Publication 17 - Introductory Material
Table of Contents
* What's New for 2005
* What's New for 2006
* Reminders
* Introduction
o Icons.
o Tax questions.
o Ordering forms and publications.
All material in this publication may be reprinted freely. A citation to
Your Federal Income Tax (2005) would be appropriate.
The explanations and examples in this publication reflect the
interpretation by the Internal Revenue Service (IRS) of:
*
Tax laws enacted by Congress,
*
Treasury regulations, and
*
Court decisions.
However, the information given does not cover every situation and is
not intended to replace the law or change its meaning.
This publication covers some subjects on which a court may have made a
decision more favorable to taxpayers than the interpretation by the IRS.
Until these differing interpretations are resolved by higher court
decisions or in some other way, this publication will continue to present
the interpretations by the IRS.
All taxpayers have important rights when working with the IRS. These
rights are described in Your Rights as a Taxpayer in the back of this
publication.
What's New for 2005
This section summarizes important tax changes that took effect in 2005.
Most of these changes are discussed in more detail throughout this publication.
Changes are also discussed in Publication 553, Highlights of 2005 Tax Changes.
Katrina Emergency Tax Relief Act of 2005. This Act provides tax relief for
persons affected by Hurricane Katrina. The provisions of the Act are
explained in Publication 4492.
caution
At the time this publication went to print, Congress was considering
legislation that would provide additional tax relief for individuals
affected by Hurricanes Katrina, Rita, and Wilma. For more details, and to
find out if this legislation was enacted, see Pub. 4492.
Telefile no longer available. You no longer can use Telefile to file your
tax return. There are other IRS e-file options you can use. See chapter 1.
Automatic six month extension to file tax return. You can now use Form
4868, Application for Automatic Extension of Time To File U.S. Individual
Income Tax Return, to obtain an automatic 6-month extension of time to file
your tax return. See chapter 1.
New definition of a qualifying child. A new definition of a “qualifying
child” applies for each of the following tax benefits.
*
Head of household filing status. See chapter 2.
*
Dependency exemption. See chapter 3.
*
Child and dependent care credit. See chapter 32.
*
Child tax credit. See chapter 34.
*
Earned income credit (EIC). See chapter 36.
Standard mileage rates. The standard mileage rate for the cost of operating
your car increased to 40.5 cents a mile for all business miles driven
before September 1, 2005. For business miles driven after August 31, 2005,
the rate increased to 48.5 cents a mile. See chapter 26. The standard
mileage rate allowed for use of your car for medical reasons increased to
15 cents for miles driven before September 1, 2005, and to 22 cents for
miles driven after August 31, 2005. See chapter 21. The standard mileage
rate allowed for use of your car for determining moving expenses increased
to 15 cents for miles driven before September 1, 2005, and to 22 cents for
miles driven after August 31, 2005. See Publication 521.
Retirement savings plans. The following paragraphs highlight changes that
affect individual retirement arrangements (IRAs) and pension plans.
Traditional IRA income limits. If you have a traditional IRA and are
covered by a retirement plan at work, the amount of income you can have and
not be affected by the deduction phaseout increases. The amounts vary
depending on filing status. See chapter 17. Limit on elective deferrals.
The maximum amount of elective deferrals under a salary reduction agreement
that could be contributed to a qualified plan increased to $14,000 ($18,000
if you were age 50 or older). However, for SIMPLE plans, the amount
increased to $10,000 ($12,000 if you were age 50 or older). IRA deduction
expanded. The amount you, and your spouse if filing jointly, may be able to
deduct as an IRA contribution will increase to $4,000 ($4,500 if age 50 or
older at the end of 2005). See chapter 17.
Contributions. If you donate a car, boat, or airplane or a patent or other
intellectual property to a qualified organization, your deduction may be
limited. See chapter 24.
Domestic production activities deduction. There is a new deduction for
domestic production activities. This deduction can be passed to you from a
business. For more information, see Form 8903.
Disaster mitigation payments. You may be able to exclude from income grants
you use to mitigate (reduce the severity of) potential damage from future
natural disasters that is paid to you through state and local governments.
If you reported income from qualified disaster mitigation payments in
previous years, you may be able to file a claim for refund. See chapter 12.
Certain amounts increased. Some tax items that are indexed for inflation
increased for 2005. Earned income credit (EIC). The maximum amount of
income you can earn and still get EIC increased. The amount depends on your
filing status and number of children. The maximum amount of investment
income you can have and still be eligible for the credit has increased to
$2,700. See chapter 36. Standard deduction. The standard deduction for
taxpayers who do not itemize deductions on Schedule A (Form 1040) has
increased. The amount depends on your filing status. See chapter 20.
Exemption amount. You are allowed a $3,200 deduction for each exemption to
which you are entitled. However, your exemption amount could be phased out
if you have high income. See chapter 3. Limit on itemized deduction. Some
of your itemized deductions may be limited if your adjusted gross income is
more than $145,950 ($72,975 if you are married filing separately). See
chapter 29. Tax benefits for adoption. The adoption credit and the maximum
exclusion from income of benefits under an employer's adoption assistance
program are increased to $10,630. See Adoption Credit in chapter 37. Hope
or lifetime learning credit income limits increased. The amount of income
you can have and still receive a Hope or lifetime learning credit has
increased. See chapter 37. Social security and Medicare taxes. The maximum
wages subject to social security tax (6.2%) increased to $90,000. All wages
are subject to Medicare tax (1.45%).
Mailing your return. If you are filing a paper return, you may be mailing
your return to a different address because the IRS has changed the filing
location for several areas. If you received an envelope with your tax
package, please use it. Otherwise, see Where to File near the end of this
publication for a list of IRS addresses.
What's New for 2006
This section summarizes the important changes that take effect in 2006 that
could affect your estimated tax payments for 2006. More information on
these and other changes can be found in Publication 553.
Energy credits. You may be able to claim a new tax credit for the purchase
of qualified energy efficiency improvements to your existing home. You may
be able to claim a tax credit for the purchase of residential solar water
heating, photovoltaic equipment, or fuel cell property.
Retirement savings plans. The following paragraphs highlight changes that
affect individual retirement arrangements (IRAs) and pension plans.
Traditional IRA income limits. If you have a traditional IRA, are covered
by a retirement plan at work, and are married filing jointly or a
qualifying widow(er), the amount of income you can have and not be affected
by the deduction phaseout increases. The amounts for other filing statuses
are not changed. Limit on elective deferrals. The maximum amount of
elective deferrals under a salary reduction agreement that can be
contributed to a qualified plan increases to $15,000 ($20,000 if you are
age 50 or older). However, for SIMPLE plans, the amount is $10,000 ($12,500
if you are age 50 or older). IRA catch-up contribution. The catch-up
contribution for persons age 50 or older at the end of 2006 is increased to
$1,000. The maximum contribution for such person is $5,000.
Alternative minimum tax (AMT). The AMT exemption amount will decrease. The
amount depends on your filing status.
Phaseouts reduced. Personal exemptions. The phaseout of the limitation on
personal exemptions will be reduced by 1/3. Itemized deductions. The
phaseout of the limitation on itemized deductions will be reduced by 1/3.
Alternative technology vehicles. You may be able to take a credit if you
place an alternative technology vehicle in service during the year. See
chapter 37. You no longer can take a deduction for clean-fuel vehicles.
Reminders
Listed below are important reminders and other items that may help you file
your 2005 tax return. Many of these items are explained in more detail
later in this publication.
Write in your social security number. To protect your privacy, social
security numbers (SSNs) are not printed on the peel-off label that comes in
the mail with your tax instruction booklet. This means you must enter your
SSN in the space provided on your tax form. If you filed a joint return for
2004 and are filing a joint return for 2005 with the same spouse, enter
your names and SSNs in the same order as on your 2004 return. See chapter
1. Victim of identity theft. If you believe someone has assumed your
identity to file federal income tax returns, or to commit other tax fraud,
call 1-800-829-0433. Victims of identity theft who are having trouble
filing their returns should call the IRS Taxpayer Advocates Office at
1-877-777-4778. You should also know that the IRS does not initiate
communication with taxpayers through email. If you do receive this type of
request, it may be an attempt by identity thieves to get your private tax
information.
Taxpayer identification numbers. You must provide the taxpayer
identification number for each person for whom you claim certain tax
benefits. This applies even if the person was born in 2005. Generally, this
number is the person's social security number (SSN). See chapter 1.
Foreign source income. If you are a U.S. citizen with income from sources
outside the United States (foreign income), you must report all such income
on your tax return unless it is exempt by U.S. law. This is true whether
you reside inside or outside the United States and whether or not you
receive a Form W-2 or 1099 from the foreign payer. This applies to earned
income (such as wages and tips) as well as unearned income (such as
interest, dividends, capital gains, pensions, rents and royalties). If you
reside outside the United States, you may be able to exclude part or all of
your foreign source earned income. For details, see Publication 54, Tax
Guide for U.S. Citizens and Resident Aliens Abroad.
Earned income credit. You can choose to include combat pay in your earned
income for purposes of computing this credit. If you are married, each of
you can make this election separately. Form 8836. If you received Form
8836, Qualifying Children Residency Statement, you have been selected to
participate in the EIC certification program. See chapter 36.
Advance earned income credit. If a qualifying child lives with you and you
expect to qualify for the earned income credit in 2006, you may be able to
get part of the credit paid to you in advance throughout the year (by your
employer) instead of waiting until you file your tax return. See chapter 36.
Sales tax deduction. You can choose to deduct state and local general sales
taxes instead of state and local income taxes as an itemized deduction on
Form 1040, Schedule A. See chapter 22.
Tax Computation Worksheet. If your taxable income is $100,000 or more,
figure your tax using the Tax Computation Worksheet. The Tax Computation
Worksheet is found near the end of this publication immediately following
the Tax Rate Schedules. (The Tax Rate Schedules are shown so you can see
the tax rate that applies to all levels of taxable income. Do not use the
Tax Rate Schedules to figure your tax.)
Joint return responsibility. Generally, both spouses are responsible for
the tax and any interest or penalties on a joint tax return. In some cases,
one spouse may be relieved of that responsibility for items of the other
spouse that were incorrectly reported on the joint return. See chapter 2.
Include your phone number on your return. To promptly resolve any questions
we have in processing your tax return, we would like to be able to call
you. Please enter your daytime telephone number on your tax form next to
your signature.
Third party designee. You can check the “Yes” box in the “Third Party
Designee” area of your return to authorize the IRS to discuss your return
with a friend, family member, or any other person you choose. This allows
the IRS to call the person you identified as your designee to answer any
questions that may arise during the processing of your return. It also
allows your designee to perform certain actions. See chapter 1.
Payment of taxes. Make your check or money order payable to “United States
Treasury.” You can pay your taxes by credit card, using the Electronic
Federal Tax Payment System (EFTPS), or, if you file electronically, by
electronic funds withdrawal. See chapter 1.
Faster ways to file your return. The IRS offers fast, accurate ways to file
your tax return information without filing a paper tax return. You can use
IRS e-file (electronic filing). See chapter 1.
Free electronic filing. You may be able to file your 2005 taxes online for
free thanks to an electronic filing agreement. See chapter 1.
Change of address. If you change your address, you should notify the IRS.
See Change of Address, under What Happens After I File, in chapter 1.
