J.K. Lasser's Your Income Tax 2010 E-Book

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: J.K. Lasser
• Sprache: Englisch

Seitenzahl: 2747

Veröffentlichungsjahr: 2010

Beschreibung

America's number one bestselling tax guide offers the best balance of thoroughness, organization, and usability

For over half a century, more than 39 million Americans have turned to J.K. Lasser for easy-to-follow, expert advice and guidance on planning and filing their taxes. Written by a team of tax specialists, J.K. Lasser's Your Income Tax 2010 includes all the outstanding features that have made this book the nation's all-time top-selling tax guide.

As an added value, you can gain direct access to dozens of bonuses through jklasser.com, including links to the latest tax forms from the IRS, up-to-the-minute tax law changes, small business help, and much more. The book of choice for today's serious taxpayer Your Income Tax 2010 contains

• Over 2,500 easy-to-use tax planning tips and strategies
• Easy-to-understand coverage of the year's tax law changes
• Filing tips and instructions to help you prepare your 2009 return
• Quick reference section that highlights what's new for 2009
• Quick topic index to help pinpoint the biggest money-saving deductions
• Advice for customers whose use software or CPAs to file their taxes

Filled with expert advice and guidance, J.K. Lasser's Your Income Tax 2010 will help you plan and file your 2009 tax return in the most efficient way possible.

Leseprobe

Table of Contents

Title Page

Copyright Page

How To Use Your Income Tax 2010

What’s New for 2009

PART 1 - Filing Basics

Do You Have To File a 2009 Tax Return?

Filing Tests for Dependents: 2009 Returns

Where To File

Key to Service Center Map

Filing Deadlines (on or Before)

