within 180 days of the mailing of the notice of final determination or the notice of disallowance. Free hrblock   The following requirements must also be met: For individual and estate taxpayers — your net worth must not exceed $2 million as of the filing date of your petition for review. Free hrblock For this purpose, individuals filing a joint return shall be treated as separate individuals. Free hrblock For charities and certain cooperatives — you must not have more than 500 employees as of the filing date of your petition for review. Free hrblock For all other taxpayers — your net worth must not exceed $7 million, and you must not have more than 500 employees as of the filing date of your petition for review. Free hrblock Abatement of Interest for Individuals Affected by Presidentially Declared Disasters or Military or Terrorist Actions If you are (or were) affected by a Presidentially declared disaster occurring after 1996 or a terrorist or military action occurring after September 10, 2001, the IRS may abate (reduce) the amount of interest you owe on certain taxes. Free hrblock The IRS may abate interest for the period of any additional time to file or pay that the IRS provides on account of the disaster or the terrorist or military action. Free hrblock The IRS will issue a notice or news release indicating who are affected taxpayers and stating the period of relief. Free hrblock If you are eligible for relief from interest, but were charged interest for the period of relief, the IRS may retroactively abate your interest. Free hrblock To the extent possible, the IRS can take the following actions: Make appropriate adjustments to your account. Free hrblock Notify you when the adjustments are made. Free hrblock Refund any interest paid by you where appropriate. Free hrblock For more information on disaster area losses, see Disaster Area Losses in Publication 547. Free hrblock For more information on other tax relief for victims of terrorist attacks, see Publication 3920. Free hrblock Offer in Compromise In certain circumstances, the IRS will allow you to pay less than the full amount you owe. Free hrblock If you think you may qualify, you should submit your offer by filing Form 656, Offer in Compromise. Free hrblock The IRS may accept your offer for any of the following reasons: There is doubt about the amount you owe (or whether you owe it). Free hrblock There is doubt as to whether you can pay the amount you owe based on your financial situation. Free hrblock An economic hardship would result if you had to pay the full amount owed. Free hrblock Your case presents compelling reasons that the IRS determines are a sufficient basis for compromise. Free hrblock If your offer is rejected, you have 30 days to ask the Appeals Office of the IRS to reconsider your offer. Free hrblock The IRS offers fast track mediation services to help taxpayers resolve many issues including a dispute regarding an offer in compromise. Free hrblock For more information, see Publication 3605. Free hrblock Generally, if you submit an offer in compromise, the IRS will delay certain collection activities. Free hrblock The IRS usually will not levy (take) your property to settle your tax bill during the following periods: While the IRS is evaluating your offer in compromise. Free hrblock The 30 days immediately after the offer is rejected. Free hrblock While your timely-filed appeal is being considered by Appeals. Free hrblock Also, if the IRS rejects your original offer and you submit a revised offer within 30 days of the rejection, the IRS generally will not levy your property while it considers your revised offer. Free hrblock For more information about submitting an offer in compromise, see Form 656. Free hrblock Appeal Rights Because people sometimes disagree on tax matters, the IRS has an appeals system. Free hrblock Most differences can be settled within this system without expensive and time-consuming court trials. Free hrblock However, your reasons for disagreeing must come within the scope of the tax laws. Free hrblock For example, you cannot appeal your case based only on moral, religious, political, constitutional, conscientious, or similar grounds. Free hrblock In most instances, you may be eligible to take your case to court if you do not reach an agreement at your appeals conference, or if you do not want to appeal your case to the IRS Office of Appeals. Free hrblock See Appeals to the Courts , later, for more information. Free hrblock Appeal Within the IRS You can appeal an IRS tax decision to a local Appeals Office, which is separate from and independent of the IRS office taking the action you disagree with. Free hrblock The Appeals Office is the only level of appeal within the IRS. Free hrblock Conferences with Appeals Office personnel are held in an informal manner by correspondence, by telephone, or at a personal conference. Free hrblock If you want an appeals conference, follow the instructions in the letter you received. Free hrblock Your request will be sent to the Appeals Office to arrange a conference at a convenient time and place. Free hrblock You or your representative should be prepared to discuss all disputed issues at the