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Military Tax Filing

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Military Tax Filing

Military tax filing 14. Military tax filing   Sale of Property Table of Contents Reminder Introduction Useful Items - You may want to see: Sales and TradesWhat Is a Sale or Trade? How To Figure Gain or Loss Nontaxable Trades Transfers Between Spouses Related Party Transactions Capital Gains and LossesCapital or Ordinary Gain or Loss Capital Assets and Noncapital Assets Holding Period Nonbusiness Bad Debts Wash Sales Rollover of Gain From Publicly Traded Securities Reminder Foreign income. Military tax filing  If you are a U. Military tax filing S. Military tax filing citizen who sells property located outside the United States, you must report all gains and losses from the sale of that property on your tax return unless it is exempt by U. Military tax filing S. Military tax filing law. Military tax filing This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the payer. Military tax filing Introduction This chapter discusses the tax consequences of selling or trading investment property. Military tax filing It explains the following. Military tax filing What a sale or trade is. Military tax filing Figuring gain or loss. Military tax filing Nontaxable trades. Military tax filing Related party transactions. Military tax filing Capital gains or losses. Military tax filing Capital assets and noncapital assets. Military tax filing Holding period. Military tax filing Rollover of gain from publicly traded securities. Military tax filing Other property transactions. Military tax filing   Certain transfers of property are not discussed here. Military tax filing They are discussed in other IRS publications. Military tax filing These include the following. Military tax filing Sales of a main home, covered in chapter 15. Military tax filing Installment sales, covered in Publication 537, Installment Sales. Military tax filing Transactions involving business property, covered in Publication 544, Sales and Other Dispositions of Assets. Military tax filing Dispositions of an interest in a passive activity, covered in Publication 925, Passive Activity and At-Risk Rules. Military tax filing    Publication 550, Investment Income and Expenses (Including Capital Gains and Losses), provides a more detailed discussion about sales and trades of investment property. Military tax filing Publication 550 includes information about the rules covering nonbusiness bad debts, straddles, section 1256 contracts, puts and calls, commodity futures, short sales, and wash sales. Military tax filing It also discusses investment-related expenses. Military tax filing Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 8949 Sales and Other Dispositions of Capital Assets 8824 Like-Kind Exchanges Sales and Trades If you sold property such as stocks, bonds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. Military tax filing Generally, you should receive the statement by February 15 of the next year. Military tax filing It will show the gross proceeds from the sale. Military tax filing If you sold a covered security in 2013, your 1099-B (or substitute statement) will show your basis. Military tax filing Generally, a covered security is a security you acquired after 2010, with certain exceptions. Military tax filing See the Instructions for Form 8949. Military tax filing The IRS will also get a copy of Form 1099-B from the broker. Military tax filing Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Military tax filing What Is a Sale or Trade? This section explains what is a sale or trade. Military tax filing It also explains certain transactions and events that are treated as sales or trades. Military tax filing A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Military tax filing A trade is a transfer of property for other property or services and may be taxed in the same way as a sale. Military tax filing Sale and purchase. Military tax filing   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Military tax filing The sale and purchase are two separate transactions. Military tax filing But see Like-kind exchanges under Nontaxable Trades, later. Military tax filing Redemption of stock. Military tax filing   A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. Military tax filing Dividend versus sale or trade. Military tax filing   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Military tax filing Both direct and indirect ownership of stock will be considered. Military tax filing The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend (see chapter 8), There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. Military tax filing Redemption or retirement of bonds. Military tax filing   A redemption or retirement of bonds or notes at their maturity is generally treated as a sale or trade. Military tax filing   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Military tax filing For details, see Regulations section 1. Military tax filing 1001-3. Military tax filing Surrender of stock. Military tax filing   A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. Military tax filing The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Military tax filing Worthless securities. Military tax filing    Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. Military tax filing This affects whether your capital loss is long term or short term. Military tax filing See Holding Period , later. Military tax filing   Worthless securities also include securities that you abandon after March 12, 2008. Military tax filing To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Military tax filing All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. Military tax filing    If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. Military tax filing Do not deduct them in the year the stock became worthless. Military tax filing How to report loss. Military tax filing    Report worthless securities in Part I or Part II, whichever applies, of Form 8949. Military tax filing In column (a), enter “Worthless. Military tax filing ”    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Military tax filing See Form 8949 and the Instructions for Form 8949. Military tax filing For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Military tax filing See also Schedule D (Form 1040), Form 8949, and their separate instructions. Military tax filing Filing a claim for refund. Military tax filing   If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. Military tax filing You must use Form 1040X, Amended U. Military tax filing S. Military tax filing Individual Income Tax Return, to amend your return for the year the security became worthless. Military tax filing You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Military tax filing For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Military tax filing How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Military tax filing Gain. Military tax filing   If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Military tax filing Loss. Military tax filing   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Military tax filing Adjusted basis. Military tax filing   The adjusted basis of property is your original cost or other original basis properly adjusted (increased or decreased) for certain items. Military tax filing See chapter 13 for more information about determining the adjusted basis of property. Military tax filing Amount realized. Military tax filing   The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). Military tax filing Amount realized includes the money you receive plus the fair market value of any property or services you receive. Military tax filing If you received a note or other debt instrument for the property, see How To Figure Gain or Loss in chapter 4 of Publication 550 to figure the amount realized. Military tax filing If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. Military tax filing For more information, see Publication 537. Military tax filing Fair market value. Military tax filing   Fair market value is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Military tax filing Example. Military tax filing You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. Military tax filing Your gain is $3,000 ($10,000 − $7,000). Military tax filing Debt paid off. Military tax filing    A debt against the property, or against you, that is paid off as a part of the transaction, or that is assumed by the buyer, must be included in the amount realized. Military tax filing This is true even if neither you nor the buyer is personally liable for the debt. Military tax filing For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. Military tax filing Example. Military tax filing You sell stock that you had pledged as security for a bank loan of $8,000. Military tax filing Your basis in the stock is $6,000. Military tax filing The buyer pays off your bank loan and pays you $20,000 in cash. Military tax filing The amount realized is $28,000 ($20,000 + $8,000). Military tax filing Your gain is $22,000 ($28,000 − $6,000). Military tax filing Payment of cash. Military tax filing   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Military tax filing Determine your gain or loss by subtracting the cash you pay plus the adjusted basis of the property you trade in from the amount you realize. Military tax filing If the result is a positive number, it is a gain. Military tax filing If the result is a negative number, it is a loss. Military tax filing No gain or loss. Military tax filing   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Military tax filing In this case, you may have neither a gain nor a loss. Military tax filing See Basis Other Than Cost in chapter 13. Military tax filing Nontaxable Trades This section discusses trades that generally do not result in a taxable gain or deductible loss. Military tax filing For more information on nontaxable trades, see chapter 1 of Publication 544. Military tax filing Like-kind exchanges. Military tax filing   If you trade business or investment property for other business or investment property of a like kind, you do not pay tax on any gain or deduct any loss until you sell or dispose of the property you receive. Military tax filing To be nontaxable, a trade must meet all six of the following conditions. Military tax filing The property must be business or investment property. Military tax filing You must hold both the property you trade and the property you receive for productive use in your trade or business or for investment. Military tax filing Neither property may be property used for personal purposes, such as your home or family car. Military tax filing The property must not be held primarily for sale. Military tax filing The property you trade and the property you receive must not be property you sell to customers, such as merchandise. Military tax filing The property must not be stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest, including partnership interests. Military tax filing However, see Special rules for mutual ditch, reservoir, or irrigation company stock, in chapter 4 of Publication 550 for an exception. Military tax filing Also, you can have a nontaxable trade of corporate stocks under a different rule, as discussed later. Military tax filing There must be a trade of like property. Military tax filing The trade of real estate for real estate, or personal property for similar personal property, is a trade of like property. Military tax filing The trade of an apartment house for a store building, or a panel truck for a pickup truck, is a trade of like property. Military tax filing The trade of a piece of machinery for a store building is not a trade of like property. Military tax filing Real property located in the United States and real property located outside the United States are not like property. Military tax filing Also, personal property used predominantly within the United States and personal property used predominantly outside the United States are not like property. Military tax filing The property to be received must be identified in writing within 45 days after the date you transfer the property given up in the trade. Military tax filing The property to be received must be received by the earlier of: The 180th day after the date on which you transfer the property given up in the trade, or The due date, including extensions, for your tax return for the year in which the transfer of the property given up occurs. Military tax filing    If you trade property with a related party in a like-kind exchange, a special rule may apply. Military tax filing See Related Party Transactions , later in this chapter. Military tax filing Also, see chapter 1 of Publication 544 for more information on exchanges of business property and special rules for exchanges using qualified intermediaries or involving multiple properties. Military tax filing Partly nontaxable exchange. Military tax filing   If you receive money or unlike property in addition to like property, and the above six conditions are met, you have a partly nontaxable trade. Military tax filing You are taxed on any gain you realize, but only up to the amount of the money and the fair market value of the unlike property you receive. Military tax filing You cannot deduct a loss. Military tax filing Like property and unlike property transferred. Military tax filing   If you give up unlike property in addition to the like property, you must recognize gain or loss on the unlike property you give up. Military tax filing The gain or loss is the difference between the adjusted basis of the unlike property and its fair market value. Military tax filing Like property and money transferred. Military tax filing   If all of the above conditions (1) – (6) are met, you have a nontaxable trade even if you pay money in addition to the like property. Military tax filing Basis of property received. Military tax filing   To figure the basis of the property received, see Nontaxable Exchanges in chapter 13. Military tax filing How to report. Military tax filing   You must report the trade of like property on Form 8824. Military tax filing If you figure a recognized gain or loss on Form 8824, report it on Schedule D (Form 1040), or on Form 4797, Sales of Business Property, whichever applies. Military tax filing See the instructions for Line 22 in the Instructions for Form 8824. Military tax filing   For information on using Form 4797, see chapter 4 of Publication 544. Military tax filing Corporate stocks. Military tax filing   The following trades of corporate stocks generally do not result in a taxable gain or a deductible loss. Military tax filing Corporate reorganizations. Military tax filing   In some instances, a company will give you common stock for preferred stock, preferred stock for common stock, or stock in one corporation for stock in another corporation. Military tax filing If this is a result of a merger, recapitalization, transfer to a controlled corporation, bankruptcy, corporate division, corporate acquisition, or other corporate reorganization, you do not recognize gain or loss. Military tax filing Stock for stock of the same corporation. Military tax filing   You can exchange common stock for common stock or preferred stock for preferred stock in the same corporation without having a recognized gain or loss. Military tax filing This is true for a trade between two stockholders as well as a trade between a stockholder and the corporation. Military tax filing Convertible stocks and bonds. Military tax filing   You generally will not have a recognized gain or loss if you convert bonds into stock or preferred stock into common stock of the same corporation according to a conversion privilege in the terms of the bond or the preferred stock