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1040 Ez Forms 2012

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1040 Ez Forms 2012

1040 ez forms 2012 3. 1040 ez forms 2012   Claiming the Special Depreciation Allowance Table of Contents Introduction What Is Qualified Property?Qualified Reuse and Recycling Property Qualified Cellulosic Biofuel Plant Property Qualified Disaster Assistance Property Certain Qualified Property Acquired After December 31, 2007 Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance How Much Can You Deduct? How Can You Elect Not To Claim an Allowance? When Must You Recapture an Allowance? Introduction You can take a special depreciation allowance to recover part of the cost of qualified property (defined next), placed in service during the tax year. 1040 ez forms 2012 The allowance applies only for the first year you place the property in service. 1040 ez forms 2012 For qualified property placed in service in 2013, you can take an additional 50% special allowance. 1040 ez forms 2012 The allowance is an additional deduction you can take after any section 179 deduction and before you figure regular depreciation under MACRS for the year you place the property in service. 1040 ez forms 2012 This chapter explains what is qualified property. 1040 ez forms 2012 It also includes rules regarding how to figure an allowance, how to elect not to claim an allowance, and when you must recapture an allowance. 1040 ez forms 2012 Corporations can elect to accelerate certain minimum tax credits in lieu of claiming the special depreciation allowance for eligible qualified property. 1040 ez forms 2012 See Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance , later. 1040 ez forms 2012 See chapter 6 for information about getting publications and forms. 1040 ez forms 2012 What Is Qualified Property? Your property is qualified property if it is one of the following. 1040 ez forms 2012 Qualified reuse and recycling property. 1040 ez forms 2012 Qualified cellulosic biofuel plant property. 1040 ez forms 2012 Qualified disaster assistance property. 1040 ez forms 2012 Certain qualified property acquired after December 31, 2007. 1040 ez forms 2012 The following discussions provide information about the types of qualified property listed above for which you can take the special depreciation allowance. 1040 ez forms 2012 Qualified Reuse and Recycling Property You can take a 50% special depreciation allowance for qualified reuse and recycling property. 1040 ez forms 2012 Qualified reuse and recycling property is any machinery or equipment (not including buildings or real estate), along with any appurtenance, that is used exclusively to collect, distribute, or recycle qualified reuse and recyclable materials (as defined in section 168(m)(3)(B) of the Internal Revenue Code). 1040 ez forms 2012 Qualified reuse and recycling property also includes software necessary to operate such equipment. 1040 ez forms 2012 The property must meet the following requirements. 1040 ez forms 2012 The property must be depreciated under MACRS. 1040 ez forms 2012 The property must have a useful life of at least 5 years. 1040 ez forms 2012 The original use of the property must begin with you after August 31, 2008. 1040 ez forms 2012 You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2 ) after August 31, 2008, with no binding written contract for the acquisition in effect before September 1, 2008. 1040 ez forms 2012 The property must be placed in service for use in your trade or business after August 31, 2008. 1040 ez forms 2012 Excepted Property Qualified reuse and recycling property does not include any of the following. 1040 ez forms 2012 Any rolling stock or other equipment used to transport reuse or recyclable materials. 1040 ez forms 2012 Property required to be depreciated using the Alternative Depreciation System (ADS). 1040 ez forms 2012 For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . 1040 ez forms 2012 Other bonus depreciation property to which section 168(k) of the Internal Revenue Code applies. 1040 ez forms 2012 Property for which you elected not to claim any special depreciation allowance (discussed later). 1040 ez forms 2012 Property placed in service and disposed of in the same tax year. 1040 ez forms 2012 Property converted from business use to personal use in the same tax year acquired. 1040 ez forms 2012 Property converted from personal use to business use in the same or later tax year may be qualified reuse and recycling property. 1040 ez forms 2012 Qualified Cellulosic Biofuel Plant Property You can take a 50% special depreciation allowance for qualified cellulosic biofuel plant property. 1040 ez forms 2012 Cellulosic biofuel is any liquid fuel which is produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis. 1040 ez forms 2012 Examples include bagasse (from sugar cane), corn stalks, and switchgrass. 1040 ez forms 2012 The property must meet the following requirements. 1040 ez forms 2012 The property is used in the United States solely to produce cellulosic biofuel. 1040 ez forms 2012 The original use of the property must begin with you after December 20, 2006. 1040 ez forms 2012 You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2 ) after December 20, 2006, with no binding written contract for acquisition in effect before December 21, 2006. 1040 ez forms 2012 The property must be placed in service for use in your trade or business or for the production of income after October 3, 2008, and before January 3, 2013. 1040 ez forms 2012 Note. 1040 ez forms 2012 For property placed in service after January 2, 2013, and before January 1, 2014, you can take a 50% special depreciation allowance for qualified second generation biofuel plant property that is used solely in the United States to produce second generation biofuel (as defined in section 40(b)(6)(E)). 1040 ez forms 2012 The other requirements for qualified second generation biofuel plant property to be eligible for the special depreciation allowance are identical to the requirements discussed for Qualified Cellulosic Biofuel Plant Property above. 1040 ez forms 2012 Special Rules Sale-leaseback. 1040 ez forms 2012   If you sold qualified cellulosic biofuel plant property you placed in service after October 3, 2008, and leased it back within 3 months after you originally placed it in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback. 1040 ez forms 2012   The property will not qualify for the special allowance if the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the property before December 21, 2006. 