conference. Free hrblock Most differences are settled at this level. Free hrblock If agreement is not reached at your appeals conference, you may be eligible to take your case to court. Free hrblock See Appeals to the Courts , later. Free hrblock Protests and Small Case Requests When you request an Appeals conference, you may also need to file either a formal written protest or a small case request with the office named in the letter you received. Free hrblock Also, see the special appeal request procedures in Publication 1660. Free hrblock Written protest. Free hrblock   You need to file a written protest in the following cases: All employee plan and exempt organization cases without regard to the dollar amount at issue. Free hrblock All partnership and S corporation cases without regard to the dollar amount at issue. Free hrblock All other cases, unless you qualify for the small case request procedure, or other special appeal procedures such as requesting Appeals consideration of liens, levies, seizures, or installment agreements. Free hrblock   If you must submit a written protest, see the instructions in Publication 5 about the information you need to provide. Free hrblock The IRS urges you to provide as much information as you can, as it will help speed up your appeal. Free hrblock That will save you both time and money. Free hrblock    Be sure to send the protest within the time limit specified in the letter you received. Free hrblock Small case request. Free hrblock   If the total amount for any tax period is not more than $25,000, you may make a small case request instead of filing a formal written protest. Free hrblock In figuring the total amount, include a proposed increase or decrease in tax (including penalties), or claimed refund. Free hrblock If you are making an offer in compromise, include total unpaid tax, penalty, and interest due. Free hrblock For a small case request, follow the instructions in our letter to you by sending a letter: Requesting Appeals consideration, Indicating the changes you do not agree with, and Indicating the reasons why you do not agree. Free hrblock Representation You can represent yourself at your appeals conference, or you can be represented by any federally authorized practitioner, including an attorney, a certified public accountant, an enrolled actuary, or an enrolled agent. Free hrblock If your representative attends a conference without you, he or she can receive or inspect confidential information only if you have filed a power of attorney or a tax information authorization. Free hrblock You can use a Form 2848 or any other properly written power of attorney or authorization. Free hrblock You can also bring witnesses to support your position. Free hrblock Confidentiality privilege. Free hrblock   Generally, the same confidentiality protection that you have with an attorney also applies to certain communications that you have with federally authorized practitioners. Free hrblock See Confidentiality privilege under If Your Return Is Examined , earlier. Free hrblock Appeals to the Courts If you and the IRS still disagree after the appeals conference, you may be entitled to take your case to the United States Tax Court, the United States Court of Federal Claims, or a United States District Court. Free hrblock These courts are independent of the IRS. Free hrblock If you elect to bypass the IRS's appeals system, you may be able to take your case to one of the courts listed above. Free hrblock However, a case petitioned to the United States Tax Court will normally be considered for settlement by an Appeals Officer before the Tax Court hears the case. Free hrblock If you unreasonably fail to pursue the IRS's appeals system, or if your case is intended primarily to cause a delay, or your position is frivolous or groundless, the Tax Court may impose a penalty of up to $25,000. Free hrblock See Appeal Within the IRS, earlier. Free hrblock Prohibition on requests to taxpayers to give up rights to bring civil action. Free hrblock   The Government cannot ask you to waive your right to sue the United States or a Government officer or employee for any action taken in connection with the tax laws. Free hrblock However, your right to sue can be waived if: You knowingly and voluntarily waive that right, The request to waive that right is made in writing to your attorney or other federally authorized practitioner, or The request is made in person and your attorney or other representative is present. Free hrblock Burden of proof. Free hrblock   For court proceedings resulting from examinations started after July 22, 1998, the IRS generally has the burden of proof for any factual issue if you have met the following requirements: You introduced credible evidence relating to the issue. Free hrblock You complied with all substantiation requirements of the Internal Revenue Code. Free hrblock You maintained all records required by the Internal Revenue Code. Free hrblock You cooperated with all reasonable requests by the IRS for information regarding the preparation and related tax treatment of any item reported on your tax return. Free hrblock You had a net worth of $7 million or less and not more than 