Choosing Which Tax Form to File

Chapter 1 - Filing Status

1.1 Which Filing Status Should You Use?

1.2 Tax Rates Based on Filing Status

1.3 Filing Separately Instead of Jointly

1.4 Filing a Joint Return

1.5 Nonresident Alien Spouse

1.6 Community Property Rules

1.7 Innocent Spouse Rules

1.8 Separate Liability Election for Former Spouses

1.9 Equitable Relief

1.10 Death of Your Spouse in 2009

1.11 Qualifying Widow(er) Status If Your Spouse Died in 2008 or 2007

1.12 Qualifying as Head of Household

1.13 Filing for Your Child

1.14 Return for Deceased

1.15 Return for an Incompetent Person

1.16 How a Nonresident Alien Is Taxed

1.17 How a Resident Alien Is Taxed

1.18 Who Is a Resident Alien?

1.19 When an Alien Leaves the United States

1.20 Expatriation Tax

PART 2 - Reporting Your Income

Chapter 2 - Wages, Salary, and Other Compensation

2.1 Salary and Wage Income

2.2 Constructive Receipt of Year-End Paychecks

2.3 Pay Received in Property Is Taxed

2.4 Commissions Taxable When Credited

2.5 Unemployment Benefits

2.6 Strike Pay Benefits and Penalties

2.7 Nonqualified Deferred Compensation

2.8 Did You Return Wages Received in a Prior Year?

2.9 Waiver of Executor’s and Trustee’s Commissions

2.10 Life Insurance Benefits

2.11 Educational Benefits for Employees’ Children

2.12 Sick Pay Is Taxable

2.13 Workers’ Compensation Is Tax Free

2.14 Disability Pensions

2.15 Stock Appreciation Rights (SARs)

2.16 Stock Options

2.17 Restricted Stock

Chapter 3 - Fringe Benefits

3.1 Tax-Free Health and Accident Coverage Under Employer Plans

3.2 Health Savings Accounts (HSAs) and Archer MSAs

3.3 Reimbursements and Other Tax-Free Payments From Employer Health and ...

3.4 Group-Term Life Insurance Premiums

3.5 Dependent Care Assistance

3.6 Adoption Benefits

3.7 Education Assistance Plans

3.8 Company Cars, Parking, and Transit Passes

3.9 Working Condition Fringe Benefits

3.10 De Minimis Fringe Benefits

3.11 Employer-Provided Retirement Advice

3.12 Employee Achievement Awards

3.13 Employer-Furnished Meals or Lodging

3.14 Minister’s Rental or Housing Allowance

3.15 Cafeteria Plans Provide Choice of Benefits

3.16 Flexible Spending Arrangements

3.17 Company Services Provided at No Additional Cost

3.18 Discounts on Company Products or Services

Chapter 4 - Dividend and Interest Income

4.1 Reporting Dividends and Mutual-Fund Distributions

4.2 Qualified Corporate Dividends Taxed at Favorable Capital Gain Rates

4.3 Dividends From a Partnership, S Corporation, Estate, or Trust

4.4 Real Estate Investment Trust (REIT) Dividends

4.5 Taxable Dividends of Earnings and Profits

4.6 Stock Dividends on Common Stock

4.7 Dividends Paid in Property

4.8 Taxable Stock Dividends

4.9 Who Reports the Dividends

4.10 Year Dividends Are Reported

4.11 Distribution Not Out of Earnings: Return of Capital

4.12 Reporting Interest on Your Tax Return

4.13 Interest on Frozen Accounts Not Taxed

4.14 Interest Income on Debts Owed to You

4.15 Reporting Interest on Bonds Bought or Sold

4.16 Forfeiture of Interest on Premature Withdrawals

4.17 Amortization of Bond Premium

4.18 Discount on Bonds

4.19 Reporting Original Issue Discount on Your Return

4.20 Reporting Income on Market Discount Bonds

4.21 Discount on Short-Term Obligations

4.22 Stripped Coupon Bonds and Stock

4.23 Sale or Retirement of Bonds and Notes

4.24 State and City Interest Generally Tax Exempt

4.25 Taxable State and City Interest

4.26 Tax-Exempt Bonds Bought at a Discount

4.27 Treasury Bills, Notes, and Bonds

4.28 Interest on United States Savings Bonds

4.29 Deferring United States Savings Bond Interest

4.30 Minimum Interest Rules

4.31 Interest-Free or Below-Market-Interest Loans

4.32 Minimum Interest on Seller-Financed Sales

Chapter 5 - Reporting Property Sales

5.1 Tax Pattern of Property Sales

5.2 How Property Sales Are Classified and Taxed

5.3 Capital Gains Rates and Holding Periods

5.4 Capital Losses and Carryovers

5.5 Capital Losses of Married Couples

5.6 Losses May Be Disallowed on Sales to Related Persons

5.7 Deferring or Excluding Gain on Small Business Stock Investment

5.8 Sample Entries of Capital Asset Sales on Schedule D

5.9 Counting the Months in Your Holding Period

5.10 Holding Period for Securities

5.11 Holding Period for Real Estate

5.12 Holding Period: Gifts, Inheritances, and Other Property

5.13 Calculating Gain or Loss

5.14 Amount Realized Is the Total Selling Price

5.15 Finding Your Cost

5.16 Unadjusted Basis of Your Property

5.17 Basis of Property You Inherited or Received as a Gift

5.18 Joint Tenancy Basis Rules for Surviving Tenants

5.19 Allocating Cost Among Several Assets

5.20 How To Find Adjusted Basis

5.21 Tax Advantage of Installment Sales

5.22 Figuring the Taxable Part of Installment Payments

5.23 Electing Not To Report on the Installment Method

5.24 Restriction on Installment Sales to Relatives

5.25 Contingent Payment Sales

5.26 Using Escrow and Other Security Arrangements

5.27 Minimum Interest on Deferred Payment Sales

5.28 Dispositions of Installment Notes

5.29 Repossession of Personal Property Sold on Installment

5.30 Boot in Like-Kind Exchange Payable in Installments

5.31 “Interest” Tax on Sales Over $150,000 Plus $5 Million Debt

5.32 Worthless Securities

5.33 Tax Consequences of Bad Debts

5.34 Four Rules To Prove a Bad Debt Deduction

5.35 Family Bad Debts

Chapter 6 - Tax-Free Exchanges of Property

6.1 Trades of Like-Kind Property

6.2 Personal Property Held for Business or Investment

6.3 Receipt of Cash and Other Property—“Boot”

6.4 Time Limits for Deferred Exchanges

6.5 Qualified Exchange Accommodation Arrangements (QEAAs) for Reverse Exchanges

6.6 Exchanges Between Related Parties

6.7 Property Transfers Between Spouses and Ex-Spouses

6.8 Tax-Free Exchanges of Stock in Same Corporation

6.9 Joint Ownership Interests

6.10 Setting up Closely Held Corporations

6.11 Exchanges of Coins and Bullion

6.12 Tax-Free Exchanges of Insurance Policies

Chapter 7 - Retirement and Annuity Income

7.1 Retirement Distributions on Form 1099-R

7.2 Lump-Sum Distributions

7.3 Lump-Sum Options If You Were Born Before January 2, 1936

7.4 Averaging on Form 4972

7.5 Capital Gain Treatment for Pre-1974 Participation

7.6 Lump-Sum Payments Received by Beneficiary

7.7 Tax-Free Rollovers From Qualified Plans

7.8 Direct Rollover or Personal Rollover

7.9 Rollover of Proceeds From Sale of Property

7.10 Distribution of Employer Stock or Other Securities

7.11 Survivor Annuity for Spouse

7.12 Court Distributions to Former Spouse Under a QDRO

7.13 When Retirement Benefits Must Begin

7.14 Payouts to Beneficiaries

7.15 Penalty for Distributions Before Age 59½

7.16 Restrictions on Loans From Company Plans

7.17 Tax Benefits of 401(k) Plans

7.18 Limit on Salary-Reduction Deferrals

7.19 Withdrawals From 401(k) Plans Restricted

7.20 Designated Roth Contributions to 401(k) Plans

7.21 Annuities for Employees of Tax-Exempts and Schools (403(b) Plans)

7.22 Government and Exempt Organization Deferred Pay Plans

7.23 Figuring the Taxable Part of Your Annuity

7.24 Life Expectancy Tables

7.25 When You Convert Your Endowment Policy

7.26 Reporting Employee Annuities

7.27 Simplified Method for Calculating Taxable Employee Annuity

7.28 Employee’s Cost in Annuity

7.29 Withdrawals Before Annuity Starting Date

7.30 Reporting and Repaying Qualified Midwestern Disaster Area Distributions

7.31 Employer-Plan Loans to Residents of Midwestern Disaster Area

Chapter 8 - IRAs

8.1 Starting a Traditional IRA

8.2 Traditional IRA Contributions Must Be Based on Earnings

8.3 Contributions to a Traditional IRA If You Are Married

8.4 IRA Deduction Restrictions for Active Participants in Employer Plan

8.5 Active Participation in Employer Plan

8.6 Nondeductible Contributions to Traditional IRAs

8.7 Penalty for Excess Contributions to Traditional IRAs

8.8 Taxable Distributions From Traditional IRAs

8.9 Partially Tax-Free Traditional IRA Distributions Allocable to Nondeductible Contributions

8.10 Tax-Free Rollovers and Direct Transfers to Traditional IRAs

8.11 Transfer of Traditional IRA to Spouse at Divorce or Death

8.12 Penalty for Traditional IRA Withdrawals Before Age 59½

8.13 Mandatory Distributions From a Traditional IRA After Age 70½ Are Waived ...

8.14 Inherited Traditional IRAs

8.15 SEP Basics

8.16 Salary-Reduction SEP Set Up Before 1997

8.17 Who Is Eligible for a SIMPLE IRA?

8.18 SIMPLE IRA Contributions and Distributions

8.19 Roth IRA Advantages

8.20 Annual Contributions to a Roth IRA

8.21 Converting a Traditional IRA to a Roth IRA

8.22 Recharacterizations and Reconversions

8.23 Distributions From a Roth IRA

8.24 Distributions to Roth IRA Beneficiaries

8.25 Three-Year Reporting of Qualified Midwestern Disaster Area Distributions

8.26 Repayment of Qualified Midwestern Disaster Area Distribution Within Three Years

Chapter 9 - Income From Rents and Royalties

9.1 Reporting Rental Income and Expenses

9.2 Checklist of Rental Deductions

9.3 Distinguishing Between a Repair and an Improvement

9.4 Reporting Rents From a Multi-Unit Residence

9.5 Depreciation on Converting a Home to Rental Property

9.6 Renting a Residence to a Relative

9.7 Personal Use and Rental of a Residence During the Year

9.8 Counting Personal-Use Days and Rental Days for a Residence

9.9 Allocating Expenses of a Residence to Rental Days

9.10 Rentals Lacking Profit Motive

9.11 Reporting Royalty Income

9.12 Production Costs of Books and Creative Properties