1040 ez forms 2012 Syndicated leasing transactions. 1040 ez forms 2012   If qualified cellulosic biofuel plant property is originally placed in service by a lessor after October 3, 2008, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale. 1040 ez forms 2012   Multiple units of property subject to the same lease will be treated as originally placed in service no earlier than the date of sale if the property is sold within 3 months after the final unit is placed in service and the period between the times the first and last units are placed in service does not exceed 12 months. 1040 ez forms 2012 Excepted Property Qualified cellulosic biofuel plant property does not include any of the following. 1040 ez forms 2012 Property placed in service and disposed of in the same tax year. 1040 ez forms 2012 Property converted from business use to personal use in the same tax year it is acquired. 1040 ez forms 2012 Property converted from personal use to business use in the same or later tax year may be qualified cellulosic biomass ethanol plant property. 1040 ez forms 2012 Property required to be depreciated using the Alternative Depreciation System (ADS). 1040 ez forms 2012 For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . 1040 ez forms 2012 Property any portion of which is financed with the proceeds of any obligation the interest on which is exempt from tax under section 103 of the Internal Revenue Code. 1040 ez forms 2012 Property for which you elected not to claim any special depreciation allowance (discussed later). 1040 ez forms 2012 Property for which a deduction was taken under section 179C for certain qualified refinery property. 1040 ez forms 2012 Other bonus depreciation property to which section 168(k) of the Internal Revenue Code applies. 1040 ez forms 2012 Qualified Disaster Assistance Property You can take a 50% special depreciation allowance for qualified disaster assistance property placed in service in federally declared disaster areas in which the disaster occurred in 2009. 1040 ez forms 2012 A list of the federally declared disaster areas is available at the FEMA website at www. 1040 ez forms 2012 fema. 1040 ez forms 2012 gov. 1040 ez forms 2012 Your property is qualified disaster assistance property if it meets the following requirements. 1040 ez forms 2012 The property is nonresidential real property or residential real property placed in service before January 1, 2014, in a federally declared disaster area in which the disaster occurred in 2009. 1040 ez forms 2012 You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2 ) on or after the applicable disaster date, with no binding written contract for the acquisition in effect before the applicable disaster date. 1040 ez forms 2012 The property must rehabilitate property damaged, or replace property destroyed or condemned, as a result of the applicable federally declared disaster. 1040 ez forms 2012 The property must be similar in nature to, and located in the same county as, the rehabilitated or replaced property. 1040 ez forms 2012 The original use of the property within the applicable disaster area must have begun with you on or after the applicable disaster date. 1040 ez forms 2012 The property is placed in service by you on or before the date which is the last day of the fourth calendar year. 1040 ez forms 2012 Substantially all (80% or more) of the use of the property must be in the active conduct of your trade or business in a federally declared disaster area, occurring in 2009. 1040 ez forms 2012 It is not excepted property (explained later in Excepted Property ). 1040 ez forms 2012 Special Rules Sale-leaseback. 1040 ez forms 2012   If you sold qualified disaster assistance property you placed in service after the applicable disaster date and leased it back within 3 months after you originally placed it in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback. 1040 ez forms 2012   The property will not qualify for the special allowance if the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the property before the applicable disaster date. 1040 ez forms 2012 Syndicated leasing transactions. 1040 ez forms 2012   If qualified disaster assistance property is originally placed in service by a lessor after the applicable disaster date, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale. 1040 ez forms 2012   Multiple units of property subject to the same lease will be treated as originally placed in service no earlier than the date of sale if the property is sold within 3 months after the final unit is placed in service and the period between the times the first and last units are placed in service does not exceed 12 months. 1040 ez forms 2012 Excepted Property Qualified disaster assistance property does not include any of the following. 1040 ez forms 2012 Property required to be depreciated using the Alternative Depreciation System (ADS). 1040 ez forms 2012 For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . 1040 ez forms 2012 Property any portion of which is financed with the proceeds of a tax-exempt obligation under section 103 of the Internal Revenue Code. 1040 ez forms 2012 Any qualified revitalization building (defined later) placed in service before January 1, 2010, for which you have elected to claim a commercial revitalization deduction for qualified revitalization expenditures. 1040 ez forms 2012 Any property used in connection with any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store, the principal business of which is the sale of alcoholic beverages for consumption off premises. 1040 ez forms 2012 Any property for which the special allowance under section 168(k) or section 1400N(d) of the Internal Revenue Code applies. 1040 ez forms 2012 Property for which you elected not to claim any special depreciation allowance (discussed later). 1040 ez forms 2012 Property placed in service and disposed of in the same tax year. 1040 ez forms 2012 Property converted from business use to personal use in the same tax year acquired. 1040 ez forms 2012 Property converted from personal use to business use in the same or later tax year may be qualified disaster assistance property. 