certificate. Military tax filing Property for stock of a controlled corporation. Military tax filing   If you transfer property to a corporation solely in exchange for stock in that corporation, and immediately after the trade you are in control of the corporation, you ordinarily will not recognize a gain or loss. Military tax filing This rule applies both to individuals and to groups who transfer property to a corporation. Military tax filing It does not apply if the corporation is an investment company. Military tax filing   For this purpose, to be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock of the corporation. Military tax filing   If this provision applies to you, you may have to attach to your return a complete statement of all facts pertinent to the exchange. Military tax filing For details, see Regulations section 1. Military tax filing 351-3. Military tax filing Additional information. Military tax filing   For more information on trades of stock, see Nontaxable Trades in chapter 4 of Publication 550. Military tax filing Insurance policies and annuities. Military tax filing   You will not have a recognized gain or loss if the insured or annuitant is the same under both contracts and you trade: A life insurance contract for another life insurance contract or for an endowment or annuity contract or for a qualified long-term care insurance contract, An endowment contract for another endowment contract that provides for regular payments beginning at a date no later than the beginning date under the old contract or for an annuity contract or for a qualified long-term insurance contract, An annuity contract for annuity contract or for a qualified long-term care insurance contract, or A qualified long-term care insurance contract for a qualified long-term care insurance contract. Military tax filing   You also may not have to recognize gain or loss on an exchange of a portion of an annuity contract for another annuity contract. Military tax filing For transfers completed before October 24, 2011, see Revenue Ruling 2003-76 in Internal Revenue Bulletin 2003-33 and Revenue Procedure 2008-24 in Internal Revenue Bulletin 2008-13. Military tax filing Revenue Ruling 2003-76 is available at www. Military tax filing irs. Military tax filing gov/irb/2003-33_IRB/ar11. Military tax filing html. Military tax filing Revenue Procedure 2008-24 is available at www. Military tax filing irs. Military tax filing gov/irb/2008-13_IRB/ar13. Military tax filing html. Military tax filing For transfers completed on or after October 24, 2011, see Revenue Ruling 2003-76, above, and Revenue Procedure 2011-38, in Internal Revenue Bulletin 2011-30. Military tax filing Revenue Procedure 2011-38 is available at www. Military tax filing irs. Military tax filing gov/irb/2011-30_IRB/ar09. Military tax filing html. Military tax filing   For tax years beginning after December 31, 2010, amounts received as an annuity for a period of 10 years or more, or for the lives of one or more individuals, under any portion of an annuity, endowment, or life insurance contract, are treated as a separate contract and are considered partial annuities. Military tax filing A portion of an annuity, endowment, or life insurance contract may be annuitized, provided that the annuitization period is for 10 years or more or for the lives of one or more individuals. Military tax filing The investment in the contract is allocated between the part of the contract from which amounts are received as an annuity and the part of the contract from which amounts are not received as an annuity. Military tax filing   Exchanges of contracts not included in this list, such as an annuity contract for an endowment contract, or an annuity or endowment contract for a life insurance contract, are taxable. Military tax filing Demutualization of life insurance companies. Military tax filing   If you received stock in exchange for your equity interest as a policyholder or an annuitant, you generally will not have a recognized gain or loss. Military tax filing See Demutualization of Life Insurance Companies in Publication 550. Military tax filing U. Military tax filing S. Military tax filing Treasury notes or bonds. Military tax filing   You can trade certain issues of U. Military tax filing S. Military tax filing Treasury obligations for other issues designated by the Secretary of the Treasury, with no gain or loss recognized on the trade. Military tax filing See Savings bonds traded in chapter 1 of Publication 550 for more information. Military tax filing Transfers Between Spouses Generally, no gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or if incident to a divorce, a former spouse. Military tax filing This nonrecognition rule does not apply in the following situations. Military tax filing The recipient spouse or former spouse is a nonresident alien. Military tax filing Property is transferred in trust and liability exceeds basis. Military tax filing Gain must be recognized to the extent the amount of the liabilities assumed by the trust, plus any liabilities on the property, exceed the adjusted basis of the property. Military tax filing For other situations, see Transfers Between Spouses in chapter 4 of Publication 550. Military tax filing Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is treated by the recipient as a gift and is not considered a sale or exchange. Military tax filing The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. Military tax filing This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its fair market value at the time of transfer or any consideration paid by the recipient. Military tax filing This rule applies for purposes of determining loss as well as gain. Military tax filing Any gain recognized on a transfer in trust increases the basis. Military tax filing A transfer of property is incident to a divorce if the transfer occurs within 1 year after the date on which the marriage ends, or if the transfer is related to the ending of the marriage. Military tax filing Related Party Transactions Special rules apply to the sale or trade of property between related parties. Military tax filing Gain on sale or trade of depreciable property. Military tax filing   Your gain from the sale or trade of property to a related party may be ordinary income, rather than capital gain, if the property can be depreciated by the party receiving it. Military tax filing See chapter 3 of Publication 544 for more information. Military tax filing Like-kind exchanges. Military tax filing   Generally, if you trade business or investment property for other business or investment property of a like kind, no gain or loss is recognized. Military tax filing See Like-kind exchanges , earlier, under Nontaxable Trades. Military tax filing   This rule also applies to trades of property between related parties, defined next under Losses on sales or trades of property. Military tax filing However, if either you or the related party disposes of the like property within 2 years after the trade, you both must report any gain or loss not recognized on the original trade on your return filed for the year in which the later disposition occurs. Military tax filing See Related Party Transactions in chapter 4 of Publication 550 for exceptions. Military tax filing Losses on sales or trades of property. Military tax filing   You cannot deduct a loss on the sale or trade of property, other than a distribution in complete liquidation of a corporation, if the transaction is directly or indirectly between you and the following related parties. Military tax filing Members of your family. Military tax filing This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. Military tax filing ), and lineal descendants (children, grandchildren, etc. Military tax filing ). Military tax filing A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. Military tax filing A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. Military tax filing (See Constructive ownership of stock , later. Military tax filing ) A tax-exempt charitable or educational organization directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. Military tax filing   In addition, a loss on the sale or trade of property is not deductible if the transaction is directly or indirectly between the following related parties. Military tax filing A grantor and fiduciary, or the fiduciary and beneficiary, of any trust. Military tax filing Fiduciaries of two different trusts, or the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. Military tax filing A trust fiduciary and a corporation of which more than 50% in value of the outstanding stock is directly or indirectly owned by or for the trust, or by or for the grantor of the trust. Military tax filing A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest, or the profits interest, in the partnership. Military tax filing Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. Military tax filing Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. Military tax filing An executor and a beneficiary of an estate (except in the case of a sale or trade to satisfy a pecuniary bequest). Military tax filing Two corporations that are members of the same controlled group. Military tax filing (Under certain conditions, however, these losses are not disallowed but must be deferred. Military tax filing ) Two partnerships if the same persons own, directly or indirectly, more than 50% of the capital interests or the profit interests in both partnerships. Military tax filing Multiple property sales or trades. Military tax filing   If you sell or trade to a related party a number of blocks of stock or pieces of property in a lump sum, you must figure the gain or loss separately for each block of stock or piece of property. Military tax filing The gain on each item may be taxable. Military tax filing However, you cannot deduct the loss on any item. Military tax filing Also, you cannot reduce gains from the sales of any of these items by losses on the sales of any of the other items. Military tax filing Indirect transactions. Military tax filing   You cannot deduct your loss on the sale of stock through your broker if, under a prearranged plan, a related party buys the same stock you had owned. Military tax filing This does not apply to a trade between related parties through an exchange that is purely coincidental and is not prearranged. Military tax filing Constructive ownership of stock. Military tax filing   In determining whether a person directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Military tax filing Rule 1. Military tax filing   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Military tax filing Rule 2. Military tax filing   An individual is considered to own the stock directly or indirectly owned by or for his or her family. Military tax filing Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Military tax filing Rule 3. Military tax filing   An individual owning, other than by applying rule 2, any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Military tax filing Rule 4. Military tax filing   When applying rule 1, 2, or 3, stock constructively owned by a person under rule 1 is treated as actually owned by that person. Military tax filing But stock constructively owned by an individual under rule 2 or rule 3 is not treated as owned by that individual for again applying either rule 2 or rule 3 to make another person the constructive owner of the stock. Military tax filing Property received from a related party. Military tax filing    If you sell or trade at a gain property you acquired from a related party, you recognize the gain only to the extent it is more than the loss previously disallowed to the related party. Military tax filing This rule applies only if you are the original transferee and you acquired the property by purchase or exchange. Military tax filing This rule does not apply if the related party's loss was disallowed because of the wash sale rules described in chapter 4 of Publication 550 under Wash Sales. Military tax filing   If you sell or trade at a loss property you acquired from a related party, you cannot recognize the loss that was not allowed to the related party. Military tax filing Example 1. Military tax filing Your brother sells you stock for $7,600. Military tax filing His cost basis is $10,000. Military tax filing Your brother cannot deduct the loss of $2,400. Military tax filing Later, you sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900. Military tax filing Your reportable gain is $500 (the $2,900 gain minus the $2,400 loss not allowed to your brother). Military tax filing Example 2. Military tax filing If, in Example 1, you sold the stock for $6,900 instead of $10,500, your recognized loss is only $700 (your $7,600 basis minus $6,900). Military tax filing You cannot deduct the loss that was not allowed to your brother. Military tax filing Capital Gains and Losses This section discusses the tax treatment of gains and losses from different types of investment transactions. Military tax filing Character of gain or loss. Military tax filing   You need to classify your gains and losses as either ordinary or capital gains or losses. Military tax filing You then need to classify your capital gains and losses as either short term or long term. Military tax filing If you have long-term gains and losses, you must identify your 28% rate gains and losses. Military tax filing If you have a net capital gain, you must also identify any unrecaptured section 1250 gain. Military tax filing   The correct classification and identification helps you figure the limit on capital losses and the correct tax on capital gains. Military tax filing Reporting capital gains and losses is explained in chapter 16. Military tax filing Capital or Ordinary Gain or Loss If you have a taxable gain or a deductible loss from a transaction, it may be either a capital gain or loss or an ordinary gain or loss, depending on the circumstances. Military tax filing Generally, a sale or trade of a capital asset (defined next) results in a capital gain or loss. Military tax filing A sale or trade of a noncapital asset generally results in ordinary gain or loss. Military tax filing Depending on the circumstances, a gain or loss on a sale or trade of property used in a trade or business may be treated as either capital or ordinary, as explained in Publication 544. Military tax filing In some situations, part of your gain or loss may be a capital gain or loss and part may be an ordinary gain or loss. Military tax filing Capital Assets and Noncapital Assets For the most part, everything you own and use for personal purposes, pleasure, or investment is a capital asset. Military tax filing Some examples are: Stocks or bonds held in your personal account, A house owned and used by you and your family, Household furnishings, A car used for pleasure or commuting, Coin or stamp collections, Gems and jewelry, and Gold, silver, or any other metal. Military tax filing Any property you own is a capital asset, except the following noncapital assets. Military tax filing Property held mainly for sale to customers or property that will physically become a part of the merchandise for sale to customers. Military tax filing For an exception, see Capital Asset Treatment for Self-Created Musical Works , later. Military tax filing Depreciable property used in your trade or business, even if fully depreciated. Military tax filing Real property used in your trade or business. Military tax filing A copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property that is: Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Acquired under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. Military tax filing For an exception to this rule, see Capital Asset Treatment for Self-Created Musical Works , later. Military tax