500 employees at the time your tax liability is contested in any court proceeding if your tax return is for a corporation, partnership, or trust. Free hrblock    The burden of proof does not change on an issue when another provision of the tax laws requires a specific burden of proof with respect to that issue. Free hrblock Use of statistical information. Free hrblock   In the case of an individual, the IRS has the burden of proof in court proceedings based on any IRS reconstruction of income solely through the use of statistical information on unrelated taxpayers. Free hrblock Penalties. Free hrblock   The IRS has the burden of initially producing evidence in court proceedings with respect to the liability of any individual taxpayer for any penalty, addition to tax, or additional amount imposed by the tax laws. Free hrblock Recovering litigation or administrative costs. Free hrblock   These are the expenses that you pay to defend your position to the IRS or the courts. Free hrblock You may be able to recover reasonable litigation or administrative costs if all of the following conditions apply: You are the prevailing party. Free hrblock You exhaust all administrative remedies within the IRS. Free hrblock Your net worth is below a certain limit (see Net worth requirements , later). Free hrblock You do not unreasonably delay the proceeding. Free hrblock You apply for administrative costs within 90 days of the date on which the final decision of the IRS Office of Appeals as to the determination of the tax, interest, or penalty was mailed to you. Free hrblock You apply for litigation costs within the time frames provided by Tax Court Rule 231, found at http://www. Free hrblock ustaxcourt. Free hrblock gov  www. Free hrblock ustaxcourt. Free hrblock gov . Free hrblock   Prevailing party, reasonable litigation costs, and reasonable administrative costs are explained later. Free hrblock Note. Free hrblock If the IRS denies your award of administrative costs, and you want to appeal, you must petition the Tax Court within 90 days of the date on which the IRS mails the denial notice. Free hrblock Prevailing party. Free hrblock   Generally, you are the prevailing party if: You substantially prevail with respect to the amount in controversy or on the most significant tax issue or set of issues in question, and You meet the net worth requirements, discussed later. Free hrblock   You will not be treated as the prevailing party if the United States establishes that its position was substantially justified. Free hrblock The position of the United States is presumed not to be substantially justified if the IRS: Did not follow its applicable published guidance (such as regulations, revenue rulings, notices, announcements, private letter rulings, technical advice memoranda, and determination letters issued to the taxpayer) in the proceeding (This presumption can be overcome by evidence. Free hrblock ), or Has lost in courts of appeal for other circuits on substantially similar issues. Free hrblock   The court will generally decide who is the prevailing party. Free hrblock Reasonable litigation costs. Free hrblock   These include the following costs: Reasonable court costs. Free hrblock The reasonable costs of studies, analyses, engineering reports, tests, or projects found by the court to be necessary for the preparation of your case. Free hrblock The reasonable costs of expert witnesses. Free hrblock Attorney fees that generally may not exceed $125 maximum hourly rate as set by statute and indexed for inflation. Free hrblock See Attorney fees , later. Free hrblock Reasonable administrative costs. Free hrblock   These include the following costs: Any administrative fees or similar charges imposed by the IRS. Free hrblock The reasonable costs of studies, analyses, engineering reports, tests, or projects. Free hrblock The reasonable costs of expert witnesses. Free hrblock Attorney fees that generally may not exceed $125 per hour. Free hrblock See Attorney fees , later. Free hrblock Timing of costs. Free hrblock    Administrative costs can be awarded for costs incurred after the earliest of: The date the first letter of proposed deficiency is sent that allows you an opportunity to request administrative review in the IRS Office of Appeals, The date you receive notice of the IRS Office of Appeals' decision, or The date of the notice of deficiency. Free hrblock Net worth requirements. Free hrblock   An individual taxpayer may be able to recover litigation or administrative costs if the following requirements are met: For individuals — your net worth does not exceed $2 million as of the filing date of your petition for review. Free hrblock For this purpose, individuals filing a joint return are treated as separate individuals. Free hrblock For estates — your net worth does not exceed $2 million as of the date of the decedent's death. Free hrblock For charities and certain cooperatives — you do not have more than 500 employees as of the filing date of your petition for review. Free hrblock For all other taxpayers — as of the filing date of your petition for review, your net worth does not exceed $7 million, and you must not have more than 500 employees. Free