1040 ez forms 2012 Any gambling or animal racing property (defined later). 1040 ez forms 2012 Qualified revitalization building. 1040 ez forms 2012   This is a commercial building and its structural components that you placed in service in a renewal community before January 1, 2010. 1040 ez forms 2012 If the building is new, the original use of the building must begin with you. 1040 ez forms 2012 If the building is not new, you must substantially rehabilitate the building and then place it in service. 1040 ez forms 2012 For more information, including definitions of substantially rehabilitated building and qualified revitalization expenditure, see section 1400I(b) of the Internal Revenue Code. 1040 ez forms 2012 Gambling or animal racing property. 1040 ez forms 2012   Gambling or animal racing property includes the following personal and real property. 1040 ez forms 2012 Any equipment, furniture, software, or other property used directly in connection with gambling, the racing of animals, or the on-site viewing of such racing. 1040 ez forms 2012 Any real property determined by square footage (other than any portion that is less than 100 square feet) that is dedicated to gambling, the racing of animals, or the on-site viewing of such racing. 1040 ez forms 2012 Certain Qualified Property Acquired After December 31, 2007 You can take a 50% special depreciation deduction allowance for certain qualified property acquired after December 31, 2007. 1040 ez forms 2012 Your property is qualified property if it meets the following requirements. 1040 ez forms 2012 It is one of the following types of property. 1040 ez forms 2012 Tangible property depreciated under MACRS with a recovery period of 20 years or less. 1040 ez forms 2012 Water utility property. 1040 ez forms 2012 Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. 1040 ez forms 2012 (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. 1040 ez forms 2012 ) Qualified leasehold improvement property (defined under Qualified leasehold improvement property later). 1040 ez forms 2012 You must have acquired the property after December 31, 2007, with no binding written contract for the acquisition in effect before January 1, 2008. 1040 ez forms 2012 The property must be placed in service for use in your trade or business or for the production of income before January 1, 2014 (before January 1, 2015, for certain property with a long production period and certain aircraft (defined next)). 1040 ez forms 2012 The original use of the property must begin with you after December 31, 2007. 1040 ez forms 2012 It is not excepted property (explained later in Excepted property). 1040 ez forms 2012 Qualified leasehold improvement property. 1040 ez forms 2012    Generally, this is any improvement to an interior part of a building that is nonresidential real property, if all the following requirements are met. 1040 ez forms 2012 The improvement is made under or according to a lease by the lessee (or any sublessee) or the lessor of that part of the building. 1040 ez forms 2012 That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part. 1040 ez forms 2012 The improvement is placed in service more than 3 years after the date the building was first placed in service by any person. 1040 ez forms 2012 The improvement is section 1250 property. 1040 ez forms 2012 See chapter 3 in Publication 544, Sales and Other Dispositions of Assets, for the definition of section 1250 property. 1040 ez forms 2012   However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following. 1040 ez forms 2012 The enlargement of the building. 1040 ez forms 2012 Any elevator or escalator. 1040 ez forms 2012 Any structural component benefiting a common area. 1040 ez forms 2012 The internal structural framework of the building. 1040 ez forms 2012   Generally, a binding commitment to enter into a lease is treated as a lease and the parties to the commitment are treated as the lessor and lessee. 1040 ez forms 2012 However, a lease between related persons is not treated as a lease. 1040 ez forms 2012 Related persons. 1040 ez forms 2012   For this purpose, the following are related persons. 1040 ez forms 2012 Members of an affiliated group. 1040 ez forms 2012 An individual and a member of his or her family, including only a spouse, child, parent, brother, sister, half-brother, half-sister, ancestor, and lineal descendant. 1040 ez forms 2012 A corporation and an individual who directly or indirectly owns 80% or more of the value of the outstanding stock of that corporation. 1040 ez forms 2012 Two corporations that are members of the same controlled group. 1040 ez forms 2012 A trust fiduciary and a corporation if 80% or more of the value of the outstanding stock is directly or indirectly owned by or for the trust or grantor of the trust. 1040 ez forms 2012 The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. 1040 ez forms 2012 The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. 1040 ez forms 2012 A tax-exempt educational or charitable organization and any person (or, if that person is an individual, a member of that person's family) who directly or indirectly controls the organization. 1040 ez forms 2012 Two S corporations, and an S corporation and a regular corporation, if the same persons own 80% or more of the value of the outstanding stock of each corporation. 1040 ez forms 2012 A corporation and a partnership if the same persons own both of the following. 1040 ez forms 2012 80% or more of the value of the outstanding stock of the corporation. 1040 ez forms 2012 80% or more of the capital or profits interest in the partnership. 1040 ez forms 2012 The executor and beneficiary of any estate. 1040 ez forms 2012 Long Production Period Property To be qualified property, long production period property must meet the following requirements. 1040 ez forms 2012 It must meet the requirements in (2)-(5), above. 1040 ez forms 2012 The property has a recovery period of at least 10 years or is transportation property. 1040 ez forms 2012 Transportation property is tangible personal property used in the trade or business of transporting persons or property. 1040 ez forms 2012 The property is subject to section 263A of the Internal Revenue Code. 1040 ez forms 2012 The property has an estimated production period exceeding 1 year and an estimated production cost exceeding $1,000,000. 