filing Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of property described in (1). Military tax filing U. Military tax filing S. Military tax filing Government publications that you received from the government free or for less than the normal sales price, or that you acquired under circumstances entitling you to the basis of someone who received the publications free or for less than the normal sales price. Military tax filing Certain commodities derivative financial instruments held by commodities derivatives dealers. Military tax filing Hedging transactions, but only if the transaction is clearly identified as a hedging transaction before the close of the day on which it was acquired, originated, or entered into. Military tax filing Supplies of a type you regularly use or consume in the ordinary course of your trade or business. Military tax filing Investment Property Investment property is a capital asset. Military tax filing Any gain or loss from its sale or trade is generally a capital gain or loss. Military tax filing Gold, silver, stamps, coins, gems, etc. Military tax filing   These are capital assets except when they are held for sale by a dealer. Military tax filing Any gain or loss you have from their sale or trade generally is a capital gain or loss. Military tax filing Stocks, stock rights, and bonds. Military tax filing   All of these (including stock received as a dividend) are capital assets except when held for sale by a securities dealer. Military tax filing However, if you own small business stock, see Losses on Section 1244 (Small Business) Stock , later, and Losses on Small Business Investment Company Stock, in chapter 4 of Publication 550. Military tax filing Personal Use Property Property held for personal use only, rather than for investment, is a capital asset, and you must report a gain from its sale as a capital gain. Military tax filing However, you cannot deduct a loss from selling personal use property. Military tax filing Capital Asset Treatment for Self-Created Musical Works You can elect to treat musical compositions and copyrights in musical works as capital assets when you sell or exchange them if: Your personal efforts created the property, or You acquired the property under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. Military tax filing You must make a separate election for each musical composition (or copyright in a musical work) sold or exchanged during the tax year. Military tax filing You must make the election on or before the due date (including extensions) of the income tax return for the tax year of the sale or exchange. Military tax filing You must make the election on Form 8949 by treating the sale or exchange as the sale or exchange of a capital asset, according to Form 8949, Schedule D (Form 1040), and their separate instructions. Military tax filing For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Military tax filing See also Schedule D (Form 1040), Form 8949, and their separate instructions. Military tax filing You can revoke the election if you have IRS approval. Military tax filing To get IRS approval, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. Military tax filing See, for example, Rev. Military tax filing Proc. Military tax filing 2013-1, corrected by Announcement 2013–9, and amplified and modified by Rev. Military tax filing Proc. Military tax filing 2013–32, available at www. Military tax filing irs. Military tax filing gov/irb/2013-01_IRB/ar06. Military tax filing html. Military tax filing Alternatively, you are granted an automatic 6-month extension from the due date of your income tax return (excluding extensions) to revoke the election, provided you timely file your income tax return, and within this 6-month extension period, you file Form 1040X that treats the sale or exchange as the sale or exchange of property that is not a capital asset. Military tax filing Discounted Debt Instruments Treat your gain or loss on the sale, redemption, or retirement of a bond or other debt instrument originally issued at a discount or bought at a discount as capital gain or loss, except as explained in the following discussions. Military tax filing Short-term government obligations. Military tax filing   Treat gains on short-term federal, state, or local government obligations (other than tax-exempt obligations) as ordinary income up to your ratable share of the acquisition discount. Military tax filing This treatment applies to obligations with a fixed maturity date not more than 1 year from the date of issue. Military tax filing Acquisition discount is the stated redemption price at maturity minus your basis in the obligation. Military tax filing   However, do not treat these gains as income to the extent you previously included the discount in income. Military tax filing See Discount on Short-Term Obligations in chapter 1 of Publication 550. Military tax filing Short-term nongovernment obligations. Military tax filing   Treat gains on short-term nongovernment obligations as ordinary income up to your ratable share of original issue discount (OID). Military tax filing This treatment applies to obligations with a fixed maturity date of not more than 1 year from the date of issue. Military tax filing   However, to the extent you previously included the discount in income, you do not have to include it in income again. Military tax filing See Discount on Short-Term Obligations in chapter 1 of Publication 550. Military tax filing Tax-exempt state and local government bonds. Military tax filing   If these bonds were originally issued at a discount before September 4, 1982, or you acquired them before March 2, 1984, treat your part of OID as tax-exempt interest. Military tax filing To figure your gain or loss on the sale or trade of these bonds, reduce the amount realized by your part of OID. Military tax filing   If the bonds were issued after September 3, 1982, and acquired after March 1, 1984, increase the adjusted basis by your part of OID to figure gain or loss. Military tax filing For more information on the basis of these bonds, see Discounted Debt Instruments in chapter 4 of Publication 550. Military tax filing   Any gain from market discount is usually taxable on disposition or redemption of tax-exempt bonds. Military tax filing If you bought the bonds before May 1, 1993, the gain from market discount is capital gain. Military tax filing If you bought the bonds after April 30, 1993, the gain is ordinary income. Military tax filing   You figure the market discount by subtracting the price you paid for the bond from the sum of the original issue price of the bond and the amount of accumulated OID from the date of issue that represented interest to any earlier holders. Military tax filing For more information, see Market Discount Bonds in chapter 1 of Publication 550. Military tax filing    A loss on the sale or other disposition of a tax-exempt state or local government bond is deductible as a capital loss. Military tax filing Redeemed before maturity. Military tax filing   If a state or local bond issued before June 9, 1980, is redeemed before it matures, the OID is not taxable to you. Military tax filing   If a state or local bond issued after June 8, 1980, is redeemed before it matures, the part of OID earned while you hold the bond is not taxable to you. Military tax filing However, you must report the unearned part of OID as a capital gain. Military tax filing Example. Military tax filing On July 2, 2002, the date of issue, you bought a 20-year, 6% municipal bond for $800. Military tax filing The face amount of the bond was $1,000. Military tax filing The $200 discount was OID. Military tax filing At the time the bond was issued, the issuer had no intention of redeeming it before it matured. Military tax filing The bond was callable at its face amount beginning 10 years after the issue date. Military tax filing The issuer redeemed the bond at the end of 11 years (July 2, 2013) for its face amount of $1,000 plus accrued annual interest of $60. Military tax filing The OID earned during the time you held the bond, $73, is not taxable. Military tax filing The $60 accrued annual interest also is not taxable. Military tax filing However, you must report the unearned part of OID ($127) as a capital gain. Military tax filing Long-term debt instruments issued after 1954 and before May 28, 1969 (or before July 2, 1982, if a government instrument). Military tax filing   If you sell, trade, or redeem for a gain one of these debt instruments, the part of your gain that is not more than your ratable share of the OID at the time of the sale or redemption is ordinary income. Military tax filing The rest of the gain is capital gain. Military tax filing If, however, there was an intention to call the debt instrument before maturity, all of your gain that is not more than the entire OID is treated as ordinary income at the time of the sale. Military tax filing This treatment of taxable gain also applies to corporate instruments issued after May 27, 1969, under a written commitment that was binding on May 27, 1969, and at all times thereafter. Military tax filing Long-term debt instruments issued after May 27, 1969 (or after July 1, 1982, if a government instrument). Military tax filing   If you hold one of these debt instruments, you must include a part of OID in your gross income each year you own the instrument. Military tax filing Your basis in that debt instrument is increased by the amount of OID that you have included in your gross income. Military tax filing See Original Issue Discount (OID) in chapter 7 for information about OID that you must report on your tax return. Military tax filing   If you sell or trade the debt instrument before maturity, your gain is a capital gain. Military tax filing However, if at the time the instrument was originally issued there was an intention to call it before its maturity, your gain generally is ordinary income to the extent of the entire OID reduced by any amounts of OID previously includible in your income. Military tax filing In this case, the rest of the gain is capital gain. Military tax filing Market discount bonds. Military tax filing   If the debt instrument has market discount and you chose to include the discount in income as it accrued, increase your basis in the debt instrument by the accrued discount to figure capital gain or loss on its disposition. Military tax filing If you did not choose to include the discount in income as it accrued, you must report gain as ordinary interest income up to the instrument's accrued market discount. Military tax filing The rest of the gain is capital gain. Military tax filing See Market Discount Bonds in chapter 1 of Publication 550. Military tax filing   A different rule applies to market discount bonds issued before July 19, 1984, and purchased by you before May 1, 1993. Military tax filing See Market discount bonds under Discounted Debt Instruments in chapter 4 of Publication 550. Military tax filing Retirement of debt instrument. Military tax filing   Any amount you receive on the retirement of a debt instrument is treated in the same way as if you had sold or traded that instrument. Military tax filing Notes of individuals. Military tax filing   If you hold an obligation of an individual issued with OID after March 1, 1984, you generally must include the OID in your income currently, and your gain or loss on its sale or retirement is generally capital gain or loss. Military tax filing An exception to this treatment applies if the obligation is a loan between individuals and all the following requirements are met. Military tax filing The lender is not in the business of lending money. Military tax filing The amount of the loan, plus the amount of any outstanding prior loans, is $10,000 or less. Military tax filing Avoiding federal tax is not one of the principal purposes of the loan. Military tax filing   If the exception applies, or the obligation was issued before March 2, 1984, you do not include the OID in your income currently. Military tax filing When you sell or redeem the obligation, the part of your gain that is not more than your accrued share of OID at that time is ordinary income. Military tax filing The rest of the gain, if any, is capital gain. Military tax filing Any loss on the sale or redemption is capital loss. Military tax filing Deposit in Insolvent or Bankrupt Financial Institution If you lose money you have on deposit in a bank, credit union, or other financial institution that becomes insolvent or bankrupt, you may be able to deduct your loss in one of three ways. Military tax filing Ordinary loss. Military tax filing Casualty loss. Military tax filing Nonbusiness bad debt (short-term capital loss). Military tax filing  For more information, see Deposit in Insolvent or Bankrupt Financial Institution, in chapter 4 of Publication 550. Military tax filing Sale of Annuity The part of any gain on the sale of an annuity contract before its maturity date that is based on interest accumulated on the contract is ordinary income. Military tax filing Losses on Section 1244 (Small Business) Stock You can deduct as an ordinary loss, rather than as a capital loss, your loss on the sale, trade, or worthlessness of section 1244 stock. Military tax filing Report the loss on Form 4797, line 10. Military tax filing Any gain on section 1244 stock is a capital gain if the stock is a capital asset in your hands. Military tax filing Report the gain on Form 8949. Military tax filing See Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. Military tax filing For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Military tax filing See also Schedule D (Form 1040), Form 8949, and their separate instructions. Military tax filing Holding Period If you sold or traded investment property, you must determine your holding period for the property. Military tax filing Your holding period determines whether any capital gain or loss was a short-term or long-term capital gain or loss. Military tax filing Long-term or short-term. Military tax filing   If you hold investment property more than 1 year, any capital gain or loss is a long-term capital gain or loss. Military tax filing If you hold the property 1 year or less, any capital gain or loss is a short-term capital gain or loss. Military tax filing   To determine how long you held the investment property, begin counting on the date after the day you acquired the property. Military tax filing The day you disposed of the property is part of your holding period. Military tax filing Example. Military tax filing If you bought investment property on February 6, 2012, and sold it on February 6, 2013, your holding period is not more than 1 year and you have a short-term capital gain or loss. Military tax filing If you sold it on February 7, 2013, your holding period is more than 1 year and you will have a long-term capital gain or loss. Military tax filing Securities traded on established market. Military tax filing   For securities traded on an established securities market, your holding period begins the day after the trade date you bought the securities, and ends on the trade date you sold them. Military tax filing    Do not confuse the trade date with the settlement date, which is the date by which the stock must be delivered and payment must be made. Military tax filing Example. Military tax filing You are a cash method, calendar year taxpayer. Military tax filing You sold stock at a gain on December 30, 2013. Military tax filing According to the rules of the stock exchange, the sale was closed by delivery of the stock 4 trading days after the sale, on January 6, 2014. Military tax filing You received payment of the sales price on that same day. Military tax filing Report your gain on your 2013 return, even though you received the payment in 2014. Military