hrblock Qualified offer rule. Free hrblock    You can also receive reasonable costs and fees and be treated as a prevailing party in a civil action or proceeding if: You make a qualified offer to the IRS to settle your case, The IRS does not accept that offer, and The tax liability (not including interest, unless interest is at issue) later determined by the court is equal to or less than the amount of your qualified offer. Free hrblock You must also meet the remaining requirements, including the exhaustion of administrative remedies and the net worth requirement, discussed earlier, to get the benefit of the qualified offer rule. Free hrblock Qualified offer. Free hrblock    This is a written offer made by you during the qualified offer period. Free hrblock It must specify both the offered amount of your liability (not including interest) and that it is a qualified offer. Free hrblock   To be a qualified offer, it must remain open from the date it is made until the earliest of: The date it is rejected, The date the trial begins, or 90 days from the date it is made. Free hrblock Qualified offer period. Free hrblock    This period begins on the day the IRS mails you the first letter of proposed deficiency that allows you to request review by the IRS Office of Appeals. Free hrblock It ends 30 days before your case is first set for trial. Free hrblock Attorney fees. Free hrblock   Attorney fees generally may not exceed $125 maximum hourly rate as set by statute and indexed for inflation. Free hrblock However, this amount can be higher in certain limited circumstances depending on the level of difficulty of the issues in the case and the local availability of tax expertise. Free hrblock See IRS. Free hrblock gov for more information. Free hrblock    Attorney fees include the fees paid by a taxpayer for the services of anyone who is authorized to practice before the Tax Court or before the IRS. Free hrblock In addition, attorney fees can be awarded in civil actions for unauthorized inspection or disclosure of a taxpayer's return or return information. Free hrblock   Fees can be awarded in excess of the actual amount charged if: You are represented for no fee, or for a nominal fee, as a pro bono service, and The award is paid to your representative or to your representative's employer. Free hrblock Jurisdiction for determination of employment status. Free hrblock    The Tax Court can review IRS employment status determinations (for example, whether individuals hired by you are in fact your employees or independent contractors) and the amount of employment tax under such determinations. Free hrblock Tax Court review can take place only if, in connection with an audit of any person, there is a controversy involving a determination by the IRS that either: One or more individuals performing services for that person are employees of that person, or That person is not entitled to relief under Section 530(a) of the Revenue Act of 1978 (discussed later). Free hrblock   The following rules also apply to a Tax Court review of employment status: A Tax Court petition to review these determinations can be filed only by the person for whom the services are performed, If you receive a Notice of Determination by certified or registered mail, you must file a petition for Tax Court review within 90 days of the date of mailing that notice (150 days if the notice is addressed to you outside the United States), If during the Tax Court proceeding, you begin to treat as an employee an individual whose employment status is at issue, the Tax Court will not consider that change in its decision, Assessment and collection of tax is suspended while the Tax Court review is taking place, Payment of the asserted employment tax deficiency is not required to petition the U. Free hrblock S. Free hrblock Tax Court for a determination of employment status. Free hrblock There can be a de novo review by the Tax Court (a review which does not consider IRS administrative findings), and At your request and with the Tax Court's agreement, small tax case procedures (discussed later) are available to simplify the case resolution process when the amount at issue (including additions to tax and penalties) is $50,000 or less for each tax period involved. Free hrblock   For further information, see Publication 3953, Questions and Answers About Tax Court Proceedings for Determination of Employment Status Under IRC Section 7436. Free hrblock Section 530(a) of the Revenue Act of 1978. Free hrblock   This section relieves an employer of certain employment tax responsibilities for individuals not treated as employees. Free hrblock It also provides relief to taxpayers under audit or involved in administrative or judicial proceedings. Free hrblock Tax Court review of request for relief from joint and several liability on a joint return. Free hrblock    As discussed later, at Relief from joint and several liability on a joint return under Claims for Refund, you can request relief from liability for tax you owe, plus related penalties and interest, that you believe should be paid by your spouse (or former spouse). Free hrblock You also can petition (ask) the Tax Court to review your