IRS Pub. 17, Your Federal Income Tax
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, the IRS will mail you Form 1040, Form 1040A, or Form
1040EZ with related instructions, based on what you filed last year.
Before you fill in the form, look it over to see if you need
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. See How To Get More
Information in the back of this publication.
Table 1-6: 6 STEPS
Substitute tax forms.
You cannot use your own version of a tax form unless it meets the
requirements explained in Publication 1167, Substitute Printed,
Computer-Prepared, and Computer-Generated Tax Forms and Schedules.
If you are an employee, you should receive Form W-2 from your
employer. You will need the information from this form before you
prepare your return.
If you do not receive Form W-2 by February 1, 1999, 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. For more
information, see Form W-2 under Credit for
Withholding and Estimated Tax in chapter 5.
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 February 1, 1999, 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.
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 ends on a particular day of the week.
You must choose your accounting period when you file your first
income tax return. It cannot be longer than 12 months.
For more information on accounting periods, including how to change
your accounting period, see Publication 538,
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
If you use this method, report all items of income in the year in
which you actually or constructively receive them. Deduct all expenses
in the year you pay them. This is the method most individual taxpayers
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, 1998, is taxable income
to you in 1998 if you could have withdrawn it in 1998 (even if the
amount is not entered in your passbook or withdrawn until 1999).
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:
- You do not withdraw the earnings,
- The credit balance in the account may be reduced or
eliminated by losses in later years, or
- 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 13
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
Check received or available.
A valid check you received or that was made available to you before
the end of the tax year is constructively received by you in that
year, even if you do not cash the check or deposit it in your account
until the next year.
No constructive receipt.
There may be facts to show that you did not constructively receive
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.
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.
Prepaid 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. Prepaid income includes rents or
interest you receive in advance and pay for services you will perform
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
If you are filing a joint return, write the SSNs in the same order
as the names. Please use this same order in submitting other forms and
documents to the IRS.
The peel-off address label you receive with your 1998 return will
not show your SSN. You must write your SSN in the spaces provided on
your tax return.
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 may 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.
If your child was born and died in 1998 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.
No social security number.
File Form SS-5 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 for aliens,
If you are a U.S. citizen, you must show proof of age, identity,
and citizenship with your Form SS-5. If you are 18 or older, you
must appear in person with this proof at an SSA office.
Form SS-5 is available at any SSA office. 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.
Adoptive child with no SSN.
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 adoption taxpayer identification number
(an ATIN) to use instead of an SSN.
File Form W-7A 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 by an authorized placement agency.
- 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 ITIN for the child.
- You are eligible to claim the child as a dependent on your
After the adoption is final, you must apply for a social
security number 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 individual
taxpayer identification number (ITIN). If your spouse is not eligible
for an SSN, see the next discussion.
Individual taxpayer identification number (ITIN) for aliens.
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 30 days to get an ITIN. Enter this number on your tax
return wherever your SSN is requested. An incorrect or missing
taxpayer identification number may increase your tax or reduce your
If your dependent is a nonresident or resident alien who does not
have and is not eligible to get a social security number (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.
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 in your correspondence. Because your SSN is used to identify
your account, this helps the IRS respond to your correspondence
This fund was set up to help pay for presidential election
campaigns. You may have $3 of your tax liability go to this fund by
checking the Yes box on Form 1040, Form 1040A, or Form
1040EZ. If you are filing a joint return, your spouse may also have $3
go to the fund. If you check Yes, it will not change the
tax you pay or the refund you will receive.
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.
You receive two W-2 forms: 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 +
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.
Form W-2, Wage and Tax Statement, 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 the first copy or copy B 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
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 the first copy or Copy B of that form in the place indicated on
the front page of your return.
There are no additional schedules to file with Form 1040EZ.
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.
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. Put forms without an attachment sequence number
next. 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.
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
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.
If you are due a refund, it cannot be issued unless you have signed
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 telephone number is
If you prepare your own return, leave the space under your
signature blank. If another person prepares your return and does not
charge you, that person should not sign your return.
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. Signature stamps and labels
are not acceptable. Paid preparers of Form 1040EZ must also put an
"X" in box 10 in the lower right corner of page 1 of 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 preparer must give you a copy of your return in addition to
the copy filed with the IRS.
If you have questions about whether a preparer must sign your
return, please contact any IRS office.
When someone can sign for you.