Private delivery services. You may be able to use a designated private
delivery service to mail your tax returns and payments. See chapter 1.
Refund on a late filed return. If you were due a refund but you did not
file a return, you generally must file your return within 3 years from the
date the return was due (including extensions) to get that refund. See
chapter 1.
Privacy Act and paperwork reduction information. The IRS Restructuring and
Reform Act of 1998, the Privacy Act of 1974, and the Paperwork Reduction
Act of 1980 require that when we ask you for information we must first tell
you what our legal right is to ask for the information, why we are asking
for it, how it will be used, what could happen if we do not receive it, and
whether your response is voluntary, required to obtain a benefit, or
mandatory under the law. A complete statement on this subject can be found
in your tax form instruction booklet.
Customer service for taxpayers expanded. The Internal Revenue Service has
expanded customer service for taxpayers. Through the agency's Everyday Tax
Solutions service, you can set up a personal appointment at the most
convenient Taxpayer Assistance Center, on the most convenient business day.
See How To Get Tax Help in the back of this publication.
Treasury Inspector General for Tax Administration. If you want to
confidentially report misconduct, waste, fraud, or abuse by an IRS
employee, you can call 1-800-366-4484 (1-800-877- 8339 for TTY/TDD users).
You can remain anonymous.
Photographs of missing children. The Internal Revenue Service is a proud
partner with the National Center for Missing and Exploited Children.
Photographs of missing children selected by the Center may appear in this
publication on pages that would otherwise be blank. You can help bring
these children home by looking at the photographs and calling
1-800-THE-LOST (1-800-843-5678) if you recognize a child.
Introduction
This publication covers the general rules for filing a federal income tax
return. It supplements the information contained in your tax form
instruction booklet. It explains the tax law to make sure you pay only the
tax you owe and no more.
How this publication is arranged. This publication closely follows Form
1040, U.S. Individual Income Tax Return. It is divided into six parts which
cover different sections of Form 1040. Each part is further divided into
chapters which generally discuss one line of the form. Do not worry if you
file Form 1040A or Form 1040EZ. Anything included on a line of either of
these forms is also included on Form 1040.
The table of contents inside the front cover and the index in the back of
the publication are useful tools to help you find the information you need.
What is in this publication. The publication begins with the rules for
filing a tax return. It explains:
1.
Who must file a return,
2.
Which tax form to use,
3.
When the return is due,
4.
How to e-file your return, and
5.
Other general information.
It will help you identify which filing status you qualify for, whether you
can claim any dependents, and whether the income you receive is taxable.
The publication goes on to explain the standard deduction, the kinds of
expenses you may be able to deduct, and the various kinds of credits you
may be able to take to reduce your tax.
Throughout the publication are examples showing how the tax law applies
in typical situations. Sample forms and schedules show you how to report
certain items on your return. Also throughout the publication are
flowcharts and tables that present tax information in an easy-to-understand
manner.
Many of the subjects discussed in this publication are discussed in
greater detail in other IRS publications. References to those other
publications are provided for your information.
Icons. Small graphic symbols, or icons, are used to draw your attention
to special information. See Table 1, Legend of Icons, below, for an
explanation of each icon used in this publication.
What is not covered in this publication. Some material that you may find
helpful is not included in this publication but can be found in your tax
form instruction booklet. This includes lists of:
*
Where to report certain items shown on information documents, and
*
Recorded tax information topics (TeleTax).
If you operate your own business or have other self-employment income,
such as from babysitting or selling crafts, see the following publications
for more information.
*
Publication 334, Tax Guide for Small Business (For Individuals Who
Use Schedule C or C-EZ).
*
Publication 535, Business Expenses.
*
Publication 587, Business Use of Your Home (Including Use by Daycare
Providers).
Help from the IRS. There are many ways you can get help from the IRS.
These are explained under How To Get Tax Help in the back of this publication.
Comments and suggestions. We welcome your comments about this publication
and your suggestions for future editions.
You can write to us at the following address:
Internal Revenue Service
Individual Forms and Publications Branch
SE:W:CAR:MP:T:I
1111 Constitution Ave. NW IR-6406
Washington, DC 20224
We respond to many letters by telephone. Therefore, it would be helpful
if you would include your daytime phone number, including the area code, in
your correspondence.
You can email us at *taxforms@irs.gov. (The asterisk must be included in
the address.) Please put “Publications Comment” on the subject line.
Although we cannot respond individually to each email, we do appreciate
your feedback and will consider your comments as we revise our tax products.
Tax questions. If you have a tax question, visit www.irs.gov or call
1-800-829-1040. We cannot answer tax questions at either of the addresses
listed above.
Ordering forms and publications. Visit www.irs.gov/formspubs to download
forms and publications, call 1-800-829-3676, or write to the National
Distribution Center at the address shown under How To Get Tax Help in the
back of this publication.
IRS mission. Provide America's taxpayers top quality service by helping
them understand and meet their tax responsibilities and by applying the tax
law with integrity and fairness to all.
What's New
Who must file. Generally, the amount of income you can receive before you
must file a return has been increased. See Table 1-1, Table 1-2, and Table
1-3 for the specific amounts.
Telefile no longer available. You can no longer use Telefile to file your
tax return. There are other IRS e-file options that you can use.
Automatic 6-month extension. You can now use Form 4868, Application for
Automatic Extension of Time To File U.S. Individual Income Tax Return, to
obtain an automatic 6-month extension to file your tax return.
Mailing your return. You may be mailing your return to a different address
this year because the IRS has changed the filing location for several
areas. If you received an envelope with your tax package, please use it.
Otherwise, see Where Do I File, later in this chapter.
Reminders
Alternative filing methods. Rather than filing a return on paper, you may
be able to file electronically using IRS e-file. Create your own personal
identification number (PIN) and file a completely paperless tax return. For
more information, see Does My Return Have To Be on Paper, later.
Change of address. If you change your address, you should notify the IRS.
See Change of Address, later, under What Happens After I File. If you were
affected by Hurricane Katrina or Rita, you may be able to verbally change
your address.
Enter your social security number. You must enter your social security
number (SSN) in the spaces provided on your tax return. If you file a joint
return, enter the SSNs in the same order as the names.
Direct deposit of refund. Instead of getting a paper check, you may be able
to have your refund deposited directly into your account at a bank or other
financial institution. See Direct Deposit under Refunds, later.
Alternative payment methods. If you owe additional tax, you may be able to
pay electronically. See How To Pay, later.
Installment agreement. If you cannot pay the full amount due with your
return, you may ask to make monthly installment payments. See Installment
Agreement, later, under Amount You Owe.
Service in combat zone. You are allowed extra time to take care of your tax
matters if you are a member of the Armed Forces who served in a combat
zone, or if you served in the combat zone in support of the Armed Forces.
See Individuals Serving in Combat Zone, later, under When Do I Have To File.
Adoption taxpayer identification number. If a child has been placed in your
home for purposes of legal adoption and you will not be able to get a
social security number for the child in time to file your return, you may
be able to get an adoption taxpayer identification number (ATIN). For more
information, see Social Security Number, later.
Taxpayer identification number for aliens. If you or your dependent is a
nonresident or resident alien who does not have and is not eligible to get
a social security number, file Form W-7, Application for IRS Individual
Taxpayer Identification Number, with the IRS. For more information, see
Social Security Number, later.
Introduction
This chapter discusses:
*
Whether you have to file a return,
*
Which form to use,
*
How to file electronically,
*
When, how, and where to file your return,
*
What happens if you pay too little or too much tax,
*
What records you should keep and how long you should keep them, and
*
How you can change a return you have already filed.
Do I Have To File a Return?
You must file a federal income tax return if you are a citizen or resident
of the United States or a resident of Puerto Rico and you meet the filing
requirements for any of the following categories that apply to you.
1.
Individuals in general. (There are special rules for surviving
spouses, executors, administrators, legal representatives, U.S. citizens
and residents living outside the United States, residents of Puerto Rico,
and individuals with income from U.S. possessions.)
2.
Dependents.
3.
Children under age 14.
4.
Self-employed persons.
5.
Aliens.
The filing requirements for each category are explained in this chapter.
The filing requirements apply even if you do not owe tax.
Tip
Even if you do not have to file a return, it may be to your advantage to do
so. See Who Should File , later.
Caution
File only one federal income tax return for the year regardless of how many
jobs you had, how many Forms W-2 you received, or how many states you lived
in during the year.
Individuals—In General
If you are a U.S. citizen or resident, whether you must file a return
depends on three factors:
1.
Your gross income,
2.
Your filing status, and
3.
Your age.
To find out whether you must file, see Table 1-1, Table 1-2, and Table 1-3.
Even if no table shows that you must file, you may need to file to get
money back. (See Who Should File, later.)
Gross income. This includes all income you receive in the form of money,
goods, property, and services that is not exempt from tax. It also includes
income from sources outside the United States (even if you may exclude all
or part of it). Common types of income are discussed in Part Two of this
publication.
Community income. If you are married and your permanent home is in a
community property state, half of any income described by state law as
community income may be considered yours. This affects your federal taxes,
including whether you must file if you do not file a joint return with your
spouse. See Publication 555, Community Property, for more information.
Self-employed individuals. If you are self-employed, your gross income
includes the amount on line 7 of Schedule C (Form 1040), Profit or Loss
From Business, line 1 of Schedule C-EZ, (Form 1040), Net Profit From
Business, and line 11 of Schedule F (Form 1040), Profit or Loss From
Farming. See Self-Employed Persons, later, for more information about your
filing requirements.
Caution
If you do not report all of your self-employment income, your social
security benefits may be lower when you retire.
Filing status. Your filing status depends on whether you are single or
married and on your family situation. Your filing status is determined on
the last day of your tax year, which is December 31 for most taxpayers. See
chapter 2 for an explanation of each filing status.
Age. If you are 65 or older at the end of the year, you generally can
have a higher amount of gross income than other taxpayers before you must
file. See Table 1-1. You are considered 65 on the day before your 65th
birthday. For example, if your 65th birthday is on January 1, 2006, you are
considered 65 for 2005.
Table 1-1.2005 Filing Requirements for Most Taxpayers
IF your filing status is... AND at the end of 2005 you
were...* THEN file a return if
your gross income
was at least...**
single under 65 $8,200
65 or older $9,450
married filing jointly*** under 65 (both spouses) $16,400
65 or older (one spouse) $17,400
65 or older (both spouses) $18,400
married filing separately any age $3,200
head of household under 65 $10,500
65 or older $11,750
qualifying widow(er) with under 65 $13,200
dependent child 65 or older $14,200
* If you were born on January 1, 1941, you are considered to be age 65 at
the end of 2005.
** Gross income means all income you received in the form of money, goods,
property, and services that is not exempt from tax, including any income
from sources outside the United States (even if you may exclude part or all
of it). Do not include social security benefits unless you are married
filing a separate return and you lived with your spouse at any time during
2005.
*** If you did not live with your spouse at the end of 2005 (or on the
date your spouse died) and your gross income was at least $3,200, you must
file a return regardless of your age.
Surviving Spouses, Executors, Administrators, and Legal Representatives
You must file a final return for a decedent (a person who died) if both of
the following are true.
*
You are the surviving spouse, executor, administrator, or legal
representative.
*
The decedent met the filing requirements at the date of death.
For more information on rules for filing a decedent's final return, see
Publication 559, Survivors, Executors, and Administrators.