request for innocent spouse relief or separation of liability if either: The IRS sends you a determination notice denying, in whole or in part, your request, or You do not receive a determination notice from the IRS within 6 months from the date you file Form 8857. Free hrblock   If you receive a determination notice, you must petition the Tax Court to review your request during the 90-day period that begins on the date the IRS mails the notice. Free hrblock See Publication 971 for more information. Free hrblock Note. Free hrblock Your spouse or former spouse may file a written protest and request an Appeals conference to protest your claim of innocent spouse relief or separation of liability. Free hrblock See Rev. Free hrblock Proc. Free hrblock 2003-19, which is on page 371 of the Internal Revenue Bulletin 2003-5 at  www. Free hrblock irs. Free hrblock gov/pub/irs-irbs/irb03-05. Free hrblock pdf. Free hrblock Tax Court You can take your case to the United States Tax Court if you disagree with the IRS over: Income tax, Estate tax, Gift tax, Employment tax involving IRS employment status determinations, or Certain excise taxes of private foundations, public charities, qualified pension and other retirement plans, or real estate investment trusts. Free hrblock For information on Tax Court review of a determination of employment status, see Jurisdiction for determination of employment status, earlier. Free hrblock For information on Tax Court review of an IRS refusal to abate interest, see Tax Court can review failure to abate interest, earlier under Examination of Returns. Free hrblock For information on Tax Court review of Appeals determinations with respect to lien notices and proposed levies, see Publication 1660. Free hrblock You cannot take your case to the Tax Court before the IRS sends you a notice of deficiency. Free hrblock You can only appeal your case if you file a petition within 90 days from the date the notice is mailed to you (150 days if it is addressed to you outside the United States). Free hrblock The notice will show the 90th (or 150th) day by which you must file your petition with the Tax Court. Free hrblock Withdrawal of notice of deficiency. Free hrblock If you consent, the IRS can withdraw a notice of deficiency. Free hrblock A notice of deficiency may be rescinded if the notice was issued as a result of an administrative error; the taxpayer submits information establishing the actual tax due is less than the amount shown in the notice; the taxpayer specifically requests a conference with the appropriate Appeals office for the purpose of entering into settlement negotiations. Free hrblock However, the notice may be rescinded only if the appropriate Appeals office first decides that the case is susceptible to agreement. Free hrblock See Revenue Procedure 98-54 for a more detailed explanation of the requirements. Free hrblock Once withdrawn, the limits on credits, refunds, and assessments concerning the notice are void, and you and the IRS have the rights and obligations that you had before the notice was issued. Free hrblock The suspension of any time limitation while the notice of deficiency was issued will not change when the notice is withdrawn. Free hrblock After the notice is withdrawn, you cannot file a petition with the Tax Court based on the notice. Free hrblock Also, the IRS can later issue a notice of deficiency in a greater or lesser amount than the amount in the withdrawn deficiency. Free hrblock Generally, the Tax Court hears cases before any tax has been assessed and paid; however, you can pay the tax after the notice of deficiency has been issued and still petition the Tax Court for review. Free hrblock If you do not file your petition on time, the proposed tax will be assessed, a bill will be sent, and you will not be able to take your case to the Tax Court. Free hrblock Under the law, you must pay the tax within 21 days (10 business days if the amount is $100,000 or more). Free hrblock Collection can proceed even if you think that the amount is excessive. Free hrblock Publication 594 explains IRS collection procedures. Free hrblock If you filed your petition on time, the court will schedule your case for trial at a location convenient to you. Free hrblock You can represent yourself before the Tax Court or you can be represented by anyone admitted to practice before that court. Free hrblock Small tax case procedure. Free hrblock   If the amount in your case is $50,000 or less for any 1 tax year or period, you can request that your case be handled under the small tax case procedure. Free hrblock If the Tax Court approves, you can present your case to the Tax Court for a decision that is final and that you cannot appeal. Free hrblock You can get more information regarding the small tax case procedure and other Tax Court matters from the United States Tax Court, 400 Second Street, N. Free hrblock W. Free hrblock , Washington, DC 20217. Free hrblock More information can be found on the Tax Court's website at www. Free hrblock ustaxcourt. Free hrblock gov. Free hrblock Motion to request redetermination of interest. Free hrblock   In certain cases, you can file a motion asking the Tax Court to