9.13 Deducting the Cost of Patents or Copyrights

9.14 Intangible Drilling Costs

9.15 Depletion Deduction

9.16 Oil and Gas Percentage Depletion

Chapter 10 - Loss Restrictions: Passive Activities and At-Risk Limits

10.1 Rental Activities

10.2 Rental Real Estate Loss Allowance of up to $25,000

10.3 Real Estate Professionals

10.4 Participation May Avoid Passive Loss Restrictions

10.5 Classifying Business Activities as One or Several

10.6 Material Participation Tests for Business

10.7 Tax Credits of Passive Activities Limited

10.8 Determining Passive or Nonpassive Income and Loss

10.9 Passive Income Recharacterized as Nonpassive Income

10.10 Working Interests in Oil and Gas Wells

10.11 Partners and Members of LLCs and LLPs

10.12 Form 8582

10.13 Suspended Losses Allowed on Disposition of Your Interest

10.14 Suspended Tax Credits

10.15 Personal Service and Closely Held Corporations

10.16 Sales of Property and of Passive Activity Interests

10.17 At-Risk Limits

10.18 What Is At Risk?

10.19 Amounts Not At Risk

10.20 At-Risk Investment in Several Activities

10.21 Carryover of Disallowed Losses

10.22 Recapture of Losses Where At Risk Is Less Than Zero

Chapter 11 - Other Income

11.1 Prizes and Awards

11.2 Lottery and Sweepstake Winnings

11.3 Gambling Winnings and Losses

11.4 Gifts and Inheritances

11.5 Refunds of State and Local Income Tax Deductions

11.6 Other Recovered Deductions

11.7 How Legal Damages Are Taxed

11.8 Cancellation of Debts You Owe

11.9 Schedule K-1

11.10 How Partners Report Partnership Profit and Loss

11.11 When a Partner Reports Income or Loss

11.12 Partnership Loss Limitations

11.13 Unified Tax Audits of Partnerships

11.14 Stockholder Reporting of S Corporation Income and Loss

11.15 How Beneficiaries Report Estate or Trust Income

11.16 Reporting Income in Respect of a Decedent (IRD)

11.17 Deduction for Estate Tax Attributable to IRD

11.18 How Life Insurance Proceeds Are Taxed to a Beneficiary

11.19 A Policy With a Family Income Rider

11.20 Selling or Surrendering Life Insurance Policy

PART 3 - Claiming Deductions

Chapter 12 - Deductions Allowed in Figuring Adjusted Gross Income

12.1 Figuring Adjusted Gross Income (AGI)

12.2 Claiming Deductions From Gross Income

12.3 What Moving Costs Are Deductible?

12.4 The Distance Test

12.5 The 39-Week Test for Employees

12.6 The 78-Week Test for the Self-Employed and Partners

12.7 Claiming Deductible Moving Expenses

12.8 Reimbursements of Moving Expenses

Chapter 13 - Claiming the Standard Deduction or Itemized Deductions

13.1 Claiming the Standard Deduction

13.2 Husbands and Wives Filing Separate Returns

13.3 Additional Standard Deduction for Real Estate Taxes, Motor Vehicle Taxes, ...

13.4 Standard Deduction If 65 or Older or Blind

13.5 Standard Deduction for Dependents

13.6 Prepaying or Postponing Itemized Expenses

13.7 Itemized Deduction Reduction

Chapter 14 - Charitable Contribution Deductions

14.1 Deductible Contributions

14.2 Nondeductible Contributions

14.3 Contributions That Provide You With Benefits

14.4 Unreimbursed Expenses of Volunteer Workers

14.5 Support of a Student in Your Home

14.6 What Kind of Property Are You Donating?

14.7 Cars, Clothing, and Other Property Valued Below Cost

14.8 Bargain Sales of Appreciated Property

14.9 Art Objects

14.10 Interests in Real Estate

14.11 Life Insurance

14.12 Form 8283 and Written Appraisal Requirements

14.13 Business Inventory

14.14 Donations Through Trusts

14.15 Records Needed To Substantiate Your Contributions

14.16 Penalty for Substantial Overvaluation of Property

14.17 Ceiling on Charitable Contributions

14.18 Carryover for Excess Donations

14.19 Election To Reduce Fair Market Value by Appreciation

Chapter 15 - Itemized Deduction for Interest Expenses

15.1 Home Mortgage Interest

15.2 Home Acquisition Loans

15.3 Home Equity Loans

15.4 Home Construction Loans

15.5 Home Improvement Loans

15.6 Mortgage Insurance Premiums and Other Payment Rules

15.7 Interest on Refinanced Loans

15.8 “Points”

15.9 Cooperative and Condominium Apartments

15.10 Investment Interest Limitations

15.11 Debts To Carry Tax-Exempt Obligations

15.12 Earmarking Use of Loan Proceeds

15.13 Year To Claim an Interest Deduction

15.14 Prepaid Interest

Chapter 16 - Deductions for Taxes

16.1 Deductible Taxes

16.2 Nondeductible Taxes

16.3 State and Local Income Taxes or Sales Taxes

16.4 Deducting Real Estate Taxes

16.5 Assessments

16.6 Tenants’ Payment of Taxes

16.7 Allocating Taxes When You Sell or Buy Realty

16.8 Automobile License Fees

16.9 Taxes Deductible as Business Expenses

16.10 Foreign Taxes

Chapter 17 - Medical and Dental Expense Deductions

17.1 Medical Expenses Must Exceed 7.5% of AGI

17.2 Allowable Medical Care Costs

17.3 Nondeductible Medical Expenses

17.4 Reimbursements Reduce Deductible Expenses

17.5 Premiums of Medical Care Policies

17.6 Expenses of Your Spouse

17.7 Expenses of Your Dependents

17.8 Decedent’s Medical Expenses

17.9 Travel Costs May Be Medical Deductions

17.10 Schooling for the Mentally or Physically Disabled

17.11 Nursing Homes

17.12 Nurses’ Wages

17.13 Home Improvements as Medical Expenses

17.14 Costs Deductible as Business Expenses

17.15 Long-Term Care Premiums and Services

17.16 Life Insurance Used by Chronically ill or Terminally ill Persons

Chapter 18 - Casualty and Theft Losses and Involuntary Conversions

18.1 Sudden Event Test for Casualty Losses

18.2 When To Deduct a Casualty Loss

18.3 Disaster Losses

18.4 Who May Deduct a Casualty Loss

18.5 Bank Deposit Losses

18.6 Damage to Trees and Shrubs

18.7 Deducting Damage to Your Car

18.8 Proving a Casualty Loss

18.9 Theft Losses

18.10 Proving a Theft Loss

18.11 Nondeductible Losses

18.12 Floors for Personal-Use Property Losses

18.13 Figuring Your Loss on Form 4684

18.14 Personal and Business Use of Property

18.15 Repairs May Be a “Measure of Loss”

18.16 Insurance Reimbursements

18.17 Excess Living Costs Paid by Insurance Are Not Taxable

18.18 Do Your Casualty or Theft Losses Exceed Your Income?

18.19 Defer Gain by Replacing Property

18.20 Involuntary Conversions Qualifying for Tax Deferral

18.21 How To Elect To Defer Tax

18.22 Time Period for Buying Replacement Property

18.23 Types of Qualifying Replacement Property

18.24 Cost of Replacement Property Determines Postponed Gain

18.25 Special Assessments and Severance Damages

18.26 Reporting Gains From Casualties

Chapter 19 - Deducting Job Costs and Other Miscellaneous Expenses

19.1 2% AGI Floor Reduces Most Miscellaneous Expenses

19.2 Effect of 2% AGI Floor on Deductions

19.3 Checklist of Job Expenses Subject to the 2% AGI Floor

19.4 Job Expenses Not Subject to the 2% AGI Floor

19.5 Dues and Subscriptions

19.6 Uniforms and Work Clothes

19.7 Expenses of Looking for a New Job

19.8 Local Transportation Costs

19.9 Unusual Job Expenses

19.10 Computers and Cell Phones Bought for Work

19.11 Calculators, Copiers, Fax Machines, and Typewriters

19.12 Small Tools

19.13 Employee Home Office Deductions

19.14 Telephone Costs

19.15 Checklist of Deductible Investment Expenses

19.16 Costs of Tax Return Preparation and Audits

19.17 Deducting Legal Costs

19.18 Contingent Fees Paid Out of Taxable Awards

Chapter 20 - Travel and Entertainment Expense Deductions

20.1 Deduction Guide for Travel and Transportation Expenses

20.2 Commuting Expenses

20.3 Overnight-Sleep Test Limits Deduction of Meal Costs

20.4 IRS Meal Allowance

20.5 Business Trip Deductions

20.6 When Are You Away From Home?

20.7 Fixing a Tax Home If You Work in Different Locations

20.8 Tax Home of Married Couple Working in Different Cities

20.9 Deducting Living Costs on Temporary Assignment

20.10 Business-Vacation Trips Within the United States

20.11 Business-Vacation Trips Outside the United States

20.12 Deducting Expenses of Business Conventions

20.13 Travel Expenses of a Spouse or Dependents

20.14 Restrictions on Foreign Conventions and Cruises

20.15 50% Deduction Limit

20.16 The Restrictive Tests for Meals and Entertainment

20.17 Directly Related Dining and Entertainment

20.18 Goodwill Entertainment

20.19 Home Entertaining

20.20 Your Personal Share of Entertainment Costs

20.21 Entertainment Costs of Spouses

20.22 Entertainment Facilities and Club Dues

20.23 Restrictive Test Exception for Reimbursements

20.24 50% Cost Limitation on Meals and Entertainment

20.25 Business Gift Deductions Are Limited

20.26 Record-Keeping Requirements

20.27 Proving Travel and Entertainment Expenses

20.28 Reporting T&E Expenses If You Are Self-Employed

20.29 Employee Reporting of Unreimbursed T&E Expenses

20.30 Tax Treatment of Reimbursements

20.31 What Is an Accountable Plan?

20.32 Per Diem Travel Allowance Under Accountable Plans

20.33 Automobile Mileage Allowance

20.34 Reimbursements Under Non-Accountable Plans

Chapter 21 - Personal Exemptions

21.1 How Many Exemptions May You Claim?

21.2 Your Spouse as an Exemption

21.3 Qualifying Children

21.4 Qualifying Relatives

21.5 Meeting the Support Test for a Qualifying Relative

PART 4 - Personal Tax Computations

Chapter 22 - Figuring Your Regular Income Tax Liability

22.1 Taxable Income and Regular Income Tax Liability

22.2 Using the Tax Table

22.3 Tax Computation Worksheet

22.4 Tax Calculation If You Have Net Capital Gain or Qualified Dividends

22.5 Foreign Earned Income Tax Worksheet

22.6 Income Averaging for Farmers and Fishermen

22.7 Tax Credits

Chapter 23 - Alternative Minimum Tax (AMT)