U.S. Citizens and Residents Living Outside the United States
If you are a U.S. citizen or resident living outside the United States, you
must file a return if you meet the filing requirements. For information on
special tax rules that may apply to you, get Publication 54, Tax Guide for
U.S. Citizens and Resident Aliens Abroad. It is available at most U.S.
embassies and consulates. Also see How To Get Tax Help in the back of this
publication.
Residents of Puerto Rico
Generally, if you are a U.S. citizen and a resident of Puerto Rico, you
must file a U.S. income tax return if you meet the filing requirements.
This is in addition to any legal requirement you may have to file an income
tax return for Puerto Rico.
If you are a resident of Puerto Rico for the entire year, gross income does
not include income from sources within Puerto Rico, except for amounts
received as an employee of the United States or a U.S. agency. If you
receive income from Puerto Rican sources that is not subject to U.S. tax,
you must reduce your standard deduction. As a result, the amount of income
you must have before you are required to file a U.S. income tax return is
lower than the applicable amount in Table 1-1 or Table 1-2. For more
information, see Publication 570, Tax Guide for Individuals With Income
From U.S. Possessions.
Individuals With Income From U.S. Possessions
If you had income from Guam, the Commonwealth of the Northern Mariana
Islands, American Samoa, or the Virgin Islands, special rules may apply
when determining whether you must file a U.S. federal income tax return. In
addition, you may have to file a return with the individual island
government. See Publication 570 for more information.
Dependents
If you are a dependent (one who meets the dependency tests in chapter 3),
see Table 1-2 to find whether you must file a return. You also must file if
your situation is described in Table 1-3.
Responsibility of parent. Generally, a child is responsible for filing
his or her own tax return and for paying any tax on the return. But if a
dependent child who must file an income tax return cannot file it for any
reason, such as age, then a parent, guardian, or other legally responsible
person must file it for the child. If the child cannot sign the return, the
parent or guardian must sign the child's name followed by the words “By
(your signature), parent for minor child.”
Child's earnings. Amounts a child earns by performing services are his or
her gross income. This is true even if under local law the child's parents
have the right to the earnings and may actually have received them. If the
child does not pay the tax due on this income, the parent is liable for the
tax.
Children Under Age 14
If a child's only income is interest and dividends (including capital gain
distributions and Alaska Permanent Fund dividends) and certain other
conditions are met, a parent can elect to include the child's income on the
parent's return. If this election is made, the child does not have to file
a return. See Parent's Election To Report Child's Interest and Dividends in
chapter 31.
Self-Employed Persons
You are self-employed if you:
*
Carry on a trade or business as a sole proprietor,
*
Are an independent contractor,
*
Are a member of a partnership, or
*
Are in business for yourself in any other way.
Self-employment can include work in addition to your regular full-time
business activities, such as certain part-time work you do at home or in
addition to your regular job.
You must file a return if your gross income is at least as much as the
filing requirement amount for your filing status and age (shown in Table
1-1). Also, you must file Form 1040 and Schedule SE (Form 1040),
Self-Employment Tax, if:
1.
Your net earnings from self-employment (excluding church employee
income) were $400 or more, or
2.
You had church employee income of $108.28 or more. (See Table 1-3.)
Use Schedule SE (Form 1040) to figure your self-employment tax.
Self-employment tax is comparable to the social security and Medicare tax
withheld from an employee's wages. For more information about this tax, get
Publication 334, Tax Guide for Small Business.
Employees of foreign governments or international organizations. If you
are a U.S. citizen who works in the United States for an international
organization, a foreign government, or a wholly owned instrumentality of a
foreign government, and your employer is not required to withhold social
security and Medicare taxes from your wages, you must include your earnings
from services performed in the United States when figuring your net
earnings from self-employment.
Ministers. You must include income from services you performed as a
minister when figuring your net earnings from self-employment, unless you
have an exemption from self-employment tax. This also applies to Christian
Science practitioners and members of a religious order who have not taken a
vow of poverty. For more information, get Publication 517, Social Security
and Other Information for Members of the Clergy and Religious Workers.
Table 1-2. 2005 Filing Requirements for Dependents
See chapter 3 to find out if someone can claim you as a dependent.
If your parents (or someone else) can claim you as a dependent, and any of
the situations below apply to you, you must file a return. (See Table 1-3
for other situations when you must file.)
In this table, earned income includes salaries, wages, tips, and
professional fees. It also includes taxable scholarship and fellowship
grants. (See Scholarships and fellowships in chapter 12.) Unearned income
includes investment-type income such as taxable interest, ordinary
dividends, and capital gain distributions. It also includes unemployment
compensation, taxable social security benefits, pensions, annuities, and
distributions of unearned income from a trust. Gross income is the total of
your earned and unearned income.
Single dependents—Were you either age 65 or older or blind?
□ No. You must file a return if any of the following apply.
• Your unearned income was more than $800.
• Your earned income was more than $5,000.
• Your gross income was more than the larger of:
• $800, or
• Your earned income (up to $4,750) plus $250.
□ Yes. You must file a return if any of the following apply.
• Your unearned income was more than $2,050 ($3,300 if 65 or older
and blind).
• Your earned income was more than $6,250 ($7,500 if 65 or older and
blind).
• Your gross income was more than $1,250 ($2,500 if 65 or older and
blind)
plus the larger of:
• $800, or
• Your earned income (up to $4,750) plus $250.
Married dependents—Were you either age 65 or older or blind?
□ No. You must file a return if any of the following apply.
• Your unearned income was more than $800.
• Your earned income was more than $5,000.
• Your gross income was at least $5 and your spouse files a separate
return and itemizes deductions.
• Your gross income was more than the larger of:
• $800, or
• Your earned income (up to $4,750) plus $250.
□ Yes. You must file a return if any of the following apply.
• Your unearned income was more than $1,800 ($2,800 if 65 or older
and blind).
• Your earned income was more than $6,000 ($7,000 if 65 or older and
blind).
• Your gross income was at least $5 and your spouse files a separate
return and itemizes deductions.
• Your gross income was more than $1,000 ($2,000 if 65 or older and
blind)
plus the larger of:
• $800, or
• Your earned income (up to $4,750) plus $250.
Aliens
Your status as an alien—resident, nonresident, or dual-status—determines
whether and how you must file an income tax return.
The rules used to determine your alien status are discussed in Publication
519, U.S. Tax Guide for Aliens.
Resident alien. If you are a resident alien for the entire year, you must
file a tax return following the same rules that apply to U.S. citizens. Use
the forms discussed in this publication.
Nonresident alien. If you are a nonresident alien, the rules and tax
forms that apply to you are different from those that apply to U.S.
citizens and resident aliens. See Publication 519 to find out if U.S.
income tax laws apply to you and which forms you should file.
Dual-status taxpayer. If you are a resident alien for part of the tax
year and a nonresident alien for the rest of the year, you are a
dual-status taxpayer. Different rules apply for each part of the year. For
information on dual-status taxpayers, see Publication 519.
Who Should File
Even if you do not have to file, you should file a federal income tax
return to get money back if any of the following conditions apply.
1.
You had federal income tax withheld from your pay.
2.
You qualify for the earned income credit. See chapter 36 for more
information.
3.
You qualify for the additional child tax credit. See chapter 34 for
more information.
4.
You qualify for the health coverage tax credit. See chapter 37 for
more information.
Which Form Should I Use?
You must use one of three forms to file your return: Form 1040EZ, Form
1040A, or Form 1040. (But also see Does My Return Have To Be on Paper, later.)
Form 1040EZ
Form 1040EZ is the simplest form to use.
You can use Form 1040EZ if all of the following apply.
1.
Your filing status is single or married filing jointly. If you were a
nonresident alien at any time in 2005, your filing status must be married
filing jointly.
2.
You (and your spouse if married filing a joint return) were under age
65 and not blind at the end of 2005. If you were born on January 1, 1941,
you are considered to be age 65 at the end of 2005.
3.
You do not claim any dependents.
4.
Your taxable income is less than $100,000.
5.
Your income is only from wages, salaries, tips, unemployment
compensation, Alaska Permanent Fund dividends, taxable scholarship and
fellowship grants, and taxable interest of $1,500 or less.
6.
You did not receive any advance earned income credit (EIC) payments.
7.
You do not claim any adjustments to income, such as a deduction for
IRA contributions or student loan interest.
8.
You do not claim any credits other than the earned income credit.
9.
You do not owe any household employment taxes on wages you paid to a
household employee.
You must meet all of these requirements to use Form 1040EZ. If you do
not, you must use Form 1040A or Form 1040.
Figuring tax. On Form 1040EZ, you can use only the tax table to figure
your tax. You cannot use Form 1040EZ to report any other tax.
Form 1040A
If you do not qualify to use Form 1040EZ, you may be able to use Form 1040A.
You can use Form 1040A if all of the following apply.
1.
Your income is only from wages, salaries, tips, IRA distributions,
pensions and annuities, taxable social security and railroad retirement
benefits, taxable scholarship and fellowship grants, interest, ordinary
dividends (including Alaska Permanent Fund dividends), capital gain
distributions, and unemployment compensation.
2.
Your taxable income is less than $100,000.
3.
Your adjustments to income are for only the following items.
1.
Educator expenses.
2.
IRA deduction.
3.
Student loan interest deduction.
4.
Tuition and fees deduction.
4.
You do not itemize your deductions.
5.
Your taxes are from only the following items.
1.
Tax Table.
2.
Alternative minimum tax. (See chapter 30.)
3.
Advance earned income credit (EIC) payments, if you received
any. (See chapter 36.)
4.
Recapture of an education credit. (See chapter 35.)
5.
Form 8615, Tax for Children Under Age 14 With Investment Income
of More Than $1,600.
6.
Qualified Dividends and Capital Gain Tax Worksheet.
6.
You claim only the following tax credits.
1.
The credit for child and dependent care expenses. (See chapter 32.)
2.
The credit for the elderly or the disabled. (See chapter 33.)
3.
The child tax credit. (See chapter 34.)
4.
The additional child tax credit. (See chapter 34.)
5.
The education credits. (See chapter 35.)
6.
The retirement savings contributions credit. (See chapter 37.)
7.
The earned income credit. (See chapter 36.)
8.
The adoption credit. (See chapter 37.)
7.
You did not have an alternative minimum tax adjustment on stock you
acquired from the exercise of an incentive stock option. (See Publication
525, Taxable and Nontaxable Income.)
You must meet all of the above requirements to use Form 1040A. If you do
not, you must use Form 1040.
If you meet the above requirements, you can use Form 1040A even if you
received employer-provided adoption benefits or dependent care benefits.
Caution
If you receive a capital gain distribution that includes unrecaptured
section 1250 gain, section 1202 gain, or collectibles (28%) gain, you
cannot use Form 1040A. You must use Form 1040.
Form 1040
If you cannot use Form 1040EZ or Form 1040A, you must use Form 1040. You
can use Form 1040 to report all types of income, deductions, and credits.
You may have received Form 1040A or Form 1040EZ in the mail because of the
return you filed last year. If your situation has changed this year, it may
be to your advantage to file Form 1040 instead. You may pay less tax by
filing Form 1040 because you can take itemized deductions, some adjustments
to income, and credits you cannot take on Form 1040A or Form 1040EZ.