1040 ez forms 2012 Noncommercial Aircraft To be qualified property, noncommercial aircraft must meet the following requirements. 1040 ez forms 2012 It must meet the requirements in (2)-(5), above. 1040 ez forms 2012 The aircraft must not be tangible personal property used in the trade or business of transporting persons or property (except for agricultural or firefighting purposes). 1040 ez forms 2012 The aircraft must be purchased (as discussed under Property Acquired by Purchase in chapter 2 ) by a purchaser who at the time of the contract for purchase, makes a nonrefundable deposit of the lesser of 10% of the cost or $100,000. 1040 ez forms 2012 The aircraft must have an estimated production period exceeding four months and a cost exceeding $200,000. 1040 ez forms 2012 Special Rules Sale-leaseback. 1040 ez forms 2012   If you sold qualified property you placed in service after December 31, 2007, and leased it back within 3 months after you originally placed in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback. 1040 ez forms 2012   The property will not qualify for the special depreciation allowance if the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the property before January 1, 2008. 1040 ez forms 2012 Syndicated leasing transactions. 1040 ez forms 2012   If qualified property is originally placed in service by a lessor after December 31, 2007, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale. 1040 ez forms 2012   Multiple units of property subject to the same lease will be treated as originally placed in service no earlier than the date of the last sale if the property is sold within 3 months after the final unit is placed in service and the period between the time the first and last units are placed in service does not exceed 12 months. 1040 ez forms 2012 Excepted Property Qualified property does not include any of the following. 1040 ez forms 2012 Property placed in service and disposed of in the same tax year. 1040 ez forms 2012 Property converted from business use to personal use in the same tax year acquired. 1040 ez forms 2012 Property converted from personal use to business use in the same or later tax year may be qualified property. 1040 ez forms 2012 Property required to be depreciated under the Alternative Depreciation System (ADS). 1040 ez forms 2012 This includes listed property used 50% or less in a qualified business use. 1040 ez forms 2012 For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . 1040 ez forms 2012 Qualified restaurant property (as defined in section 168(e)(7) of the Internal Revenue Code). 1040 ez forms 2012 Qualified retail improvement property (as defined in section 168(e)(8) of the Internal Revenue Code). 1040 ez forms 2012 Property for which you elected not to claim any special depreciation allowance (discussed later). 1040 ez forms 2012 Property for which you elected to accelerate certain credits in lieu of the special depreciation allowance (discussed next). 1040 ez forms 2012 Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance An election made by a corporation to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, or its first tax year ending after December 31, 2010, continues to apply to round 2 extension property (as defined in section 168(k)(4)(I)(iv)), unless the corporation made an election not to apply the section 168(k)(4) election to round 2 extension property for its first tax year ending after December 31, 2010. 1040 ez forms 2012 For 2013, round 2 extension property generally is long production period and noncommercial aircraft if acquired after March 31, 2008, and placed in service after December 31, 2012, but before January 1, 2014. 1040 ez forms 2012 An election made by a corporation to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, or its first tax year ending after December 31, 2010, continues to apply to round 3 extension property (as defined in section 168(k)(4)(J)(iv)), unless the corporation makes an election not to apply the section 168(k)(4) election to round 3 extension property. 1040 ez forms 2012 If a corporation did not make a section 168(k)(4) election for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, or its first tax year ending after December 31, 2010, the corporation may elect for its first tax year ending after December 31, 2012, to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance for only round 3 extension property. 1040 ez forms 2012 If you make an election to accelerate these credits in lieu of claiming the special depreciation allowance for eligible property, you must not take the 50% special depreciation allowance for the property and must depreciate the basis in the property under MACRS using the straight line method. 1040 ez forms 2012 See Which Depreciation Method Applies in chapter 4 . 1040 ez forms 2012 Once made, the election cannot be revoked without IRS consent. 1040 ez forms 2012 Additional guidance. 1040 ez forms 2012   For additional guidance on the election to accelerate the research or minimum tax credit in lieu of claiming the special depreciation allowance, see Rev. 1040 ez forms 2012 Proc. 1040 ez forms 2012 2008-65 on page 1082 of Internal Revenue Bulletin 2008-44, available at www. 1040 ez forms 2012 irs. 1040 ez forms 2012 gov/pub/irs-irbs/irb08-44. 1040 ez forms 2012 pdf, Rev. 1040 ez forms 2012 Proc. 1040 ez forms 2012 2009-16 on page 449 of Internal Revenue Bulletin 2009-06, available at www. 1040 ez forms 2012 irs. 1040 ez forms 2012 gov/pub/irs-irbs/irb09-06. 1040 ez forms 2012 pdf, and Rev. 1040 ez forms 2012 Proc. 1040 ez forms 2012 2009-33 on page 150 of Internal Revenue Bulletin 2009-29, available at www. 1040 ez forms 2012 irs. 1040 ez forms 2012 gov/pub/irs-irbs/irb09-29. 1040 ez forms 2012 pdf. 1040 ez forms 2012 Also, see Form 3800, General Business Credit; Form 8827, Credit for Prior Year Minimum Tax — Corporations; and related instructions. 1040 ez forms 2012   Additional guidance regarding the election to accelerate the minimum tax credit in lieu of claiming the special depreciation allowance for round 2 extension property and round 3 extension property may also be available in later Internal Revenue Bulletins available at www. 1040 ez forms 2012 irs. 1040 ez forms 2012 gov/irb. 1040 ez forms 2012 How Much Can You Deduct? Figure the special depreciation allowance by multiplying the depreciable basis of qualified reuse and recycling property, qualified cellulosic biofuel plant property, qualified disaster assistance property, and certain qualified property acquired after December 31, 2007, by 50%. 