redetermine the amount of interest on either an underpayment or an overpayment. Free hrblock You can do this only in a situation that meets all of the following requirements: The IRS has assessed a deficiency that was determined by the Tax Court. Free hrblock The assessment included interest. Free hrblock You have paid the entire amount of the deficiency plus the interest claimed by the IRS. Free hrblock The Tax Court has found that you made an overpayment. Free hrblock You must file the motion within one year after the decision of the Tax Court becomes final. Free hrblock District Court and Court of Federal Claims Generally, the District Courts and the Court of Federal Claims hear tax cases only after you have paid the entire tax and penalties, and filed a claim for a credit or refund. Free hrblock The taxpayer may litigate certain types of employment tax cases in either the United States District Court or the United States Court of Federal Claims. Free hrblock Before taxpayers can initiate suit in either of these courts with respect to certain employment taxes, they will have to pay, at a minimum, the employment tax assessment attributable to one employee for any one quarter and file a claim for refund of the tax. Free hrblock Once the claim for refund is denied or 6 months elapse without any action by the IRS, the taxpayer may initiate suit. Free hrblock As explained later under Claims for Refund, you can file a claim with the IRS for a credit or refund if you think that the tax you paid is incorrect or excessive. Free hrblock If your claim is totally or partially disallowed by the IRS, you should receive a notice of claim disallowance. Free hrblock If the IRS does not act on your claim within 6 months from the date you filed it, you can then file suit for a refund. Free hrblock You generally must file suit for a credit or refund no later than 2 years after the IRS informs you that your claim has been rejected. Free hrblock However, you can file suit if it has been 6 months since you filed your claim and the IRS has not yet delivered a decision. Free hrblock You can file suit for a credit or refund in your United States District Court or in the United States Court of Federal Claims. Free hrblock However, you cannot appeal to the United States Court of Federal Claims if your claim is for credit or refund of a penalty that relates to promoting an abusive tax shelter or to aiding and abetting the understatement of tax liability on someone else's return. Free hrblock For information about procedures for filing suit in either court, contact the Clerk of your District Court or of the United States Court of Federal Claims. Free hrblock Refund or Credit of Overpayments Before Final Determination Any court with proper jurisdiction, including the Tax Court, can order the IRS to refund any part of a tax deficiency that the IRS collects from you during a period when the IRS is not permitted to assess that deficiency, or to levy or engage in any court proceeding to collect that deficiency. Free hrblock In addition, the court can order a refund of any part of an overpayment determined by the Tax Court that is not at issue on appeal to a higher court. Free hrblock The court can order these refunds before its decision on the case is final. Free hrblock Taxpayers should thoroughly review IRS settlement offers before signing a Tax Court Decision document to ensure that all adjustments are correct, including the inclusion of any tax credits that the taxpayer is allowed to claim. Free hrblock Note. Free hrblock The court may no longer order a refund of an overpayment after the case is final. Free hrblock Generally, the IRS is not permitted to take action on a tax deficiency during: The 90-day (or 150-day if outside the United States) period that you have to petition a notice of deficiency to the Tax Court, or The period that the case is under appeal if a bond is provided. Free hrblock Claims for Refund If you believe you have overpaid your tax, you have a limited amount of time in which to file a claim for a credit or refund. Free hrblock You can claim a credit or refund by filing Form 1040X. Free hrblock See Time for Filing a Claim for Refund , later. Free hrblock File your claim by mailing it to the IRS Service Center where you filed your original return. Free hrblock File a separate form for each year or period involved. Free hrblock Include an explanation of each item of income, deduction, or credit on which you are basing your claim. Free hrblock Corporations should file Form 1120X, Amended U. Free hrblock S. Free hrblock Corporation Income Tax Return, or other form appropriate to the type of credit or refund claimed. Free hrblock See Publication 3920 for information on filing claims for tax forgiveness for individuals affected by terrorist attacks. Free hrblock Requesting a copy of your tax return. Free hrblock   You can obtain a copy of the actual return and all attachments you filed with the IRS for an earlier year. Free hrblock This includes a copy of the Form W-2 or Form 1099 filed with your return. Free hrblock Use Form 4506 to make your request. Free hrblock You will be charged a fee, which you must pay when you submit Form 4506. Free