You must use Form 1040 if any of the following apply.
1.
Your taxable income is $100,000 or more.
2.
You itemize your deductions.
3.
You had income that cannot be reported on Form 1040EZ or Form 1040A,
including tax-exempt interest from private activity bonds issued after
August 7, 1986.
4.
You claim any adjustments to gross income other than the adjustments
listed earlier under Form 1040A.
5.
Your Form W-2, box 12, shows uncollected employee tax (social
security and Medicare tax) on tips (see chapter 6) or group-term life
insurance (see chapter 5).
6.
You received $20 or more in tips in any one month and did not report
all of them to your employer. (See chapter 6.)
7.
You claim any credits other than the credits listed earlier under
Form 1040A.
8.
You owe the excise tax on insider stock compensation from an
expatriated corporation.
9.
Your Form W-2 shows an amount in box 12 with a code Z.
10.
You have to file other forms with your return to report certain
exclusions, taxes, or transactions.
Table 1-3.Other Situations When You Must File a 2005 Return
If any of the four conditions listed below apply, you must file a return,
even if your income is less than the amount shown in Table 1-1 or Table 1-2.
1. You owe any special taxes, such as:
•
•
•
•
•
•
•
•
•
•
•
•
• Social security or Medicare tax on tips you did not report to your
employer. (See chapter 6.)
Uncollected social security, Medicare, or railroad retirement tax on tips
you reported to your employer. (See chapter 6.)
Uncollected social security, Medicare, or railroad retirement tax on your
group-term life insurance. This amount should be shown in box 12 of your
Form W-2.
Alternative minimum tax. (See chapter 30.)
Additional tax on a qualified retirement plan, including an individual
retirement arrangement (IRA). (See chapter 17.)
Additional tax on an Archer MSA or health savings account. (See Publication
969, Health Savings Accounts and Other Tax-Favored Health Plans.)
Additional tax on a Coverdell ESA or qualified tuition program. (See
Publication 970, Tax Benefits for Education.)
Recapture of an investment credit or a low-income housing credit. (See the
instructions for Form 4255, Recapture of Investment Credit, or Form 8611,
Recapture of Low-Income Housing Credit.)
Recapture tax on the disposition of a home purchased with a
federally-subsidized mortgage. (See chapter 15.)
Recapture of the qualified electric vehicle credit. (See chapter 37.)
Recapture of an education credit. (See chapter 35.)
Recapture of the Indian employment credit. (See the instructions for Form
8845, Indian Employment Credit.)
Recapture of the new markets credit. (See Form 8874, New Markets Credit.)
2. You received any advance earned income credit (EIC) payments from your
employer. This amount should be shown in box 9 of your Form W-2. (See
chapter 36.)
3. You had net earnings from self-employment of at least $400. (See
Self-Employed Persons earlier in this chapter.)
4. You had wages of $108.28 or more from a church or qualified
church-controlled organization that is exempt from employer social security
and Medicare taxes. (See Publication 334.)
Does My Return Have To Be on Paper?
You may be able to file a paperless return using IRS e-file (electronic
filing). It's so easy, over 68 million taxpayers preferred e-file over
filing a paper tax return last year.
This section explains how to e-file:
*
Using an Authorized IRS e-file Provider, or
*
Using your personal computer.
IRS e-file
E-file logo
Please click here for the text description of the image.
E-file logo
Table 1-4 lists the benefits of IRS e-file. IRS e-file uses automation to
replace most of the manual steps needed to process paper returns. As a
result, the processing of e-file returns is faster and more accurate than
the processing of paper returns. However, as with a paper return, you are
responsible for making sure your return contains accurate information and
is filed on time.
Using e-file does not affect your chances of an IRS examination of your return.
Electronic signatures. Create your own personal identification number
(PIN) and use a tax professional or file your own paperless return
electronically. If you are married filing jointly, you and your spouse will
each need to create a PIN and enter these PINs as your electronic signatures.
A PIN is any combination of five numbers, except five zeros. If you use a
PIN, there is nothing to sign and nothing to mail—not even your Forms W-2.
To verify your identity, you will be asked to enter your adjusted gross
income (AGI) from your originally filed 2004 income tax return, if
applicable. Do not use your AGI from an amended return (Form 1040X), math
error notice, or other changed amount from the IRS. AGI is the amount shown
on your 2004 Form 1040, line 36; Form 1040A, line 21; Form 1040EZ, line 4;
and on TeleFile Tax Record, line 1. If you do not have your 2004 income tax
return, call the IRS at 1-800-829-1040 to get a free transcript of your
account. You will also be asked to enter your date of birth (DOB). Make
sure your DOB is accurate and matches the information on record with the
Social Security Administration by checking your annual Social Security
Statement.
Table 1-4.Benefits of IRS e-file
Eligible for Free File • Free File allows qualified taxpayers to prepare
and e-file their own tax returns for free using commercially available
online tax preparation software.
• Review online tax software provider offerings and determine if you
are eligible by visiting the Free File page at www.irs.gov.
Fast! Easy! Convenient! • Get your refund in half the time as paper
filers do, even faster and safer with direct deposit.
• Sign electronically and file a completely paperless return.
• Receive an electronic proof of receipt within 48 hours that the IRS
received your return.
• If you owe, you can e-file and authorize an electronic funds
withdrawal or pay by credit card. If you e-file before April 17, 2006, you
can schedule an electronic funds withdrawal from your checking or savings
account as late as April 17, 2006.
• Prepare and file your federal and state returns together and save time.
Accurate! Secure! • IRS computers quickly and automatically check for
errors or other missing information.
• The chance of being audited does not differ whether you e-file or
file a paper tax return.
• Your bank account information is safeguarded along with other tax
return information. The IRS does not have access to credit card numbers.
Caution
You cannot sign your return electronically if you are a first-time filer
under age 16 at the end of 2005, or if you are filing Form 3115, 3468 (if
attachments are required), 5713, 8283 (if completing Section B), 8332,
8858, or 8885.
For more details on the PIN method, visit www.irs.gov/efile and click on
“IRS e-file for Individual Taxpayers.”
Tip
An Authorized IRS e-file Provider can, with your authorization, generate a
PIN for you.
Forms 8453 and 8453-OL. Your return is not complete without your
signature. If you are not eligible or choose not to sign your return
electronically, you must complete, sign, and file Form 8453, U.S.
Individual Income Tax Declaration for an IRS e-file Return, or Form
8453-OL, U.S. Individual Income Tax Declaration for an IRS e-file Online
Return, whichever applies.
State returns. In most states, you can file an electronic state return
simultaneously with your federal return. For more information, check with
your local IRS office, state tax agency, tax professional, or the IRS
website at www.irs.gov/efile.
Refunds. You can have a refund check mailed to you, or you can have your
refund deposited directly to your checking or savings account. With e-file,
your refund will be issued in half the time as when filing on paper.
As with a paper return, you may not get all of your refund if you owe
certain past-due amounts, such as federal tax, state tax, a student loan,
or child support. See Offset against debts under Refunds, later.
Refund inquiries. If you do not receive your refund within 3 weeks after
your electronically-filed return was accepted by IRS, see Past-Due Refund,
later.
Balance due. If you owe tax, you must pay it by April 17, 2006, to avoid
late-payment penalties and interest. You can make your payment
electronically by credit card or by scheduling an electronic funds
withdrawal from your checking or savings account.
See How To Pay, later, for information on how to pay the balance due.
Using an Authorized IRS e-file Provider
Use an Authorized IRS e-file Provider
Many tax professionals electronically file tax returns for their clients.
As a taxpayer, you have two options.
1) You can prepare your return, take it to an Authorized IRS e-file
Provider, and have the provider transmit it electronically to the IRS.
2) You can have a tax professional prepare your return and transmit
it for you electronically.
You may personally enter your PIN or complete Form 8879, IRS e-file
Signature Authorization, to authorize the provider to enter your PIN on
your return.
Note.
Tax professionals may charge a fee for IRS e-file. Fees may vary depending
on the professional and the specific services rendered.
Using Your Personal Computer
Access by computer
You can file your tax return in a fast, easy, convenient way using your
personal computer. A computer with a modem or Internet access and tax
preparation software are all you need. Best of all, you can e-file from the
comfort of your home 24 hours a day, 7 days a week.
IRS approved tax preparation software is available for online use on the
Internet, for download from the Internet, and in retail stores.
For information, visit our website at www.irs.gov/efile.
Through Employers and Financial Institutions
Some businesses offer free e-file to their employees, members, or
customers. Others offer it for a fee. Ask your employer or financial
institution if they offer IRS e-file as an employee, member, or customer
benefit.
Free Help With Your Return
Free help in preparing your return is available nationwide from IRS-trained
volunteers. The Volunteer Income Tax Assistance (VITA) program is designed
to help low-income taxpayers and the Tax Counseling for the Elderly (TCE)
program is designed to assist taxpayers age 60 or older with their tax
returns. Many VITA sites offer free electronic filing and all volunteers
will let you know about the credits and deductions you may be entitled to
claim. To find a site near you, call 1-800-829-1040. Or to find the nearest
AARP TaxAide site, visit AARP's website at www.aarp.org/taxaide or call
1-888-227-7669. For more information on these programs, go to www.irs.gov
and enter keyword “VITA” in the upper right-hand corner.
When Do I Have To File?
April 17, 2006, is the due date for filing your 2005 income tax return if
you use the calendar year. For a quick view of due dates for filing a
return with or without an extension of time to file (discussed later), see
Table 1-5.
Table 1-5. When To File Your 2005 Return
For U.S. citizens and residents who file returns on a calendar year.
For Most Taxpayers For Certain Taxpayers
Outside the U.S.
No extension requested April 17, 2006 June 15, 2006
Automatic extension
Form 4868 filed, or credit
card payment made October 16, 2006 October 16, 2006
If you use a fiscal year (a year ending on the last day of any month except
December, or a 52-53-week year), your income tax return is due by the 15th
day of the 4th month after the close of your fiscal year.
When the due date for doing any act for tax purposes—filing a return,
paying taxes, etc.—falls on a Saturday, Sunday, or legal holiday, the due
date is delayed until the next business day.
Filing on time. Your paper return is filed on time if it is mailed in an
envelope that is properly addressed, has enough postage, and is postmarked
by the due date. If you send your return by registered mail, the date of
the registration is the postmark date. The registration is evidence that
the return was delivered. If you send a return by certified mail and have
your receipt postmarked by a postal employee, the date on the receipt is
the postmark date. The postmarked certified mail receipt is evidence that
the return was delivered.
Private delivery services. If you use a private delivery service
designated by the IRS to send your return, the postmark date generally is
the date the private delivery service records in its database or marks on
the mailing label. The private delivery service can tell you how to get
written proof of this date.
The following are designated private delivery services.
*
DHL Express (DHL): DHL Same Day Service, DHL Next Day 10:30 am, DHL
Next Day 12:00 pm, DHL Next Day 3:00 pm, and DHL 2nd Day Service.
*
Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard
Overnight, FedEx 2Day, FedEx International Priority, and FedEx
International First.
*
United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air
Saver, UPS 2nd Day Air, UPS 2nd Day Air A.M., UPS Worldwide Express Plus,
and UPS Worldwide Express.
Caution
Private delivery services cannot deliver items to P.O. boxes. You must use
the U.S. Postal Service to mail any item to an IRS P.O. box address.