tax filing The gain is long term or short term depending on whether you held the stock more than 1 year. Military tax filing Your holding period ended on December 30. Military tax filing If you had sold the stock at a loss, you would also report it on your 2013 return. Military tax filing U. Military tax filing S. Military tax filing Treasury notes and bonds. Military tax filing   The holding period of U. Military tax filing S. Military tax filing Treasury notes and bonds sold at auction on the basis of yield starts the day after the Secretary of the Treasury, through news releases, gives notification of acceptance to successful bidders. Military tax filing The holding period of U. Military tax filing S. Military tax filing Treasury notes and bonds sold through an offering on a subscription basis at a specified yield starts the day after the subscription is submitted. Military tax filing Automatic investment service. Military tax filing   In determining your holding period for shares bought by the bank or other agent, full shares are considered bought first and any fractional shares are considered bought last. Military tax filing Your holding period starts on the day after the bank's purchase date. Military tax filing If a share was bought over more than one purchase date, your holding period for that share is a split holding period. Military tax filing A part of the share is considered to have been bought on each date that stock was bought by the bank with the proceeds of available funds. Military tax filing Nontaxable trades. Military tax filing   If you acquire investment property in a trade for other investment property and your basis for the new property is determined, in whole or in part, by your basis in the old property, your holding period for the new property begins on the day following the date you acquired the old property. Military tax filing Property received as a gift. Military tax filing   If you receive a gift of property and your basis is determined by the donor's adjusted basis, your holding period is considered to have started on the same day the donor's holding period started. Military tax filing   If your basis is determined by the fair market value of the property, your holding period starts on the day after the date of the gift. Military tax filing Inherited property. Military tax filing   Generally, if you inherited investment property, your capital gain or loss on any later disposition of that property is long-term capital gain or loss. Military tax filing This is true regardless of how long you actually held the property. Military tax filing However, if you inherited property from someone who died in 2010, see the information below. Military tax filing Inherited property from someone who died in 2010. Military tax filing   If you inherit investment property from a decedent who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your holding period. Military tax filing Real property bought. Military tax filing   To figure how long you have held real property bought under an unconditional contract, begin counting on the day after you received title to it or on the day after you took possession of it and assumed the burdens and privileges of ownership, whichever happened first. Military tax filing However, taking delivery or possession of real property under an option agreement is not enough to start the holding period. Military tax filing The holding period cannot start until there is an actual contract of sale. Military tax filing The holding period of the seller cannot end before that time. Military tax filing Real property repossessed. Military tax filing   If you sell real property but keep a security interest in it, and then later repossess the property under the terms of the sales contract, your holding period for a later sale includes the period you held the property before the original sale and the period after the repossession. Military tax filing Your holding period does not include the time between the original sale and the repossession. Military tax filing That is, it does not include the period during which the first buyer held the property. Military tax filing Stock dividends. Military tax filing   The holding period for stock you received as a taxable stock dividend begins on the date of distribution. Military tax filing   The holding period for new stock you received as a nontaxable stock dividend begins on the same day as the holding period of the old stock. Military tax filing This rule also applies to stock acquired in a “spin-off,” which is a distribution of stock or securities in a controlled corporation. Military tax filing Nontaxable stock rights. Military tax filing   Your holding period for nontaxable stock rights begins on the same day as the holding period of the underlying stock. Military tax filing The holding period for stock acquired through the exercise of stock rights begins on the date the right was exercised. Military tax filing Nonbusiness Bad Debts If someone owes you money that you cannot collect, you have a bad debt. Military tax filing You may be able to deduct the amount owed to you when you figure your tax for the year the debt becomes worthless. Military tax filing Generally, nonbusiness bad debts are bad debts that did not come from operating your trade or business, and are deductible as short-term capital losses. Military tax filing To be deductible, nonbusiness bad debts must be totally worthless. Military tax filing You cannot deduct a partly worthless nonbusiness debt. Military tax filing Genuine debt required. Military tax filing   A debt must be genuine for you to deduct a loss. Military tax filing A debt is genuine if it arises from a debtor-creditor relationship based on a valid and enforceable obligation to repay a fixed or determinable sum of money. Military tax filing Basis in bad debt required. Military tax filing    To deduct a bad debt, you must have a basis in it—that is, you must have already included the amount in your income or loaned out your cash. Military tax filing For example, you cannot claim a bad debt deduction for court-ordered child support not paid to you by your former spouse. Military tax filing If you are a cash method taxpayer (as most individuals are), you generally cannot take a bad debt deduction for unpaid salaries, wages, rents, fees, interest, dividends, and similar items. Military tax filing When deductible. Military tax filing   You can take a bad debt deduction only in the year the debt becomes worthless. Military tax filing You do not have to wait until a debt is due to determine whether it is worthless. Military tax filing A debt becomes worthless when there is no longer any chance that the amount owed will be paid. Military tax filing   It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. Military tax filing You must only show that you have taken reasonable steps to collect the debt. Military tax filing Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. Military tax filing How to report bad debts. Military tax filing    Deduct nonbusiness bad debts as short-term capital losses on Form 8949. Military tax filing    Make sure you report your bad debt(s) (and any other short-term transactions for which you did not receive a Form 1099-B) on Form 8949, Part I, with box C checked. Military tax filing    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Military tax filing See also Schedule D (Form 1040), Form 8949, and their separate instructions. Military tax filing   For each bad debt, attach a statement to your return that contains: A description of the debt, including the amount, and the date it became due, The name of the debtor, and any business or family relationship between you and the debtor, The efforts you made to collect the debt, and Why you decided the debt was worthless. Military tax filing For example, you could show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt. Military tax filing Filing a claim for refund. Military tax filing    If you do not deduct a bad debt on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the bad debt. Military tax filing To do this, use Form 1040X to amend your return for the year the debt became worthless. Military tax filing You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Military tax filing For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Military tax filing Additional information. Military tax filing   For more information, see Nonbusiness Bad Debts in Publication 550. Military tax filing For information on business bad debts, see chapter 10 of Publication 535, Business Expenses. Military tax filing Wash Sales You cannot deduct losses from sales or trades of stock or securities in a wash sale. Military tax filing A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: Buy substantially identical stock or securities, Acquire substantially identical stock or securities in a fully taxable trade, Acquire a contract or option to buy substantially identical stock or securities, or Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA. Military tax filing If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). Military tax filing The result is your basis in the new stock or securities. Military tax filing This adjustment postpones the loss deduction until the disposition of the new stock or securities. Military tax filing Your holding period for the new stock or securities includes the holding period of the stock or securities sold. Military tax filing For more information, see Wash Sales, in chapter 4 of Publication 550. Military tax filing Rollover of Gain From Publicly Traded Securities You may qualify for a tax-free rollover of certain gains from the sale of publicly traded securities. Military tax filing This means that if you buy certain replacement property and make the choice described in this section, you postpone part or all of your gain. Military tax filing You postpone the gain by adjusting the basis of the replacement property as described in Basis of replacement property , later. Military tax filing This postpones your gain until the year you dispose of the replacement property. Military tax filing You qualify to make this choice if you meet all the following tests. Military tax filing You sell publicly traded securities at a gain. Military tax filing Publicly traded securities are securities traded on an established securities market. Military tax filing Your gain from the sale is a capital gain. Military tax filing During the 60-day period beginning on the date of the sale, you buy replacement property. Military tax filing This replacement property must be either common stock of, or a partnership interest in a specialized small business investment company (SSBIC). Military tax filing This is any partnership or corporation licensed by the Small Business Administration under section 301(d) of the Small Business Investment Act of 1958, as in effect on May 13, 1993. Military tax filing Amount of gain recognized. Military tax filing   If you make the choice described in this section, you must recognize gain only up to the following amount. Military tax filing The amount realized on the sale, minus The cost of any common stock or partnership interest in an SSBIC that you bought during the 60-day period beginning on the date of sale (and did not previously take into account on an earlier sale of publicly traded securities). Military tax filing  If this amount is less than the amount of your gain, you can postpone the rest of your gain, subject to the limit described next. Military tax filing If this amount is equal to or more than the amount of your gain, you must recognize the full amount of your gain. Military tax filing Limit on gain postponed. Military tax filing   The amount of gain you can postpone each year is limited to the smaller of: $50,000 ($25,000 if you are married and file a separate return), or $500,000 ($250,000 if you are married and file a separate return), minus the amount of gain you postponed for all earlier years. Military tax filing Basis of replacement property. Military tax filing   You must subtract the amount of postponed gain from the basis of your replacement property. Military tax filing How to report and postpone gain. Military tax filing    See How to report and postpone gain under Rollover of Gain From Publicly Traded Securities in chapter 4 of Publication 550 for details. Military tax filing Prev  Up  Next   Home   More Online Publications
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    The Military Tax Filing

    Military tax filing 4. Military tax filing   Tax Withholding and Estimated Tax Table of Contents What's New for 2014 Reminders Introduction Useful Items - You may want to see: Tax Withholding for 2014Salaries and Wages Tips Taxable Fringe Benefits Sick Pay Pensions and Annuities Gambling Winnings Unemployment Compensation Federal Payments Backup Withholding Estimated Tax for 2014Who Does Not Have To Pay Estimated Tax Who Must Pay Estimated Tax How To Figure Estimated Tax When To Pay Estimated Tax How To Figure Each Payment How To Pay Estimated Tax Credit for Withholding and Estimated Tax for 2013Withholding Estimated Tax Underpayment Penalty for 2013 What's New for 2014 Tax law changes for 2014. Military tax filing  When you figure how much income tax you want withheld from your pay and when you figure your estimated tax, consider tax law changes effective in 2014. Military tax filing For more information, see Publication 505. Military tax filing Reminders Estimated tax safe harbor for higher income taxpayers. Military tax filing  If your 2013 adjusted gross income was more than $150,000 ($75,000 if you are married filing a separate return), you must pay the smaller of 90% of your expected tax for 2014 or 110% of the tax shown on your 2013 return to avoid an estimated tax penalty. Military tax filing Introduction This chapter discusses how to pay your tax as you earn or receive income during the year. Military tax filing In general, the federal income tax is a pay-as-you-go tax. Military tax filing There are two ways to pay as you go. Military tax filing Withholding. Military tax filing If you are an employee, your employer probably withholds income tax from your pay. Military tax filing Tax also may be withheld from certain other income, such as pensions, bonuses, commissions, and gambling winnings. Military tax filing The amount withheld is paid to the IRS in your name. Military tax filing Estimated tax. Military tax filing If you do not pay your tax through withholding, or do not pay enough tax that way, you may have to pay estimated tax. Military tax filing People who are in business for themselves generally will have to pay their tax this way. Military tax filing Also, you may have to pay estimated tax if you receive income such as dividends, interest, capital gains, rent, and royalties. Military tax filing Estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well. Military tax filing This chapter explains these methods. Military tax filing In addition, it also explains the following. Military tax filing Credit for withholding and estimated tax. Military tax filing When you file your 2013 income tax return, take credit for all the income tax withheld from your salary, wages, pensions, etc. Military tax filing , and for the estimated tax you paid for 2013. Military tax filing Also take credit for any excess social security or railroad retirement tax withheld (discussed in chapter 37). Military tax filing Underpayment penalty. Military tax filing If you did not pay enough tax during the year, either through withholding or by making estimated tax payments, you may have to pay a penalty. Military tax filing In most cases, the IRS can figure this penalty for you. Military tax filing See Underpayment Penalty for 2013 at the end of this chapter. Military tax filing Useful Items - You may want to see: Publication 505 Tax Withholding and Estimated Tax Form (and Instructions) W-4 Employee's Withholding Allowance Certificate W-4P Withholding Certificate for Pension or Annuity Payments W-4S Request for Federal Income Tax Withholding From Sick Pay W-4V Voluntary Withholding Request 1040-ES Estimated Tax for Individuals 2210 Underpayment of Estimated Tax by Individuals, Estates, and Trusts 2210-F Underpayment of Estimated Tax by Farmers and Fishermen Tax Withholding for 2014 This section discusses income tax withholding on: Salaries and wages, Tips, Taxable fringe benefits, Sick pay, Pensions and annuities, Gambling winnings, Unemployment compensation, and Certain federal payments. Military tax filing This section explains the rules for withholding tax from each of these types of income. Military tax filing This section also covers backup withholding on interest, dividends, and other payments. Military tax filing Salaries and Wages Income tax is withheld from the pay of most employees. Military tax filing Your pay includes your regular pay, bonuses, commissions, and vacation allowances. Military tax filing It also includes reimbursements and other expense allowances paid under a nonaccountable plan. Military tax filing See Supplemental Wages , later, for more information about reimbursements and allowances paid under a nonaccountable plan. Military tax filing If your income is low enough that you will not have to pay income tax for the year, you may be exempt from withholding. Military tax filing This is explained under Exemption From Withholding , later. Military tax filing You can ask your employer to withhold income tax from noncash wages and other wages not subject to withholding. Military tax filing If your employer does not agree to withhold tax, or if not enough is withheld, you may have to pay estimated tax, as discussed later under Estimated Tax for 2014 . Military tax filing Military retirees. Military tax filing   Military retirement pay is treated in the same manner as regular pay for income tax withholding purposes, even though it is treated as a pension or annuity for other tax purposes. Military tax filing Household workers. Military tax filing   If you are a household worker, you can ask your employer to withhold income tax from your pay. Military tax filing A household worker is an employee who performs household work in a private home, local college club, or local fraternity or sorority chapter. Military tax filing   Tax is withheld only if you want it withheld and your employer agrees to withhold it. Military tax filing If you do not have enough income tax withheld, you may have to pay estimated tax, as discussed later under Estimated Tax for 2014 . Military tax filing Farmworkers. Military tax filing   Generally, income tax is withheld from your cash wages for work on a farm unless your employer does both of these: Pays you cash wages of less than $150 during the year, and Has expenditures for agricultural labor totaling less than $2,500 during the year. Military tax filing Differential wage payments. Military tax filing    When employees are on leave from employment for military duty, some employers make up the difference between the military pay and civilian pay. Military tax filing Payments to an employee who is on active duty for a period of more than 30 days will be subject to income tax withholding, but not subject to social security or Medicare taxes. Military tax filing The wages and withholding will be reported on Form W-2, Wage and Tax Statement. Military tax filing   The credit employers can claim for differential wages paid to activated military reservists is scheduled to expire for wages paid after December 31, 2013. Military tax filing Determining Amount of Tax Withheld Using Form W-4 The amount of income tax your employer withholds from your regular pay depends on two things. Military tax filing The amount you earn in each payroll period. Military tax filing The information you give your employer on Form W-4. Military tax filing Form W-4 includes four types of information that your employer will use to figure your withholding. Military tax filing Whether to withhold at the single rate or at the lower married rate. Military tax filing How many withholding allowances you claim (each allowance reduces the amount withheld). Military tax filing Whether you want an additional amount withheld. Military tax filing Whether you are claiming an exemption from withholding in 2014. Military tax filing See Exemption From Withholding , later. Military tax filing Note. Military tax filing You must specify a filing status and a number of withholding allowances on Form W-4. Military tax filing You cannot specify only a dollar amount of withholding. Military tax filing New Job When you start a new job, you must fill out Form W-4 and give it to your employer. Military tax filing Your employer should have copies of the form. Military tax filing If you need to change the information later, you must fill out a new form. Military tax filing If you work only part of the year (for example, you start working after the beginning of the year), too much tax may be withheld. Military tax filing You may be able to avoid overwithholding if your employer agrees to use the part-year method. Military tax filing See Part-Year Method in chapter 1 of Publication 505 for more information. Military tax filing Employee also receiving pension income. Military tax filing   If you receive pension or annuity income and begin a new job, you will need to file Form W-4 with your new employer. Military tax filing However, you can choose to split your withholding allowances between your pension and job in any manner. Military tax filing Changing Your Withholding During the year changes may occur to your marital status, exemptions, adjustments, deductions, or credits you expect to claim on your tax return. Military tax filing When this happens, you may need to give your employer a new Form W-4 to change your withholding status or your number of allowances. Military tax filing If the changes reduce the number of allowances you are claiming or changes your marital status from married to single, you must give your employer a new Form W-4 within 10 days. Military tax filing Generally, you can submit a new Form W-4 whenever you wish to change the number of your withholding allowances for any other reason. Military tax filing Changing your withholding for 2015. Military tax filing   If events in 2014 will decrease the number of your withholding allowances for 2015, you must give your employer a new Form W-4 by December 1, 2014. Military tax filing If the event occurs in December 2014, submit a new Form W-4 within 10 days. Military tax filing Checking Your Withholding After you have given your employer a Form W-4, you can check to see whether the amount of tax withheld from your pay is too little or too much. Military tax filing If too much or too little tax is being withheld, you should give your employer a new Form W-4 to change your withholding. Military tax filing You should try to have your withholding match your actual tax liability. Military tax filing If not enough tax is withheld, you will owe tax at the end of the year and may have to pay interest and a penalty. Military tax filing If too much tax is withheld, you will lose the use of that money until you get your refund. Military tax filing Always check your withholding if there are personal or financial changes in your life or changes in the law that might change your tax liability. Military tax filing Note. Military tax filing You cannot give your employer a payment to cover withholding on salaries and wages for past pay periods or a payment for estimated tax. Military tax filing Completing Form W-4 and Worksheets Form W-4 has worksheets to help you figure how many withholding allowances you can claim. Military tax filing The worksheets are for your own records. Military tax filing Do not give them to your employer. Military tax filing Multiple jobs. Military tax filing   If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. Military tax filing Then split your allowances between the Forms W-4 for each job. Military tax filing You cannot claim the same allowances with more than one employer at the same time. Military tax filing You can claim all your allowances with one employer and none with the other(s), or divide them any other way. Military tax filing Married individuals. Military tax filing   If both you and your spouse are employed and expect to file a joint return, figure your withholding allowances using your combined income, adjustments, deductions, exemptions, and credits. Military tax filing Use only one set of worksheets. Military tax filing You can divide your total allowances any way, but you cannot claim an allowance that your spouse also claims. Military tax filing   If you and your spouse expect to file separate returns, figure your allowances using separate worksheets based on your own individual income, adjustments, deductions, exemptions, and credits. Military tax filing Alternative method of figuring withholding allowances. Military tax filing   You do not have to use the Form W-4 worksheets if you use a more accurate method of figuring the number of withholding allowances. Military tax filing For more information, see Alternative method of figuring withholding allowances under Completing Form W-4 and Worksheets in Publication 505, chapter 1. Military tax filing Personal Allowances Worksheet. Military tax filing   Use the Personal Allowances Worksheet on Form W-4 to figure your withholding allowances based on exemptions and any special allowances that apply. Military tax filing Deduction and Adjustments Worksheet. Military tax filing   Use the Deduction and Adjustments Worksheet on Form W-4 if you plan to itemize your deductions, claim certain credits, or claim adjustments to the income on your 2014 tax return and you want to reduce your withholding. Military tax filing Also, complete this worksheet when you have changes to these items to see if you need to change your withholding. Military tax filing Two-Earners/Multiple Jobs Worksheet. Military tax filing   You may need to complete the Two-Earners/Multiple Jobs Worksheet on Form W-4 if you have more than one job, a working spouse, or are also receiving a pension. Military tax filing Also, on this worksheet you can add any additional withholding necessary to cover any amount you expect to owe other than income tax, such as self-employment tax. Military tax filing Getting the Right Amount of Tax Withheld In most situations, the tax withheld from your pay will be close to the tax you figure on your return if you follow these two rules. Military tax filing You accurately complete all the Form W-4 worksheets that apply to you. Military tax filing You give your employer a new Form W-4 when changes occur. Military tax filing But because the worksheets and withholding methods do not account for all possible situations, you may not be getting the right amount withheld. Military tax filing This is most likely to happen in the following situations. Military tax filing You are married and both you and your spouse work. Military tax filing You have more than one job at a time. Military tax filing You have nonwage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income. Military tax filing You will owe additional amounts with your return, such as self-employment tax. Military tax filing Your withholding is based on obsolete Form W-4 information for a substantial part of the year. Military tax filing Your earnings are more than the amount shown under Check your withholding in the instructions at the top of page 1 of Form W-4. Military tax filing You work only part of the year. Military tax filing You change the number of your withholding allowances during the year. Military tax filing Cumulative wage method. Military tax filing   If you change the number of your withholding allowances during the year, too much or too little tax may have been withheld for the period before you made the change. Military tax filing You may be able to compensate for this if your employer agrees to use the cumulative wage withholding method for the rest of the year. Military tax filing You must ask your employer in writing to use this method. Military tax filing   To be eligible, you must have been paid for the same kind of payroll period (weekly, biweekly, etc. Military tax filing ) since the beginning of the year. Military tax filing Publication 505 To make sure you are getting the right amount of tax withheld, get Publication 505. Military tax filing It will help you compare the total tax to be withheld during the year with the tax you can expect to figure on your return. Military tax filing It also will help you determine how much, if any, additional withholding is needed each payday to avoid owing tax when you file your return. Military tax filing If you do not have enough tax withheld, you may have to pay estimated tax, as explained under Estimated Tax for 2014 , later. Military tax filing You can use the IRS Withholding Calculator at www. Military tax filing irs. Military tax filing gov/Individuals, instead of Publication 505 or the worksheets included with Form W-4, to determine whether you need to have your withholding increased or decreased. Military tax filing Rules Your Employer Must Follow It may be helpful for you to know some of the withholding rules your employer must follow. Military tax filing These rules can affect how to fill out your Form W-4 and how to handle problems that may arise. Military tax filing New Form W-4. Military tax filing   When you start a new job, your employer should have you complete a Form W-4. Military tax filing Beginning with your first payday, your employer will use the information you give on the form to figure your withholding. Military tax filing   If you later fill out a new Form W-4, your employer can put it into effect as soon as possible. Military tax filing The deadline for putting it into effect is the start of the first payroll period ending 30 or more days after you turn it in. Military tax filing No Form W-4. Military tax filing   If you do not give your employer a completed Form W-4, your employer must withhold at the highest rate, as if you were single and claimed no withholding allowances. Military tax filing Repaying withheld tax. Military tax filing   If you find you are having too much tax withheld because you did not claim all the withholding allowances you are entitled to, you should give your employer a new Form W-4. Military tax filing Your employer cannot repay any of the tax previously withheld. Military tax filing Instead, claim the full amount withheld when you file your tax return. Military tax filing   However, if your employer has withheld more than the correct amount of tax for the Form W-4 you have in effect, you do not have to fill out a new Form W-4 to have your withholding lowered to the correct amount. Military tax filing Your employer can repay the amount that was withheld incorrectly. Military tax filing If you are not repaid, your Form W-2 will reflect the full amount actually withheld, which you would claim when you file your tax return. Military tax filing Exemption From Withholding If you claim exemption from withholding, your employer will not withhold federal income tax from your wages. Military tax filing The exemption applies only to income tax, not to social security or Medicare tax. Military tax filing You can claim exemption from withholding for 2014 only if both of the following situations apply. Military tax filing For 2013 you had a right to a refund of all federal income tax withheld because you had no tax liability. Military tax filing For 2014 you expect a refund of all federal income tax withheld because you expect to have no tax liability. Military tax filing Students. Military