You can appoint an agent to sign your return if you are:
- Unable to sign the return because of disease or
- Absent from the United States for a continuous period of at
least 60 days before the due date for filing your return, or
- Given permission to do so by the IRS district director in
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
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
Spouse unable to sign.
If your spouse is unable to sign for any reason, see Signing a
joint return, in chapter 2.
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 (signature), parent
(or guardian) for minor child."
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 (1999)
If you choose to have a 1998 overpayment applied to your 1999
estimated tax, you cannot change your mind and have any of it refunded
to you after the due date of your 1998 return.
You cannot have your overpayment applied to your 1999 estimated tax
if you file Form 1040EZ.
Follow the instructions in your tax forms package to complete the
entries to claim your refund and/or to apply your overpayment to your
1999 estimated tax.
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. To request direct deposit, follow the
instructions for the refund line on your return.
If the direct deposit cannot be done, the IRS will send a check
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
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 two 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 income tax, other federal
debts (such as student loans), and child and spousal support payments.
You will be notified if the refund you claimed has been offset against
Joint return and injured spouse.
When a joint return is filed and only one spouse owes past-due
child and spousal support or a federal debt, 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:
- File a joint return,
- Have received income (such as wages, interest, etc.),
- Have made tax payments (such as federal income tax withheld
from wages or estimated tax payments),
- Report the income and tax payments on the joint return,
- Have an overpayment, all or part of which may be applied
against the past-due amount.
If you are an injured spouse, you can obtain your portion of the
joint refund by completing
Form 8379, Injured
Spouse Claim and Allocation. Follow the instructions on the
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 you owe less than one dollar, you
need not pay it.
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 31.
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,
Understanding the Collection Process.
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
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 31.
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
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 a taxpayer's case. A managerial act includes
personnel transfers and extended personnel training.
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
For more information, get Publication 556.
How To Pay
If you pay by check or money order, make it out to the "United
States Treasury." Please show your correct name, address, social
security number, daytime telephone number, and the tax year and form
number on the front of your check or money order.
For example, if you file Form 1040 for 1998 and you owe additional
tax, show your name, address, social security number, daytime
telephone number, and "1998 Form 1040" on the front of your check
or money order. If you file an amended return (Form 1040X) for 1997
and you owe tax, show your name, address, social security number,
daytime telephone number, and "1997 Form 1040X" on the front of
your check or money order.
Enclose your payment with your return, but do not attach it to the
Do not mail cash with your return. If you pay cash at an IRS
office, keep the receipt as part of your records.
If you have a balance due on your 1998 Form 1040 and you receive
Payment Voucher, use it to send your payment to the
IRS. This will help us process your payment more accurately and
efficiently. Follow the instructions that come with the form.
Estimated tax payments.
Do not include any 1999 estimated tax payment in your check or
money order for your 1998 income tax return. Mail the estimated tax
payment separately to the address shown in the Form 1040-ES
instructions. The address for mailing estimated tax payments is
different from the address for sending your tax return.
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.
If you cannot pay the full amount due with your return, you can ask
to make monthly installment payments. However, you will be charged
interest and may be charged a late payment penalty on the tax not paid
by April 15, 1999, 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.
Guaranteed availability of installment agreement.
The IRS must agree to accept the payment of your tax liability in
installments if, as of the date you offer to enter into the agreement:
- Your total taxes (not counting interest, penalties,
additions to the tax, or additional amounts) do not exceed
- In the last 5 years, you (and your spouse if the liability
relates to a joint return) have not:
- Failed to file any required income tax return,
- Failed to pay any tax shown on any such return, or
- Entered into an installment agreement for the payment of any
- You show you cannot pay your income tax in full when
- The tax will be paid in full in 3 years or less, and
- You agree to comply with the tax laws while your agreement
is in effect.
Gift To Reduce
the Public Debt
You can make a contribution (gift) to reduce the public debt. If
you wish to do so, make a separate check payable to
"Bureau of the Public Debt." You can send it to:
Bureau of the Public Debt
Washington, DC 20239-0601.
Or, you can enclose the
check in the envelope with your income tax return. Please 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
Peel-Off Address Label
After you have completed your return, peel off the label with your
name and address from the inside 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 a 1040PC return, place the label over the name and
address area. If you file electronically, use your label on Form 8453.
(More information on electronic filing and the 1040PC return 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
The peel-off address label you receive with your 1998 return will
not show your SSN. 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.
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 (do not
type) this information in the spaces provided.
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.
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:
- Province or state, and
- Name of foreign country (do not abbreviate the
name of the country).
Follow the country's practice for entering the postal code.
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