Electronically filed returns. If you use IRS e-file, your return is
considered filed on time if the authorized electronic return transmitter
postmarks the transmission by the due date. An authorized electronic return
transmitter is a participant in the IRS e-file program that transmits
electronic tax return information directly to the IRS.
The electronic postmark is a record of when the authorized electronic
return transmitter received the transmission of your electronically filed
return on its host system. The date and time in your time zone controls
whether your electronically filed return is timely.
Filing late. If you do not file your return by the due date, you may have
to pay a failure-to-file penalty and interest. For more information, see
Penalties, later. Also see Interest under Amount You Owe.
If you were due a refund but you did not file a return, you generally
must file within 3 years from the date the return was due (including
extensions) to get that refund.
Nonresident alien. If you are a nonresident alien and earn wages subject
to U.S. income tax withholding, your 2005 U.S. income tax return (Form
1040NR or Form 1040NR-EZ) is due by:
*
April 17, 2006, if you use a calendar year, or
*
The 15th day of the 4th month after the end of your fiscal year if
you use a fiscal year.
If you do not earn wages subject to U.S. income tax withholding, your
return is due by:
*
June 15, 2006, if you use a calendar year, or
*
The 15th day of the 6th month after the end of your fiscal year, if
you use a fiscal year.
Get Publication 519 for more filing information.
Filing for a decedent. If you must file a final income tax return for a
taxpayer who died during the year (a decedent), the return is due by the
15th day of the 4th month after the end of the decedent's normal tax year.
In most cases, for a 2005 return, this will be April 17, 2006. See
Publication 559.
Extensions of Time To File
You may be able to get an extension of time to file your return. Special
rules apply for those who were:
*
Outside the United States, or
*
Serving in a combat zone.
Automatic Extension
If you cannot file your 2005 return by the due date, you may be able to get
an automatic 6-month extension of time to file.
Example.
If your return is due on April 17, 2006, you will have until October 16,
2006, to file.
Caution
If you do not pay the tax due by the regular due date (generally, April
15), you will owe interest. You may also be charged penalties, discussed later.
How to get the automatic extension. You can get the automatic extension by:
1.
Using IRS e-file (electronic filing), or
2.
Filing a paper form.
E-file options. There are two ways you can use e-file to get an extension
of time to file. Complete Form 4868, Application for Automatic Extension of
Time To File U.S. Individual Income Tax Return, to use as a worksheet. If
you think you may owe tax when you file your return, use Part II of the
form to estimate your balance due. If you e-file Form 4868 to the IRS, do
not also send a paper Form 4868.
E-file using your personal computer or a tax professional. You can use a
tax software package with your personal computer or a tax professional to
file Form 4868 electronically. You will need to provide certain information
from your tax return for 2004. If you wish to make a payment by electronic
funds withdrawal, see Electronic payment options, under How To Pay, later
in this chapter.
E-file and pay by credit card. You can get an extension by paying part or
all of your estimate of tax due by using a credit card. You can do this by
phone or over the Internet. You do not file Form 4868. See Credit card,
under How To Pay, later in this chapter.
Filing a paper Form 4868. You can get an extension of time to file by
filing a paper Form 4868. Mail it to the address shown in the form
instructions.
If you want to make a payment with the form, make your check or money
order payable to the “United States Treasury.” Write your SSN, daytime
phone number, and “2005 Form 4868” on your check or money order.
When to file. You must request the automatic extension by the due date
for your return. You can file your return any time before the 6-month
extension period ends.
When you file your return. Enter any payment you made related to the
extension of time to file on Form 1040, line 69. If you file Form 1040EZ or
Form 1040A, include that payment in your total payments on Form 1040EZ,
line 9, or Form 1040A, line 43. Also enter “Form 4868” and the amount paid
in the space to the left of line 9 or line 43.
Individuals Outside the United States
You are allowed an automatic 2-month extension (until June 15, 2006, if you
use the calendar year) to file your 2005 return and pay any federal income
tax due if:
1.
You are a U.S. citizen or resident, and
2.
On the due date of your return:
1.
You are living outside the United States and Puerto Rico, and
your main place of business or post of duty is outside the United States and
Puerto Rico, or
2.
You are in military or naval service on duty outside the United
States and
Puerto Rico.
However, if you pay the tax due after the regular due date (generally,
April 15), interest will be charged from that date until the date the tax
is paid.
If you served in a combat zone or qualified hazardous duty area, you may be
eligible for a longer extension of time to file. See Individuals Serving in
Combat Zone, later, for special rules that apply to you.
Married taxpayers. If you file a joint return, only one spouse has to
qualify for this automatic extension. If you and your spouse file separate
returns, this automatic extension applies only to the spouse who qualifies.
How to get the extension. To use this automatic extension, you must
attach a statement to your return explaining what situation qualified you
for the extension. (See the situations listed under (2), earlier.)
Extensions beyond 2 months. If you cannot file your return within the
automatic 2-month extension period, you may be able to get an additional
4-month extension, for a total of 6 months. File Form 4868 and check the
box on line 8.
This additional 4-month extension of time to file is not a further
extension of time to pay. You can use a credit card to pay your estimate of
tax due. See How To Pay, later in this chapter.
No further extension. An extension of more than 6 months will generally
not be granted. However, if you are outside the United States and meet
certain tests, you may be granted a longer extension. For more information,
see Further extensions under When To File and Pay in Publication 54.
Individuals Serving in Combat Zone
The deadline for filing your tax return, paying any tax you may owe, and
filing a claim for refund is automatically extended if you serve in a
combat zone. This applies to members of the Armed Forces, as well as
merchant marines serving aboard vessels under the operational control of
the Department of Defense, Red Cross personnel, accredited correspondents,
and civilians under the direction of the Armed Forces in support of the
Armed Forces.
Combat zone. For purposes of the automatic extension, the term “combat
zone” includes the following areas.
1.
The Persian Gulf area, effective January 17, 1991.
2.
The qualified hazardous duty area of Bosnia and Herzegovina, Croatia,
and Macedonia, effective November 21, 1995.
3.
The qualified hazardous duty area of the Federal Republic of
Yugoslavia (Serbia/Montenegro), Albania, the Adriatic Sea, and the Ionian
Sea north of the 39th parallel, effective March 24, 1999.
4.
Afghanistan, effective September 19, 2001.
See Publication 3, Armed Forces' Tax Guide, for information about other
tax benefits available to military personnel serving in a combat zone.
Extension period. The deadline for filing your return, paying any tax
due, and filing a claim for refund is extended for at least 180 days after
the later of:
1.
The last day you are in a combat zone or the last day the area
qualifies as a combat zone, or
2.
The last day of any continuous qualified hospitalization for injury
from service in the combat zone.
In addition to the 180 days, your deadline is also extended by the number
of days you had left to take action with the IRS when you entered the
combat zone. For example, you have 3½ months (January 1-April 15) to file
your tax return. Any days left in this period when you entered the combat
zone (or the entire 3½ months if you entered it before the beginning of the
year) are added to the 180 days. See Extension of Deadline in Publication 3
for more information.
The above rules on the extension for filing your return also apply when
you are deployed outside the United States (away from your permanent duty
station) while participating in a designated contingency operation.
How Do I Prepare My Return?
This section explains how to get ready to fill in your tax return and when
to report your income and expenses. It also explains how to complete
certain sections of the form. You may find Table 1-6 helpful when you
prepare your return.
In most cases, based on what you filed last year, the IRS will mail you
Form 1040, Form 1040A, or Form 1040EZ with related instructions. Before you
fill in the form, look at the form instructions to see if you need, or
would benefit from filing, a different form this year. Also see if you need
any additional forms or schedules. You may also want to read Does My Return
Have To Be on Paper, earlier.
If you do not receive a tax return package in the mail, or if you need
other forms, you can order them or print them from the Internet. See How To
Get Tax Help in the back of this publication.
Table 1-6. Six Steps for Preparing Your Return
1 — Get your records together for income and expenses.
2 — Get the forms, schedules, and publications you need.
3 — Fill in your return.
4 — Check your return to make sure it is correct.
5 — Sign and date your return.
6 — Attach all required forms and schedules.
Substitute tax forms. You cannot use your own version of a tax form
unless it meets the requirements explained in Publication 1167, General
Rules and Specifications for Substitute Forms and Schedules.
Form W-2. If you are an employee, you should receive Form W-2 from your
employer. You will need the information from this form to prepare your
return. See Form W-2 under Credit for Withholding and Estimated Tax in
chapter 4.
If you do not receive Form W-2 by January 31, 2006, contact your
employer. If you still do not get the form by February 15, the IRS can help
you by requesting the form from your employer. When you request IRS help,
be prepared to provide the following information.
*
Your name, address (including zip code), and phone number.
*
Your SSN.
*
Your dates of employment.
*
Your employer's name, address (including zip code), and phone number.
Form 1099. If you received certain types of income, you may receive a
Form 1099. For example, if you received taxable interest of $10 or more,
the payer generally must give you a Form 1099-INT. If you have not received
it by January 31, 2006, contact the payer. If you still do not get the form
by February 15, call the IRS for help.
When Do I Report My Income and Expenses?
You must figure your taxable income on the basis of a tax year. A “tax
year” is an annual accounting period used for keeping records and reporting
income and expenses. You must account for your income and expenses in a way
that clearly shows your taxable income. The way you do this is called an
accounting method. This section explains which accounting periods and
methods you can use.
Accounting Periods
Most individual tax returns cover a calendar year—the 12 months from
January 1 through December 31. If you do not use a calendar year, your
accounting period is a fiscal year. A regular fiscal year is a 12-month
period that ends on the last day of any month except December. A 52-53-week
fiscal year varies from 52 to 53 weeks and always ends on the same day of
the week.
You choose your accounting period (tax year) when you file your first
income tax return. It cannot be longer than 12 months.
More information. For more information on accounting periods, including
how to change your accounting period, see Publication 538, Accounting
Periods and Methods.
Accounting Methods
Your accounting method is the way you account for your income and expenses.
Most taxpayers use either the cash method or an accrual method. You choose
a method when you file your first income tax return. If you want to change
your accounting method after that, you generally must get IRS approval.
Cash method. If you use this method, report all items of income in the
year in which you actually or constructively receive them. Generally, you
deduct all expenses in the year you actually pay them. This is the method
most individual taxpayers use.
Constructive receipt. Generally, you constructively receive income when
it is credited to your account or set apart in any way that makes it
available to you. You do not need to have physical possession of it. For
example, interest credited to your bank account on December 31, 2005, is
taxable income to you in 2005 if you could have withdrawn it in 2005 (even
if the amount is not entered in your passbook or withdrawn until 2006).
Garnisheed wages. If your employer uses your wages to pay your debts, or
if your wages are attached or garnisheed, the full amount is constructively
received by you. You must include these wages in income for the year you
would have received them.
Brokerage and other accounts. Profits from a brokerage account, or
similar account, are fully taxable in the year you earn them. This is true
even if:
1.
You do not withdraw the earnings,
2.
The credit balance in the account may be reduced or eliminated by
losses in later years, or
3.
Current profits are used to reduce or eliminate a debit balance from
previous years.
Debts paid for you. If another person cancels or pays your debts (but not
as a gift or loan), you have constructively received the amount and
generally must include it in your gross income for the year. See Canceled
Debts in chapter 12 for more information.