tax filing   If you are a student, you are not automatically exempt. Military tax filing See chapter 1 to find out if you must file a return. Military tax filing If you work only part time or only during the summer, you may qualify for exemption from withholding. Military tax filing Age 65 or older or blind. Military tax filing   If you are 65 or older or blind, use Worksheet 1-3 or 1-4 in chapter 1 of Publication 505, to help you decide if you qualify for exemption from withholding. Military tax filing Do not use either worksheet if you will itemize deductions, claim exemptions for dependents, or claim tax credits on your 2014 return. Military tax filing Instead, see Itemizing deductions or claiming exemptions or credits in chapter 1 of Publication 505. Military tax filing Claiming exemption from withholding. Military tax filing   To claim exemption, you must give your employer a Form W-4. Military tax filing Do not complete lines 5 and 6. Military tax filing Enter “Exempt” on line 7. Military tax filing   If you claim exemption, but later your situation changes so that you will have to pay income tax after all, you must file a new Form W-4 within 10 days after the change. Military tax filing If you claim exemption in 2014, but you expect to owe income tax for 2015, you must file a new Form W-4 by December 1, 2014. Military tax filing   Your claim of exempt status may be reviewed by the IRS. Military tax filing An exemption is good for only 1 year. Military tax filing   You must give your employer a new Form W-4 by February 15 each year to continue your exemption. Military tax filing Supplemental Wages Supplemental wages include bonuses, commissions, overtime pay, vacation allowances, certain sick pay, and expense allowances under certain plans. Military tax filing The payer can figure withholding on supplemental wages using the same method used for your regular wages. Military tax filing However, if these payments are identified separately from your regular wages, your employer or other payer of supplemental wages can withhold income tax from these wages at a flat rate. Military tax filing Expense allowances. Military tax filing   Reimbursements or other expense allowances paid by your employer under a nonaccountable plan are treated as supplemental wages. Military tax filing   Reimbursements or other expense allowances paid under an accountable plan that are more than your proven expenses are treated as paid under a nonaccountable plan if you do not return the excess payments within a reasonable period of time. Military tax filing   For more information about accountable and nonaccountable expense allowance plans, see Reimbursements in chapter 26. Military tax filing Penalties You may have to pay a penalty of $500 if both of the following apply. Military tax filing You make statements or claim withholding allowances on your Form W-4 that reduce the amount of tax withheld. Military tax filing You have no reasonable basis for those statements or allowances at the time you prepare your Form W-4. Military tax filing There is also a criminal penalty for willfully supplying false or fraudulent information on your Form W-4 or for willfully failing to supply information that would increase the amount withheld. Military tax filing The penalty upon conviction can be either a fine of up to $1,000 or imprisonment for up to 1 year, or both. Military tax filing These penalties will apply if you deliberately and knowingly falsify your Form W-4 in an attempt to reduce or eliminate the proper withholding of taxes. Military tax filing A simple error or an honest mistake will not result in one of these penalties. Military tax filing For example, a person who has tried to figure the number of withholding allowances correctly, but claims seven when the proper number is six, will not be charged a W-4 penalty. Military tax filing Tips The tips you receive while working on your job are considered part of your pay. Military tax filing You must include your tips on your tax return on the same line as your regular pay. Military tax filing However, tax is not withheld directly from tip income, as it is from your regular pay. Military tax filing Nevertheless, your employer will take into account the tips you report when figuring how much to withhold from your regular pay. Military tax filing See chapter 6 for information on reporting your tips to your employer. Military tax filing For more information on the withholding rules for tip income, see Publication 531, Reporting Tip Income. Military tax filing How employer figures amount to withhold. Military tax filing   The tips you report to your employer are counted as part of your income for the month you report them. Military tax filing Your employer can figure your withholding in either of two ways. Military tax filing By withholding at the regular rate on the sum of your pay plus your reported tips. Military tax filing By withholding at the regular rate on your pay plus a percentage of your reported tips. Military tax filing Not enough pay to cover taxes. Military tax filing   If your regular pay is not enough for your employer to withhold all the tax (including income tax and social security and Medicare taxes (or the equivalent railroad retirement tax)) due on your pay plus your tips, you can give your employer money to cover the shortage. Military tax filing See Giving your employer money for taxes in chapter 6. Military tax filing Allocated tips. Military tax filing   Your employer should not withhold income tax, Medicare tax, social security tax, or railroad retirement tax on any allocated tips. Military tax filing Withholding is based only on your pay plus your reported tips. Military tax filing Your employer should refund to you any incorrectly withheld tax. Military tax filing See Allocated Tips in chapter 6 for more information. Military tax filing Taxable Fringe Benefits The value of certain noncash fringe benefits you receive from your employer is considered part of your pay. Military tax filing Your employer generally must withhold income tax on these benefits from your regular pay. Military tax filing For information on fringe benefits, see Fringe Benefits under Employee Compensation in chapter 5. Military tax filing Although the value of your personal use of an employer-provided car, truck, or other highway motor vehicle is taxable, your employer can choose not to withhold income tax on that amount. Military tax filing Your employer must notify you if this choice is made. Military tax filing For more information on withholding on taxable fringe benefits, see chapter 1 of Publication 505. Military tax filing Sick Pay Sick pay is a payment to you to replace your regular wages while you are temporarily absent from work due to sickness or personal injury. Military tax filing To qualify as sick pay, it must be paid under a plan to which your employer is a party. Military tax filing If you receive sick pay from your employer or an agent of your employer, income tax must be withheld. Military tax filing An agent who does not pay regular wages to you may choose to withhold income tax at a flat rate. Military tax filing However, if you receive sick pay from a third party who is not acting as an agent of your employer, income tax will be withheld only if you choose to have it withheld. Military tax filing See Form W-4S , later. Military tax filing If you receive payments under a plan in which your employer does not participate (such as an accident or health plan where you paid all the premiums), the payments are not sick pay and usually are not taxable. Military tax filing Union agreements. Military tax filing   If you receive sick pay under a collective bargaining agreement between your union and your employer, the agreement may determine the amount of income tax withholding. Military tax filing See your union representative or your employer for more information. Military tax filing Form W-4S. Military tax filing   If you choose to have income tax withheld from sick pay paid by a third party, such as an insurance company, you must fill out Form W-4S. Military tax filing Its instructions contain a worksheet you can use to figure the amount you want withheld. Military tax filing They also explain restrictions that may apply. Military tax filing   Give the completed form to the payer of your sick pay. Military tax filing The payer must withhold according to your directions on the form. Military tax filing Estimated tax. Military tax filing   If you do not request withholding on Form W-4S, or if you do not have enough tax withheld, you may have to make estimated tax payments. Military tax filing If you do not pay enough tax, either through estimated tax or withholding, or a combination of both, you may have to pay a penalty. Military tax filing See Underpayment Penalty for 2013 at the end of this chapter. Military tax filing Pensions and Annuities Income tax usually will be withheld from your pension or annuity distributions unless you choose not to have it withheld. Military tax filing This rule applies to distributions from: A traditional individual retirement arrangement (IRA); A life insurance company under an endowment, annuity, or life insurance contract; A pension, annuity, or profit-sharing plan; A stock bonus plan; and Any other plan that defers the time you receive compensation. Military tax filing The amount withheld depends on whether you receive payments spread out over more than 1 year (periodic payments), within 1 year (nonperiodic payments), or as an eligible rollover distribution (ERD). Military tax filing Income tax withholding from an ERD is mandatory. Military tax filing More information. Military tax filing   For more information on taxation of annuities and distributions (including ERDs) from qualified retirement plans, see chapter 10. Military tax filing For information on IRAs, see chapter 17. Military tax filing For more information on withholding on pensions and annuities, including a discussion of Form W-4P, see Pensions and Annuities in chapter 1 of Publication 505. Military tax filing Gambling Winnings Income tax is withheld at a flat 25% rate from certain kinds of gambling winnings. Military tax filing Gambling winnings of more than $5,000 from the following sources are subject to income tax withholding. Military tax filing Any sweepstakes; wagering pool, including payments made to winners of poker tournaments; or lottery. Military tax filing Any other wager, if the proceeds are at least 300 times the amount of the bet. Military tax filing It does not matter whether your winnings are paid in cash, in property, or as an annuity. Military tax filing Winnings not paid in cash are taken into account at their fair market value. Military tax filing Exception. Military tax filing   Gambling winnings from bingo, keno, and slot machines generally are not subject to income tax withholding. Military tax filing However, you may need to provide the payer with a social security number to avoid withholding. Military tax filing See Backup withholding on gambling winnings in chapter 1 of Publication 505. Military tax filing If you receive gambling winnings not subject to withholding, you may need to pay estimated tax. Military tax filing See Estimated Tax for 2014 , later. Military tax filing If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. Military tax filing See Underpayment Penalty for 2013 at the end of this chapter. Military tax filing Form W-2G. Military tax filing   If a payer withholds income tax from your gambling winnings, you should receive a Form W-2G, Certain Gambling Winnings, showing the amount you won and the amount withheld. Military tax filing Report the tax withheld on line 62 of Form 1040. Military tax filing Unemployment Compensation You can choose to have income tax withheld from unemployment compensation. Military tax filing To make this choice, fill out Form W-4V (or a similar form provided by the payer) and give it to the payer. Military tax filing All unemployment compensation is taxable. Military tax filing So, if you do not have income tax withheld, you may have to pay estimated tax. Military tax filing See Estimated Tax for 2014 , later. Military tax filing If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. Military tax filing For information, see Underpayment Penalty for 2013 at the end of this chapter. Military tax filing Federal Payments You can choose to have income tax withheld from certain federal payments you receive. Military tax filing These payments are: Social security benefits, Tier 1 railroad retirement benefits, Commodity credit corporation loans you choose to include in your gross income, Payments under the Agricultural Act of 1949 (7 U. Military tax filing S. Military tax filing C. Military tax filing 1421 et. Military tax filing seq. Military tax filing ), as amended, or title II of the Disaster Assistance Act of 1988, that are treated as insurance proceeds and that you receive because: Your crops were destroyed or damaged by drought, flood, or any other natural disaster, or You were unable to plant crops because of a natural disaster described in (a), and Any other payment under Federal law as determined by the Secretary. Military tax filing To make this choice, fill out Form W-4V (or a similar form provided by the payer) and give it to the payer. Military tax filing If you do not choose to have income tax withheld, you may have to pay estimated tax. Military tax filing See Estimated Tax for 2014 , later. Military tax filing If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. Military tax filing For information, see Underpayment Penalty for 2013 at the end of this chapter. Military tax filing More information. Military tax filing   For more information about the tax treatment of social security and railroad retirement benefits, see chapter 11. Military tax filing Get Publication 225, Farmer's Tax Guide, for information about the tax treatment of commodity credit corporation loans or crop disaster payments. Military tax filing Backup Withholding Banks or other businesses that pay you certain kinds of income must file an information return (Form 1099) with the IRS. Military tax filing The information return shows how much you were paid during the year. Military tax filing It also includes your name and taxpayer identification number (TIN). Military tax filing TINs are explained in chapter 1 under Social Security Number (SSN) . Military tax filing These payments generally are not subject to withholding. Military tax filing However, “backup” withholding is required in certain situations. Military tax filing Backup withholding can apply to most kinds of payments that are reported on Form 1099. Military tax filing The payer must withhold at a flat 28% rate in the following situations. Military tax filing You do not give the payer your TIN in the required manner. Military tax filing The IRS notifies the payer that the TIN you gave is incorrect. Military tax filing You are required, but fail, to certify that you are not subject to backup withholding. Military tax filing The IRS notifies the payer to start withholding on interest or dividends because you have underreported interest or dividends on your income tax return. Military tax filing The IRS will do this only after it has mailed you four notices over at least a 210-day period. Military tax filing See Backup Withholding in chapter 1 of Publication 505 for more information. Military tax filing Penalties. Military tax filing   There are civil and criminal penalties for giving false information to avoid backup withholding. Military tax filing The civil penalty is $500. Military tax filing The criminal penalty, upon conviction, is a fine of up to $1,000 or imprisonment of up to 1 year, or both. Military tax filing Estimated Tax for 2014 Estimated tax is the method used to pay tax on income that