hrblock Requesting a copy of your tax account information. Free hrblock   Use Form 4506-T, Request for Transcript of Tax Return, to request free copies of your tax return transcript, tax account transcript, record of account, verification of nonfiling, or Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript. Free hrblock The tax return transcript contains most of the line items of a tax return. Free hrblock A tax account transcript contains information on the financial status of the account, such as payments, penalty assessments, and adjustments. Free hrblock A record of account is a combination of line item information and later adjustments to the account. Free hrblock Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript contains data from these information returns. Free hrblock Penalty for erroneous claim for refund. Free hrblock   If you claim an excessive amount of tax refund or credit relating to income tax (other than a claim relating to the earned income credit), you may be liable for a penalty of 20% of the amount that is determined to be excessive. Free hrblock An excessive amount is the amount of the claim for refund or credit that is more than the amount of claim allowable for the tax year. Free hrblock The penalty may be waived if you can show that you had a reasonable basis for making the claim. Free hrblock Time for Filing a Claim for Refund Generally, you must file a claim for a credit or refund within 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later. Free hrblock If you do not file a claim within this period, you may no longer be entitled to a credit or a refund. Free hrblock If the due date to file a return or a claim for a credit or refund is a Saturday, Sunday, or legal holiday, it is filed on time if it is filed on the next business day. Free hrblock Returns you filed before the due date are considered filed on the due date. Free hrblock This is true even when the due date is a Saturday, Sunday, or legal holiday. Free hrblock Disaster area claims for refund. Free hrblock   If you live in a Presidentially declared disaster area or are affected by terroristic or military action, the deadline to file a claim for a refund may be postponed. Free hrblock This section discusses the special rules that apply to Presidentially declared disaster area refunds. Free hrblock    A Presidentially declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Disaster Relief and Emergency Assistance Act. Free hrblock Postponed refund deadlines. Free hrblock   The IRS may postpone for up to 1 year the deadlines for filing a claim for refund. Free hrblock The postponement can be used by taxpayers who are affected by a Presidentially declared disaster. Free hrblock The IRS may also postpone deadlines for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. Free hrblock For more information, see Publication 547. Free hrblock   If any deadline is postponed, the IRS will publicize the postponement in your area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin. Free hrblock A list of the areas eligible for assistance under the Disaster Relief and Emergency Assistance Act is available at the Federal Emergency Management Agency (FEMA) website at www. Free hrblock fema. Free hrblock gov and at the IRS website at www. Free hrblock irs. Free hrblock gov. Free hrblock Nonfilers can get refund of overpayments paid within 3-year period. Free hrblock   The Tax Court can consider taxes paid during the 3-year period preceding the date of a notice of deficiency for determining any refund due to a nonfiler. Free hrblock This means that if you do not file your return, and you receive a notice of deficiency in the third year after the due date (with extensions) of your return and file suit with the Tax Court to contest the notice of deficiency, you may be able to receive a refund of excessive amounts paid within the 3-year period preceding the date of the notice of deficiency. Free hrblock The IRS may postpone for up to 1 year certain tax deadlines, including the time for filing claims for refund, for taxpayers who are affected by a terrorist attack occurring after September 10, 2001. Free hrblock For more information, see Publication 3920. Free hrblock Claim for refund by estates electing the installment method of payment. Free hrblock   In certain cases where an estate has elected to make tax payments through the installment method, the executor can file a suit for refund with a U. Free hrblock S. Free hrblock District Court or the U. Free hrblock S. Free hrblock Court of Federal Claims before all the installment payments have been made. Free hrblock However, all the following must be true before a suit can be filed: The estate consists largely of an interest in a closely-held business. Free hrblock All installment payments due on or before the date the suit is filed have been made. Free hrblock No accelerated installment payments have been made. Free hrblock No Tax Court case is pending with respect to any estate tax liability. Free hrblock If a notice of deficiency was issued to the estate regarding its liability for estate tax, the time for petitioning the Tax Court has passed. Free hrblock No proceeding is pending for a