Payment to third party. If a third party is paid income from property you
own, you have constructively received the income. It is the same as if you
had actually received the income and paid it to the third party.
Payment to an agent. Income an agent receives for you is income you
constructively received in the year the agent receives it. If you indicate
in a contract that your income is to be paid to another person, you must
include the amount in your gross income when the other person receives it.
Check received or available. A valid check that was made available to you
before the end of the tax year is constructively received by you in that
year. A check that was “made available to you” includes a check you have
already received, but not cashed or deposited. It also includes, for
example, your last paycheck of the year that your employer made available
for you to pick up at the office before the end of the year. It is
constructively received by you in that year whether or not you pick it up
before the end of the year or wait to receive it by mail after the end of
the year.
No constructive receipt. There may be facts to show that you did not
constructively receive income.
Example.
Alice Johnson, a teacher, agreed to her school board's condition that, in
her absence, she would receive only the difference between her regular
salary and the salary of a substitute teacher hired by the school board.
Therefore, Alice did not constructively receive the amount by which her
salary was reduced to pay the substitute teacher.
Accrual method. If you use an accrual method, you generally report income
when you earn it, rather than when you receive it. You generally deduct
your expenses when you incur them, rather than when you pay them.
Income paid in advance. An advance payment of income is generally
included in gross income in the year you receive it. Your method of
accounting does not matter as long as the income is available to you. An
advance payment may include rent or interest you receive in advance and pay
for services you will perform later.
A limited deferral until the next tax year may be allowed for certain
advance payments. See Publication 538 for specific information.
Additional information. For more information on accounting methods,
including how to change your accounting method, get Publication 538.
Social Security Number
You must enter your social security number (SSN) in the space provided on
your return. Be sure the SSN on your return is the same as the SSN on your
social security card. If you are married, enter the SSNs for both you and
your spouse, whether you file jointly or separately.
If you are filing a joint return, write the SSNs in the same order as the
names. Use this same order in submitting other forms and documents to the IRS.
Name change. If you changed your name because of marriage, divorce, etc.,
immediately notify your Social Security Administration (SSA) office so the
name on your tax return is the same as the one the SSA has on its records.
This will help prevent delays in issuing your refund and safeguard your
future social security benefits.
Dependent's social security number. You must provide the SSN of each
dependent you claim, regardless of the dependent's age. This requirement
applies to all dependents (not just your children) claimed on your tax return.
Exception. If your child was born and died in 2005 and you do not have
an SSN for the child, you may attach a copy of the child's birth
certificate instead. If you do, enter “DIED” in column (2) of line 6c (Form
1040 or 1040A).
No social security number. File Form SS-5, Application for a Social
Security Card, with your local SSA office to get an SSN for yourself or
your dependent. It usually takes about 2 weeks to get an SSN. If you or
your dependent is not eligible for an SSN, see Individual taxpayer
identification number (ITIN), later.
If you are a U.S. citizen or resident alien, you must show proof of age,
identity, and citizenship or alien status with your Form SS-5. If you are
12 or older and have never been assigned an SSN, you must appear in person
with this proof at an SSA office.
Form SS-5 is available at any SSA office, on the Internet at
www.socialsecurity.gov, or by calling 1-800-772-1213. If you have any
questions about which documents you can use as proof of age, identity, or
citizenship, contact your SSA office.
If your dependent does not have an SSN by the time your return is due,
you may want to ask for an extension of time to file, as explained earlier
under When Do I Have To File.
If you do not provide a required SSN or if you provide an incorrect SSN,
your tax may be increased and any refund may be reduced.
Adoption taxpayer identification number (ATIN). If you are in the process
of adopting a child who is a U.S. citizen or resident and cannot get an SSN
for the child until the adoption is final, you can apply for an ATIN to use
instead of an SSN.
File Form W-7A, Application for Taxpayer Identification Number for
Pending U.S. Adoptions, with the IRS to get an ATIN if all of the following
are true.
*
You have a child living with you who was placed in your home for
legal adoption.
*
You cannot get the child's existing SSN even though you have made a
reasonable attempt to get it from the birth parents, the placement agency,
and other persons.
*
You cannot get an SSN for the child from the SSA because, for
example, the adoption is not final.
*
You cannot get an individual taxpayer identification number (ITIN)
(discussed later) for the child.
*
You are eligible to claim the child as a dependent on your tax return.
After the adoption is final, you must apply for an SSN for the child. You
cannot continue using the ATIN.
See Form W-7A for more information.
Nonresident alien spouse. If your spouse is a nonresident alien and you
file a joint or separate return, your spouse must have either an SSN or an
ITIN. If your spouse is not eligible for an SSN, see the next discussion.
Individual taxpayer identification number (ITIN). The IRS will issue you
an ITIN if you are a nonresident or resident alien and you do not have and
are not eligible to get an SSN. To apply for an ITIN, file Form W-7 with
the IRS. It usually takes about 4 to 6 weeks to get an ITIN. Enter this
number on your tax return wherever your SSN is requested.
Tip
If you are applying for an ITIN in order to file your tax return, attach
your completed tax return to your Form W-7. See the Form W-7 instructions
for how and where to file.
Alien dependent. If your dependent is a nonresident or resident alien who
does not have and is not eligible to get an SSN, file Form W-7 with the IRS
to apply for an ITIN. Enter this number on your return wherever the
dependent's SSN is requested.
Caution
An ITIN is for tax use only. It does not entitle you or your dependent to
social security benefits or change the employment or immigration status of
either of you under U.S. law.
Penalty for not providing social security number. If you do not include
your SSN or the SSN of your spouse or dependent as required, you may have
to pay a penalty. See the discussion on Penalties, later, for more information.
SSN on correspondence. If you write to the IRS about your tax account, be
sure to include your SSN (and the name and SSN of your spouse, if you filed
a joint return) in your correspondence. Because your SSN is used to
identify your account, this helps the IRS respond to your correspondence
promptly.
Presidential Election Campaign Fund
This fund helps pay for Presidential election campaigns. The fund reduces
candidates' dependence on large contributions from individuals and groups
and places candidates on an equal financial footing in the general
election. If you want $3 to go to this fund, check the box. If you are
filing a joint return, your spouse can also have $3 go to the fund. If you
check a box, your tax or refund will not change.
Computations
The following information on entering numbers on your tax return may be
useful in making the return easier to complete.
Rounding off dollars. You may round off cents to whole dollars on your
return and schedules. If you do round to whole dollars, you must round all
amounts. To round, drop amounts under 50 cents and increase amounts from 50
to 99 cents to the next dollar. For example, $1.39 becomes $1 and $2.50
becomes $3.
If you have to add two or more amounts to figure the amount to enter on a
line, include cents when adding the amounts and round off only the total.
Example.
You receive two Forms W-2: one showing wages of $5,000.55 and one showing
wages of $18,500.73. On Form 1040, line 7, you would enter $23,501
($5,000.55 + $18,500.73 = $23,501.28), not $23,502 ($5,001 + $18,501).
Equal amounts. If you are asked to enter the smaller or larger of two
equal amounts, enter that amount.
Example.
Line 1 is $500. Line 3 is $500. Line 5 asks you to enter the smaller of
line 1 or 3. Enter $500 on line 5.
Negative amounts. If you need to enter a negative amount, put the amount
in parentheses rather than using a minus sign. To combine positive and
negative amounts, add all the positive amounts together and then subtract
the negative amounts.
Attachments
Depending on the form you file and the items reported on your return, you
may have to complete additional schedules and forms and attach them to your
return.
Tip
You may be able to file a paperless return using IRS e-file . There's
nothing to sign, attach, or mail, not even your Forms W-2.
Form W-2. Form W-2 is a statement from your employer of wages and other
compensation paid to you and taxes withheld from your pay. You should have
a Form W-2 from each employer. Be sure to attach a copy of Form W-2 in the
place indicated on the front page of your return. Attach it only to the
front page of your return, not to any attachments. For more information,
see Form W-2 in chapter 4.
If you received a Form 1099-R, Distributions From Pensions, Annuities,
Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.,
showing federal income tax withheld, attach a copy of that form in the
place indicated on the front page of your return.
Form 1040EZ. There are no additional schedules to file with Form 1040EZ.
Form 1040A. Attach the additional schedules and forms that you had to
complete behind the Form 1040A in order by number. If you are filing
Schedule EIC, put it last. Do not attach items unless required to do so.
Form 1040. Attach any forms and schedules behind Form 1040 in order of
the “Attachment Sequence Number” shown in the upper right corner of the
form or schedule. Then arrange all other statements or attachments in the
same order as the forms and schedules they relate to and attach them last.
Do not attach items unless required to do so.
Third Party Designee
You can authorize the IRS to discuss your return with a friend, family
member, or any other person you choose. If you check the “Yes” box in the
Third party designee area of your 2005 tax return and provide the
information required, you are authorizing:
1.
The IRS to call the designee to answer any questions that arise
during the processing of your return, and
2.
The designee to:
1.
Give information that is missing from your return to the IRS,
2.
Call the IRS for information about the processing of your
return or the status of your refund or payments,
3.
Receive copies of notices or transcripts related to your
return, upon request, and
4.
Respond to certain IRS notices about math errors, offsets (see
Refunds, later), and return preparation.
The authorization will automatically end no later than the due date
(without any extensions) for filing your 2006 tax return. This is April 16,
2007, for most people.
See your form instructions for more information.
Tip
If you want to allow the paid preparer who signed your return to discuss it
with the IRS, just enter “Preparer” in the space for the designee's name.
Signatures
You must sign and date your return. If you file a joint return, both you
and your spouse must sign the return, even if only one of you had income.
Caution
If you file a joint return, both spouses are generally liable for the tax,
and the entire tax liability may be assessed against either spouse. See
chapter 2.
Tip
If you e-file your return, you can use an electronic signature to sign your
return. See Does My Return Have To Be on Paper , earlier.
If you are due a refund, it cannot be issued unless you have signed your
return.
Enter your occupation in the space provided in the signature section. If
you file a joint return, enter both your occupation and your spouse's
occupation. Entering your daytime phone number may help speed the
processing of your return.
When someone can sign for you. You can appoint an agent to sign your
return if you are:
1.
Unable to sign the return because of disease or injury,
2.
Absent from the United States for a continuous period of at least 60
days before the due date for filing your return, or
3.
Given permission to do so by the IRS office in your area.
Power of attorney. A return signed by an agent in any of these cases must
have a power of attorney (POA) attached that authorizes the agent to sign
for you. You can use a POA that states that the agent is granted authority
to sign the return, or you can use Form 2848, Power of Attorney and
Declaration of Representative. Part I of Form 2848 must state that the
agent is granted authority to sign the return.
Unable to sign. If the taxpayer is mentally incompetent and cannot sign
the return, it must be signed by a court-appointed representative who can
act for the taxpayer.
If the taxpayer is mentally competent but physically unable to sign the
return or POA, a valid “signature” is defined under state law. It can be
anything that clearly indicates the taxpayer's intent to sign. For example,
the taxpayer's “X” with the signatures of two witnesses might be considered
a valid signature under a state's law.
Spouse unable to sign. If your spouse is unable to sign for any reason,
see Signing a joint return in chapter 2.
Child's return. If a child has to file a tax return but cannot sign the
return, the child's parent, guardian, or another legally responsible person
must sign the child's name, followed by the words “By (your signature),
parent for minor child.”