1040 ez forms 2012 For qualified property other than listed property, enter the special allowance on line 14 in Part II of Form 4562. 1040 ez forms 2012 For qualified property that is listed property, enter the special allowance on line 25 in Part V of Form 4562. 1040 ez forms 2012 If you place qualified property in service in a short tax year, you can take the full amount of a special depreciation allowance. 1040 ez forms 2012 Depreciable basis. 1040 ez forms 2012   This is the property's cost or other basis multiplied by the percentage of business/investment use, reduced by the total amount of any credits and deductions allocable to the property. 1040 ez forms 2012   The following are examples of some credits and deductions that reduce depreciable basis. 1040 ez forms 2012 Any section 179 deduction. 1040 ez forms 2012 Any deduction for removal of barriers to the disabled and the elderly. 1040 ez forms 2012 Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. 1040 ez forms 2012 Basis adjustment to investment credit property under section 50(c) of the Internal Revenue Code. 1040 ez forms 2012   For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. 1040 ez forms 2012   For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property in chapter 1 . 1040 ez forms 2012 For a discussion of business/investment use, see Partial business or investment use under Property Used in Your Business or Income-Producing Activity in chapter 1 . 1040 ez forms 2012 Depreciating the remaining cost. 1040 ez forms 2012   After you figure your special depreciation allowance for your qualified property, you can use the remaining cost to figure your regular MACRS depreciation deduction (discussed in chapter 4 . 1040 ez forms 2012 Therefore, you must reduce the depreciable basis of the property by the special depreciation allowance before figuring your regular MACRS depreciation deduction. 1040 ez forms 2012 Example. 1040 ez forms 2012 On November 1, 2013, Tom Brown bought and placed in service in his business qualified property that cost $450,000. 1040 ez forms 2012 He did not elect to claim a section 179 deduction. 1040 ez forms 2012 He deducts 50% of the cost ($225,000) as a special depreciation allowance for 2013. 1040 ez forms 2012 He uses the remaining $225,000 of cost to figure his regular MACRS depreciation deduction for 2013 and later years. 1040 ez forms 2012 Like-kind exchanges and involuntary conversions. 1040 ez forms 2012   If you acquire qualified property in a like-kind exchange or involuntary conversion, the carryover basis of the acquired property is eligible for a special depreciation allowance. 1040 ez forms 2012 After you figure your special allowance, you can use the remaining carryover basis to figure your regular MACRS depreciation deduction. 1040 ez forms 2012 In the year you claim the allowance (the year you place in service the property received in the exchange or dispose of involuntarily converted property), you must reduce the carryover basis of the property by the allowance before figuring your regular MACRS depreciation deduction. 1040 ez forms 2012 See Figuring the Deduction for Property Acquired in a Nontaxable Exchange , in chapter 4 under How Is the Depreciation Deduction Figured . 1040 ez forms 2012 The excess basis (the part of the acquired property's basis that exceeds its carryover basis) is also eligible for a special depreciation allowance. 1040 ez forms 2012 How Can You Elect Not To Claim an Allowance? You can elect, for any class of property, not to deduct any special allowances for all property in such class placed in service during the tax year. 1040 ez forms 2012 To make an election, attach a statement to your return indicating what election you are making and the class of property for which you are making the election. 1040 ez forms 2012 When to make election. 1040 ez forms 2012   Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. 1040 ez forms 2012   However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). 1040 ez forms 2012 Attach the election statement to the amended return. 1040 ez forms 2012 On the amended return, write “Filed pursuant to section 301. 1040 ez forms 2012 9100-2. 1040 ez forms 2012 ” Revoking an election. 1040 ez forms 2012   Once you elect not to deduct a special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. 1040 ez forms 2012 A request to revoke the election is a request for a letter ruling. 1040 ez forms 2012 If you elect not to have any special allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation. 1040 ez forms 2012 When Must You Recapture an Allowance? When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. 1040 ez forms 2012 See When Do You Recapture MACRS Depreciation in chapter 4 or more information. 1040 ez forms 2012 Recapture of allowance deducted for qualified GO Zone property. 1040 ez forms 2012   If, in any year after the year you claim the special depreciation allowance for qualified GO Zone property (including specified GO Zone extension property), the property ceases to be used in the GO Zone, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. 1040 ez forms 2012 For additional guidance, see Notice 2008-25 on page 484 of Internal Revenue Bulletin 2008-9. 1040 ez forms 2012 Qualified cellulosic biomass ethanol plant property and qualified cellulosic biofuel plant property. 1040 ez forms 2012   If, in any year after the year you claim the special depreciation allowance for any qualified cellulosic biomass ethanol plant property or qualified biofuel plant property, the property ceases to be qualified cellulosic biomass ethanol plant property or qualified biofuel plant property, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. 1040 ez forms 2012 Recapture of allowance for qualified Recovery Assistance property. 1040 ez forms 2012   If, in any year after the year you claim the special depreciation allowance for qualified Recovery Assistance property, the property ceases to be used in the Kansas disaster area, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. 1040 ez forms 2012 For additional guidance, see Notice 2008-67 on page 307 of Internal Revenue Bulletin 2008-32. 1040 ez forms 2012 Recapture of allowance for qualified disaster assistance property. 1040 ez forms 2012   If, in any year after the year you claim the special depreciation allowance for qualified disaster assistance property, the property ceases to be used in the applicable disaster area, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. 1040 ez forms 2012   For additional guidance, see Notice 2008-67 on page 307 of Internal Revenue Bulletin 2008-32. 1040 ez forms 2012 Prev  Up  Next   Home   More Online Publications