is not subject to withholding. Military tax filing This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards. Military tax filing You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough. Military tax filing Estimated tax is used to pay both income tax and self-employment tax, as well as other taxes and amounts reported on your tax return. Military tax filing If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. Military tax filing If you do not pay enough by the due date of each payment period (see When To Pay Estimated Tax , later), you may be charged a penalty even if you are due a refund when you file your tax return. Military tax filing For information on when the penalty applies, see Underpayment Penalty for 2013 at the end of this chapter. Military tax filing Who Does Not Have To Pay Estimated Tax If you receive salaries or wages, you can avoid having to pay estimated tax by asking your employer to take more tax out of your earnings. Military tax filing To do this, give a new Form W-4 to your employer. Military tax filing See chapter 1 of Publication 505. Military tax filing Estimated tax not required. Military tax filing   You do not have to pay estimated tax for 2014 if you meet all three of the following conditions. Military tax filing You had no tax liability for 2013. Military tax filing You were a U. Military tax filing S. Military tax filing citizen or resident alien for the whole year. Military tax filing Your 2013 tax year covered a 12-month period. Military tax filing   You had no tax liability for 2013 if your total tax was zero or you did not have to file an income tax return. Military tax filing For the definition of “total tax” for 2013, see Publication 505, chapter 2. Military tax filing Who Must Pay Estimated Tax If you owe additional tax for 2013, you may have to pay estimated tax for 2014. Military tax filing You can use the following general rule as a guide during the year to see if you will have enough withholding, or if you should increase your withholding or make estimated tax payments. Military tax filing General rule. Military tax filing   In most cases, you must pay estimated tax for 2014 if both of the following apply. Military tax filing You expect to owe at least $1,000 in tax for 2014, after subtracting your withholding and refundable credits. Military tax filing You expect your withholding plus your refundable credits to be less than the smaller of: 90% of the tax to be shown on your 2014 tax return, or 100% of the tax shown on your 2013 tax return (but see Special rules for farmers, fishermen, and higher income taxpayers, later). Military tax filing Your 2013 tax return must cover all 12 months. Military tax filing    If the result from using the general rule above suggests that you will not have enough withholding, complete the 2014 Estimated Tax Worksheet in Publication 505 for a more accurate calculation. Military tax filing Special rules for farmers, fishermen, and higher income taxpayers. Military tax filing   If at least two-thirds of your gross income for tax year 2013 or 2014 is from farming or fishing, substitute 662/3% for 90% in (2a) under the General rule, earlier. Military tax filing If your AGI for 2013 was more than $150,000 ($75,000 if your filing status for 2014 is married filing a separate return), substitute 110% for 100% in (2b) under General rule , earlier. Military tax filing See Figure 4-A and Publication 505, chapter 2 for more information. Military tax filing Figure 4-A. Military tax filing Do You Have To Pay Estimated Tax? Please click here for the text description of the image. Military tax filing Figure 4-A Do You Have To Pay Estimated Tax? Aliens. Military tax filing   Resident and nonresident aliens also may have to pay estimated tax. Military tax filing Resident aliens should follow the rules in this chapter unless noted otherwise. Military tax filing Nonresident aliens should get Form 1040-ES (NR), U. Military tax filing S. Military tax filing Estimated Tax for Nonresident Alien Individuals. Military tax filing   You are an alien if you are not a citizen or national of the United States. Military tax filing You are a resident alien if you either have a green card or meet the substantial presence test. Military tax filing For more information about the substantial presence test, see Publication 519, U. Military tax filing S. Military tax filing Tax Guide for Aliens. Military tax filing Married taxpayers. Military tax filing   If you qualify to make joint estimated tax payments, apply the rules discussed here to your joint estimated income. Military tax filing   You and your spouse can make joint estimated tax payments even if you are not living together. Military tax filing   However, you and your spouse cannot make joint estimated tax payments if:  You are legally separated under a decree of divorce or separate maintenance, You and your spouse have different tax years, or Either spouse is a nonresident alien (unless that spouse elected to be treated as a resident alien for tax purposes (see chapter 1 of Publication 519)). Military tax filing   If you do not qualify to make joint estimated tax payments, apply these rules to your separate estimated income. Military tax filing Making joint or separate estimated tax payments will not affect your choice of filing a joint tax return or separate returns for 2014. Military tax filing 2013 separate returns and 2014 joint return. Military tax filing   If you plan to file a joint return with your spouse for 2014, but you filed separate returns for 2013, your 2013 tax is the total of the tax shown on your separate returns. Military tax filing You filed a separate return if you filed as single, head of household, or married filing separately. Military tax filing 2013 joint return and 2014 separate returns. Military tax filing   If you plan to file a separate return for 2014 but you filed a joint return for 2013, your 2013 tax is your share of the tax on the joint return. Military tax filing You file a separate return if you file as single, head of household, or married filing separately. Military tax filing   To figure your share of the tax on the joint return, first figure the tax both you and your spouse would have paid had you filed separate returns for 2013 using the same filing status as for 2014. Military tax filing Then multiply the tax on the joint return by the following fraction. Military tax filing     The tax you would have paid had you filed a separate return   The total tax you and your spouse would have paid had you filed separate returns Example. Military tax filing Joe and Heather filed a joint return for 2013 showing taxable income of $48,500 and a tax of $6,386. Military tax filing Of the $48,500 taxable income, $40,100 was Joe's and the rest was Heather's. Military tax filing For 2014, they plan to file married filing separately. Military tax filing Joe figures his share of the tax on the 2013 joint return as follows. Military tax filing   Tax on $40,100 based on a separate return $5,960     Tax on $8,400 based on a separate return 843     Total $6,803     Joe's percentage of total ($5,960 ÷ $6,803) 87. Military tax filing 6%     Joe's share of tax on joint return  ($6,386 × 87. Military tax filing 6%) $5,594   How To Figure Estimated Tax To figure your estimated tax, you must figure your expected adjusted gross income (AGI), taxable income, taxes, deductions, and credits for the year. Military tax filing When figuring your 2014 estimated tax, it may be helpful to use your income, deductions, and credits for 2013 as a starting point. Military tax filing Use your 2013 federal tax return as a guide. Military tax filing You can use Form 1040-ES and Publication 505 to figure your estimated tax. Military tax filing Nonresident aliens use Form 1040-ES (NR) and Publication 505 to figure estimated tax (see chapter 8 of Publication 519 for more information). Military tax filing You must make adjustments both for changes in your own situation and for recent changes in the tax law. Military tax filing For a discussion of these changes, visit IRS. Military tax filing gov. Military tax filing For more complete information on how to figure your estimated tax for 2014, see chapter 2 of Publication 505. Military tax filing When To Pay Estimated Tax For estimated tax purposes, the tax year is divided into four payment periods. Military tax filing Each period has a specific payment due date. Military tax filing If you do not pay enough tax by the due date of each payment period, you may be charged a penalty even if you are due a refund when you file your income tax return. Military tax filing The payment periods and due dates for estimated tax payments are shown next. Military tax filing   For the period: Due date:*     Jan. Military tax filing 1 – March 31 April 15     April 1 – May 31 June 16     June 1 – August 31 Sept. Military tax filing 15     Sept. Military tax filing 1– Dec. Military tax filing 31 Jan. Military tax filing 15, next year     *See Saturday, Sunday, holiday rule and January payment . Military tax filing Saturday, Sunday, holiday rule. Military tax filing   If the due date for an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next day that is not a Saturday, Sunday, or legal holiday. Military tax filing January payment. Military tax filing   If you file your 2014 Form 1040 or Form 1040A by January 31, 2015, and pay the rest of the tax you owe, you do not need to make the payment due on January 15, 2015. Military tax filing Fiscal year taxpayers. Military tax filing   If your tax year does not start on January 1, see the Form 1040-ES instructions for your payment due dates. Military tax filing When To Start You do not have to make estimated tax payments until you have income on which you will owe income tax. Military tax filing If you have income subject to estimated tax during the first payment period, you must make your first payment by the due date for the first payment period. Military tax filing You can pay all your estimated tax at that time, or you can pay it in installments. Military tax filing If you choose to pay in installments, make your first payment by the due date for the first payment period. Military tax filing Make your remaining installment payments by the due dates for the later periods. Military tax filing No income subject to estimated tax during first period. Military tax filing    If you do not have income subject to estimated tax until a later payment period, you must make your first payment by the due date for that period. Military tax filing You can pay your entire estimated tax by the due date for that period or you can pay it in installments by the due date for that period and the due dates for the remaining periods. Military tax filing The following chart shows when to make installment payments. Military tax filing If you first have income on which you must pay estimated tax: Make a payment  by:* Make later installments by:* Before April 1 April 15 June 16 Sept. Military tax filing 15 Jan. Military tax filing 15 next year April 1–May 31 June 16 Sept. Military tax filing 15 Jan. Military tax filing 15 next year June 1–Aug. Military tax filing 31 Sept. Military tax filing 15 Jan. Military tax filing 15 next year After Aug. Military tax filing 31 Jan. Military tax filing 15 next year (None) *See Saturday, Sunday, holiday rule and January payment . Military tax filing How much to pay to avoid a penalty. Military tax filing   To determine how much you should pay by each payment due date, see How To Figure Each Payment, next. Military tax filing How To Figure Each Payment You should pay enough estimated tax by the due date of each payment period to avoid a penalty for that period. Military tax filing You can figure your required payment for each period by using either the regular installment method or the annualized income installment method. Military tax filing These methods are described in chapter 2 of Publication 505. Military tax filing If you do not pay enough during each payment period, you may be charged a penalty even if you are due a refund when you file your tax return. Military tax filing If the earlier discussion of No income subject to estimated tax during first period or the later discussion of Change in estimated tax applies to you, you may benefit from reading Annualized Income Installment Method in chapter 2 of Publication 505 for information on how to avoid a penalty. Military tax filing Underpayment penalty. Military tax filing   Under the regular installment method, if your estimated tax payment for any period is less than one-fourth of your estimated tax, you may be charged a penalty for underpayment of estimated tax for that period when you file your tax return. Military tax filing Under the annualized income installment method, your estimated tax payments vary with your income, but the amount required must be paid each period. Military tax filing See chapter 4 of Publication 505 for more information. Military tax filing Change in estimated tax. Military tax filing   After you make an estimated tax payment, changes in your income, adjustments, deductions, credits, or exemptions may make it necessary for you to refigure your estimated tax. Military tax filing Pay the unpaid balance of your amended estimated tax by the next payment due date after the change or in installments by that date and the due dates for the remaining payment periods. Military tax filing Estimated Tax Payments Not Required You do not have to pay estimated tax if your withholding in each payment period is at least as much as: One-fourth of your required annual payment, or Your required annualized income installment for that period. Military tax filing You also do not have to pay estimated tax if you will pay enough through withholding to keep the amount you owe with your return under $1,000. Military tax filing How To Pay Estimated Tax There are several ways to pay estimated tax. Military tax filing Credit an overpayment on your 2013 return to your 2014 estimated tax. Military tax filing Pay by direct transfer from your bank account, or pay by credit or debit card using a pay-by-phone system or the Internet. Military tax filing Send in your payment (check or money order) with a payment voucher from Form 1040-ES. Military tax filing Credit an Overpayment If you show an overpayment of tax after completing your Form 1040 or Form 1040A for 2013, you can apply part or all of it to your estimated tax for 2014. Military tax filing On line 75 of Form 1040, or line 44 of Form 1040A, enter the amount you want credited to your estimated tax rather than refunded. Military tax filing Take the amount you have credited into account when figuring your estimated tax payments. Military tax filing You cannot have any of the amount you credited to your estimated tax refunded to you until you file your tax return for the following year. Military tax filing You also cannot use that overpayment in any other way. Military tax filing Pay Online Paying online is convenient and secure and helps make sure we get your payments on time. Military tax filing You can pay using either of the following electronic payment methods. Military tax filing Direct transfer from your bank account. Military tax filing Credit or debit card. Military tax filing To pay your taxes online or for more information, go to www. Military tax filing irs. Military tax filing gov/e-pay. Military tax filing Pay by Phone Paying by phone is another safe and secure method of paying electronically. Military tax filing Use one of the following methods. Military tax filing Direct transfer from your bank account. Military tax filing Credit or debit card. Military tax filing To pay by direct transfer from your bank account, call 1-800-555-4477 (English), 1-800-244-4829 (Espanol). Military tax filing People who are deaf, hard of hearing, or have a speech