Paid Preparer
Generally, anyone you pay to prepare, assist in preparing, or review your
tax return must sign it and fill in the other blanks in the paid preparer's
area of your return.
A paid preparer can sign the return manually or use a rubber stamp,
mechanical device, or computer software program. The preparer is personally
responsible for affixing his or her signature to the return.
If the preparer is self-employed (that is, not employed by any person or
business to prepare the return), he or she should check the self-employed
box in the Paid Preparer's Use Only space on the return.
The preparer must give you a copy of your return in addition to the copy
filed with the IRS.
If you prepare your own return, leave this area blank. If another person
prepares your return and does not charge you, that person should not sign
your return.
If you have questions about whether a preparer must sign your return,
contact any IRS office.
Refunds
When you complete your return, you will determine if you paid more income
tax than you owed. If so, you can get a refund of the amount you overpaid
or, if you file Form 1040 or Form 1040A, you can choose to apply all or
part of the overpayment to your next year's (2006) estimated tax. You
cannot have your overpayment applied to your 2006 estimated tax if you file
Form 1040EZ.
Caution
If you choose to have a 2005 overpayment applied to your 2006 estimated
tax, you cannot change your mind and have any of it refunded to you after
the due date (without extensions) of your 2005 return.
Follow the form instructions to complete the entries to claim your refund
and/or to apply your overpayment to your 2006 estimated tax.
Tip
If your refund for 2005 is large, you may want to decrease the amount of
income tax withheld from your pay in 2006. See chapter 4 for more information.
Choose Direct Deposit
Instead of getting a paper check, you may be able to have your refund
deposited directly into your account at a bank or other financial
institution. Follow the form instructions to request direct deposit.
If the direct deposit cannot be done, the IRS will send a check instead.
Overpayment less than one dollar. If your overpayment is less than one
dollar, you will not get a refund unless you ask for it in writing.
Cashing your refund check. Cash your tax refund check soon after you
receive it. Checks not cashed within 12 months of the date they are issued
will be canceled and the proceeds returned to the IRS.
If your check has been canceled, you can apply to the IRS to have it
reissued.
Refund more or less than expected. If you receive a check for a refund
you are not entitled to, or for an overpayment that should have been
credited to estimated tax, do not cash the check. Call the IRS.
If you receive a check for more than the refund you claimed, do not cash
the check until you receive a notice explaining the difference.
If your refund check is for less than you claimed, it should be
accompanied by a notice explaining the difference. Cashing the check does
not stop you from claiming an additional amount of refund.
If you did not receive a notice and you have any questions about the
amount of your refund, you should wait 2 weeks. If you still have not
received a notice, call the IRS.
Offset against debts. If you are due a refund but have not paid certain
amounts you owe, all or part of your refund may be used to pay all or part
of the past-due amount. This includes past-due federal income tax, other
federal debts (such as student loans), state income tax, and child and
spousal support payments. You will be notified if the refund you claimed
has been offset against your debts.
Joint return and injured spouse. When a joint return is filed and only
one spouse owes a past-due amount, the other spouse can be considered an
injured spouse. An injured spouse can get a refund for his or her share of
the overpayment that would otherwise be used to pay the past-due amount.
To be considered an injured spouse, you must:
1.
File a joint return, and
2.
Have reported income (such as wages, interest, etc.), or
3.
Have made and reported tax payments (such as federal income tax
withheld from wages or estimated tax payments), or claimed the earned
income credit or other refundable credit, and
4.
Not be required to pay the past-due amount.
Note.
If the injured spouse's permanent home is in a community property state,
then the injured spouse must only meet (1) and (4) above. For more
information, see Publication 555, Community Property.
If you are an injured spouse, you must file Form 8379, Injured Spouse
Allocation, to have your portion of the overpayment refunded to you. Follow
the instructions for the form.
If you have not filed your joint return and you know that your joint
refund will be offset, file Form 8379 with your return. You should receive
your refund within 14 weeks from the date the paper return is filed or
within 11 weeks from the date the return is filed electronically.
If you filed your joint return and your joint refund was offset, file
Form 8379 by itself. When filed after offset, it can take up to 8 weeks to
receive your refund. Do not attach the previously filed tax return, but do
include copies of all Forms W-2 and W-2G for both spouses and any Forms
1099 that show income tax withheld.
Generally, you must file Form 8379 no later than 2 years after the date
of the Notice of Offset. A separate Form 8379 must be filed for each tax
year to be considered.
Caution
An injured spouse claim is different from an innocent spouse relief
request. An injured spouse uses Form 8379 to request the division of the
tax overpayment attributed to each spouse. An innocent spouse uses Form
8857, Request for Innocent Spouse Relief, to request relief from joint
liability for tax, interest, and penalties on a joint return for items of
the other spouse (or former spouse) that were incorrectly reported on the
joint return. For information on innocent spouses, see Relief from joint
liability under Filing a Joint Return in chapter 2.
Amount You Owe
When you complete your return, you will determine if you have paid the full
amount of tax that you owe. If you owe additional tax, you should pay it
with your return.
If the IRS figures your tax for you, you will receive a bill for any tax
that is due. You should pay this bill within 30 days (or by the due date of
your return, if later). See Tax Figured by IRS in chapter 30.
Caution
If you do not pay your tax when due, you may have to pay a failure-to-pay
penalty. See Penalties , later. For more information about your balance
due, see Publication 594, The IRS Collection Process.
Tip
If the amount you owe for 2005 is large, you may want to increase the
amount of income tax withheld from your pay or make estimated tax payments
for 2006. See chapter 4 for more information.
How To Pay
If you have an amount due on your tax return, you can pay by check, money
order, or credit card. If you filed electronically, you also may be able to
make your payment electronically.
Tip
You do not have to pay if the amount you owe is less than $1.
Check or money order. If you pay by check or money order, make it out to
the “United States Treasury.” Show your correct name, address, SSN, daytime
phone number, and the tax year and form number on the front of your check
or money order. If you are filing a joint return, enter the SSN shown first
on your tax return.
For example, if you file Form 1040 for 2005 and you owe additional tax,
show your name, address, SSN, daytime phone number, and “2005 Form 1040” on
the front of your check or money order. If you file an amended return (Form
1040X) for 2004 and you owe tax, show your name, address, SSN, daytime
phone number, and “2004 Form 1040X” on the front of your check or money order.
Enclose your payment with your return, but do not attach it to the form.
If you filed Form 1040, please complete Form 1040-V, Payment Voucher, and
enclose it with your payment and return. Form 1040-V will help us process
your payment more accurately and efficiently. Follow the instructions that
come with the form.
Do not mail cash with your return. If you pay cash at an IRS office, keep
the receipt as part of your records.
Payment not honored. If your check or money order is not honored by your
bank (or other financial institution) and the IRS does not receive the
funds, you still owe the tax. In addition, you may be subject to a
dishonored check penalty.
Electronic payment options. Electronic payment options are convenient,
safe, and secure methods for paying individual income taxes. There's no
check to write, money order to buy, or voucher to mail. Payments can be
made 24 hours a day, 7 days a week.
Credit card. You can use your American Express®, Discover®, MasterCard®,
or Visa® credit card.
To pay by credit card, call a service provider and follow the recorded
instructions. You can also pay by credit card over the Internet using a
service provider's website.
The service providers charge a convenience fee based on the amount you
are paying. Fees may vary between the providers. You will be told what the
fee is during the transaction and will have the option to continue or end
the transaction. You may also obtain the convenience fee by calling the
service provider's automated customer service telephone number or visiting
their respective website.
Caution
Do not add the convenience fee to your tax payment.
If you pay by credit card, write the confirmation number you were given
at the end of the transaction and the tax payment amount in the upper left
corner of page 1 of your tax return.
Service Providers
To make a payment, call 1-888-PAY-1040 SM
or 1-888-729-1040
For Customer Service 1-888-658-5465
Web Address www.PAY1040.com
Official Payments Corporation
To make a payment, call 1-800-2PAY-TAX SM
or 1-800-272-9829
For Customer Service 1-877-754-4413
Web Address www.officialpayments.com
You can e-file and pay in a single step by authorizing a credit card
payment. This option is available through some tax software packages and
tax professionals. You can also pay by credit card using the telephone or
the Internet.
Electronic funds withdrawal. You can e-file and pay in a single step by
authorizing an electronic funds withdrawal from your checking or savings
account. If you select this payment option, you will need to have your
account number, your financial institution's routing transit number, and
account type (checking or savings). You can schedule the payment for any
future date up to and including the return due date (April 17, 2006).
Caution
Be sure to check with your financial institution to make sure that an
electronic funds withdrawal is allowed and to get the correct routing and
account numbers.
Electronic Federal Tax Payment System (EFTPS). EFTPS is a free tax
payment system that all individual and business taxpayers can use. You can
make payments online or by phone.
Here are just a few of the benefits of this easy-to-use system.
*
Convenient and flexible. You can use it to schedule payments in
advance. For example, you can schedule estimated tax payments (Form
1040-ES) or installment agreement payments weekly, monthly, or quarterly.
*
Fast and accurate. You can make a tax payment in minutes. Because
there are verification steps along the way, you can check and review your
information before sending it.
*
Safe and secure. It offers the highest available levels of security.
Every transaction receives an immediate confirmation.
For more information or details on enrolling, visit www.EFTPS.gov or call
EFTPS Customer Service at 1-800-316-6541 (individual) or 1-800-555-4477
(business).
Estimated tax payments. Do not include any 2006 estimated tax payment in
the payment for your 2005 income tax return. See chapter 4 for information
on how to pay estimated tax.
Interest
Interest is charged on tax you do not pay by the due date of your return.
Interest is charged even if you get an extension of time for filing.
Tip
If the IRS figures your tax for you, interest cannot start earlier than the
31st day after the IRS sends you a bill. For information, see Tax Figured
by IRS in chapter 30.
Interest on penalties. Interest is charged on the failure-to-file
penalty, the accuracy-related penalty, and the fraud penalty from the due
date of the return (including extensions) to the date of payment. Interest
on other penalties starts on the date of notice and demand, but is not
charged on penalties paid within 21 calendar days from the date of the
notice (or within 10 business days if the notice is for $100,000 or more).
Interest due to IRS error or delay. All or part of any interest you were
charged can be forgiven if the interest is due to an unreasonable error or
delay by an officer or employee of the IRS in performing a ministerial or
managerial act.
A ministerial act is a procedural or mechanical act that occurs during
the processing of your case. A managerial act includes personnel transfers
and extended personnel training. A decision concerning the proper
application of federal tax law is not a ministerial or managerial act.
The interest can be forgiven only if you are not responsible in any
important way for the error or delay and the IRS has notified you in
writing of the deficiency or payment. For more information, get Publication
556, Examination of Returns, Appeal Rights, and Claims for Refund.
Interest and certain penalties may also be suspended for a limited period
if you filed your return by the due date (including extensions) and the IRS
does not provide you with a notice specifically stating your liability and
the basis for it before the close of the 18-month period beginning on the
later of:
*
The date the return is filed, or
*
The due date of the return without regard to extensions.
For more information, get Publication 556.