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The 1040 Ez Forms 2012

1040 ez forms 2012 2. 1040 ez forms 2012   Employees' Pay Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Tests for Deducting PayTest 1—Reasonableness Test 2—For Services Performed Kinds of PayAwards Bonuses Education Expenses Fringe Benefits Loans or Advances Property Reimbursements for Business Expenses Sick and Vacation Pay Introduction You can generally deduct the amount you pay your employees for the services they perform. 1040 ez forms 2012 The pay may be in cash, property, or services. 1040 ez forms 2012 It may include wages, salaries, bonuses, commissions, or other non-cash compensation such as vacation allowances and fringe benefits. 1040 ez forms 2012 For information about deducting employment taxes, see chapter 5. 1040 ez forms 2012 You can claim employment credits, such as the following, if you hire individuals who meet certain requirements. 1040 ez forms 2012 Empowerment zone employment credit (Form 8844). 1040 ez forms 2012 Indian employment credit (Form 8845). 1040 ez forms 2012 Work opportunity credit (Form 5884). 1040 ez forms 2012 Credit for employer differential wage payments (Form 8932). 1040 ez forms 2012 Reduce your deduction for employee wages by the amount of employment credits you claim. 1040 ez forms 2012 For more information about these credits, see the form on which the credit is claimed. 1040 ez forms 2012 Topics - This chapter discusses: Tests for deducting pay Kinds of pay Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits See chapter 12 for information about getting publications and forms. 1040 ez forms 2012 Tests for Deducting Pay To be deductible, your employees' pay must be an ordinary and necessary business expense and you must pay or incur it. 1040 ez forms 2012 These and other requirements that apply to all business expenses are explained in chapter 1. 1040 ez forms 2012 In addition, the pay must meet both of the following tests. 1040 ez forms 2012 Test 1. 1040 ez forms 2012 It must be reasonable. 1040 ez forms 2012 Test 2. 1040 ez forms 2012 It must be for services performed. 1040 ez forms 2012 The form or method of figuring the pay does not affect its deductibility. 1040 ez forms 2012 For example, bonuses and commissions based on sales or earnings, and paid under an agreement made before the services were performed, are both deductible. 1040 ez forms 2012 Test 1—Reasonableness You must be able to prove that the pay is reasonable. 1040 ez forms 2012 Whether the pay is reasonable depends on the circumstances that existed when you contracted for the services, not those that exist when reasonableness is questioned. 1040 ez forms 2012 If the pay is excessive, the excess pay is disallowed as a deduction. 1040 ez forms 2012 Factors to consider. 1040 ez forms 2012   Determine the reasonableness of pay by the facts and circumstances. 1040 ez forms 2012 Generally, reasonable pay is the amount that a similar business would pay for the same or similar services. 1040 ez forms 2012   To determine if pay is reasonable, also consider the following items and any other pertinent facts. 1040 ez forms 2012 The duties performed by the employee. 1040 ez forms 2012 The volume of business handled. 1040 ez forms 2012 The character and amount of responsibility. 1040 ez forms 2012 The complexities of your business. 1040 ez forms 2012 The amount of time required. 1040 ez forms 2012 The cost of living in the locality. 1040 ez forms 2012 The ability and achievements of the individual employee performing the service. 1040 ez forms 2012 The pay compared with the gross and net income of the business, as well as with distributions to shareholders if the business is a corporation. 1040 ez forms 2012 Your policy regarding pay for all your employees. 1040 ez forms 2012 The history of pay for each employee. 1040 ez forms 2012 Test 2—For Services Performed You must be able to prove the payment was made for services actually performed. 1040 ez forms 2012 Employee-shareholder salaries. 1040 ez forms 2012   If a corporation pays an employee who is also a shareholder a salary that is unreasonably high considering the services actually performed, the excessive part of the salary may be treated as a constructive dividend to the employee-shareholder. 1040 ez forms 2012 The excessive part of the salary would not be allowed as a salary deduction by the corporation. 1040 ez forms 2012 For more information on corporate distributions to shareholders, see Publication 542, Corporations. 1040 ez forms 2012 Kinds of Pay Some of the ways you may provide pay to your employees in addition to regular wages or salaries are discussed next. 1040 ez forms 2012 For specialized and detailed information on employees' pay and the employment tax treatment of employees' pay, see Publications 15, 15-A, and 15-B. 1040 ez forms 2012 Awards You can generally deduct amounts you pay to your employees as awards, whether paid in cash or property. 1040 ez forms 2012 If you give property to an employee as an employee achievement award, your deduction may be limited. 1040 ez forms 2012 Achievement awards. 1040 ez forms 2012   An achievement award is an item of tangible personal property that meets all the following requirements. 1040 ez forms 2012 It is given to an employee for length of service or safety achievement. 1040 ez forms 2012 It is awarded as part of a meaningful presentation. 1040 ez forms 2012 It is awarded under conditions and circumstances that do not create a significant likelihood of disguised pay. 1040 ez forms 2012 Length-of-service award. 1040 ez forms 2012    An award will qualify as a length-of-service award only if either of the following applies. 1040 ez forms 2012 The employee receives the award after his or her first 5 years of employment. 1040 ez forms 2012 The employee did not receive another length-of-service award (other than one of very small value) during the same year or in any of the prior 4 years. 1040 ez forms 2012 Safety achievement award. 