23.1 Computing Alternative Minimum Tax on Form 6251

23.2 Adjustments for AMT

23.3 Tax Preference Items

23.4 Net Operating Losses

23.5 Tax Credits Allowed Against AMT

23.6 AMT Tax Credit From Regular Tax

23.7 Avoiding AMT

Chapter 24 - Computing the “Kiddie Tax” on Your Child’s Investment Income

24.1 Filing Your Child’s Return

24.2 Children Subject to “Kiddie Tax” for 2009

24.3 Computing “Kiddie Tax” on Child’s Return

24.4 Parent’s Election To Report Child’s Dividends and Interest

Chapter 25 - Personal Tax Credits Reduce Your Tax Liability

25.1 Overview of Personal Tax Credits

25.2 Child Tax Credit for Children Under Age 17

25.3 Figuring the Child Tax Credit

25.4 Qualifying for Child and Dependent Care Credit

25.5 Limits on the Dependent Care Credit

25.6 Earned Income Test for Dependent Care Credit

25.7 Credit Allowed for Care of Qualifying Persons

25.8 Expenses Qualifying for the Dependent Care Credit

25.9 Dependent Care Credit Rules for Separated Couples

25.10 Qualifying Tests for EIC

25.11 Income Tests for Earned Income Credit (EIC)

25.12 Look up EIC in Government Tables

25.13 Advance Payment of Earned Income Credit

25.14 Qualifying for the Adoption Credit

25.15 Claiming the Adoption Credit on Form 8839

25.16 Eligibility for the Saver’s Credit

25.17 Figuring the Saver’s Credit

25.18 Health Coverage Credit

25.19 Mortgage Interest Credit

25.20 District of Columbia First-Time Homebuyer Credit

25.21 Residential Energy Credits

25.22 Credits for Hybrid and Other Alternative Fuel Vehicles and Plug-in ...

25.23 First-Time Homebuyer Credit

25.24 Making Work Pay and Government Retiree Credits

Chapter 26 - Tax Withholdings

26.1 Withholdings Should Cover Estimated Tax

26.2 Income Taxes Withheld on Wages

Chapter 27 - Estimated Tax Payments

27.1 Do You Owe an Estimated Tax Penalty for 2009?

27.2 Planning Estimated Tax Payments for 2010

27.3 Dates for Paying Estimated Tax Installments for 2010

27.4 Estimates by Husband and Wife

27.5 Adjusting Your Payments During the Year

PART 5 - Tax Planning

Chapter 28 - Tax Planning Overview

28.1 Tax-Saving Opportunities

28.2 When To Defer Income and Accelerate Deductions

28.3 Earning Over the Thresholds for the Exemption Phaseout and Itemized ...

Chapter 29 - Tax Savings for Residence Sales

29.1 Avoiding Tax on Sale of Principal Residence

29.2 Meeting the Ownership and Use Tests

29.3 Home Sales by Married Persons

29.4 Reduced Maximum Exclusion

29.5 Figuring Gain or Loss

29.6 Figuring Adjusted Basis

29.7 Personal and Business Use of a Home

29.8 No Loss Allowed on Personal Residence

29.9 Loss on Residence Converted to Rental Property

29.10 Loss on Residence Acquired by Gift or Inheritance

Chapter 30 - Tax Rules for Investors in Securities

30.1 Planning Year-End Securities Transactions

30.2 Earmarking Stock Lots

30.3 Sale of Stock Dividends

30.4 Stock Rights

30.5 Short Sales of Stock

30.6 Wash Sales

30.7 Convertible Stocks and Bonds

30.8 Constructive Sales of Appreciated Financial Positions

30.9 Straddle Losses

30.10 Capital Gain Restricted on Conversion Transactions

30.11 Puts and Calls and Index Options

30.12 Investing in Tax-Exempts

30.13 Ordinary Loss for Small Business Stock (Section 1244)

30.14 Series EE and E Bonds

30.15 I Bonds

30.16 Trader, Dealer, or Investor?

30.17 Mark-to-Market Election for Traders

Chapter 31 - Tax Savings for Investors in Real Estate

31.1 Investing in Real Estate Ventures

31.2 Sales of Subdivided Land—Dealer or Investor?

31.3 Exchanging Real Estate Without Tax

31.4 Timing Your Real Property Sales

31.5 Cancellation of a Lease

31.6 Sale of an Option

31.7 Granting of an Easement

31.8 Special Tax Credits for Real Estate Investments

31.9 Foreclosures, Repossessions, and Voluntary Conveyances to Creditors

31.10 Restructuring Mortgage Debt

31.11 Abandonments

31.12 Seller’s Repossession After Buyer’s Default on Mortgage

31.13 Foreclosure on Mortgages Other Than Purchase Money

31.14 Foreclosure Sale to Third Party

31.15 Transferring Mortgaged Realty

Chapter 32 - Tax Rules for Investors in Mutual Funds

32.1 Timing of Your Investment Can Affect Your Taxes

32.2 Reinvestment Plans

32.3 Mutual-Fund Distributions Reported on Form 1099-DIV

32.4 Tax-Exempt Bond Funds

32.5 Fund Expenses

32.6 Tax Credits From Mutual Funds

32.7 How To Report Mutual Fund Distributions

32.8 Redemptions and Exchanges of Fund Shares

32.9 Basis of Redeemed Shares

32.10 Comparison of Basis Methods

Chapter 33 - Educational Tax Benefits

33.1 Scholarships and Grants

33.2 Tuition Reductions for College Employees

33.3 How Fulbright Awards Are Taxed

33.4 United States Savings Bond Tuition Plans

33.5 Contributing to a Qualified Tuition Program (Section 529 Plan)

33.6 Distributions From Qualified Tuition Programs (Section 529 Plans)

33.7 Education Tax Credits

33.8 Hope/American Opportunity Credit

33.9 Lifetime Learning Credit

33.10 Income Phaseout of Education Credits

33.11 Contributing to a Coverdell Education Savings Account (ESA)

33.12 Distributions From Coverdell ESAs

33.13 Tuition and Fees Deduction

33.14 Student Loan Interest Deduction

33.15 Types of Deductible Work-Related Costs

33.16 Work-Related Tests for Education Costs

33.17 Local Transportation and Travel Away From Home To Take Courses

Chapter 34 - Special Tax Rules for Senior Citizens

34.1 Senior Citizens Get Certain Filing Breaks

34.2 Social Security Benefits Subject to Tax

34.3 Computing Taxable Social Security Benefits

34.4 Election for Lump-Sum Social Security Benefit Payment

34.5 Retiring on Social Security Benefits

34.6 How Tax on Social Security Reduces Your Earnings

34.7 Claiming the Credit for the Elderly and Disabled

34.8 Base Amount for the Elderly or Disabled Credit

34.9 Reduction of the Base Amount and Liability Limitation for the Credit

34.10 Tax Effects of Moving to a Continuing Care Facility

34.11 Imputed Interest on Refundable Entrance Fees

34.12 Part B Premiums for 2010 Affected by Social Security

Chapter 35 - Members of the Armed Forces

35.1 Taxable Armed Forces Pay and Benefits

35.2 Tax-Free Armed Forces Benefits

35.3 Deductions for Armed Forces Personnel

35.4 Tax-Free Pay for Service in Combat Zone

35.5 Tax Deadlines Extended for Combat Zone or Contingency Operation Service

35.6 Tax Forgiveness for Combat Zone or Terrorist or Military Action Deaths

35.7 Extension To Pay Your Tax When Entering the Service

35.8 Tax Information for Reservists

Chapter 36 - How To Treat Foreign Earned Income

36.1 Claiming the Foreign Earned Income Exclusion

36.2 What Is Foreign Earned Income?

36.3 Qualifying for the Foreign Earned Income Exclusion

36.4 How To Treat Housing Costs

36.5 Meeting the Foreign Residence or Physical Presence Test

36.6 Claiming Deductions

36.7 Exclusion Not Established When Your Return Is Due

36.8 Tax-Free Meals and Lodging for Workers in Camps

36.9 Virgin Islands, Samoa, Guam, and Northern Marianas

36.10 Earnings in Puerto Rico

36.11 Tax Treaties With Foreign Countries

36.12 Exchange Rates and Blocked Currency

36.13 Reporting Foreign Bank Accounts

36.14 Foreign Tax Credit

Chapter 37 - Planning Alimony and Marital Settlements

37.1 Planning Alimony Agreements

37.2 Decree or Agreement Required

37.3 Cash Payments Required

37.4 Payments Must Stop at Death

37.5 Child Support Payments Are Not Alimony

37.6 No Minimum Payment Period for Alimony

37.7 3rd Year Recapture If Alimony Drops by More Than $15,000

37.8 Legal Fees of Marital Settlements

Chapter 38 - Household Employment Taxes (“Nanny Tax”)