Installment Agreement
If you cannot pay the full amount due with your return, you can ask to make
monthly installment payments for the full or a partial amount. However, you
will be charged interest and may be charged a late payment penalty on the
tax not paid by April 17, 2006, even if your request to pay in installments
is granted. If your request is granted, you must also pay a fee. To limit
the interest and penalty charges, pay as much of the tax as possible with
your return. But before requesting an installment agreement, you should
consider other less costly alternatives, such as a bank loan.
To ask for an installment agreement, use Form 9465, Installment Agreement
Request. You should receive a response to your request within 30 days. But
if you file your return after March 31, it may take longer for a reply.
In addition to paying by check or money order, you can use a credit card or
EFTPS to make installment agreement payments. See Credit card and
Electronic Federal Tax Payment System (EFTPS), under How To Pay, earlier.
Guaranteed availability of installment agreement. The IRS must agree to
accept the full payment of your tax liability in installments if, as of the
date you offer to enter into the agreement:
1.
Your total taxes (not counting interest, penalties, additions to the
tax, or additional amounts) do not exceed $10,000,
2.
In the last 5 years, you (and your spouse if the liability relates to
a joint return) have not:
1.
Failed to file any required income tax return,
2.
Failed to pay any tax shown on any such return, or
3.
Entered into an installment agreement for the payment of any
income tax,
3.
You show you cannot pay your income tax in full when due,
4.
The tax will be paid in full in 3 years or less, and
5.
You agree to comply with the tax laws while your agreement is in effect.
Gift To Reduce Debt Held by the Public
Address you may need
You can make a contribution (gift) to reduce debt held by the public. If
you wish to do so, make a separate check payable to “Bureau of the Public
Debt.”
Send your check to:
Bureau of the Public Debt
Department G
P.O. Box 2188
Parkersburg, WV 26106-2188.
Or, enclose your separate check in the envelope with your income tax
return. Do not add this gift to any tax you owe.
You can deduct this gift as a charitable contribution on next year's tax
return if you itemize your deductions on Schedule A (Form 1040).
Peel-Off Address Label
After you have completed your return, peel off the label with your name and
address from the back of your tax return package and place it in the
appropriate area of the Form 1040, Form 1040A, or Form 1040EZ you send to
the IRS. If you have someone prepare your return, give that person your
label to use on your tax return.
If you file electronically and you are not eligible or choose not to sign
your return using your PIN, use your label on Form 8453 or 8453-OL. (More
information on electronic filing is found earlier in this chapter.)
The label helps the IRS to correctly identify your account. It also saves
processing costs and speeds up processing so that refunds can be issued sooner.
Caution
You must write your SSN in the spaces provided on your tax return.
Correcting the label. Make necessary name and address changes on the
label. If you have an apartment number that is not shown on the label,
please write it in. If you changed your name, see the discussion under
Social Security Number, earlier.
No label. If you did not receive a tax return package with a label, print
or type your name and address in the spaces provided at the top of Form
1040 or Form 1040A. If you are married filing a separate return, do not
enter your spouse's name in the space at the top. Instead, enter his or her
name in the space provided on line 3.
If you file Form 1040EZ and you do not have a label, print or type this
information in the spaces provided.
P.O. box. If your post office does not deliver mail to your street
address and you have a P.O. box, print your P.O. box number on the line for
your present home address instead of your street address.
Foreign address. If your address is outside the United States or its
possessions or territories, enter the information on the line for “City,
town or post office, state, and ZIP code” in the following order:
1.
City,
2.
Province or state, and
3.
Name of foreign country. (Do not abbreviate the name of the country.)
Follow the country's practice for entering the postal code.
Where Do I File?
After you complete your return, you must send it to the IRS. You can mail
it or you may be able to file it electronically. See Does My Return Have To
Be on Paper, earlier.
Mailing your return. If an addressed envelope came with your tax forms
package, you should mail your return in that envelope.
If you do not have an addressed envelope or if you moved during the year,
mail your return to the address shown at the end of this publication for
the area where you now live.
What Happens After I File?
After you send your return to the IRS, you may have some questions. This
section discusses concerns you may have about recordkeeping, your refund,
and what to do if you move.
What Records Should I Keep?
Records you should keep
You must keep records so that you can prepare a complete and accurate
income tax return. The law does not require any special form of records.
However, you should keep all receipts, canceled checks or other proof of
payment, and any other records to support any deductions or credits you claim.
If you file a claim for refund, you must be able to prove by your records
that you have overpaid your tax.
How long to keep records. You must keep your records for as long as they
are important for the federal tax law.
Keep records that support an item of income or a deduction appearing on a
return until the period of limitations for the return runs out. (A period
of limitations is the period of time after which no legal action can be
brought.) For assessment of tax you owe, this generally is 3 years from the
date you filed the return. For filing a claim for credit or refund, this
generally is 3 years from the date you filed the original return, or 2
years from the date you paid the tax, whichever is later. Returns filed
before the due date are treated as filed on the due date.
If you did not report income that you should have reported on your
return, and it is more than 25% of the income shown on the return, the
period of limitations does not run out until 6 years after you filed the
return. If a return is false or fraudulent with intent to evade tax, or if
no return is filed, an action can generally be brought at any time.
You may need to keep records relating to the basis of property longer
than the period of limitations. Keep those records as long as they are
important in figuring the basis of the original or replacement property.
Generally, this means for as long as you own the property and, after you
dispose of it, for the period of limitations that applies to you. See
chapter 13 for information on basis.
Note.
If you receive a Form W-2, keep Copy C until you begin receiving social
security benefits. This will help protect your benefits in case there is a
question about your work record or earnings in a particular year. Review
the information shown on your annual (for workers over age 25) Social
Security Statement.
Copies of returns. You should keep copies of tax returns you have filed
and the tax forms package as part of your records. They may be helpful in
amending filed returns or preparing future ones.
If you need a copy of a prior year tax return, you can get it from the
IRS. Use Form 4506, Request for Copy of Tax Return. There is a charge for a
copy of a return, which you must pay with Form 4506. It may take up to 60
days to process your request.
waived fee
If your main home, principal place of business, or tax records are located
in a Presidentially declared disaster area, the charge will be waived.
Transcript of tax return. If you just need information from your return,
you can order a transcript by calling 1-800-829-1040, or using Form 4506-T,
Request for Transcript of Tax Return. There is no fee for a transcript.
You can request the following items.
Return transcript. This includes most of the line items of a tax return
as filed with the IRS. Return transcripts are available for the current
year and returns processed during the prior 3 processing years. Most
requests will be processed within 10 business days.
Account transcript. This contains information on the financial status of
the account, such as payments made on the account, penalty assessments, and
adjustments made by you or the IRS after the return was filed. Return
information is limited to items such as tax liability and estimated tax
payments. Account transcripts are available for most returns. Most requests
will be processed within 20 business days.
Record of account. This is a combination of line item information and
later adjustments to the account. This information is available for the
current year and 3 prior tax years. Most requests will be processed within
20 business days.
More information. For more information on recordkeeping, get Publication
552, Recordkeeping for Individuals.
Interest on Refunds
If you are due a refund, you may get interest on it. The interest rates are
adjusted quarterly.
If the refund is made within 45 days after the due date of your return, no
interest will be paid. If you file your return after the due date
(including extensions), no interest will be paid if the refund is made
within 45 days after the date you filed. If the refund is not made within
this 45-day period, interest will be paid from the due date of the return
or from the date you filed, whichever is later.
Accepting a refund check does not change your right to claim an additional
refund and interest. File your claim within the period of time that
applies. See Amended Returns and Claims for Refund, later. If you do not
accept a refund check, no more interest will be paid on the overpayment
included in the check.
Interest on erroneous refund. All or part of any interest you were
charged on an erroneous refund generally will be forgiven. Any interest
charged for the period before demand for repayment was made will be
forgiven unless:
1.
You, or a person related to you, caused the erroneous refund in any
way, or
2.
The refund is more than $50,000.
For example, if you claimed a refund of $100 on your return, but the IRS
made an error and sent you $1,000, you would not be charged interest for
the time you held the $900 difference. You must, however, repay the $900
when the IRS asks.
Past-Due Refund
You can check on the status of your 2005 refund if it has been at least 6
weeks from the date you filed your return (3 weeks if you filed
electronically). Be sure to have a copy of your 2005 tax return available
because you will need to know the filing status, the first SSN shown on the
return, and the exact whole-dollar amount of the refund. To check on your
refund, do one of the following.
*
Go to www.irs.gov, and click on “Where's My Refund.”
*
Call 1-800-829-4477 24 hours a day, 7 days a week for automated
refund information.
*
Call 1-800-829-1954 during the hours shown in your form instructions.
Change of Address
If you have moved, file your return using your new address.
If you move after you filed your return, you should give the IRS clear and
concise written notification of your change of address. Send the
notification to the Internal Revenue Service Center serving your old
address. You can use Form 8822, Change of Address. If you are expecting a
refund, also notify the post office serving your old address. This will
help in forwarding your check to your new address (unless you chose direct
deposit of your refund).
Be sure to include your SSN (and the name and SSN of your spouse, if you
filed a joint return) in any correspondence with the IRS.
What If I Made a Mistake?
Errors may delay your refund or result in notices being sent to you. If you
discover an error, you can file an amended return or claim for refund.
Amended Returns and Claims for Refund
You should correct your return if, after you have filed it, you find that:
1.
You did not report some income,
2.
You claimed deductions or credits you should not have claimed,
3.
You did not claim deductions or credits you could have claimed, or
4.
You should have claimed a different filing status. (Once you file a
joint return, you cannot choose to file separate returns for that year
after the due date of the return. However, an executor may be able to make
this change for a deceased spouse.)
If you need a copy of your return, see Copies of returns under What Records
Should I Keep, earlier in this chapter.
Form 1040X. Use Form 1040X, Amended U.S. Individual Income Tax Return, to
correct a return you have already filed. An amended tax return cannot be
filed electronically under the e-file system.
Completing Form 1040X. On Form 1040X, write your income, deductions, and
credits as you originally reported them on your return, the changes you are
making, and the corrected amounts. Then figure the tax on the corrected
amount of taxable income and the amount you owe or your refund.
If you owe tax, pay the full amount with Form 1040X. The tax owed will
not be subtracted from any amount you had credited to your estimated tax.
If you cannot pay the full amount due with your return, you can ask to
make monthly installment payments. See Installment Agreement, earlier.
If you overpaid tax, you can have all or part of the overpayment refunded
to you, or you can apply all or part of it to your estimated tax. If you
choose to get a refund, it will be sent separately from any refund shown on
your original return.
Filing Form 1040X. After you finish your Form 1040X, check it to be sure
that it is complete. Do not forget to show the year of your original return
and explain all changes you made. Be sure to attach any forms or schedules
needed to explain your changes. Mail your Form 1040X to the Internal
Revenue Service Center serving the area where you now live (as shown in the
instructions to the form). However, if you are filing Form 1040X in
response to a notice you received from the IRS, mail it to the address
shown on the notice. Do not use the addresses listed at the end of this
publication.
File a separate form for each tax year involved.
Time for filing a claim for refund. Generally, you must file your claim
for a credit or refund within 3 years after the date you filed your
original return or within 2 years after the date you paid the tax,
whichever is later. Returns filed before the due date (without regard to
extensions) are considered filed on the due date (even if the due date was
a Saturday, Sunday, or legal holiday). These time periods are suspended
while you are financially disabled, discussed later.
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