1040 ez forms 2012    An award for safety achievement will qualify as an achievement award unless one of the following applies. 1040 ez forms 2012 It is given to a manager, administrator, clerical employee, or other professional employee. 1040 ez forms 2012 During the tax year, more than 10% of your employees, excluding those listed in (1), have already received a safety achievement award (other than one of very small value). 1040 ez forms 2012 Deduction limit. 1040 ez forms 2012   Your deduction for the cost of employee achievement awards given to any one employee during the tax year is limited to the following. 1040 ez forms 2012 $400 for awards that are not qualified plan awards. 1040 ez forms 2012 $1,600 for all awards, whether or not qualified plan awards. 1040 ez forms 2012   A qualified plan award is an achievement award given as part of an established written plan or program that does not favor highly compensated employees as to eligibility or benefits. 1040 ez forms 2012   A highly compensated employee is an employee who meets either of the following tests. 1040 ez forms 2012 The employee was a 5% owner at any time during the year or the preceding year. 1040 ez forms 2012 The employee received more than $115,000 in pay for the preceding year. 1040 ez forms 2012 You can choose to ignore test (2) if the employee was not also in the top 20% of employees ranked by pay for the preceding year. 1040 ez forms 2012   An award is not a qualified plan award if the average cost of all the employee achievement awards given during the tax year (that would be qualified plan awards except for this limit) is more than $400. 1040 ez forms 2012 To figure this average cost, ignore awards of nominal value. 1040 ez forms 2012 Deduct achievement awards as a nonwage business expense on your return or business schedule. 1040 ez forms 2012 You may not owe employment taxes on the value of some achievement awards you provide to an employee. 1040 ez forms 2012 See Publication 15-B. 1040 ez forms 2012 Bonuses You can generally deduct a bonus paid to an employee if you intended the bonus as additional pay for services, not as a gift, and the services were performed. 1040 ez forms 2012 However, the total bonuses, salaries, and other pay must be reasonable for the services performed. 1040 ez forms 2012 If the bonus is paid in property, see Property , later. 1040 ez forms 2012 Gifts of nominal value. 1040 ez forms 2012    If, to promote employee goodwill, you distribute food or merchandise of nominal value to your employees at holidays, you can deduct the cost of these items as a nonwage business expense. 1040 ez forms 2012 Your deduction for de minimis gifts of food or drink are not subject to the 50% deduction limit that generally applies to meals. 1040 ez forms 2012 For more information on this deduction limit, see Meals and lodging , later. 1040 ez forms 2012 Education Expenses If you pay or reimburse education expenses for an employee, you can deduct the payments if they are part of a qualified educational assistance program. 1040 ez forms 2012 Deduct them on the “Employee benefit programs” or other appropriate line of your tax return. 1040 ez forms 2012 For information on educational assistance programs, see Educational Assistance in section 2 of Publication 15-B. 1040 ez forms 2012 Fringe Benefits A fringe benefit is a form of pay for the performance of services. 1040 ez forms 2012 You can generally deduct the cost of fringe benefits. 1040 ez forms 2012 You may be able to exclude all or part of the value of some fringe benefits from your employees' pay. 1040 ez forms 2012 You also may not owe employment taxes on the value of the fringe benefits. 1040 ez forms 2012 See Table 2-1, Special Rules for Various Types of Fringe Benefits, in Publication 15-B for details. 1040 ez forms 2012 Your deduction for the cost of fringe benefits for activities generally considered entertainment, amusement, or recreation, or for a facility used in connection with such an activity (for example, a company aircraft) for certain officers, directors, and more-than-10% shareholders is limited. 1040 ez forms 2012 Certain fringe benefits are discussed next. 1040 ez forms 2012 See Publication 15-B for more details on these and other fringe benefits. 1040 ez forms 2012 Meals and lodging. 1040 ez forms 2012   You can usually deduct the cost of furnishing meals and lodging to your employees. 1040 ez forms 2012 Deduct the cost in whatever category the expense falls. 1040 ez forms 2012 For example, if you operate a restaurant, deduct the cost of the meals you furnish to employees as part of the cost of goods sold. 1040 ez forms 2012 If you operate a nursing home, motel, or rental property, deduct the cost of furnishing lodging to an employee as expenses for utilities, linen service, salaries, depreciation, etc. 1040 ez forms 2012 Deduction limit on meals. 1040 ez forms 2012   You can generally deduct only 50% of the cost of furnishing meals to your employees. 1040 ez forms 2012 However, you can deduct the full cost of the following meals. 1040 ez forms 2012 Meals whose value you include in an employee's wages. 1040 ez forms 2012 Meals that qualify as a de minimis fringe benefit as discussed in section 2 of Publication 15-B. 1040 ez forms 2012 This generally includes meals you furnish to employees at your place of business if more than half of these employees are provided the meals for your convenience. 1040 ez forms 2012 Meals you furnish to your employees at the work site when you operate a restaurant or catering service. 1040 ez forms 2012 Meals you furnish to your employees as part of the expense of providing recreational or social activities, such as a company picnic. 1040 ez forms 2012 Meals you are required by federal law to furnish to crew members of certain commercial vessels (or would be required to furnish if the vessels were operated at sea). 1040 ez forms 2012 This does not include meals you furnish on vessels primarily providing luxury water transportation. 1040 ez forms 2012 Meals you furnish on an oil or gas platform or drilling rig located offshore or in Alaska. 1040 ez forms 2012 This includes meals you furnish at a support camp that is near and integral to an oil or gas drilling rig located in Alaska. 1040 ez forms 2012 Employee benefit programs. 1040 ez forms 2012   Employee benefit programs include the following. 