declaratory judgment by the Tax Court on whether the estate is eligible to pay tax in installments. Free hrblock The executor has not included any previously litigated issues in the current suit for refund. Free hrblock The executor does not discontinue making installment payments timely, while the court considers the suit for refund. Free hrblock    If in its final decision on the suit for refund the court redetermines the estate's tax liability, the IRS must refund any part of the estate tax amount that is disallowed. Free hrblock This includes any part of the disallowed amount previously collected by the IRS. Free hrblock Protective claim for refund. Free hrblock   If your right to a refund is contingent on future events and may not be determinable until after the time period for filing a claim for refund expires, you can file a protective claim for refund. Free hrblock A protective claim can be either a formal claim or an amended return for credit or refund. Free hrblock Protective claims are often based on current litigation or expected changes in the tax law, other legislation, or regulations. Free hrblock A protective claim preserves your right to claim a refund when the contingency is resolved. Free hrblock A protective claim does not have to state a particular dollar amount or demand an immediate refund. Free hrblock However, to be valid, a protective claim must: Be in writing and be signed, Include your name, address, social security number or individual taxpayer identification number, and other contact information, Identify and describe the contingencies affecting the claim, Clearly alert the IRS to the essential nature of the claim, and Identify the specific year(s) for which a refund is sought. Free hrblock   Generally, the IRS will delay action on the protective claim until the contingency is resolved. Free hrblock Once the contingency is resolved, the IRS may obtain additional information necessary to process the claim and then either allow or disallow the claim. Free hrblock   Mail your protective claim for refund to the address listed in the instructions for Form 1040X, under Where To File. Free hrblock Exceptions The limits on your claim for refund can be affected by the type of item that forms the basis of your claim. Free hrblock Special refunds. Free hrblock   If you file a claim for refund based on one of the items listed below, the limits discussed earlier under Time for Filing a Claim for Refund may not apply. Free hrblock These special items are: A bad debt, A worthless security, A payment or accrual of foreign tax, A net operating loss carryback, and A carryback of certain tax credits. Free hrblock   The limits discussed earlier also may not apply if you have signed an agreement to extend the period of assessment of tax. Free hrblock For information on special rules on filing claims for an individual affected by a terrorist attack, see Publication 3920. Free hrblock Periods of financial disability. Free hrblock   If you are an individual (not a corporation or other taxpaying entity), the period of limitations on credits and refunds can be suspended during periods when you cannot manage your financial affairs because of physical or mental impairment that is medically determinable and either: Has lasted or can be expected to last continuously for at least 12 months, or Can be expected to result in death. Free hrblock    The period for filing a claim for refund will not be suspended for any time that someone else, such as your spouse or guardian, was authorized to act for you in financial matters. Free hrblock   To claim financial disability, you generally must submit the following statements with your claim for credit or refund: A written statement signed by a physician, qualified to make the determination, that sets forth: The name and a description of your physical or mental impairment, The physician's medical opinion that your physical or mental impairment prevented you from managing your financial affairs, The physician's medical opinion that your physical or mental impairment was or can be expected to result in death, or that it has lasted (or can be expected to last) for a continuous period of not less than 12 months, and To the best of the physician's knowledge, the specific time period during which you were prevented by such physical or mental impairment from managing your financial affairs, and A written statement by the person signing the claim for credit or refund that no person, including your spouse, was authorized to act on your behalf in financial matters during the period described in paragraph (1)(d) of the physician's statement. Free hrblock Alternatively, if a person was authorized to act on your behalf in financial matters during any part of the period described in that paragraph, the beginning and ending dates of the period of time the person was so authorized. Free hrblock    The period of limitations will not be suspended on any claim for refund that (without regard to this provision) was barred as of July 22, 1998. Free hrblock Limit on Amount of Refund If you file your claim within 3 years after filing your return, the credit or refund cannot be more than the part of the tax paid wi