38.1 Who Is a Household Employee?

38.2 Social Security and Medicare (FICA) Taxes for Household Employees

38.3 Filing Schedule H To Report Household Employment Taxes

38.4 Federal Unemployment Taxes (FUTA) for Household Employees

Chapter 39 - Gift and Estate Tax Planning

39.1 Gifts of Appreciated Property

39.2 Gift Tax Basics

39.3 Filing a Gift Tax Return

39.4 Gift Tax Credit

39.5 Custodial Accounts for Minors

39.6 Trusts in Family Planning

39.7 What Is the Estate Tax?

39.8 Take Inventory

39.9 Finding the Value of Your Estate

39.10 How the Estate Tax Is Applied

39.11 Estate Tax for 2009

39.12 Reducing or Eliminating a Potential Estate Tax

PART 6 - Business Tax Planning

Chapter 40 - Income or Loss From Your Business or Profession

40.1 Forms of Doing Business

40.2 Reporting Self-Employed Income

40.3 Accounting Methods for Reporting Business Income

40.4 Tax Reporting Year for Self-Employed

40.5 Reporting Certain Payments and Receipts to the IRS

40.6 Filing Schedule C

40.7 Deductions for Professionals

40.8 Nondeductible Expense Items

40.9 How Authors and Artists May Write Off Expenses

40.10 Deducting Expenses of a Sideline Business or Hobby

40.11 Deducting Expenses of Looking for a New Business

40.12 Home Office Deduction

40.13 What Home Office Expenses Are Deductible?

40.14 Allocating Expenses to Business Use

40.15 Business Income May Limit Home Office Deductions

40.16 Home Office for Sideline Business

40.17 Depreciation of Office in Cooperative Apartment

40.18 Net Operating Losses (NOLs)

40.19 Your Net Operating Loss

40.20 How To Report a Net Operating Loss

40.21 How To Carry Back Your Net Operating Loss

40.22 Election To Carry Forward Losses

40.23 Overview of the Domestic Production Activities Deduction

40.24 Qualified Production Activities

40.25 Figuring the Deduction

40.26 Business Credits

40.27 Filing Schedule F

40.28 Farming Expenses

Chapter 41 - Retirement and Medical Plans for Self-Employed

41.1 Overview of Retirement and Medical Plans

41.2 Choosing a Keogh Plan

41.3 Choosing a SEP

41.4 Deductible Keogh or SEP Contributions

41.5 How To Claim the Keogh or SEP Deduction

41.6 How To Qualify a Keogh Plan or SEP Plan

41.7 Annual Keogh Plan Return

41.8 How Keogh Plan Distributions Are Taxed

41.9 SIMPLE IRA Plans

41.10 Health Savings Account (HSA) Basics

41.11 Limits on Deductible HSA Contributions

41.12 Distributions From HSAs

41.13 Archer MSAs

Chapter 42 - Claiming Depreciation Deductions

42.1 What Property May Be Depreciated?

42.2 Claiming Depreciation on Your Tax Return

42.3 First-Year Expensing Deduction

42.4 MACRS Recovery Periods

42.5 MACRS Rates

42.6 Half-Year Convention for MACRS

42.7 Last Quarter Placements—Mid-Quarter Convention

42.8 150% Rate Election

42.9 Straight-Line Depreciation

42.10 Computers and Other Listed Property

42.11 Assets in Service Before 1987

42.12 Straight-Line Recovery for Assets in Service Before 1987

42.13 MACRS for Real Estate Placed in Service After 1986

42.14 Demolishing a Building

42.15 Leasehold Improvements

42.16 Depreciating Real Estate Placed in Service After 1980 and Before 1987

42.17 When MACRS Is Not Allowed

42.18 Amortizing Goodwill and Other Intangibles (Section 197)

42.19 Deducting the Cost of Computer Software

42.20 Amortizing Song Rights

42.21 Bonus Depreciation

Chapter 43 - Deducting Car and Truck Expenses

43.1 Standard Mileage Rate

43.2 Expense Allocations

43.3 Depreciation Restrictions on Cars, Trucks, and Vans

43.4 Annual Ceilings on Depreciation

43.5 MACRS Rates for Cars, Trucks, and Vans

43.6 Straight-Line Method

43.7 Depreciation for Year Vehicle Is Disposed Of

43.8 Depreciation After Recovery Period Ends

43.9 Trade-in of Business Vehicle

43.10 Recapture of Deductions on Business Car, Truck, or Van

43.11 Keeping Records of Business Use

43.12 Leased Business Vehicles: Deductions and Income

Chapter 44 - Sales of Business Property

44.1 Depreciation Recaptured as Ordinary Income on Sale of Personal Property

44.2 Depreciation Recaptured as Ordinary Income on Sale of Real Estate

44.3 Recapture of First-Year Expensing

44.4 Gifts and Inheritances of Depreciable Property

44.5 Involuntary Conversions and Tax-Free Exchanges

44.6 Installment Sale of Depreciable Property

44.7 Sale of a Proprietorship

44.8 Property Used in a Business (Section 1231 Assets)

44.9 Sale of Property Used for Business and Personal Purposes

44.10 Should You Trade in Business Equipment?

44.11 Corporate Liquidation

Chapter 45 - Figuring Self-Employment Tax

45.1 What Is Self-Employment Income?

45.2 Partners Pay Self-Employment Tax

45.3 Schedule SE

45.4 How Wages Affect Self-Employment Tax

45.5 Optional Method If 2009 Was a Low-Income or Loss Year

45.6 Self-Employment Tax Rules for Certain Positions

PART 7 - Filing Your Return and What Happens After You File

Chapter 46 - Filing Your Return

46.1 Keeping Tax Records

46.2 Getting Ready To File Your Return

46.3 Applying for an Extension

46.4 Getting Your Refund

46.5 Paying Taxes Due

46.6 Electronic Filing

46.7 Notify the IRS of Address Changes

46.8 Interest on Tax Underpayments

46.9 Tax Penalties for Late Filing and Late Payment

Chapter 47 - Filing Refund Claims, and Amended Returns

47.1 Filing An Amended Return

47.2 When To File a Refund Claim

47.3 Joint Refund Claims

47.4 Stating the Reasons for Refund Claims

47.5 Quick Refund Claims

47.6 Interest Paid on Refund Claims

47.7 Refunds Withheld To Cover Debts

47.8 Amended Returns Showing Additional Tax

47.9 Penalty for Filing Excessive Refund Claim

Chapter 48 - If the IRS Examines Your Return

48.1 Odds of Being Audited

48.2 When the IRS Can Assess Additional Taxes

48.3 Audit Overview

48.4 Preparing for the Audit

48.5 Handling the Audit

48.6 Tax Penalties for Inaccurate Returns

48.7 Agreeing to the Audit Changes

48.8 Disputing the Audit Changes

48.9 Offer in Compromise

48.10 Recovering Costs of a Tax Dispute

48.11 Suing the IRS for Unauthorized Collection

PART 8 - Sample 2009 Tax Forms and Tables

GLOSSARY

INDEX

Staff for This Book

J.K. Lasser Editorial

Elliott Eiss, Member of the New York Bar, Senior Editor Barbara Weltman, Member of the New York Bar, Contributing Editor Angelo C. Jack, Senior Production Editor Carolyn Francis, Copyediting and Proofreading Helen Chin, Indexing William Hamill, Production Assistant Damon S. Walker, Production Assistant

John Wiley & Sons, Inc.