disability and who have access to TTY/TDD can call 1-800-733-4829. Military tax filing To pay using a credit or debit card, you can call one of the following service providers. Military tax filing There is a convenience fee charged by these providers that varies by provider, card type, and payment amount. Military tax filing WorldPay 1-888-9-PAY-TAXTM(1-888-972-9829) www. Military tax filing payUSAtax. Military tax filing com Official Payments Corporation 1-888-UPAY-TAXTM (1-888-872-9829) www. Military tax filing officialpayments. Military tax filing com Link2Gov Corporation 1-888-PAY-1040TM (1-888-729-1040) www. Military tax filing PAY1040. Military tax filing com For the latest details on how to pay by phone, go to www. Military tax filing irs. Military tax filing gov/e-pay. Military tax filing Pay by Check or Money Order Using the Estimated Tax Payment Voucher Each payment of estimated tax by check or money order must be accompanied by a payment voucher from Form 1040-ES. Military tax filing During 2013, if you: made at least one estimated tax payment but not by electronic means, did not use software or a paid preparer to prepare or file your return,  then you should receive a copy of the 2014 Form 1040-ES/V. Military tax filing The enclosed payment vouchers will be preprinted with your name, address, and social security number. Military tax filing Using the preprinted vouchers will speed processing, reduce the chance of error, and help save processing costs. Military tax filing Use the window envelopes that came with your Form 1040-ES package. Military tax filing If you use your own envelopes, make sure you mail your payment vouchers to the address shown in the Form 1040-ES instructions for the place where you live. Military tax filing Note. Military tax filing These criteria can change without notice. Military tax filing If you do not receive a Form 1040-ES/V package and you are required to make an estimated tax payment, you should go to www. Military tax filing irs. Military tax filing gov and print a copy of Form 1040-ES which includes four blank payment vouchers. Military tax filing Complete one of these and make your payment timely to avoid penalties for paying late. Military tax filing Do not use the address shown in the Form 1040 or Form 1040A instructions for your estimated tax payments. Military tax filing If you did not pay estimated tax last year, you can order Form 1040-ES from the IRS (see inside back cover of this publication) or download it from IRS. Military tax filing gov. Military tax filing Follow the instructions to make sure you use the vouchers correctly. Military tax filing Joint estimated tax payments. Military tax filing   If you file a joint return and are making joint estimated tax payments, enter the names and social security numbers on the payment voucher in the same order as they will appear on the joint return. Military tax filing Change of address. Military tax filing   You must notify the IRS if you are making estimated tax payments and you changed your address during the year. Military tax filing Complete Form 8822, Change of Address, and mail it to the address shown in the instructions for that form. Military tax filing Credit for Withholding and Estimated Tax for 2013 When you file your 2013 income tax return, take credit for all the income tax and excess social security or railroad retirement tax withheld from your salary, wages, pensions, etc. Military tax filing Also take credit for the estimated tax you paid for 2013. Military tax filing These credits are subtracted from your total tax. Military tax filing Because these credits are refundable, you should file a return and claim these credits, even if you do not owe tax. Military tax filing Two or more employers. Military tax filing   If you had two or more employers in 2013 and were paid wages of more than $113,700, too much social security or tier 1 railroad retirement tax may have been withheld from your pay. Military tax filing You may be able to claim the excess as a credit against your income tax when you file your return. Military tax filing See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld in chapter 37. Military tax filing Withholding If you had income tax withheld during 2013, you should be sent a statement by January 31, 2014, showing your income and the tax withheld. Military tax filing Depending on the source of your income, you should receive: Form W-2, Wage and Tax Statement, Form W-2G, Certain Gambling Winnings, or A form in the 1099 series. Military tax filing Forms W-2 and W-2G. Military tax filing   If you file a paper return, always file Form W-2 with your income tax return. Military tax filing File Form W-2G with your return only if it shows any federal income tax withheld from your winnings. Military tax filing   You should get at least two copies of each form. Military tax filing If you file a paper return, attach one copy to the front of your federal income tax return. Military tax filing Keep one copy for your records. Military tax filing You also should receive copies to file with your state and local returns. Military tax filing Form W-2 Your employer is required to provide or send Form W-2 to you no later than January 31, 2014. Military tax filing You should receive a separate Form W-2 from each employer you worked for. Military tax filing If you stopped working before the end of 2013, your employer could have given you your Form W-2 at any time after you stopped working. Military tax filing However, your employer must provide or send it to you by January 31, 2014. Military tax filing If you ask for the form, your employer must send it to you within 30 days after receiving your written request or within 30 days after your final wage payment, whichever is later. Military tax filing If you have not received your Form W-2 by January 31, you should ask your employer for it. Military tax filing If you do not receive it by February 15, call the IRS. Military tax filing Form W-2 shows your total pay and other compensation and the income tax, social security tax, and Medicare tax that was withheld during the year. Military tax filing Include the federal income tax withheld (as shown in box 2 of Form W-2) on: Line 62 if you file Form 1040, Line 36 if you file Form 1040A, or Line 7 if you file Form 1040EZ. Military tax filing In addition, Form W-2 is used to report any taxable sick pay you received and any income tax withheld from your sick pay. Military tax filing Form W-2G If you had gambling winnings in 2013, the payer may have withheld income tax. Military tax filing If tax was withheld, the payer will give you a Form W-2G showing the amount you won and the amount of tax withheld. Military tax filing Report the amounts you won on line 21 of Form 1040. Military tax filing Take credit for the tax withheld on line 62 of Form 1040. Military tax filing If you had gambling winnings, you must use Form 1040; you cannot use Form 1040A or Form 1040EZ. Military tax filing The 1099 Series Most forms in the 1099 series are not filed with your return. Military tax filing These forms should be furnished to you by January 31, 2014 (or, for Forms 1099-B, 1099-S, and certain Forms 1099-MISC, by February 15, 2014). Military tax filing Unless instructed to file any of these forms with your return, keep them for your records. Military tax filing There are several different forms in this series, including: Form 1099-B, Proceeds From Broker and Barter Exchange Transactions; Form 1099-DIV, Dividends and Distributions; Form 1099-G, Certain Government Payments; Form 1099-INT, Interest Income; Form 1099-K, Payment Card and Third Party Network Transactions; Form 1099-MISC, Miscellaneous Income; Form 1099-OID, Original Issue Discount; Form 1099-PATR, Taxable Distributions Received from Cooperatives; Form 1099-Q, Payments From Qualified Education Programs; Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Military tax filing ; Form 1099-S, Proceeds From Real Estate Transactions; Form RRB-1099, Payments by the Railroad Retirement Board. Military tax filing If you received the types of income reported on some forms in the 1099 series, you may not be able to use Form 1040A or Form 1040EZ. Military tax filing See the instructions to these forms for details. Military tax filing Form 1099-R. Military tax filing   Attach Form 1099-R to your paper return if box 4 shows federal income tax withheld. Military tax filing Include the amount withheld in the total on line 62 of Form 1040 or line 36 of Form 1040A. Military tax filing You cannot use Form 1040EZ if you received payments reported on Form 1099-R. Military tax filing Backup withholding. Military tax filing   If you were subject to backup withholding on income you received during 2013, include the amount withheld, as shown on your Form 1099, in the total on line 62 of Form 1040, line 36 of Form 1040A, or line 7 of Form 1040EZ. Military tax filing Form Not Correct If you receive a form with incorrect information on it, you should ask the payer for a corrected form. Military tax filing Call the telephone number or write to the address given for the payer on the form. Military tax filing The corrected Form W-2G or Form 1099 you receive will have an “X” in the “CORRECTED” box at the top of the form. Military tax filing A special form, Form W-2c, Corrected Wage and Tax Statement, is used to correct a Form W-2. Military tax filing In certain situations, you will receive two forms in place of the original incorrect form. Military tax filing This will happen when your taxpayer identification number is wrong or missing, your name and address are wrong, or you received the wrong type of form (for example, a Form 1099-DIV instead of a Form 1099-INT). Military tax filing One new form you receive will be the same incorrect form or have the same incorrect information, but all money amounts will be zero. Military tax filing This form will have an “X” in the “CORRECTED” box at the top of the form. Military tax filing The second new form should have all the correct information, prepared as though it is the original (the “CORRECTED” box will not be checked). Military tax filing Form Received After Filing If you file your return and you later receive a form for income that you did not include on your return, you should report the income and take credit for any income tax withheld by filing Form 1040X, Amended U. Military tax filing S. Military tax filing Individual Income Tax Return. Military tax filing Separate Returns If you are married but file a separate return, you can take credit only for the tax withheld from your own income. Military tax filing Do not include any amount withheld from your spouse's income. Military tax filing However, different rules may apply if you live in a community property state. Military tax filing Community property states are listed in chapter 2. Military tax filing For more information on these rules, and some exceptions, see Publication 555, Community Property. Military tax filing Fiscal Years If you file your tax return on the basis of a fiscal year (a 12-month period ending on the last day of any month except December), you must follow special rules to determine your credit for federal income tax withholding. Military tax filing For a discussion of how to take credit for withholding on a fiscal year return, see Fiscal Years (FY) in chapter 3 of Publication 505. Military tax filing Estimated Tax Take credit for all your estimated tax payments for 2013 on line 63 of Form 1040 or line 37 of Form 1040A. Military tax filing Include any overpayment from 2012 that you had credited to your 2013 estimated tax. Military tax filing You must use Form 1040 or Form 1040A if you paid estimated tax. Military tax filing You cannot use Form 1040EZ. Military tax filing Name changed. Military tax filing   If you changed your name, and you made estimated tax payments using your old name, attach a brief statement to the front of your paper tax return indicating: When you made the payments, The amount of each payment, Your name when you made the payments, and Your social security number. Military tax filing The statement should cover payments you made jointly with your spouse as well as any you made separately. Military tax filing   Be sure to report the change to the Social Security Administration. Military tax filing This prevents delays in processing your return and issuing any refunds. Military tax filing Separate Returns If you and your spouse made separate estimated tax payments for 2013 and you file separate returns, you can take credit only for your own payments. Military tax filing If you made joint estimated tax payments, you must decide how to divide the payments between your returns. Military tax filing One of you can claim all of the estimated tax paid and the other none, or you can divide it in any other way you agree on. Military tax filing If you cannot agree, you must divide the payments in proportion to each spouse's individual tax as shown on your separate returns for 2013. Military tax filing Divorced Taxpayers If you made joint estimated tax payments for 2013, and you were divorced during the year, either you or your former spouse can claim all of the joint payments, or you each can claim part of them. Military tax filing If you cannot agree on how to divide the payments, you must divide them in proportion to each spouse's individual tax as shown on your separate returns for 2013. Military tax filing If you claim any of the joint payments on your tax return, enter your former spouse's social security number (SSN) in the space provided on the front of Form 1040 or Form 1040A. Military tax filing If you divorced and remarried in 2013, enter your present spouse's SSN in that space and write your former spouse's SSN, followed by “DIV,” to the left of Form 1040, line 63, or Form 1040A, line 37. Military tax filing Underpayment Penalty for 2013 If you did not pay enough tax, either through withholding or by making timely estimated tax payments, you will have an underpayment of estimated tax and you may have to pay a penalty. Military tax filing Generally, you will not have to pay a penalty for 2013 if any of the following apply. Military tax filing The total of your withholding and estimated tax payments was at least as much as your 2012 tax (or 110% of your 2012 tax if your AGI was more than $150,000, $75,000 if your 2013 filing status is married filing separately) and you paid all required estimated tax payments on time. Military tax filing The tax balance due on your 2013 return is no more than 10% of your total 2013 tax, and you paid all required estimated tax payments on time. Military tax filing Your total 2013 tax minus your withholding and refundable credits is less than $1,000. Military tax filing You did not have a tax liability for 2012 and your 2012 tax year was 12 months, or You did not have any withholding taxes and your current year tax less any household employment taxes is less than $1,000. Military tax filing See Publication 505, chapter 4, for a definition of “total tax” for 2012 and 2013. Military tax filing Farmers and fishermen. Military tax filing   Special rules apply if you are a farmer or fisherman. Military tax filing See Farmers and Fishermen in chapter 4 of Publication 505 for more information. Military tax filing IRS can figure the penalty for you. Military tax filing   If you think you owe the penalty but you do not want to figure it yourself when you file your tax return, you may not have to. Military tax filing Generally, the IRS will figure the penalty for you and send you a bill. Military tax filing However, if you think you are able to lower or eliminate your penalty, you must complete Form 2210 or Form 2210-F and attach it to your paper return. Military tax filing See chapter 4 of Publication 505. Military tax filing Prev  Up  Next   Home   More Online Publications