1040 ez forms 2012 Accident and health plans. 1040 ez forms 2012 Adoption assistance. 1040 ez forms 2012 Cafeteria plans. 1040 ez forms 2012 Dependent care assistance. 1040 ez forms 2012 Education assistance. 1040 ez forms 2012 Life insurance coverage. 1040 ez forms 2012 Welfare benefit funds. 1040 ez forms 2012   You can generally deduct amounts you spend on employee benefit programs on the applicable line of your tax return. 1040 ez forms 2012 For example, if you provide dependent care by operating a dependent care facility for your employees, deduct your costs in whatever categories they fall (utilities, salaries, etc. 1040 ez forms 2012 ). 1040 ez forms 2012 Life insurance coverage. 1040 ez forms 2012   You cannot deduct the cost of life insurance coverage for you, an employee, or any person with a financial interest in your business, if you are directly or indirectly the beneficiary of the policy. 1040 ez forms 2012 See Regulations section 1. 1040 ez forms 2012 264-1 for more information. 1040 ez forms 2012 Welfare benefit funds. 1040 ez forms 2012   A welfare benefit fund is a funded plan (or a funded arrangement having the effect of a plan) that provides welfare benefits to your employees, independent contractors, or their beneficiaries. 1040 ez forms 2012 Welfare benefits are any benefits other than deferred compensation or transfers of restricted property. 1040 ez forms 2012   Your deduction for contributions to a welfare benefit fund is limited to the fund's qualified cost for the tax year. 1040 ez forms 2012 If your contributions to the fund are more than its qualified cost, carry the excess over to the next tax year. 1040 ez forms 2012   Generally, the fund's “qualified cost” is the total of the following amounts, reduced by the after-tax income of the fund. 1040 ez forms 2012 The cost you would have been able to deduct using the cash method of accounting if you had paid for the benefits directly. 1040 ez forms 2012 The contributions added to a reserve account that are needed to fund claims incurred but not paid as of the end of the year. 1040 ez forms 2012 These claims can be for supplemental unemployment benefits, severance pay, or disability, medical, or life insurance benefits. 1040 ez forms 2012   For more information, see sections 419(c) and 419A of the Internal Revenue Code and the related regulations. 1040 ez forms 2012 Loans or Advances You generally can deduct as wages an advance you make to an employee for services performed if you do not expect the employee to repay the advance. 1040 ez forms 2012 However, if the employee performs no services, treat the amount you advanced as a loan. 1040 ez forms 2012 If the employee does not repay the loan, treat it as income to the employee. 1040 ez forms 2012 Below-market interest rate loans. 1040 ez forms 2012   On certain loans you make to an employee or shareholder, you are treated as having received interest income and as having paid compensation or dividends equal to that interest. 1040 ez forms 2012 See Below-Market Loans in chapter 4. 1040 ez forms 2012 Property If you transfer property (including your company's stock) to an employee as payment for services, you can generally deduct it as wages. 1040 ez forms 2012 The amount you can deduct is the property's fair market value on the date of the transfer less any amount the employee paid for the property. 1040 ez forms 2012 You can claim the deduction only for the tax year in which your employee includes the property's value in income. 1040 ez forms 2012 Your employee is deemed to have included the value in income if you report it on Form W-2, Wage and Tax Statement, in a timely manner. 1040 ez forms 2012 You treat the deductible amount as received in exchange for the property, and you must recognize any gain or loss realized on the transfer, unless it is the company's stock transferred as payment for services. 1040 ez forms 2012 Your gain or loss is the difference between the fair market value of the property and its adjusted basis on the date of transfer. 1040 ez forms 2012 These rules also apply to property transferred to an independent contractor for services, generally reported on Form 1099-MISC, Miscellaneous Income. 1040 ez forms 2012 Restricted property. 1040 ez forms 2012   If the property you transfer for services is subject to restrictions that affect its value, you generally cannot deduct it and do not report gain or loss until it is substantially vested in the recipient. 1040 ez forms 2012 However, if the recipient pays for the property, you must report any gain at the time of the transfer up to the amount paid. 1040 ez forms 2012    “Substantially vested” means the property is not subject to a substantial risk of forfeiture. 1040 ez forms 2012 This means that the recipient is not likely to have to give up his or her rights in the property in the future. 1040 ez forms 2012 Reimbursements for Business Expenses You can generally deduct the amount you pay or reimburse employees for business expenses incurred for your business. 1040 ez forms 2012 However, your deduction may be limited. 1040 ez forms 2012 If you make the payment under an accountable plan, deduct it in the category of the expense paid. 1040 ez forms 2012 For example, if you pay an employee for travel expenses incurred on your behalf, deduct this payment as a travel expense. 1040 ez forms 2012 If you make the payment under a nonaccountable plan, deduct it as wages and include it in the employee's Form W-2. 1040 ez forms 2012 See Reimbursement of Travel, Meals, and Entertainment in chapter 11 for more information about deducting reimbursements and an explanation of accountable and nonaccountable plans. 1040 ez forms 2012 Sick and Vacation Pay Sick pay. 1040 ez forms 2012   You can deduct amounts you pay to your employees for sickness and injury, including lump-sum amounts, as wages. 1040 ez forms 2012 However, your deduction is limited to amounts not compensated by insurance or other means. 1040 ez forms 2012 Vacation pay. 1040 ez forms 2012   Vacation pay is an employee benefit. 1040 ez forms 2012 It includes amounts paid for unused vacation leave. 1040 ez forms 2012 You can deduct vacation pay only in the tax year in which the employee actually receives it. 1040 ez forms 2012 This rule applies regardless of whether you use the cash or accrual method of accounting. 1040 ez forms 2012 Prev  Up  Next   Home   More Online Publications