John Wiley & Sons, Inc. 111 River Street Hoboken, NJ 07030

Copyright © 2009 by John Wiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey

Published simultaneously in Canada

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at [phone], outside the United States at [phone], or fax [phone].

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com.

eISBN : 978-0-470-73054-6

How To Use Your Income Tax 2010

Tax alert symbols. Throughout the text of Your Income Tax, these special symbols alert you to advisory tips about filing your federal tax return and tax planning opportunities:

Filing Tip or Filing Instruction.....A Filing Tip or Filing Instruction helps you prepare your 2009 return.

Planning Reminder..... A Planning Reminder highlights year-end tax strategies for 2009 or planning opportunities for 2010 and later years.

Caution.....A Caution points out potential pitfalls to avoid and areas where IRS opposition may be expected.

Law Alert.....A Law Alert indicates recent changes in the tax law and pending legislation before Congress.

Court Decision.....A Court Decision highlights key rulings from the Tax Court and other federal courts.

IRS Alert.....An IRS Alert highlights key rulings and announcements from the IRS.

Visit www.jklasser.com for FREE download ofe-Supplement

You can download a free e-Supplement to Your Income Tax 2010 at www.jklasser.com. The e-Supplement will provide an update on tax developments from the IRS and Congress, including a look ahead to 2010.

On the homepage at jklasser.com, you will find free tax news, tax tips and tax planning articles, and you can sign up for a free e-newsletter. You will also find links to IRS and state tax forms.

The federal income tax law, despite efforts at simplification, remains a maze of statutes, regulations, rulings, and court decisions written in technical language covering thousands and thousands of pages. For over 70 years, J.K. Lasser’s™Your Income Tax has aided and guided millions of taxpayers through this complex law. Every effort has been made to provide a direct and easy-to-understand explanation that shows how to comply with the law and at the same time take advantage of tax-saving options and plans.

The 2010 edition of Your Income Tax—our 73rd edition—continues this tradition. To make maximum use of this tax guide, we suggest that you use these aids:

Contents Chapter by Chapter. The contents, on pages v-xxi, lists the chapters in Your Income Tax. References direct you to sections within a particular chapter. Thus a reference to 21.1 directs you to Chapter 21 and then to section 1 within that chapter. Section and page references are provided in the index at the back of the book.

What’s New for 2009. Pages xxiii-xxv alert you to tax developments that may affect your 2009 tax return.

Key Tax Numbers for 2009. Pages xxvii-xxviii.

Filing tax basics. Pages 1-7 alert you to filing requirements, filing addresses shown on a map of IRS Service Centers, and a calendar with 2010 filing deadlines.

What’s New for 2009

For an update on tax developments and a free download of the e-Supplement to this book, visit us online at www.jklasser.com.

Tax News for 2009

Item—Highlight—Making Work Pay CreditIndividuals with earned income in 2009 may be able to claim a tax credit of up to $400, $800 if married filing jointly. The credit is phased out if modified adjusted gross income exceeds $75,000, or $150,000 on a joint return (25.24). The Making Work Pay credit is also reduced if a $250 economic recovery payment was received during 2009 or if the $250 government retiree credit is allowed (25.24).First-time homebuyer creditFor a purchase in 2009 before December 1, 2009, eligible homebuyers may qualify for a tax credit of $8,000 ($4,000 if married filing separately) or, if less, 10% of the purchase price (25.23). The taxpayer (and his or her spouse if married) must not have owned another principal residence in the prior three years. The credit begins to phase out if modified adjusted gross income exceeds $75,000, or $150,000 on a joint return. Proposals have been made to extend the credit to home purchases after November 30, 2009.Hope education credit expandedThe Hope credit for 2009 and 2010 has been expanded and renamed the American Opportunity credit. The maximum credit is generally $2,500 per student and it is allowed for the first four years of post-secondary education (33.8). The phaseout of the credit applies if modified adjusted gross income is between $80,000 and $90,000, or between $160,000 and $180,000 on a joint return (33.9).Required minimum distributions waived for 2009Individuals age 70½ and older did not have to receive a required minimum distribution for 2009 from their traditional IRA (8.13) or employer’s defined contribution retirement plan (7.13). The waiver also applied to beneficiaries (8.14, 7.13). Unless the waiver law is extended, required minimum distributions for 2010 will have to be received.Unemployment compensation partially untaxedRecipients of unemployment compensation in 2009 may exclude from income the first $2,400 of benefits received (2.5). Proposals have been made to extend the exclusion to 2010.Deduction for sales and excise taxes on new motor vehicleA deduction is allowed for sales/excise taxes on a qualifying new motor vehicle or motor home purchased after February 16, 2009 and before January 1, 2010. Used vehicles do not qualify. The deduction applies to the taxes on the first $49,500 of the purchase price. The deduction is phased out if modified adjusted gross income exceeds $125,000, or $250,000 on a joint return. The deduction increases the standard deduction on Schedule L (13.3) for those who do not itemize. For taxpayers who itemize deductions, the deduction may be claimed in addition to the deduction for state and local income taxes (16.3).Residential energy creditsThe credit for home energy improvements (high efficiency property such as insulation, storm windows, heaters), which expired after 2007, has been reinstated and increased. A 30% credit is allowed, with a two-year overall credit limit of $1,500 for 2009 and 2010 (25.21). Prior dollar limits have been removed on the 30% credit for solar panels, solar water heating equipment and other alternative energy improvements (25.21).Expanded standard deductionExtra standard deduction amounts may be claimed by taxpayers who paid state and local real estate taxes, had a net disaster loss, or paid sales/excise taxes on qualifying new motor vehicles (see above). Schedule L must be used to claim the additional standard deduction amounts (13.3).

Item—Highlight—Qualified tuition plan distributionsFor purposes of figuring if a distribution from a qualified tuition plan (Section 529 plan) is tax free, the cost of a computer, software and Internet access that will be used while the student is enrolled is considered a qualified expense. (33.6).Nonqualified use limits home sale exclusionGain from the sale of a principal residence is not excludable to the extent that it is allocable to nonqualified use after 2008. With certain exceptions, nonqualified use means any period after 2008 during which the home is not used as a principal residence (29.2).Higher floor for personal casualty and theft lossesEach 2009 casualty or theft loss on personal-use property must exceed $500 to be allowed. This is in addition to the 10% of adjusted gross income floor on the net loss for personal use assets, other than losses attributable to federally declared disasters (18.12).Estimated tax relief for small business ownersA favorable 90% prior-year safe harbor makes it easier for certain small business owners to avoid a 2009 estimated tax penalty. Over 50% of 2008 gross income must have been from a qualifying small business and 2008 adjusted gross income had to be less than $500,000, or $250,000 if filing separately for 2009 (27.1).Self-employment taxNet self-employment earnings of up to $106,800 are subject to the 12.4% Social Security rate for 2009 (45.3).Transportation fringe benefitsFor 2009, the monthly exclusion for employer-provided parking is $230. For transit passes and commuter van/bus transportation, the monthly exclusion for January and February 2009 is $120, and for March -December 2009 the monthly exclusion is $230. An exclusion of up to $20 may be allowed for reimbursed bicycle commuting costs, but restrictions apply (3.8).First-year expensing (Section 179) deductionFor 2009, the limit on the first-year expensing deduction for business equipment is $250,000. The limit is reduced if the cost of qualifying property placed in service during 2009 exceeds $800,000 (42.3).Bonus depreciation deduction (special depreciation allowance)For property placed in service in 2009, a special first-year depreciation allowance of 50% of the basis of eligible property is allowed in addition to first-year expensing (42.21).IRS mileage ratesFor 2009, the IRS standard business mileage rate (43.1) is 55 cents per mile. For medical (17. 9) and moving expenses (12.3), the rate is 24 cents per mile for the first six months and the rate for charitable volunteers (14.4) is 14 cents per mile.Vehicle depreciation limitsThe maximum depreciation deduction (including expensing) for a car placed in service in 2009 is $10,960 if the special depreciation allowance applies, otherwise $2,960. For a light truck or van, the maximum deduction is $11,060 with the special allowance, or $3,060 without the special allowance (43.4).Plug-in electric vehicle creditsA new 10% credit, up to $2,500, is allowed for the cost of qualified two-or-three wheel rechargeable electric vehicles and four-wheel low-speed rechargeable electric vehicles placed in service after February 17, 2009 (25.22). Another new credit applies for plug-in electric drive motor vehicles with at least four wheels. The minimum credit of $2,500 is increased depending on the battery capacity and weight of the vehicle (25.22).Custodial parent’s revocation of a waiver of exemption for childA custodial parent who has released the claim to an exemption for a child to the noncustodial parent may revoke the release on Form 8332 (21.7).

Item—Highlight—IRA and Roth IRA contributionsFor 2009, the contribution limit for traditional IRAs (8.2) and Roth IRAs (8.20) is $5,000, or $6,000 for individuals age 50 or older. The deduction limit for 2009 contributions to a traditional IRA is phased out (8.4) for active plan participants with modified AGI (MAGI) of over $55,000 and under $65,000 for a single person or head of household, or over $89,000 and under $109,000 for married persons filing jointly. The phaseout range is MAGI of over $166,000 and under $176,000 for a spouse who is not an active plan participant and files jointly with a spouse who is an active plan participant. The 2009 Roth IRA contribution limit is phased out (8.20) for a single person or head of household with MAGI over $105,000 and under $120,000, and for married persons filing jointly with MAGI over $166,000 and under $176,000.Health savings accounts (HSAs)Individuals with qualifying high deductible health plan coverage (41.10) may contribute up to $3,000 to an HSA for 2009 if the coverage is self-only, $5,950 for family coverage. The limit is increased by $1,000 for HSA owners age 55 or older (41.11).Phaseout of personal exemptions and reduction of itemized deductionsThe reduction of itemized deductions (13.7) applies if 2009 adjusted gross income exceeds $166,800, or $ 83,400 if married filing separately. The phaseout of personal exemptions (21.12) applies if adjusted gross income exceeds $125,100 for married persons filing separately, $166,800 if single, $208,500 if head of household, and $250,200 if married filing jointly (or qualifying widow(er)).Alternative minimum tax (AMT)The AMT exemption for 2009 is $70,950 if married filing jointly or a qualifying widow(er)), $46,700 if single or head of household, or $ 35,475 if married filing separately (23.1).Additional child tax creditThe child tax credit is refundable for 2009 to the extent of 15% of earned income in excess of $3,000 (25.3).Adoption creditThe maximum adoption credit for 2009 is $12,150 per child. The limit is phased out if modified adjusted gross income exceeds $182,180, and the phaseout is complete if MAGI is $222,180 or more (25.15).Annual exclusion for giftsFor gift tax purposes, the per-donee exclusion for gifts of present interests in 2009 is $13,000 (39.2).Earned income creditA higher earned income credit is allowed to taxpayers with three or more qualifying children (25.10). Also, the phaseout range has been expanded for married couples filing jointly (25.11).Foreign earned income and housing exclusionsThe maximum foreign earned income exclusion for 2009 is $91,400 (36.3). The maximum housing exclusion is generally $12,796, but the IRS may increase the exclusion for high cost localities (36.4).

Key Tax Numbers for 2009

PART 1

Filing Basics

In this part, you will learn these income tax basics:

• Whether you must file a return

• When and where to file your return

• Which tax form to file

• What filing status you qualify for

• When filing separately is an advantage for married persons

• How to qualify as head of household

• How filing rules for resident aliens and nonresident aliens differ

• How to claim personal exemption deductions for yourself, your spouse, and your dependents.

Do You Have To File a 2009 Tax Return?

If you are—You must file if gross income is at leastSingleUnder age 65$ 9,350Age 65 or older on or before January 1, 200910,750Married and living together at the end of 2009Filing a joint return—both spouses under age 6518,700Filing a joint return—one spouse age 65 or older19,800Filing a joint return—both spouses age 65 or older20,900Filing a separate return (any age)3,650Married and living apart at the end of 2009Filing a joint or separate return3,650Head of a household maintained for a child or other relative(1. 12)Under age 6512,000Age 65 or older on or before January 1, 201013,400Widowed in 2008 or 2007 and have a dependent child(1.11)Under age 6515,050Age 65 or older on or before January 1, 201016,150

Marital status. For federal tax purposes, only a man and woman in a legal union as husband and wife are considered married. For 2009 returns, marital status is generally determined as of December 31, 2009. Thus, if you were divorced or legally separated during 2009, you are not considered married for 2009 tax purposes, and you must use the filing threshold for single persons unless you qualify as a head of household (1.12), or you remarried in 2009 and are filing a joint return with your new spouse.

If your spouse died in 2009 and you were living together on the date of death, use the filing threshold shown for married persons living together at the end of 2009. If you were not living together on the date of death, the $3,650 filing threshold applies, unless you remarried during 2009 and are filing jointly with your new spouse.

Age 65. Whether you are age 65 or older is generally determined as of the end of the year, but if your 65th birthday is on January 1, 2010, you are treated as being age 65 at the end of 2009.

Gross income. Gross income is generally all the income that you received in 2009, except for items specifically exempt from tax.

Include wages and tips (Chapter 2), self-employment income (Chapter 45), taxable scholarships (Chapter 33), taxable interest and dividends (Chapter 4), capital gains (Chapter 5), taxable pensions and annuities (Chapter 7), rents (Chapter 9), and trust distributions (Chapter 11). Home sale proceeds that are tax free (Chapter 29) and tax-free foreign earned income (Chapter 36) are considered gross income for purposes of the filing test.

Exclude tax-exempt interest (Chapter 4), tax-free fringe benefits (Chapter 3), qualifying scholarships (Chapter 33), and life insurance (Chapter 11). Also exclude Social Security benefits unless (1) you are married filing separately and you lived with your spouse at any time during 2009, or (2) 50% of net Social Security benefits plus other gross income exceeds $25,000 ($32,000 if married filing jointly).

Other situations when you must file. Even if you are not required to file under the gross income tests, you must file a 2009 return if:

• You are self-employed and you owe self-employment tax because your net self-employment earnings for 2009 are $400 or more (Chapter 45), or

• You are entitled to a refund of taxes withheld from your wages (Chapter 26) or a refund based on the earned income credit for working families (Chapter 25), or

• You received any earned income credit payments in advance from your employer (Chapter 25), or

• You owe any special tax such as alternative minimum tax (Chapter 23), IRA penalty (Chapter 8), household employment taxes (Chapter 38), and FICA on tips (Chapter 26), or

• You are a nonresident alien with a U.S. business or have tax liability not covered by withholding; see Form 1040NR.

Filing tests for dependents. If you can be claimed as a dependent by your parent, or by any other taxpayer.

Filing Tests for Dependents: 2009 Returns

The income threshold for filing a tax return is generally lower for an individual who may be claimed as a dependent than for a nondependent. You are a “dependent” if you are the qualifying child or qualifying relative of another taxpayer, and the other tests for dependents at 21.1 are met.

If, under the tests at 21.1, you may be claimed as a dependent by someone else, use the chart on this page to determine if you must file a 2009 return. Include as unearned income taxable interest and dividends, capital gains, pensions, annuities, unemployment compensation, and distributions of unearned income from a trust. Earned income includes wages, tips, self-employment income, and taxable scholarships or fellowships (Chapter 33). Gross income is the total of unearned and earned income.

For married dependents, the filing requirements in the chart assume that the dependent is filing a separate return and not a joint return (Chapter 1). Generally, a married person who files a joint return may not be claimed as a dependent by a third party who provides support.

If you are the parent of a dependent child who had only investment income subject to the “kiddie tax” (24.3), you may elect to report the child’s income on your own return for 2009 instead of filing a separate return for the child; see 24.5 for the election rules.

For purposes of the following chart, a person is treated as being age 65 (or older) if his or her 65th birthday is on or before January 1, 2010. Blindness is determined as of December 31, 2009.

Filing Instruction

File for Refund of Withholdings

Even if you are not required to file a return under the income tests on this page, you should file to obtain a refund of federal tax withholdings.

File a Return for 2009 If You Are a—

If your parent (or someone else) can claim you as a dependent, use this chart to see if you must file a return.

In this chart, unearned income includes 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. Earned income includes salaries, wages, tips, professional fees, and taxable scholarship and fellowship grants. Gross income is the total of your unearned and earned 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 over $950.

• Your earned income was over $5,700.

• Your gross income was more than the larger of—

• $950, or

• Your earned income (up to $5,400) plus $300.

• Yes. You must file a return if any of the following apply.

• Your unearned income was over $2,350 ($3,750 if 65 or older and blind).

• Your earned income was over $7,100 ($8,500 if 65 or older and blind).

• Your gross income was more than the larger of—

• $2,350 ($3,750 if 65 or older and blind), or

• Your earned income (up to $5,400) plus $1,700 ($3,100 if 65 or older and blind).

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 over $950.

• Your earned income was over $5,700.

• 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—

• $950, or

• Your earned income (up to $5,400) plus $300.

• Yes. You must file a return if any of the following apply.

• Your unearned income was over $2,050 ($3,150 if 65 or older and blind).

• Your earned income was over $6,800 ($7,900 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 the larger of—

• $2,050 ($3,150 if 65 or older and blind), or

• Your earned income (up to $5,400) plus $1,400 ($2,500 if 65 or older and blind).

Where To File

If you are filing—File with the Internal Revenue Service Center—Form 1040, 1040A, or 1040EZFor your place of legal residence. If you received an IRS packet of forms with a pre-addressed envelope, use it unless you have moved. If you do not have an envelope, mail your return to the Service Center shown on the map below for your residence.A partnership (Form 1065) or S corporation(Form 1120S) returnFor the location of your principal place of business; follow the Form 1065 or 1120S instructions.As a U.S. citizen working abroadFile Form 1040, 1040A, or 1040EZ at Austin, TX 73301-0215 USA.As a service member in the Armed ForcesFor the place you are stationed. If you are overseas and have an APO or FPO address, file Form 1040, 1040A, or 1040EZ with the Service Center at Austin, TX (see zip codes below).

Key to Service Center Map

KeyForm 1040 Mailing Address—*1.Internal Revenue Service, Andover, Massachusetts 05501-0102 if making a payment; otherwise 05501-0002. Residents of the District of Columbia file here.2.Internal Revenue Service, Atlanta, Georgia 39901-0102 if making a payment; otherwise 39901-0002.3.Internal Revenue Service, Kansas City, Missouri 64999-0102 if making a payment; otherwise 64999-0002.4.Internal Revenue Service, Austin, Texas 73301-0102 if making a payment; otherwise 73301-0002.5.Internal Revenue Service, Fresno, California 93888-0102 if making a payment; otherwise 93888-0002.* Filing Form 1040A or 1040EZ: If you are filing Form 1040A, the last four digits of the zip codes for the IRS Service Centers are 0015 (no payment) or 0115 (payment).For Form 1040EZ the last four digits are 0014 (no payment) or 0114 (payment). Check your tax form instructions and the e-Supplement at jklasser.comat jklasser. com for any late changes to the addresses or zip codes on this page.

Filing Deadlines (on or Before)

January 15, 2010— Pay the balance of your 2009 estimated tax. If you do not meet this date, you may avoid an estimated tax penalty for the last quarter by filing your 2009 return and paying the balance due by February 1, 2010.

Farmers and fishermen: File your single 2009 estimated tax payment by this date. If you do not, you may still avoid an estimated tax penalty by filing a final tax return and paying the full tax by March 1, 2010.

February 1, 2010— Make sure you have received a Form W-2 from each employer for whom you worked in 2009.

April 15, 2010— File your 2009 tax return and pay the balance of your tax. If you cannot meet the April 15 deadline, you may obtain an automatic six-month filing extension by filing Form 4868 (on paper or electronically). However, even if you get an extension, interest will still be charged for taxes not paid by April 15, and late payment penalties will be imposed unless at least 90% of your tax liability is paid by this date or you otherwise show reasonable cause. If you cannot pay the full amount of tax you owe when you file your return, you can file Form 9465 to request an installment payment arrangement.

If on this date you are a U.S. citizen or resident living and working abroad or in military service outside the U.S. or Puerto Rico, you have an automatic two-month filing extension until June 15, 2010.

Pay the first installment of your 2010 estimated tax by this date.

June 15, 2010— Pay the second installment of your 2010 estimated tax. You may amend your estimate at this time.

If on April 15 you were a U.S. citizen or resident living and working abroad or in military service outside the U.S. or Puerto Rico, file your 2009 return and pay the balance due. You may obtain an additional four-month filing extension until October 15, 2009, by filing Form 4868.

If you are a nonresident alien who did not have tax withheld from your wages, file Form 1040NR by this date and pay the balance due.

September 15, 2010— Pay the third installment of your 2010 estimated tax. You may amend your estimate at this time.

October 15, 2010—File your 2009 return if you received an automatic six-month filing extension using Form 4868. Also file your 2009 return and pay the balance due if on April 15 you were a U.S. citizen or resident living and working abroad or in military service outside the U.S. or Puerto Rico, and by June 15 you qualified for an additional four-month extension by filing Form 4868.

December 31, 2010— If self-employed, this is the last day to set up a Keogh plan for 2010.

January 18, 2011— Pay the balance of your 2010 estimated tax.

April 15, 2011—File your 2010 return and pay the balance of your tax. Pay the first installment of your 2011 estimated tax by this date.

15th day of the 4th month after the fiscal year ends— File your fiscal year return and pay the balance of the tax due. If you cannot meet the filing deadline, apply for an automatic four-month filing extension on Form 4868.

2010

2011

Choosing Which Tax Form to File

There are three individual tax forms: Form 1040, Form 1040A, and Form 1040EZ. Use the simplified Form 1040EZ or Form 1040A only if you find the return will save you time and not cause you to give up tax-saving deductions or credits that are only available if you file Form 1040. To help you make your selection, fill in the following chart.

By checking the box that indicates your tax status, income, expenses, and credit items, you will be guided in choosing which form to use.

Chapter 1

Filing Status

The filing status you use when you file your return determines the tax rates that will apply (1.2) to your taxable income. Filing status also determines the standard deduction you may claim (13.1) if you do not itemize deductions and your ability to claim certain other deductions, credits, and exclusions.

This chapter explains the five different filing statuses: single, married filing jointly, married filing separately, head of household, and qualifying widow(er). If you are married, filing a joint return is generally advantageous, but there are exceptions discussed in 1.3